<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
SCUDDER PATHWAY SERIES
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Declaration of Trust)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
[SCUDDER LOGO] September 1997
SCUDDER PATHWAY SERIES
IMPORTANT NEWS
FOR SCUDDER FUND SHAREHOLDERS
While we encourage you to read the full text of the enclosed Proxy
Statement, here's a brief overview of some matters affecting your Fund which
require a shareholder vote.
Q & A: QUESTIONS AND ANSWERS
Q. WHAT IS HAPPENING?
A. Scudder, Stevens & Clark, Inc. ("Scudder"), your Fund's investment manager,
has agreed to form an alliance with Zurich Insurance Company ("Zurich").
Zurich is a leading international insurance and financial services
organization. As a result of the proposed alliance, there will be a change
in ownership of Scudder. In order for Scudder to continue to serve as
investment manager of your Fund, it is necessary for the Fund's shareholders
to approve a new investment management agreement. The following pages give
you additional information on Zurich and the proposed new investment
management agreement and certain other matters. The most important matters
to be voted upon by you are approval of the new investment management
agreement and the election of Trustees. THE BOARD MEMBERS OF YOUR FUND,
INCLUDING THOSE WHO ARE NOT AFFILIATED WITH THE FUND OR SCUDDER, RECOMMEND
THAT YOU VOTE FOR THESE PROPOSALS.
Q. WHY AM I BEING ASKED TO VOTE ON THE PROPOSED NEW INVESTMENT MANAGEMENT
AGREEMENT?
A. The Investment Company Act of 1940, which regulates investment companies
such as your Fund, requires a vote whenever there is a change in control of
a fund's investment manager. Zurich's alliance with Scudder will result in
such a change of control and requires shareholder approval of a new
investment management agreement with your Fund.
Pathway
<PAGE> 3
Q. HOW WILL THE SCUDDER-ZURICH ALLIANCE AFFECT ME AS A FUND SHAREHOLDER?
A. Your Fund and your Fund's investment objective will not change. You will
still own the same shares in the same Fund. The terms of the new investment
management agreement are the same in all material respects as the current
investment management agreement. Similarly, the other service arrangements
between your Fund and Scudder will not be affected. You should continue to
receive the same level of services that you have come to expect from Scudder
over the years. If shareholders do not approve the new investment management
agreement, the current investment management agreement will terminate upon
the closing of the transaction and the Board of Trustees will take such
action as it deems to be in the best interests of your Fund and its
shareholders.
Q. WHY HAS SCUDDER DECIDED TO ENTER INTO THIS ALLIANCE?
A. Scudder believes that the Scudder-Zurich alliance will enable Scudder to
enhance its capabilities as a global asset manager. Scudder further believes
that the alliance will enable it to enhance its ability to deliver the level
of services currently provided to you and your Fund and to fulfill its
obligations under the new investment management agreement consistent with
current practices.
Q. WILL THE INVESTMENT MANAGEMENT FEES BE THE SAME?
A. Yes, the investment management fees paid by your Fund will remain the same.
Q. WILL I CONTINUE TO BE ABLE TO PURCHASE SHARES WITHOUT ANY SALES LOAD?
A. Yes, you will be able to continue to purchase shares of your Fund without
any sales load.
Q. WHAT OTHER MATTERS AM I BEING ASKED TO VOTE ON?
A. In order to save your Fund the expense of a subsequent meeting, a vote is
also being sought for granting the Trustees discretionary authority to
convert the Fund into a "master/feeder" structure, for the amendment of the
Declaration of Trust applicable to your Fund, and for the revision of
certain fundamental investment policies. You are also being asked to vote
for the ratification of the Board's selection of the Fund's accountants.
(continues on inside back cover)
<PAGE> 4
Q. HOW DO THE BOARD MEMBERS OF MY FUND RECOMMEND THAT I VOTE?
A. After careful consideration, the Board members of your Fund, including those
who are not affiliated with the Fund or Scudder, recommend that you vote in
favor of all the proposals on the enclosed proxy card.
Q. WHOM DO I CALL FOR MORE INFORMATION?
A. Please call Shareholder Communications Corporation, your Fund's information
agent, at 1-800-733-8481, ext. 488.
Q. WILL THE FUND PAY FOR THE PROXY SOLICITATION AND LEGAL COSTS ASSOCIATED WITH
THIS TRANSACTION?
A. No, Scudder will bear these costs.
ABOUT THE PROXY CARD
If you have more than one account in the Fund in your name at the same
address, you will receive separate proxy cards for each account but only one
proxy statement for the Fund. Please vote all issues on each proxy card that you
receive.
THANK YOU FOR MAILING YOUR PROXY CARD(S) PROMPTLY.
<PAGE> 5
[SCUDDER LOGO]
For more information, please call Shareholder Communications Corporation, your
Fund's information agent, at 1-800-733-8481, ext. 488.
Pathway
<PAGE> 6
Two International Place
Boston, Massachusetts 02110
SCUDDER PATHWAY SERIES
September 2, 1997
Dear Shareholder:
On June 26, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") entered into
an agreement with Zurich Insurance Company ("Zurich") pursuant to which Scudder
and Zurich have agreed to form an alliance. Under the terms of the agreement,
Zurich will acquire a majority interest in Scudder, and Zurich Kemper
Investments, Inc., a Zurich subsidiary, will become part of Scudder. Scudder's
name will be changed to Scudder Kemper Investments, Inc. As a result of this
transaction, it is necessary for the shareholders of each of the funds for which
Scudder acts as investment manager, including your Fund, to approve a new
investment management agreement.
The following important facts about the transaction are outlined below:
- The transaction has no effect on the number of shares you own or the
value of those shares.
- The advisory fees and expenses paid by your Fund will not increase as a
result of this transaction. As is now the case, you will not pay sales
loads on purchases of shares of your Fund.
- The investment objective of your Fund will remain the same.
- The Non-interested Trustees of your Fund have carefully reviewed the
proposed transaction, and have concluded that the transaction should
cause no reduction in the quality of services provided to the Fund and
should enhance Scudder's ability to provide such services.
