<PAGE>
As filed with the Securities and Exchange Commission
on December 29, 2000
Securities Act File No.
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [_] Post-Effective Amendment No. [_]
SCUDDER PORTFOLIO TRUST
(Exact Name of Registrant as Specified in Charter)
Two International Place, Boston, MA 02110-4103
(Address of Principal Executive Offices) (Zip Code)
John Millette
Scudder Kemper Investments, Inc.
Two International Place
Boston, MA 02110-4103
(Name and Address of Agent for Service)
(617) 295-1000
(Registrant's Area Code and Telephone Number)
with copies to:
Caroline Pearson, Esq. Joseph R. Fleming, Esq.
Scudder Kemper Investments, Inc. Dechert
Two International Place Ten Post Office Square - South
Boston, MA 02110-4103 Boston, MA 02109-4603
Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement is declared effective.
Title of Securities Being Registered:
Shares of Beneficial Interest ($.01 par value)
of Scudder High Yield Bond Fund, a series of the Registrant
________________________________________________________________________________
It is proposed that this filing will become effective on January 28, 2001
pursuant to Rule 488 under the Securities Act of 1933.
________________________________________________________________________________
No filing fee is required because the Registrant has previously registered an
indefinite number of its shares under the Securities Act of 1933, as amended,
pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended.
<PAGE>
PART A
INFORMATION REQUIRED IN THE PROXY STATEMENT/PROSPECTUS
<PAGE>
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF
KEMPER HIGH YIELD OPPORTUNITY FUND
Please take notice that a Special Meeting of Shareholders (the "Meeting")
of Kemper High Yield Opportunity Fund (the "Fund"), a series of Kemper High
Yield Series (the "Trust"), will be held at the offices of Scudder Kemper
Investments, Inc., 13th Floor, Two International Place, Boston, MA 02110-4103,
on May 24, 2001, at 4:00 p.m., Eastern time, for the following purposes:
PROPOSAL 1: To elect Trustees of the Trust.
PROPOSAL 2: To approve an Agreement and Plan of Reorganization for the
Fund (the "Plan"). Under the Plan, (i) all or substantially
all of the assets and all of the liabilities of the Fund would
be transferred to Scudder High Yield Bond Fund, (ii) each
shareholder of the Fund would receive shares of Scudder High
Yield Bond Fund of a corresponding class to those held by the
shareholder in the Fund in an amount equal to the value of
their holdings in the Fund, and (iii) the Fund would then be
terminated.
PROPOSAL 3: To ratify the selection of Ernst & Young LLP as the
independent auditors for the Fund for the Fund's current
fiscal year.
The persons named as proxies will vote in their discretion on any other
business that may properly come before the Meeting or any adjournments or
postponements thereof.
Holders of record of shares of the Fund at the close of business on
March 5, 2001 are entitled to vote at the Meeting and at any adjournments or
postponements thereof.
In the event that the necessary quorum to transact business or the vote
required to approve any Proposal is not obtained at the Meeting, the persons
named as proxies may propose one or more adjournments of the Meeting in
accordance with applicable law to permit further solicitation of proxies. Any
such adjournment as to a matter will require the affirmative vote of the holders
of a majority of the Trust's (for a trust-wide vote) or the Fund's (for a fund-
wide vote) shares present in person or by proxy at the Meeting. The persons
named as proxies will vote FOR any such adjournment those proxies which they are
entitled to vote in favor of that Proposal and will vote AGAINST any such
adjournment those proxies to be voted against that Proposal.
By Order of the Board,
/s/ Philip J. Collora
Philip J. Collora
Secretary
March 6, 2001
IMPORTANT -- WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY CARD(S) AND RETURN
IT IN THE ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE (OR TO TAKE ADVANTAGE OF
THE ELECTRONIC OR TELEPHONIC VOTING PROCEDURES DESCRIBED ON THE PROXY CARD(S)).
YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD(S) (OR YOUR VOTING BY OTHER
AVAILABLE MEANS) MAY SAVE THE NECESSITY AND EXPENSE OF FURTHER SOLICITATIONS.
IF YOU WISH TO ATTEND THE MEETING AND VOTE YOUR SHARES IN PERSON AT THAT TIME,
YOU WILL STILL BE ABLE TO DO SO.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INTRODUCTION............................................................... __
PROPOSAL 1: ELECTION OF TRUSTEES.......................................... __
PROPOSAL 2: APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION.............. __
SYNOPSIS...................................................... __
PRINCIPAL RISK FACTORS........................................ __
THE PROPOSED TRANSACTION...................................... __
PROPOSAL 3: RATIFICATION OR REJECTION OF THE SELECTION OF INDEPENDENT
AUDITORS...................................................... __
ADDITIONAL INFORMATION..................................................... __
</TABLE>
<PAGE>
PROXY STATEMENT/PROSPECTUS
MARCH [ ], 2001
RELATING TO THE ACQUISITION OF THE ASSETS OF
KEMPER HIGH YIELD OPPORTUNITY FUND
A SEPARATE SERIES OF
KEMPER HIGH YIELD SERIES (THE "ACQUIRED TRUST")
222 SOUTH RIVERSIDE PLAZA
CHICAGO, ILLINOIS 60606
(800) [ ]
--------------------------
BY AND IN EXCHANGE FOR SHARES OF BENEFICIAL INTEREST OF
SCUDDER HIGH YIELD BOND FUND,
A SEPARATE SERIES OF
SCUDDER PORTFOLIO TRUST (THE "ACQUIRING TRUST")
TWO INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110-4103
(800) [ ]
--------------------------
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to shareholders of
Kemper High Yield Opportunity Fund (the "Fund") in connection with three
proposals. Proposal 1 describes the election of Trustees and Proposal 3
proposes the ratification of the selection of the Fund's auditors.
In Proposal 2, shareholders are asked to vote on an Agreement and Plan
of Reorganization (the "Plan") pursuant to which all or substantially all of the
assets of the Fund would be acquired by Scudder High Yield Bond Fund, a fund
with similar investment characteristics and managed by the same investment
manager as the Fund, in exchange for shares of beneficial interest of Scudder
High Yield Bond Fund and the assumption by Scudder High Yield Bond Fund of all
of the liabilities of the Fund, as described more fully below (the
"Reorganization"). Shares of Scudder High Yield Bond Fund received would then
be distributed to the shareholders of the Fund in complete liquidation of the
Fund. As a result of the Reorganization, shareholders of the Fund will become
shareholders of Scudder High Yield Bond Fund and will receive shares of Scudder
High Yield Bond Fund in an amount equal to the value of their holdings in the
Fund as of the close of business on the business day preceding the closing of
the Reorganization (the "Valuation Date"). The closing of the Reorganization
(the "Closing") is contingent upon shareholder approval of the Plan. A copy of
the Plan is attached as Exhibit A. The Reorganization is expected to occur on
or about June 25, 2001.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES NOR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Proposals 1 and 2 arise out of a restructuring program proposed by
Scudder Kemper Investments, Inc. ("Scudder Kemper" or the "Investment Manager"),
the investment manager of both the Fund and
<PAGE>
Scudder High Yield Bond Fund, described in more detail below. The restructuring
program is designed to respond to changing industry conditions and investor
needs. Scudder Kemper seeks to consolidate its fund line-up and offer all of the
open-end funds it advises under the "Scudder" name. In addition, Scudder Kemper
anticipates changing its name to "Zurich Scudder Investments, Inc." Scudder
Kemper believes that the combination of its open-end, directly-distributed funds
(the "Scudder Funds") with the funds in the Kemper Family of Funds (the "Kemper
Funds") will permit it to streamline its administrative infrastructure and focus
its distribution efforts. The restructuring program will not result in any
reduction in the services currently offered to Kemper Funds shareholders.
In the descriptions of the Proposals below, the word "fund" is
sometimes used to mean an investment company or series thereof in general, and
not the Fund whose proxy statement this is. In addition, for simplicity,
actions are described in this Proxy Statement/Prospectus as being taken by
either the Fund or Scudder High Yield Bond Fund (which are collectively referred
to as the "Funds" and each referred to as a "Fund"), although all actions are
actually taken either by the Acquired Trust or the Acquiring Trust (together
with the Acquired Trust, the "Trusts"), on behalf of the applicable Fund.
Scudder High Yield Bond Fund and the Fund are diversified series of
shares of beneficial interest of the Acquiring Trust and the Acquired Trust,
respectively, which are open-end management investment companies organized as
Massachusetts business trusts.
This Proxy Statement/Prospectus sets forth concisely the information
about Scudder High Yield Bond Fund that a prospective investor should know
before investing and should be retained for future reference. For a more
detailed discussion of the investment objective, policies, restrictions and
risks of Scudder High Yield Bond Fund, see Scudder High Yield Bond Fund's
prospectus dated March 1, 2001, as supplemented from time to time, which is
included in the materials you received with this document and incorporated
herein by reference (meaning that it is legally part of this document). For a
more detailed discussion of the investment objective, policies, restrictions and
risks of the Fund, see the Fund's prospectus dated January 1, 2001, as
supplemented from time to time, which is also incorporated herein by reference
and a copy of which may be obtained upon request and without charge by calling
or writing the Fund at the telephone number or address listed above.
Also incorporated herein by reference is Scudder High Yield Bond
Fund's statement of additional information dated March 1, 2001, as supplemented
from time to time, which may be obtained upon request and without charge by
calling or writing Scudder High Yield Bond Fund at the telephone number or
address listed above. A Statement of Additional Information, dated March [ ],
2001, containing additional information about the Reorganization has been filed
with the Securities and Exchange Commission (the "SEC" or the "Commission") and
is incorporated by reference into this Proxy Statement/Prospectus. A copy of
this Statement of Additional Information is available upon request and without
charge by calling or writing Scudder High Yield Bond Fund at the telephone
number or address listed above. Shareholder inquiries regarding Scudder High
Yield Bond Fund may be made by calling (800) [ ] and shareholder
inquiries regarding the Fund may be made by calling (800) [ ]. The
information contained in this document concerning each Fund has been provided
by, and is included herein in reliance upon, that Fund.
The Board of Trustees that oversees the Fund is soliciting proxies
from shareholders of the Fund for the Special Meeting of Shareholders to be held
on May 24, 2001, at Scudder Kemper's offices, 13th Floor, Two International
Place, Boston, MA 02110-4103 at 4:00 p.m. (Eastern time), and at any and all
adjournments or postponements thereof (the "Meeting"). This Proxy
Statement/Prospectus, the Notice of
2
<PAGE>
Special Meeting and the proxy card(s) are first being mailed to shareholders on
or about March 6, 2001 or as soon as practicable thereafter.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THE NOMINEES LISTED IN PROPOSAL 1, AND FOR PROPOSALS 2 AND 3.
PROPOSAL 1: ELECTION OF TRUSTEES
At the Meeting, shareholders will be asked to elect eleven individuals
to constitute the Board of Trustees of the Acquired Trust. Shareholders are
being asked to elect these individuals to the Board of Trustees in case the
Plan, as described under Proposal 2, is not approved by shareholders. However,
if the Plan is approved, the current Board of Trustees of the Acquiring Trust
will oversee the operations of the combined fund (see "Synopsis - Other
Differences Between the Funds" under Proposal 2).
As discussed further below, Scudder Kemper commenced an initiative to
restructure and streamline the management and operations of the funds it
advises. In connection with that initiative, the Independent Trustees (as
defined below) of the two separate boards of Kemper Funds proposed to
consolidate into a single board. The eleven individuals who have been nominated
for election as Trustees of the Acquired Trust were nominated after careful
consideration by the present Board of Trustees. The nominees are listed below.
Seven of the nominees are currently Trustees of the Acquired Trust and three of
the nominees are currently trustees or directors of other Kemper Funds. One of
the nominees, although not currently a trustee or director of any Kemper Fund,
is a senior executive officer of Scudder Kemper. These eleven nominees are also
being nominated for election as trustees or directors of most of the other
Kemper Funds. The proposed slate of nominees reflects an effort to consolidate
the two separate boards who have historically supervised different Kemper Funds.
The proposed consolidation is expected to provide administrative efficiencies to
both the Funds and Scudder Kemper.
The persons named as proxies on the enclosed proxy card(s) will vote
for the election of the nominees named below unless authority to vote for any or
all of the nominees is withheld in the proxy. Each Trustee so elected will
serve as a Trustee commencing on July 1, 2001 and until the next meeting of
shareholders, if any, called for the purpose of electing Trustees and until the
election and qualification of a successor or until such Trustee sooner dies,
resigns or is removed as provided in the governing documents of the Acquired
Trust. Each of the nominees has indicated that he or she is willing to serve as
a Trustee. If any or all of the nominees should become unavailable for election
due to events not now known or anticipated, the persons named as proxies will
vote for such other nominee or nominees as the current Trustees may recommend.
The following tables present information about the nominees and the Trustees not
standing for re-election. Each nominee's or Trustee's date of birth is in
parentheses after his or her name. Unless otherwise noted, (i) each of the
nominees and Trustees has engaged in the principal occupation(s) noted in the
following tables for at least the most recent five years, although not
necessarily in the same capacity, and (ii) the address of each nominee is c/o
Scudder Kemper Investments, Inc., 222 South Riverside Plaza, Chicago, Illinois
60606.
3
<PAGE>
NOMINEES FOR ELECTION AS TRUSTEES:
<TABLE>
<CAPTION>
YEAR FIRST
BECAME A BOARD
NAME (DATE OF BIRTH), PRINCIPAL OCCUPATION AND AFFILIATIONS MEMBER
------------------------------------------------------------------------------
<S> <C>
John W. Ballantine (2/16/46),(1) Retired; formerly, First
Chicago NBD Corporation/The First National Bank of
Chicago: 1996-1998 Executive Vice President and Chief Risk
Management Officer; 1995-1996 Executive Vice President and
Head of International Banking. 1999
------------------------------------------------------------------------------
LEWIS A. BURNHAM (1/8/33),(1) Retired; formerly, Partner,
Business Resources Group; formerly, Executive Vice
President, Anchor Glass Container Corporation. 1977
------------------------------------------------------------------------------
LINDA C. COUGHLIN (1/1/52),*(2) Managing Director, Scudder
Kemper. 2000
------------------------------------------------------------------------------
DONALD L. DUNAWAY (3/8/37),(1) Retired; formerly, Executive
Vice President, A.O. Smith Corporation (diversified
manufacturer). 1980
------------------------------------------------------------------------------
JAMES R. EDGAR (7/22/46),(3) Distinguished Fellow,
University of Illinois Institute of Government and Public
Affairs; Director, Kemper Insurance Companies (not
affiliated with the Kemper Funds); formerly, Governor,
State of Illinois. Nominee
------------------------------------------------------------------------------
WILLIAM F. GLAVIN (8/30/58),* Managing Director, Scudder
Kemper. Nominee
------------------------------------------------------------------------------
ROBERT B. HOFFMAN (12/11/36),(1) Retired; formerly,
Chairman, Harnischfeger Industries, Inc. (machinery for
the mining and paper industries); formerly, Vice Chairman
and Chief Financial Officer, Monsanto Company
(agricultural, pharmaceutical and nutritional/food
products); formerly, Vice President, Head of International
Operations, FMC Corporation (manufacturer of machinery and
chemicals); Director, Harnischfeger Industries, Inc. 1981
------------------------------------------------------------------------------
SHIRLEY D. PETERSON (9/3/41),(1) Retired; formerly,
President, Hood College; formerly, Partner, Steptoe &
Johnson (attorneys); prior thereto, Commissioner, Internal
Revenue Service; prior thereto, Assistant Attorney General
(Tax), U.S. Department of Justice; Director, Bethlehem
Steel Corp. 1995
------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST
BECAME A BOARD
NAME (DATE OF BIRTH), PRINCIPAL OCCUPATION AND AFFILIATIONS MEMBER
------------------------------------------------------------------------------
<S> <C>
FRED B. RENWICK (2/1/30),(3) Professor of Finance, New York
University, Stern School of Business; Director, the
Wartburg Foundation; Chairman, Investment Committee of
Morehouse College Board of Trustees; Director, American
Bible Society Investment Committee; previously member of
the Investment Committee of Atlanta University Board of
Trustees; formerly Director of Board of Pensions
Evangelical Lutheran Church in America. Nominee
------------------------------------------------------------------------------
WILLIAM P. SOMMERS (7/22/33),(1) Consultant and Director,
SRI Consulting; prior thereto, President and Chief
Executive Officer, SRI International (research and
development); prior thereto, Executive Vice President,
Iameter (medical information and educational service
provider); prior thereto, Senior Vice President and
Director, Booz, Allen & Hamilton Inc. (management
consulting firm); Director, PSI Inc., Evergreen Solar,
Inc. and Litton Industries. 1979
------------------------------------------------------------------------------
JOHN G. WEITHERS (8/8/33),(3) Formerly, Chairman of the
Board and Chief Executive Officer, Chicago Stock Exchange;
Director, Federal Life Insurance Company; President of the
Members of the Corporation and Trustee, DePaul University. Nominee
------------------------------------------------------------------------------
</TABLE>
* Interested person of the Acquired Trust, as defined in the Investment
Company Act of 1940, as amended (the "1940 Act").
(1) Messrs. Ballantine, Burnham, Dunaway, Hoffman, Sommers and Ms. Peterson
serve as board members of 26 investment companies, with 45 portfolios
managed by Scudder Kemper.
(2) Ms. Coughlin serves as a board member of 52 investment companies with 97
portfolios managed by Scudder Kemper.
(3) Messrs. Edgar, Renwick and Weithers serve as board members of 16 investment
companies with 58 portfolios managed by Scudder Kemper.
TRUSTEES NOT STANDING FOR RE-ELECTION:
<TABLE>
<CAPTION>
Present Office with the Acquired Trust;
Principal Occupation or Employment
Name (Date of Birth) and Directorships
---------------------------------------------- -----------------------------------------------
<S> <C>
DONALD R. JONES (1/17/30) Trustee; Retired; Director, Motorola, Inc.
(manufacturer of electronic equipment and
components); formerly, Executive Vice
President and Chief Financial Officer,
Motorola, Inc.
-----------------------------------------------------------------------------------------------
THOMAS W. LITTAUER (4/26/55)* Chairman, Trustee and Vice President; Managing
Director, Scudder Kemper; formerly, Head of
Broker Dealer Division of Putnam Investment
Management; formerly, President of Client
Management Services for Fidelity Investments.
-----------------------------------------------------------------------------------------------
</TABLE>
* Interested person of the Acquired Trust, as defined in the 1940 Act.
Appendix 1 lists the number of shares of each series of the Acquired Trust
owned directly or beneficially by the Trustees and by the nominees for election.
5
<PAGE>
RESPONSIBILITIES OF THE BOARD OF TRUSTEES -- BOARD AND COMMITTEE MEETINGS
The primary responsibility of the Board is to represent the interests of the
shareholders of the Fund and to provide oversight of the management of the Fund.
The board that is proposed for election at this Meeting is comprised of two
individuals who are considered "interested" Trustees, and nine individuals who
have no affiliation with Scudder Kemper and who are not considered "interested"
Trustees (the "Independent Trustees"). The SEC has recently proposed a rule
that would require a majority of the board members of a fund to be "independent"
if the fund were to take advantage of certain exemptive rules under the 1940
Act. If the proposed Board of Trustees is approved by shareholders, more than
75% will be Independent Trustees. The Independent Trustees have been selected
and nominated solely by the current Independent Trustees of the Acquired Trust.
The Trustees meet multiple times during the year to review the investment
performance of the Fund and other operational matters, including policies and
procedures designed to assure compliance with regulatory and other requirements.
Furthermore, the Independent Trustees review the fees paid to the Investment
Manager and its affiliates for investment advisory services and other
administrative and shareholder services. The Trustees have adopted specific
policies and guidelines that, among other things, seek to further enhance the
effectiveness of the Independent Trustees in performing their duties. Many of
these are similar to those suggested in the Investment Company Institute's 1999
Report of the Advisory Group on Best Practices for Fund Directors (the "Advisory
Group Report"). For example, the Independent Trustees select independent legal
counsel to work with them in reviewing fees, advisory and other contracts and
overseeing fund matters, and regularly meet privately with their counsel.
Currently, the Board of Trustees has an Audit Committee and a Nominating and
Governance Committee, the responsibilities of which are described below. In
addition, the Board has a Valuation Committee and a Contract Renewal Committee.
During calendar year 2000, the Board of Trustees met eight times. Each then
current Trustee attended 75% or more of the respective meetings of the Board and
the Committees (if a member thereof) held during calendar year 2000.
AUDIT COMMITTEE
The Audit Committee makes recommendations regarding the selection of
independent auditors for the Fund, confers with the independent auditors
regarding the Fund's financial statements, the results of audits and related
matters, and performs such other tasks as the full Board of Trustees deems
necessary or appropriate. As suggested by the Advisory Group Report, the Audit
Committee is comprised of only Independent Trustees, receives annual
representations from the auditors as to their independence, and has a written
charter that delineates the committee's duties and powers. Currently, the
members of the Audit Committee are Donald L. Dunaway (Chairman), Robert B.
Hoffman and Donald R. Jones. The Audit Committee held five meetings during
calendar year 2000.
6
<PAGE>
NOMINATING AND GOVERNANCE COMMITTEE
The Board of Trustees has a Nominating and Governance Committee, comprised of
only Independent Trustees, that seeks and reviews candidates for consideration
as nominees for membership on the Board and oversees the administration of the
Acquired Trust's Governance Procedures and Guidelines. The Nominating and
Governance Committee has a written charter that delineates the committee's
duties and powers. Shareholders wishing to submit the name of a candidate for
consideration by the committee should submit their recommendation(s) to the
Secretary of the Fund. Currently, the members of the Nominating and Governance
Committee are Lewis A. Burnham (Chairman), John W. Ballantine, Shirley D.
Peterson and William P. Sommers. The Nominating and Governance Committee held
one meeting during calendar year 2000.
OFFICERS
The following persons are officers of the Acquired Trust:
<TABLE>
<CAPTION>
Present Office with the Acquired
Trust; Principal Occupation or
Name (Date of Birth) Employment Year First Became an Officer/(1)/
--------------------------------- -------------------------------- ----------------------------------
<S> <C> <C>
Mark S. Casady (9/21/60) President; Managing Director, 1998
Scudder Kemper; formerly,
Institutional Sales Manager of
an unaffiliated mutual fund
distributor.
---------------------------------------------------------------------------------------------------------
Philip J. Collora (11/15/45) Vice President and Secretary; 1989
Attorney, Senior Vice President,
Scudder Kemper.
---------------------------------------------------------------------------------------------------------
Thomas W. Littauer (4/26/55) Vice President, Chairman and 1998
Trustee; Managing Director,
Scudder Kemper; formerly, Head of
Broker Dealer Division of an
unaffiliated investment
management firm during 1997;
prior thereto, President of
Client Management Services of an
unaffiliated investment
management firm from 1991 to 1996.
---------------------------------------------------------------------------------------------------------
Kathryn L. Quirk (12/3/52) Vice President; Managing 1998
Director, Scudder Kemper.
---------------------------------------------------------------------------------------------------------
Harry E. Resis, Jr. Vice President; Managing 1993
Director, Scudder Kemper.
---------------------------------------------------------------------------------------------------------
</TABLE>
--------------------
/(1)/ The President, Treasurer and Secretary each holds office until the first
meeting of Trustees in each calendar year and until his or her successor
has been duly elected and qualified, and all other officers hold offices
as the Trustees permit in accordance with the By-laws of the Acquired
Trust.
7
<PAGE>
<TABLE>
<CAPTION>
Present Office with the Acquired
Trust; Principal Occupation or
Name (Date of Birth) Employment Year First Became an Officer/(1)/
--------------------------------- -------------------------------- ----------------------------------
<S> <C> <C>
Linda J. Wondrack (9/12/64) Vice President; Senior Vice 1998
President, Scudder Kemper.
---------------------------------------------------------------------------------------------------------
John R. Hebble (6/27/58) Treasurer; Senior Vice President, 1998
Scudder Kemper.
---------------------------------------------------------------------------------------------------------
Brenda Lyons (2/21/63) Assistant Treasurer; Senior Vice 1998
President, Scudder Kemper.
---------------------------------------------------------------------------------------------------------
Maureen E. Kane (2/14/62) Assistant Secretary; Vice 1998
President, Scudder Kemper;
formerly, Assistant Vice
President of an unaffiliated
investment management firm; prior
thereto, Associated Staff
Attorney of an unaffiliated
investment management firm and
Associate, Peabody & Arnold (law
firm).
---------------------------------------------------------------------------------------------------------
Caroline Pearson (4/1/62) Assistant Secretary; Senior Vice 1998
President, Scudder Kemper;
formerly, Associate, Dechert
Price & Rhoads (law firm) from
1989-1997.
---------------------------------------------------------------------------------------------------------
</TABLE>
COMPENSATION OF TRUSTEES AND OFFICERS
The Fund pays the Independent Trustees a monthly retainer and an attendance
fee, plus expenses, for each Board meeting and committee meeting attended. As
reflected below, the Trustees currently serve as board members of various other
Kemper Funds. Scudder Kemper supervises the Fund's investments, pays the
compensation and expenses of its personnel who serve as Trustees and officers on
behalf of the Fund and receives a management fee for its services. Several of
the officers and Trustees are also officers, directors, employees or
stockholders of Scudder Kemper and participate in the fees paid to that firm,
although the Fund makes no direct payments to them.
To facilitate the restructuring of the boards of the Kemper Funds, certain
Independent Trustees agreed not to stand for re-election. Independent Trustees
of the Acquired Trust are not entitled to benefits under any pension or
retirement plan. However, the Board of each Kemper Fund determined that,
particularly given the benefits that would accrue to the Kemper Funds from the
restructuring of the boards, it was appropriate to provide the four Independent
Trustees who were not standing for re-election for various Kemper Funds a one-
time benefit. The cost of such benefit is being allocated among all the Kemper
Funds, with Scudder Kemper agreeing to bear one-half of the cost of such
benefit, given that Scudder Kemper also benefits from administrative
efficiencies of a consolidated board. Mr. Jones, an Independent Trustee of the
Acquired Trust who is not standing for re-election, will receive such a one-time
benefit. The amount received on behalf of each fund for which he serves as a
trustee ranges from $1,071 to $8,078.
