<PAGE>
As filed with the Securities and Exchange Commission
on March 6, 2000.
Securities Act File No.
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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. Sheldon A. Jones, Esq.
Scudder Kemper Investments, Inc. Dechert Price & Rhoads
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 Balanced Fund, a series of the Registrant
<PAGE>
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It is proposed that this filing will become effective on April 5, 2000
pursuant to Rule 488 under the Securities Act of 1933.
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No filing fee is required because the Registrant has previously registered an
indefinite number of its shares under the Securities Act of 1933, as amended,
pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended.
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<PAGE>
PART A
INFORMATION REQUIRED IN THE PROXY STATEMENT/PROSPECTUS
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<PAGE>
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF
AARP GROWTH TRUST
AARP BALANCED STOCK AND BOND FUND
Please take notice that a Special Meeting of Shareholders (the "Meeting")
of AARP Balanced Stock and Bond Fund (the "Fund"), a series of AARP Growth Trust
(the "Trust"), will be held at the offices of Scudder Kemper Investments, Inc.,
Floor 13, Two International Place, Boston, MA 02110-4103, on July 11, 2000 at
2:00 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 whereby all or substantially all of the assets
and liabilities of the Fund would be acquired by Scudder
Balanced Fund in exchange for shares of the AARP Shares
class of Scudder Balanced Fund; and
PROPOSAL 3: To ratify the selection of PricewaterhouseCoopers LLP
as the independent accountants for the Fund for the Fund's
current fiscal year.
The appointed proxies will vote in their discretion on any other
business that may properly come before the Meeting or any adjournments thereof.
Holders of record of shares of the Fund at the close of business on
April 17, 2000 are entitled to vote at the Meeting and at any adjournments
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 Fund's 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,
[Signature]
Kathryn L. Quirk,
Secretary
[date]
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
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<PAGE>
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.
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<PAGE>
Table of Contents
Introduction....................
Proposal 1: Election of Trustees/Directors for the Acquired
Trust/Corporation........
Nominees for Election..............
Trustees/Directors Not Standing for Re-election............
Responsibilities of the Board -- Board and Committee Meetings........
Audit Committee........
Committee on Independent Trustees/Directors........
Attendance............
Honorary Trustees/Directors.........
Officers.............
Compensation of Trustees/Directors and Officers.........
Proposal 2: Approval of Agreement and Plan of Reorganization......
I. SYNOPSIS.........
Introduction.........
Background of the Reorganization...........
Reasons for the Proposed Transaction; Board Approval.......
Investment Objectives, Policies and Restrictions of the
Funds........
Portfolio Turnover..........
Performance...........
Investment Manager; Fees and Expenses......
Administrative Fee..........
Comparison of Expenses.........
Financial Highlights.........
Distribution of Shares........
Purchase, Redemption and Exchange Information.........
Dividends and other Distributions..........
Tax Consequences........
II. PRINCIPAL RISK FACTORS......
III. THE PROPOSED TRANSCTION..........
Description of the Plan........
Board Approval of the Proposed Transaction......
Description of the Securities to be Issued.....
Federal Income Tax Consequences.........
Capitalization...........
Proposal 3: Ratification or Rejection of the Selection of Independent
Accountants
Additional Information
Exhibit A
Exhibit B
Appendix 1
Appendix 2
Part B: Statement of Additional Information
Part C: Other Information
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<PAGE>
PROXY STATEMENT/PROSPECTUS
[DATE]
RELATING TO THE ACQUISITION OF THE ASSETS OF
AARP BALANCED STOCK AND BOND FUND (THE "ACQUIRED FUND"),
A SEPARATE SERIES OF
AARP GROWTH TRUST (THE "ACQUIRED TRUST")
TWO INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110-4103
(800) 253-2277
BY AND IN EXCHANGE FOR SHARES OF BENEFICIAL INTEREST OF
THE AARP SHARES CLASS OF
SCUDDER BALANCED FUND (THE "ACQUIRING FUND"),
A SEPARATE SERIES OF
SCUDDER PORTFOLIO TRUST (THE "ACQUIRING TRUST")
TWO INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110-4103
(800) 728-3337
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to shareholders of the
Acquired Fund in connection with three proposals (each a "Proposal"). Proposal 1
describes the election of Trustees, and Proposal 3 proposes the ratification of
the Acquired Fund's accountants.
In Proposal 2, shareholders are asked to approve a proposed reorganization
in which all or substantially all of the assets of the Acquired Fund would be
acquired by the Acquiring Fund, in exchange for shares of beneficial interest of
the AARP Shares class of the Acquiring Fund (known as "AARP Shares") and the
assumption by the Acquiring Fund of all of the liabilities of the Acquired Fund,
as described more fully below (the "Reorganization"). Shares of the Acquiring
Fund thereby received would then be distributed to the shareholders of the
Acquired Fund in complete liquidation of the Acquired Fund. As a result of the
Reorganization, each shareholder of the Acquired Fund would receive that number
of AARP Shares having an aggregate net asset value equal to the aggregate net
asset value of such shareholder's shares of the Acquired Fund held as of the
close of business on the business day preceding the closing of the
Reorganization (the "Valuation Date"). Shareholders of the Acquired Fund will
vote on an Agreement and Plan of Reorganization (the "Plan") pursuant to which
the Reorganization would be consummated. A copy of the Plan is attached hereto
as Exhibit A. The closing of the Reorganization (the "Closing") is contingent
upon shareholder approval of the Plan. The Reorganization is expected to occur
on or about August 28, 2000.
Proposals 1 and 2 relate to a restructuring program proposed by Scudder
Kemper Investments, Inc. ("Scudder Kemper" or the "Investment Manager") and
described in more detail below.
In the descriptions of the Proposals below, the word "fund" is sometimes
used to mean investment companies or series thereof in general, and not the
Acquired Fund whose proxy statement this is. In addition, for simplicity,
actions are described in this Proxy Statement as being taken by either the
Acquired Fund or the Acquiring Fund (each a "Fund" and collectively the
"Funds"), 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.
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<PAGE>
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.
This Proxy Statement/Prospectus sets forth concisely the information about
the Acquiring Fund that a prospective investor should know before investing and
should be retained for future reference. For a more detailed discussion of the
investment objectives, policies, restrictions and risks of the Acquiring Fund,
see the Acquiring Fund's prospectus dated April 12, 2000, as supplemented from
time to time, which is included herewith and incorporated herein by reference.
For a more detailed discussion of the investment objectives, policies,
restrictions and risks of the Acquired Fund, see the Acquired Fund's prospectus,
dated February 1, 2000, as supplemented from time to time, which is incorporated
herein by reference and a copy of which may be obtained upon request and without
charge by calling or writing the Acquired Fund at the telephone number or
address set forth on the preceding page.
The Acquiring Fund's Statement of Additional Information, dated April 12,
2000, is incorporated herein by reference and may be obtained upon request and
without charge by calling or writing the Acquiring Fund at the telephone number
or address set forth on the preceding page. A Statement of Additional
Information dated ___________________, containing additional information about
the Reorganization and the parties thereto 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 the Statement of
Additional Information relating to the Reorganization is available upon request
and without charge by calling or writing the Acquiring Fund at the telephone
number or address set forth on the preceding page. Shareholder inquiries
regarding the Acquired Fund may be made by calling (800) 253-2277. Shareholder
inquiries regarding the Acquiring Fund may be made by calling (800) 728-3337.
The information contained herein concerning the Acquired Fund has been provided
by, and is included herein in reliance upon, the Acquired Fund. The information
contained herein concerning the Acquiring Fund has been provided by, and is
included herein in reliance upon, the Acquiring Fund. The AARP Shares will be a
newly-established class of shares of the Acquiring Fund and will be identical in
all material respects to the Acquiring Fund shares currently offered and sold,
as described in the prospectus and statement of additional information for the
Acquiring Fund, dated April 12, 2000, except as otherwise described herein.
The Acquiring Fund and the Acquired Fund are diversified series of shares
of beneficial interest of, respectively, the Acquiring Trust and the Acquired
Trust. The Acquiring Trust and the Acquired Trust are open-end management
investment companies organized as Massachusetts business trusts.
The Board of Trustees (except as otherwise noted, "Trustees" refers to
Trustees of the Acquired Trust and "Board" refers to the Board of Trustees of
the Acquired Trust) is soliciting proxies from shareholders of the Acquired
Fund, on behalf of the Acquired Fund, for the Special Meeting of Shareholders to
be held on July 11, 2000, at Scudder Kemper's offices, at Floor 13, Two
International Place, Boston, MA 02110-4103, at 2:00 p.m. (Eastern time), or at
such later time made necessary by adjournment (the "Meeting").
THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE NOMINEES
LISTED IN PROPOSAL 1, AND FOR PROPOSALS 2 AND 3.
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<PAGE>
PROPOSAL 1: ELECTION OF TRUSTEES FOR THE ACQUIRED TRUST
At the Meeting, shareholders will be asked to elect nine individuals to
constitute the Board of Trustees of the Acquired Trust. These individuals were
nominated after a careful and deliberate selection process by the present Board
of Trustees of the Acquired Trust. The nominees for election, who are listed
below, include seven persons who currently serve as Independent Trustees (as
defined below) of the Acquired Trust or the Acquiring Trust or as independent
trustees or directors of other no-load funds advised by Scudder Kemper and who
have no affiliation with Scudder Kemper or AARP. The nominees listed below are
also being nominated for election as Trustees of the Acquiring Trust and as
trustees or directors of most of the other no-load funds advised by Scudder
Kemper.
Currently five different boards of trustees or directors are responsible
for overseeing different groups of no-load funds advised by Scudder Kemper. As
part of a broader restructuring effort described below under Proposal 2, Scudder
Kemper has recommended, and the Board of Trustees has agreed, that shareholder
interests can more effectively be represented by a single board with
responsibility for overseeing substantially all of the Scudder no-load funds.
Creation of a single, consolidated board should also provide certain
administrative efficiencies and potential future cost savings for both the Funds
and Scudder Kemper.
Election of each of the listed nominees for Trustee on the Board of the
Acquired Trust requires the affirmative vote of a plurality of the votes cast at
the Meeting, in person or by proxy. The persons named as proxies on the enclosed
proxy card 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 of the Acquired Trust 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 Trustees may
recommend. The following paragraphs and table set forth information concerning
the nominees and the Trustees not standing for re-election. Each nominee's or
Trustee's age is in parentheses after his or her name. Unless otherwise noted,
(i) each of the nominees and Trustees has engaged in the principal occupation
listed in the following paragraphs and table for more than five years, but not
necessarily in the same capacity, and (ii) the address of each nominee is c/o
Scudder Kemper Investments, Inc., Two International Place, Boston, MA
02110-4103.
NOMINEES FOR ELECTION AS TRUSTEES:
HENRY P. BECTON, JR. (56)
Henry P. Becton, Jr. graduated from Yale University in 1965, where he was
elected to Phi Beta Kappa and was Chairman of the Yale Broadcasting Corporation.
He received his J.D. degree from Harvard Law School in 1968. He joined the staff
of WGBH Educational Foundation in 1970, was appointed General Manager in 1978,
and was elected President and General Manager in 1984. Mr. Becton is a member of
the PBS Board of Directors, a Trustee of American Public Television, the New
England Aquarium, the Boston Museum of Science, Concord Academy, and the
Massachusetts Corporation for Educational Telecommunications, an Overseer of the
Boston Museum of Fine Arts, and a member of the Board of Governors of the Banff
International Television Festival Foundation. He is also a Director of Becton
Dickinson and Company and A.H. Belo Company, a Trustee of the Committee for
Economic Development, and a member of the Board of Visitors of the Dimock
Community Health Center, the
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<PAGE>
Dean's Council of Harvard University's Graduate School of Education, and the
Massachusetts Bar. Mr. Becton has served as a trustee of various mutual funds
advised by Scudder Kemper since 1990.
LINDA C. COUGHLIN (48)*
Linda C. Coughlin, a Managing Director of Scudder Kemper, is head of Scudder
Kemper's U.S. Retail Mutual Funds Business. Ms. Coughlin joined Scudder Kemper
in 1986 and was a member of the firm's Board of Directors. She currently
oversees the marketing, service and operations of Scudder Kemper retail
businesses in the United States, which include the Scudder, Kemper, AARP, and
closed-end fund families, and the direct and intermediary channels. She also
serves as Chairperson of the AARP Investment Program from Scudder and as a
Trustee of the Program's mutual funds. Ms. Coughlin is also a member of the
Mutual Funds Management Group. Previously, she served as a regional Marketing
Director in the retail banking division of Citibank and at the American Express
Company as Director of Consumer Marketing for the mutual fund group. Ms.
Coughlin received a B.A. degree in economics (summa cum laude) from Fordham
University. Ms. Coughlin has served on the boards of various funds advised by
Scudder Kemper, including the AARP Investment Program Funds, since 1996.
DAWN-MARIE DRISCOLL (53)
Dawn-Marie Driscoll is an Executive Fellow and Advisory Board member of the
Center for Business Ethics at Bentley College, one of the nation's leading
institutes devoted to the study and practice of business ethics. Ms. Driscoll is
also president of Driscoll Associates, a consulting firm. She is a member of the
Board of Governors of the Investment Company Institute and serves as Chairman of
the Directors Services Committee. She has been a director, trustee and overseer
of many civic and business institutions, including The Massachusetts Bay United
Way and Regis College. Ms. Driscoll was formerly a law partner at Palmer & Dodge
in Boston and served for over a decade as Vice President of Corporate Affairs
and General Counsel of Filene's, the Boston-based department store chain. Ms.
Driscoll received a B.A. from Regis College, a J.D. from Suffolk University Law
School, a D.H.L. (honorary) from Suffolk University and a D.C.S. (honorary) from
Bentley College Graduate School of Business. Ms. Driscoll has served as a
trustee of various mutual funds advised by Scudder Kemper since 1987.
EDGAR R. FIEDLER (70)
Edgar R. Fiedler is Senior Fellow and Economic Counsellor at The Conference
Board. He served as the Board's Vice President, Economic Research from 1975 to
1986 and as Vice President and Economic Counsellor from 1986 to 1996. Mr.
Fiedler's business experience includes positions at Eastman Kodak in Rochester
(1956-59), Doubleday and Company in New York City (1959-60), and Bankers Trust
Company in New York City (1960-69). He also served as Assistant Secretary of the
Treasury for Economic Policy from 1971 to 1975. Mr. Fiedler graduated from the
University of Wisconsin in 1951. He received his M.B.A. from the University of
Michigan and his doctorate from New York University. During the 1980's, Mr.
Fiedler was an Adjunct Professor of Economics at the Columbia University
Graduate School of Business. From 1990 to 1991, he was the Stephen Edward Scarff
Distinguished Professor at Lawrence University in Wisconsin. Mr. Fiedler is a
Director of The Stanley Works, Harris Insight Funds, Brazil Fund, and PEG
Capital Management, Inc. He has served as a board member of various mutual funds
advised by Scudder Kemper, including the AARP Investment Program Funds, since
1984.
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<PAGE>
KEITH R. FOX (46)
Keith R. Fox is the managing partner of the Exeter Group of Funds, a series of
private equity funds with offices in New York and Boston, which he founded in
1986. The Exeter Group invests in a wide range of private equity situations,
including venture capital, expansion financings, recapitalizations and
management buyouts. Prior to forming Exeter, Mr. Fox was a director and vice
president of BT Capital Corporation, a subsidiary of Bankers Trust New York
Corporation organized as a small business investment company and based in New
York City. Mr. Fox graduated from Oxford University in 1976, and in 1981
received an M.B.A. degree from the Harvard Business School. Mr. Fox is also a
qualified accountant. He is a board member and former Chairman of the National
Association of Small Business Investment Companies, and a director of Golden
State Vintners, K-Communications, Progressive Holding Corporation and Facts On
File, as well as a former director of over twenty companies. Mr. Fox has served
as a trustee of various mutual funds advised by Scudder Kemper since 1996.
JOAN EDELMAN SPERO (55)
Joan E. Spero is the president of the Doris Duke Charitable Foundation, a
position to which she was named in January 1997. From 1993 to 1997, Ms. Spero
served as Undersecretary of State for Economic, Business and Agricultural
Affairs under President Clinton. From 1981 to 1993, she was an executive at the
American Express Company, where her last position was executive vice president
for Corporate Affairs and Communications. Ms. Spero served as U.N. Ambassador to
the United Nations Economic and Social Council under President Carter from 1980
to 1981. She was an assistant professor at Columbia University from 1973 to
1979. She graduated Phi Beta Kappa from the University of Wisconsin and holds a
master's degree in international affairs and a doctorate in political science
from Columbia University. Ms. Spero is a member of the Council on Foreign
Relations and the Council of American Ambassadors. She also serves as a trustee
of the Wisconsin Alumni Research Foundation, The Brookings Institution and
Columbia University and is a Director of First Data Corporation. Ms. Spero has
served as a trustee of various mutual funds advised by Scudder Kemper since
1998.
JEAN GLEASON STROMBERG (56)
Ms. Stromberg acts as a consultant on regulatory matters. From 1996 to 1997, Ms.
Stromberg represented the U.S. General Accounting Office before Congress and
elsewhere on issues involving banking, securities, securities markets, and
government-sponsored enterprises. Prior to that, Ms. Stromberg was a corporate
and securities law partner at the Washington, D.C. law office of Fulbright and
Jaworski, a national law firm. She served as Associate Director of the SEC's
Division of Investment Management from 1977 to 1979 and prior to that was
Special Counsel for the Division of Corporation Finance from 1972 to 1977. Ms.
Stromberg graduated Phi Beta Kappa from Wellesley College and received her law
degree from Harvard Law School. From 1988 to 1991 and 1993 to 1996, she was a
Trustee of the American Bar Retirement Association, the funding vehicle for
American Bar Association-sponsored retirement plans. Ms. Stromberg serves on the
Wellesley College Business Leadership Council and the Council for Mutual Fund
Director Education at Northwestern University Law School and was a panelist at
the SEC's Investment Company Director's Roundtable. Ms. Stromberg has served as
a board member of the AARP Investment Program Funds since 1997.
JEAN C. TEMPEL (56)
Jean C. Tempel is a venture partner for Internet Capital Group, a strategic
network of Internet partnership companies whose principal offices are in Wayne,
Pennsylvania. Ms. Tempel concentrates on investment opportunities in the Boston
area. She spent 25 years in technology/operations executive management at
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<PAGE>
various New England banks, building custody operations and real time
financial/securities processing systems, most recently as Chief Operations
Officer at The Boston Company. From 1991 until 1993 she was president/COO of
Safeguard Scientifics, a Pennsylvania technology venture company. In that role
she was a founding investor, director and vice chairman of Cambridge Technology
Partners. She is a director of XLVision, Inc., Marathon Technologies, Inc.,
Aberdeen Group and Sonesta Hotels International, and is a Trustee of
Northeastern University, Connecticut College, and The Commonwealth Institute.
She received a B.A. from Connecticut College, an M.S. from Rensselaer
Polytechnic Institute of New York, and attended Harvard Business School's
Advanced Management Program. Ms. Tempel has served as a trustee of various
mutual funds advised by Scudder Kemper since 1994.