Shareholders are also being asked to approve certain other matters that
have been set forth in the Fund's Notice of Meeting. THE BOARD MEMBERS OF YOUR
FUND BELIEVE THAT EACH OF THE PROPOSALS SET FORTH IN THE NOTICE OF MEETING FOR
YOUR FUND IS IMPORTANT AND RECOMMEND THAT YOU READ THE ENCLOSED MATERIALS
CAREFULLY AND THEN VOTE FOR ALL PROPOSALS.
Since all of the funds for which Scudder acts as investment manager are
required to conduct shareholder meetings, if you own shares of more than one
fund, you will receive more than one proxy card. Please sign and return each
proxy card you receive.
<PAGE> 7
Your vote is important. PLEASE TAKE A MOMENT NOW TO SIGN AND RETURN YOUR
PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE. If we do not receive
your executed proxy card(s) after a reasonable amount of time you may receive a
telephone call from our proxy solicitor, Shareholder Communications Corporation,
reminding you to vote your shares.
Respectfully,
/s/ David S. Lee
David S. Lee
President
SHAREHOLDERS ARE URGED TO SIGN THE PROXY CARD(S) AND RETURN IT IN THE
POSTAGE-PAID ENVELOPE TO ENSURE A QUORUM AT THE MEETING. YOUR VOTE IS IMPORTANT
REGARDLESS OF THE SIZE OF YOUR SHAREHOLDINGS.
<PAGE> 8
SCUDDER PATHWAY SERIES
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Please take notice that a Special Meeting of Shareholders of Scudder
Pathway Series (the "Trust"), the series of which are the Conservative
Portfolio, the Balanced Portfolio, the Growth Portfolio and the International
Portfolio (each a "Fund" and, collectively, the "Funds") is to be held at the
offices of Scudder, Stevens & Clark, Inc., 13th Floor, Two International Place,
Boston, Massachusetts 02110, on October 24, 1997, at 9:30 a.m., Eastern time,
for the following purposes:
(1) To approve or disapprove a new investment management agreement
between each Fund and Scudder Kemper Investments, Inc.;
(2) To elect Trustees;
(3) To approve or disapprove the Board's discretionary authority to
convert each Fund to a master/feeder fund structure through a
sale or transfer of assets or otherwise;
(4) To approve or disapprove certain amendments to the Declaration
of Trust;
(5) For each Fund, to approve or disapprove the revision of certain
fundamental investment policies; and
(6) To ratify or reject the selection of Coopers & Lybrand L.L.P. as
independent accountants for each Fund's current fiscal year.
The appointed proxies will vote on any other business as may properly come
before the Special Meeting or any adjournments thereof.
Holders of record of shares of beneficial interest of each Fund at the
close of business on August 25, 1997 are entitled to vote at the Special Meeting
and at any adjournments thereof.
In the event that the necessary quorum to transact business or the vote
required to approve or reject any proposal is not obtained at the Special
Meeting with respect to the Trust or, where applicable, one or more Funds, the
persons named as proxies may propose one or more adjournments of the Special
Meeting in accordance with applicable law, to permit further solicitation of
proxies. Any such adjournment as to a matter requiring, respectively, a Trust-
wide or a Fund by Fund vote will require the affirmative vote of the holders of
a majority of the Trust's (for a Trust-wide vote) or, where applicable, the
Fund's (for a Fund by Fund vote), shares present in person or by proxy at the
Special Meeting. The persons named as proxies will vote in favor of such
adjournment
<PAGE> 9
those proxies which they are entitled to vote in favor and will vote against any
such adjournment those proxies to be voted against that proposal.
By order of the Board of Trustees,
/s/ Thomas F. McDonough
Thomas F. McDonough
Secretary
September 2, 1997
IMPORTANT--WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY CARD(S) AND RETURN IT
IN THE ENCLOSED ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE AND IS INTENDED FOR
YOUR CONVENIENCE. YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD(S) MAY SAVE THE
NECESSITY AND EXPENSE OF FURTHER SOLICITATIONS TO ENSURE A QUORUM AT THE SPECIAL
MEETING. IF YOU CAN ATTEND THE SPECIAL MEETING AND WISH TO VOTE YOUR SHARES IN
PERSON AT THAT TIME, YOU WILL BE ABLE TO DO SO.
<PAGE> 10
SCUDDER PATHWAY SERIES
TWO INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Trustees (the "Board") of Scudder Pathway Series (the
"Trust"), the series of which are the Conservative Portfolio, the Balanced
Portfolio, the Growth Portfolio and the International Portfolio (each a "Fund"
and, collectively, the "Funds"), for use at the Special Meeting of Shareholders,
to be held at the offices of Scudder, Stevens & Clark, Inc. ("Scudder"), 13th
Floor, Two International Place, Boston, Massachusetts 02110, on October 24, 1997
at 9:30 a.m., Eastern time, and at any and all adjournments thereof (the
"Special Meeting"). (In the descriptions of the various proposals below, the
word "fund" is sometimes used to mean investment companies or series thereof in
general, and not the Funds whose proxy statement this is.)
This Proxy Statement, the Notice of Special Meeting and the proxy cards are
first being mailed to shareholders on or about September 2, 1997 or as soon as
practicable thereafter. Any shareholder giving a proxy has the power to revoke
it by mail (addressed to the Secretary at the principal executive office of the
Trust (c/o Scudder, Stevens & Clark, Inc., Two International Place, Boston,
Massachusetts 02110), or in person at the Special Meeting, by executing a
superseding proxy or by submitting a notice of revocation to the Trust. All
properly executed proxies received in time for the Special Meeting will be voted
as specified in the proxy or, if no specification is made, for each proposal
referred to in the Proxy Statement.