8
<PAGE>
The following Compensation Table provides in tabular form the following data:
Column (1) All Trustees who receive compensation from the Fund.
Column (2) Aggregate compensation received by each Trustee from the Fund
during calendar year 2000.
Column (3) Total compensation received by each Trustee from funds advised by
Scudder Kemper (collectively, the "Fund Complex") during calendar year 2000.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Aggregate Compensation Total Compensation From
Name of Trustee from Fund Fund Complex(2)(3)
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
John W. Ballantine $ [ ] $ [ ]
---------------------------------------------------------------------------------------------------------
Lewis A. Burnham $ [ ] $ [ ]
---------------------------------------------------------------------------------------------------------
Donald L. Dunaway(1) $ [ ] $ [ ]
---------------------------------------------------------------------------------------------------------
Robert B. Hoffman $ [ ] $ [ ]
---------------------------------------------------------------------------------------------------------
Donald R. Jones $ [ ] $ [ ]
---------------------------------------------------------------------------------------------------------
Shirley D. Peterson $ [ ] $ [ ]
---------------------------------------------------------------------------------------------------------
William P. Sommers $ [ ] $ [ ]
---------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes deferred fees. Pursuant to deferred compensation agreements with
the Fund, deferred amounts accrue interest monthly at a rate equal to the
yield of Zurich Money Funds -- Zurich Money Market Fund. Total deferred
fees (including interest thereon) payable from the Fund to Mr. Dunaway are
$_______.
(2) Includes compensation for service on the boards of [ ] Kemper
trusts/corporations comprised of [ ] funds. Each trustee currently serves
on the boards of [ ] Kemper trusts/corporations comprised of [ ] funds.
(3) Aggregate compensation does not reflect amounts paid to the Trustees for
special meetings in connection with the Scudder Kemper restructuring
initiative. Such amounts totaled [$_______, $_______, $_______, $_______,
$_______, $_______ and $_______ for Messrs. Ballantine, Burnham, Dunaway,
Hoffman, Jones, Sommers and Ms. Peterson,] respectively.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS
THAT THE SHAREHOLDERS OF THE FUND VOTE FOR EACH NOMINEE.
PROPOSAL 2: APPROVAL OF AGREEMENT
AND PLAN OF REORGANIZATION
I. SYNOPSIS
INTRODUCTION
The Board of Trustees, including all of the Independent Trustees, approved the
Plan at a meeting held on November 29, 2000. Subject to its approval by the
shareholders of the Fund, the Plan provides for (a) the transfer of all or
substantially all of the assets and all of the liabilities of the Fund to
Scudder
9
<PAGE>
High Yield Bond Fund in exchange for Class A, Class B and Class C shares of
Scudder High Yield Bond Fund; (b) the distribution of such shares to the
shareholders of the Fund in complete liquidation of the Fund; and (c) the
termination of the Fund. As a result of the Reorganization, each shareholder of
the Fund will become a shareholder of Scudder High Yield Bond Fund, a fund with
similar investment characteristics and managed by the same investment manager as
the Fund. Immediately after the Reorganization, each shareholder of the Fund
will hold shares of the class of shares of Scudder High Yield Bond Fund that
corresponds to the class of shares of the Fund held by that shareholder on the
Valuation Date, having an aggregate net asset value equal to the aggregate net
asset value of such shareholder's shares of the Fund on the Valuation Date.
Scudder Kemper is the investment manager of both Funds. If the Reorganization
is completed, the Fund's shareholders will continue to enjoy all of the same
shareholder privileges as they currently enjoy, such as access to professional
service representatives, exchange privileges and automatic dividend
reinvestment. Services provided to the Class A, Class B and Class C
shareholders of Scudder High Yield Bond Fund following the Reorganization will
be identical to those currently provided to shareholders of the corresponding
class of the Fund. See "Purchase, Redemption and Exchange Information."
BACKGROUND OF THE REORGANIZATION
The Reorganization is part of a broader restructuring program to respond to
changing industry conditions and investor needs. The mutual fund industry has
grown dramatically over the last ten years. During this period of rapid growth,
investment managers expanded the range of fund offerings that are available to
investors in an effort to meet the growing and changing needs and desires of an
increasingly large and dynamic group of investors. With this expansion has come
increased complexity and competition among mutual funds, as well as the
potential for increased confusion among investors. The group of funds advised
by Scudder Kemper has followed this pattern.
As a result, Scudder Kemper has sought ways to restructure and streamline the
management and operations of the funds it advises by consolidating all of the
retail mutual funds that it currently sponsors into a single product line
offered under the "Scudder" name. Scudder Kemper believes, and has advised the
boards, that further reducing the number of funds it advises and adding the
classes of shares currently offered on all Kemper Funds to the Scudder Funds
will benefit fund shareholders. Scudder Kemper has, therefore, proposed the
combination of many Scudder Funds and Kemper Funds that have similar or
compatible investment objectives and policies. Scudder Kemper believes that the
larger funds, along with the fewer number of funds, that result from these
combinations may help to enhance investment performance and increase efficiency
of operations. The restructuring program will not result in any changes in the
shareholder services currently offered to shareholders of the Kemper Funds.
Most of the Scudder Funds have recently adopted a new fee structure for
certain administrative services. Under this fee structure, in exchange for
payment by a fund of a single administrative fee rate, Scudder Kemper provides
or pays for substantially all services that the fund normally requires for its
operations, other than those provided under the fund's investment management
agreement and certain other expenses. This administrative fee enables investors
to determine with greater certainty the expense level that a fund will
experience, and, for the term of the administration agreement, transfers
substantially all of the risk of increased costs to Scudder Kemper. Likewise,
Scudder Kemper receives all of the benefits of economies of scale from increases
in asset size or decreased operating expenses. Scudder High Yield Bond Fund has
implemented such an administrative fee, as described in "Administrative Fee"
10
<PAGE>
below. As part of the restructuring effort, Scudder Kemper has proposed
extending this administrative fee structure to those funds currently offered
under the Kemper name.
The fund consolidations and the consolidation of the boards currently
overseeing the Kemper Funds (see Proposal 1 above) are expected to have a
positive impact on Scudder Kemper, as well. These changes are likely to result
in reduced costs (and the potential for increased profitability) for Scudder
Kemper in advising or servicing funds.
REASONS FOR THE PROPOSED REORGANIZATION; BOARD APPROVAL
Since receiving Scudder Kemper's proposals on May 24, 2000, the Independent
Trustees have conducted a thorough review of all aspects of the proposed
restructuring program. They have been assisted in this regard by their
independent counsel and by independent consultants with special expertise in
financial and mutual fund industry matters. In the course of discussions with
representatives of Scudder Kemper, the Independent Trustees have requested, and
Scudder Kemper has accepted, numerous changes designed to protect and enhance
the interests of shareholders. See "The Proposed Transaction - Board Approval
of the Proposed Transaction" below.
In determining whether to recommend that the shareholders of the Fund
approve the Reorganization, the Board of Trustees considered that:
. As part of Scudder Kemper's overall restructuring, the Fund would be
duplicative of another similar fund advised by Scudder Kemper in the
same distribution channel.
. The combined fund would adopt an investment management fee schedule
that, at all asset levels, is lower than the current rate applicable to
the Fund.
. The fixed fee rate under the Administration Agreement is expected to be
less than the estimated current applicable operating expenses the Fund
would otherwise pay.
. It is a condition of the Reorganization that each Fund receive an
opinion of tax counsel that the transaction would be a tax-free
transaction.
. Although the Fund agreed to pay the estimated costs of the
Reorganization allocated to each class of shares, management has
estimated that such allocated costs will be recoverable from lower
overall expense rates within four months of completion of the
Reorganization. Scudder Kemper agreed to pay all of the costs of the
Reorganization that exceed estimated costs.
For these reasons, as more fully described below under "The Proposed
Transaction -- Board Approval of the Proposed Transaction," the Board of
Trustees, including the Independent Trustees, has concluded that:
. the Reorganization is in the best interests of the Fund and its
shareholders; and
. the interests of the existing shareholders of the Fund will not be
diluted as a result of the Reorganization.
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<PAGE>
ACCORDINGLY, THE TRUSTEES UNANIMOUSLY RECOMMEND APPROVAL OF THE PLAN EFFECTING
THE REORGANIZATION. If the Plan is not approved, the Fund will continue in
existence unless other action is taken by the Trustees.
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS OF THE FUNDS
This section will help you compare the investment objectives and policies of
the Fund and Scudder High Yield Bond Fund. Please be aware that this is only a
summary. More complete information may be found in the Funds' prospectuses.
The investment objectives, policies and restrictions of the Funds are
similar. Some differences do exist. The investment objective of Scudder High
Yield Bond Fund is to seek to provide high income and, secondarily, capital
appreciation. The investment objective of the Fund is to seek total return
through high current income and capital appreciation. [Both Funds are managed in
a substantially similar manner]. There can be no assurance that either Fund will
achieve its investment objective.
Each Fund invests mainly in lower rated, higher yielding corporate bonds of
U.S. issuers, often called junk bonds (i.e., bonds rated BB/Ba and below by
Moody's Investors Service, Inc. or Standard & Poor's Ratings Service).
Typically, the Fund invests approximately 80-90% of its total assets in high
yield, fixed-income securities. Scudder High Yield Bond Fund may invest up to
35% of its total assets in bonds of higher credit quality (i.e., rated BBB/Baa
and above), but normally invests less than 35% in such bonds. Scudder High
Yield Bond Fund normally invests at least 65% of its total assets in U.S. junk
bonds. Each Fund may invest up to 25% of its total assets in bonds of foreign
issuers. In seeking to enhance total return, the Fund may invest up to 20% of
its total assets in common stocks and other equities, including preferred
stocks, convertible securities and real estate investment trusts (REITs), while
Scudder High Yield Bond Fund may also invest in such equity securities, among a
variety of other securities, consistent with its investment objective of
providing high income.
While the Investment Manager may adjust each Fund's duration (a measure of
sensitivity to interest rate movements), the Investment Manager generally
intends to keep it between four and eight years for Scudder High Yield Bond
Fund. The Fund does not have a stated duration range; the Investment Manager
adjusts the Fund's duration depending on its outlook for interest rates. Also,
while the Funds are permitted to use various types of derivatives (contracts
whose value is based on, for example, indices, commodities or securities), the
Investment Manager does not intend to use them as principal investments and
might not use them at all.
In deciding which securities to buy and sell for each Fund, the Investment
Manager relies on extensive independent analysis of issuers' creditworthiness.
Bonds of companies whose credit is gaining strength or which are deemed unlikely
to default are sought for the Fund, while Scudder High Yield Bond Fund seeks
bonds from three types of issuers: (i) young, growing companies that seem to
have good business prospects and whose credit is gaining strength; (ii)
companies that have stable or growing cash flows and appear able to improve
their balance sheets; and (iii) established companies that may have been through
setbacks but now look to be regaining their financial health, perhaps in
conjunction with some type of positive restructuring. For the Fund, the
Investment Manager also seeks to take advantage of special opportunities by
investing in stocks of high yield issuers, including initial public offerings of
stock (IPOs). Based on analysis of economic and market trends, the Investment
Manager may, with respect to each Fund, favor bonds from different segments of
the economy at different times, while still maintaining
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<PAGE>
variety in terms of the companies and industries represented. For example, in
the case of the Fund, the Investment Manager typically favors subordinated debt
(which has higher risks and may pay higher returns), but may emphasize senior
debt if the Manager expects an economic slowdown.
The Funds' fundamental investment restrictions, as set forth under
"Investment Restrictions" in each Fund's statement of additional information,
are identical. Fundamental investment restrictions may not be changed without
the approval of Fund shareholders. The Funds' non-fundamental investment
restrictions (i.e., those changeable by the Board without shareholder approval),
as set forth under "Investment Restrictions" in each Fund's statement of
additional information, are identical, except that (i) Scudder High Yield Bond
Fund cannot, with certain exceptions, borrow money in an amount greater than 5%
of its total assets, while the limit applicable to the Fund is 20% of total
assets; (ii) Scudder High Yield Bond Fund may not lend portfolio securities in
an amount greater than 5% of its total assets whereas the Fund may lend up to
one-third of its total assets; and (iii) the Fund, and not Scudder High Yield
Bond Fund, has a stated restriction limiting the Fund's investments in illiquid
securities to no more than 15% of its net assets. Both Funds are, however,
subject to such a restriction pursuant to applicable regulation. Investors
should refer to each Fund's statement of additional information for a fuller
description of the Fund's investment policies and restrictions.
PORTFOLIO TURNOVER
The portfolio turnover rate for Scudder High Yield Bond Fund, i.e., the ratio
of the lesser of annual sales or purchases to the monthly average value of the
portfolio (excluding from both the numerator and the denominator securities with
maturities at the time of acquisition of one year or less), for the fiscal year
ended January 31, 2001 was [ ]%. The portfolio turnover rate for the Fund for
the fiscal year ended September 30, 2000 was 66%. [A higher portfolio turnover
rate involves greater brokerage and transaction expenses to a fund and may
result in the realization of net capital gains, which would be taxable to
shareholders when distributed.]
COMPARATIVE CONSIDERATIONS
The portfolio characteristics of the combined Fund after the Reorganization
will reflect the blended characteristics of the Fund and Scudder High Yield Bond
Fund. The following characteristics are as of ____, 2000 for both Funds and
also reflect the blended characteristics of both Funds after the Reorganization
as of that same date.
<TABLE>
<CAPTION>
%
AVG. AVG. INVESTED
MATURITY DURATION IN PORTFOLIO QUALITY(3)
YIELD(1) (YEARS)(2) (YEARS)(2) EQUITIES -------------------------------------------------
BBB AND BB B BELOW B UNRATED
ABOVE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund
Scudder High
Yield Bond
Fund
New (Pro
forma)(4)
-----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The yield provided for the Fund represents the yield for its Class A shares
and the yield provided for Scudder High Yield Bond Fund represents the yield for
its Class S shares, for the 30 days ended ____________, 2000. The yield is
computed by dividing the net investment income per share earned during a
specified one month or 30-day period by the maximum offering price per share on
the last day of the period. In the case of the Class S shares of Scudder High
Yield Bond Fund, the maximum offering price was calculated using the up-front
sales charge [and
13
<PAGE>
the current expense ratio] applicable to the Fund's Class A shares. The pro
forma yield reflects the Class A shares up-front sales charge and estimated
expense ratio of the combined Fund, giving effect to the Reorganization, and,
therefore, is not necessarily indicative of the actual yield to any particular
shareholder. The yield for other classes of shares would vary.
(2) Both dollar-weighted average maturity and duration reflect the sensitivity
of a Fund to interest rate fluctuations. The average dollar-weighted maturity
of a Fund is the dollar-weighted average of the stated maturities of all debt
instruments held by the Fund. Duration is the weighted present value of
principal and interest payments expressed in years and may more accurately
measure a Fund's sensitivity to incremental changes in interest rates than
average maturity. Other factors being equal (e.g., portfolio quality), a Fund
with a longer maturity and duration reacts more strongly to interest rate
changes than a Fund with a shorter maturity and duration. For example, a Fund
with a duration of five (5) years is expected to experience a price decrease of
roughly five percent (5%) for each percent increase in interest rates while a
comparable Fund with a duration of four (4) years is expected to experience a
price decrease of roughly four percent (4%) for the same change in interest
rates.
(3) Represents the higher of ratings by Moody's and S&P. See Annex A to the
Statement of Additional Information for a general description of Moody's and
S&P's ratings.
(4) Reflects the blended characteristics of the Fund and Scudder High Yield
Bond Fund as of ______________, 2000.
PERFORMANCE
The following table shows how the returns of the Fund and Scudder High Yield
Bond Fund over different periods average out. For context, the table also
includes a broad-based market index (which, unlike the Funds, does not have any
fees or expenses). The performances of both Funds and the index vary over time,
and past performance is not necessarily indicative of future results. All
figures assume reinvestment of dividends and distributions.
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDED DECEMBER 31, 2000
[Insert Table]
For management's discussion of Scudder High Yield Bond Fund's performance for
the fiscal year ended January 31, 2001, please refer to Exhibit B.
INVESTMENT MANAGER; FEES AND EXPENSES
Each Fund retains the investment management firm of Scudder Kemper, pursuant
to separate contracts, to manage its daily investment and business affairs,
subject to the policies established by each Fund's Trustees. Scudder Kemper is
a Delaware corporation located at Two International Place, Boston, Massachusetts
02110-4103.
Pursuant to separate contracts, each Fund pays the Investment Manager a
graduated investment management fee, although the fee rates and breakpoints
differ. The fee is graduated so that increases in a Fund's net assets may
result in a lower annual fee rate and decreases in its net assets may result in
a higher annual fee rate. As of January 31, 2001, Scudder High Yield Bond Fund
had total net assets of $[ ]. For the fiscal year ended January 31,
2001, Scudder High Yield Bond Fund paid the Investment Manager a fee of [ ]% of
its average daily net assets. As of September 30, 2000, the Fund had total net
assets of $22,386,702. For the fiscal year ended September 30, 2000, the Fund
paid the Investment Manager a fee of 0.65% of its average daily net assets.
14
<PAGE>
Currently the fee schedules for the Fund and Scudder High Yield Bond Fund are
as follows:
<TABLE>
<CAPTION>
FUND SCUDDER HIGH YIELD BOND FUND
-------------------------------------------------------------------------------------------------------------
Average Daily Net Assets Fee Rate Average Daily Net Assets Fee Rate
------------------------------------- ------------- ------------------------------------- -------------
<S> <C> <C> <C>
First $250 million 0.65% First $500 million 0.600%
Next $750 million 0.62% Next $500 million 0.575%
Next $1.5 billion 0.60% Over $1 billion 0.550%
Next $2.5 billion 0.58%
Next $2.5 billion 0.55%
Next $2.5 billion 0.53%
Next $2.5 billion 0.51%
Over $12.5 billion 0.49%
-------------------------------------------------------------------------------------------------------------
</TABLE>
Scudder Kemper has proposed that Scudder High Yield Bond Fund adopt a new
investment management fee schedule, that, at all asset levels, is lower than the
fee schedule for the Fund, as shown in the table below:
<TABLE>
<CAPTION>
COMBINED FUND
---------------------------------------------------
Average Daily Net Assets Fee Rate
------------------------------------- -------------
<S> <C>
First $500 million 0.600%
Next $500 million 0.575%
Next $500 million 0.550%
Next $500 million 0.525%
Next $1 billion 0.500%
Over $3 billion 0.475%
---------------------------------------------------
</TABLE>
The effectiveness of the new investment management agreement for Scudder High
Yield Bond Fund and the Closing are contingent upon each other. Based upon each
Fund's average net assets for the twelve month period ended September 30, 2000,
the effective advisory fee rate for Scudder High Yield Bond Fund after the
Reorganization would be 0.60% of average daily net assets, giving effect to the
proposed new investment management agreement.
ADMINISTRATIVE FEE
Scudder High Yield Bond Fund has entered into an administration agreement with
Scudder Kemper (the "Administration Agreement"), pursuant to which Scudder
Kemper provides or pays others to provide substantially all of the
administrative services required by the Class A, Class B and Class C shares of
Scudder High Yield Bond Fund (other than those provided by Scudder Kemper under
its investment management agreement with that Fund) in exchange for the payment
by Scudder High Yield Bond Fund of an annual administrative services fee (the
"Administrative Fee") equal to 0.325%, 0.375% and 0.35% of average daily net
assets attributable to the Class A, Class B and Class C shares, respectively.
The fees for the services provided by Kemper Distributors, Inc. ("KDI") under
its current services agreement and underwriting and distribution agreement with
Scudder High Yield Bond Fund are not covered by, and are in addition to, the
Administrative Fee. One effect of this arrangement is to make Scudder High
Yield Bond Fund's future expense ratio more predictable. On the other hand, the
administrative fee rate does not decrease with economies of scale from increases
in asset size or decreased operating expenses. The details of this arrangement
(including expenses that are not covered) are set out below.
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<PAGE>
Various service providers (the "Service Providers"), some of which are
affiliated with Scudder Kemper, provide certain services to Scudder High Yield
Bond Fund pursuant to separate agreements. These Service Providers may differ
from current Service Providers of the Fund. Scudder Fund Accounting
Corporation, a subsidiary of Scudder Kemper, computes net asset value for
Scudder High Yield Bond Fund and maintains its accounting records. Kemper
Service Company, also a subsidiary of Scudder Kemper, is the transfer,
shareholder servicing and dividend-paying agent for the Class A, Class B and
Class C shares of Scudder High Yield Bond Fund. Scudder Trust Company, an
affiliate of Scudder Kemper, provides subaccounting and recordkeeping services
for shareholder accounts in certain retirement and employee benefit plans. As
custodian, State Street Bank and Trust Company ("State Street") holds the
portfolio securities of Scudder High Yield Bond Fund, pursuant to a custodian
agreement. Other Service Providers include the independent public accountants
and legal counsel for Scudder High Yield Bond Fund.
Under the Administration Agreement, each Service Provider provides the
services to Scudder High Yield Bond Fund described above, except that Scudder
Kemper pays these entities for the provision of their services to Scudder High
Yield Bond Fund and pays most other fund expenses, including insurance,
registration, printing and postage fees. In return, Scudder High Yield Bond
Fund pays Scudder Kemper the Administrative Fee.
The Administration Agreement will remain in effect with respect to the Class
A, Class B and Class C shares for an initial term ending September 30, 2003,
subject to earlier termination by the trustees that oversee Scudder High Yield
Bond Fund. The Administration Agreement shall continue in effect on an annual
basis after September 30, 2003, provided that such continuance is approved at
least annually by a majority of the trustees, including the Independent
Trustees, that oversee Scudder High Yield Bond Fund. The fee payable by Scudder
High Yield Bond Fund to Scudder Kemper pursuant to the Administration Agreement
is reduced by the amount of any credit received from Scudder High Yield Bond
Fund's custodian for cash balances.
Certain expenses of Scudder High Yield Bond Fund are not borne by Scudder
Kemper under the Administration Agreement, such as taxes, brokerage, interest
and extraordinary expenses, and the fees and expenses of the Independent
Trustees (including the fees and expenses of their independent counsel).
Scudder High Yield Bond Fund continues to pay the fees required by its
investment management agreement with Scudder Kemper. In addition, it pays the
fees under its services agreement and underwriting and distribution services
agreement with KDI, as described in "Distribution and Service Fees" below.
COMPARISON OF EXPENSES
The tables and examples below are designed to assist you in understanding the
various costs and expenses that you will bear directly or indirectly as an
investor in the Class A, Class B and Class C shares of Scudder High Yield Bond
Fund, and compares these with the expenses of the Fund. [COMPARATIVE STATEMENT
TO BE INSERTED REGARDING EXPENSES.] Unless otherwise noted, the information is
based on each Fund's expenses and average daily net assets during the twelve
months ended September 30, 2000 and on a pro forma basis as of that date and for
the twelve month period then ended, assuming the Reorganization had been in
effect for the period.
16
<PAGE>
EXPENSE COMPARISON TABLE
CLASS A SHARES
<TABLE>
<CAPTION>
SCUDDER
HIGH YIELD PRO FORMA
SHAREHOLDER FEES FUND BOND FUND (COMBINED)(1)
--------------------------------------------- ------------ --------------------- -------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on 4.50% 4.50% 4.50%
Purchases (as % of offering price)
Maximum Contingent Deferred Sales Charge None None None
(Load) (as % of redemption proceeds)(2)
Maximum Deferred Sales Charge (Load) imposed None None None
on reinvested dividends
Redemption Fee (as a percentage of amount None None None
redeemed, if applicable)
ANNUAL FUND OPERATING EXPENSES (unaudited)
------------------------------
(as a % of average net assets)
------------------------------
Management Fees 0.65% 0.60%(4) 0.60%
Rule 12b-1/ASF Fees 0.22% 0.25% 0.22%
Other Expenses 1.03% 0.33%(5) 0.33%
Total Annual Fund Operating Expenses 1.90% 1.18% 1.15%
EXPENSE EXAMPLE OF TOTAL OPERATING EXPENSES
-------------------------------------------
AT THE END OF THE PERIOD(3)
------------------------
One Year $ 634 $ 565 $ 562
Three Years $1,020 $ 808 $ 799
Five Years $1,430 $1,070 $1,054
Ten Years $2,572 $1,817 $1,785
</TABLE>
Notes to Expense Comparison Table:
----------------------------------
(1) The Pro Forma column reflects expenses estimated for the Reorganized Fund
subsequent to the Reorganization and reflects the effect of the
Reorganization, including the implementation of Scudder High Yield Bond
Fund's new investment management agreement, its Administration Agreement
and the adoption of a distribution plan.
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<PAGE>
(2) Class A shares purchased under the Large Order NAV Purchase Privilege have
a 1% contingent deferred sales charge if sold during the first year after
purchase and .50% if sold during the second year after purchase.
(3) Expense examples reflect what an investor would pay on a $10,000
investment, assuming a 5% annual return, the reinvestment of all dividends,
total operating expenses remain the same and redemptions at the end of each
period.
(4) Restated to reflect the implementation of Scudder High Yield Bond Fund's
new investment management agreement.
(5) Restated to reflect the implementation of Scudder High Yield Bond Fund's
Administration Agreement.