STEVEN ZALEZNICK (45)*
Steven Zaleznick is President and CEO of AARP Services, Inc., a wholly-owned and
independently-operated subsidiary of AARP which manages a range of products and
services offered to AARP members, provides marketing services to AARP and its
member service providers and establishes an electronic commerce presence for
AARP members. Mr. Zaleznick previously served as AARP's general counsel for nine
years. He was responsible for the legal affairs of the AARP, which included tax
and legal matters affecting non-profit organizations, contract negotiations,
publication review and public policy litigation. In 1979, he joined the AARP as
a legislation representative responsible for issues involving taxes, pensions,
age discrimination, and other national issues affecting older Americans. Mr.
Zaleznick is President of the Board of Cradle of Hope Adoption Center in
Washington, D.C. He is a former treasurer and currently a board member of the
National Senior Citizens Law Center. Mr. Zaleznick received his B.A. in
economics from Brown University. He received his J.D. degree from Georgetown
University Law Center and is a member of the District of Columbia Bar
Association.
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Trustees Not Standing for Re-election:
<TABLE>
<CAPTION>
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Name Present Office with the Acquired Trust;
- ---- Principal Occupation or Employment and
Directorships
----------------------------------------
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<S> <C>
Horace B. Deets (61)* Vice Chairperson and Trustee; Executive
Director, AARP (1989 - Present). Mr. Deets
serves on the Boards of an additional 4
trusts whose funds are advised by Scudder
Kemper.
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Carole Lewis Anderson (55) Trustee; Principal, Suburban Capital
Markets, Inc. (1995 - Present). Ms. Anderson
serves on the Boards of an additional 4
trusts whose funds are advised by Scudder
Kemper.
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Adelaide Attard (69) Trustee; Member, NYC Department of Aging
Advisory Council (1995 - Present);
Consultant, Gerontology Commissioner, County
of Nassau, New York, Department of Senior
Citizen Affairs (1971-1991). Ms. Attard
serves on the Boards of an additional 4
trusts whose funds are advised by Scudder
Kemper.
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Robert N. Butler, M.D. (73) Trustee; Director, International Longevity
Center and Professor of Geriatrics and Adult
Development; Chairman, Henry L. Schwartz
Department of Geriatrics and Adult
Development, Mount Sinai Medical Center
(1982 - present). Dr. Butler serves on the
Boards of an additional 4 trusts whose funds
are advised by Scudder Kemper.
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Lt. Gen. Eugene P. Forrester (73) Trustee; Lt. General (Retired), U.S. Army;
International Trade Counselor (1983 -
present); Consultant. Lt. Gen. Forrester
serves on the Boards of an additional 4
trusts whose funds are advised by Scudder
Kemper.
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George L. Maddox, Jr. (74) Trustee; Professor Emeritus and Director,
Long Term Care Resources Program, Duke
University Medical Center; Professor
Emeritus of Sociology, Departments of
Sociology and Psychiatry, Duke University.
Mr. Maddox serves on the Boards of an
additional 4 trusts whose funds are advised
by Scudder Kemper.
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<PAGE>
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Robert J. Myers (87) Trustee; Actuarial Consultant (1983-
present). Mr. Myers serves on the Boards of
an additional 4 trusts whose funds are
advised by Scudder Kemper.
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James H. Schulz (63) Trustee; Professor of Economics and Kirstein
Professor of Aging Policy, Policy Center on
Aging, Florence Heller School, Brandeis
University. Mr. Schulz serves on the Boards
of an additional 4 trusts whose funds are
advised by Scudder Kemper.
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Gordon Shillinglaw (74) Trustee; Professor Emeritus of Accounting,
Columbia University Graduate School of
Business. Dr. Shillinglaw serves on the
Boards of an additional 4 trusts whose funds
are advised by Scudder Kemper.
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</TABLE>
* Nominee or Trustee considered by the Acquired Trust and its counsel to be
an "interested person" (as defined in the Investment Company Act of 1940,
as amended (the "1940 Act")) of the Acquired Trust, the Investment Manager
or AARP because of his or her employment by the Investment Manager or
AARP, and, in some cases, holding offices with the Acquired Trust.
Appendix 1 hereto sets forth the number of shares of each series of the
Acquired Trust owned directly or beneficially by the Trustees of the Acquired
Trust and by the nominees for election.
RESPONSIBILITIES OF THE BOARD -- BOARD AND COMMITTEE MEETINGS
A fund's board is responsible for the general oversight of fund business.
The board that is proposed for shareholder voting at this Meeting is comprised
of two individuals who are considered "interested" Trustees, and seven
individuals who have no affiliation with Scudder Kemper and who are called
"independent" 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. On the proposed Board of Trustees, if approved by
shareholders, nearly 78% will be Independent Trustees. The Independent Trustees
have been nominated solely by the current Independent Trustees of the Acquired
Trust, a practice also favored by the SEC. The Independent Trustees have primary
responsibility for assuring that the Acquired Fund is managed in the best
interests of its shareholders.
The Trustees meet several times during the year to review the investment
performance of each fund of the Acquired Trust 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 several policies and practices which help ensure their effectiveness and
independence in reviewing fees and representing shareholders. Many of these are
similar to those suggested in the 1999 Advisory Group Report 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
-14-
<PAGE>
matters. The Trustees are also assisted in this regard by the funds' independent
public accountants and other independent experts retained for this purpose. The
Independent Trustees regularly meet privately with their counsel and other
advisors. In addition, the Independent Trustees from time to time have appointed
task forces and subcommittees from their members to focus on particular matters.
The Board of the Acquired Trust has an Audit Committee and a Committee on
Independent Trustees, the responsibilities of which are described below. In
addition, the Acquired Trust has an Executive Committee, a Shareholder Service
Committee and a Valuation Committee.
AUDIT COMMITTEE
The Audit Committee reviews with management and the independent public
accountants for each series of the Acquired Trust, among other things, the scope
of the audit and the internal controls of each series of the Acquired Trust and
its agents, reviews and approves in advance the type of services to be rendered
by independent accountants, recommends the selection of independent accountants
for each series of the Acquired Trust to the Board, reviews the independence of
such firm, and, in general, considers and reports to the Board on matters
regarding the accounting and financial reporting practices of each series of the
Acquired Trust.
As suggested by the Advisory Group Report, the Acquired Trust's Audit
Committee is comprised entirely of Independent Trustees, meets privately with
the independent accountants of each series of the Acquired Trust, will receive
annual representations from the accountants as to their independence, and has a
written charter that delineates the committee's duties and powers.
Committee on Independent Trustees
The Board of Trustees of the Acquired Trust has a Committee on Independent
Trustees, comprised solely of Independent Trustees, charged with the duty of
making all nominations of Independent Trustees, establishing Trustees'
compensation policies and reviewing matters relating to the Independent
Trustees.
Attendance
The full Board of Trustees of the Acquired Trust met six times, the Audit
Committee met two times and the Committee on Independent Trustees met two times
during calendar year 1999. Each then current Trustee attended 100% of the total
meetings of the Board and each committee on which he or she served as a regular
member that were held during that period, except Horace B. Deets, Robert J.
Myers and James H. Schulz, who attended 90%, 94% and 92%, respectively, of those
meetings. In addition to these Board and committee meetings, the Trustees of the
Acquired Trust attended various other meetings on behalf of the Acquired Trust
during the year, including meetings with their independent legal counsel and
informational meetings.
-15-
<PAGE>
OFFICERS
The following persons are officers of the Acquired Trust:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Present Office with the
Acquired Trust; Principal Year First Became
Name (Age) Occupation or Employment(1) an Officer(2)
- ---------- ------------------------- -----------------
<S> <C> <C>
Linda C. Coughlin (48) Trustee and President; 2000
Managing Director of Scudder
Kemper
- --------------------------------------------------------------------------------
William Glavin (41) Vice President; 1997
Senior Vice President of
Scudder Kemper
- --------------------------------------------------------------------------------
Ann M. McCreary (43) Vice President; Managing 1998
Director of Scudder Kemper
- --------------------------------------------------------------------------------
James Masur (39) Vice President; Senior Vice 1999
President of Scudder Kemper
- --------------------------------------------------------------------------------
John Millette (37) Vice President and Assistant 1999
Secretary; Assistant Vice
President of Scudder Kemper
- --------------------------------------------------------------------------------
James W. Pasman (47) Vice President; Senior Vice 1996
President of Scudder Kemper
- --------------------------------------------------------------------------------
Kathryn L. Quirk (47) Vice President and Secretary; 1997
Managing Director of Scudder
Kemper
- --------------------------------------------------------------------------------
John Hebble (41) Treasurer; Senior Vice 1997
President, Scudder Kemper
- --------------------------------------------------------------------------------
</TABLE>
- ----------
(1) Unless otherwise stated, all of the officers have been associated with
their respective companies for more than five years, although not
necessarily in the same capacity.
(2) The President, Treasurer and Secretary each holds office until his or her
successor has been duly elected and qualified, and all other officers hold
offices in accordance with the By-laws of the Acquired Trust.
-16-
<PAGE>
COMPENSATION OF TRUSTEES AND OFFICERS
The Acquired Trust pays each Independent Trustee an annual Trustee's fee
for each series of the Acquired Trust plus specified amounts for Board and
committee meetings attended and reimburses expenses related to the business of
any series of the Acquired Trust. As of April 1, 1999, each Independent Trustee
receives an annual Trustee's fee of $12,000. (Prior to April 1, 1999, the annual
Trustee's fee was $10,000.) Each Independent Trustee also receives fees of $175
per fund for attending each meeting of the Board and between $80 and $150 per
fund (depending on meeting type) for attending each committee meeting, or
meeting held for the purpose of considering arrangements between the Acquired
Trust and Scudder Kemper, or any of its other affiliates. The newly-constituted
Board may determine to change its compensation structure.
The Independent Trustees of the Acquired Trust are not entitled to
benefits under any pension or retirement plan. A one-time benefit, however,
will be provided to those Independent Trustees who are not standing for
re-election in a amount equal to twice a Trustee's calendar year 1999
compensation from the Acquired Trust. Inasmuch as Scudder Kemper will also
benefit from the administrative efficiencies of a consolidated board, Scudder
Kemper has agreed to bear one-half of the cost of any such benefit.
Scudder Kemper supervises the Acquired Trust's investments, pays the
compensation and certain expenses of its personnel who serve as Trustees and
officers of the Acquired Trust and receives a management fee for its services.
Several of the Acquired Trust's officers and Trustees are also officers,
directors, employees or stockholders of Scudder Kemper and participate in the
fees paid to that firm, although the Acquired Trust makes no direct payments to
them other than for reimbursement of travel expenses in connection with their
attendance at Board and committee meetings.
The following Compensation Table provides in tabular form the following
data:
COLUMN (1) All Trustees who receive compensation from the Acquired Trust.
COLUMN (2) Aggregate compensation received by each Trustee of the Acquired
Trust during calendar year 1999.
COLUMN (3) Total compensation received by each Trustee from funds managed
by Scudder Kemper (collectively, the "Fund Complex") during calendar year 1999.
-17-
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Trustees Aggregate Total Compensation
Compensation (number from Fund Complex*
of funds) Paid to Trustee
- ---------------------------------------------------------------------
<S> <C> <C>
Carole Lewis Anderson $20,280 (5 funds) $40,935 (16 funds)
- ---------------------------------------------------------------------
Adelaide Attard $19,013 (5 funds) $38,375 (16 funds)
- ---------------------------------------------------------------------
Robert N. Butler $17,271 (5 funds) $34,855 (16 funds)
- ---------------------------------------------------------------------
Edgar R. Fiedler $16,013 (5 funds) $54,495 (17 funds)
- ---------------------------------------------------------------------
Eugene P. Forrester $20,280 (5 funds) $40,935 (16 funds)
- ---------------------------------------------------------------------
George L. Maddox, Jr. $20,280 (5 funds) $40,935 (16 funds)
- ---------------------------------------------------------------------
Robert J. Myers $18,838 (5 funds) $38,200 (16 funds)
- ---------------------------------------------------------------------
James H. Schulz $18,381 (5 funds) $37,095 (16 funds)
- ---------------------------------------------------------------------
Gordon Shillinglaw $23,208 (5 funds) $44,280 (16 funds)
- ---------------------------------------------------------------------
Jean Gleason Stromberg $20,276 (5 funds) $40,935 (16 funds)
- ---------------------------------------------------------------------
</TABLE>
* The Fund Complex includes two funds for which the Trustees serve without
compensation.
THE BOARD OF TRUSTEES OF AARP GROWTH TRUST RECOMMENDS THAT
THE SHAREHOLDERS OF AARP BALANCED STOCK AND BOND FUND VOTE FOR EACH NOMINEE.
PROPOSAL 2: APPROVAL OF
AGREEMENT AND PLAN OF REORGANIZATION
I. SYNOPSIS
The following is 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.
INTRODUCTION
The Board of the Acquired Trust, including all of the Independent
Trustees, approved the Plan at a meeting held on February 7, 2000. Subject to
its approval by the shareholders of the Acquired Fund, the Plan provides for (a)
the transfer of all or substantially all of the assets and all of the
liabilities of the Acquired Fund to the Acquiring Fund in exchange for AARP
Shares; (b) the distribution of such shares to the shareholders of the Acquired
Fund in complete liquidation of the Acquired Fund; and (c) the abolition of the
Acquired Fund as a series of the Acquired Trust. As a result of the
Reorganization, each shareholder of the Acquired Fund will become a shareholder
of the AARP Shares and will hold, immediately after the Reorganization, AARP
Shares having an aggregate net asset value equal to the aggregate net asset
value of such shareholder's shares of the Acquired Fund on the Valuation Date.
Scudder Kemper is the investment manager of both Funds. If the
Reorganization is completed, the Acquired Fund's shareholders will continue to
enjoy many of the same shareholder privileges as they currently enjoy, such as
the ability to buy, exchange and sell shares without paying a sales commission,
access to professional service representatives, and automatic dividend
reinvestment. See "Purchase, Redemption and Exchange Information."
-18-
<PAGE>
BACKGROUND OF THE REORGANIZATION
The Reorganization is part of a broader restructuring program proposed by
Scudder Kemper to respond to changing industry conditions and investor needs.
Scudder Kemper seeks to offer the full lineup of the Scudder Family of no-load
funds to members of the AARP Investment Program. The expanded offering should
position the AARP Investment Program to meet the increasingly diverse needs of
current and prospective AARP members.
Scudder Kemper and AARP have advised the Board that they believe that the
proposed changes in the AARP Investment Program from Scudder are in the
interests of shareholders of the funds offered through the AARP Investment
Program (the "AARP Funds") and AARP members: the Program would consist of
forty-three no-load funds compared with the current sixteen and would retain its
separate identity with separate statements and lower minimum investments for
participating shareholders; six core funds would continue to have a risk managed
strategy; education will remain a focus of Scudder Kemper; and AARP will
continue to be involved with the Program and is proposed to have board
representation.
As part of this initiative, Scudder Kemper has sought ways to restructure
and streamline the management and operations of the funds it advises. Scudder
Kemper believes, and has advised the boards, that the consolidation of certain
funds advised by it would benefit fund shareholders. Scudder Kemper has,
therefore, proposed the consolidation of a number of no-load funds advised by it
that Scudder Kemper believes have similar or compatible investment objectives
and policies. In many cases, the proposed consolidations are designed to
eliminate the substantial overlap in current offerings by the Scudder Funds and
the AARP Funds, all of which are advised by Scudder Kemper. Consolidation plans
are proposed for other funds that have not gathered enough assets to operate
efficiently and, in turn, have relatively high expense ratios. Scudder Kemper
believes that these consolidations may help to enhance investment performance of
funds and increase efficiency of operations. The Reorganization is also expected
to result in lower operating expenses for Acquired Fund shareholders, as
described in "Comparison of Expenses" below.
There are currently five different boards for the no-load funds advised by
Scudder Kemper. Scudder Kemper believes, and has proposed to the boards, that
creating a single board responsible for most of the no-load funds advised by
Scudder Kemper would increase efficiency and benefit fund shareholders. (See
Proposal 1 above.)
As part of this restructuring effort, Scudder Kemper has also proposed the
adoption of an administrative fee for most of the no-load funds advised by
Scudder Kemper. Under this fee structure, in exchange for payment by the
Acquiring Fund of an administrative fee, Scudder Kemper would agree to provide
or pay for substantially all services that a fund normally requires for its
operations, other than those provided under the fund's investment management
agreement and certain other expenses. Such an administrative fee would enable
investors to determine with greater certainty the expense level that a fund will
experience, and would transfer substantially all of the risk of increased costs
to Scudder Kemper. Scudder Kemper has proposed that the Acquiring Fund implement
such an administrative fee upon the Closing, as described in "Administrative
Fee" below.
The fund consolidations, the adoption of an administrative fee and the
creation of a single board 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.
-19-
<PAGE>
REASONS FOR THE PROPOSED REORGANIZATION; BOARD APPROVAL
Since receiving Scudder Kemper's proposals on September 22, 1999, 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.
The Trustees believe that the Reorganization may provide shareholders of
the Acquired Fund with the following benefits:
- - LOWER EXPENSES. If the Reorganization is approved, Acquired Fund
shareholders may benefit from lower total Fund operating expenses. Please
refer to "Comparison of Expenses" below.
- - GREATER PREDICTABILITY OF EXPENSES. On or prior to Closing, the Acquiring
Fund and Scudder Kemper will enter into an administrative services
agreement pursuant to which Scudder Kemper will provide or pay others to
provide substantially all of the administrative services required by the
Acquiring Fund, and most Acquiring Fund expenses, in return for payment by
the Acquiring Fund of a single administrative fee rate. This agreement,
which has an initial three year term, will protect the Acquiring Fund's
shareholders from increases in the Acquiring Fund's expense ratio
attributed to any increases in the costs of providing these services.
- - OPPORTUNITY FOR HIGHER RETURN. The Acquiring Fund does not have reducing
downside risk as part of its objective. The Acquiring Fund may provide an
opportunity for a higher level of return, with greater risk, than the
Acquired Fund, although there can be no assurances in this regard. The
Acquiring Fund has outperformed the Acquired Fund over the past one,
three, and five year periods, and has been in the top quartile of all
funds in the Lipper Balanced Funds category for each of those periods.
- - SIMILAR INVESTMENT OBJECTIVES AND POLICIES. Although the combined fund
will not have the Acquired Fund's current policy of seeking to reduce
downside risk, the combined fund will continue to seek a balance of growth
and income by investing in a mix of stocks and bonds.
- - TAX-FREE REORGANIZATION. Shareholders of the Acquired Fund will exchange
their shares for shares of the Acquiring Fund of equal value. It is
expected that the transaction will be tax-free for Acquired Fund
shareholders.
For these reasons, as more fully described below under "The Proposed
Transaction - Board Approval of the Proposed Transaction," the Trustees of the
Acquired Trust, including the Independent Trustees, have concluded that:
- - the Reorganization is in the best interests of the Acquired Fund and its
shareholders; and
- - the interests of the existing shareholders of the Acquired Fund will not
be diluted as a result of the Reorganization.
ACCORDINGLY, THE TRUSTEES RECOMMEND APPROVAL OF THE PLAN EFFECTING THE
REORGANIZATION. If the Plan is not approved, the Acquired Fund will continue in
existence unless other action is taken by the Trustees.
-20-
<PAGE>
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS OF THE FUNDS
Although the investment objectives, policies and restrictions of the
Acquired Fund and the Acquiring Fund (and, consequently, the risks of investing
in either Fund) are similar, there are differences between the Acquired Fund and
the Acquiring Fund. The investment objective of the Acquiring Fund is to seek a
balance of growth and income from a diversified portfolio of equity and
fixed-income securities. The Acquiring Fund also seeks long-term preservation of
capital through a quality-oriented investment approach designed to reduce risk.