The presence at any shareholders' meeting, in person or by proxy, of the
holders of one-third of the shares entitled to be cast of the Trust (for a
Trust-wide vote) or a Fund (for a Fund by Fund vote) shall be necessary and
sufficient to constitute a quorum for the transaction of business requiring,
respectively, Trust-wide or Fund by Fund voting. In the event that the necessary
quorum to transact business or the vote required to approve or disapprove any
proposal is not obtained at the Special Meeting with respect to one or more
Funds, the persons named as proxies may propose one or more adjournments of the
Special Meeting in accordance with applicable law to permit further solicitation
of proxies with respect to any proposal which did not receive the vote necessary
for its passage or to obtain a quorum. With respect to those proposals for which
there is represented a sufficient number of votes in favor, actions taken at the
Special Meeting will be effective irrespective of any adjournments with respect
to any other proposals. Any such adjournment as to a matter requiring,
respectively, a Trust-wide or a Fund by Fund vote will require the affirmative
vote of the holders of a majority of the Trust's (for a Trust-wide vote)
1
<PAGE> 11
or Fund's (for a Fund by Fund vote) shares present in person or by proxy at the
Special Meeting. The persons named as proxies will vote in favor of such
adjournment those proxies which they are entitled to vote in favor and will vote
against any such adjournment those proxies to be voted against that proposal.
For purposes of determining the presence of a quorum for transacting business at
the Special Meeting, abstentions and broker "non-votes" will be treated as
shares that are present but which have not been voted. Broker non-votes are
proxies received by the 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.
Proposals 1 and 5 each requires the affirmative vote of a "majority of the
outstanding voting securities" of each Fund. The terms "majority of the
outstanding voting securities" as defined in the Investment Company Act of 1940,
as amended (the "1940 Act"), and as used in this Proxy Statement, means: the
affirmative vote of the lesser of (1) 67% of the voting securities of each Fund
present at the meeting if more than 50% of the outstanding shares of the Fund
are present in person or by proxy or (2) more than 50% of the outstanding shares
of each Fund. Approval of Proposal 2 requires the affirmative vote of a
plurality of the shares of the Trust voting at the Special Meeting. The
requisite vote for Proposals 3 and 4 is governed by the Declaration of Trust.
Approval of Proposal 3 requires the affirmative vote of a majority of the shares
of each Fund. Approval of Proposal 4 requires the affirmative vote of two-thirds
of the shares of the Trust outstanding and entitled to vote. Approval of
Proposal 6 requires the affirmative vote of a majority of the shares of each
Fund voting at the Special Meeting.
Abstentions will have the effect of a "no" vote on all proposals. Broker
non-votes will have the effect of a "no" vote for Proposals 1, 3 and 5, which
require the approval of a specified percentage of the outstanding shares of each
Fund and Proposal 4, which requires the approval of a specified percentage of
the outstanding shares of the Trust, if such vote is determined on the basis of
obtaining the affirmative vote of more than 50% of the outstanding shares of the
Fund. Broker non-votes will not constitute "yes" or "no" votes, and will be
disregarded in determining the voting securities "present" if such vote is
determined on the basis of the affirmative vote of 67% of the voting securities
of the Fund, or the Trust, as the case may be, present at the Special Meeting
with respect to Proposals 1 and 5. Broker non-votes will not be counted in favor
of, but will have no other effect on the vote for Proposals 2 and 6 which
require the approval of a plurality of the shares of the Trust, and majority of
the shares of the Trust, respectively, voting at the Special Meeting.
Shareholders of each Fund will vote separately with respect to each of
Proposals 1, 3, 5 and 6; and Shareholders of the Trust will vote together on
proposals 2 and 4.
2
<PAGE> 12
The following table summarizes those voting requirements:
<TABLE>
<CAPTION>
SHAREHOLDERS ENTITLED VOTE REQUIRED
TO VOTE FOR APPROVAL
---------------------- ----------------------
<S> <C> <C>
Proposal 1 Shareholders of each Approved by a "major-
(Approval of new Investment Fund vote separately ity of the outstanding
Management Agreement) voting securities" of
each Fund
Proposal 2 Shareholders of the Each nominee must be
(Election of Trustees) Trust vote together elected by a plurality
for each nominee of the shares of the
Trust voting at the
Special Meeting
Proposal 3 Shareholders of each Approved by a majority
(Approval of discretionary Fund vote separately of the shares of each
authority to convert to Fund
master/feeder fund structure)
Proposal 4 Shareholders of the Approved by the vote
(Approval of amendments to Trust vote together of two-thirds of the
the Declaration of Trust) shares of the Trust
outstanding and
entitled to vote
Proposal 5 Shareholders of each Approved by a "major-
(Approval of the revision of Fund vote separately ity of the outstanding
certain fundamental voting securities" of
investment policies) each Fund
Proposal 6 Shareholders of each Approved by a majority
(Ratification of selection of Fund vote separately of the shares of each
Accountants) fund voting at the
Special Meeting
</TABLE>
3
<PAGE> 13
Holders of record of the shares of beneficial interest of each Fund at the
close of business on August 25, 1997 (the "Record Date"), as to any matter on
which they are entitled to vote, will be entitled to one vote per share on all
business of the Special Meeting. The table below sets forth the number of shares
outstanding for each Fund as of June 30, 1997.
<TABLE>
<CAPTION>
NUMBER OF SHARES OUTSTANDING
NAME OF FUND AS OF JUNE 30, 1997
- ----------------------- ----------------------------
<S> <C>
Conservative Portfolio 1,089,712
Balanced Portfolio 12,902,389
Growth Portfolio 3,138,611
International Portfolio 667,227
</TABLE>
Each Fund provides periodic reports to all shareholders which highlight
relevant information, including investment results and a review of portfolio
changes. You may receive an additional copy of the most recent annual report for
each Fund and a copy of any more recent semi-annual report, if any, without
charge, by calling 800-225-2470 or writing the Fund, c/o Scudder, Stevens &
Clark, Inc., Two International Place, Boston, Massachusetts 02110.