EXPENSE COMPARISON TABLE
CLASS B SHARES
<TABLE>
<CAPTION>
SCUDDER
HIGH YIELD PRO FORMA
FUND BOND FUND (COMBINED)(1)
------------ ---------------------- --------------------
SHAREHOLDER FEES
----------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases None None None
(as % of offering price)
Maximum Contingent Deferred Sales Charge (Load) 4.00% 4.00% 4.00%
(as % of redemption proceeds)(2)
Maximum Deferred Sales Charge (Load) imposed on - None None None
reinvested dividends
Redemption Fee (as a percentage of amount None None None
redeemed, if applicable)
ANNUAL FUND OPERATING EXPENSES (unaudited)
------------------------------
(as a % of average net assets)
------------------------------
Management Fees 0.65% 0.60%(4) 0.60%
Rule 12b-1/ASF Fees 1.00% 1.00% 1.00%
Other Expenses 1.01% 0.38%(5) 0.38%
Total Annual Fund Operating Expenses 2.66% 1.98% 1.98%
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
SCUDDER
HIGH YIELD PRO FORMA
FUND BOND FUND (COMBINED)(1)
------------ ---------------------- --------------------
<S> <C> <C> <C>
EXPENSE EXAMPLE OF TOTAL OPERATING EXPENSES
-------------------------------------------
ASSUMING REDEMPTION AT THE END OF THE PERIOD(3)
--------------------------------------------
One Year $ 669 $ 601 $ 601
Three Years $1,126 $ 921 $ 921
Five Years $1,610 $1,268 $1,268
Ten Years $2,641 $1,910 $1,894
EXPENSE EXAMPLE OF TOTAL OPERATING EXPENSES
-------------------------------------------
ASSUMING NO REDEMPTION AT THE END OF THE
----------------------------------------
PERIOD(3)
-------
One Year $ 269 $ 201 $ 201
Three Years $ 826 $ 621 $ 621
Five Years $1,410 $1,068 $1,068
Ten Years $2,641 $1,910 $1,894
</TABLE>
--------------------
Notes to Expense Comparison Table:
----------------------------------
(1) The Pro Forma column reflects expenses estimated for the Reorganized Fund
subsequent to the Reorganization and reflects the effect of the
Reorganization, including the implementation of Scudder High Yield Bond
Fund's new investment management agreement, its Administration Agreement
and the adoption of a distribution plan.
(2) Contingent deferred sales charges on Class B shares sold during the first
six years of ownership are 4% in the first year, 3% in the second and third
year, 2% in the fourth and fifth year, and 1% in the sixth year.
(3) Expense examples reflect what an investor would pay on a $10,000
investment, assuming a 5% annual return, the reinvestment of all dividends
and total operating expenses remain the same. Assumes conversion to Class
A shares six years after purchase.
(4) Restated to reflect the implementation of Scudder High Yield Bond Fund's
new investment management agreement.
(5) Restated to reflect the implementation of Scudder High Yield Bond Fund's
Administration Agreement.
19
<PAGE>
EXPENSE COMPARISON TABLE
CLASS C SHARES
<TABLE>
<CAPTION>
SCUDDER
HIGH YIELD PRO FORMA
SHAREHOLDER FEES FUND BOND FUND (COMBINED)(1)
---------------- ------------- ---------------------- -------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases None None None
(as % of offering price)
Maximum Contingent Deferred Sales Charge (Load) 1.00% 1.00% 1.00%
(as % of redemption proceeds)(2)
Maximum Deferred Sales Charge (Load) imposed on - None None None
reinvested dividends
Redemption Fee (as a percentage of amount None None None
redeemed, if applicable)
ANNUAL FUND OPERATING EXPENSES (unaudited)
------------------------------
(as a % of average net assets)
------------------------------
Management Fees 0.65% 0.60%(4) 0.60%
Rule 12b-1/ASF Fees 1.00% 1.00% 1.00%
Other Expenses 0.96% 0.35%(5) 0.35%
Total Annual Fund Operating Expenses 2.61% 1.95% 1.95%
EXPENSE EXAMPLE OF TOTAL OPERATING EXPENSES
-------------------------------------------
ASSUMING REDEMPTION AT THE END OF THE PERIOD(3)
--------------------------------------------
One Year $ 364 $ 298 $ 298
Three Years $ 811 $ 612 $ 612
Five Years $1,385 $1,052 $1,052
Ten Years $2,944 $2,275 $2,275
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
SCUDDER
HIGH YIELD PRO FORMA
SHAREHOLDER FEES FUND BOND FUND (COMBINED)(1)
---------------- ------------- ---------------------- -------------
<S> <C> <C> <C>
Expense Example of Total Operating Expenses
-------------------------------------------
Assuming No Redemption at the End of the
----------------------------------------
Period(3)
-------
One Year $ 264 $ 198 $ 198
Three Years $ 811 $ 612 $ 612
Five Years $1,385 $1,052 $1,052
Ten Years $2,944 $2,275 $2,275
</TABLE>
--------------------
Notes to Expense Comparison Table:
----------------------------------
(1) The Pro Forma column reflects expenses estimated for the Reorganized Fund
subsequent to the Reorganization and reflects the effect of the
Reorganization, including the implementation of Scudder High Yield Bond
Fund's new investment management agreement, its Administration Agreement
and the adoption of a distribution plan.
(2) Contingent deferred sales charge on Class C shares is 1% for shares sold
during the first year after purchase.
(3) Expense examples reflect what an investor would pay on a $10,000
investment, assuming a 5% annual return, the reinvestment of all dividends
and total operating expenses remain the same.
(4) Restated to reflect the implementation of Scudder High Yield Bond Fund's
new investment management agreement.
(5) Restated to reflect the implementation of Scudder High Yield Bond Fund's
Administration Agreement.
DISTRIBUTION AND SERVICES FEES
Pursuant to an underwriting and distribution services agreement with
Scudder High Yield Bond Fund, KDI, 222 South Riverside Plaza, Chicago, Illinois
60606, an affiliate of the Investment Manager, acts as the principal underwriter
and distributor of the Class A, Class B and Class C shares of that Fund and acts
as agent of the Fund in the continuing offer of such shares. Scudder High Yield
Bond Fund has adopted distribution plans on behalf of the Class A, Class B and
Class C shares in accordance with Rule 12b-1 under the 1940 Act that are
substantially identical to the existing distribution plans adopted by the Fund,
with one exception. As under the current distribution plans for the Fund,
Scudder High Yield Bond Fund pays KDI an asset-based fee at an annual rate of
0.75% of Class B and Class C shares. The distribution plans for Scudder High
Yield Bond Fund, however, unlike the distribution plans for the Fund, also
authorize the payment to KDI of the 0.25% services fee with respect to the Class
A, Class B and Class C shares pursuant to the services agreement described
below. Neither KDI nor the Trustees of the Fund believe that the services
performed by KDI under the services agreement have been primarily intended to
result in sales of fund shares (i.e., "distribution" services) as defined in
Rule 12b-1, but rather are post-sale administrative and other services provided
to existing shareholders. Nonetheless, to avoid legal uncertainties due to the
ambiguity of the language contained in Rule 12b-1 and eliminate any doubt that
may arise in the future regarding whether the services performed by KDI under
the services agreement are "distribution" services, the distribution plans for
Scudder High Yield Bond Fund authorize the payment of the services fee. The fact
that the services fee is authorized by Scudder High Yield Bond Fund's
distribution plans does not change the fee rate or affect the nature or quality
of the services provided by KDI.
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<PAGE>
Pursuant to the services agreement with Scudder High Yield Bond Fund, which is
substantially identical to the current services agreement with the Fund, KDI
receives a services fee of up to 0.25% per year with respect to the Class A,
Class B and Class C shares of Scudder High Yield Bond Fund. KDI uses the
services fee to compensate financial services firms ("firms") for providing
personal services and maintenance of accounts for their customers that hold
those classes of shares of Scudder High Yield Bond Fund, and may retain any
portion of the fee not paid to firms to compensate itself for administrative
functions performed for the Fund. All fee amounts are payable monthly and are
based on the average daily net assets of each Fund attributable to the relevant
class of shares.
PURCHASES, EXCHANGES, AND REDEMPTIONS
Both Funds are part of the Scudder Kemper complex of mutual funds. The
procedures for purchases, exchanges, and redemptions of Class A, Class B and
Class C shares of Scudder High Yield Bond Fund are identical to those of the
Fund. Shares of Scudder High Yield Bond Fund are exchangeable for shares of the
same class of most other open-end funds advised by Scudder Kemper offering such
shares.
Corresponding classes of shares of Scudder High Yield Bond Fund have identical
sales charges to those of the Fund. Scudder High Yield Bond Fund has a maximum
initial sales charge of 4.50% on Class A shares. Shareholders who purchase
$1 million or more of Class A shares pay no initial sales charge but may have to
pay a contingent deferred sales charge (a "CDSC") of up to 1% if the shares are
sold within 2 years of the date on which they were purchased. Class B shares are
sold without a front-end sales charge, but may be subject to a CDSC upon
redemption, depending on the length of time the shares are held. The CDSC begins
at 4% for shares sold in the first year, declines to 1% in the sixth year and is
eliminated after the sixth year. After six years, Class B shares automatically
convert to Class A shares. Class C shares are sold without a front-end sales
charge, but may be subject to a CDSC of up to 1% if the shares are sold within
one year of purchase.
Class A, Class B and Class C shares of Scudder High Yield Bond Fund received
in the Reorganization will be issued at net asset value, without a sales charge,
and no CDSC will be imposed on any shares of the Fund exchanged for shares of
Scudder High Yield Bond Fund as a result of the Reorganization. However,
following the Reorganization, any CDSC that applies to shares of the Fund will
continue to apply to shares of Scudder High Yield Bond Fund received in the
Reorganization, using the original purchase date for such shares to calculate
the holding period, rather than the date such shares are received in the
Reorganization.
Services available to shareholders of Class A, Class B and Class C shares of
Scudder High Yield Bond Fund are identical to those available to shareholders of
the corresponding classes of shares of the Fund and include the purchase and
redemption of shares through an automated telephone system and over the
Internet, telephone redemptions, and exchanges by telephone to most other
Scudder Kemper funds that offer Class A, Class B and Class C shares, and
reinvestment privileges. Please see the Fund's prospectus for additional
information.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Fund intends to declare dividends from its net investment income and
distribute them monthly. Scudder High Yield Bond Fund intends to declare
dividends from its net investment income daily and distribute them monthly.
The Fund intends to distribute long-term capital gains in December,
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<PAGE>
or otherwise as needed. Scudder High Yield Bond Fund intends to distribute long-
term and short-term capital gains in December, or otherwise as needed.
Additional distributions may be made if necessary. Shareholders of each Fund can
have their dividends and distributions automatically invested in additional
shares of the same class of that Fund, or a different fund in the same family of
funds, at net asset value and credited to the shareholder's account on the
payment date or, at the shareholder's election, paid in cash. For retirement
plans, reinvestment is the only option.
If the Plan is approved by the Fund's shareholders, the Fund will pay its
shareholders a distribution of all undistributed net investment income and
undistributed realized net capital gains immediately prior to the Closing.
OTHER DIFFERENCES BETWEEN THE FUNDS.
Charter Documents.
Each of the Acquired Trust and the Acquiring Trust is established as a
Massachusetts business trust pursuant to separate Declarations of Trust.
Although the organizational documents of the Acquired Trust and the
Acquiring Trust are similar, some differences do exist. The more
significant differences are listed below.
. A vote of a majority of the Acquired Trust's outstanding shares is
required to remove a trustee from office; a vote of two-thirds of
the Acquiring Trust's outstanding shares is required to remove a
trustee from office.
. A special meeting of Fund shareholders may be called by
shareholders holding at least 25% (or 10% if the purpose is to
determine the removal of a Trustee) of the Acquired Trust's shares
then outstanding; 10% of the Acquiring Trust's shares then
outstanding are required to call a special meeting of its
shareholders.
Trustees and Officers.
The Trustees of the Acquired Trust, currently and as proposed under
Proposal 1, are different from those of Scudder High Yield Bond Fund. As
described in Scudder High Yield Bond Fund's prospectus that has been
included in the materials that you received with this document, the
following individuals comprise the Board of Trustees of Scudder High Yield
Bond Fund: Linda C. Coughlin, Henry P. Becton, Jr., Dawn-Marie Driscoll,
Edgar Fiedler, Keith R. Fox, Joan E. Spero, Jean Gleason Stromberg, Jean C.
Tempel, and Steven Zaleznick. In addition, the officers of the Acquired
Trust and Scudder High Yield Bond Fund are different. (See Proposal 1 and
the Statement of Additional Information for further information.)
Fiscal Year.
The Fund's fiscal year-end is September 30. Scudder High Yield Bond
Fund's fiscal year-end is January 31.
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<PAGE>
Auditors.
The Fund's auditors are Ernst & Young LLP. Scudder High Yield Bond Fund's
auditors are PricewaterhouseCoopers LLP.
TAX CONSEQUENCES
As a condition to the Reorganization, each Fund will have received an opinion
of Willkie Farr & Gallagher in connection with the Reorganization, to the effect
that, based upon certain facts, assumptions and representations, the
Reorganization will constitute a tax-free reorganization within the meaning of
section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code").
If the Reorganization constitutes a tax-free reorganization, no gain or loss
will be recognized by the Fund or its shareholders as a direct result of the
Reorganization. See "The Proposed Transaction -- Federal Income Tax
Consequences."
* * *
The preceding is only a summary of certain information contained in this Proxy
Statement/Prospectus relating to the Reorganization. This summary is qualified
by reference to the more complete information contained elsewhere in this Proxy
Statement/Prospectus, the prospectuses and statements of additional information
of the Funds, and the Plan. Shareholders should read this entire Proxy
Statement/Prospectus carefully.
II. PRINCIPAL RISK FACTORS
Because of their similar investment objectives, policies and strategies,
the principal risks presented by Scudder High Yield Bond Fund are similar to
those presented by the Fund. The main risks applicable to each Fund include,
among others, management risk (i.e., securities selection by the Investment
Manager), risk associated with interest rates, the economy, and risk associated
with credit quality. In addition, investments in high yield securities, or
"junk bonds," entail relatively greater risk of loss of income and principal
than investments in higher rated securities, and may fluctuate more in value.
To the extent that a Fund invests in foreign securities, it may be exposed to
the risks associated with such investments and foreign currency risk. In
addition, to the extent that a Fund invests in equity securities, it may be
subject to market risk. Lastly, the Funds are not insured or guaranteed by the
FDIC or any other government agency. Share prices will go up and down, so be
aware that you could lose money.
For a further discussion of the investment techniques and risk factors
applicable to the Funds, see "Investment Objectives, Policies and Restrictions
of the Funds" above, and each Fund's prospectus and statement of additional
information.
III. THE PROPOSED TRANSACTION
DESCRIPTION OF THE PLAN
As stated above, the Plan provides for the transfer of all or substantially
all of the assets of the Fund to Scudder High Yield Bond Fund in exchange for
that number of full and fractional Class A, Class B and Class C shares having an
aggregate net asset value equal to the aggregate net asset value of the shares
of the corresponding classes of the Fund as of the close of business on the
Valuation Date. Scudder High Yield Bond Fund will assume all of the liabilities
of the Fund. The Fund will distribute the Class A, Class B and Class C shares
received in the exchange to the shareholders of the Fund in complete liquidation
of the Fund. The Fund will then be terminated.
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<PAGE>
Upon completion of the Reorganization, each shareholder of the Fund will own
that number of full and fractional Class A, Class B and Class C Shares having an
aggregate net asset value equal to the aggregate net asset value of such
shareholder's shares of the corresponding class held in the Fund as of the close
of business on the Valuation Date. Such shares will be held in an account with
Scudder High Yield Bond Fund identical in all material respects to the account
currently maintained by the Fund for such shareholder. In the interest of
economy and convenience, Class A, Class B and Class C shares issued to the
Fund's shareholders in the Reorganization will be in uncertificated form. If
Class A, Class B or Class C shares of the Fund are represented by certificates
prior to the Closing, such certificates should be returned to the Fund's
shareholder servicing agent. Any Class A, Class B or Class C shares of Scudder
High Yield Bond Fund distributed in the Reorganization to shareholders in
exchange for certificated shares of the Fund may not be transferred, exchanged
or redeemed without delivery of such certificates.
Until the Closing, shareholders of the Fund will continue to be able to redeem
their shares at the net asset value next determined after receipt by the Fund's
transfer agent of a redemption request in proper form. Redemption and purchase
requests received on or after the Valuation Date by the transfer agent will be
treated as requests received for the redemption or purchase of Class A, Class B
or Class C shares of Scudder High Yield Bond Fund received by the shareholder in
connection with the Reorganization.
The obligations of each of the Acquired Trust, on behalf of the Fund, and the
Acquiring Trust, on behalf of Scudder High Yield Bond Fund, under the Plan are
subject to various conditions, as stated therein, which includes Scudder High
Yield Bond Fund's adoption of a new investment management agreement. The Plan
also requires that all filings be made with, and all authority be received from,
the SEC and state securities commissions as may be necessary in the opinion of
counsel to permit the parties to carry out the transactions contemplated by the
Plan. Each Fund is in the process of making the necessary filings. To provide
for unforeseen events, the Plan may be terminated: (i) by the mutual agreement
of the parties; (ii) by either party if the Closing has not occurred by _____
__, 2001, unless such date is extended by mutual agreement of the parties; or
(iii) by either party if the other party has materially breached its obligations
under the Plan or made a material misrepresentation in the Plan or in connection
with the Reorganization. The Plan may also be amended by mutual agreement in
writing. However, no amendment may be made following the shareholder meeting if
such amendment would have the effect of changing the provisions for determining
the number of shares of Scudder High Yield Bond Fund to be issued to the Fund in
the Plan to the detriment of the Fund's shareholders without their approval.
For a complete description of the terms and conditions of the Reorganization,
please refer to the Plan at Exhibit A.
BOARD APPROVAL OF THE PROPOSED TRANSACTION
As discussed above, the Reorganization is part of a Scudder Kemper
initiative that is intended to restructure and streamline the management and
operations of the funds Scudder Kemper advises. Scudder Kemper first proposed
the Reorganization to the Trustees of the Fund at a meeting held on May 24,
2000, see "Synopsis--Background of the Reorganization" above. This initiative
includes five major components:
(i) A change in branding to offer virtually all funds advised by Scudder
Kemper under the Scudder Investments name, with a concentration on
intermediary distribution;
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<PAGE>
(ii) The combination of funds with similar investment objectives and
policies, including in particular the combination of the Kemper Funds
with similar Scudder Funds currently offered to the general public;
(iii) The liquidation of certain small funds which have not achieved market
acceptance and which are unlikely to reach an efficient operating
size;
(iv) The implementation of an administration agreement for the Kemper
Funds similar to that recently adopted by the Scudder Funds covering,
for a single fee rate, substantially all services required for the
operation of the fund (other than those provided under the fund's
investment management agreement) and most expenses; and
(v) The consolidation of certain boards overseeing funds advised by
Scudder Kemper.
The Independent Trustees of the Fund reviewed the potential implications of
these proposals for the Fund as well as the various other funds for which they
serve as board members. They were assisted in this review by their independent
legal counsel and by independent consultants with special expertise in financial
and mutual fund industry matters. Following the May 24th meeting, the
Independent Trustees met in person or by telephone on numerous occasions
(including committee meetings) to review and discuss these proposals, both among
themselves and with representatives of Scudder Kemper, including the
"interested" Trustees. In the course of their review, the Independent Trustees
requested and received substantial additional information and suggested numerous
changes to Scudder Kemper's proposals.
Following the conclusion of this process, the Trustees of the Fund, the
board members of other funds involved and Scudder Kemper reached general
agreement on the elements of a restructuring plan that they believed were in the
best interests of shareholders and, where required, agreed to submit elements of
the plan for approval to shareholders of those funds.
On November 29, 2000, the Board of Trustees, including the Independent
Trustees, unanimously approved the terms of the Reorganization and certain
related proposals. The Trustees have also unanimously agreed to recommend that
the Reorganization be approved by the Fund's shareholders.
In determining whether to recommend that the shareholders of the Fund
approve the Reorganization, the Board of Trustees considered that:
. As part of Scudder Kemper's overall restructuring, the Fund would be
duplicative of another similar fund advised by Scudder Kemper in the
same distribution channel.
. The combined fund would adopt an investment management fee schedule
that, at all asset levels, is lower than the current rate applicable to
the Fund.
. The fixed fee rate under the Administration Agreement is expected to be
less than the estimated current applicable operating expenses the Fund
would otherwise pay.
. It is a condition of the Reorganization that each Fund receive an
opinion of tax counsel that the transaction would be a tax-free
transaction.
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<PAGE>
. Although the Fund agreed to pay the estimated costs of the
Reorganization allocated to each class of shares, management has
estimated that such allocated costs will be recoverable from lower
overall expense rates within four months of completion of the
Reorganization. Scudder Kemper agreed to pay all of the costs of the
Reorganization that exceed estimated costs.
As part of their deliberations, the Trustees considered, among other
things: (a) the fees and expense ratios of the Funds, including comparisons
between the expenses of the Fund and the estimated operating expenses of Scudder
High Yield Bond Fund after the Reorganization, and between the estimated
operating expenses of Scudder High Yield Bond Fund and other mutual funds with
similar investment objectives; (b) the terms and conditions of the
Reorganization and whether the Reorganization would result in the dilution of
shareholder interests; (c) the compatibility of the Funds' investment
objectives, policies, restrictions and portfolios; (d) the service features
available to shareholders of each Fund; (e) prospects for Scudder High Yield
Bond Fund to attract additional assets; and (f) the investment performance of
each Fund.
As part of their analysis, the Trustees considered direct and indirect
costs to shareholders including: (a) the direct costs of the Reorganization to
be borne by existing shareholders; (b) the potential costs of any necessary
rebalancing of the Fund's portfolio; and (c) the potential tax consequences to
shareholders as a result of differences in the Funds' realized or unrealized
capital gains or losses and capital loss carry-forwards.
Costs. The anticipated costs of the Reorganization allocable to the
Fund are $15,649, which includes board meeting fees, legal, accounting
and other consultant fees, and proxy solicitation costs. Each class
of the Fund will pay 100% of its estimated allocable costs which are
$5,709, $7,373 and $2,567 for Class A, Class B and Class C shares,
respectively (except that Scudder High Yield Bond Fund is bearing the
SEC and state registration and notice fees which are estimated to be
$_________). Scudder Kemper is bearing any cost overruns.
The estimated costs of the Reorganization borne by the Fund have been
expensed, resulting in a reduction of net asset value per share of
$0.0040, $0.0043 and $0.0076 for Class A, Class B and Class C shares,
respectively. Management of the Fund expects that reduced operating
expenses resulting from the Reorganization should allow for recovery
of the allocated costs of the Reorganization within four months after
the Closing.
Portfolio Transaction Costs. To consider the potential costs of any
necessary rebalancing of the Fund's portfolio as a result of the
Reorganization, the Independent Trustees asked for, and Scudder Kemper
provided, an estimate of the expected turnover of the securities of
the Fund, as a percentage of the assets of the combined fund, as a
result of the Reorganization. Scudder Kemper estimated such turnover
to be 0%.
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<PAGE>
Potential Tax Consequences. Although the Reorganizations will be
achieved on a federally tax-free basis (see "Federal Income Tax
Consequences" below), there are differences in the Funds' realized or
unrealized capital gains or losses and capital loss carry forwards,
which at [ ], 2000 were as follows (although they may differ
at the time of the Closing):
[Charts to be inserted]
As noted above, under the terms of the Plan, shareholders of the Fund
will receive shares of Scudder High Yield Bond Fund in an amount equal
to the relative net asset value of their Fund shares. The Trustees
considered whether an adjustment in this formula should be made for
the above tax differentials. The Trustees determined that no
adjustment should be made because the potential tax consequences were
not material, quantifiable or predictable because of (1) uncertainties
as to the amounts of any actual future realization of capital gains or
losses in view of future changes in portfolio values, (2) the
exemption of some shareholders from federal income taxation, and (3)
the differing consequences of federal and various other income
taxation upon a distribution received by each shareholder whose tax
liability (if any) is determined by the net effect of a multitude of
considerations that are individual to the shareholder. Shareholders
should, however, review their own tax situation to determine what
effect, if any, these potential tax differences may have on them.
The Trustees also gave extensive consideration to possible economies of
scale that might be realized by Scudder Kemper in connection with the
Reorganization, as well as the other fund combinations included in Scudder
Kemper's restructuring proposal.
Based on all the foregoing, the Board concluded that the Fund's participation
in the Reorganization would be in the best interests of the Fund and would not
dilute the interests of the Fund's shareholders. THE BOARD OF TRUSTEES,
INCLUDING THE INDEPENDENT TRUSTEES, UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF
THE FUND APPROVE THE REORGANIZATION.
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DESCRIPTION OF THE SECURITIES TO BE ISSUED
Scudder High Yield Bond Fund is a series of the Acquiring Trust, a
Massachusetts business trust established under a Declaration of Trust dated
September 20, 1984, as amended. The Acquiring Trust's authorized capital
consists of an unlimited number of shares of beneficial interest, par value
$0.01 per share. The Trustees of the Acquiring Trust are authorized to divide
the shares of the Acquiring Trust into separate series. Scudder High Yield Bond
Fund is one of three active series of the Acquiring Trust. The Trustees of the
Acquiring Trust are also authorized to further divide the shares of the series
of the Acquiring Trust into classes. The shares of Scudder High Yield Bond Fund
are currently divided into five classes, Class S, Class AARP, Class A, Class B
and Class C. Although shareholders of different classes of a series have an
interest in the same portfolio of assets, shareholders of different classes bear
different expense levels because distribution costs and certain other expenses
approved by the Trustees of the Acquiring Trust are borne directly by the class
incurring such expenses.
Each share of each class of Scudder High Yield Bond Fund represents an
interest in Scudder High Yield Bond Fund that is equal to and proportionate with
each other share of that class of Scudder High Yield Bond Fund. Scudder High
Yield Bond Fund shareholders are entitled to one vote per share held on matters
on which they are entitled to vote. In the areas of shareholder voting and the
powers and conduct of the Trustees, there are no material differences between
the rights of shareholders of the Fund and the rights of shareholders of Scudder
High Yield Bond Fund, other than as set forth under "Other Differences Between
the Funds" above.