The investment objective of the Acquired Fund is to provide long-term capital
growth and income while actively seeking to reduce downside risk as compared
with other balanced mutual funds. There can be no assurance that either Fund
will achieve its investment objective. Both Funds are managed in a substantially
similar manner, except that the Acquired Fund seeks to reduce downside risk. The
Acquired Fund seeks to reduce downside risk by diversifying widely among
industries and companies and by investing significantly in dividend-paying
stocks. The Acquired Fund's bond investments are also diversified by maturity,
credit quality and industry.
The Acquiring Fund normally invests from 50% to 75% of its net assets in
common stocks and other equity securities, and 25% to 50% of its net assets in
fixed-income securities. The Acquiring Fund will invest at least 25% of its net
assets in fixed-income senior securities at all times. The Acquired Fund can
invest up to 70% of its net assets in equity securities, and invests at least
30% of its net assets in fixed-income securities or cash at all times.
The Acquiring Fund principally invests in equity securities of
medium-to-large size domestic companies with annual revenues or market
capitalizations of a least $1 billion with consistent and above-average rates of
growth and above-average financial quality which offer, in the opinion of the
Investment Manager, the prospect for above-average growth in earnings, capital
and price appreciation. At least 65% of the value of the Acquiring Fund's common
stocks will be of issuers which qualify, at the time of purchase, for one of the
three highest equity earnings and dividends ranking categories. The Acquiring
Fund's remaining assets are allocated to investment-grade bonds and other
fixed-income securities, including cash reserves. At least 75% of the value of
the Acquiring Fund's debt securities must be rated within the three highest
quality ratings of Standard & Poor's Ratings Services or Moody's Investors
Services.
The Acquired Fund principally invests in a mix of stocks with
above-average dividend yields and which, in the opinion of the Investment
Manager, offer the opportunity for capital growth and growth of earnings,
high-quality bonds and cash reserves. The Acquired Fund does not invest in
securities issued by tobacco-producing companies and has a stated goal of
educating shareholders on investment topics affecting their lives.
Each Fund may invest in certain securities in which the other Fund does
not. The Acquiring Fund may invest in indexed securities, illiquid securities,
reverse repurchase agreements and dollar-roll transactions. The Acquired Fund
may invest in trust preferred securities and restricted securities issued in
private placements. The Acquiring Fund, while limited to 5% of assets committed
to strategic transactions entered into for non-hedging purposes, may make more
use of such transactions. For temporary defensive purposes, each Fund may invest
without limit in cash and in other money market and short-term instruments. The
Acquired Fund may make only limited use of strategic transactions.
The Acquiring Fund's investment restrictions, as set forth in its
Statement of Additional Information, are identical to the Acquired Fund's
investment restrictions, except that the Acquiring Fund may not, as a
non-fundamental policy, lend portfolio securities in an amount greater than 5%
of its total assets. Investment restrictions of each Fund that are fundamental
policies may not be changed without
-21-
<PAGE>
the approval of Fund shareholders. Investors should refer to the respective
Statements of Additional Information of the Acquiring Fund and the Acquired Fund
for a fuller description of each Fund's investment policies and restrictions.
PORTFOLIO TURNOVER
The average annual portfolio turnover rate for the Acquiring 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 December 31, 1999 (i.e., prior to the creation of AARP
Shares) was 102.3%. The average annual portfolio turnover rate for the Acquired
Fund for the fiscal year ended September 30, 1999 was 47.6%. 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.
PERFORMANCE
The following table compares the investment performance of each Fund, and
may provide some indication of the risks of investing in each Fund by showing
changes in each Fund's performance from year to year and how the Fund's average
annual return for the periods indicated compare with those of a broad measure of
market performance. Neither Fund's past performance is an indication of how the
Fund will perform in the future.
AVERAGE ANNUAL TOTAL RETURN
FOR THE PERIODS ENDING DECEMBER 31, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
3-Month U.S.
Treasury
Acquiring Fund+ Acquired Fund S&P 500** LBAB*** Bill#
-------------- ------------- ------- ---- ------
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Past year 13.46% 2.87% 21.04% (0.82%) 4.72%
- -------------------------------------------------------------------------------------------------
Past 5 years 18.94% 13.54% 28.56% 7.72% 5.10%
- -------------------------------------------------------------------------------------------------
Since Inception* 13.47% N/A 21.52% 6.42% 4.69%
- -------------------------------------------------------------------------------------------------
Since Inception++ N/A 11.02% 21.67% 6.21% 4.72%
- -------------------------------------------------------------------------------------------------
</TABLE>
+ AARP Shares were not offered during the periods covered. Performance shown is
for shares of the Acquiring Fund existing during the periods covered.
* The inception date for the Acquiring Fund is January 4, 1993.
++ The inception date for the Acquired Fund is February 1, 1994.
** The Standard & Poor's Composite Stock Price Index (S&P 500) is a
capitalization-weighted index of 500 stocks. The index is designed to measure
performance of the broad domestic economy through changes in the aggregate
market value of 500 stocks representing all major industries.
*** The Lehman Brothers Aggregate Bond (LBAB) Index is an unmanaged market
value-weighted measure of treasury issues, agency issues, corporate bond issues
and mortgage securities.
-22-
<PAGE>
Total return for the Acquiring Fund would have been lower during all
periods if the Investment Manager had not maintained expenses.
For management's discussion of the Acquiring Fund's performance for the
fiscal year ended December 31, 1999 (prior to the creation of AARP Shares), see
Exhibit B attached hereto.
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 the Fund's Trustees.
Shareholders pay no direct charges or fees for investment management or other
services. Scudder Kemper is a Delaware corporation located at Two International
Place, Boston, Massachusetts 02110-4103.
The Investment Manager receives a fee for its services pursuant to its
investment management agreement with the Acquiring Fund. For these services, the
Acquiring Fund pays the Investment Manager a fee at an annual rate of 0.70% of
average daily net assets. As of December 31, 1999, the Acquiring Fund had total
net assets of $573,599,587. For the fiscal year ended December 31, 1999, the
Acquiring Fund paid the Investment Manager a fee of 0.70% of average daily net
assets.
Scudder Kemper has proposed a new investment management agreement for the
Acquiring Fund. The proposed new investment management agreement includes a new
fee rate, which, at all asset levels, is lower than the current rate applicable
to the Acquiring Fund. The proposed new fee rate is 0.47% of the first $1.5
billion of average daily net assets, 0.445% of the next $500 million, and 0.42%
on average daily net assets in excess of $2 billion. Each of the effectiveness
of the new investment management agreement for the Acquiring Fund and the
Closing is contingent upon the other.
The Investment Manager receives a fee pursuant to the investment
management agreement as compensation for its services on behalf of the
Acquired Fund. Pursuant to the Acquired Fund's investment management
agreement, the fee payable to Scudder Kemper is calculated using a formula
based in part on the combined net assets of all AARP Funds, except for the
two series of AARP Managed Investment Portfolios Trust. The Acquired Fund
currently pays the Investment Manager a fee at an annual rate of 0.47% of
average daily net assets. The fee for the Acquiring Fund is calculated in a
different manner than is currently used for the Acquired Fund. Unlike the fee
for the Acquired Fund, the Acquiring Fund's fee will not go up or down based
on the net assets of other funds managed by the Investment Manager. As of
September 30, 1999, the Acquired Fund had total net assets of $681,933,451.
For the fiscal year ended September 30, 1999, the Acquired Fund paid the
Investment Manager a fee of 0.47% of average daily net assets. The Investment
Manager pays a portion of its management fee from the Acquired Fund to AARP
Financial Services Corporation ("AFSC") in return for advice and other
services relating to AARP Fund investment by AARP members. The fee paid to
AFSC is calculated on a daily basis as a percentage of the combined net
assets of all AARP Funds, except for the two series of AARP Managed
Investment Portfolios Trust, and decreases with the size of the AARP
Investment Program. The fee rate is 0.07% for the first $6 billion, 0.06% for
the next $10 billion and 0.05% thereafter.
ADMINISTRATIVE FEE
On or prior to the Closing, the Acquiring Fund will have entered into an
administrative services agreement with Scudder Kemper (the "Administration
Agreement"), pursuant to which Scudder Kemper will provide or pay others to
provide substantially all of the administrative services required by the
-23-
<PAGE>
Acquiring Fund (other than those provided by Scudder Kemper under its
investment management agreement with the Fund, as described above) in
exchange for the payment by the Acquiring Fund of an administrative services
fee (the "Administrative Fee") of 0.30% of average daily net assets. One
effect of this arrangement is to make the Acquiring Fund's future expense
ratio more predictable. The details of the proposal (including expenses that
are not covered) are set out below.
Various third-party service providers (the "Service Providers"), some
of which are affiliated with Scudder Kemper, provide certain services to the
Acquiring Fund pursuant to separate agreements with the Fund, subject to
oversight and approval by the Acquiring Trust's trustees. Scudder Fund
Accounting Corporation, a subsidiary of Scudder Kemper, computes net asset
value for the Acquiring Fund and maintains its accounting records. Scudder
Service Corporation, also a subsidiary of Scudder Kemper, is the transfer,
shareholder servicing and dividend-paying agent for the shares of the
Acquiring 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 holds the portfolio securities of the Acquiring Fund,
pursuant to a custodian agreement. PricewaterhouseCoopers LLP audits the
financial statements of the Acquiring Fund and provides other audit, tax, and
related services. Dechert Price & Rhoads acts as general counsel for the
Acquiring Fund. In addition to the fees it pays under its current investment
management agreement with Scudder Kemper, the Acquiring Fund pays the fees
and expenses associated with these service arrangements, as well as the
Acquiring Fund's insurance, registration, printing, postage and other costs.
Once the Administration Agreement becomes effective, each Service Provider
will continue to provide the services that it currently provides to the
Acquiring Fund, as described above, under the current arrangements, except that
Scudder Kemper will pay these entities for the provision of their services to
the Acquiring Fund and will pay most other Fund expenses, including insurance,
registration, printing and postage fees. In return, the Acquiring Fund will pay
Scudder Kemper the Administrative Fee.
The proposed Administration Agreement will have an initial term of three
years, subject to earlier termination by the Acquiring Trust's trustees. The fee
payable by the Acquiring Fund to Scudder Kemper pursuant to the Administration
Agreement would be reduced by the amount of any credit received from the
Acquiring Fund's custodian for cash balances.
Certain expenses of the Acquiring Fund would not be 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). In
addition, the Acquiring Fund would continue to pay the fees required by its
investment management agreement with Scudder Kemper.
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 Acquiring Fund, and comparing these with the expenses of the
Acquired Fund. As indicated below, it is expected that the total expense ratio
of the Acquiring Fund will be substantially lower than the current expense ratio
of the Acquired Fund. Unless otherwise noted, the information is based on each
Fund's expenses and average daily net assets for the twelve months ended October
31, 1999 and on a pro forma basis as of that date and for the period then ended,
giving effect to the Reorganization. Information in the tables and examples
relating to the Acquiring Fund relates to the Acquiring Fund as a whole prior to
the creation of the AARP
-24-
<PAGE>
Shares. Pro Forma information in the tables and examples relates to the AARP
Shares and the Class S shares class of the Acquiring Fund.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Pro Forma
Acquiring Fund Acquired Fund (Combined)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge (load)
imposed on purchases (as a
percentage of offering price) None None None
- ------------------------------------------------------------------------------------------
Maximum deferred sales charge
(load) (as a percentage of
purchase price or redemption
proceeds) None None None
- ------------------------------------------------------------------------------------------
Maximum deferred sales charge
(load) imposed on reinvested
dividends None None None
- ------------------------------------------------------------------------------------------
Redemption fee (as a percentage
of amount redeemed, if None None None
applicable)+
- ------------------------------------------------------------------------------------------
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (UNAUDITED)
- ------------------------------------------------------------------------------------------
Pro Forma*
Acquiring Fund Acquired Fund (Combined)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management fees 0.70% 0.47% 0.47%
- ------------------------------------------------------------------------------------------
Distribution and/or service
(12b-1) fees None None None
- ------------------------------------------------------------------------------------------
Other expenses 0.57% 0.41% 0.30%
- ------------------------------------------------------------------------------------------
Total annual Fund operating
expenses 1.27% 0.88% 0.77%
- ------------------------------------------------------------------------------------------
</TABLE>
+ There is a $5 wire service fee for receiving redemption proceeds via wire.
-25-
<PAGE>
* Pro Forma expenses reflect the implementation of the Administrative
Fee and of a new investment management fee for the Acquiring Fund to be
effective upon the Reorganization.
In evaluating the Proposals, the Independent Trustees focused their
consideration on the Acquiring Fund's and the Acquired Fund's estimated
expense ratios calculated utilizing Fund net assets at December 31, 1999
(rather than average daily net assets for a full year, as used in the table
above), the number of shareholder accounts at the date, and other relevant
factors. This calculation resulted in an estimated expense ratio of 1.25%
for the Acquiring Fund and 0.86% for the Acquired Fund.
EXAMPLES (UNAUDITED)
Based on the costs above, the following examples are intended to help
you compare the cost of investing in the Funds with the cost of investing in
other mutual funds. The examples assume that you invest $10,000 in each Fund for
the time periods indicated and then redeem all of your shares at the end of
those periods. The examples also assume that your investment has a 5% return
each year and that each Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions, your costs
would be as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Pro Forma
Year Acquiring Fund Acquired Fund (Combined)**
- ---- -------------- ------------- ----------
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1st $129 $90 $79
- --------------------------------------------------------------------------------
3rd $403 $281 $246
- --------------------------------------------------------------------------------
5th $697 $488 $428
- --------------------------------------------------------------------------------
10th $1,534 $1,084 $954
- --------------------------------------------------------------------------------
</TABLE>
**Pro Forma expenses reflect the implementation of the Administrative Fee and of
a new investment management fee for the Acquiring Fund to be effective upon the
Reorganization.
FINANCIAL HIGHLIGHTS
The financial highlights table for the Acquiring Fund prior to the
creation of the AARP Shares, which is intended to help you understand the
Acquiring Fund's financial performance for the past five years, is included in
the Acquiring Fund's prospectus dated April 12, 2000, which is included herewith
and incorporated herein by reference.
DISTRIBUTION OF SHARES
Scudder Investor Services, Inc. ("SIS"), Two International Place, Boston,
Massachusetts 02110, a subsidiary of the Investment Manager, is the principal
underwriter of each Fund. SIS charges no direct fees in connection with the
distribution of shares of the Funds. Following the Reorganization, Acquiring
-26-
<PAGE>
Fund shareholders will continue to be able to purchase shares of funds in the
Scudder Family of Funds on a no-load basis.
PURCHASE, REDEMPTION AND EXCHANGE INFORMATION
The purchase, redemption and exchange procedures and privileges of the
Acquired Fund are identical to those that will be in place for the AARP Shares,
except that Acquired Fund shareholders may exchange Acquired Fund shares only
into AARP Funds, while AARP Shares shareholders will be able to exchange AARP
Shares into AARP Shares of any fund within the Scudder Family of Funds on a
no-load basis.
The minimum balance for non-retirement accounts investing in the AARP
Shares will be $1,000, which is higher than the minimum balance for
non-retirement accounts investing in the Acquired Fund. The minimum balance for
Individual Retirement Accounts ("IRAs") investing in AARP Shares will be $500,
as compared to $250 for the Acquired Fund. However, Acquired Fund non-retirement
account shareholders receiving AARP Shares as a result of the Reorganization
will only be required to meet the Acquired Fund's $500 minimum balance
requirement for non-retirement accounts and Acquired Fund IRA shareholders
receiving AARP Shares as a result of the Reorganization will only be required to
meet the Acquired Fund's $250 minimum balance requirement for IRAs. AARP Share
shareholders will not currently be charged an annual fee for accounts that fall
below the $1,000 minimum balance nor will such sub-minimum accounts currently be
subject to involuntary redemption by the Acquiring Fund.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each of the Funds intends to distribute dividends from its net investment
income in March, June, September and December of each year. Each Fund intends to
distribute net realized capital gains after utilization of capital loss
carryforwards, if any, in December of each year. An additional distribution may
be made if necessary. Dividends and distributions of each Fund will be invested
in additional shares of the Fund at net asset value and credited to the
shareholder's account on the payment date or, at the shareholder's election,
paid in cash.
If the Plan is approved by the Acquired Fund's shareholders, the Acquired
Fund will pay its shareholders a distribution of all undistributed net
investment income and undistributed realized net capital gains immediately prior
to the Closing.
TAX CONSEQUENCES
As a condition to the Reorganization, the Acquiring Fund and the Acquired
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 Acquired Fund
or its shareholders as a direct result of the Reorganization. See "The Proposed
Transaction - Federal Income Tax Consequences."
II. PRINCIPAL RISK FACTORS
Because of their similar investment objectives, policies and strategies,
the principal risks presented by the Acquiring Fund are similar to those
presented by the Acquired Fund. The main risks applicable to each Fund include,
among others, management risk, market risk, and, to the extent the Fund
-27-
<PAGE>
invests in bonds, risk associated with interest rates and risk associated with
credit quality. Management risk refers to the fact that securities selected by
Scudder Kemper on behalf of a Fund might not perform as well as the securities
held by other mutual funds. Market risk refers to the fact that the market
values of common stock can fluctuate based on business performance of the
issuing companies, investor perception and general economic or financial market
movements. If certain sectors or securities don't perform as the portfolio
managers expect, a Fund could substantially underperform other balanced mutual
funds or lose money. For example, the Acquiring Fund places greater emphasis on
"growth" equity securities than does the Acquired Fund, and will suffer greater
losses to the extent these securities underperform other types of investments.
Risk associated with interest rates refers to the link between interest rates
and debt security performance. A rise in interest rates generally means a fall
in bond prices, and therefore in the value of the debt securities in the
portfolio of a Fund. Risk associated with credit quality refers to the fact
that, if a portfolio debt security declines in credit quality or goes into
default, it could hurt a Fund's performance. Also, 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. This risk may be particularly acute for the Acquiring Fund, which
generally invests a larger portion of its assets in high yield securities than
does the Acquired Fund. Because the Acquiring Fund does not actively seek to
reduce downside risk as compared with other balanced mutual funds, it may
present more significant risks than the Acquired Fund in a weak market.
For a further discussion of the investment techniques and risk factors
applicable to the Acquired Fund and the Acquiring Fund, see the "Investment
Objectives, Policies and Restrictions of the Funds" herein, and the Prospectuses
and Statements of Additional Information for the Funds, which are incorporated
by reference herein.
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 Acquired Fund to the Acquiring Fund in
exchange for that number of full and fractional AARP Shares having an aggregate
net asset value equal to the aggregate net asset value of the Acquired Fund as
of the close of business on the Valuation Date. The Acquiring Fund will assume
all of the liabilities of the Acquired Fund. The Acquired Fund will distribute
the AARP Shares received in the exchange to the shareholders of the Acquired
Fund in complete liquidation of the Acquired Fund. The Acquired Fund will be
abolished as a series of the Acquired Trust.