PROPOSAL 1: APPROVAL OF NEW
INVESTMENT MANAGEMENT AGREEMENT
INTRODUCTION
Scudder acts as the investment manager for each Fund pursuant to an
investment management agreement entered into by the Funds and Scudder (the
"Current Investment Management Agreement") (Scudder is sometimes referred to in
this proxy statement as the "Investment Manager.") On June 26, 1997, Scudder
entered into a Transaction Agreement (the "Transaction Agreement") with Zurich
Insurance Company ("Zurich") pursuant to which Scudder and Zurich have agreed to
form an alliance. Under the terms of the Transaction Agreement, Zurich will
acquire a majority interest in Scudder, and Zurich Kemper Investments, Inc.
("ZKI"), a Zurich subsidiary, will become part of Scudder. Scudder's name will
be changed to Scudder Kemper Investments, Inc. ("Scudder Kemper"). The foregoing
are referred to as the "Transactions." ZKI, a Chicago-based investment adviser
and the adviser to the Kemper funds, has approximately $80 billion under
management. The headquarters of Scudder Kemper will be in New York. Edmond D.
Villani, Scudder's CEO, will continue as CEO of Scudder Kemper and will become a
member of Zurich's Corporate Executive Board.
Consummation of the Transactions would constitute an "assignment," as that
term is defined in the 1940 Act, of the Funds' Current Investment Management
Agreement with Scudder. As required by the 1940 Act, the Current Investment
Management Agreement provides for its automatic termination in the event of its
assignment. In anticipation of the Transactions, a new investment
4
<PAGE> 14
management agreement (the "New Investment Management Agreement," together with
the Current Investment Management Agreement, the "Investment Management
Agreement") between the Funds and Scudder Kemper is being proposed for approval
by shareholders of each Fund. A copy of the master form of the New Investment
Management Agreement is attached hereto as Exhibit A. THE NEW INVESTMENT
MANAGEMENT AGREEMENT FOR THE FUNDS IS ON THE SAME TERMS IN ALL MATERIAL RESPECTS
AS THE CURRENT INVESTMENT MANAGEMENT AGREEMENT. Conforming changes are being
recommended to the New Investment Management Agreement in order to promote
consistency among all the funds currently advised by Scudder and to permit ease
of administration. The material terms of the Current Investment Management
Agreement are described under "Description of the Current Investment Management
Agreement" below.
BOARD OF TRUSTEES' RECOMMENDATION
On August 6, 1997, the Board of the Trust, including the Trustees who are
not parties to such agreement or "interested persons" (as defined under the 1940
Act) of any such party, voted to approve the New Investment Management Agreement
and to recommend their respective approval to shareholders.
For information about the Board's deliberations and the reasons for its
recommendation, please see "Board of Trustees' Evaluation" below.
The Board of the Trust recommends that its shareholders vote in favor of
the approval of the New Investment Management Agreement for the Funds.
BOARD OF TRUSTEES' EVALUATION
On June 26, 1997, representatives of Scudder advised the Non-interested
Trustees of the Trust by means of a telephone conference call that Scudder had
entered into the Transaction Agreement. At that time, Scudder representatives
described the general terms of the proposed Transactions and the perceived
benefits for the Scudder organization and for its investment advisory clients.
Scudder subsequently furnished the Non-interested Trustees with additional
information regarding the proposed Transactions, including information regarding
the terms of the proposed Transactions, and information regarding the Zurich and
ZKI organizations. In a series of subsequent telephone conference calls and
in-person meetings, the Non-interested Trustees discussed this information among
themselves and with representatives of Scudder and Zurich. They were assisted in
their review of this information by their independent legal counsel and also
consulted with a representative of the Funds' independent auditors and with an
independent consultant knowledgeable in mutual fund industry matters.
In the course of these discussions, Scudder advised the Non-interested
Trustees that it did not expect that the proposed Transactions would have a
material effect on the operations of the Funds or their shareholders. Scudder
has advised the
5
<PAGE> 15
Non-interested Trustees that the Transaction Agreement, by its terms, does not
contemplate any changes in the structure or operations of the Funds. Scudder
representatives have informed the Trustees that Scudder currently intends to
maintain the separate existence of the funds that Scudder and ZKI manage in
their respective distribution channels. Scudder has also advised the
Non-interested Trustees that although it expects that various portions of the
ZKI organization would be combined with Scudder's operations, the senior
executives of Scudder overseeing those operations will remain largely unchanged.
It is possible, however, that changes in certain personnel currently involved in
providing services to the Funds may result from future efforts to combine the
strengths and efficiencies of both firms. In their discussions with the
Trustees, Scudder representatives also emphasized the strengths of the Zurich
organization and its commitment to provide the new Scudder Kemper organization
with the resources necessary to continue to provide high quality services to the
Funds and the other investment advisory clients of the new Scudder Kemper
organization.
The Board of the Trust was advised that Scudder intends to rely on Section
15(f) of the 1940 Act, which provides a non-exclusive safe harbor for an
investment adviser to an investment company or any of the investment adviser's
affiliated persons (as defined under the 1940 Act) to receive any amount or
benefit in connection with a change in control of the investment adviser so long
as two conditions are met. First, for a period of three years after the
transaction, at least 75% of the board members of the investment company must
not be "interested persons" of the investment company's investment adviser or
its predecessor adviser. On or prior to the consummation of the Transactions,
each of the Boards, assuming the election of the nominees that you are being
asked to elect in "Proposal 2: Election of Trustees," would be in compliance
with this provision of Section 15(f). (See "Proposal 2: Election of Trustees").
Second, an "unfair burden" must not be imposed upon the investment company as a
result of such transaction or any express or implied terms, conditions or
understandings applicable thereto. The term "unfair burden" is defined in
Section 15(f) to include any arrangement during the two-year period after the
transaction whereby the investment adviser, or any interested person of any such
adviser, receives or is entitled to receive any compensation, directly or
indirectly, from the investment company or its shareholders (other than fees for
bona fide investment advisory or other services) or from any person in
connection with the purchase or sale of securities or other property to, from or
on behalf of the investment company (other than bona fide ordinary compensation
as principal underwriter for such investment company). No such compensation
agreements are contemplated in connection with the Transactions. Scudder has
undertaken to pay the costs of preparing and distributing proxy materials to,
and of holding the meeting of, the Funds' shareholders as well as other fees and
expenses in connection with the Transactions, including the fees and expenses of
legal counsel and consultants to the Funds and the Non-interested Trustees.