FEDERAL INCOME TAX CONSEQUENCES
The Reorganization is conditioned upon the receipt by each Fund of an opinion
from Willkie Farr & Gallagher substantially to the effect that, based upon
certain facts, assumptions and representations of the parties, for federal
income tax purposes: (i) the transfer to Scudder High Yield Bond Fund of all or
substantially all of the assets of the Fund in exchange solely for Class A,
Class B and Class C shares and the assumption by Scudder High Yield Bond Fund of
all of the liabilities of the Fund, followed by the distribution of such shares
to the Fund's shareholders in exchange for their shares of the Fund in complete
liquidation of the Fund, will constitute a "reorganization" within the meaning
of Section 368(a)(1) of the Code, and Scudder High Yield Bond Fund and the Fund
will each be "a party to a reorganization" within the meaning of Section 368(b)
of the Code; (ii) no gain or loss will be recognized by the Fund upon the
transfer of all or substantially all of its assets to Scudder High Yield Bond
Fund in exchange solely for Class A, Class B and Class C shares and the
assumption by Scudder High Yield Bond Fund of all of the liabilities of the Fund
or upon the distribution of the Class A, Class B and Class C shares to
shareholders of the Fund in exchange for their shares of the Fund; (iii) the
basis of the assets of the Fund in the hands of Scudder High Yield Bond Fund
will be the same as the basis of such assets of the Fund immediately prior to
the transfer; (iv) the holding period of the assets of the Fund in the hands of
Scudder High Yield Bond Fund will include the period during which such assets
were held by the Fund; (v) no gain or loss will be recognized by Scudder High
Yield Bond Fund upon the receipt of the assets of the Fund in exchange for Class
A, Class B and Class C shares and the assumption by Scudder High Yield Bond Fund
of all of the liabilities of the Fund; (vi) no gain or loss will be recognized
by the shareholders of the Fund upon the receipt of the Class A, Class B and
Class C shares solely in exchange for their shares of the Fund as part of the
transaction; (vii) the basis of the Class A, Class B and Class C shares received
by each shareholder of the Fund will be the same as the basis of the shares of
the Fund exchanged therefor; and (viii) the holding period of Class A, Class B
and Class C shares received by each shareholder of the Fund will include the
holding period during which the shares of the Fund exchanged therefor were held,
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<PAGE>
provided that at the time of the exchange the shares of the Fund were held as
capital assets in the hands of such shareholder of the Fund.
After the Closing, Scudder High Yield Bond Fund may dispose of certain
securities received by it from the Fund in connection with the Reorganization,
which may result in transaction costs and capital gains.
While the Fund is not aware of any adverse state or local tax consequences of
the proposed Reorganization, it has not requested any ruling or opinion with
respect to such consequences and shareholders may wish to consult their own tax
adviser with respect to such matters.
LEGAL MATTERS
Certain legal matters concerning the federal income tax consequences of the
Reorganization will be passed on by Willkie Farr & Gallagher, 787 Seventh
Avenue, New York, New York 10019. Certain legal matters concerning the issuance
of shares of Scudder High Yield Bond Fund will be passed on by Dechert, Ten Post
Office Square, South, Boston, Massachusetts 02109.
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<PAGE>
Capitalization
The following table shows on an unaudited basis the capitalization of Scudder
High Yield Bond Fund and the Fund as of September 30, 2000 and on a pro forma
basis as of that date, giving effect to the Reorganization(1):
<TABLE>
<CAPTION>
SCUDDER HIGH YIELD BOND
FUND FUND PRO FORMA ADJUSTMENTS PRO FORMA (COMBINED)
----------------------- ---------- --------------------- --------------------
<S> <C> <C> <C> <C>
NET ASSETS
Class S Shares $130,554,856 (3) $ 130,554,856
Class A Shares $ 9,483,681 (4) $ 9,483,681
Class B Shares $10,944,900 (4) $ 10,944,900
Class C Shares $ 1,958,121 (4) $ 1,958,121
--------------
Total Net Assets 152,941,558 (2)
==============
SHARES OUTSTANDING
Class S Shares 12,788,909 12,788,909
Class A Shares 1,366,333 (437,471) 928,862
Class B Shares 1,577,804 (505,826) 1,071,978
Class C Shares 282,086 (90,301) 191,785
NET ASSET VALUE PER SHARE
Class S Shares $ 10.21 $ 10.21
Class A Shares $ 6.94 $ 10.21
Class B Shares $ 6.94 $ 10.21
Class C Shares $ 6.94 $ 10.21
</TABLE>
(1) Assumes the Reorganization had been consummated on September 30, 2000, and
is for informational purposes only. No assurance can be given as to how
many shares of the Scudder High Yield Bond Fund will be received by the
shareholders of the Fund on the date the Reorganization takes place, and
the foregoing should not be relied upon to reflect the number of shares of
Scudder High Yield Bond Fund that actually will be received on or after
such date.
(2) Pro forma (combined) net assets do not reflect expense reductions that
would result from the implementation of Scudder High Yield Bond Fund's
administrative fee for the full year.
(3) Represents one-time proxy, legal, accounting and other costs of the
Reorganization to be borne by Scudder High Yield Bond Fund.
(4) Represents one-time proxy, legal, accounting and other costs of the
Reorganization to be borne by the Fund.
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<PAGE>
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF THE
FUND VOTE IN FAVOR OF THIS PROPOSAL 2.
PROPOSAL 3: RATIFICATION OR REJECTION OF THE SELECTION OF INDEPENDENT AUDITORS
The Board of Trustees, including all of the Independent Trustees, has
selected Ernst & Young LLP to act as independent auditors of the Fund for the
Fund's current fiscal year and recommends that shareholders ratify such
selection. However, if the Plan is approved, as described under Proposal 2,
PricewaterhouseCoopers LLP will serve as the independent auditors for the
combined fund. One or more representatives of Ernst & Young LLP are expected to
be present at the Meeting and will have an opportunity to make a statement if
they so desire. Such representatives are expected to be available to respond to
appropriate questions posed by shareholders or management.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF THE
FUND VOTE IN FAVOR OF THIS PROPOSAL 3.
ADDITIONAL INFORMATION
INFORMATION ABOUT THE FUNDS
Additional information about the Acquiring Trust and the Acquired
Trust, the Funds and the Reorganization has been filed with the SEC and may be
obtained without charge by writing to Scudder Investor Services, Inc., Two
International Place, Boston, MA 02110-4103, or by calling 1-800-[ ].
The Acquiring Trust and the Acquired Trust are subject to the
informational requirements of the Securities Exchange Act of 1934, as amended,
and the 1940 Act, and in accordance therewith, file reports, proxy material and
other information about each of the Funds with the SEC. Such reports, proxy
material and other information filed by the Acquiring Trust, and those filed by
the Acquired Trust, can be inspected and copied at the Public Reference Room
maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the following SEC Regional Offices: Northeast Regional Office, 7 World Trade
Center, Suite 1300, New York, NY 10048; Southeast Regional Office, 1401 Brickell
Avenue, Suite 200, Miami, FL 33131; Midwest Regional Office, Citicorp Center,
500 W. Madison Street, Chicago, IL 60661-2511; Central Regional Office, 1801
California Street, Suite 4800, Denver, CO 80202-2648; and Pacific Regional
Office, 5670 Wilshire Boulevard, 11th Floor, Los Angeles, CA 90036-3648. Copies
of such material can also be obtained from the Public Reference Branch, Office
of Consumer Affairs and Information Services, Securities and Exchange
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
The SEC maintains an Internet World Wide Web site (at http://www.sec.gov) which
contains the prospectuses and statements of additional information for the
Funds, materials that are incorporated by reference into the prospectuses and
statements of additional information, and other information about the Acquiring
Trust, the Acquired Trust and the Funds.
GENERAL
Proxy Solicitation. Proxy solicitation costs will be considered
Reorganization expenses and will be allocated accordingly. See "The Proposed
Transaction - Board Approval of the Proposed Transaction." In addition to
solicitation by mail, certain officers and representatives of the Acquired
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<PAGE>
Trust, officers and employees of Scudder Kemper and certain financial services
firms and their representatives, who will receive no extra compensation for
their services, may solicit proxies by telephone, telegram or personally.
Any shareholder of the Fund giving a proxy has the power to revoke it
by mail (addressed to the Secretary at the principal executive office of the
Fund, c/o Scudder Kemper Investments, Inc., at the address for the Fund shown at
the beginning of this Proxy Statement/Prospectus) or in person at the Meeting,
by executing a superseding proxy or by submitting a notice of revocation to the
Fund. All properly executed proxies received in time for the Meeting will be
voted as specified in the proxy or, if no specification is made, in favor of
each Proposal.
The presence at any shareholders' meeting, in person or by proxy, of
the holders of at least 30% of the shares of the Acquired Trust (for a trust-
wide vote) or the Fund (for a fund-wide vote) entitled to be cast shall be
necessary and sufficient to constitute a quorum for the transaction of business.
In the event that the necessary quorum to transact business or the vote required
to approve any Proposal is not obtained at the Meeting, the persons named as
proxies may propose one or more adjournments of the Meeting in accordance with
applicable law to permit further solicitation of proxies with respect to that
Proposal. Any such adjournment as to a matter will require the affirmative vote
of the holders of a majority of the Acquired Trust's (for a trust-wide vote) or
the Fund's (for a fund-wide vote) shares present in person or by proxy at the
Meeting. The persons named as proxies will vote in favor of any such
adjournment those proxies which they are entitled to vote in favor of that
Proposal and will vote against any such adjournment those proxies to be voted
against that Proposal. For purposes of determining the presence of a quorum for
transacting business at the Meeting, abstentions and broker "non-votes" will be
treated as shares that are present but which have not been voted. Broker non-
votes are proxies received by the Fund from brokers or nominees when the broker
or nominee has neither received instructions from the beneficial owner or other
persons entitled to vote nor has discretionary power to vote on a particular
matter. Accordingly, shareholders are urged to forward their voting
instructions promptly.
The election of the Trustees under Proposal 1 requires the affirmative
vote of a plurality of the shares of the Acquired Trust voting on such election.
Approval of Proposal 2 requires the affirmative vote of the holders of a
majority of the Fund's shares outstanding and entitled to vote thereon.
Approval of Proposal 3 requires the affirmative vote of a majority of the shares
of the Fund voting at the Meeting. Abstentions and broker non-votes will not be
counted in favor of, but will have no other effect on, Proposals 1 and 3, and
will have the effect of a "no" vote on Proposal 2.
Holders of record of the shares of the Fund at the close of business
on March 5, 2001 will be entitled to one vote per share on all business of the
Meeting. As of February 5, 2001, there were [ ] Class A shares,
[ ] Class B shares and [ ] Class C shares of the Fund
outstanding.
[As of December 31, 2000, the officers and Trustees of Scudder High
Yield Bond Fund as a group owned beneficially less than 1% of the outstanding
shares of each class of Scudder High Yield Bond Fund.] Appendix 2 hereto sets
forth the beneficial owners of more than 5% of each class of each Fund's shares,
as well as the beneficial owners of more than 5% of the shares of each class of
each other series of the Acquired Trust. To the best of each Fund's knowledge,
as of December 31, 2000, no person owned beneficially more than 5% of any class
of either Fund's outstanding shares, except as stated on Appendix 2.
33
<PAGE>
Shareholder Communications Corporation ("SCC") has been engaged to
assist in the solicitation of proxies, at an estimated cost of $[ ].
As the Meeting date approaches, certain shareholders of the Fund may receive a
telephone call from a representative of SCC if their votes have not yet been
received. Authorization to permit SCC to execute proxies may be obtained by
telephonic or electronically transmitted instructions from shareholders of the
Fund. Proxies that are obtained telephonically will be recorded in accordance
with the procedures described below. The Trustees believe that these procedures
are reasonably designed to ensure that both the identity of the shareholder
casting the vote and the voting instructions of the shareholder are accurately
determined.
In all cases where a telephonic proxy is solicited, the SCC
representative is required to ask for each shareholder's full name and address,
or the last four digits of the shareholder's social security or employer
identification number, or both, and to confirm that the shareholder has received
the proxy materials in the mail. If the shareholder is a corporation or other
entity, the SCC representative is required to ask for the person's title and
confirmation that the person is authorized to direct the voting of the shares.
If the information solicited agrees with the information provided to SCC, then
the SCC representative has the responsibility to explain the process, read the
Proposals on the proxy card(s), and ask for the shareholder's instructions on
the Proposals. Although the SCC representative is permitted to answer questions
about the process, he or she is not permitted to recommend to the shareholder
how to vote, other than to read any recommendation set forth in the Proxy
Statement/Prospectus. SCC will record the shareholder's instructions on the
card. Within 72 hours, the shareholder will be sent a letter or mailgram to
confirm his or her vote and asking the shareholder to call SCC immediately if
his or her instructions are not correctly reflected in the confirmation.
Shareholders may also provide their voting instructions through
telephone touch-tone voting or Internet voting. These options require
shareholders to input a control number which is located on each voting
instruction card. After inputting this number, shareholders will be prompted to
provide their voting instructions on the Proposals. Shareholders will have an
opportunity to review their voting instructions and make any necessary changes
before submitting their voting instructions and terminating their telephone call
or Internet link. Shareholders who vote on the Internet, in addition to
confirming their voting instructions prior to submission, will also receive an
e-mail confirming their instructions.
If a shareholder wishes to participate in the Meeting, but does not
wish to give a proxy by telephone or electronically, the shareholder may still
submit the proxy card(s) originally sent with the Proxy Statement/Prospectus or
attend in person. Should shareholders require additional information regarding
the proxy or replacement proxy card(s), they may contact SCC toll-free at 1-800-
[ ]. Any proxy given by a shareholder is revocable until voted at the
Meeting.
Shareholder Proposals for Subsequent Meetings. Shareholders wishing
to submit proposals for inclusion in a proxy statement for a shareholder meeting
subsequent to the Meeting, if any, should send their written proposals to the
Secretary of the Acquired Trust, c/o Scudder Kemper Investments, Inc., 222 South
Riverside Plaza, Chicago, Illinois 60606, within a reasonable time before the
solicitation of proxies for such meeting. The timely submission of a proposal
does not guarantee its inclusion.
Other Matters to Come Before the Meeting. The Board is not aware of
any matters that will be presented for action at the Meeting other than the
matters described in this material. Should any other matters requiring a vote
of shareholders arise, the proxy in the accompanying form will confer upon the
person or persons entitled to vote the shares represented by such proxy the
discretionary authority to vote
34
<PAGE>
the shares as to any such other matters in accordance with their best judgment
in the interest of the Acquired Trust and/or the Fund.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) (OR TAKE ADVANTAGE
OF AVAILABLE ELECTRONIC OR TELEPHONIC VOTING PROCEDURES) PROMPTLY. NO POSTAGE
IS REQUIRED IF MAILED IN THE UNITED STATES.
By Order of the Board,
/s/ Philip J. Collora
----------------------
Philip J. Collora
Secretary
35
<PAGE>
INDEX OF EXHIBITS AND APPENDICES
<TABLE>
<CAPTION>
Page
----
<S> <C>
EXHIBIT A: FORM OF AGREEMENT AND PLAN OF REORGANIZATION................. __
EXHIBIT B: MANAGEMENT'S DISCUSSION OF SCUDDER HIGH YIELD BOND FUND'S
PERFORMANCE.................................................. __
APPENDIX 1: TRUSTEE AND NOMINEE SHAREHOLDINGS............................ __
APPENDIX 2: BENEFICIAL OWNERS OF FUND SHARES............................. __
</TABLE>
36
<PAGE>
EXHIBIT A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this [ ] day of [ ], 2001, by and among Scudder Portfolio Trust (the
"Acquiring Trust"), a Massachusetts business trust, on behalf of Scudder High
Yield Bond Fund (the "Acquiring Fund"), a separate series of the Acquiring
Trust, Kemper High Yield Series (the "Acquired Trust" and, together with the
Acquiring Trust, each a "Trust" and collectively the "Trusts"), a Massachusetts
business trust, on behalf of Kemper High Yield Opportunity Fund (the "Acquired
Fund" and, together with the Acquiring Fund, each a "Fund" and collectively the
"Funds"), a separate series of the Acquired Trust, and Scudder Kemper
Investments, Inc. ("Scudder Kemper"), investment adviser to the Funds (for
purposes of Paragraph 10.2 of the Agreement only). The principal place of
business of the Acquiring Trust is Two International Place, Boston,
Massachusetts 02110-4103. The principal place of business of the Acquired Trust
is 222 South Riverside Plaza, Chicago, Illinois 60606.
This Agreement is intended to be and is adopted as a plan of reorganization
and liquidation within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"). The reorganization (the
"Reorganization") will consist of the transfer of all or substantially all of
the assets of the Acquired Fund to the Acquiring Fund in exchange solely for
Class A, Class B and Class C voting shares of beneficial interest ($.01 par
value per share) of the Acquiring Fund (the "Acquiring Fund Shares"), the
assumption by the Acquiring Fund of all of the liabilities of the Acquired Fund
and the distribution of the Acquiring Fund Shares to the Class A, Class B and
Class C shareholders of the Acquired Fund in complete liquidation of the
Acquired Fund as provided herein, all upon the terms and conditions hereinafter
set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND TO THE ACQUIRING FUND IN EXCHANGE
FOR ACQUIRING FUND SHARES, THE ASSUMPTION OF ALL ACQUIRED FUND LIABILITIES
AND THE LIQUIDATION OF THE ACQUIRED FUND
1.1. Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, the Acquired Fund agrees
to transfer to the Acquiring Fund all or substantially all of the Acquired
Fund's assets as set forth in section 1.2, and the Acquiring Fund agrees in
exchange therefor (i) to deliver to the Acquired Fund that number of full and
fractional Class A, Class B and Class C Acquiring Fund Shares determined by
dividing the value of the Acquired Fund's assets net of any liabilities of the
Acquired Fund with respect to the Class A, Class B and Class C shares of the
Acquired Fund, computed in the manner and as of the time and date set forth in
section 2.1, by the net asset value of one Acquiring Fund Share of the
corresponding class, computed in the manner and as of the time and date set
forth in section 2.2; and (ii) to assume all of the liabilities of the Acquired
Fund, including, but not limited to, any deferred compensation to the Acquired
Fund board members. All Acquiring Fund Shares delivered to the Acquired Fund
shall be delivered at net asset value without sales load, commission or other
similar fee being imposed. Such transactions shall take place at the closing
provided for in section 3.1 (the "Closing").
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<PAGE>
1.2. The assets of the Acquired Fund to be acquired by the Acquiring Fund
(the "Assets") shall consist of all assets, including, without limitation, all
cash, cash equivalents, securities, commodities and futures interests and
dividends or interest or other receivables that are owned by the Acquired Fund
and any deferred or prepaid expenses shown on the unaudited statement of assets
and liabilities of the Acquired Fund prepared as of the effective time of the
Closing in accordance with generally accepted accounting principles ("GAAP")
applied consistently with those of the Acquired Fund's most recent audited
balance sheet. The Assets shall constitute at least 90% of the fair market
value of the net assets, and at least 70% of the fair market value of the gross
assets, held by the Acquired Fund immediately before the Closing (excluding for
these purposes assets used to pay the dividends and other distributions paid
pursuant to section 1.4).
1.3. The Acquired Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date as defined in section 3.6.
1.4. On or as soon as practicable prior to the Closing Date as defined in
section 3.1, the Acquired Fund will declare and pay to its shareholders of
record one or more dividends and/or other distributions so that it will have
distributed substantially all of its investment company taxable income (computed
without regard to any deduction for dividends paid) and realized net capital
gain, if any, for the current taxable year through the Closing Date.
1.5. Immediately after the transfer of Assets provided for in section 1.1,
the Acquired Fund will distribute to the Acquired Fund's shareholders of record
with respect to each class of its shares (the "Acquired Fund Shareholders"),
determined as of the Valuation Time (as defined in section 2.1), on a pro rata
basis within that class, the Acquiring Fund Shares of the same class received by
the Acquired Fund pursuant to section 1.1 and will completely liquidate. Such
distribution and liquidation will be accomplished with respect to each class of
the Acquired Fund by the transfer of the Acquiring Fund Shares then credited to
the account of the Acquired Fund on the books of the Acquiring Fund to open
accounts on the share records of the Acquiring Fund in the names of the Acquired
Fund Shareholders. The Acquiring Fund shall have no obligation to inquire as to
the validity, propriety or correctness of such records, but shall assume that
such transaction is valid, proper and correct. The aggregate net asset value of
Class A, Class B and Class C Acquiring Fund Shares to be so credited to the
Class A, Class B and Class C Acquired Fund Shareholders shall, with respect to
each class, be equal to the aggregate net asset value of the Acquired Fund
shares of the same class owned by such shareholders as of the Valuation Time.
All issued and outstanding shares of the Acquired Fund will simultaneously be
cancelled on the books of the Acquired Fund, although share certificates
representing interests in Class A, Class B and Class C shares of the Acquired
Fund will represent a number of Acquiring Fund Shares after the Closing Date as
determined in accordance with section 2.3. The Acquiring Fund will not issue
certificates representing Acquiring Fund Shares in connection with such
exchange.
1.6. Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund. Shares of the Acquiring Fund will be issued in the manner
described in the Acquiring Fund's then-current prospectus and statement of
additional information.
1.7. Any reporting responsibility of the Acquired Fund including, without
limitation, the responsibility for filing of regulatory reports, tax returns, or
other documents with the Securities and Exchange Commission (the "Commission"),
any state securities commission, and any federal, state or local tax authorities
or any other relevant regulatory authority, is and shall remain the
responsibility of the Acquired Fund.
2
<PAGE>
1.8. All books and records of the Acquired Fund, including all books and
records required to be maintained under the Investment Company Act of 1940, as
amended (the "1940 Act"), and the rules and regulations thereunder, shall be
available to the Acquiring Fund from and after the Closing Date and shall be
turned over to the Acquiring Fund as soon as practicable following the Closing
Date.
2. VALUATION
2.1. The value of the Assets shall be computed as of the close of regular
trading on The New York Stock Exchange, Inc. (the "NYSE") on the business day
immediately preceding the Closing Date, as defined in section 3.1 (the
"Valuation Time") after the declaration and payment of any dividends and/or
other distributions on that date, using the valuation procedures set forth in
the Acquiring Trust's Declaration of Trust, as amended, and then-current
prospectus or statement of additional information, copies of which have been
delivered to the Acquired Fund.
2.2. The net asset value of a Class A, Class B or Class C Acquiring Fund
Share shall be the net asset value per share computed with respect to that class
as of the Valuation Time using the valuation procedures referred to in section
2.1. Notwithstanding anything to the contrary contained in this Agreement, in
the event that, as of the Valuation Time, there are no Class A, Class B and/or
Class C Acquiring Fund Shares issued and outstanding, then, for purposes of this
Agreement, the per share net asset value of a Class A, Class B and/or Class C
share, as applicable, shall be equal to the net asset value of one Class S
Acquiring Fund Share.
2.3. The number of the Class A, Class B and Class C Acquiring Fund Shares
to be issued (including fractional shares, if any) in exchange for the Assets
shall be determined with respect to each such class by dividing the value of the
Assets with respect to Class A, Class B and Class C shares of the Acquired Fund,
as the case may be, determined in accordance with section 2.1 by the net asset
value of an Acquiring Fund Share of the same class determined in accordance with
section 2.2.
2.4. All computations of value hereunder shall be made by or under the
direction of each Fund's respective accounting agent, if applicable, in
accordance with its regular practice and the requirements of the 1940 Act and
shall be subject to confirmation by each Fund's respective independent
accountants upon the reasonable request of the other Fund.
3. CLOSING AND CLOSING DATE
3.1. The Closing of the transactions contemplated by this Agreement shall
be June 25, 2001, or such later date as the parties may agree in writing (the
"Closing Date"). All acts taking place at the Closing shall be deemed to take
place simultaneously as of 9:00 a.m., Eastern time, on the Closing Date, unless
otherwise agreed to by the parties. The Closing shall be held at the offices of
Dechert, Ten Post Office Square - South, Boston, MA 02109, or at such other
place and time as the parties may agree.
3.2. The Acquired Fund shall deliver to Acquiring Fund on the Closing Date
a schedule of Assets.
3.3. State Street Bank and Trust Company ("State Street"), custodian for
the Acquired Fund, shall deliver at the Closing a certificate of an authorized
officer stating that (a) the Assets shall have been delivered in proper form to
State Street, custodian for the Acquiring Fund, prior to or on the Closing Date
and (b) all necessary taxes in connection with the delivery of the Assets,
including all applicable federal
3
<PAGE>
and state stock transfer stamps, if any, have been paid or provision for payment
has been made. The Acquired Fund's portfolio securities represented by a
certificate or other written instrument shall be presented by the custodian for
the Acquired Fund to the custodian for the Acquiring Fund for examination no
later than five business days preceding the Closing Date and transferred and
delivered by the Acquired Fund as of the Closing Date by the Acquired Fund for
the account of Acquiring Fund duly endorsed in proper form for transfer in such
condition as to constitute good delivery thereof. The Acquired Fund's portfolio
securities and instruments deposited with a securities depository, as defined in
Rule 17f-4 under the 1940 Act, shall be delivered as of the Closing Date by book
entry in accordance with the customary practices of such depositories and the
custodian for the Acquiring Fund. The cash to be transferred by the Acquired
Fund shall be delivered by wire transfer of federal funds on the Closing Date.
3.4. Kemper Service Company, as transfer agent for the Acquired Fund, on
behalf of the Acquired Fund, shall deliver at the Closing a certificate of an
authorized officer stating that its records contain the names and addresses of
the Acquired Fund Shareholders and the number and percentage ownership (to three
decimal places) of outstanding Class A, Class B and Class C Acquired Fund shares
owned by each such shareholder immediately prior to the Closing. The Acquiring
Fund shall issue and deliver a confirmation evidencing the Acquiring Fund Shares
to be credited on the Closing Date to the Acquired Fund or provide evidence
satisfactory to the Acquired Fund that such Acquiring Fund Shares have been
credited to the Acquired Fund's account on the books of the Acquiring Fund. At
the Closing, each party shall deliver to the other such bills of sale, checks,
assignments, share certificates, if any, receipts or other documents as such
other party or its counsel may reasonably request to effect the transactions
contemplated by this Agreement.