Upon completion of the Reorganization, each shareholder of the Acquired
Fund will own that number of full and fractional AARP Shares having an aggregate
net asset value equal to the aggregate net asset value of such shareholder's
shares held in the Acquired Fund immediately as of the close of business on the
Valuation Date. Such shares will be held in an account with the Acquiring Trust
identical in all material respects to the account currently maintained by the
Acquired Trust for such shareholder, except as noted above. In the interest of
economy and convenience, AARP Shares issued to the Acquired Fund's shareholders
will be in uncertificated form.
Until the Closing, shareholders of the Acquired Fund will continue to be
able to redeem their shares at the net asset value next determined after receipt
by the Acquired Fund's transfer agent of a redemption request in proper form.
Redemption requests received by the transfer agent after the Closing will be
treated as requests received for the redemption of AARP Shares received by the
shareholder in connection with the Reorganization.
-28-
<PAGE>
The obligations of each Trust on behalf of each of the Acquired Fund and
the Acquiring Fund under the Plan are subject to various conditions, as stated
therein. Among other things, the Plan 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. The Acquired Fund and the Acquiring
Fund are in the process of making the necessary filings. To provide against
unforeseen events, the Plan may be terminated or amended at any time prior to
the Closing by action of the Trustees of either Trust, notwithstanding the
approval of the Plan by the shareholders of the Acquired Fund. However, no
amendment may be made that materially adversely affects the interests of the
shareholders of the Acquired Fund without obtaining the approval of the Acquired
Fund's shareholders. The Acquired Fund and the Acquiring Fund may at any time
waive compliance with certain of the covenants and conditions contained in the
Plan. For a complete description of the terms and conditions of the
Reorganization, see the Plan at Exhibit A.
Each Fund will pay its own allocable share of expenses associated with the
Reorganization, except that Scudder Kemper will bear any such expenses in excess
of $313,877 for the Acquiring Fund and $582,380 for the Acquired Fund
(approximately $0.0116 and $0.0171 per share, respectively, based on December
31, 1999 net assets for each Fund).
BOARD APPROVAL OF THE PROPOSED TRANSACTION
Scudder Kemper first proposed the Reorganization to the Independent
Trustees of the Acquired Fund at a meeting held on September 22, 1999. The
Reorganization was presented to the Trustees and considered by them as part of a
broader initiative by Scudder Kemper to restructure many of the mutual funds
advised by it that are currently offered to retail investors, see "Synopsis
Background of the Reorganization". This initiative includes four major
components:
(i) The combination of funds with similar investment objectives and
policies, including in particular the combination of the AARP Funds
with similar Scudder Funds currently offered to the general public;
(ii) The liquidation of certain small funds which have not achieved
market acceptance and which are unlikely to reach an efficient
operating size;
(iii) The implementation of an administration agreement for each fund,
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
(iv) The consolidation of the separate boards currently responsible for
overseeing several groups of no-load funds managed by Scudder Kemper
into a single board.
The Independent Trustees of the Acquired Fund reviewed the potential
implications of these proposals for the Acquired Fund as well as the various
other funds for which they serve as trustees or directors. 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 September 22 meeting, the Independent Trustees met in person or by telephone
on a number of occasions (including committee meetings) to review and discuss
these proposals, both among themselves and with representatives of Scudder
Kemper. On a number of occasions, these meetings included representatives of the
independent trustees or directors of other funds affected by these proposals. In
the course of their review, the Independent Trustees requested and received
substantial additional information and suggested numerous changes to Scudder
Kemper's proposals, many of which were accepted.
-29-
<PAGE>
Following the conclusion of this process, the Independent Trustees of the
Acquired Fund, the independent trustees/directors of other funds involved and
Scudder Kemper reached general agreement on the elements of a restructuring plan
as it affects shareholders of various funds and, where required, agreed to
submit elements of the plan for approval to shareholders of those funds.
On February 7, 2000, the Board of the Acquired Fund, including the
Independent Trustees of the Acquired Fund, approved the terms of the
Reorganization and certain related proposals. At the February 7, 2000 meeting,
the Independent Trustees also agreed to recommend that the Reorganization be
approved by the Acquired Fund's shareholders.
In determining to recommend that the shareholders of the Acquired Fund
approve the Reorganization, the Board considered, among other factors: (a)
the fees and expense ratios of the Funds, including comparisons between the
expenses of the Acquired Fund and the estimated operating expenses of the
Acquiring Fund, and between the estimated operating expenses of the Acquiring
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
Acquired Fund's and the Acquiring Fund's investment objectives, policies,
restrictions and portfolios; (d) the agreement by Scudder Kemper to provide
services to the Acquiring Fund for a fixed fee rate under the Administration
Agreement with an initial three year term; (e) the service features available
to shareholders of the Acquired Fund and the Acquiring Fund; (f) the costs to
be borne by the Acquired Fund, the Acquiring Fund and Scudder Kemper as a
result of the Reorganization; (g) prospects for the Acquiring Fund to attract
additional assets; (h) the tax consequences of the Reorganization on the
Acquired Fund, the Acquiring Fund and their respective shareholders; and (i)
the investment performance of the Acquired Fund and the Acquiring Fund.
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. The Trustees concluded that these economies
were appropriately reflected in the fee and expense arrangements of the
Acquiring Fund, as proposed to be revised upon completion of the Reorganization.
In particular, the Trustees considered the benefits to shareholders resulting
from locking in the rate of the Acquiring Fund's Administrative Fee for an
initial three-year period. Because the Acquiring Fund will pay only its stated
Administrative Fee rate for such services and expenses regardless of changes in
actual costs, the Acquiring Fund's shareholders will be protected from increases
in the Acquiring Fund's expense ratio attributable to increases in such actual
costs. The Board also considered the protection this would afford shareholders
if the Acquiring Fund's net assets declined as a result of market fluctuations
or net redemptions.
The Trustees also considered the impact of the Reorganization on the total
expenses to be borne by shareholders of the Acquired Fund. As noted above under
"Comparison of Expenses," the pro forma expense ratio (reflecting the
Administrative Fee) for the combined Fund following the Reorganization is
substantially lower than the current expense ratio for the Acquired Fund. The
Board also considered that the Reorganization would permit the shareholders of
the Acquired Fund to pursue substantially similar investment goals in a larger
fund.
Finally, the Trustees concluded that the shareholders of the Acquired Fund
would be better served by having their interests represented by a single board
of trustees with responsibility for overseeing substantially all of the funds to
be marketed as a "family of funds" through Scudder's no-load distribution
channels. Accordingly, the Trustees agreed to recommend the election of a new
consolidated board comprised of representatives of each of the various boards
currently serving as Trustees of these funds.
-30-
<PAGE>
Based on all of the foregoing, the Board concluded that the Acquired
Fund's participation in the Reorganization would be in the best interests of the
Acquired Fund and would not dilute the interests of the Acquired Fund's
shareholders. THE BOARD OF TRUSTEES, INCLUDING THE INDEPENDENT TRUSTEES,
RECOMMENDS THAT SHAREHOLDERS OF THE ACQUIRED FUND APPROVE THE REORGANIZATION.
DESCRIPTION OF THE SECURITIES TO BE ISSUED
The Acquiring 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 Acquiring
Trust's shares into separate series. The Acquiring Fund is one of four series of
the Acquiring Trust that the Board has created to date. The Trustees of the
Acquiring Trust are also authorized to further divide the shares of the series
of the Acquiring Trust into classes. The Trustees of the Acquiring Trust have
authorized the division of the Acquiring Fund into two classes, Class S shares
and AARP Shares. It is anticipated that this division will occur prior to the
Closing and that shares of the Acquiring Fund existing at that time will be
redesignated as Class S shares of the Acquiring Fund. If AARP Shares are not
created prior to the Closing, then the Reorganization will not be consummated.
Although shareholders of different classes of a series have an interest in the
same portfolio of assets, shareholders of different classes may bear different
expenses in connection with different methods of distribution.
Each share of each class of the Acquiring Fund represents an interest in
the Acquiring Fund that is equal to and proportionate with each other share of
that class of the Acquiring Fund. Acquiring Fund shareholders are entitled to
one vote per share (and a proportionate fractional vote per each fractional
share) held on matters on which they are entitled to vote. The Acquiring Trust
is not required to hold shareholder meetings annually, although shareholder
meetings may be called for purposes such as electing or removing Trustees,
changing fundamental policies or approving an investment management contract. In
the event that shareholders of the Acquiring Trust wish to communicate with
other shareholders concerning the removal of any Trustee, such shareholders
shall be assisted in communicating with other shareholders for the purpose of
obtaining signatures to request a meeting of shareholders, all in the manner
provided in Section 16(c) of the 1940 Act as if Section 16(c) were applicable.
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 Acquired Fund and the rights of shareholders of the Acquiring Fund.
FEDERAL INCOME TAX CONSEQUENCES
The Reorganization is conditioned upon the receipt by the Acquired Trust,
on behalf of the Acquired Fund, and the Acquiring Trust, on behalf of the
Acquiring 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 the Acquiring
Fund of all or substantially all of the assets of the Acquired Fund in exchange
solely for AARP 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's 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
-31-
<PAGE>
Fund in exchange solely for AARP Shares and the assumption by the Acquiring Fund
of all of the liabilities of the Acquired Fund or upon the distribution of the
AARP Shares to the Acquired Fund shareholders in exchange for their shares 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 AARP 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 the shareholders of the Acquired Fund upon the
receipt of the AARP Shares solely in exchange for their shares of the Acquired
Fund as part of the transaction; (vii) the basis of the AARP Shares received by
the shareholders of the Acquired Fund will be the same as the basis of the
shares of the Acquired Fund exchanged therefor; and (viii) the holding period of
AARP Shares received by the shareholders of the Acquired Fund 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 the shareholders of the
Acquired Fund.
After the Closing, the Acquiring Fund may dispose of certain securities
received by it from the Acquired Fund in connection with the Reorganization,
which may result in transaction costs and capital gains.
While the Acquired Trust 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.
Capitalization
The following table shows on an unaudited basis the capitalization of each
Fund as of October 31, 1999 (i.e., prior to the creation of AARP Shares), and on
a pro forma basis as of that date giving effect to the Reorganization:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
PRO FORMA PRO FORMA
ACQUIRING FUND ACQUIRED FUND ADJUSTMENTS COMBINED(1)
-------------- ------------- ----------- --------
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSETS
- ------------------------------------------------------------------------------------------------------
Class S Shares $538,736,461 (313,877)(3) $538,422,584
- ------------------------------------------------------------------------------------------------------
AARP Shares $685,178,567 (582,380)(4) $684,596,187
- ------------------------------------------------------------------------------------------------------
Total Net Assets $1,223,018,771(2)
- ------------------------------------------------------------------------------------------------------
SHARES OUTSTANDING
- ------------------------------------------------------------------------------------------------------
Class S Shares 26,799,863 26,799,863
- ------------------------------------------------------------------------------------------------------
AARP Shares 34,605,226 (528,761) 34,076,465
- ------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER
SHARE
- ------------------------------------------------------------------------------------------------------
Class S Shares $20.10 $20.09
- ------------------------------------------------------------------------------------------------------
AARP Shares $19.80 $20.09
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Assumes the Reorganization had been consummated on October 31, 1999, and is
for information purposes only. No assurance can be given as to how many shares
of the Acquiring Fund will be received by the shareholders of the Acquired Fund
on the date the Reorganization takes place, and the foregoing
-32-
<PAGE>
should not be relied upon to reflect the number of shares of the Acquiring 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 the Administrative Fee and of a new investment
management fee for the Acquiring Fund.
(3) Represents one-time proxy, legal, accounting and other costs of the
Reorganization to be borne by the Acquiring Fund.
(4) Represents one-time proxy, legal, accounting and other costs of the
Reorganization to be borne by the Acquired Fund.
THE BOARD OF TRUSTEES OF AARP GROWTH TRUST RECOMMENDS THAT THE SHAREHOLDERS OF
AARP BALANCED STOCK AND BOND FUND VOTE IN FAVOR OF THIS PROPOSAL 2.
PROPOSAL 3: RATIFICATION OR REJECTION OF THE SELECTION OF INDEPENDENT
ACCOUNTANTS
The Board of the Acquired Trust, including a majority of the Independent
Trustees, has selected PricewaterhouseCoopers LLP to act as independent
accountants of the Acquired Fund for the Acquired Fund's current fiscal year.
One or more representatives of PricewaterhouseCoopers 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 OF AARP GROWTH TRUST RECOMMENDS THAT THE SHAREHOLDERS OF
AARP BALANCED STOCK AND BOND FUND VOTE IN FAVOR OF THIS PROPOSAL 3.
ADDITIONAL INFORMATION
INFORMATION ABOUT THE FUNDS
Additional information about the Trusts, 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 1-800-225-2470.
The Trusts are subject to the informational requirements of the Securities
Exchange Act of 1934 and the 1940 Act, and in accordance therewith, file
reports, proxy material and other information about each of the Funds with the
Securities and Exchange Commission. 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
Securities and Exchange Commission 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 Statements of Additional Information for
the Acquiring Trust and the Acquired Trust, materials that are incorporated by
reference into the prospectuses and Statements
-33-
<PAGE>
of Additional Information, and other information about the Acquiring Trust, the
Acquired Trust and the Funds.
INTERESTS OF CERTAIN PERSONS
The Investment Manager has a financial interest in the Reorganization,
arising from the fact that its fee under its investment management agreement
with the Acquiring Fund will increase as the amount of the Acquiring Fund's
assets increases. The amount of those assets will increase by virtue of the
Reorganization. See "Synopsis - Fees and Expenses."
GENERAL
Proxy Solicitation. Proxy solicitation costs will be considered
Reorganization expenses and will be allocated accordingly. In addition to
solicitation by mail, certain officers and representatives of the Acquired
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.
This Proxy Statement/Prospectus, the Notice of Special Meeting and the
proxy card(s) are first being mailed to shareholders on or about April 18, 2000
or as soon as practicable thereafter. Any Acquired Fund shareholder giving a
proxy has the power to revoke it by mail (addressed to the Secretary at the
principal executive office of the Acquired Fund, c/o Scudder Kemper Investments,
Inc., at the address for the Acquired 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 Acquired 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 one-third of the shares of the Acquired Trust (for a trust-wide vote)
or the Acquired 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 Acquired 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 Acquired 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.
Approval of Proposal 1 requires the affirmative vote of a plurality of the
shares of the Acquired Trust voting at the Meeting. Approval of Proposal 2
requires the affirmative vote of the holders of a majority of the Acquired
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 Acquired Fund
voting at the Meeting.
-34-
<PAGE>
Abstentions and broker non-votes will not be counted in favor of, but will have
no other effect on, Proposal 1, and will have the effect of a "no" vote on
Proposals 2 and 3.
Holders of record of the shares of the Acquired Fund at the close of
business on April 17, 2000 (the "Record Date") will be entitled to one vote per
share on all business of the Meeting. As of [date], there were ____________
shares of the Acquired Fund outstanding.
As of [date], the officers and Trustees of the Acquiring Trust as a group
owned beneficially [less than 1%][__%] of the outstanding shares of the
Acquiring Fund. [Appendix 2 hereto sets forth the beneficial owners of at least
5% of each Fund's shares.] To the best of each Trust's knowledge, as of
_______________, no person owned beneficially more than 5% of either Fund's
outstanding shares[, except as stated on Appendix 2.]
Shareholder Communications Corporation ("SCC") has been engaged to assist
in the solicitation of proxies, at an estimated cost of $79,920. As the Meeting
date approaches, certain shareholders of the Acquired 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
Acquired Fund. Proxies that are obtained telephonically will be recorded in
accordance with the procedures set forth 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, address, social security or
employer identification number, title (if the shareholder is authorized to act
on behalf of an entity, such as a corporation), and the number of shares owned,
and to confirm that the shareholder has received the proxy materials in the
mail. If the information solicited agrees with the information provided to SCC,
then the SCC representative has the responsibility to explain the process, read
the Proposals on the proxy card, 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. 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.
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 originally sent with the proxy statement or attend in person.
Should shareholders require additional information regarding the proxy or
replacement proxy cards, they may contact SCC toll-free at 1-800-605-1203. Any
proxy given by a shareholder is revocable until voted at the Meeting.
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.
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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 Trust, c/o Scudder Kemper Investments, Inc., Two International
Place, Boston, Massachusetts 02110, 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. No Trustee is aware of any
matters that will be presented for action at the Meeting other than the matters
set forth herein. 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 the shares as to any such other matters in accordance with
their best judgment in the interest of the Trust and/or the Acquired 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,
[signature]
Kathryn L. Quirk
Secretary
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INDEX OF EXHIBITS
EXHIBIT A: AGREEMENT AND PLAN OF REORGANIZATION
EXHIBIT B: MANAGEMENT'S DISCUSSION OF THE ACQUIRING FUND'S PERFORMANCE FOR
ITS MOST RECENT FISCAL YEAR.
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EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this ____ day of ________, 2000, by and between Scudder Portfolio Trust (the
"Acquiring Trust"), a Massachusetts business trust, on behalf of Scudder
Balanced Fund (the "Acquiring Fund"), a separate series of the Acquiring Trust,
and AARP Growth Trust (the "Acquired Trust" and, together with the Acquiring
Trust, each a "Trust" and collectively the "Trusts"), a Massachusetts business
trust, on behalf of AARP Balanced Stock and Bond Fund (the "Acquired Fund" and,
together with the Acquiring Fund, each a "Fund" and collectively the "Funds"), a
separate series of the Acquired Trust. The principal place of business of each
Trust is Two International Place, Boston, Massachusetts 02110-4103
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
voting shares of beneficial interest ($.01 par value per share) of the AARP
Shares class 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 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 Acquiring Fund Shares determined by dividing the value of the
Acquired Fund's net assets, 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,
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. Such transactions
shall take place at the closing provided for in section 3.1 (the "Closing").
1.2. The assets of the Acquired Fund to be acquired by the Acquiring Fund
(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 Acquired Fund immediately before
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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 3.1.
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
(the "Acquired Fund Shareholders"), determined as of the Valuation Time (as
defined in section 2.1), on a pro rata basis, the Acquiring Fund Shares received
by the Acquired Fund pursuant to section 1.1 and will completely liquidate. Such
distribution and liquidation will be accomplished by the transfer of the
Acquiring Fund Shares then credited to the account of the Acquired Fund on the
books of the Acquiring Fund to open accounts on the share records of the
Acquiring Fund in the names of the Acquired Fund Shareholders. The aggregate net
asset value of Acquiring Fund Shares to be so credited to Acquired Fund
Shareholders shall be equal to the aggregate net asset value of the Acquired
Fund shares owned by such shareholders as of the Valuation Time. All issued and
outstanding shares of the Acquired Fund will simultaneously be cancelled on the
books of the Acquired Fund, although share certificates representing interests
in shares of the Acquired Fund will represent a number of 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.
1.8. All books and records of the Acquired Fund, including all books and
records required to be maintained under the 1940 Act and the rules and
regulations thereunder, shall be available to the Acquiring Fund from and after
the Closing Date and shall be turned over to the Acquiring Fund 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 (such time and
date being hereinafter called the "Valuation Time") after the declaration and
payment of any dividends and/or other distributions on that date, using the
valuation procedures set forth in the Acquiring Fund's Declaration of Trust, as
amended, and then-current prospectus or statement of additional information.
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2.2. The net asset value of an Acquiring Fund share shall be the net asset
value per share computed as of the Valuation Time using the valuation procedures
referred to in section 2.1.