During the course of their deliberations, the Non-interested Trustees
considered a variety of factors, including the nature, quality and extent of the
6
<PAGE> 16
services furnished by Scudder to the Funds; the necessity of Scudder's
maintaining and enhancing its ability to retain and attract capable personnel to
serve the Funds; the investment record of Scudder in managing the Funds; the
increased complexity of the domestic and international securities markets;
Scudder's profitability from advising the Funds; possible economies of scale;
comparative data as to investment performance, advisory fees and other fees,
including administrative fees, and expense ratios; the risks assumed by Scudder;
the advantages and possible disadvantages to the Funds of having an adviser of
the Funds which also serves other investment companies as well as other
accounts; possible benefits to Scudder from serving as manager to the Funds and
from affiliates of Scudder serving the Funds in various other capacities;
current and developing conditions in the financial services industry, including
the entry into the industry of large and well capitalized companies which are
spending and appear to be prepared to continue to spend substantial sums to
engage personnel and to provide services to competing investment companies; and
the financial resources of Scudder and the continuance of appropriate incentives
to assure that Scudder will continue to furnish high quality services to the
Funds.
In addition to the foregoing factors, the Non-interested Trustees gave
careful consideration to the likely impact of the Transactions on the Scudder
organization. In this regard, the Non-interested Trustees considered, among
other things, the structure of the Transactions which affords Scudder executives
substantial autonomy over Scudder's operations and provides substantial equity
participation and incentives for many Scudder employees; Scudder's and Zurich's
commitment to Scudder's paying compensation adequate to attract and retain top
quality personnel; Zurich's strategy for the development of its asset management
business through Scudder; information regarding the financial resources and
business reputation of Zurich; and the complementary nature of various aspects
of the business of Scudder and the Zurich Kemper organization and the intention
to maintain separate Scudder and Kemper brands in the mutual fund business.
Based on the foregoing, the Non-interested Trustees concluded that the
Transactions should cause no reduction in the quality of services provided to
the Funds and believe that the Transactions should enhance Scudder's ability to
provide such services. The Non-interested Trustees considered the foregoing
factors with respect to each of the Funds.
On August 6, 1997, the Trustees of the Trust, including the Non-interested
Trustees of the Trust, approved the New Investment Management Agreement.
INFORMATION CONCERNING THE TRANSACTIONS AND ZURICH
Under the Transaction Agreement, Zurich will pay $866.7 million in cash to
acquire two-thirds of Scudder's outstanding shares and will contribute ZKI to
Scudder for additional shares, following which Zurich will have a 79.1% fully
diluted equity interest in the combined business. Zurich will then transfer a
9.6% fully diluted equity interest in Scudder Kemper to a defined contribution
plan for the benefit of Scudder and ZKI employees, as well as cash and warrants
on
7
<PAGE> 17
Zurich shares for award to Scudder employees, in each case subject to five-year
vesting schedules. After giving effect to the Transactions, current Scudder
stockholders will have a 29.6% fully diluted equity interest in Scudder Kemper
and Zurich will have a 69.5% fully diluted interest in Scudder Kemper. Scudder's
name will be changed to Scudder Kemper Investments, Inc.
The purchase price for Scudder or for ZKI in the Transactions is subject to
adjustment based on the impact to revenues of non-consenting clients, and will
be reduced if the annualized investment management fee revenues (excluding the
effect of market changes, but taking into account new assets under management)
from clients at the time of closing, as a percentage of such revenues as of June
30, 1997 (the "Revenue Run Rate Percentage"), is less than 90%.
At the closing, Zurich and the other stockholders of Scudder Kemper will
enter into a Second Amended and Restated Security Holders Agreement (the "New
SHA"). Under the New SHA, Scudder stockholders will be entitled to designate
three of the seven members of the Scudder Kemper board of directors and two of
the four members of an Executive Committee, which will be the primary
management-level committee of Scudder Kemper. Zurich will be entitled to
designate the other four members of the Scudder Kemper board and the other two
members of the Executive Committee.
The names, addresses and principal occupations of the initial Scudder-
designated directors of Scudder Kemper are as follows: Lynn S. Birdsong, 345
Park Avenue, New York, New York, Managing Director Scudder; Cornelia M. Small,
345 Park Avenue, New York, New York, Managing Director of Scudder; and Edmond D.
Villani, 345 Park Avenue, New York, New York, President, Chief Executive Officer
and Managing Director of Scudder.
The names, addresses and principal occupations of the initial Zurich-
designated directors of Scudder Kemper are as follows: Lawrence W. Cheng,
Mythenquai 2, Zurich, Switzerland, Chief Investment Officer for Investments and
Institutional Asset Management and the corporate functions of Securities and
Real Estate for Zurich; Steven M. Gluckstern, Mythenquai 2, Zurich, Switzerland,
responsible for Reinsurance, Structured Finance, Capital Market Products and
Strategic Investments, and a member of the Corporate Executive Board of Zurich;
Rolf Hueppi, Mythenquai 2, Zurich, Switzerland, Chairman of the Board and Chief
Executive Officer of Zurich; and Markus Rohrbasser, Mythenquai 2, Zurich,
Switzerland, Chief Financial Officer and member of the Corporate Executive Board
of Zurich.
The initial Scudder-designated Executive Committee members will be Messrs.
Birdsong and Villani (Chairman). The initial Zurich-designated Executive
Committee members will be Messrs. Cheng and Rohrbasser.