3.5. In the event that immediately prior to the Valuation Time (a) the NYSE
or another primary trading market for portfolio securities of the Acquiring Fund
or the Acquired Fund shall be closed to trading or trading thereupon shall be
restricted, or (b) trading or the reporting of trading on such Exchange or
elsewhere shall be disrupted so that, in the judgment of the Board members of
either party to this Agreement, accurate appraisal of the value of the net
assets with respect to the Class A, Class B and Class C shares of the Acquiring
Fund or the Acquired Fund is impracticable, the Closing Date shall be postponed
until the first business day after the day when trading shall have been fully
resumed and reporting shall have been restored.
3.6. The liabilities of the Acquired Fund shall include all of the Acquired
Fund's liabilities, debts, obligations, and duties of whatever kind or nature,
whether absolute, accrued, contingent, or otherwise, whether or not arising in
the ordinary course of business, whether or not determinable at the Closing
Date, and whether or not specifically referred to in this Agreement including
but not limited to any deferred compensation to the Acquired Fund's board
members.
4. REPRESENTATIONS AND WARRANTIES
4.1. The Acquired Trust, on behalf of the Acquired Fund, represents and
warrants to the Acquiring Fund as follows:
(a) The Acquired Trust is a voluntary association with transferable
shares commonly referred to as a Massachusetts business trust duly organized and
validly existing under the laws of The Commonwealth of Massachusetts with power
under the Acquired Trust's Declaration of Trust, as amended, to own all of its
properties and assets and to carry on its business as it is now being conducted
and, subject to approval of shareholders of the Acquired Fund, to carry out the
Agreement. The Acquired
4
<PAGE>
Fund is a separate series of the Acquired Trust duly designated in accordance
with the applicable provisions of the Acquired Trust's Declaration of Trust. The
Acquired Trust and Acquired Fund are qualified to do business in all
jurisdictions in which they are required to be so qualified, except
jurisdictions in which the failure to so qualify would not have material adverse
effect on the Acquired Trust or Acquired Fund. The Acquired Fund has all
material federal, state and local authorizations necessary to own all of the
properties and assets and to carry on its business as now being conducted,
except authorizations which the failure to so obtain would not have a material
adverse effect on the Acquired Fund;
(b) The Acquired Trust is registered with the Commission as an open-
end management investment company under the 1940 Act, and such registration is
in full force and effect and the Acquired Fund is in compliance in all material
respects with the 1940 Act and the rules and regulations thereunder;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquired Fund of
the transactions contemplated herein, except such as have been obtained under
the Securities Act of 1933, as amended (the "1933 Act"), the Securities Exchange
Act of 1934, as amended (the "1934 Act"), and the 1940 Act and such as may be
required by state securities laws;
(d) Other than with respect to contracts entered into in connection
with the portfolio management of the Acquired Fund which shall terminate on or
prior to the Closing Date, the Acquired Trust is not, and the execution,
delivery and performance of this Agreement by the Acquired Trust will not result
(i) in violation of Massachusetts law or of the Acquired Trust's Declaration of
Trust, as amended, or By-Laws, (ii) in a violation or breach of, or constitute a
default under, any material agreement, indenture, instrument, contract, lease or
other undertaking to which the Acquired Fund is a party or by which it is bound,
and the execution, delivery and performance of this Agreement by the Acquired
Fund will not result in the acceleration of any obligation, or the imposition of
any penalty, under any agreement, indenture, instrument, contract, lease,
judgment or decree to which the Acquired Fund is a party or by which it is
bound, or (iii) in the creation or imposition of any lien, charge or encumbrance
on any property or assets of the Acquired Fund;
(e) No material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or to its knowledge threatened against the Acquired Fund or any properties or
assets held by it. The Acquired Fund knows of no facts which might form the
basis for the institution of such proceedings which would materially and
adversely affect its business and is not a party to or subject to the provisions
of any order, decree or judgment of any court or governmental body which
materially and adversely affects its business or its ability to consummate the
transactions herein contemplated;
(f) The Statements of Assets and Liabilities, Operations, and Changes
in Net Assets, the Financial Highlights, and the Investment Portfolio of the
Acquired Fund at and for the fiscal year ended September 30, 2000, have been
audited by Ernst & Young LLP, independent auditors, and are in accordance with
GAAP consistently applied, and such statements (a copy of each of which has been
furnished to the Acquiring Fund) present fairly, in all material respects, the
financial position of the Acquired Fund as of such date in accordance with GAAP,
and there are no known contingent liabilities of the Acquired Fund required to
be reflected on a balance sheet (including the notes thereto) in accordance with
GAAP as of such date not disclosed therein;
5
<PAGE>
(g) Since September 30, 2000, 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 requirements of the 1933
Act and state securities laws, (ii) are, and on the Closing Date will be, duly
and validly issued and outstanding, fully paid and non-assessable and not
subject to preemptive or dissenter's rights (recognizing that, under
Massachusetts law, Acquired Fund Shareholders, under certain circumstances,
could be held personally liable for obligations of the Acquired Fund), and (iii)
will be held at the time of the Closing by the persons and in the amounts set
forth in the records of Kemper Service Company, as provided in section 3.4. The
Acquired Fund does not have outstanding any options, warrants or other rights to
subscribe for or purchase any of the Acquired Fund shares, nor is there
outstanding any security convertible into any of the Acquired Fund shares;
(k) At the Closing Date, the Acquired Fund will have good and
marketable title to the Acquired Fund's assets to be transferred to the
Acquiring Fund pursuant to section 1.2 and full right, power, and authority to
sell, assign, transfer and deliver such assets hereunder free of any liens or
other encumbrances, except those liens or encumbrances as to which the Acquiring
Fund has received notice at or prior to the Closing, and upon delivery and
payment for such assets, the Acquiring Fund will acquire good and marketable
title thereto, subject to no restrictions on the full transfer thereof,
including such restrictions as might arise under the 1933 Act and the 1940 Act,
except those restrictions as to which the Acquiring Fund has received notice and
necessary documentation at or prior to the Closing;
(l) The execution, delivery and performance of this Agreement will
have been duly authorized prior to the Closing Date by all necessary action on
the part of the Board members of the Acquired Trust (including the
determinations required by Rule 17a-8(a) under the 1940 Act), and, subject to
the approval of the Acquired Fund Shareholders, this Agreement constitutes a
valid and binding obligation of the Acquired Trust, on behalf of the Acquired
Fund, enforceable in accordance with its
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terms, subject, as to enforcement, to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other laws relating to or affecting
creditors' rights and to general equity principles;
(m) The information to be furnished by the Acquired Fund for use in
applications for orders, registration statements or proxy materials or for use
in any other document filed or to be filed with any federal, state or local
regulatory authority (including the National Association of Securities Dealers,
Inc. (the "NASD")), which may be necessary in connection with the transactions
contemplated hereby, shall be accurate and complete in all material respects and
shall comply in all material respects with federal securities and other laws and
regulations applicable thereto;
(n) The current prospectus and statement of additional information of
the Acquired Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations of
the Commission thereunder and do not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not materially misleading; and
(o) The proxy statement of the Acquired Fund to be included in the
Registration Statement referred to in section 5.7 (the "Proxy Statement"),
insofar as it relates to the Acquired Fund, will, on the effective date of the
Registration Statement and on the Closing Date, (i) comply in all material
respects with the provisions and Regulations of the 1933 Act, 1934 Act and 1940
Act, as applicable, and (ii) not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which such
statements are made, not materially misleading; provided, however, that the
representations and warranties in this section shall not apply to statements in
or omissions from the Proxy Statement and the Registration Statement made in
reliance upon and in conformity with information that was furnished or should
have been furnished by the Acquiring Fund for use therein.
4.2. The Acquiring Trust, on behalf of the Acquiring Fund, represents and
warrants to the Acquired Fund as follows:
(a) The Acquiring Trust is a voluntary association with transferable
shares commonly referred to as a Massachusetts business trust duly organized and
validly existing under the laws of The Commonwealth of Massachusetts with power
under the Acquiring Trust's Declaration of Trust, as amended, to own all of its
properties and assets and to carry on its business as it is now being conducted
and, subject to the approval of shareholders of the Acquired Fund, to carry out
the Agreement. The Acquiring Fund is a separate series of the Acquiring Trust
duly designated in accordance with the applicable provisions of the Acquiring
Trust's Declaration of Trust. The Acquiring Trust and Acquiring Fund are
qualified to do business in all jurisdictions in which they are required to be
so qualified, except jurisdictions in which the failure to so qualify would not
have material adverse effect on the Acquiring Trust or Acquiring Fund. The
Acquiring Fund has all material federal, state and local authorizations
necessary to own all of the properties and assets and to carry on its business
as now being conducted, except authorizations which the failure to so obtain
would not have a material adverse effect on the Acquiring Fund;
(b) The Acquiring Trust is registered with the Commission as an open-
end management investment company under the 1940 Act, and such registration is
in full force and effect and
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the Acquiring Fund is in compliance in all material respects with the 1940 Act
and the rules and regulations thereunder;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquiring Fund of
the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act and such as may be required by state
securities laws;
(d) The Acquiring Trust is not, and the execution, delivery and
performance of this Agreement by the Acquiring Trust will not result (i) in
violation of Massachusetts law or of the Acquiring Trust's Declaration of Trust,
as amended, or By-Laws, or (ii) in a violation or breach of, or constitute a
default under, any material agreement, indenture, instrument, contract, lease or
other undertaking known to counsel to which the Acquiring Fund is a party or by
which it is bound, and the execution, delivery and performance of this Agreement
by the Acquiring Fund will not result in the acceleration of any obligation, or
the imposition of any penalty, under any agreement, indenture, instrument,
contract, lease, judgment or decree to which the Acquiring Fund is a party or by
which it is bound, or (iii) in the creation or imposition of any lien, charge or
encumbrance on any property or assets of the Acquiring Fund;
(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 January 31, 2001, have been
audited] by PricewaterhouseCoopers LLP, independent accountants, and are in
accordance with GAAP consistently applied, and such statements (a copy of each
of which has been furnished to the Acquired Fund) present fairly, in all
material respects, the financial position of the Acquiring Fund as of such date
in accordance with GAAP, and there are no known contingent liabilities of the
Acquiring Fund required to be reflected on a balance sheet (including the notes
thereto) in accordance with GAAP as of such date not disclosed therein;
(g) [Since January 31, 2001], 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
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shall have been made for the payment thereof, and, to the best of the Acquiring
Fund's knowledge, no such return is currently under audit and no assessment has
been asserted with respect to such returns;
(i) For each taxable year of its operation, the Acquiring Fund has met
the requirements of Subchapter M of the Code for qualification as a regulated
investment company and has elected to be treated as such, has been eligible to
and has computed its federal income tax under Section 852 of the Code, and will
do so for the taxable year including the Closing Date;
(j) All issued and outstanding shares of the Acquiring Fund (i) have
been offered and sold in every state and the District of Columbia in compliance
in all material respects with applicable registration requirements of the 1933
Act and state securities laws and (ii) are, and on the Closing Date will be,
duly and validly issued and outstanding, fully paid and non-assessable, and not
subject to preemptive or dissenter's rights (recognizing that, under
Massachusetts law, Acquiring Fund Shareholders, under certain circumstances,
could be held personally liable for the obligations of the Acquiring Fund). The
Acquiring Fund does not have outstanding any options, warrants or other rights
to subscribe for or purchase any of the Acquiring Fund shares, nor is there
outstanding any security convertible into any of the Acquiring Fund shares;
(k) The Acquiring Fund Shares to be issued and delivered to the
Acquired Fund, for the account of the Acquired Fund Shareholders, pursuant to
the terms of this Agreement, will at the Closing Date have been duly authorized
and, when so issued and delivered, will be duly and validly issued and
outstanding Acquiring Fund Shares, and will be fully paid and non-assessable
(recognizing that, under Massachusetts law, Acquiring Fund Shareholders, under
certain circumstances, could be held personally liable for the obligations of
the Acquiring Fund);
(l) At the Closing Date, the Acquiring Fund will have good and
marketable title to the Acquiring Fund's assets, free of any liens or other
encumbrances, except those liens or encumbrances as to which the Acquired Fund
has received notice at or prior to the Closing;
(m) The execution, delivery and performance of this Agreement will
have been duly authorized prior to the Closing Date by all necessary action on
the part of the Board members of the Acquiring Trust (including the
determinations required by Rule 17a-8(a) under the 1940 Act) and this Agreement
will constitute a valid and binding obligation of the Acquiring Trust, on behalf
of the Acquiring Fund, enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws relating to or affecting creditors' rights and to
general equity principles;
(n) The information to be furnished by the Acquiring Fund for use in
applications for orders, registration statements or proxy materials or for use
in any other document filed or to be filed with any federal, state or local
regulatory authority (including the NASD), which may be necessary in connection
with the transactions contemplated hereby, shall be accurate and complete in all
material respects and shall comply in all material respects with federal
securities and other laws and regulations applicable thereto;
(o) The current prospectus and statement of additional information of
the Acquiring Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and regulations of
the Commission thereunder and do not include any untrue statement of a material
fact or omit to state any
9
<PAGE>
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
materially misleading;
(p) The Proxy Statement to be included in the Registration Statement,
only insofar as it relates to the Acquiring Fund, will, on the effective date of
the Registration Statement and on the Closing Date, (i) comply in all material
respects with the provisions and Regulations of the 1933 Act, 1934 Act, and 1940
Act and (ii) not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not materially misleading; provided, however, that the
representations and warranties in this section shall not apply to statements in
or omissions from the Proxy Statement and the Registration Statement made in
reliance upon and in conformity with information that was furnished or should
have been furnished by the Acquired Fund for use therein; and
(q) The Acquiring Fund agrees to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the 1940 Act and such
of the state securities laws as may be necessary in order to continue its
operations after the Closing Date.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1. The Acquiring Fund and the Acquired Fund each covenants to operate its
business in the ordinary course between the date hereof and the Closing Date, it
being understood that (a) such ordinary course of business will include (i) the
declaration and payment of customary dividends and other distributions and (ii)
such changes as are contemplated by the Funds' normal operations; and (b) each
Fund shall retain exclusive control of the composition of its portfolio until
the Closing Date. No party shall take any action that would, or reasonably
would be expected to, result in any of its representations and warranties set
forth in this Agreement being or becoming untrue in any material respect. The
Acquired Fund and Acquiring Fund covenant and agree to coordinate the respective
portfolios of the Acquired Fund and Acquiring Fund from the date of the
Agreement up to and including the Closing Date in order that at Closing, when
the Assets are added to the Acquiring Fund's portfolio, the resulting portfolio
will meet the Acquiring Fund's investment objective, policies and restrictions,
as set forth in the Acquiring Fund's Prospectus, a copy of which has been
delivered to the Acquired Fund.
5.2. Upon reasonable notice, the Acquiring Fund's officers and agents shall
have reasonable access to the Acquired Fund's books and records necessary to
maintain current knowledge of the Acquired Fund and to ensure that the
representations and warranties made by the Acquired Fund are accurate.
5.3. The Acquired Fund covenants to call a meeting of the Acquired Fund
Shareholders entitled to vote thereon to consider and act upon this Agreement
and to take all other reasonable action necessary to obtain approval of the
transactions contemplated herein. Such meeting shall be scheduled for no later
than May 24, 2001.
5.4. The Acquired Fund covenants that the Acquiring Fund Shares to be
issued hereunder are not being acquired for the purpose of making any
distribution thereof other than in accordance with the terms of this Agreement.
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<PAGE>
5.5. The Acquired Fund covenants that it will assist the Acquiring Fund in
obtaining such information as the Acquiring Fund reasonably requests concerning
the beneficial ownership of the Acquired Fund shares.
5.6. Subject to the provisions of this Agreement, the Acquiring Fund and
the Acquired Fund will each take, or cause to be taken, all actions, and do or
cause to be done, all things reasonably necessary, proper, and/or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.7. Each Fund covenants to prepare in compliance with the 1933 Act, the
1934 Act and the 1940 Act the Registration Statement on Form N-14 (the
"Registration Statement") in connection with the meeting of the Acquired Fund
Shareholders to consider approval of this Agreement and the transactions
contemplated herein. The Acquiring Fund will file the Registration Statement,
including the Proxy Statement, with the Commission. The Acquired Fund will
provide the Acquiring Fund with information reasonably necessary for the
preparation of a prospectus, which will include the Proxy Statement referred to
in section 4.1(o), all to be included in the Registration Statement, in
compliance in all material respects with the 1933 Act, the 1934 Act and the 1940
Act.
5.8. The Acquired Fund covenants that it will, from time to time, as and
when reasonably requested by the Acquiring Fund, execute and deliver or cause to
be executed and delivered all such assignments and other instruments, and will
take or cause to be taken such further action as the Acquiring Fund may
reasonably deem necessary or desirable in order to vest in and confirm the
Acquiring Fund's title to and possession of all the assets and otherwise to
carry out the intent and purpose of this Agreement.
5.9. The Acquiring Fund covenants to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act and 1940 Act, and such
of the state securities laws as it deems appropriate in order to continue its
operations after the Closing Date and to consummate the transactions
contemplated herein; provided, however, that the Acquiring Fund may take such
actions it reasonably deems advisable after the Closing Date as circumstances
change.
5.10. The Acquiring Fund covenants that it will, from time to time, as and
when reasonably requested by the Acquired Fund, execute and deliver or cause to
be executed and delivered all such assignments, assumption agreements, releases,
and other instruments, and will take or cause to be taken such further action,
as the Acquired Fund may reasonably deem necessary or desirable in order to (i)
vest and confirm to the Acquired Fund title to and possession of all Acquiring
Fund shares to be transferred to the Acquired Fund pursuant to this Agreement
and (ii) assume the liabilities from the Acquired Fund.
5.11. As soon as reasonably practicable after the Closing, the Acquired
Fund shall make a liquidating distribution to its shareholders consisting of the
Acquiring Fund Shares received at the Closing.
5.12. The Acquiring Fund and the Acquired Fund shall each use its
reasonable best efforts to fulfill or obtain the fulfillment of the conditions
precedent to effect the transactions contemplated by this Agreement as promptly
as practicable.
5.13. The intention of the parties is that the transaction will qualify as
a reorganization within the meaning of Section 368(a) of the Code. Neither the
Trusts, the Acquiring Fund nor the Acquired
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<PAGE>
Fund shall take any action, or cause any action to be taken (including, without
limitation, the filing of any tax return) that is inconsistent with such
treatment or results in the failure of the transaction to qualify as a
reorganization within the meaning of Section 368(a) of the Code. At or prior to
the Closing Date, the Trusts, the Acquiring Fund and the Acquired Fund will take
such action, or cause such action to be taken, as is reasonably necessary to
enable Willkie Farr & Gallagher to render the tax opinion contemplated herein in
section 8.5.
5.14. At or immediately prior to the Closing, the Acquired Fund may declare
and pay to its stockholders a dividend or other distribution in an amount large
enough so that it will have distributed substantially all (and in any event not
less than 98%) of its investment company taxable income (computed without regard
to any deduction for dividends paid) and realized net capital gain, if any, for
the current taxable year through the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions:
6.1. All representations and warranties of the Acquiring Trust, on behalf
of the Acquiring Fund, contained in this Agreement shall be true and correct in
all material respects as of the date hereof and, except as they may be affected
by the transactions contemplated by this Agreement, as of the Closing Date, with
the same force and effect as if made on and as of the Closing Date; and there
shall be (i) no pending or threatened litigation brought by any person (other
than the Acquired Fund, its adviser or any of their affiliates) against the
Acquiring Fund or its investment adviser(s), Board members or officers arising
out of this Agreement and (ii) no facts known to the Acquiring Fund which the
Acquiring Fund reasonably believes might result in such litigation.
6.2. The Acquiring Fund shall have delivered to the Acquired Fund on the
Closing Date a certificate executed in its name by its President or a Vice
President, in a form reasonably satisfactory to the Acquired Trust, on behalf of
the Acquired Fund, and dated as of the Closing Date, to the effect that the
representations and warranties of the Acquiring Fund made in this Agreement are
true and correct on and as of the Closing Date, except as they may be affected
by the transactions contemplated by this Agreement, and as to such other matters
as the Acquired Fund shall reasonably request.
6.3. The Acquired Fund shall have received on the Closing Date an opinion
of Dechert, in a form reasonably satisfactory to the Acquired Fund, and dated as
of the Closing Date, to the effect that:
(a) The Acquiring Trust has been duly formed and is an existing
business trust; (b) the Acquiring Fund has the power to carry on its business as
presently conducted in accordance with the description thereof in the Acquiring
Fund's registration statement under the 1940 Act; (c) the Agreement has been
duly authorized, executed and delivered by the Acquiring Trust, on behalf of the
Acquiring Fund, and constitutes a valid and legally binding obligation of the
Acquiring Trust, on behalf of the Acquiring Fund, enforceable in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and laws of general applicability relating to or
affecting creditors' rights and to general equity principles; (d) the execution
and delivery of the Agreement did not, and the exchange of the Acquired Fund's
assets for Acquiring Fund Shares pursuant to the Agreement will not, violate the
Acquiring Trust's Declaration of Trust, as amended, or By-laws; and (e) to the
knowledge of
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such counsel, and without any independent investigation, (i) the Acquiring Trust
is not subject to any litigation or other proceedings that might have a
materially adverse effect on the operations of the Acquiring Trust, (ii) the
Acquiring Trust is duly registered as an investment company with the Commission
and is not subject to any stop order; and (iii) all regulatory consents,
authorizations, approvals or filings required to be obtained or made by the
Acquiring Fund under the federal laws of the United States or the laws of The
Commonwealth of Massachusetts for the exchange of the Acquired Fund's assets for
Acquiring Fund Shares, pursuant to the Agreement have been obtained or made.
The delivery of such opinion is conditioned upon receipt by Dechert of
customary representations it shall reasonably request of each of the Acquiring
Trust and the Acquired Trust.
6.4. The Acquiring Fund shall have performed all of the covenants and
complied with all of the provisions required by this Agreement to be performed
or complied with by the Acquiring Fund on or before the Closing Date.
6.5. The Acquiring Fund shall have [(i) adopted a new investment management
agreement and (ii) entered into an administrative services agreement with
Scudder Kemper, each] in a form reasonably satisfactory to the Acquired Fund.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquired Fund of all of the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following further
conditions:
7.1. All representations and warranties of the Acquired Trust, on behalf of
the Acquired Fund, contained in this Agreement shall be true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated by this Agreement, as of the Closing Date, with
the same force and effect as if made on and as of the Closing Date; and there
shall be (i) no pending or threatened litigation brought by any person (other
than the Acquiring Fund, its adviser or any of their affiliates) against the
Acquired Fund or its investment adviser(s), Board members or officers arising
out of this Agreement and (ii) no facts known to the Acquired Fund which the
Acquired Fund reasonably believes might result in such litigation.
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 Trust, on behalf
of the Acquiring Fund, and dated as of the Closing Date, to the effect that the
representations and warranties of the Acquired Trust with respect to the
Acquired Fund made in this Agreement are true and correct on and as of the
Closing Date, except as they may be affected by the transactions contemplated by
this Agreement, and as to such other matters as the Acquiring Fund shall
reasonably request.
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7.4. The Acquiring Fund shall have received on the Closing Date an opinion
of Dechert, in a form reasonably satisfactory to the Acquiring Fund, and dated
as of the Closing Date, to the effect that:
(a) The Acquired Trust has been duly formed and is an existing
business trust; (b) the Acquired Fund has the power to carry on its business as
presently conducted in accordance with the description thereof in the Acquired
Trust's registration statement under the 1940 Act; (c) the Agreement has been
duly authorized, executed and delivered by the Acquired Trust, on behalf of the
Acquired Fund, and constitutes a valid and legally binding obligation of the
Acquired Trust, on behalf of the Acquired Fund, enforceable in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and laws of general applicability relating to or
affecting creditors' rights and to general equity principles; (d) the execution
and delivery of the Agreement did not, and the exchange of the Acquired Fund's
assets for Acquiring Fund Shares pursuant to the Agreement will not, violate the
Acquired Trust's Declaration of Trust, as amended, or By-laws; and (e) to the
knowledge of such counsel, and without any independent investigation, (i) the
Acquired Trust is not subject to any litigation or other proceedings that might
have a materially adverse effect on the operations of the Acquired Trust, (ii)
the Acquired Trust is duly registered as an investment company with the
Commission and is not subject to any stop order, and (iii) all regulatory
consents, authorizations, approvals or filings required to be obtained or made
by the Acquired Fund under the federal laws of the United States or the laws of
The Commonwealth of Massachusetts for the exchange of the Acquired Fund's assets
for Acquiring Fund Shares, pursuant to the Agreement have been obtained or made.
The delivery of such opinion is conditioned upon receipt by Dechert of
customary representations it shall reasonably request of each of the Acquiring
Trust and the Acquired Trust.
7.5. The Acquired Fund shall have performed all of the covenants and
complied with all of the provisions required by this Agreement to be performed
or complied with by the Acquired Fund on or before the Closing Date.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND THE
ACQUIRED FUND
If any of the conditions set forth below have not been met on or before the
Closing Date with respect to the Acquired Fund or the Acquiring Fund, the other
party to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1. This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Acquired Fund in accordance with the provisions of the Acquired Trust's
Declaration of Trust, as amended, and By-Laws, applicable Massachusetts law and
the 1940 Act, and certified copies of the resolutions evidencing such approval
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.
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<PAGE>
8.3. All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities deemed necessary by
the Acquiring Fund or the Acquired Fund to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of the
Acquiring Fund or the Acquired Fund, provided that either party hereto may for
itself waive any of such conditions.