2.3. The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Assets shall be determined by
dividing the value of the Assets with respect to shares of the Acquired Fund
determined in accordance with section 2.1 by the net asset value of an Acquiring
Fund Share 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 August 28, 2000, 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 Price & Rhoads, 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 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. Scudder Service Corp. (the "Transfer Agent"), on behalf of the
Acquired Fund, shall deliver at the Closing a certificate of an authorized
officer stating that its records contain the names and addresses of the Acquired
Fund Shareholders and the number and percentage ownership (to three decimal
places) of outstanding 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,
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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 Acquiring Fund Shares or the Acquired Fund shares 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.
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 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;
(b) The Acquired Trust is registered with the Commission as an open-end
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"), and such registration is in full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquired Fund of
the transactions contemplated herein, except such as have been obtained under
the Securities Act of 1933, as amended (the "1933 Act"), the Securities Exchange
Act of 1934, as amended (the "1934 Act") and the 1940 Act and such as may be
required by state securities laws;
(d) Other than with respect to contracts entered into in connection with
the portfolio management of the Acquired Fund which shall terminate on or prior
to the Closing Date, the Acquired Trust is not, and the execution, delivery and
performance of this Agreement by the Acquired Trust will not result, in
violation of Massachusetts law or of the Acquired Trust's Declaration of Trust,
as amended, or By-Laws, or of any material agreement, indenture, instrument,
contract, lease or other undertaking known to counsel to which the Acquired Fund
is a party or by which it is bound, and the execution, delivery and performance
of this Agreement by the Acquired Fund will not result in the acceleration of
any obligation, or the imposition of any penalty, under any agreement,
indenture, instrument, contract, lease, judgment or decree to which the Acquired
Fund is a party or by which it is bound;
(e) No material litigation or administrative proceeding or investigation
of or before any court or governmental body is presently pending or to its
knowledge threatened against the Acquired Fund or any properties or assets held
by it. The Acquired Fund knows of no facts which might form the basis for the
institution of such proceedings which would materially and adversely affect its
business and is not a party to or subject to the provisions of any order, decree
or judgment of any court or governmental body which materially and adversely
affects its business or its ability to consummate the transactions herein
contemplated;
(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
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September 30, 1999, 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 Acquiring Fund)
present fairly, in all material respects, the financial position of the Acquired
Fund as of such date in accordance with GAAP, and there are no known contingent
liabilities of the Acquired Fund required to be reflected on a balance sheet
(including the notes thereto) in accordance with GAAP as of such date not
disclosed therein;
(g) Since September 30, 1999, 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 (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 the Transfer Agent, 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;
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(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, 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 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, 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 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;
(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;
(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, in
violation of Massachusetts law or of the Acquiring Trust's Declaration of Trust,
as amended, or By-Laws, or of any material agreement, indenture, instrument,
contract, lease or other undertaking known to counsel to which the Acquiring
Fund is a party
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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;
(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 December 31, 1999 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 December 31, 1999 there has not been any material adverse
change in the Acquiring Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or any
incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred except as otherwise disclosed to
and accepted in writing by the Acquired Fund. For purposes of this subsection
(g), a decline in net asset value per share of the Acquiring Fund due to
declines in market values of securities in the Acquiring Fund's portfolio, the
discharge of Acquiring Fund liabilities, or the redemption of Acquiring Fund
shares by Acquiring Fund shareholders shall not constitute a material adverse
change;
(h) At the date hereof and at the Closing Date, all federal and other tax
returns and reports of the Acquiring Fund required by law to have been filed by
such dates (including any extensions) shall have been filed and are or will be
correct in all material respects, and all federal and other taxes shown as due
or required to be shown as due on said returns and reports shall have been paid
or provision shall have been made for the payment thereof, and, to the best of
the Acquiring Fund's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns;
(i) For each taxable year of its operation, the Acquiring Fund has met the
requirements of Subchapter M of the Code for qualification as a regulated
investment company and has elected to be treated as such, has been eligible to
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 (recognizing
that, under Massachusetts law, Acquiring Fund Shareholders, under certain
circumstances, could be held personally liable for the obligations of the
Acquired Fund). The Acquiring Fund does not have outstanding any options,
warrants
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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
Acquired 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 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 material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not materially misleading;
(p) The Proxy Statement to be included in the Registration Statement, only
insofar as it relates to the Acquiring Fund, will, on the effective date of the
Registration Statement and on the Closing Date, not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not materially misleading;
provided, however, that the representations and warranties in this section shall
not apply to statements in or omissions from the Proxy Statement and the
Registration Statement made in reliance upon and in conformity with information
that was furnished or should have been furnished by the Acquired Fund for use
therein; and
(q) The Acquiring Fund agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and such of
the state securities laws as may be necessary in order to continue its
operations after the Closing Date.
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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.
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 July 11, 2000.
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.
5.5. The Acquired Fund covenants that it will assist the Acquiring Fund in
obtaining such information as the Acquiring Fund reasonably requests concerning
the beneficial ownership of the Acquired Fund shares and will provide the
Acquiring Fund with a list of affiliates of the Acquired Fund.
5.6. Subject to the provisions of this Agreement, the Acquiring Fund and
the Acquired Fund will each take, or cause to be taken, all actions, and do or
cause to be done, all things reasonably necessary, proper, and/or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.7. Each Fund covenants to prepare 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
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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 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.
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 Acquired Trust, with
respect to the Acquired Fund, contained in this Agreement shall be true and
correct in all material respects as of the date hereof and, except as they may
be affected by the transactions contemplated by this Agreement, as of the
Closing Date, with the same force and effect as if made on and as of the Closing
Date; and there shall be (i) no pending or threatened litigation brought by any
person (other than 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.
6.2. The Acquiring Fund shall have delivered to the Acquired Fund on the
Closing Date a certificate executed in its name by its President or a Vice
President, in a form reasonably satisfactory to the Acquired Fund and dated as
of the Closing Date, to the effect that the representations and warranties of
the Acquiring Trust, on behalf 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 Price & Rhoads, in a form reasonably satisfactory to the Acquired
Fund, and dated as of the Closing Date, to the effect that:
(a) The Acquiring 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,
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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 such counsel, all regulatory consents, authorizations, approvals or
filings required to be obtained or made by the Acquiring Fund under the Federal
laws of the United States or the laws of the 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; and
6.4. The Acquiring Fund shall have performed all of the covenants and
complied with all of the provisions required by this Agreement to be performed
or complied with by the Acquiring Fund on or before the Closing Date.
6.5 The Acquiring Fund shall have (i) adopted a new investment management
agreement and (ii) entered into an administrative services agreement with
Scudder Kemper Investments, Inc. ("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 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.
7.2. The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets and liabilities as of the Closing Date,
certified by the Treasurer of the Acquired Fund;
7.3. The Acquired Fund shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by its President or a Vice
President, in a form reasonably satisfactory to the Acquiring Fund and dated as
of the Closing Date, to the effect that the representations and warranties of
the Acquired 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;
7.4. The Acquiring Fund shall have received on the Closing Date an opinion
of Dechert Price & Rhoads, in a form reasonably satisfactory to the Acquiring
Fund, and dated as of the Closing Date, to the effect that:
(a) The Acquired 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
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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, 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;
and
7.5. The Acquired Fund shall have performed all of the covenants and
complied with all of the provisions required by this Agreement to be performed
or complied with by the Acquired Fund on or before the Closing Date.
7.6 The Acquiring Fund shall have (i) adopted a new investment management
agreement and (ii) entered into an administrative services agreement with
Scudder Kemper.
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;
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; and
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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's 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 the shareholders of the Acquired Fund 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 the shareholders of the Acquired Fund 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 the shareholders of the
Acquired Fund 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 the shareholders of the Acquired Fund. The delivery of such opinion is
conditioned upon receipt by Willkie Farr & Gallagher of representations it shall
request of each of the Acquiring Fund 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 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.
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10. FEES AND EXPENSES
10.1. Each of the Acquiring Fund 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. Each Fund will pay its own allocable share of expenses associated
with the Reorganization, except that Scudder Kemper will bear any such expenses
in excess of $313,877 for the Acquiring Fund and $582,380 for the Acquired Fund
(approximately $0.0116 and $0.0171 per share, respectively, based on December
31, 1999 net assets for each Fund). 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. The 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
August 28, 2000, unless such date is extended by mutual agreement of the
parties, or (iii) by either party if the other party shall have materially
breached its obligations under this Agreement or made a material and intentional
misrepresentation herein or in connection herewith. In the event of any such
termination, this Agreement shall become void and there shall be no liability
hereunder on the part of any party or their respective 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 5.2 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.
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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, Two International Place, Boston, MA 02110-4103, with a copy to
Dechert Price & Rhoads, Ten Post Office Square South, Boston, MA 02109-4603,
Attention: Sheldon A. Jones, Esq., or to the Acquiring Fund, Two International
Place, Boston, MA 02110-4103, with a copy to Dechert Price & Rhoads, Ten Post
Office Square South, Boston, MA 02109-4603, Attention: Sheldon A. Jones, Esq.,
or to any other address that the Acquired Fund or the Acquiring Fund shall have
last designated by notice to the other party.
15. HEADINGS; COUNTERPARTS; ASSIGNMENT; LIMITATION OF LIABILITY
15.1. The Article and section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15.2. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
15.3. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and the shareholders of the
Acquiring Fund and the Acquired Fund and their respective successors and
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 the 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 the 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 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 theTrusts 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.
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15.5. This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Massachusetts, without regard to its
principles of conflicts of laws.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by an authorized officer and its seal to be affixed thereto and
attested by its Secretary or Assistant Secretary.
Attest: AARP GROWTH TRUST
on behalf of AARP Balanced Stock
and Bond Fund
- -------------------------
Secretary
------------------------------
By:
--------------------------
Its:
--------------------------
Attest: SCUDDER PORTFOLIO TRUST
on behalf of Scudder Balanced Fund
- -------------------------
Secretary
------------------------------
By:
---------------------------
Its:
--------------------------
AGREED TO AND ACKNOWLEDGED
ONLY WITH RESPECT TO
PARAGRAPH 10.2 HERETO
SCUDDER KEMPER INVESTMENTS, INC.
- ------------------------------------
By:
---------------------------------
Its:
--------------------------------
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EXHIBIT B
Scudder Balanced Fund
Annual Report
December 31, 1999
- --------------------------------------------------------------------------------
Portfolio Management Discussion
- --------------------------------------------------------------------------------
December 31, 1999
In the following interview, portfolio manager Gary Langbaum discusses the
recent market environment and the strategy of Scudder Balanced Fund in the
twelve-month period ended December 31, 1999.
Q: The stock market produced another stellar year in 1999, but bonds lagged.
What were some of the key factors driving market performance?
A: The potent combination of favorable liquidity factors, stronger than
expected economic growth, and a powerful rise in corporate earnings helped
propel the U.S. stock market to strong gains in 1999, the fifth consecutive
year in which the S&P 500 has delivered a total return of over 20%. The
Nasdaq average rose 85.6% behind the incredible gains in technology stocks,
which once again benefited from investors' emphasis on earnings growth over
valuation. Bonds, on the other hand, posted poor performance due to
persistent fears of inflation and three interest rate hikes by the U.S.
Federal Reserve. The yield on the benchmark 30-year Treasury issue rose from
5.10% to 6.48% in 1999 (as its price fell), its second worst performance
since 1973. However, certain sectors of the bond market -- such as
mortgage-backed securities and high-yield corporates -outperformed government
issues.
Q: How did the fund perform in this environment?
A: For the twelve months ended December 31, 1999, the fund returned 13.46%,
beating the 11.99% return of its unmanaged benchmark, which is a combination
of the S&P 500 (60%) and the Lehman Brothers Aggregate Bond Index (40%). The
equity portion of the portfolio produced a return of 25.46%, which beat the
21.04% return of the S&P 500. The fund's 13.46% return stacked up well
against the 8.72% average return of funds in the balanced category, as
calculated by Lipper Analytical Services. The fund has performed well against
its peers over the long term, as well. Its total return through December 31
placed it in the top 23%, 10%, and 19% of comparable funds over the one-,
three-, and five-year periods, respectively.
<PAGE>
Q: What was your strategy with respect to the equity portion of the portfolio?
A: Fund strategy has been shaped by our strongly bullish view on the stock
market. We held a larger than normal weighting in equities, and were
well-positioned to capitalize on the rally in technology stocks. Performance
has been boosted by our holdings in a number of the large cap tech stocks
that led the market in 1999, such as Microsoft, Oracle, Applied Materials,
Motorola, America Online, and Sun Microsystems. The fund's equity position
has also been buoyed by its holdings in broadcasting, retail, and
biotechnology, but its positions in pharmaceuticals and financials lagged.
We employ a strategy known as "GARP," which stands for "growth at a
reasonable price." Essentially, we are using a value-oriented approach to
select what we see as the strongest candidates from a growth universe.
Utilizing a quantitative discipline, we evaluate current and potential
holdings based on their fundamental strengths, sustainability of earnings,
and valuations. In the process, we screen out stocks whose valuations have
climbed to what we see as excessive levels with respect to their growth
potential, a condition that usually increases their vulnerability to earnings
disappointments. In our view, good companies with superior long-term growth
characteristics are worth more than less reliable companies that are often
"cheap" for a reason. However, we are very conscious of valuation, and have
been reducing our positions in the types of high-octane stocks that drove
market performance in 1999.
Q: What are some individual companies that performed well for the fund?
A: The retail sector provided mixed returns in 1999, but we benefited from
our positions in two of the best performers in the group: Wal-Mart and Home
Depot. The top players in their respective categories, both companies
continue to produce outstanding earnings growth and same-store sales figures.
While higher interest rates are
<PAGE>
usually a negative for retailers, we believe that Wal-Mart and Home Depot
will remain two of the best long-term retail stories even if growth slows
from its current pace. Both companies sell at a premium multiple in relation
to their peer group, but we believe they are worth it given their outstanding
track records.
Our selection of some of the top-performing stocks in the media sector also
provided a boost to fund performance. An example of a company that has done
well for us is Clear Channel Communications, which owns and operates radio
stations across the United States. The company has been a direct beneficiary
of the "dot.com" fever, since many of the Internet companies that have gone
public over the past year have put the cash to work by launching aggressive
marketing campaigns. The ensuing increase in demand for advertising time -- a
product for which there is a relatively stable supply -- has been a windfall
for radio companies like Clear Channel. Even after the company's outstanding
performance in 1999, we remain optimistic on its prospects due to its strong
management, outstanding execution, and history of steady earnings growth.
Q: Where have you found opportunities on the fixed income side?
A: Even though bonds produced poor performance over the course of the year,
we gained an incremental advantage by being well-positioned within the
sector. At the end of the second quarter, we increased our weighting in
corporate bonds when yields reached attractive levels in relation to
Treasuries. As Y2K fears dissipated in the second half of the year,
corporates held up well even as the interest rate environment deteriorated.
The fund gained particularly strong performance from its fixed income
holdings in the energy and telecommunications sectors.
As the year drew to a close, we cut back on our holdings in corporates and
added to our weighting in Treasuries. We made this move in order to increase
our flexibility with respect to the fund's duration. While the duration of
the portfolio (or interest rate sensitivity) is neutral at the present time,
we are preparing for a shift in the interest
<PAGE>
rate outlook later in 2000 when the threat of further rate hikes by the
Federal Reserve begin to diminish. Since it is much easier to make
adjustments to the portfolio when it has a larger position in Treasuries --
which are more liquid than corporates -- we feel this move will make it
easier for us to take advantage of the shifts in the interest rate
environment that we see occurring in the first half of 2000.
Q: What is your outlook for the year ahead?
A: We believe that the key variable could be November's elections. In recent
years, the markets have performed best in periods when there is a spilt
government; in other words, when different parties are in control of Congress
and the White House. If we were to see a return of one-party government in
favor of either the Democrats or the Republicans, the change in the political
environment may have a negative impact on individual sectors of the market.
For example, the Democrats may attempt to pass a comprehensive health care
bill, which in turn would be likely to depress pharmaceutical stocks. We
believe that as the interest rate picture becomes clearer toward mid-year,
these political issues will move to the forefront of the markets' attention.
Nevertheless, we remain bullish on the outlook for the stock market. Although
it is likely that we will see an even higher level of volatility than last
year, we believe that the fundamental underpinnings of the stock market --
increasing productivity, strong economic growth, and rising corporate
earnings -- remain in place. On the fixed income side, we feel that bonds are
poised for a rebound following their poor performance in 1999. Once the end
of the Fed's current tightening cycle is in sight, the pressure that has been
on the bond market for the past year will be eased, making investors more
inclined to take advantage of the high real yields that currently exist.
Despite our expectation for a more challenging investment environment in the
coming months, we are confident that the combination of solid growth stocks
and high-quality bonds will position the portfolio for long-term
outperformance.
<PAGE>
Performance Update
- --------------------------------------------------------------------------------
December 31, 1999
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
- --------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
<TABLE>
<CAPTION>
Scudder Balanced Fund S&P 500 Index* LBAB Index*
<S> <C> <C> <C> <C> <C>
1/31/93** 10000 1/31/93** 10000 1/31/93** 10000
93 10412 93 10915 93 10768
94 10164 94 11059 94 10454
95 12855 95 15214 95 12386
96 14339 96 18707 96 12833
97 17605 97 24951 97 14075
98 21319 98 32083 98 15295
99 24188 99 38834 99 15167
Yearly periods ended December 31
</TABLE>
- --------------------------------------------------------------------------------
Fund Index Comparison
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Total Return
Growth of Average
Period ended 12/31/1999 $10,000 Cumulative Annual
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Scudder Balanced Fund
- --------------------------------------------------------------------------------
1 year $ 11,346 13.46% 13.46%
- --------------------------------------------------------------------------------
5 year $ 23,799 137.99% 18.94%
- --------------------------------------------------------------------------------
Life of Fund** $ 24,188 141.88% 13.47%
- --------------------------------------------------------------------------------
S&P 500 Index (60%) and LBAB Index (40%)*
- --------------------------------------------------------------------------------
1 year $ 11,199 11.99% 11.99%
- --------------------------------------------------------------------------------
5 year $ 24,971 149.71% 20.07%
- --------------------------------------------------------------------------------
Life of Fund** $ 27,029 170.29% 15.46%
- --------------------------------------------------------------------------------
</TABLE>
* The Standard & Poor's 500 Index is a capitalization-weighted index of 500
stocks. The index is designed to measure performance of the broad domestic
economy through changes in the aggregate market value of 500 stocks
representing all major industries. The Lehman Brothers Aggregate Bond (LBAB)
Index is an unmanaged market value-weighted measure of treasury issues,
agency issues, corporate bond issues and mortgage securities. Index returns
assume reinvestment of dividends and, unlike Fund returns, do not reflect
any fees or expenses.
** The Fund commenced operation on January 4, 1993. Index comparisons begin
January 31, 1993.
<PAGE>
<PAGE>
APPENDIX 1
FUND SHARES OWNED BY NOMINEES AND TRUSTEES
Many of the Nominees and Trustees own shares of the series of the
Acquired Trust and of other funds in the Scudder Family of Funds and AARP
Funds, allocating their investments among such funds based on their individual
investment needs. The following table sets forth, for each Nominee and Trustee,
the number of shares owned in each series of the Acquired Trust as of January
31, 2000. The information as to beneficial ownership is based on statements
furnished to the Acquired Trust by each Nominee and Trustee. Unless otherwise
noted, beneficial ownership is based on sole voting and investment power. [Each
Nominee's and Trustee's individual shareholdings of any series of the Acquired
Trust constitute less than 1% of the shares outstanding of such fund.] [As a
group, the Trustees and officers own less than 1% of the shares of any series
of the Acquired Trust.]