The New SHA requires the approval of a majority of the Scudder-designated
directors for certain decisions, including changing the name of Scudder Kemper,
effecting an initial public offering before April 15, 2005, causing Scudder
Kemper to engage substantially in non-investment management and related
8
<PAGE> 18
business, making material acquisitions or divestitures, making material changes
in Scudder Kemper's capital structure, dissolving or liquidating Scudder Kemper,
or entering into certain affiliated transactions with Zurich. The New SHA also
provides for various put and call rights with respect to Scudder Kemper stock
held by current Scudder employees, limitations on Zurich's ability to purchase
other asset management companies outside of Scudder Kemper, rights of Zurich to
repurchase Scudder Kemper stock upon termination of employment of Scudder Kemper
personnel, and registration rights for stock held by continuing Scudder
stockholders.
The Transactions are subject to a number of conditions, including approval
by Scudder stockholders; the Revenue Run Rate Percentages of Scudder and ZKI
being at least 75%; Scudder and ZKI having obtained director and shareholder
approvals from U.S.-registered funds representing 90% of assets of such funds
under management as of June 30, 1997; the absence of any restraining order or
injunction preventing the Transactions, or any litigation challenging the
Transactions that is reasonably likely to result in an injunction or
invalidation of the Transactions, and the continued accuracy of the
representations and warranties contained in the Transaction Agreement. The
Transactions are expected to close during the fourth quarter of 1997.
The information set forth above concerning the Transactions has been
provided to the Trust by Scudder, and the information set forth below concerning
Zurich has been provided to the Trust by Zurich.
Founded in 1872, Zurich is a multinational, public corporation organized
under the laws of Switzerland. Its home office is located at Mythenquai 2, 8002
Zurich, Switzerland. Historically, Zurich's earnings have resulted from its
operations as an insurer as well as from its ownership of its subsidiaries and
affiliated companies (the "Zurich Insurance Group"). Zurich and the Zurich
Insurance Group provide an extensive range of insurance products and services,
and have branch offices and subsidiaries in more than 40 countries throughout
the world. Zurich Insurance Group is particularly strong in the insurance of
international companies and organizations. Over the past few years, Zurich's
global presence, particularly in the United States, has been strengthened by
means of selective acquisitions.
DESCRIPTION OF THE CURRENT INVESTMENT MANAGEMENT AGREEMENT
Under the Current Investment Management Agreement, Scudder provides each
Fund with continuing investment management services. The Investment Manager also
determines which securities shall be purchased, held, or sold, and what portion
of each Fund's assets shall be held uninvested, subject to the Trust's
Declaration of Trust, By-Laws, investment policies and restrictions, the
provisions of the 1940 Act, and such policies and instructions as the Trustees
may determine.
9
<PAGE> 19
The Current Investment Management Agreement provides that the Investment
Manager will provide portfolio management services, place portfolio transactions
in accordance with policies expressed in each Fund's registration statement, pay
each Fund's office rent, render significant administrative services on behalf of
each Fund (not otherwise provided by third parties) necessary for each Fund's
operating as an open-end investment company including, but not limited to,
preparing reports to and meeting materials for the Trust's Board of Trustees and
reports and notices to Fund shareholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of
various third-party and affiliated service providers to each Fund (such as each
Fund's transfer and pricing agents, fund accounting agent, custodian,
accountants and others) and other persons in any capacity deemed necessary or
desirable to Fund operations; preparing and making filings with the Securities
and Exchange Commission (the "SEC" or the "Commission") and other regulatory and
self-regulatory organizations, including but not limited to, preliminary and
definitive proxy materials, post-effective amendments to the Registration
Statement, semi-annual reports on Form N-SAR and notices pursuant to Rule 24f-2
under the 1940 Act; overseeing the tabulation of proxies by each Fund's transfer
agent; assisting in the preparation and filing of each Fund's federal, state and
local tax returns; preparing and filing each Fund's federal excise tax returns
pursuant to Section 4982 of the Internal Revenue Code of 1986, as amended;
providing assistance with investor and public relations matters; monitoring the
valuation of portfolio securities and the calculation of net asset value;
monitoring the registration of shares of each Fund under applicable federal and
state securities laws; maintaining or causing to be maintained for each Fund all
books, records and reports and any other information required under the 1940
Act, to the extent such books, records and reports and other information are not
maintained by each Fund's custodian or other agents of each Fund; assisting in
establishing accounting policies of each Fund; assisting in the resolution of
accounting issues that may arise with respect to each Fund's operations and
consulting with each Fund's independent accountants, legal counsel and each
Fund's other agents as necessary in connection therewith; establishing and
monitoring each Fund's operating expense budgets; reviewing each Fund's bills;
processing the payment of bills that have been approved by an authorized person;
assisting each Fund in determining the amount of dividends and distributions
available to be paid by each Fund to its shareholders, preparing and arranging
for the printing of dividend notices to shareholders, and providing the transfer
and dividend paying agent, the custodian, and the accounting agent with such
information as is required for such parties to effect the payment of dividends
and distributions; and otherwise assisting each Fund in the conduct of its
business, subject to the direction and control of the Trust's Board of Trustees.
The Current Investment Management Agreement also provides that the
Investment Manager is not required to pay any expenses of the Funds except those
expenses specifically allocated to the Investment Manager in the Current
10
<PAGE> 20
Investment Management Agreement and under the Special Servicing Agreement
("Service Agreement") among the Investment Manager, the Trust, Scudder Fund
Accounting Corporation, Scudder Service Corporation, Scudder Trust Company,
Scudder Investor Services, Inc., and the various funds in which the Trust's
Funds may invest ("Underlying Funds"). Under the Service Agreement, the
Investment Manager is responsible for arranging all services pertaining to the
operation of the Trust including the services of Scudder Service Corporation and
Scudder Fund Accounting Corporation to act as Shareholder Servicing Agent and
Fund Accounting Agent, respectively, for each Fund of the Trust.