8.4. The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act.
8.5. The parties shall have received an opinion of Willkie Farr & Gallagher
addressed to each of the Acquiring Fund and the Acquired Fund, in a form
reasonably satisfactory to each such party to this Agreement, substantially to
the effect that, based upon certain facts, assumptions and representations of
the parties, for federal income tax purposes: (i) the transfer to the Acquiring
Fund of all or substantially all of the assets of the Acquired Fund in exchange
solely for Acquiring Fund Shares and the assumption by the Acquiring Fund of all
of the liabilities of the Acquired Fund, followed by the distribution of such
shares to the Acquired Fund Shareholders in exchange for their shares of the
Acquired Fund in complete liquidation of the Acquired Fund, will constitute a
"reorganization" within the meaning of Section 368(a)(1) of the Code, and the
Acquiring Fund and the Acquired Fund will each be "a party to a reorganization"
within the meaning of Section 368(b) of the Code; (ii) no gain or loss will be
recognized by the Acquired Fund upon the transfer of all or substantially all of
its assets to the Acquiring Fund in exchange solely for Acquiring Fund Shares
and the assumption by the Acquiring Fund of all of the liabilities of the
Acquired Fund; (iii) the basis of the assets of the Acquired Fund in the hands
of the Acquiring Fund will be the same as the basis of such assets of the
Acquired Fund immediately prior to the transfer; (iv) the holding period of the
assets of the Acquired Fund in the hands of the Acquiring Fund will include the
period during which such assets were held by the Acquired Fund; (v) no gain or
loss will be recognized by the Acquiring Fund upon the receipt of the assets of
the Acquired Fund in exchange for Acquiring Fund Shares and the assumption by
the Acquiring Fund of all of the liabilities of the Acquired Fund; (vi) no gain
or loss will be recognized by Acquired Fund Shareholders upon the receipt of the
Acquiring Fund Shares solely in exchange for their shares of the Acquired Fund
as part of the transaction; (vii) the basis of the Acquiring Fund Shares
received by Acquired Fund Shareholders will be the same as the basis of the
shares of the Acquired Fund exchanged therefor; and (viii) the holding period of
Acquiring Fund Shares received by Acquired Fund Shareholders will include the
holding period during which the shares of the Acquired Fund exchanged therefor
were held, provided that at the time of the exchange the shares of the Acquired
Fund were held as capital assets in the hands of Acquired Fund Shareholders.
The delivery of such opinion is conditioned upon receipt by Willkie Farr &
Gallagher of representations it shall request of each of the Acquiring Trust and
Acquired Trust. Notwithstanding anything herein to the contrary, neither the
Acquiring Fund nor the Acquired Fund may waive the condition set forth in this
section 8.5.
9. INDEMNIFICATION
9.1. The Acquiring Fund agrees to indemnify and hold harmless the Acquired
Fund and each of the Acquired Fund's Board members and officers from and against
any and all losses, claims, damages, liabilities or expenses (including, without
limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which jointly and severally, the Acquired Fund or any of its
Board members or
15
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officers may become subject, insofar as any such loss, claim, damage, liability
or expense (or actions with respect thereto) arises out of or is based on any
breach by the Acquiring Fund of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
9.2. The Acquired Fund agrees to indemnify and hold harmless the Acquiring
Fund and each of the Acquiring Fund's Board members and officers from and
against any and all losses, claims, damages, liabilities or expenses (including,
without limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which jointly and severally, the Acquiring Fund or any of its
Board members or officers may become subject, insofar as any such loss, claim,
damage, liability or expense (or actions with respect thereto) arises out of or
is based on any breach by the Acquired Fund of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
10. FEES AND EXPENSES
10.1. Each of the Acquiring Trust, on behalf of the Acquiring Fund, and the
Acquired Trust, on behalf of the Acquired Fund, represents and warrants to the
other that it has no obligations to pay any brokers or finders fees in
connection with the transactions provided for herein.
10.2. The anticipated costs of the Reorganization allocable to the Acquired
Fund are $15,649, which includes board meeting fees, legal, accounting and other
consultant fees, and proxy solicitation costs. Each class of the Acquired Fund
will pay 100% of its estimated allocable costs which are $5,709, $7,373 and
$2,567 for Class A, Class B and Class C shares, respectively, [(except that the
Acquiring Fund is bearing the SEC and state registration and notice fees which
are estimated to be $_________)]. Scudder Kemper is bearing any cost overruns.
Any such expenses which are so borne by Scudder Kemper will be solely and
directly related to the Reorganization within the meaning of Revenue Ruling 73-
54, 1973-1 C.B. 187. [Acquired Fund Shareholders will pay their own expenses,
if any, incurred in connection with the Reorganization.]
11. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
11.1. The Acquiring Fund and the Acquired Fund agree that neither party has
made any representation, warranty or covenant not set forth herein and that this
Agreement constitutes the entire agreement between the parties.
11.2. Except as specified in the next sentence set forth in this section
11.2, the representations, warranties and covenants contained in this Agreement
or in any document delivered pursuant hereto or in connection herewith shall not
survive the consummation of the transactions contemplated hereunder. The
covenants to be performed after the Closing and the obligations of each of the
Acquiring Fund and Acquired Fund in sections 9.1 and 9.2 shall survive the
Closing.
12. TERMINATION
12.1. This Agreement may be terminated and the transactions contemplated
hereby may be abandoned by either party by (i) mutual agreement of the parties,
or (ii) by either party if the Closing shall not have occurred on or before [
], 2001, unless such date is extended by mutual agreement of the parties, or
(iii) by either party if the other party shall have materially breached its
obligations under this 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
16
<PAGE>
hereunder on the part of any party or their respective Board members or
officers, except for any such material breach or intentional misrepresentation,
as to each of which all remedies at law or in equity of the party adversely
affected shall survive.
13. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by any authorized officer of the Acquired
Fund and any authorized officer of the Acquiring Fund; provided, however, that
following the meeting of the Acquired Fund Shareholders called by the Acquired
Fund pursuant to section 5.3 of this Agreement, no such amendment may have the
effect of changing the provisions for determining the number of the Acquiring
Fund Shares to be issued to the Acquired Fund Shareholders under this Agreement
to the detriment of such shareholders without their further approval.
14. NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be deemed duly given
if delivered by hand (including by Federal Express or similar express courier)
or transmitted by facsimile or three days after being mailed by prepaid
registered or certified mail, return receipt requested, addressed to the
Acquired Fund, 222 South Riverside Plaza, Chicago, Illinois 60606, with a copy
to Dechert, Ten Post Office Square South, Boston, MA 02109-4603, Attention:
Joseph R. Fleming, Esq., or to the Acquiring Fund, Two International Place,
Boston, Massachusetts 02110-4103, with a copy to Dechert, Ten Post Office Square
South, Boston, MA 02109-4603, Attention: Joseph R. Fleming, Esq., or to any
other address that the Acquired Fund or the Acquiring Fund shall have last
designated by notice to the other party.
15. HEADINGS; COUNTERPARTS; ASSIGNMENT; LIMITATION OF LIABILITY
15.1. The Article and section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15.2. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
15.3. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and the shareholders of the
Acquiring Fund and the Acquired Fund and their respective successors and
assigns, any rights or remedies under or by reason of this Agreement.
15.4. References in this Agreement to each Trust mean and refer to the
Board members of each Trust from time to time serving under its Declaration of
Trust on file with the Secretary of State of The Commonwealth of Massachusetts,
as the same may be amended from time to time, pursuant to which each Trust
conducts its business. It is expressly agreed that the obligations of each Trust
hereunder shall not be binding upon any of the Board members, shareholders,
nominees, officers, agents, or employees of the Trusts or the Funds personally,
but bind only the respective property of the Funds, as provided in each
17
<PAGE>
Trust's Declaration of Trust. Moreover, no series of either Trust other than the
Funds shall be responsible for the obligations of the Trusts hereunder, and all
persons shall look only to the assets of the Funds to satisfy the obligations of
the Trusts hereunder. The execution and the delivery of this Agreement have been
authorized by each Trust's Board members, on behalf of the applicable Fund, and
this Agreement has been signed by authorized officers of each Fund acting as
such, and neither such authorization by such Board members, nor such execution
and delivery by such officers, shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but shall
bind only the respective property of the Funds, as provided in each Trust's
Declaration of Trust.
Notwithstanding anything to the contrary contained in this Agreement, the
obligations, agreements, representations and warranties with respect to each
Fund shall constitute the obligations, agreements, representations and
warranties of that Fund only (the "Obligated Fund"), and in no event shall any
other series of the Trusts or the assets of any such series be held liable with
respect to the breach or other default by the Obligated Fund of its obligations,
agreements, representations and warranties as set forth herein.
15.5. This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of The Commonwealth of Massachusetts, without regard
to its principles of conflicts of laws.
18
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by an authorized officer and its seal to be affixed thereto and
attested by its Secretary or Assistant Secretary.
Attest: SCUDDER PORTFOLIO TRUST
on behalf of Scudder High Yield Bond Fund
_________________________
Secretary
______________________________
By:___________________________
Its:___________________________
Attest: KEMPER HIGH YIELD SERIES
on behalf of Kemper High Yield Opportunity Fund
_________________________
Secretary
______________________________
By:___________________________
Its:____________________________
AGREED TO AND ACKNOWLEDGED
ONLY WITH RESPECT TO
PARAGRAPH 10.2 HERETO
SCUDDER KEMPER INVESTMENTS, INC.
____________________________________
By:_________________________________
Its:_________________________________
19
<PAGE>
EXHIBIT B
MANAGEMENT'S DISCUSSION OF SCUDDER HIGH YIELD BOND FUND'S PERFORMANCE
<PAGE>
Performance Update
--------------------------------------------------------------------------------
January 31, 2000
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Merrill Lynch
Scudder High Yield High Yield
Bond Fund Master Index*
6/96** 10000 10000
7/96 10003 10068
1/97 11119 10883
7/97 12008 11705
1/98 12897 12368
7/98 13411 12808
1/99 13363 12756
7/99 13377 12873
1/00 13502 12764
-----------------------------------------------------------------------------
Fund Index Comparison
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Total Return
Growth of Average
Period ended 1/31/2000 $10,000 Cumulative Annual
-----------------------------------------------------------------------------
Scudder High Yield Bond Fund
-----------------------------------------------------------------------------
<S> <C> <C> <C>
1 year $10,104 1.04% 1.04%
-----------------------------------------------------------------------------
Life of Fund** $13,502 35.02% 8.71%
-----------------------------------------------------------------------------
Merrill Lynch High Yield Master Index*
-----------------------------------------------------------------------------
1 year $10,006 0.06% 0.06%
-----------------------------------------------------------------------------
Life of Fund** $12,764 27.64% 7.04%
-----------------------------------------------------------------------------
</TABLE>
* The Merrill Lynch High Yield Master Index is an unmanaged index broadly
reflective of below-investment grade corporate bonds. Index returns assume
reinvested dividends and, unlike Fund returns, do not reflect any fees or
expenses.
** The Fund commenced operations on June 28, 1996. Index comparisons begin
June 30, 1996.
6
<PAGE>
Performance is historical and assumes reinvestment of all dividends and
capital gains and is not indicative of future results. Total return and
principal value will fluctuate, so an investor's shares, when redeemed, may
be worth more or less than when purchased. If the Adviser had not maintained
the Fund's expenses, total returns for the Fund would have been lower.
7
<PAGE>
Portfolio Management Discussion
--------------------------------------------------------------------------------
January 31, 2000
For an overview of Scudder High Yield Bond Fund's performance, strategy, and
outlook, we present an interview with Scudder High Yield Bond Fund's lead
portfolio manager, Kelly D. Babson.
Q: How has Scudder High Yield Bond performed over its most recent fiscal year?
A: For the 12-month period ended January 31, 2000, Scudder High Yield Bond Fund
posted a 1.04% total return. Over the same period the high yield market as
measured by the Merrill Lynch High Yield Master Index returned 0.06%. The fund's
total return was 35.02% since its June 28, 1996, inception, surpassing the
Index's 27.64% return over the same period. On January 31, the fund offered an
11.16% 30-day SEC yield.
Q: The high yield market endured difficult market conditions during the fund's
most recent fiscal year. Did conditions improve at the close of the period?
A: The fourth quarter of the fund's fiscal year showed some improvement. We had
what typically would be the January rally in November and early December.
Earlier on, in July, August, and September, investors were leaving the riskier
asset classes, concerned over Y2K and rising interest rates. Then, as interest
rate spreads of high yield bonds versus Treasuries widened enough to look
attractive by the end of October, we did see a fairly significant rally in high
yield issues, with some new money coming into the sector. That rally reversed
course, though, from the second week of December through the end of January.
Q: What has the market environment been for high yield bonds?
A: To provide some perspective, in 1998, high yield mutual funds took in about
$20 billion, down from the record set in 1997, but still a healthy number. Last
year, high yield mutual funds took in a little less than $1 billion, a very flat
year, and so far this year they've lost assets. Typically January is a very
strong month for high yield issues, as investors' risk tolerance generally
improves with
10
<PAGE>
the start of the new year. So, we're not seeing the normal seasonal trends right
now, and we believe most of that money is going to the equity market. Partly,
it's because some investors don't want to own bonds in a rising rate
environment, and partly it's that high yield as a sector has endured two years
of subcoupon total returns.
Q: In light of continued favorable economic conditions in the U.S., do you find
the high yield market's recent performance surprising?
A: Imagine that you could flip the calendar back to 1998 and successfully
predict that the economy would continue to grow at a rate of 4% or better,
inflation would remain contained at the 2 to 2 1/2% level, global growth would
accelerate, and equity markets would continue to soar. How would high yield
perform? No one would have predicted what actually happened -- that the high
yield market would experience a significant increase in default rates
approaching early 1990s levels, and subcoupon returns.
Q: Why has high yield underperformed as a sector?
A: With the increase in wealth fueled by the stock market and rising home
prices, a typical individual's balance sheet looks very healthy today. But it's
a paper balance sheet. Individuals and companies have been emboldened to borrow
more, to leverage themselves to a greater degree. The equity market has allowed
individuals and companies to access capital more cheaply and more easily. And
the stock market seemed to go nowhere but up through the end of January. But
that positive sentiment was actually at the margins. It's concentrated in high
growth areas -- in the Internet, in telecomm, and in media companies. It's not
in smokestack America, in basic industrials. Until this year, the Russell 2000
has been limping along. Small cap and value stocks, which have been the bread
and butter of the high yield market, are doing comparatively poorly. These basic
industrial companies are being squeezed by cheap imports and by their inability
to pass through significant
11
<PAGE>
price increases on raw materials to their end customer because of the low
inflation environment overall.
Basic industrials are also having difficulty finding labor at affordable rates,
and they're facing tightened bank lending standards. The equity market is
fueling growth, but value stories are not finding an audience in the equity
market right now. That's why you're seeing a spike up in personal bankruptcies
and an increase in the number of companies that violate cash flow or net worth
covenants in their revolving credit arrangements with banks. Three or four years
ago banks just rolled over this debt, or the company could raise money in the
high yield market. With liquidity more stressed in the high yield market, and
with banks tightening, there's a credit squeeze. The equity advance has not been
very broad and valuations on corporations outside the media, Internet, and
telecomm sectors have been shrinking in many cases. So the move to a new economy
has caught a lot of what were traditionally high yield borrowers and left them
behind, at least temporarily.
Q: How have these changing conditions affected the market?
A: In 1999, we witnessed a growing dispersion in yields within the high yield
sector, and more differentiation by credit quality within high yield bonds. In
1997, spreads between high yield companies of varying degrees of quality were
very tight. Over the last two years (and accelerating quite dramatically in
1999) there has been a "blowout" in dispersion of yields, where the lower
quality and the more challenged borrowers are trading at much wider yield
spreads than before. Better quality companies continue to trade fairly tight to
Treasuries. Investors are being much more risk averse, in light of the spike in
default rates and the reduced recovery values that we're seeing in the market.
12
<PAGE>
Q: Given yield dispersion and a higher default rate within the overall market,
what was the fund's portfolio strategy over the period?
A: Throughout the fund's fiscal year we maintained a relatively defensive
portfolio strategy. Though we do monitor sector allocations within the
portfolio, we generally followed a bottom-up strategy during the period. We
sought to head off potential problems by being well ahead of negative
developments within credits that the fund owns. We maintained a core of BB-rated
securities -- at the high end of our universe's quality spectrum -- despite the
fact that in a rising interest rate environment we would expect BB-rated bonds
to underperform lower-rated credits on a total-return basis. BB-rated and
B-rated bonds within the portfolio posted fairly good performance during the
period as the credit profiles of many of these companies moved toward investment
grade. We also continued to have meaningful CCC exposure in the portfolio, 15%
as of the period's close, concentrated in telecomm and Internet-related
companies. On the subject of credit quality, it's worth noting that Scudder High
Yield Bond Fund has never experienced any bond defaults.
Q: Were there any changes to sector allocations within the portfolio?
A: Sectors were fairly consistent throughout the period. The fund's largest
overweights continued to be in telecommunications and media. That's because the
growth prospects and the potential for credit upgrades within these two sectors
are very promising. As the bulk of the new issuance has been concentrated in
media and telecommunications, to keep up with the market we've had to continue
to increase our allocations in those sectors. In addition, we increased our
weighting in energy, paper, and forest products at the beginning of the year,
which was generally positive from a sector perspective as well as from an
individual security perspective. Areas that we underweighted included health
care, supermarkets,
13
<PAGE>
technology, and retail. These underweights, particularly in health care, helped
fund performance.
Q: What is your outlook for the high yield market over the coming months?
A: I'm optimistic about the market near term. The higher default rate that the
high yield market has experienced is discounted in spreads right now. We believe
that most of the more speculative issuance that recently experienced credit
problems has seen the worst. Because liquidity conditions have become more
challenging, investors are more discriminating about what they'll buy. There's
also more selectivity and discipline in the high yield offerings that are being
brought to market, which bodes well for market fundamentals and technicals going
forward. It will take some time for these positive developments to translate
into meaningful spread tightening and increased total return for high yield
investors. But given the fact that yields are fairly high, we believe that the
income potential from a high yield portfolio is very attractive going forward.
We believe that Scudder High Yield Bond Fund remains an attractive vehicle for
investors seeking high current income as well as capital appreciation potential.
14
<PAGE>
APPENDIX 1
Trustee and Nominee Shareholdings
The following table sets forth, for each nominee and Trustee, the
number of shares owned in each series of the Acquired Trust as of December 31,
2000. [Each nominee's and Trustee's individual shareholdings of any series of
the Acquired Trust constitute less than 1% of the outstanding shares of such
fund.] [As a group, the Trustees and officers own less than 1% of each class of
shares of any series of the Acquired Trust.]
[To be provided]
<PAGE>
APPENDIX 2
BENEFICIAL OWNERS OF FUND SHARES
<PAGE>
This Proxy Statement/Prospectus is accompanied by Scudder High Yield
Bond Fund's prospectus offering Class A, Class B and Class C shares dated March
1, 2001, which was previously filed with the Securities and Exchange Commission
(the "Commission") via EDGAR on December 26, 2000 (File No. 811-00042) and is
incorporated by reference herein.
Kemper High Yield Opportunity Fund's prospectus dated January 1, 2001,
which was previously filed with the Commission via EDGAR on October 13, 2000
(File No. 811-02786), is incorporated by reference herein.
Scudder High Yield Bond Fund's statement of additional information
offering Class A, Class B and Class C shares dated March 1, 2001, which was
previously filed with the Commission via EDGAR on December 26, 2000 (File No.
811-00042), is incorporated by reference herein.
<PAGE>
PART B
SCUDDER PORTFOLIO TRUST
-------------------------------------------------------------------------------
Statement of Additional Information
March [ ], 2001
-------------------------------------------------------------------------------
Acquisition of the Assets of By and in Exchange for Shares of
Kemper High Yield Opportunity Fund, Scudder High Yield Bond Fund,
a series of Kemper High Yield Series a series of Scudder Portfolio Trust
(the "Acquired Trust") (the "Acquiring Trust")
222 South Riverside Plaza Two International Place
Chicago, IL 60606 Boston, MA 02110-4103
This Statement of Additional Information is available to the
shareholders of Kemper High Yield Opportunity Fund in connection with a proposed
transaction whereby Scudder High Yield Bond Fund will acquire all or
substantially all of the assets and all of the liabilities of Kemper High Yield
Opportunity Fund in exchange for shares of the Scudder High Yield Bond Fund (the
"Reorganization").
This Statement of Additional Information of the Acquiring Trust
contains material which may be of interest to investors but which is not
included in the Proxy Statement/Prospectus of the Acquiring Trust relating to
the Reorganization. This Statement of Additional Information consists of this
cover page and the following documents:
1. Scudder High Yield Bond Fund's statement of additional information offering
Class A, Class B and Class C shares dated March 1, 2001, which was previously
filed with the Securities and Exchange Commission (the "Commission") via EDGAR
on December 26, 2000 (File No. 811-00042) and is incorporated by reference
herein.
2. Scudder High Yield Bond Fund's annual report to shareholders for the fiscal
year ended January 31, 2000, which was previously filed with the Commission via
EDGAR on March 29, 2000 (File No. 811-00042) and is incorporated by reference
herein.
3. Scudder High Yield Bond Fund's semiannual report to shareholders for the
period ended July 31, 2000, which was previously filed with the Commission via
EDGAR on September 29, 2000 (File No. 811-00042) and is incorporated by
reference herein.
4. Kemper High Yield Opportunity Fund's prospectus dated January 1, 2001, which
was previously filed with the Commission via EDGAR on October 13, 2000 (File No.
811-02786) and is incorporated by reference herein.
5. Kemper High Yield Opportunity Fund's statement of additional information
dated January 1, 2001, which was previously filed with the Commission via EDGAR
on October 13, 2000 (File No. 811-02786) and is incorporated by reference
herein.
6. Kemper High Yield Opportunity Fund's annual report to shareholders for the
fiscal year ended September 30, 2000, which was previously filed with the
Commission via EDGAR on December 1, 2000 (File No. 811-02786) and is
incorporated by reference herein.
7. The financial statements and schedules of Scudder High Yield Bond Fund and
Kemper High Yield Opportunity Fund required by Regulation S-X for the periods
specified in Article 3 thereof, which are filed herein.
This Statement of Additional Information is not a prospectus. A Proxy
Statement/Prospectus dated March [ ], 2001 relating to the Reorganization may
be obtained by writing Kemper High Yield Opportunity Fund at 222 South Riverside
Drive, Chicago, IL 60606 or by calling [ ] at 1-800-[ ].
This Statement of Additional Information should be read in conjunction with the
Proxy Statement/Prospectus.