<TABLE>
<CAPTION>
- ----------------------------- ------------- -------------- ------------- ------------- -------------- ------------- ---------------
AARP AARP AARP
BALANCED CAPITAL GLOBAL AARP AARP AARP SMALL AARP U.S.
STOCK AND GROWTH GROWTH GROWTH AND INTERNATIONAL COMPANY STOCK
BOND FUND FUND FUND INCOME FUND STOCK FUND STOCK FUND INDEX FUND
- ----------------------------- ------------- -------------- ------------- ------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Carole Lewis Anderson(1)
- ----------------------------- ------------- -------------- ------------- ------------- -------------- ------------- ---------------
Adelaide Attard(2)
- ----------------------------- ------------- -------------- ------------- ------------- -------------- ------------- ---------------
Henry P. Becton, Jr.(3)
- ----------------------------- ------------- -------------- ------------- ------------- -------------- ------------- ---------------
Robert N. Butler, M.D.(4)
- ----------------------------- ------------- -------------- ------------- ------------- -------------- ------------- ---------------
Linda C. Coughlin(5)
- ----------------------------- ------------- -------------- ------------- ------------- -------------- ------------- ---------------
Horace B. Deets(6)
- ----------------------------- ------------- -------------- ------------- ------------- -------------- ------------- ---------------
Dawn-Marie Driscoll(7)
- ----------------------------- ------------- -------------- ------------- ------------- -------------- ------------- ---------------
Edgar R. Fiedler(8)
- ----------------------------- ------------- -------------- ------------- ------------- -------------- ------------- ---------------
Lt. Gen. Eugene P.
Forrester(9)
- ----------------------------- ------------- -------------- ------------- ------------- -------------- ------------- ---------------
Keith R. Fox(10)
- ----------------------------- ------------- -------------- ------------- ------------- -------------- ------------- ---------------
George L. Maddox, Jr.(11)
- ----------------------------- ------------- -------------- ------------- ------------- -------------- ------------- ---------------
Robert J. Myers(12)
- ----------------------------- ------------- -------------- ------------- ------------- -------------- ------------- ---------------
James H. Schulz(13)
- ----------------------------- ------------- -------------- ------------- ------------- -------------- ------------- ---------------
Gordon Shillinglaw(14)
- ----------------------------- ------------- -------------- ------------- ------------- -------------- ------------- ---------------
Joan Edelman Spero(15)
- ----------------------------- ------------- -------------- ------------- ------------- -------------- ------------- ---------------
Jean Gleason Stromberg(16)
- ----------------------------- ------------- -------------- ------------- ------------- -------------- ------------- ---------------
Jean C. Tempel(17)
- ----------------------------- ------------- -------------- ------------- ------------- -------------- ------------- ---------------
Steven Zaleznick(18)
- ----------------------------- ------------- -------------- ------------- ------------- -------------- ------------- ---------------
[All Trustees and Officers
as a Group]
- ----------------------------- ------------- -------------- ------------- ------------- -------------- ------------- ---------------
</TABLE>
(1) As of January 31, 2000, Ms. Anderson's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
(2) As of January 31, 2000, Ms. Attard's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
(3) As of January 31, 2000, Mr. Becton's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
(4) As of January 31, 2000, Dr. Butler's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
(5) As of January 31, 2000, Ms. Coughlin's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
<PAGE>
(6) As of January 31, 2000, Mr. Deets's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
(7) As of January 31, 2000, Ms. Driscoll's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
(8) As of January 31, 2000, Mr. Fiedler's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
(9) As of January 31, 2000, Lt. Gen. Forrester's total aggregate holdings in
each series of the Acquired Trust listed above and all other funds in the
Scudder Family of Funds and AARP Funds ranged between $___________ and
$___________.
(10) As of January 31, 2000, Mr. Fox's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
(11) As of January 31, 2000, Mr. Maddox's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
(12) As of January 31, 2000, Mr. Myers's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
(13) As of January 31, 2000, Mr. Schulz's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
(14) As of January 31, 2000, Dr. Shillinglaw's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
(15) As of January 31, 2000, Ms. Spero's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
(16) As of January 31, 2000, Ms. Stromberg's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
(17) As of January 31, 2000, Ms. Tempel's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
(18) As of January 31, 2000, Mr. Zaleznick's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
2
<PAGE>
APPENDIX 2
Beneficial Ownership of Fund Shares
-55-
<PAGE>
This proxy statement/prospectus is accompanied by the Acquiring Fund's
prospectus dated April 12, 2000, which was previously filed with the
Commission via EDGAR on February 11, 2000 (File N. 2-13627) and is
incorporated by reference herein.
<PAGE>
PART B
SCUDDER PORTFOLIO TRUST
- ------------------------------------------------------------------------------
Statement of Additional Information
[date]
- ------------------------------------------------------------------------------
<TABLE>
<S> <C>
Acquisition of the Assets of By and in Exchange for Shares of AARP Balanced
Stock and Bond Fund (the Scudder Balanced Fund (the "Acquiring Fund"), a
"Acquired Fund"), a series of AARP Growth Trust series of Scudder Portfolio
Trust (the Two International Place "Acquiring Trust") Boston, MA 02110-4103 Two
International Place Boston, MA 02110-4103.
</TABLE>
This Statement of Additional Information is available to the shareholders of the
Acquired Fund in connection with a proposed transaction whereby the Acquiring
Fund will acquire all or substantially all of the assets and all of the
liabilities of the Acquired Fund in exchange for shares of the Acquiring 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
Prospectus/Proxy Statement of the Acquiring Trust relating to the
Reorganization. This Statement of Additional Information consists of this cover
page and the following documents:
1. The Acquiring Fund's statement of additional information dated April 12,
2000, which was previously filed with the Securities and Exchange Commission
(the "Commission") via EDGAR on February 11, 2000 (File No. 2-13627) and is
incorporated by reference herein.
2. The Acquiring Fund's annual report to shareholders for the fiscal year ended
December 31, 1999, which was previously filed with the Commission via EDGAR on
February 24, 2000 (File No. 811-42) and is incorporated by reference herein.
3. The Acquired Fund's prospectus dated February 1, 2000, which was previously
filed with the Commission via EDGAR on February 1, 2000 (File No. 2-91578) and
is incorporated by reference herein.
4. The Acquired Fund's statement of additional information dated February 1,
2000, which was previously filed with the Commission via EDGAR on February 1,
2000 (File No. 2-91578) and is incorporated by reference herein.
5. The Acquired Fund's annual report to shareholders for the fiscal year ended
September 30, 1999, which was previously filed with the Commission via EDGAR on
December 3, 1999 (File No. 811-4048) and is incorporated by reference herein.
6. The financial statements and schedules of the Acquiring Fund and the Acquired
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 Prospectus/Proxy
Statement dated ____________________ relating to the Reorganization may be
obtained by writing the Acquired Fund at
-56-
<PAGE>
Two International Place, Boston, MA 02110-4103 or by calling Scudder Investor
Services, Inc. at 1-800-225-2470. This Statement of Additional Information
should be read in conjunction with the Prospectus/Proxy Statement.
-57-
<PAGE>
PRO FORMA
PORTFOLIO OF INVESTMENTS
AS OF OCTOBER 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SCUDDER AARP Balanced Pro Forma SCUDDER AARP Balanced
Balanced Stock & Bond Combined Balanced Stock & Bond Pro Forma
Par/Share Par/Share Par/Share Market Market Value Combined
Amount Amount Amount Value($) ($) Market Value($)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REPURCHASE AGREEMENTS 0.1%
- -------------------------------------
Repurchase Agreement with State Street 1,953,000 1,953,000 1,953,000 1,953,000
Bank and Trust Company, 5.200%,
11/1/99
================================================
REPURCHASE AGREEMENTS 1,953,000 1,953,000
================================================
REPURCHASE AGREEMENTS (COST OF $0
$1,953,000 AND $1,953,000
RESPECTIVELY)
U. S. GOVERNMENT & AGENCIES 13.0%
- --------------------------------------
Federal Home Loan Mortgage Corp., 3,000,000 3,000,000 2,940,000 2,940,000
5.750%, 07/15/2003
U.S. Treasury Bond Inflationary Index 1,750,000 5,750,000 7,500,000 1,656,755 5,443,625 7,100,380
3.625%, 04/15/2028
U.S. Treasury Bond, 6.250%, 08/15/2023 3,000,000 3,750,000 6,750,000 2,935,770 3,669,713 6,605,483
U.S. Treasury Bond, 9.375%, 02/15/2006 16,000,000 16,000,000 18,615,040 18,615,040
U.S. Treasury Bond, 7.250%, 05/15/2016 20,000,000 20,000,000 21,553,200 21,553,200
U.S. Treasury Note, 3.875%, 01/15/2009 2,000,000 4,000,000 6,000,000 1,999,140 3,998,280 5,997,420
U.S. Treasury Note, 5.500%, 05/31/2003 15,250,000 15,250,000 15,025,978 15,025,978
U.S. Treasury Note, 5.625%, 09/30/2001 9,800,000 9,800,000 9,766,288 9,766,288
U.S. Treasury Note, 5.625%, 12/31/2002 8,500,000 8,500,000 8,430,895 8,430,895
U.S. Treasury Note, 6.000%, 08/15/2004 8,700,000 1,700,000 10,400,000 8,720,358 1,703,978 10,424,336
U.S. Treasury Note, 6.000%, 08/15/2009 28,000,000 28,000,000 27,960,520 27,960,520
U.S. Treasury Note, 7.500%, 02/15/2005 16,000,000 16,000,000 17,002,560 17,002,560
U.S. Treasury Note, 6.500%, 10/15/2006 4,000,000 4,000,000 4,070,640 4,070,640
================================================
U. S. GOVERNENT & AGENCIES 105,287,016 50,205,724 155,492,740
================================================
U. S. GOVERNENT & AGENCIES
(COST OF $106,334,544 $52,614,455
AND $158,948,999 RESPECTIVELY)
GOV'T NATIONAL MORTGAGE ASSOCIATION 1.2%
- ---------------------------------------
Government National Mortgage 5,188 5,188 5,509 5,509
Association Pass-thru, 9.500%,
8/15/19
Government National Mortgage 6,349,932 7,375,839 13,725,771 6,229,878 7,236,390 13,466,268
Association Pass-thru 7.00% with
various maturities to 5/01/2029
================================================
GOV'T NATIONAL MORTGAGE ASSOCIATION 6,235,387 7,236,390 13,471,777
================================================
GOV'T NATIONAL MORTGAGE ASSOCIATION
(COST OF $6,439,895 $7,473,799
AND $13,913,694 RESPECTIVELY)
U.S.GOVERNMENT BACKED MORTGAGES 3.0%
- ---------------------------------------
Federal Home Loan Mortgage Corp. 627,165 627,165 636,905 636,905
8.00% with various maturities to
4/1/08
Federal National Mortgage Association 6,038,302 24,399,104 30,437,406 5,804,338 23,456,645 29,260,983
6.50% with various maturities to
3/1/28
Federal National Mortgage Association 1,315,442 3,888,472 5,203,914 1,344,521 3,973,513 5,318,034
8.00% with various maturities to
2/1/13
================================================
U.S.GOVERNMENT BACKED MORTGAGES 7,785,764 27,430,158 35,215,922
================================================
U.S.GOVERNMENT BACKED MORTGAGES
(COST OF $7,984,512 $28,036,347
AND $36,020,859 RESPECTIVELY)
COLLATERALIZED MORTGAGE OBLIGATIONS 1.2%
- ---------------------------------------
Residential Accredit Loans, Inc., 3,930,893 3,930,893 7,861,786 3,816,037 3,816,037 7,632,074
Series 1997-QS12, A7, 7.250%, 11/25/2027
Residential Asset Securitization Trust 1,541,000 1,541,000 1,541,000 1,541,000
Series 1997-A6, 7.250%, 09/25/2012
Residential Funding Mortgage 2,453,275 2,453,275 2,440,242 2,440,242
Securities Series 1993-A2, 6.850%,
9/25/23
Ryland Mortgage Securities Corp., 2,195,207 2,195,207 2,220,589 2,220,589
8.000%, 08/25/2025
================================================
COLLATERALIZED MORTGAGE OBLIGATIONS 5,357,037 8,476,868 13,833,905
================================================
COLLATERALIZED MORTGAGE OBLIGATIONS
(COST OF $5,561,584 $8,697,114
AND $14,258,698 RESPECTIVELY)
FOREIGN BONDS - U.S. $ DENOMINATED 2.0%
- ---------------------------------------
<PAGE>
<CAPTION>
SCUDDER AARP Balanced Pro Forma SCUDDER AARP Balanced
Balanced Stock & Bond Combined Balanced Stock & Bond Pro Forma
Par/Share Par/Share Par/Share Market Market Value Combined
Amount Amount Amount Value($) ($) Market Value($)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Norsk Hydro AS, 7.750%, 06/15/2023 1,000,000 5,000,000 6,000,000 991,200 4,956,000 5,947,200
PacifiCorp Australia LLC, 6.150%, 2,000,000 6,000,000 8,000,000 1,851,060 5,553,180 7,404,240
1/15/08
Petroleum Geo-Services, 6.625%, 1,000,000 4,000,000 5,000,000 938,750 3,755,000 4,693,750
3/30/08
Saga Petroleum ASA, 7.250%, 09/23/2027 1,000,000 5,000,000 6,000,000 917,830 4,589,150 5,506,980
================================================
FOREIGN BONDS - U.S. $ DENOMINATED 4,698,840 18,853,330 23,552,170
================================================
FOREIGN BONDS - U.S. $ DENOMINATED
(COST OF $5,083,440 $20,422,280
AND $25,505,720 RESPECTIVELY)
ASSET BACKED 2.2%
- ---------------------------------------
Automobile Receivables 0.5%
First Security Auto Owner Trust, 2,000,000 3,000,000 5,000,000 1,983,750 2,975,625 4,959,375
Series 1999-2 A3, 6.000%, 10/15/2003
Premier Auto Trust Asset Backed 493,160 493,160 493,776 493,776
Certificate, Series 1996-3 A4, 6.750%,
11/6/00
------------------------------------------------
2,477,526 2,975,625 5,453,151
------------------------------------------------
Credit Card Receivables 1.0%
Citibank Credit Card Master Trust I, 2,000,000 2,000,000 1,905,620 1,905,620
Series 1999-1 A, 5.500%, 02/15/2006
Citibank Credit Card Master Trust I, 3,500,000 3,500,000 3,465,000 3,465,000
6.000%, 04/10/2003
MBNA Master Credit Card Trust, 5.800%, 1,500,000 5,000,000 6,500,000 1,456,875 4,856,250 6,313,125
12/15/05
------------------------------------------------
3,362,495 8,321,250 11,683,745
------------------------------------------------
Home Equity Loans 0.5%
First Plus Home Loan Trust, Series 1,000,000 5,000,000 6,000,000 985,000 4,925,000 5,910,000
1998, 6.250%, 11/10/2016 ------------------------------------------------
Manufacturing Housing Receivables 0.2%
Green Tree Financial Corp., Series 3,000,000 3,000,000 2,349,375 2,349,375
1997-2 B1, 7.560%, 06/15/2028 ------------------------------------------------
================================================
ASSET BACKED 6,825,021 18,571,250 25,396,271
================================================
ASSET BACKED (COST OF $6,984,039
$19,515,614 AND $26,499,653
RESPECTIVELY)
CORPORATE BONDS 13.7%
- ---------------------------------------
Consumer Staples 1.3%
Bass America Inc., 6.625%, 03/01/2003 1,500,000 5,000,000 6,500,000 1,477,365 4,924,550 6,401,915
Pepsi Bottling Holdings, Inc., 5.625%, 1,500,000 3,500,000 5,000,000 1,349,865 3,149,685 4,499,550
2/17/09
Racers-Kellogg, 5.750%, 02/02/2001 1,000,000 4,000,000 5,000,000 993,750 3,975,000 4,968,750
------------------------------------------------
3,820,980 12,049,235 15,870,215
------------------------------------------------
Communications 1.3%
AT&T Corp., 6.000%, 03/15/2009 2,000,000 2,000,000 1,848,840 1,848,840
Lucent Technologies Inc., 6.900%, 1,250,000 1,250,000 1,261,000 1,261,000
7/15/01
Sprint Capital Corp., 6.125%, 3,500,000 3,000,000 6,500,000 3,236,450 2,774,100 6,010,550
11/15/08
WorldCom, Inc., 6.400%, 08/15/2005 2,000,000 5,000,000 7,000,000 1,943,960 4,859,900 6,803,860
------------------------------------------------
8,290,250 7,634,000 15,924,250
------------------------------------------------
Financial 5.2%