Each Fund is responsible for other expenses, including organizational
expenses (including out-of-pocket expenses, but not including the Investment
Manager's overhead or employee costs); brokers' commissions or other costs of
acquiring or disposing of any portfolio securities of each Fund; legal, auditing
and accounting expenses; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; taxes and
governmental fees; the fees and expenses of each Fund's transfer agent; expenses
of preparing share certificates and any other expenses, including clerical
expenses, of issuance, offering, distribution, sale, redemption or repurchase of
shares; the expenses of and fees for registering or qualifying securities for
sale; the fees and expenses of Non-interested Trustees; the cost of printing and
distributing reports, notices and dividends to current shareholders; and the
fees and expenses of each Fund's custodians, subcustodians, accounting agent,
dividend disbursing agents and registrars. Each Fund may arrange to have third
parties assume all or part of the expenses of sale, underwriting and
distribution of shares of each Fund. Each Fund is also responsible for expenses
of shareholders' and other meetings, the cost of responding to shareholders'
inquiries, and its expenses incurred in connection with litigation, proceedings
and claims and the legal obligation it may have to indemnify officers and
Trustees of the Trust with respect thereto. Each Fund is also responsible for
the maintenance of books and records which are required to be maintained by each
Fund's custodian or other agents of the Trust; telephone, telex, facsimile,
postage and other communications expenses; any fees, dues and expenses incurred
by each Fund in connection with membership in investment company trade
organizations; expenses of printing and mailing prospectuses and statements of
additional information of each Fund and supplements thereto to current
shareholders; costs of stationery; fees payable to the Investment Manager and to
any other Fund advisors or consultants; expenses relating to investor and public
relations; interest charges, bond premiums and other insurance expense; freight,
insurance and other charges in connection with the shipment of each Fund's
portfolio securities; and other expenses.
The Investment Manager is responsible for the payment of the compensation
and expenses of all Trustees, officers and executive employees of each Fund
(including each Fund's share of payroll taxes) affiliated with the Investment
Manager and making available, without expense to each Fund, the services of such
Trustees, officers and employees as may duly be elected officers
11
<PAGE> 21
of the Trust subject to their individual consent to serve and to any limitations
imposed by law. Each Fund is responsible for the fees and expenses (specifically
including travel expenses relating to Fund business) of Trustees not affiliated
with the Investment Manager. Under the Current Investment Management Agreement,
the Investment Manager also pays each Fund's share of payroll taxes, as well as
expenses, such as travel expenses (or an appropriate portion thereof), of
Trustees and officers of the Trust who are directors, officers or employees of
the Investment Manager, except to the extent that such expenses relate to
attendance at meetings of the Board of Trustees of the Trust or any committees
thereof or advisors thereto, held outside Boston, Massachusetts or New York, New
York. During the Trust's most recent fiscal year, no compensation, direct or
otherwise (other than through fees paid to the Investment Manager), was paid or
became payable by the Trust to any of its officers or Trustees who were
affiliated with the Investment Manager.
The Investment Manager does not receive a fee for its services under the
Current Investment Management Agreement since the Investment Manager expects to
receive additional compensation under investment management agreements currently
in effect between the Investment Manager and the Underlying Funds due to growth
in the assets of the Underlying Funds resulting from investment in the
Underlying Funds by the Funds.
The Current Investment Management Agreement further provides that the
Investment Manager shall not be liable for any error of judgment or mistake of
law or for any loss suffered by any Fund in connection with matters to which
such agreement relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Investment Manager in the
performance of its duties or from reckless disregard by the Investment Manager
of its obligations and duties under such agreement.
The Current Investment Management Agreement may be terminated without
penalty upon sixty (60) days' written notice by either party. Each Fund may
agree to terminate the Current Investment Management Agreement either by the
vote of a majority of the outstanding voting securities of the Fund, or by a
vote of the Board of Trustees. As stated above, the Current Investment
Management Agreement automatically terminates in the event of its assignment.
Scudder has acted as the Investment Manager for each Fund since each Fund
commenced operations as shown below. Also shown below is the date of each
Current Investment Management Agreement, the date when the Current Investment
Management Agreement was last approved by the Trustees and the shareholders of
each Fund and the date to which the Current Investment Management Agreement was
last continued. The Current Investment Management Agreement was last submitted
to shareholders prior to its becoming effective, as required by the 1940 Act.
12
<PAGE> 22
<TABLE>
<CAPTION>
DATE OF
CURRENT
INVESTMENT LAST LAST
COMMENCED MANAGEMENT APPROVED BY APPROVED BY DATE
NAME OF FUND OPERATIONS AGREEMENT TRUSTEES SHAREHOLDERS CONTINUED TO
- ------------------------ --------- ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Conservative Portfolio 11/15/96 11/15/96 8/6/97 11/11/96 9/30/98
Balanced Portfolio 11/15/96 11/15/96 8/6/97 11/11/96 9/30/98
Growth Portfolio 11/15/96 11/15/96 8/6/97 11/11/96 9/30/98
International Portfolio 11/15/96 11/15/96 8/6/97 11/11/96 9/30/98
</TABLE>
THE NEW INVESTMENT MANAGEMENT AGREEMENT
The New Investment Management Agreement for the Funds will be dated as of
the date of the consummation of the Transactions, which is expected to occur in
the fourth quarter of 1997, but in no event later than February 28, 1998. The
New Investment Management Agreement will be in effect for an initial term ending
on the same date as would the Current Investment Management Agreement but for
the Transactions, and may continue thereafter from year to year only if
specifically approved at least annually by the vote of "a majority of the
outstanding voting securities" of each Fund, or by the Board and, in either
event, the vote of a majority of the Non-interested Trustees cast in person at a
meeting called for such purpose. In the event that shareholders of each Fund do
not approve the New Investment Management Agreement, the Current Investment
Management Agreement will remain in effect until the closing of the
Transactions, at which time it would terminate. In such event, the Board will
take such action as it deems to be in the best interests of the Fund and its
shareholders. In the event the Transactions are not consummated, Scudder will
continue to provide services to each Fund in accordance with the terms of the
Current Investment Management Agreement for such periods as may be approved at
least annually by the Board, including a majority of the Non-interested
Trustees.