<PAGE>
Pro Forma
Portfolio of Investments
as of September 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
Scudder Kemper
High Yield High Yield Pro Forma Scudder Kemper Pro Forma
Bond Opp Combined High Yield High Yield Combined
Par/Share Par/Share Par/Share Bond Opp Market
Amount Amount Amount Value ($) Value ($) Value($)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REPURCHASE AGREEMENTS (4.4%)
----------------------------
Repurchase Agreement with State Street
Bank, 6.48%, 10/02/2000 6,480,000 116,000 6,596,000 6,480,000 116,000 6,596,000
----------------------------------------
Total Repurchase Agreements (Cost of $6,480,000,
$116,000, and $6,596,000 respectively) 6,480,000 116,000 6,596,000
========================================
FOREIGN BONDS - U. S.$ DENOMINATED (2.7%)
-----------------------------------------
Dolphin Telecom PLC, Zero Coupon, 05/15/2009 1,000,000 1,000,000 190,000 190,000
Euramax International, PLC, 11.25%, 10/01/2006 1,000,000 660,000 1,660,000 870,000 574,200 1,444,200
AES Drax Energy Ltd., 11.50%, 08/30/2010 260,000 100,000 360,000 274,950 105,750 380,700
Federal Republic of Brazil, 14.50%, 10/15/2009 500,000 100,000 600,000 552,500 110,500 663,000
Kappa Beheer BV, 10.625%, 07/15/2009 490,000 490,000 503,475 503,475
TFM, S.A. de C.V., 10.25%, 06/15/2007 1,000,000 1,000,000 920,000 920,000
----------------------------------------
Total Foreign Bonds-U.S.$Denominated (Cost of
$3,522,180, $873,400, and $4,395,580 respectively) 3,310,925 790,450 4,101,375
========================================
U.S. TREASURY OBLIGATIONS (4.1%)
--------------------------------
U.S. Treasury Note, 6.00%, 08/15/2009 3,000,000 3,000,000 3,015,000 3,015,000
----------------------------------------
3,015,000 3,015,000
========================================
U.S. Treasury Bond, 6.50%, 02/15/2010 3,000,000 3,000,000 3,126,090 3,126,090
----------------------------------------
Total U.S. Treasury Obligations (Cost of
$6,112,969, $0, and $6,112,969 respectively) 3,126,090 3,126,090
========================================
CORPORATE BOND (85.9%)
----------------------
COMMUNICATIONS
Allegiance Telecom, Inc. 12.875%, 05/15/2008 1,210,000 200,000 1,410,000 1,234,200 204,000 1,438,200
Call-Net Enterprises, Inc., 9.3755, 05/15/2009 270,000 270,000 121,500 121,500
Call-Net Enterprises, Inc., Step-up Coupon,
0% to 05/15/2004, 10.80% to 05/15/2009 640,000 640,000 192,000 192,000
Crown Castle International Corp.,Step-up Coupon,
0% to 08/01/2004, 11.25% to 08/01/2011 90,000 90,000 59,400 59,400
Crown Castle International Corp., 10.750%, 08/01/2011 620,000 70,000 690,000 629,300 71,050 700,350
Doubloon Communications Corp., 10.875%, 07/01/2010 190,000 100,000 290,000 184,300 97,000 281,300
Esprit Telecom Group, PLACE, 11.50%, 12/15/2007 330,000 330,000 151,800 151,800
Esprit Telecom Group, PLACE, 10.875%, 06/15/2008 110,000 110,000 50,600 50,600
Fairmont Communications, 12.50%, 05/01/2010 550,000 110,000 660,000 536,250 107,250 643,500
Global Crossing Holdings Ltd., 9.625%, 05/15/2008 850,000 850,000 841,500 841,500
Global Crossing Holdings Ltd., 9.50%, 11/15/2009 1,500,000 240,000 1,740,000 1,492,500 238,800 1,731,300
Global Telesystems Group, 9.875%, 02/15/2005 100,000 100,000 44,000 44,000
Hermes Europe Rialto BV, 11.50%, 08/15/2007 50,000 50,000 23,000 23,000
ICE Holdings, Inc., Step-up Coupon,
0% to 09/15/2000, 13.50% to 09/15/2005 1,000,000 500,000 1,500,000 220,000 110,000 330,000
Impost Corp., 12.375%, 06/15/2008 1,250,000 155,000 1,405,000 937,500 116,250 1,053,750
KMC Telecom Holdings, Inc.,Step-up Coupon,
0% to 02/15/2003, 12.50% to 02/15/2008 480,000 480,000 163,200 163,200
KMC Telecom Holdings Inc., 13.50%, 05/15/2009 220,000 220,000 138,600 138,600
Level 3 Communications Inc., 9.125%, 05/01/2008 410,000 410,000 350,550 350,550
MGC Communications, 13.00%, 10/01/2004 310,000 310,000 254,200 254,200
McLeod USA, Inc., 9.25%, 07/15/2007 2,000,000 2,000,000 1,860,000 1,860,000
Metromedia Fiber Network, Inc., 10.0%, 11/15/2008 740,000 740,000 684,500 684,500
MetroNet Communications Corp., Step-up Coupon,
0% to 06/15/2003, 9.95%, 06/15/2008 2,150,000 2,150,000 1,789,875 1,789,875
Millicom International Cellular, S.A., Step up
Coupon, )% to 06/01/2001, 13.5% to 06/01/2006 1,460,000 1,460,000 1,270,200 1,270,200
Nextel Communications, 9.0375%, 11/15/2009 2,060,000 340,000 2,400,000 2,026,525 334,475 2,361,000
Nextlink Communications, Inc., 12.50%, 04/15/2006 80,000 80,000 78,400 78,400
Nextlink Communications, Inc., Step-up Coupon,
0% to 04/15/2003, 9.45% to 04/15/2008 3,600,000 40,000 3,640,000 2,160,000 24,000 2,184,000
Price Communications Wireless, 9.125%, 12/15/2006 1,500,000 1,500,000 1,530,000 1,530,000
Primus Telecommunications Group, 11.75%, 08/01/2004 540,000 540,000 297,000 297,000
Primus Telecommunications Group, 11.25%, 01/15/2009 250,000 70,000 320,000 125,000 35,000 160,000
Primus Telecommunications Group, 12.75%, 10/15/2009 750,000 50,000 800,000 382,500 25,500 408,000
Rogers Cantel, 9.755, 06/01/2016 1,000,000 170,000 1,170,000 1,075,000 182,750 1,257,750
SBA Communications Corp., Step-up,
0% to 03/01/2003, 12.0% to 03/01/2008 1,850,000 110,000 1,960,000 1,378,250 81,950 1,460,200
Spectrasite Holdings, Inc., Step-up Coupon,
0% to 07/15/2003, 12.0% to 07/15/2008 240,000 510,000 750,000 165,600 351,900 517,500
Spectrasite Holdings, Inc., Step-up Coupon,
0% to 04/15/2004, 11.25% to 04/15/2009 2,000,000 500,000 2,500,000 1,095,000 273,750 1,368,750
Spectrasite Holdings, Inc., Step-up Coupon,
10.75% to 03/15/2010 445,000 20,000 465,000 422,750 19,000 441,750
Sprint Spectrum L.P. Senior Note, 11.0%, 08/15/2006 1,000,000 1,000,000 1,106,680 1,106,680
Star Choice Communications Inc., 13.0%, 12/15/2005 1,000,000 1,000,000 1,100,000 1,100,000
Telecorp PCS, Inc., Step-up-Coupon,
0% to 04/15/2004, 11.625 to 04/15/2009 2,750,000 650,000 3,400,000 1,856,250 438,750 2,295,000
Telecorp PCS, Inc., Step-up-Coupon,
10.625% to 07/15/2010 360,000 100,000 460,000 363,600 101,000 464,600
Teligent, Inc., 11.50%, 12/01/2007 2,000,000 280,000 2,280,000 880,000 123,200 1,003,200
Tritel PCS Inc., Step-up Coupon,
0% to 05/01/2004, 12.75% to 05/15/2009 260,000 260,000 174,200 174,200
Triton Communications, L.L.C., Step-up Coupon,
0% to 05/01/2003, 11% to 05/01/2008 260,000 880,000 1,140,000 195,000 660,000 855,000
Triton Communications LLC, Step-up Coupon,
0% 05/01/2003, 11.0%, 05/01/2008 790,000 790,000 592,500 592,500
Versatel Teleco, 11.875%, 07/15/2009 1,000,000 1,000,000 870,000 870,000
Viatel, Inc., Step-up Coupon,
0% to 04/15/2003, 12.5% to 04/15/2008 430,000 430,000 111,800 111,800
Voicestream Wireless Corp.,10.375%, 11/15/2009 1,290,000 1,290,000 1,396,425 1,396,425
WorldCom, Inc., 8.875%, 01/15/2006 368,000 368,000 380,858 380,858
----------------------------------------
31,557,913 5,030,025 36,587,938
========================================
CONSTRUCTION
Dimac Corp.,9.75%, 01/15/2008 120,000 120,000 1,200 1,200
Hovnanian Enterprises, Inc., 9.125%, 05/01/2009 975,000 975,000 882,375 882,375
Lennar Corp., 9.95%, 05/01/2010 1,620,000 240,000 1,860,000 1,660,500 237,493 1,897,993
Millar Western Forest Products, 9.875%, 05/15/2008 725,000 725,000 667,000 667,000
Nortek, Inc., 9.25%, 03/15/2007 1,000,000 1,000,000 965,000 965,000
Nortek, Inc., 9.875%, 03/01/2005 1,000,000 1,000,000 947,500 947,500
Standard Pacific Corp.,8.0%, 02/15/2008 100,000 100,000 91,250 91,250
Standard Pacific Corp.,8.50%, 04/01/2009 200,000 200,000 188,500 188,500
Toll Corp., 8.125%, 02/01/2009 100,000 100,000 94,250 94,250
Toll Corp., 8.00%, 05/01/2009 100,000 100,000 94,500 94,500
Del Webb Corp., 9.75%, 01/15/2008 200,000 200,000 186,000 186,000
----------------------------------------
5,122,375 893,193 6,015,568
========================================
CONSUMER DISCRETIONARY
AFC Enterprises, 10.25%, 05/15/2007 510,000 510,000 507,450 507,450
Avondale Mills, 10.25%, 05/01/2006 274,000 274,000 260,300 260,300
Cinemark USA, Inc. Series D, 9.625%, 08/01/2008 1,000,000 1,000,000 430,000 430,000
Circus Circus Mandalay Resort Group, 6.45%, 02/01/2006 130,000 30,000 160,000 114,572 26,440 141,012
Finlay Fine Jewelry Co., 8.375%, 05/01/2008 2,250,000 2,250,000 2,070,000 2,070,000
Boca Resorts, Inc., 9.875%, 04/15/2009 1,700,000 400,000 2,100,000 1,640,500 386,000 2,026,500
Guitar Center Management, 11.0%, 07/01/2006 1,350,000 330,000 1,680,000 1,302,750 318,450 1,621,200
Hines Horticulture, Inc., 11.75%, 10/15/2005 450,000 450,000 443,250 443,250
Hollywood Entertainment Corp., 10.63%, 08/15/2004 210,000 160,000 370,000 161,700 123,200 284,900
Horseshoe Gaming Holdings, 8.625%, 05/15/2009 1,510,000 1,510,000 1,483,575 1,483,575
International Game Technology, 8.375%, 05/15/2009 2,000,000 2,000,000 1,955,000 1,955,000
MGM Grand Inc., 9.75%, 06/01/2007 960,000 220,000 1,180,000 991,200 227,150 1,218,350
MGM Mirage, Inc., 8.50%, 09/15/2010 690,000 130,000 820,000 676,200 127,400 803,600
Mandalay Resort Group, 10.25%, 08/01/2007 310,000 100,000 410,000 319,300 103,000 422,300
Mandalay Resort Group, 9.50%, 08/01/2008 140,000 100,000 240,000 142,450 101,750 244,200
Mohegan Tribal Gaming Authority, 8.125%, 01/01/2006 2,000,000 2,000,000 1,960,000 1,960,000
National Vision Association, LTD., 12.75%, 10/15/2005 1,830,000 1,830,000 732,000 732,000
Park Place Entertainment, Inc., 9.375%, 02/15/2007 1,500,000 150,000 1,650,000 1,522,500 152,250 1,674,750
Perkins Finance, L.P., 10.125%, 12/15/2007 190,000 190,000 178,600 178,600
Premier Parks Inc., 9.75%, 01/15/2007 1,500,000 1,500,000 1,485,000 1,485,000
Restaurant Co., Step-up Coupon,
0% to 05/15/2003, 11.25% to 05/15/2008 250,000 250,000 125,000 125,000
Sealy Mattress Co., Step-up Coupon,
0% to 12/15/2002, 10.875% to 12/15/2007 670,000 670,000 497,475 497,475
Specialty Retailers, Inc., 9.0%, 07/15/2007 200,000 200,000 0 0
----------------------------------------
16,986,747 3,577,715 20,564,462
========================================
CONSUMER STAPLES
Dyersburg Corp., Series B, 9.75%, 09/01/2007 1,500,000 1,500,000 120,000 120,000
Fleming Companies, Inc., 10.625%, 07/31/2007 1,400,000 1,400,000 1,120,000 1,120,000
Grove Worldwide LLC, 9.25%, 05/01/2008 125,000 125,000 15,000 15,000
Jafra Cosmetics International, Inc., 11.75%, 05/01/2008 1,500,000 190,000 1,690,000 1,440,000 182,400 1,622,400
US Can Corporation, 12.375%, 10/01/2010 100,000 100,000 102,000 102,000
----------------------------------------
2,782,000 197,400 2,979,400
========================================
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
Scudder Kemper
High Yield High Yield Pro Forma Scudder Kemper Pro Forma
Bond Opp Combined High Yield High Yield Combined
Par/Share Par/Share Par/Share Bond Opp Market
Amount Amount Amount Value ($) Value ($) Value($)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DURABLES
Airxcel, 11.00%, 11/15/2007 800,000 160,000 960,000 512,000 102,400 614,400
DeCrane Aircraft Holdings, Inc., 12.0%, 09/30/2008 1,000,000 1,000,000 920,000 920,000
Fairchild Corp., 10.75%, 04/15/2009 460,000 460,000 372,600 372,600
----------------------------------------
1,804,600 102,400 1,907,000
========================================
ENERGY
AES Corp., 9.375%, 09/15/2010 820,000 150,000 970,000 828,200 151,500 979,700
Chesapeake Energy Corp., 9.625%, 05/01/2005 350,000 350,000 348,250 348,250
Chesapeake Energy Corp., 9.625%, 05/01/2005 350,000 350,000 348,250 348,250
Cliffs Drilling Co., Series D, 10.25%, 05/15/2003 1,000,000 1,000,000 1,030,000 1,030,000
EOTT Energy Partners, 11.25%, 11/01/2009 1,750,000 1,750,000 1,855,000 1,855,000
Key Energy Services, Inc.,14.0%, 01/15/2009 100,000 100,000 114,000 114,000
Nuevo Energy, 9.375%, 10/01/2010 130,000 100,000 230,000 130,000 100,000 230,000
Swift Energy Co., 10.25%, 08/01/2009 1,000,000 1,000,000 1,025,000 1,025,000
Triton Energy, Ltd., 8.875%, 10/01/2007 350,000 100,000 450,000 350,000 100,000 450,000
----------------------------------------
5,566,450 813,750 6,380,200
========================================
FINANCIAL
Bank United Capital Trust, Series B,
10.25%, 12/31/2026 1,000,000 1,000,000 779,000 779,000
Eaton Vance CDO Class C, 13.68%, 07/15/2012 1,000,000 200,000 1,200,000 1,000,000 200,000 1,200,000
FRD Acquisition, 12.50%, 07/15/2004 100,000 20,000 120,000 37,000 7,400 44,400
HMH Properties Inc., 7.875%, 08/01/2008 2,100,000 200,000 2,300,000 1,932,000 184,000 2,116,000
HMH Properties Inc., 8.45%, 12/01/2008 400,000 400,000 382,000 382,000
----------------------------------------
4,130,000 391,400 4,521,400
========================================
HEALTH
Dade International Inc., 11.125, 05/01/2006 950,000 950,000 294,500 294,500
Mariner Post-Acute Network, Inc., Step-up Coupon,
0% to 11/01/2002, 10.50% to 11/01/2007 510,000 510,000 2,550 2,550
MEDIQ, Inc., 11.00%, 06/01/2008 500,000 500,000 25,000 25,000
Tenet Healthcare Corp., 9.255, 09/01/2010 720,000 150,000 870,000 753,300 156,938 910,238
Vencor, Inc., 9.875%, 05/01/2005 55,000 55,000 8,250 8,250
----------------------------------------
1,072,800 167,738 1,240,538
========================================
MANUFACTURING
Agriculture, Mining and Chemicals, in.,
10.75%, 09/30/2003 90,000 90,000 61,200 61,200
American Standard Companies, Inc., 9.25%,
12/01/.2016 1,100,000 1,100,000 1,102,750 1,102,750
Ball Corp., 8.25%, 08/01/2008 1,000,000 1,000,000 966,300 966,300
Berry Plastics Corp.,12.25%, 04/15/2004 330,000 330,000 310,200 310,200
Congoleum Corp., 8.625%, 08/01/2008 500,000 500,000 300,000 300,000
Consumers International, 10.25%, 04/01/2005 200,000 200,000 68,000 68,000
Delco Remy International, 10.625%, 08/01/2006 750,000 750,000 735,000 735,000
Eagle-Picher Holdings, Series B, Step-Up Coupon,
0% to 03/1/2008, 11.75% to 03/1/2008,
9.375% 03/01/2008 1,910,000 1,910,000 429,750 429,750
Flowserve Corporation, 12.25%, 08/15/2010 270,000 100,000 370,000 278,100 103,000 381,100
GS Technologies, 12.0%, 09/01/2004 1,000,000 210,000 1,210,000 100,000 21,000 121,000
GS Technologies, 12.25%, 10/01/2005 370,000 370,000 37,000 37,000
Gaylord Container Corp., 9.75%, 06/15/2007 260,000 260,000 182,000 182,000
Gaylord Container Corp., 9.875%, 02/15/2008 560,000 50,000 610,000 196,000 17,500 213,500
Grove Holdings LLC, Step-up Coupon,
0% to 05/01/2003, 11.625% to 05/01/2009 1,000,000 80,000 1,080,000 10,000 800 10,800
Grove Holdings LLC, 14.50%, 05/01/2010 137,630 137,630 1,376 1,376
Huntsman Package, 11.75, 12/01/2004 1,288,000 200,000 1,488,000 1,304,100 202,500 1,506,600
ISP Holdings Inc., 9.0%, 10/15/2003 500,000 500,000 450,000 450,000
ISP Holdings Inc., 9.75%, 02/15/2002 250,000 250,000 237,500 237,500
NL Industries, Inc., Senior Note, 11.75%, 10/15/2003 710,000 710,000 717,100 717,100
Plainwell, Inc., 11.00%, 03/01/2008 320,000 320,000 64,000 64,000
Printpack, Inc., 10.625%, 08/15/2006 330,000 330,000 318,450 318,450
Riverwood International Corp., 10.25%, 04/01/2006 460,000 10,000 470,000 457,700 9,950 467,650
Riverwood International Corp., 10.875%, 04/01/2008 1,670,000 820,000 2,490,000 1,528,050 750,300 2,278,350
Riverwood International Corp., 10.625%, 08/01/2007 100,000 20,000 120,000 100,500 20,100 120,600
SF Holdings Group, Inc., Step-up Coupon,
0% to 03/15/2003, 12.75% to 03/15/2008 470,000 470,000 244,400 244,400
Tenneco Automotive Inc., 11.625%, 10/15/2009 2,000,000 450,000 2,450,000 1,270,000 285,750 1,555,750
Terex Corp., 8.875%, 04/01/2008 1,000,000 1,000,000 900,000 900,000
Texas Petrochemicals, 11.125%, 07/01/2006 500,000 500,000 425,000 425,000
U.S. Can Corp., 10.125, 10/15/2006 20,000 20,000 21,400 21,400
----------------------------------------
10,387,150 3,839,626 14,226,776
========================================
MEDIA
AMFM Operating Inc., 12.625%, 10/31/2006 1,859,000 1,859,000 2,138,660 2,138,660
Adelphia Communications Corp., 10.50%, 07/15/2004 1,500,000 1,500,000 1,498,125 1,498,125
American Lawyer Media, Inc., 9.75%, 12/15/2007 1,000,000 330,000 1,330,000 947,500 312,675 1,260,175
Avalon Cable Holdings LLC, Step-up coupon,
0% to 12/01/03, 11.875% to 12/01/2008 200,000 200,000 136,000 136,000
CSC Holdings, Inc., 9.250%, 11/01/2005 100,000 100,000 101,000 101,000
CSC Holdings, Inc., 8.125%, 08/15/2009 54,000 54,000 52,920 52,920
CSC Holdings, Inc., 10.50%, 05/15/2016 60,000 60,000 64,800 64,800
AMFM, Inc., Step-up Coupon, 0% to 02/01/2002,
12.75% to 02/01/2009 110,000 110,000 105,462 105,462
AMFM, Inc., 8.00%, 11/01/2008 330,000 330,000 333,712 333,712
Charter Communications Holdings LLC, 8.25%,
04/01/2007 410,000 410,000 369,000 369,000
Charter Communications Holdings LLC,
8.625%, 04/01/2009 2,250,000 2,250,000 2,025,000 2,025,000
Comcast UK Cable Partners Ltd., Step-up Coupon
0% to 11/15/2000, 11.20% to 11/15/2007 1,500,000 1,500,000 1,421,250 1,421,250
Echostar DBS Corp., 9.375%, 02/01/2009 2,000,000 2,000,000 1,960,000 1,960,000
NTL, Inc. 11.50%, 10/01/2008 2,000,000 255,000 2,255,000 1,950,000 248,625 2,198,625
NTL Communications Corp., 11.875%, 10/01/2010 20,000 20,000 19,575 19,575
Outdoor Systems, Inc., 8.875%, 06/15/2007 2,750,000 2,750,000 2,822,188 2,822,188
Panavision, Inc., Step-up Coupon,
0% to 02/01/2002, 9.625% to 02/01/2006 370,000 370,000 92,500 92,500
Renaissance Media Group, Step-up Coupon,
0% to 04/15/2003, 10.0% to 04/15/2008 130,000 130,000 87,100 87,100
Sinclair Broadcast Group, Inc., 10.0%, 09/30/2005 1,500,000 1,500,000 1,485,000 1,485,000
Star Choice Communications Inc., 13.0%, 12/15/2005 50,000 50,000 55,000 55,000
TeleWest Communications, PLC, 11.25%, 11/01/2008 140,000 140,000 136,500 136,500
TeleWest Communications PLC, Step-Up Coupon,
0% to 04/15/2004, 9.625% to 04/15/2009 1,600,000 1,600,000 840,000 840,000
TeleWest Communications 30,000 30,000 27,300 27,300
TeleWest Communications, PLC, Step-up Coupon,
0% to 10/01/2000, 11.0% to 10/01/2007 1,000,000 95,000 1,095,000 957,500 90,963 1,048,463
Transwestern Publishing, Step-up Coupon, 78
0% to 11/15/2002, 11.875% to 11/15/2008 310,000 310,000 238,700 238,700
Transwestern Publishing, 9.625%, 11/15/2007 340,000 340,000 339,150 339,150
United International Holdings, Step-up Coupon,
0% to 02/15/2003, 10.75% to 02/15/2008 1,400,000 170,000 1,570,000 938,000 113,900 1,051,900
----------------------------------------
18,983,223 2,924,882 21,908,105
========================================
METALS & MINERALS
MMI Products, Inc., 11.25%, 04/15/2007 790,000 340,000 1,130,000 772,225 332,350 1,104,575
Metal Management, Inc., 10.00%, 05/15/2008 870,000 870,000 87,000 87,000
Metals USA, Inc., 8.625%, 02/15/2008 175,000 175,000 133,000 133,000
Metals USA, Inc., 8.625%, 02/15/2008 790,000 790,000 600,400 600,400
Pen Holdings, Inc., 9.875%, 06/15/2008 1,000,000 1,000,000 750,000 750,000
Renco Steel Holdings Co., Series B,
10.875%, 02/01/2005 1,000,000 480,000 1,480,000 650,000 312,000 962,000
Republic Technologies International,
13.75%, 07/15/2009 2,000,000 260,000 2,260,000 400,000 52,000 452,000
----------------------------------------
3,172,625 916,350 4,088,975
========================================
MISCELLANEOUS
Ryland Group, 9.75%, 09/01/2010 660,000 660,000 660,000 660,000
----------------------------------------
660,000 660,000
========================================
SERVICE INDUSTRIES
Avis Rent A Car, 11.00%, 05/01/2009 1,750,000 1,750,000 1,903,125 1,903,125
Coinmach Laundry Corp., 11.755%, 11/15/2005 2,000,000 2,000,000 2,005,000 2,005,000
Spincycle, Inc., Step-up Coupon,
0% to 02/15/2003, 10.75% to 02/15/2008 350,000 350,000 105,000 105,000
----------------------------------------
3,908,125 105,000 4,013,125
========================================
TECHNOLOGY
Exodus Communications, Inc., 11.625%, 07/15/2010 410,000 80,000 490,000 414,100 80,800 494,900
Flextronics International, 9.875%, 07/01/2010 340,000 110,000 450,000 349,350 113,025 462,375
PSINet, Inc., 11.00%, 08/01/2009 160,000 160,000 102,400 102,400
PSINet, Inc., 10.00%, 02/15/2005 1,090,000 1,090,000 697,600 697,600
PSINet, Inc., 11.50%, 11/01/2008 160,000 160,000 105,600 105,600
----------------------------------------
1,461,050 401,825 1,862,875
========================================
TRANSPORTATION
Travelcenters America, 10.25%, 04/01/2007 500,000 500,000 503,750 503,750
----------------------------------------
503,750 503,750
========================================
UTILITIES
Azurix Corp., 10.375%, 02/15/2007 1,255,000 80,000 1,335,000 1,142,050 72,800 1,214,850
Azurix Corp., 10.75%, 02/15/2010 130,000 140,000 270,000 115,700 124,600 240,300
Calpine Corp, 7.75%, 04/15/2009 350,000 100,000 450,000 331,919 94,834 426,753
Calpine Corp, 8.625%, 08/15/2010 260,000 50,000 310,000 259,233 49,852 309,085
----------------------------------------
1,848,902 342,086 2,190,988
========================================
Total Corporate Bonds (Cost of
$127,102,232, $25,338,775, and
$152,441,007 respectively)
BOND INVESTMENT PORTFOLIO (0.0%)
--------------------------------
Morgan Stanley High Yield Fund 100 100 1,138 1,138
----------------------------------------
Total Bond Investment Portfolio (Cost of
$0, $1,125, and $1,125 respectively) 1,138 1,138
========================================
CONVERTIBLE PREFERRED STOCKS (.4%)
----------------------------------
COMMUNICATIONS World Access, Inc 718 72 790 531,128 53,546 584,674
----------------------------------------
Total Convertible Preferred Stocks (Cost of
$1,061,250, $106,904, and $1,168,154 respectively) 531,128 53,546 584,674
========================================
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Scudder Kemper
High Yield High Yield Pro Forma Scudder Kemper Pro Forma
Bond Opp Combined High Yield High Yield Combined
Par/Share Par/Share Par/Share Bond Opp Market
Amount Amount Amount Value ($) Value ($) Value($)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PREFERRED STOCKS (2.0%)
-----------------------
COMMUNICATIONS
Dobson Communications Corp. 2,399 2,399 2,147,105 2,147,105
Dobson Communications 181 181 166,520 166,520
Globalstar LP 1,000 1,000 25,000 25,000
Nextel Communications 10 10 9,600 9,600
----------------------------------------
2,172,105 176,120 2,348,225
========================================
FINANCIAL
Crown American Realty Trust 560 560 21,560 21,560
----------------------------------------
21,560 21,560
========================================
MANUFACTURING
Day International Group 654 654 490,500 490,500
Eagle-Picher Holdings 20 20 45,000 45,000
SF Holdings Group 10 10 41,360 41,360
----------------------------------------
490,500 86,360 576,860
========================================
MEDIA
CSC Holdings Inc. 731 731 78,034 78,034
----------------------------------------
Total Preferred Stocks (Cost of $2,950,609,
$429,574, and $3,380,183 respectively) 78,034 78,034
========================================
COMMON STOCKS (.7%)
--------------------
COMMUNICATIONS
KMC Telecom Holdings* 160 160 640 640
Orbital Imaging* 700 700 3,500 3,500
Star Choice Communications* 23,160 1,158 24,318 196,860 9,843 206,703
Tele1 Europe Holding AB - ADR 1,761 1,761 15,849 15,849
Viatel 6,136 6,136 62,894 62,894
----------------------------------------
263,254 26,332 289,586
========================================
CONSTRUCTION
Hovnanian Enterprises Inc. 15,000 15,000 111,562 111,562
Waxman Industries 18,000 18,000 3,375 3,375
----------------------------------------
114,937 114,937
========================================
DURABLES
Decrane Holdings Co.* 1,000 230 1,230 -0- -0- -0-
----------------------------------------
FINANCIAL
Ishares Russell 2000 Index Fund 1,000 1,000 103,625 103,625
Ono Finance PLC* 1,000 360 1,360 90,000 32,400 122,400
----------------------------------------
90,000 136,025 226,025
========================================
MANUFACTURING
Gaylord Container Corp. 10,000 10,000 16,875 16,875
SF Holdings Group 131 131 655 655
Smurfit-Stone Container Corp. 5,000 5,000 60,000 60,000
----------------------------------------
77,530 77,530
========================================
METALS & MINERALS
Metals USA 24,000 24,000 70,500 70,500
Republic Technologies International* 2,000 260 2,260 20 3 23
----------------------------------------
20 70,503 70,523
========================================
SERVICE INDUSTRIES
American Banknote Corp.* 100 100 1 1
Spincycle* 350 350 4 4
----------------------------------------
Total Common Stocks (Cost of $81,238,
$636,205, and $717,443 respectively) 5 5
========================================
----------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100%
(Cost of $147,310,478, $27,501,983,
and $174,812,461 respectively) 129,001,016 21,877,646 150,878,662
========================================
</TABLE>
*Represents warrants.