Associates Corp. of North America, 500,000 5,850,000 6,350,000 501,350 5,865,795 6,367,145
6.625%, 05/15/2001
Boeing Capital Corp., Medium Term 1,000,000 3,000,000 4,000,000 1,002,980 3,008,940 4,011,920
Note, 6.750%, 12/23/2003
Capital One Bank, Medium Term Note, 1,000,000 4,000,000 5,000,000 985,520 3,942,080 4,927,600
5.950%, 02/15/2001
First USA Bank, 5.850%, 02/22/2001 1,000,000 3,000,000 4,000,000 991,600 2,974,800 3,966,400
First Union Corporation, 8.125%, 1,000,000 2,500,000 3,500,000 1,031,680 2,579,200 3,610,880
6/24/02
Fleet Financial Group, 6.875%, 1,000,000 4,000,000 5,000,000 899,120 3,596,480 4,495,600
1/15/28
<PAGE>
<CAPTION>
SCUDDER AARP Balanced Pro Forma SCUDDER AARP Balanced
Balanced Stock & Bond Combined Balanced Stock & Bond Pro Forma
Par/Share Par/Share Par/Share Market Market Value Combined
Amount Amount Amount Value($) ($) Market Value($)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ford Motor Credit Co., 6.125%, 2,500,000 5,000,000 7,500,000 2,441,575 4,883,150 7,324,725
4/28/03
General Electric Capital Corp., 1,000,000 4,000,000 5,000,000 995,000 3,980,000 4,975,000
6.020%, 05/04/2001
Home Savings of America, 6.000%, 1,000,000 3,000,000 4,000,000 992,560 2,977,680 3,970,240
11/1/00
Merrill Lynch & Co., Inc., 6.000%, 1,500,000 3,000,000 4,500,000 1,370,130 2,740,260 4,110,390
2/17/09
Prudential Insurance Co., 6.375%, 1,000,000 3,000,000 4,000,000 941,370 2,824,110 3,765,480
7/23/06
Southern National Corp., 7.050%, 1,000,000 4,000,000 5,000,000 993,120 3,972,480 4,965,600
5/23/03
Wachovia Corp., 6.700%, 06/21/2004 3,000,000 3,000,000 2,994,510 2,994,510
Wells Fargo & Co., 6.875%, 04/01/2006 2,000,000 2,000,000 1,966,440 1,966,440
------------------------------------------------
16,140,515 45,311,415 61,451,930
------------------------------------------------
Media 1.3%
News America Holdings Inc., 9.250%, 1,000,000 3,000,000 4,000,000 1,098,840 3,296,520 4,395,360
2/1/13
TCI-Communications, Inc., 8.000%, 1,000,000 4,000,000 5,000,000 1,043,990 4,175,960 5,219,950
8/1/05
Time Warner Inc., 9.125%, 01/15/2013 1,000,000 4,500,000 5,500,000 1,123,140 5,054,130 6,177,270
------------------------------------------------
3,265,970 12,526,610 15,792,580
------------------------------------------------
Durables 0.3%
Martin Marietta Corp., 6.500%, 1,000,000 3,000,000 4,000,000 972,500 2,917,500 3,890,000
4/15/03 ------------------------------------------------
Manufacturing 0.9%
Fort James Corp., 6.625%, 09/15/2004 1,000,000 3,000,000 4,000,000 972,230 2,916,690 3,888,920
TRW, Inc., 6.625%, 06/01/2004 2,000,000 2,000,000 1,941,400 1,941,400
Tyco International Group, 6.125%, 2,500,000 2,500,000 2,269,875 2,269,875
1/15/09
Xerox Corp., 5.500%, 11/15/2003 750,000 2,000,000 2,750,000 709,350 1,891,600 2,600,950
------------------------------------------------
5,892,855 4,808,290 10,701,145
------------------------------------------------
Technology 1.0%
IBM Corp., 5.100%, 11/10/2003 1,500,000 5,500,000 7,000,000 1,414,688 5,187,188 6,601,876
Raytheon Co., 6.000%, 12/15/2010 2,500,000 3,000,000 5,500,000 2,191,550 2,629,860 4,821,410
------------------------------------------------
3,606,238 7,817,048 11,423,286
------------------------------------------------
Energy 1.6%
Anadarko Petroleum Corp., 5.875%, 1,500,000 5,000,000 6,500,000 1,424,220 4,747,400 6,171,620
10/15/03
Atlantic Richfield Co., 5.550%, 2,000,000 2,000,000 1,932,400 1,932,400
4/15/03
Conoco Inc., 5.900%, 04/15/2004 2,500,000 2,500,000 2,406,700 2,406,700
Louisiana Land & Exploration Co., 1,250,000 5,000,000 6,250,000 1,214,363 4,857,450 6,071,813
7.650%, 12/01/2023
Occidental Petroleum Corp., 8.450%, 2,500,000 2,500,000 2,629,700 2,629,700
2/15/29
------------------------------------------------
9,607,383 9,604,850 19,212,233
------------------------------------------------
Transportation 0.4%
Continental Airlines Inc., 6.795%, 1,500,000 3,000,000 4,500,000 1,393,650 2,787,300 4,180,950
2/2/20 -------------------------------------------------
Utilities 0.4%
Public Service Co. of Colorado, 1,000,000 3,500,000 4,500,000 975,490 3,414,215 4,389,705
------------------------------------------------
6.000%, 04/15/2003
================================================
CORPORATE BONDS 53,965,831 108,870,463 162,836,294
================================================
CORPORATE BONDS (COST OF
$56,377,690 $113,244,335
AND $169,622,025
RESPECTIVELY)
CONVERTIBLE BONDS 0.5%
- ----------------------------
Media
Advertising
Interpublic Group of Companies Inc., 4,500,000 4,500,000 5,265,000 5,265,000
<PAGE>
<CAPTION>
SCUDDER AARP Balanced Pro Forma SCUDDER AARP Balanced
Balanced Stock & Bond Combined Balanced Stock & Bond Pro Forma
Par/Share Par/Share Par/Share Market Market Value Combined
Amount Amount Amount Value($) ($) Market Value($)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1.800%, 09/16/2004
================================================
CONVERTIBLE BONDS 5,265,000 5,265,000
================================================
CONVERTIBLE BONDS
(COST OF $0 $3,839,362
AND $3,839,362 RESPECTIVELY)
CONVERTIBLE PREFERRED STOCKS 0.3%
- -------------------------------------
Health 0.2%
Biotechnolgy
Monsanto Co., 6.5% 62,600 62,600 2,370,975 2,370,975
------------------------------------------------
Financial 0.1%
Real Estate
ProLogis Trust "B" (REIT), 7.000% 18,900 18,900 463,050 463,050
------------------------------------------------
================================================
CONVERTIBLE PREFERRED STOCKS 0 2,834,025 2,834,025
================================================
CONVERTIBLE PREFERRED STOCKS
(COST OF $0 $3,055,886 AND
$3,055,886 RESPECTIVELY)
COMMON STOCKS 62.8%
- -------------------------------------
CONSUMER DISCRETIONARY 3.5%
Department & Chain Stores 2.6%
Dayton Hudson Corp. 67,400 67,400 4,355,725 4,355,725
Federated Department Stores, Inc. 57,500 57,500 2,454,531 2,454,531
Home Depot, Inc. 114,400 114,400 8,637,200 8,637,200
Wal-Mart Stores, Inc. 153,500 115,000 268,500 8,701,531 6,519,063 15,220,594
------------------------------------------------
24,148,987 6,519,063 30,668,050
------------------------------------------------
Restaurants 0.4%
McDonald's Corp. 111,400 111,400 4,595,250 4,595,250
------------------------------------------------
Specialty Retail 0.5%
Tandy Corp. 103,500 103,500 6,514,031 6,514,031
------------------------------------------------
CONSUMER STAPLES 3.5%
Food & Beverage 1.4%
Albertson's Inc. 71,045 71,045 2,579,801 2,579,801
Bestfoods 40,000 40,000 2,350,000 2,350,000
H.J. Heinz Co. 72,000 104,050 176,050 3,438,000 4,968,388 8,406,388
PepsiCo, Inc. 98,100 98,100 3,402,844 3,402,844
------------------------------------------------
9,190,844 7,548,189 16,739,033
------------------------------------------------
Package Goods/Cosmetics 2.1%
Avon Products, Inc. 252,900 252,900 8,156,025 8,156,025
Colgate-Palmolive Co. 110,800 110,800 6,703,400 6,703,400
Estee Lauder Companies "A" 61,200 61,200 2,853,450 2,853,450
Gillette Co. 82,900 82,900 2,999,944 2,999,944
Procter & Gamble Co. 48,200 48,200 5,054,975 5,054,975
------------------------------------------------
14,611,825 11,155,969 25,767,794
------------------------------------------------
HEALTH 6.0%
Biotechnology 0.3%
Biogen, Inc. 32,000 32,000 2,372,000 2,372,000
Genentech, Inc. 12,100 12,100 1,763,575 1,763,575
------------------------------------------------
4,135,575 4,135,575
------------------------------------------------
Medical Supply & Specialty 0.3%
Baxter International, Inc. 54,000 54,000 3,503,250 3,503,250
------------------------------------------------
Pharmaceuticals 5.4%
Abbott Laboratories 60,000 60,000 2,422,500 2,422,500
Allergan, Inc. 28,500 28,500 3,060,188 3,060,188
American Home Products Corp. 80,000 214,300 294,300 4,180,000 11,197,175 15,377,175
Bristol-Myers Squibb Co. 75,000 85,000 160,000 5,760,938 6,529,063 12,290,001
<PAGE>
<CAPTION>
SCUDDER AARP Balanced Pro Forma SCUDDER AARP Balanced
Balanced Stock & Bond Combined Balanced Stock & Bond Pro Forma
Par/Share Par/Share Par/Share Market Market Value Combined
Amount Amount Amount Value($) ($) Market Value($)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Glaxo Wellcome PLC (ADR) 67,100 67,100 4,017,613 4,017,613
Johnson & Johnson 38,700 45,200 83,900 4,053,825 4,734,700 8,788,525
Merck & Co., Inc. 30,000 30,000 2,386,875 2,386,875
Pfizer, Inc. 83,500 83,500 3,298,250 3,298,250
Schering-Plough Corp. 70,100 70,100 3,469,950 3,469,950
SmithKline Beecham PLC (ADR) 56,100 56,100 3,590,400 3,590,400
Warner-Lambert Co. 69,600 69,600 5,554,950 5,554,950
------------------------------------------------
34,187,476 30,068,951 64,256,427
------------------------------------------------
COMMUNICATIONS 6.8%
Telephone/Communications 6.8%
Alltel Corp. 99,000 99,000 8,241,750 8,241,750
AT&T Corp. 53,000 53,000 2,477,746 2,477,746
Bell Atlantic Corp. 50,000 119,564 169,564 3,246,875 7,764,187 11,011,062
BellSouth Corp. 274,500 274,500 12,352,500 12,352,500
GTE Corp. 27,000 160,200 187,200 2,025,000 12,015,000 14,040,000
Global Crossing Ltd. 62,525 120,530 183,055 2,164,928 4,173,351 6,338,279
MCI WorldCom, Inc. 62,800 62,800 5,389,025 5,389,025
SBC Communicatons, Inc. 108,000 164,625 272,625 5,501,250 8,385,586 13,886,836
Sprint Corp. 106,700 106,700 7,929,144 7,929,144
------------------------------------------------
20,804,824 60,861,518 81,666,342
------------------------------------------------
FINANCIAL 11.5%
Banks 4.4%
Bank of America Corp. 35,000 156,300 191,300 2,253,125 10,061,813 12,314,938
Chase Manhattan Corp. 97,600 97,600 8,527,800 8,527,800
First Union Corp. 109,866 109,866 4,689,905 4,689,905
Fleet Boston Corp. 170,400 170,400 7,433,700 7,433,700
First Tennessee National Corp. 67,600 67,600 2,298,400 2,298,400
J.P. Morgan & Co., Inc. 15,000 14,900 29,900 1,963,125 1,950,038 3,913,163
KeyCorp 87,800 87,800 2,452,913 2,452,913
US Bancorp 49,000 172,600 221,600 1,816,063 6,396,988 8,213,051
Wells Fargo Co. 70,000 70,000 3,351,250 3,351,250
------------------------------------------------
11,681,963 41,513,157 53,195,120
------------------------------------------------
Insurance 2.5%
American International Group, Inc. 72,484 72,484 7,461,321 7,461,321
Cigna Corp. 40,000 40,000 2,990,000 2,990,000
Jefferson Pilot Corp. 42,000 42,000 3,152,625 3,152,625
Lincoln National Corp. 59,800 59,800 2,758,275 2,758,275
Marsh & McLennan Companies, Inc. 30,700 30,700 2,427,219 2,427,219
Safeco Corp. 2,500 2,500 68,780 68,780
St. Paul Companies, Inc. 108,000 108,000 3,456,000 3,456,000
XL Capital Ltd. " A" 136,505 136,505 7,328,612 7,328,612
------------------------------------------------
17,059,946 12,582,886 29,642,832
------------------------------------------------
Consumer Finance 2.3%
American Express co. 21,300 17,600 38,900 3,280,200 2,710,400 5,990,600
Capital One Finance Corp. 66,600 66,600 3,529,800 3,529,800
Citigroup, Inc. 80,000 108,100 188,100 4,330,000 5,850,913 10,180,913
Household International, Inc. 97,000 97,000 4,328,625 4,328,625
SLM Holding Corp. 61,900 61,900 3,029,231 3,029,231
------------------------------------------------
15,468,625 11,590,544 27,059,169
------------------------------------------------
Other Financial Companies 1.4%
Federal National Mortgage Association 116,700 116,700 8,256,525 8,256,525
Morgan Stanley Dean Witter & Co. 32,700 40,400 73,100 3,607,219 4,456,625 8,063,844
<PAGE>
<CAPTION>
SCUDDER AARP Balanced Pro Forma SCUDDER AARP Balanced
Balanced Stock & Bond Combined Balanced Stock & Bond Pro Forma
Par/Share Par/Share Par/Share Market Market Value Combined
Amount Amount Amount Value($) ($) Market Value($)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------
3,607,219 12,713,150 16,320,369
------------------------------------------------
Real Estate 0.9%
Arden Realty Group, Inc. 84,500 84,500 1,700,563 1,700,563
Boston Properties, Inc. (REIT) 51,500 51,500 1,535,344 1,535,344
Equity Office Properties Trust (REIT) 85,300 85,300 1,887,263 1,887,263
General Growth Properties, Inc. (REIT) 95,200 95,200 2,754,850 2,754,850
ProLogis Trust (REIT) 171,154 171,154 3,305,412 3,305,412
------------------------------------------------
11,183,432 11,183,432
------------------------------------------------
MEDIA 3.0%
Advertising 0.6%
Omnicom Group, Inc. 60,100 60,100 5,288,800 5,288,800
Outdoor Systems, Inc. 48,262 48,262 2,045,102 2,045,102
------------------------------------------------
7,333,902 7,333,902
------------------------------------------------
Broadcasting & Entertainment 1.6%
Clear Channel Communications, Inc. 98,800 98,800 7,941,050 7,941,050
Infinity Broadcasting Corp. 102,600 102,600 3,546,113 3,546,113
Time Warner, Inc. 40,000 40,000 2,787,500 2,787,500
Univision Communication, Inc. 54,000 54,000 4,593,375 4,593,375
------------------------------------------------
18,868,038 18,868,038
------------------------------------------------
Cable Television 0.5%
AT&T Corp - Liberty Media Group 82,600 82,600 3,278,188 3,278,188
Comcast Corp. "A" 56,000 56,000 2,359,000 2,359,000
------------------------------------------------
5,637,188 5,637,188
------------------------------------------------
Print Media 0.3%
Tribune Co. 60,000 60,000 3,600,000 3,600,000
------------------------------------------------
SERVICE INDUSTRIES 1.2%
Edp Services 0.5%
Electronic Data Systems Corp. 68,600 31,200 99,800 4,013,100 1,825,200 5,838,300
------------------------------------------------
Printing/Publishing 0.7%
McGraw-Hill, Inc. 33,100 110,000 143,100 1,973,588 6,558,750 8,532,338
------------------------------------------------
DURABLES 2.7%
Aerospace 1.2%
Lockheed Martin Corp. 211,718 211,718 4,234,360 4,234,360
Northrop Grumman Corp. 24,800 24,800 1,360,900 1,360,900
Rockwell International Corp. 125,500 125,500 6,078,906 6,078,906
United Technologies Corp. 45,000 45,000 2,722,500 2,722,500
------------------------------------------------
2,722,500 11,674,166 14,396,666
------------------------------------------------
Automobiles 1.0%
Ford Motor Co. 194,300 194,300 10,662,213 10,662,213
Meritor Automotive, Inc. 113,466 113,466 1,921,830 1,921,830
------------------------------------------------
12,584,043 12,584,043
------------------------------------------------
Construction/Agricultural Equipment 0.2%
PACCAR, Inc. 57,100 57,100 2,690,838 2,690,838
------------------------------------------------
Telecommunications Equipment 0.3%
Lucent Technologies, Inc. 49,800 49,800 3,199,650 3,199,650
------------------------------------------------
MANUFACTURING 7.1%
Chemicals 0.5%
Dow Chemical Co. 22,800 22,800 2,696,100 2,696,100
E.I. du Pont de Nemours & Co. 41,100 41,100 2,648,381 2,648,381
<PAGE>
<CAPTION>
AARP Balanced Pro Forma AARP Balanced
Balanced Stock & Bond Combined Balanced Stock & Bond Pro Forma
Par/Share Par/Share Par/Share Market Market Value Combined
Amount Amount Amount Value($) ($) Market Value($)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------
5,344,481 5,344,481
------------------------------------------------
Containers & Paper 0.0%
Temple-Inland Inc. 6,900 6,900 401,063 401,063
------------------------------------------------
Diversified Manufacturing 2.3%
General Electric Co. 115,400 41,100 156,500 15,643,913 ,571,619 21,215,532
Tyco International Ltd. 160,200 160,200 6,397,988 6,397,988
------------------------------------------------
22,041,901 5,571,619 27,613,520
------------------------------------------------
Electrical Products 0.8%
Emerson Electric Co. 37,500 69,900 107,400 2,252,344 4,198,369 6,450,713
Thomas & Betts Corp. 61,200 61,200 2,746,350 746,350
------------------------------------------------
2,252,344 6,944,719 9,197,063
------------------------------------------------
Industry Specialty 2.1%
Corning, Inc. 325,000 325,000 25,553,125 25,553,125
------------------------------------------------
Machinery/Components/Controls 0.8%
Parker-Hannifin Corp. 75,000 138,400 213,400 3,435,938 6,340,450 9,776,388
------------------------------------------------
Office Equipment/Supplies 0.4%
Xerox Corp. 156,800 156,800 4,390,400 4,390,400
------------------------------------------------
Specialty Chemicals 0.2%
Air Products & Chemicals, Inc. 45,000 49,000 94,000 1,237,500 1,347,500 2,585,000
------------------------------------------------
TECHNOLOGY 7.5%
Computer Software 2.5%
America Online Inc. 39,500 39,500 5,122,638 5,122,638
Computer Associates International, 57,100 57,100 3,226,150 3,226,150
Inc.
Electronic Arts Inc. 64,800 64,800 5,236,650 5,236,650
Microsoft Corp. 101,400 101,400 9,385,838 9,385,838
Oracle Systems Corp. 40,000 112,400 152,400 1,902,500 5,346,025 7,248,525
------------------------------------------------
16,524,988 13,694,813 30,219,801
------------------------------------------------
Diverse Electronic Products 1.2%
Applied Materials, Inc. 51,900 51,900 4,661,269 4,661,269
Motorola, Inc. 32,800 32,800 3,195,950 3,195,950
Solectron Corp. 46,500 46,500 3,499,125 3,499,125
Teradyne, Inc. 76,700 76,700 2,952,950 2,952,950
------------------------------------------------
14,309,294 14,309,294
------------------------------------------------
Electronic Components/Distributors 1.0%
Altera Corp. 37,500 37,500 1,823,438 1,823,438
Cisco Systems, Inc. 133,550 133,550 9,882,700 9,882,700
------------------------------------------------
11,706,138 11,706,138
------------------------------------------------
Electronic Data Processing 1.3%
Hewlett-Packard Co. 24,900 24,900 1,844,156 1,844,156
International Business Machines Corp. 38,200 38,200 3,757,925 3,757,925
Sun Microsystems, Inc. 96,000 96,000 10,158,000 10,158,000
------------------------------------------------
13,915,925 1,844,156 15,760,081
------------------------------------------------
Semicononductors 1.5%
Intel Corp. 128,700 60,600 189,300 9,966,206 4,692,713 14,658,919
Linear Technology Corp. 50,000 50,000 3,496,875 3,496,875
------------------------------------------------
13,463,081 4,692,713 18,155,794
------------------------------------------------
ENERGY 5.5%
Oil & Gas Production 1.7%
Coastal Corp. 51,000 51,000 2,148,375 2,148,375
Conoco, Inc. "A" 70,000 162,700 232,700 1,920,625 4,464,081 6,384,706
Conoco, Inc. "B" 134,758 134,758 3,655,311 3,655,311
<PAGE>
<CAPTION>
SCUDDER AARP Balanced Pro Forma SCUDDER AARP Balanced
Balanced Stock & Bond Combined Balanced Stock & Bond Pro Forma
Par/Share Par/Share Par/Share Market Market Value Combined
Amount Amount Amount Value($) ($) Market Value($)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Royal Dutch Petroleum Co. (New York 56,000 87,500 143,500 3,356,500 5,244,531 8,601,031
shares)
------------------------------------------------
7,425,500 13,363,923 20,789,423
------------------------------------------------
Oil Companies 3.1%
Exxon Corp. 37,500 37,500 2,777,344 2,777,344
Mobil Corp. 33,000 48,800 81,800 3,184,500 4,709,200 7,893,700
Texaco, Inc. 31,000 124,000 155,000 1,902,625 7,610,500 9,513,125
Total SA (ADR) 247,674 247,674 16,516,760 16,516,760
------------------------------------------------
7,864,469 28,836,460 36,700,929
------------------------------------------------
Oil /Gas Transmission 0.5%
Williams Cos., Inc. 159,100 159,100 5,966,250 5,966,250
------------------------------------------------
Oilfield Services/Equipment 0.2%
Schlumberger Ltd. 39,300 39,300 2,380,106 2,380,106
------------------------------------------------
METALS & MINERALS 0.4%
Steel & Metals 0.4%
Allegheny Teledyne Inc. 275,135 275,135 4,178,613 4,178,613
Oregon Steel Mills, Inc. 68,300 68,300 576,281 576,281
------------------------------------------------
4,754,894 4,754,894
------------------------------------------------
CONSTRUCTION 0.6%
Building Products 0.1%
Georgia Pacific Group 15,900 15,900 631,031 631,031
------------------------------------------------
Forest Products 0.5%
Weyerhaeuser Co. 106,200 106,200 6,338,813 6,338,813
------------------------------------------------
TRANSPORTATION 2.1%
Airlines 0.5%
AMR Corp. 41,800 41,800 2,654,300 2,654,300
Air New Zealand Ltd. "B" 2,248,500 2,248,500 3,327,456 3,327,456
------------------------------------------------
5,981,756 5,981,756
------------------------------------------------
Marine Transportation 0.1%
Knightsbridge Tankers Ltd. 80,000 80,000 1,230,000 1,230,000
------------------------------------------------
Railroads 1.5%
CSX Corp. 211,500 211,500 8,671,500 8,671,500
Canadian National Railway Co. 74,000 130,200 204,200 2,245,701 3,951,220 6,196,921
Norfolk Southern Corp. 120,100 120,100 2,934,944 2,934,944
------------------------------------------------
2,245,701 15,557,664 17,803,365
------------------------------------------------
UTILITIES 1.4%
Electric Utilities 1.4%
CINergy Corp. 160,400 160,400 4,531,300 4,531,300
PacifiCorp 285,400 285,400 5,886,375 5,886,375
Unicom Corp. 166,300 166,300 6,371,369 6,371,369
195,104,403 261,586,380 456,690,783
------------------------------------------------
16,789,044 16,789,044
------------------------------------------------
------------------------------------------------
COMMON STOCKS 335,660,666 416,644,730 752,305,396
================================================
COMMON STOCKS (COST OF $250,439,105 $324,089,726 AND $574,528,831 RESPECTIVELY)
================================================
TOTAL INVESTMENT PORTFOLIO -100% 525,815,562 666,340,938 1,192,156,500
================================================
INVESTMENT PORTFOLIO (TOTAL COST OF $445,204,809 $582,941,918 AND $1,028,146,727 RESPECTIVELY)
</TABLE>
<PAGE>
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINING CONDENSED STATEMENT OF ASSETS AND LIABILITIES
AS OF OCTOBER 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SCUDDER
BALANCED AARP BALANCED PRO FORMA PRO FORMA
FUND STOCK & BOND ADJUSTMENTS COMBINED
--------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Investments, at value $ 525,815,562 $ 666,340,938 $ 1,192,156,500
Cash 11,959,755 - 11,959,755
Other assets less liabilities 961,144 18,837,629 $ (896,257) (2) 18,902,516
--------------------- -------------------- ------------------- --------------------
Total Net assets $ 538,736,461 $ 685,178,567 $ (896,257) $ 1,223,018,771
===================== ==================== =================== ====================
NET ASSETS
Scudder Shares $ 538,422,584
AARP Shares $ 684,596,187
SHARES OUTSTANDING
Scudder Shares 26,799,863 26,799,863
AARP Shares 34,605,226 (528,761) 34,076,465
NET ASSET VALUE PER SHARE
Scudder Shares $ 20.10 $ 20.09
AARP Shares $ 19.80 $ 20.09
</TABLE>
<PAGE>
PRO FORMA COMBINING CONDENSED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTH PERIOD ENDED OCTOBER 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
SCUDDER
BALANCED AARP BALANCED PRO FORMA PRO FORMA
FUND STOCK & BOND ADJUSTMENTS COMBINED
----------------- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income:
Interest and dividend income $ 12,631,207 30,519,640 $ -- $ 43,150,847
---------------------------------------------------------------------------------
Total Investment Income 12,631,207 30,519,640 43,150,847
Expenses
Management fees 2,941,885 3,480,597 (965,678) (3) 5,456,804
Trustees Fees 54,425 28,559 (28,559) (4) 54,425
All other expenses 2,334,646 2,999,206 (1,850,786) (5) 3,483,066
---------------------------------------------------------------------------------
Total expenses before reductions 5,330,956 6,508,362 (2,845,023) 8,994,295
Expense reductions - - - -
---------------------------------------------------------------------------------
Expenses, net 5,330,956 6,508,362 (2,845,023) 8,994,295
---------------------------------------------------------------------------------
Net investment income (loss) 7,300,251 24,011,278 2,845,023 34,156,552
---------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss)
on Investments:
Net realized gain (loss) from investments 14,248 6,257,075 -- 6,271,323
Net unrealized appreciation (depreciation)
of investments 46,584,571 9,732,886 -- 56,317,457
---------------------------------------------------------------------------------
Net increase in net assets from operations $ 53,899,070 $ 40,001,239 $ 2,845,023 $ 96,745,332
=================================================================================
</TABLE>
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
(UNAUDITED)
OCTOBER 31, 1999
1. These financial statements set forth the unaudited pro forma condensed
Statement of Assets and Liabilities as of October 31, 1999, and the
unaudited pro forma condensed Statement of Operations for the twelve month
period ended October 31, 1999 for Scudder Balanced Fund and AARP Balanced
Stock & Bond 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 $313,877 and $582,380 to be borne by the Acquiring Fund
and the Acquired Fund, respectively.
3. Represents reduction in management fees resulting from a new management
agreement.
4. Reduction in trustee fees resulting from the Reorganization.
5. Represents reduction in other expenses resulting from the implementation of
an administrative fee contract.
<PAGE>
PART C. OTHER INFORMATION
Item 15. Indemnification.
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
provide as follows:
SECTION 4.1. NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES, ETC.
No Shareholder shall be subject to any personal liability whatsoever
to any Person in connection with Trust Property or the acts,
obligations or affairs of the Trust. No Trustee, officer, employee
or agent of the Trust shall be subject to any personal liability
whatsoever to any Person, other than to the Trust or its
Shareholders, in connection with Trust Property or the affairs of
the Trust, save only that arising from bad faith, willful
misfeasance, gross negligence or reckless disregard of his duties
with respect to such Person; and all such Persons shall look solely
to the Trust Property for satisfaction of claims of any nature
arising in connection with the affairs of the Trust. If any
Shareholder, Trustee, officer, employee, or agent, as such, of the
Trust, is made a party to any suit or proceeding to enforce any such
liability of the Trust, he shall not, on account thereof, be held to
any personal liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims and liabilities, to
which such Shareholder may become subject by reason of his being or
having been a Shareholder, and shall reimburse such Shareholder for
all legal and other expenses reasonably incurred by him in
connection with any such claim or liability. The indemnification and
reimbursement 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.
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
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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 other rights to which any Trustee or officer
may now or hereafter be entitled, shall continue as to a person who
has ceased to be such Trustee or officer and shall inure to the
benefit of the heirs, executors, administrators and assigns of such
a person. Nothing contained herein shall affect any rights to
indemnification to which personnel of the Trust other than Trustees
and officers may be entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any
claim, action, suit, or proceeding of the character described in
paragraph (a) of this Section 4.3 shall be advanced by the Trust
prior to final disposition thereof upon receipt of an undertaking by
or on behalf of the recipient, to repay such amount if it is
ultimately determined that he is not entitled to indemnification
under this Section 4.3, provided that either:
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(i) such undertaking is secured by a surety bond or some other
appropriate security provided by the recipient, or the Trust shall
be insured against losses arising out of any such advances; or
(ii) a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees act
on the matter) or an independent legal counsel in a written opinion
shall determine, based upon a review of readily available facts (as
opposed to a full trial-type inquiry), that there is reason to
believe that the recipient ultimately will be found entitled to
indemnification.
As used in this Section 4.3, a "Disinterested Trustee" is one
who is not (i) an "Interested Person" of the Trust (including anyone
who has been exempted from being an "Interested Person" by any rule,
regulation or order of the Commission), or (ii) involved in the
claim, action, suit or proceeding.
ITEM 16. Exhibits:
- --------
(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.
(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.
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(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) Agreement and Plan of Reorganization, filed as Exhibit A to Part
A hereof.
(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.
(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.
(7) 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.
(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.
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<PAGE>
(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.
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<PAGE>
(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) Inapplicable.
(11) Legal Opinion and Consent of Dechert Price & Rhoads filed herein.
(12) Legal Opinion and Consent of Willkie Farr & Gallagher 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.
(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.
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(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.
(14) Consent of PricewaterhouseCoopers LLP filed herein.
(15) Inapplicable.
(16) Powers of Attorney filed herein.
(17) Form of proxy filed herein.
ITEM 17. UNDERTAKINGS.
(1) The undersigned registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this registration statement by any
person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act [17 CFR 230.145c], the
reoffering prospectus will contain the information called for by the
applicable registration form for C-8 350 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.
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<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 3rd day of March, 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.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Linda C. Coughlin President & Trustee March 3, 2000
- ----------------------
Linda C. Coughlin
/s/ Henry P. Becton, Jr.* Trustee March 3, 2000
- -------------------------
Henry P. Becton, Jr.
/s/ Dawn-Marie Driscoll* Trustee March 3, 2000
- ------------------------
Dawn-Marie Driscoll
/s/ Peter B. Freeman* Trustee March 3, 2000
- ---------------------
Peter B. Freeman
/s/ George M. Lovejoy, Jr.* Trustee March 3, 2000
- ---------------------------
George M. Lovejoy, Jr.
/s/ Welsey W. Marple, Jr.* Trustee March 3, 2000
- --------------------------
Welsey W. Marple, Jr.
/s/ Kathryn L. Quirk* Trustee, Vice President & March 3, 2000
- --------------------- Assistant Secretary
Kathryn L. Quirk
/s/ Jean C. Tempel* Trustee March 3, 2000
- -------------------
Jean C. Tempel
/s/ John R. Hebble Treasurer (Principal March 3, 2000
- ------------------- Financial and Accounting
John R. Hebble Officer)
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<PAGE>
*By: /s/ Sheldon A. Jones March 3, 2000
--------------------
Sheldon A. Jones
Attorney-in-fact
*Executed pursuant to powers of attorney filed with the Registrant's
Registration Statement on Form N-14 as filed with the Commission electronically
herewith.
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EXHIBIT 11
DECHERT PRICE & RHOADS LETTERHEAD
March 3, 2000
Scudder Portfolio Trust on behalf of
Scudder Balanced Fund
Two International Place
Boston, Massachusetts 02110-4103
Dear Sirs:
We have acted as counsel to Scudder Portfolio Trust, a Massachusetts
business trust (the "Trust"), and we have a general familiarity with the
Trust's business operations, practices and procedures. You have asked for our
opinion regarding the issuance of AARP Shares class of shares of beneficial
interest by the Trust in connection with the acquisition by Scudder Balanced
Fund, a series of the Trust, of the assets of AARP Balanced Stock and Bond
Fund, a series of AARP Growth Trust, which shares are registered on a Form
N-14 Registration Statement (the "Registration Statement") filed by the Trust
with the Securities and Exchange Commission.
We have examined originals or certified copies, or copies otherwise
identified to our satisfaction as being true copies, of various trust records of
the Trust and such other instruments, documents and records as we have deemed
necessary in order to render this opinion. We have assumed the genuineness of
all signatures, the authenticity of all documents examined by us and the
correctness of all statements of fact contained in those documents.
On the basis of the foregoing, we are of the opinion that the AARP
Shares class of shares of beneficial interest of the Trust being registered
under the Securities Act of 1933 in the Registration Statement, subject to
the creation of the AARP Shares class of shares in accordance with the laws
of the Commonwealth of Massachusetts, will be legally and validly issued,
fully paid and non-assessable by the Trust, upon transfer of the assets of
AARP Balanced Stock and Bond Fund pursuant to the terms of the Agreement and
Plan of Reorganization included in the Registration Statement.
We hereby consent to the filing of this opinion with and as part of the
Registration Statement.
Very truly yours,
/s/ DECHERT PRICE & RHOADS
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EXHIBIT 14
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Proxy
Statement/Prospectus and Statement of Additional Information constituting parts
of this Registration Statement on Form N-14 (the "Registration Statement") of
our report dated February 11, 2000, relating to the financial statements and
financial highlights appearing in the December 31, 1999 Annual Report to
Shareholders of Scudder Balanced Fund which are also incorporated by
reference into the Registration Statement.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
March 1, 2000
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Proxy
Statement/Prospectus and Statement of Additional Information constituting parts
of this Registration Statement on Form N-14 (the "Registration Statement") of
our report dated November 8, 1999, relating to the financial statements and
financial highlights appearing in the September 30, 1999 Annual Report to
Shareholders of AARP Balanced Stock & Bond Fund which are also incorporated by
reference into the Registration Statement. We also consent to the references to
us under the heading "Administrative Fee" in the Proxy Statement/Prospectus and
under the headings "Financial Highlights" in the Prospectus and "Experts" in the
Statement of Additional Information dated February 1, 2000.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
March 1, 2000
<PAGE>
EXHIBIT 16
SCUDDER PORTFOLIO TRUST
POWERS OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, the Registration
Statement has been signed below by the following persons in the capacities
and on the dates indicated. By so signing, the undersigned in his capacity as
director or officer, or both, as the case may be, of the Registrant, does
hereby appoint Sheldon A. Jones, Allison R. Beakley, Caroline Pearson and
John Millette and each of them, severally, his/her true and lawful attorney
and agent to execute in his/her name, place and stead (in such capacity) any
and all amendments to the Registration Statement and any post-effective
amendments thereto and all instruments necessary or desirable in connection
therewith, to attest the seal of the Registrant thereon and to file the same
with the Securities and Exchange Commission. Each of said attorneys and
agents shall have power to act with or without the other and have full power
and authority to do and perform in the name and on behalf of the undersigned,
in any and all capacities, every act whatsoever necessary or advisable to be
done in the premises as fully and to all intents and the purposes as the
undersigned might or could do in person, hereby ratifying and approving the
act of said attorneys and agents and each of them.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Linda C. Coughlin President & Trustee
- ---------------------- February 8, 2000
Linda C. Coughlin
/s/ Henry P. Becton, Jr. Trustee
- ------------------------- February 8, 2000
Henry P. Becton, Jr.
/s/ Dawn-Marie Driscoll Trustee
- ------------------------ February 8, 2000
Dawn-Marie Driscoll
/s/ Peter B. Freeman Trustee
- --------------------- February 8, 2000
Peter B. Freeman
/s/ George M. Lovejoy, Jr. Trustee
- --------------------------- February 8, 2000
George M. Lovejoy, Jr.
/s/ Welsey W. Marple, Jr. Trustee
- -------------------------- February 8, 2000
Welsey W. Marple, Jr.
/s/ Kathryn L. Quirk Trustee, Vice President,
- --------------------- & Assistant Secretary February 8, 2000
Kathryn L. Quirk
/s/ Jean C. Tempel Trustee
- ------------------- February 8, 2000
Jean C. Tempel
/s/ Treasurer (Principal
- ------------------- Financial and Accounting February 8, 2000
John R. Hebble Officer)
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EXHIBIT 17
FORM OF PROXY
[LOGO] YOUR VOTE IS IMPORTANT!
[ADDRESS]
VOTE TODAY BY MAIL,
TOUCH-TONE PHONE OR THE INTERNET
CALL TOLL FREE 1-XXX-XXX-XXXX OR
LOG ON TO WWW.PROXYWEB.COM/XXXXX
*** CONTROL NUMBER: XXX XXX XXX XXX XX ***
PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING.
[ACQUIRED FUND]
[ACQUIRED TRUST/CORPORATION]
[address]
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
[time], on [date]
The undersigned hereby appoints __________, ____________ and ____________,
and each of them, the proxies of the undersigned, with the power of substitution
to each of them, to vote all shares of the [Acquired Fund] (the "Fund") which
the undersigned is entitled to vote at the Special Meeting of Shareholders of
the Fund to be held at the offices of Scudder Kemper Investments, Inc.,
[address], on [date] at [time], Eastern time, and at any adjournments thereof.
PLEASE SIGN AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED.
Dated ____________________,2000
PLEASE SIGN EXACTLY AS YOUR
NAME OR NAMES APPEAR. WHEN
SIGNING AS AN ATTORNEY,
EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE
GIVE YOUR FULL TITLE AS SUCH.
-------------------------------
[NAME]
[ADDRESS] -------------------------------
SIGNATURE(S) OF SHAREHOLDER(S)
<PAGE>
[LOGO] YOUR VOTE IS IMPORTANT!
[ADDRESS]
VOTE TODAY BY MAIL,
TOUCH-TONE PHONE OR THE INTERNET
CALL TOLL FREE 1-XXX-XXX-XXXX OR
LOG ON TO WWW.PROXYWEB.COM/XXXXX
PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING.
ALL PROPERLY EXECUTED PROXIES WILL BE VOTED AS DIRECTED. IF NO INSTRUCTIONS
ARE INDICATED ON A PROPERLY EXECUTED PROXY, THE PROXY WILL BE VOTED FOR APPROVAL
OF THE PROPOSALS.
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF [TRUSTEES/DIRECTORS] OF THE
[ACQUIRED FUND]. THE BOARD OF [TRUSTEES/DIRECTORS] RECOMMENDS A VOTE FOR THE
PROPOSALS.
PLEASE VOTE BY FILLING IN THE BOXES BELOW.
FOR AGAINST ABSTAIN
PROPOSAL 1
To elect Trustees to the Board of Trustees
of the Portfolio to hold office until their
respective successors have been duly elected / / / / / /
and qualified or until their earlier
resignation or removal.
NOMINEES:
(01) __________, (02) ____________, (03) _________, (04) ______________, (05)
______________, (06) __________, (07) ______________, (08)_______________, (09)
____________.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE
FOR ANY INDIVIDUAL NOMINEE, WRITE THE
NAME(S) ON THE LINE IMMEDIATELY BELOW.
- ----------------------------------------------------
PROPOSAL 2
To approve an Agreement and Plan of
Reorganization for the Fund whereby all or
substantially all of the assets an / / / / / /
liabilities of the Fund would be acquired by
[Acquiring Fund] in exchange for shares of
the [class] of the [Acquiring Fund].
PROPOSAL 3
To ratify the selection of
PricewaterhouseCoopers LLP as the Fund's / / / / / /
independent accountants for the current
fiscal year.
<PAGE>
THE PROXIES ARE AUTHORIZED TO VOTE IN THEIR DISCRETION ON ANY OTHER BUSINESS
WHICH MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENTS THEREOF.
PLEASE SIGN ON REVERSE SIDE