3
<PAGE>
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
<TABLE>
PRO FORMA COMBINING CONDENSED STATEMENT OF ASSETS AND LIABILITIES
AS OF SEPTEMBER 30, 2000 (UNAUDITED)
<CAPTION>
Scudder High Kemper High Pro Forma Pro Forma
Yield Bond Yield Opportunity Adjustments Combined
----------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Investments, at value $ 129,001,016 $ 21,877,646 $ 150,878,662
Cash 135,554 - $ 135,554
Other assets less liabilities 1,418,286 509,056 $ - (2) $ 1,927,342
---------------------- -------------------- ------------------- --------------------
Total Net assets $ 130,554,856 $ 22,386,702 $ - $ 152,941,558
====================== ==================== =================== ====================
Net Assets
Class S Shares $ 130,554,856 $ 130,554,856
Class A Shares $ 9,483,681 $ 9,483,681
Class B Shares $ 10,944,900 $ 10,944,900
Class C Shares $ 1,958,121 $ 1,958,121
Shares Outstanding
Class S Shares 12,788,909 12,788,909
Class A Shares 1,366,333 (437,471) 928,862
Class B Shares 1,577,804 (505,826) 1,071,978
Class C Shares 282,086 (90,301) 191,785
Net Asset Value per Share
Class S Shares $ 10.21 $ 10.21
Class A Shares $ 6.94 $ 10.21
Class B Shares $ 6.94 $ 10.21
Class C Shares $ 6.94 $ 10.21
</TABLE>
4
<PAGE>
PRO FORMA COMBINING CONDENSED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTH PERIOD ENDED SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
Scudder High Kemper High Pro Forma Pro Forma
Yield Bond Yield Opportunity Adjustments Combined
-------------------- ----------------- --------------- ----------
<S> <C> <C> <C> <C>
Investment Income:
Interest and dividend income $ 16,664,527 $ 3,742,655 $ - $ 20,407,182
-------------------------------------------------------------------------
Total Investment Income 16,664,527 3,742,655 20,407,182
Expenses
Management fees 1,069,772 195,625 (192,532) (3) 1,072,865
12B-1 - 193,818 - 193,818
Trustees Fees 75,969 26,598 - (4) 102,567
All other expenses 556,344 296,559 (300,815) (5) 552,089
-------------------------------------------------------------------------
Total expenses before reductions 1,702,085 712,600 (493,347) 1,921,338
Expense reductions (557,825) (2,620) 560,445 (6) -
-------------------------------------------------------------------------
Expenses, net 1,144,260 709,980 67,098 1,921,338
-------------------------------------------------------------------------
Net investment income (loss) 15,520,267 3,032,675 (67,098) 18,485,844
-------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss)
on Investments:
Net realized gain (loss) from investments (11,834,538) (2,586,478) - (14,421,016)
Net unrealized appreciation (depreciation)
of investments (4,909,300) (2,160,377) - (7,069,677)
-------------------------------------------------------------------------
Net increase in net assets from operations $ (1,223,571) $ (1,714,180) $ (67,098) $ (3,004,849)
=========================================================================
</TABLE>
Notes to Pro Forma Combining Financial Statements
(Unaudited)
September 30, 2000
1. These financial statements set forth the unaudited pro forma condensed
Statement of Assets and Liabilities as of September 30, 2000, and the
unaudited pro forma condensed Statement of Operations for the twelve month
period ended September 30, 2000 for Scudder High Yield Bond Fund and Kemper
High Yield Opportunities Fund as adjusted giving effect to the
Reorganization as if it had occurred as of the beginning of the period.
These statements have been derived from the books and records utilized in
calculating daily net asset value for each fund.
2. Represents one-time proxy, legal, accounting and other costs of the
Reorganization of $xxxxxx and $xxxxxx to be borne by Scudder High Yield Bond
Fund and Kemper High Yield Opportunity Fund, respectively.
3. Represents reduction in management fees resulting from the utilization of
Scudder High Yield Bond Fund's new investment management fee for the entire
year.
4. Reduction in trustee fees resulting from the Reorganization.
5. Represents reduction in other expenses resulting from the utilization of
Scudder High Yield Bond Fund's administrative fee for the entire year.
6. Represents elimination of waivers.
5
<PAGE>
ANNEX A
The following is a description of the ratings given by Moody's Investors
Service, Inc. ("Moody's") or Standard & Poor's Ratings Service ("S&P") to
corporate and municipal bonds.
RATINGS OF MUNICIPAL AND CORPORATE BONDS
S&P:
Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong. Debt rated AA has a very
strong capacity to pay interest and repay principal and differs from the highest
rated issues only in small degree. Debt rated A has a strong capacity to pay
interest and repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than debt in
higher rated categories. Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest.
While such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major exposures to adverse
conditions.
Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating. Debt rated B has a greater
vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay interest and repay
principal. The B rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB- rating.
MOODY'S:
Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues. Bonds which are rated Aa are
judged to be of high quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks appear
somewhat larger than in Aaa securities. Bonds which are rated A possess many
favorable investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future.
Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. Bonds which are rated Ba are
judged to have speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this class. Bonds
which are rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
<PAGE>
PART C. OTHER INFORMATION
<TABLE>
<CAPTION>
Item 15. Indemnification.
-------- ----------------
<S> <C>
A policy of insurance covering Scudder Kemper Investments, Inc., its affiliates
including Scudder Investor Services, Inc., and all of the registered investment
companies advised by Scudder Kemper Investments, Inc. insures the Registrant's
Trustees and officers and others against liability arising by reason of an alleged
breach of duty caused by any negligent act, error or accidental omission in the scope
of their duties.
Article IV, Sections 4.1 - 4.3 of Registrant's Declaration of Trust (Exhibits
(1)(a)(1)(a)(9) hereto, which are incorporated herein by reference) provides as
follows:
Section 4.1. No personal Liability of Shareholders, Trustees, etc. No Shareholder
shall be subject to any personal liability whatsoever to any Person in connection with
Trust Property or the acts, obligations or affairs of the Trust. No Trustee, officer,
employee or agent of the Trust shall be subject to any personal liability whatsoever
to any Person, other than to the Trust or its Shareholders, in connection with Trust
Property or the affairs of the Trust, save only that arising from bad faith, willful
misfeasance, gross negligence or reckless disregard of his duties with respect to such
Person; and all such Persons shall look solely to the Trust Property for satisfaction
of claims of any nature arising in connection with the affairs of the Trust. If any
Shareholder, Trustee, officer, employee, or agent, as such, of the Trust, is made a
party to any suit or proceeding to enforce any such liability of the Trust, he shall
not, on account thereof, be held to any personal liability. The Trust shall indemnify
and hold each Shareholder harmless from and against all claims and liabilities, to
which such Shareholder may become subject by reason of his being or having been a
Shareholder, and shall reimburse such Shareholder for all legal and other expenses
reasonably incurred by him in connection with any such claim or liability. The
indemnification and reimbursement by the preceding sentence shall be made only out of
the assets of the one or more series of which the Shareholder who is entitled to
indemnification or reimbursement was a Shareholder at the time the act or event
occurred which gave rise to the claim against or liability of said Shareholders. The
rights accruing to a Shareholder under this Section 4.1 shall not impair any other
right to which such Shareholder may be lawfully entitled, nor shall anything herein
contained restrict the right of the Trust to indemnify or reimburse a Shareholder in
any appropriate situation even though not specifically provided herein.
Section 4.2. Non-Liability of Trustees, etc. No Trustee, officer, employee or agent
of the Trust shall be liable to the Trust, its Shareholders, or to any Shareholder,
Trustee, officer, employee, or agent thereof for any action or failure to act
(including without limitation the failure to compel in any way any former or acting
Trustee to redress any breach of trust) except for his own bad faith, willful
misfeasance, gross negligence or reckless disregard of the duties involved in the
conduct of his office.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Item 15. Indemnification (Continued)
-------- ---------------------------
<S> <C>
Section 4.3. Mandatory Indemnification. (a) Subject to the exceptions and limitations
contained in paragraph (b) below:
(i) every person who is, or has been, a Trustee or officer of the Trust shall be
indemnified by the Trust to the fullest extent permitted by law against all liability
and against all expenses reasonably incurred or paid by him in connection with any
claim, action, suit or proceeding in which he becomes involved as a party or otherwise
by virtue of his being or having been a Trustee or officer and against amounts paid or
incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall apply to all claims,
actions, suits or proceedings (civil, criminal, or other, including appeals), actual
or threatened; and the words "liability" and "expenses" shall include, without
limitation, attorneys' fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or officer:
(i) against any liability to the Trust or the Shareholders by reason of a final
adjudication by the court or other body before which the proceeding was brought that
he engaged in willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office;
(ii) with respect to any matter as to which he shall have been finally adjudicated not
to have acted in good faith in the reasonable belief that his action was in the best
interest of the Trust;
(iii) in the event of a settlement or other disposition not involving a final
adjudication as provided in paragraph (b)(i) resulting in a payment by a Trustee or
officer, unless there has been a determination that such Trustee or officer did not
engage in willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office;
(A) by the court or other body approving the settlement or other disposition; or
(B) based upon a review of readily available facts (as opposed to a full trial-type
inquiry) by (x) vote of a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office act on the
matter) or (y) written opinion of independent legal counsel.
(c) The rights of indemnification herein provided may be insured against by policies
maintained by the Trust, shall be severable, shall not affect any rights to which any
Trustee or officer may now or hereafter be entitled, shall continue as to a person who
has ceased to be such Trustee or officer and shall inure to the benefit of the heirs,
executors, administrators and assigns of such a person. Nothing contained herein
shall affect any rights to indemnification to which personnel of the Trust other than
Trustees and officers may be entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any claim, action, suit,
or proceeding of the character described in paragraph (a) of this Section 4.3 shall be
advanced by the Trust prior to final disposition thereof upon receipt of an
undertaking
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Item 15. Indemnification (Continued)
-------- ---------------------------
<S> <C>
by or on behalf of the recipient, to repay such amount if it is ultimately
determined that he is not entitled to indemnification under this Section 4.3, provided
that either:
(i) such undertaking is secured by a surety bond or some other appropriate security
provided by the recipient, or the Trust shall be insured against losses arising out of
any such advances; or
(ii) a majority of the Disinterested Trustees acting on the matter (provided that a
majority of the Disinterested Trustees act on the matter) or an independent legal
counsel in a written opinion shall determine, based upon a review of readily available
facts (as opposed to a full trial-type inquiry), that there is a reason to believe
that the recipient ultimately will be found entitled to indemnification.
As used in this Section 4.3, a "Disinterested Trustee" is one who is not (i) an
"Interested Person" of the Trust (including anyone who has been exempted from being an
"Interested Person" by any rule, regulation or order of the Commission), or (ii)
involved in the claim, action, suit or proceeding.
</TABLE>
<TABLE>
<CAPTION>
Item 16. Exhibits.
----------- -----------
<S> <C> <C> <C>
(1) (a)(1) Amended and Restated Declaration of Trust dated November 3,
1987 is incorporated by reference to Post-Effective
Amendment No. 69 to the Registrant's Registration Statement
on Form N-1A, as amended (the "Registration Statement").
(a)(2) Certificate of Amendment of Declaration of Trust dated
November 13, 1990 is incorporated by reference to
Post-Effective Amendment No. 69 to the Registration
Statement.
(a)(3) Certificate of Amendment of Declaration of Trust dated
October 13, 1992 is incorporated by reference to
Post-Effective Amendment No. 69 to the Registration
Statement.
(a)(4) Establishment and Designation of Series dated October 13,
1992 is incorporated by reference to Post-Effective
Amendment No. 69 to the Registration Statement.
(a)(5) Establishment and Designation of Series dated April 9, 1996
is incorporated by reference to Post-Effective Amendment
No. 61 to the Registration Statement.
(a)(6) Establishment and Designation of Series, on behalf of
Corporate Bond Fund, dated August 25, 1998 is incorporated
by reference to Post-Effective Amendment No. 77 to the
Registration Statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Item 16. Exhibits (Continued)
-------- ---------------------
<S> <C> <C> <C>
(a)(7) Establishment and Designation of Classes of Shares of
Beneficial Interest, $0.01 par value, Class S and Class
AARP, with respect to Scudder Balanced Fund is incorporated
by reference to Post-Effective Amendment No. 82 to the
Registration Statement.
(a)(8) Establishment and Designation of Classes of Shares of
Beneficial Interest, $0.01 par value, Class S and Class
AARP, with respect to Scudder High Yield Bond Fund is
incorporated by reference to Post-Effective Amendment No.
82 to the Registration Statement.
(a)(9) Establishment and Designation of Classes of Shares of
Beneficial Interest, $0.01 par value, Class S and Class
AARP, with respect to Scudder Income Fund is incorporated
by reference to Post-Effective Amendment No. 82 to the
Registration Statement.
(2) (b)(1) By-Laws of the Registrant dated September 20, 1984 are
incorporated by reference to Post-Effective Amendment No.
69 to the Registration Statement.
(b)(2) Amendment to By-Laws of the Registrant dated August 13,
1991 is incorporated by reference to Post-Effective
Amendment No. 69 to the Registration Statement.
(b)(3) Amendment to By-Laws of the Registrant dated November 12,
1991 is incorporated by reference to Post-Effective
Amendment No. 78 to the Registration Statement.
(3) Inapplicable.
(4) Form of Agreement and Plan of Reorganization is filed
herein as Exhibit A to Part A.
(5) Inapplicable.
(6) (d)(1) Investment Management Agreement between the Registrant, on
behalf of Scudder Income Fund, and Scudder Kemper
Investments, Inc. dated September 7,1998 is incorporated by
reference to Post-Effective Amendment No. 78 to the
Registration Statement.
(d)(2) Investment Management Agreement between the Registrant, on
behalf of Scudder Balanced Fund, and Scudder Kemper
Investments, Inc. dated September 7,1998 is incorporated by
reference to Post-Effective Amendment No. 78 to the
Registration Statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Item 16. Exhibits (Continued)
-------- ---------------------
<S> <C> <C> <C>
(d)(3) Investment Management Agreement between the Registrant, on
behalf of Scudder High Yield Bond Fund, and Scudder Kemper
Investments, Inc. dated September 7,1998 is incorporated by
reference to Post-Effective Amendment No. 78 to the
Registration Statement.
(d)(4) Investment Management Agreement between the Registrant, on
behalf of Scudder Corporate Bond Fund, and Scudder Kemper
Investments, Inc. dated September 7,1998 is incorporated by
reference to Post-Effective Amendment No. 78 to the
Registration Statement.
(d)(5) Form of Investment Management Agreement between the
Registrant, on behalf of Scudder Income Fund, and Scudder
Kemper Investments, Inc. dated July 31, 2000 is
incorporated by reference to Post-Effective Amendment No.
83 to the Registration Statement.
(d)(6) Form of Investment Management Agreement between the
Registrant, on behalf of Scudder Balanced Fund, and Scudder
Kemper Investments, Inc. dated August 28, 2000 is
incorporated by reference to Post-Effective Amendment No.
83 to the Registration Statement.
(d)(7) Form of Investment Management Agreement between the
Registrant, on behalf of Scudder High Yield Bond Fund, and
Scudder Kemper Investments, Inc. dated October 2, 2000 is
incorporated by reference to Post-Effective Amendment No.
83 to the Registration Statement.
(7) (e)(1) Underwriting Agreement between the Registrant and Scudder
Investor Services, Inc. dated September 7, 1998 is
incorporated by reference to Post-Effective Amendment No.
77 to the Registration Statement.
(e)(2) Underwriting Agreement between the Registrant and Scudder
Investor Services, Inc. dated May 8, 2000 is incorporated
by reference to Post-Effective Amendment No. 83 to the
Registration Statement.
(8) Inapplicable.
(9) (g)(1) Custodian Contract and fee schedule between the Registrant
and State Street Bank and Trust Company ("State Street")
dated December 31, 1984 is incorporated by reference to
Post-Effective Amendment No. 69 to the Registration
Statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Item 16. Exhibits (Continued)
-------- ---------------------
<S> <C> <C> <C>
(g)(2) Fee schedule for Exhibit (9)(g)(1) dated October 7, 1986 is
incorporated by reference to Post-Effective Amendment No.
69 to the Registration Statement.
(g)(3) Amendment to Custodian Contract between the Registrant and
State Street dated April 1, 1985 is incorporated by
reference to Post-Effective Amendment No. 69 to the
Registration Statement.
(g)(4) Amendment to Custodian Contract between the Registrant and
State Street dated March 10, 1987 is incorporated by
reference to Post-Effective Amendment No. 69 to the
Registration Statement.
(g)(5) Amendment to Custodian Contract between the Registrant and
State Street dated March 10, 1987 is incorporated by
reference to Post-Effective Amendment No. 69 to the
Registration Statement.
(g)(6) Amendment to Custodian Contract between the Registrant and
State Street dated August 11, 1987 is incorporated by
reference to Post-Effective Amendment No. 69 to the
Registration Statement.
(g)(7) Amendment to Custodian Contract between the Registrant and
State Street dated August 9, 1988 is incorporated by
reference to Post-Effective Amendment No. 69 to the
Registration Statement.
(g)(8) Fee schedule for Exhibit (9)(g)(1) is incorporated by
reference to Post-Effective Amendment No. 60 to the
Registration Statement.
(g)(9) Amendment to Custodian Contract between the Registrant and
State Street dated April 9, 1996 is incorporated by
reference to Post-Effective Amendment No. 63 to the
Registration Statement.
(g)(10) Fee schedule for Exhibit (9)(g)(1) is incorporated by
reference to Post-Effective Amendment No. 63 to the
Registration Statement.
(g)(11) Subcustodian Agreement with fee schedule between State
Street and The Bank of New York, London office, dated
December 31, 1978 is incorporated by reference to
Post-Effective Amendment No. 69 to the Registration
Statement.
(g)(12) Amendment dated February 8, 1999 to Custodian Contract
between the Registrant and State Street dated December 31,
1984 is incorporated by reference to Post-Effective
Amendment No. 78 to the Registration Statement.
(10) (n)(1) Plan with respect to Scudder Balanced Fund pursuant to Rule
18f-3 is incorporated by reference to Post-Effective
Amendment No. 83 to the Registration Statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Item 16. Exhibits (Continued)
-------- ---------------------
<S> <C> <C> <C>
(n)(2) Plan with respect to Scudder Income Fund pursuant to Rule
18f-3 is incorporated by reference to Post-Effective
Amendment No. 83 to the Registration Statement.
(n)(3) Plan with respect to Scudder High Yield Bond Fund pursuant
to Rule 18f-3 is incorporated by reference to
Post-Effective Amendment No. 83 to the Registration
Statement.
(n)(4) Amended and Restated Plan with respect to Scudder Balanced
Fund pursuant to Rule 18f-3 is incorporated by reference to
Post-Effective Amendment No. 83 to the Registration
Statement.
(n)(5) Amended and Restated Plan with respect to Scudder Income
Fund pursuant to Rule 18f-3 is incorporated by reference to
Post-Effective Amendment No. 83 to the Registration
Statement.
(n)(6) Amended and Restated Plan with respect to Scudder High
Yield Bond Fund pursuant to Rule 18f-3 is incorporated by
reference to Post-Effective Amendment No. 83 to the
Registration Statement.
(n)(7) Plan with respect to Scudder Corporate Bond Fund pursuant
to Rule 18f-3 is incorporated by reference to
Post-Effective Amendment No. 83 to the Registration
Statement.
(n)(8) Amended and Restated Plan with respect to Scudder Corporate
Bond Fund pursuant to Rule 18f-3 is incorporated by
reference to Post-Effective Amendment No. 83 to the
Registration Statement.
(n)(9) Scudder Funds Amended and Restated Multi-Distribution
System Plan is filed herewith.
(11) Opinion and Consent of Dechert is filed herewith.
(12) Opinion and Consent of Willkie, Farr & Gallagher is to be
filed by post-effective amendment.
(13) (h)(1) Transfer Agency and Service Agreement with fee schedule
between the Registrant and Scudder Service Corporation
dated October 2, 1989 is incorporated by reference to
Post-Effective Amendment No. 69 to the Registration
Statement.
(h)(2) Revised Fee Schedule dated October 1, 1995 for Exhibit
(13)(h)(1) is incorporated by reference to Post-Effective
Amendment No. 67 to the Registration Statement.
(h)(3) Revised Fee Schedule dated October 1, 1996 for Exhibit
(13)(h)(1) is incorporated by reference to Post-Effective
Amendment No. 67 to the Registration Statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Item 16. Exhibits (Continued)
-------- ---------------------
<S> <C> <C> <C>
(h)(4) COMPASS Service Agreement between Scudder Trust Company and
the Registrant dated October 1, 1995 is incorporated by
reference to Post-Effective Amendment No. 61 to the
Registration Statement.
(h)(5) Revised Fee Schedule dated October 1, 1996 for Exhibit
(13)(h)(4) is incorporated by reference to Post-Effective
Amendment No. 67 to the Registration Statement.
(h)(6) Service Agreement between Copeland Associates, Inc. and
Scudder Service Corporation (on behalf of Scudder Balance
Fund) dated June 8, 1995 is incorporated by reference to
Post-Effective Amendment No. 62 to the Registration
Statement.
(h)(7) Shareholder Services Agreement between the Registrant and
Charles Schwab & Co., Inc. dated June 1, 1990 is
incorporated by reference to Post-Effective Amendment No.
69 to the Registration Statement.
(h)(8) Fund Accounting Services Agreement between the Registrant,
on behalf of Scudder Balanced Fund, and Scudder Fund
Accounting Corporation dated January 18, 1995 is
incorporated by reference to Post-Effective Amendment No.
69 to the Registration Statement.
(h)(9) Fund Accounting Services Agreement between the Registrant,
on behalf of Scudder Income Fund, and Scudder Fund
Accounting Corporation dated January 12, 1995 is
incorporated by reference to Post-Effective Amendment No.
60 to the Registration Statement.
(h)(10) Fund Accounting Services Agreement between the Registrant,
on behalf of Scudder High Yield Bond Fund, and Scudder Fund
Accounting Corporation dated June 28, 1996 is incorporated
by reference to Post-Effective Amendment No. 63 to the
Registration Statement.
(h)(11) Fund Accounting Services Agreement between the Registrant,
on behalf of Scudder Corporate Bond Fund, and Scudder Fund
Accounting Corporation dated August 31, 1998 is
incorporated by reference to Post-Effective Amendment No.
78 to the Registration Statement.
(h)(12) Form of Administrative Agreement between the Registrant and
Scudder Kemper Investments, Inc. dated July 24, 2000 is
incorporated by reference to Post-Effective Amendment No.
83 to the Registration Statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Item 16. Exhibits (Continued)
-------- ---------------------
<S> <C> <C> <C>
(14) Consents of Independent Accountants are filed herewith.
(15) Inapplicable.
(16) Powers of Attorney are filed herewith.
(17) Form of Proxy is filed herewith.
</TABLE>
<TABLE>
<CAPTION>
Item 17. Undertakings.
---------- -------------
<C> <S>
(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 of 1933 (the "1933 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.
(3) The undersigned Registrant undertakes to file, by post-effective amendment, an opinion
of counsel supporting the tax consequences of the proposed reorganization within a
reasonable time after receipt of such opinion.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Scudder Portfolio Trust has duly caused this
Registration Statement on Form N-14 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston and the
Commonwealth of Massachusetts on the 29th day of December, 2000.
SCUDDER PORTFOLIO TRUST
By: /s/ Linda C. Coughlin
------------------------
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form N-14 has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Linda C. Coughlin President and Trustee December 29, 2000
___________________
Linda C. Coughlin
/s/ Henry P. Becton, Jr* Trustee December 29, 2000
___________________
Henry P. Becton, Jr.
/s/ Dawn-Marie Driscoll* Trustee December 29, 2000
___________________
Dawn-Marie Driscoll
/s/ Edgar R. Fiedler* Trustee December 29, 2000
___________________
Edgar R. Fiedler
/s/ Keith R. Fox* Trustee December 29, 2000
___________________
Keith R. Fox
/s/ Joan E. Spero* Trustee December 29, 2000
___________________
Joan E. Spero
/s/ Jean Gleason Stromberg* Trustee December 29, 2000
___________________
Jean Gleason Stromberg
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Jean C. Tempel* Trustee December 29, 2000
___________________
Jean C. Tempel
/s/ Steven Zaleznick* Trustee December 29, 2000
___________________
Steven Zaleznick
/s/ John R. Hebble Treasurer (Principal Financial and December 29, 2000
___________________ Accounting Officer)
John R. Hebble
</TABLE>
*By: /s/ Joseph R. Fleming December 29, 2000
-----------------------------------
Joseph R. Fleming, Attorney-in-fact
* Executed pursuant to powers of attorney filed herein as an exhibit to the
Registrant's Registration Statement on Form N-14.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SCUDDER PORTFOLIO TRUST
<PAGE>
SCUDDER PORTFOLIO TRUST
EXHIBIT INDEX
Exhibit 10 Scudder Funds Amended and Restated Multi-Distribution System Plan
Exhibit 11 Opinion and Consent of Dechert
Exhibit 14 Consents of Independent Auditors
Exhibit 16 Powers of Attorney
Exhibit 17 Form of Proxy