DIFFERENCES BETWEEN THE CURRENT AND NEW INVESTMENT MANAGEMENT AGREEMENT
The New Investment Management Agreement is substantially the same as the
Current Investment Management Agreement in all material respects. The principal
changes that have been made are summarized below. The New Investment Management
Agreement reflects conforming changes that have been made in order to promote
consistency among all funds currently advised by Scudder and to permit ease of
administration. For example, the Trust on behalf of each Fund proposes to update
the list of types of services that may be provided by the Investment Manager to
include the monitoring of accounting
13
<PAGE> 23
agents. In addition, the New Investment Management Agreement would specify that
the Investment Manager is not responsible for payment of the fees and expenses
of the Fund's accounting agent. The Trust, on behalf of each of the Funds, would
add "accounting agents" to the list of service providers to which the Investment
Manager must provide information in connection with the payment of dividends and
distributions. In addition, the New Investment Management Agreement would
clarify that purchase and sale opportunities, which are suitable for more than
one client of the Investment Manager, will be allocated by the Investment
Manager in an equitable manner.
Other conforming changes include: deletion of the Investment Manager's
potential responsibility for monitoring the calculation and payment of
distributions to shareholders; deletion of a provision that does not hold the
Investment Manager responsible for extraordinary expenses of the Funds; a
provision clarifying that the Investment Manager will not be responsible for
expenses related to the indemnification of Trustees and officers of the Trust;
and inclusion of a provision clarifying that the New Investment Management
Agreement supersedes all prior agreements.
INVESTMENT MANAGER
Scudder is one of the most experienced investment counsel firms in the
United States. It was established in 1919 as a partnership and was restructured
as a Delaware corporation in 1985. The principal source of Scudder's income is
professional fees received from providing continuing investment advice. Scudder
provides investment counsel for many individuals and institutions, including
insurance companies, endowments, industrial corporations and financial and
banking organizations.
As stated above, Scudder is a Delaware corporation. Daniel Pierce* is the
Chairman of the Board of Scudder, Edmond D. Villani# is President and Chief
Executive Officer of Scudder, Stephen R. Beckwith#, Lynn S. Birdsong#, Nicholas
Bratt#, E. Michael Brown*, Mark S. Casady*, Linda C. Coughlin*, Margaret D.
Hadzima*, Jerard K. Hartman#, Richard A. Holt@, John T. Packard+, Kathryn L.
Quirk#, Cornelia M. Small# and Stephen A. Wohler* are the other members of the
Board of Directors of Scudder (see footnote for symbol key).+ The principal
occupation of each of the above named individuals is serving as a Managing
Director of Scudder.
All of the outstanding voting and nonvoting securities of Scudder are held
of record by Stephen R. Beckwith, Juris Padegs#, Daniel Pierce and Edmond D.
Villani in their capacity as the representatives of the beneficial owners of
such
- ------------------------------
+
* Two International Place, Boston, Massachusetts
# 345 Park Avenue, New York, New York
+ 101 California Street, San Francisco, California
@ Two Prudential Plaza, 180 North Stetson, Suite 5400, Chicago, Illinois.
14
<PAGE> 24
securities (the "Representatives"), pursuant to a Security Holders' Agreement
among Scudder, the beneficial owners of securities of Scudder and such
Representatives. Pursuant to the Security Holders' Agreement, the
Representatives have the right to reallocate shares among the beneficial owners
from time to time. Such reallocations will be at net book value in cash
transactions. All Managing Directors of Scudder own voting and nonvoting stock
and all Principals of Scudder own nonvoting stock.
Directors, officers and employees of Scudder from time to time may enter
into transactions with various banks, including each Fund's custodian bank. It
is Scudder's opinion that the terms and conditions of those transactions will
not be influenced by existing or potential custodial or other Fund
relationships.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of Scudder,
computes net asset value for each Fund. Scudder Service Corporation ("SSC"),
also a subsidiary of Scudder, is the transfer, shareholder servicing and
dividend-paying agent for each Fund. Scudder Trust Company ("STC"), an affiliate
of Scudder, provides subaccounting and recordkeeping services for shareholder
accounts in certain retirement and employee benefit plans. The table below sets
forth for each Fund the respective fees paid to SFAC, SSC and STC during the
last fiscal year of each Fund.
<TABLE>
<CAPTION>
AGGREGATE FEE PAID AGGREGATE FEE PAID AGGREGATE FEE PAID
TO SFAC DURING TO SSC DURING TO STC DURING
NAME OF FUND FISCAL YEAR* LAST FISCAL YEAR* LAST FISCAL YEAR* LAST FISCAL YEAR*
- ------------- ------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Conservative
Portfolio 9/30/97 $ 23,281 $ 12,687 $ 46,403
Balanced
Portfolio 9/30/97 $ 25,588 $ 24,723 $362,712
Growth
Portfolio 9/30/97 $ 23,281 $ 42,956 $ 73,905
International
Portfolio 9/30/97 $ 23,281 $ 22,330 $ 327
</TABLE>
- ------------------------------
* As of 6/30/97.
SFAC, SSC and STC will continue to provide fund accounting and transfer
agency, subaccounting and recordkeeping services to the Funds under the current
arrangements if the New Investment Management Agreement is approved.
Exhibit B sets forth the fees and other information regarding other
investment companies advised by Scudder.
BROKERAGE COMMISSIONS ON PORTFOLIO TRANSACTIONS
To the maximum extent feasible, Scudder places orders for portfolio
transactions through Scudder Investor Services, Inc., Two International Place,
Boston, Massachusetts 02110 (the "Distributor") (a corporation registered as a
15
<PAGE> 25
broker/dealer and a subsidiary of Scudder), which in turn places orders on
behalf of the Funds with issuers, underwriters or other brokers and dealers. In
selecting brokers and dealers with which to place portfolio transactions for a
Fund, Scudder will not consider sales of shares of funds currently advised by
ZKI, although it may place such transactions with brokers and dealers that sell
shares of funds currently advised by ZKI. The Distributor receives no
commissions, fees or other remuneration from the Funds for this service.
Allocation of portfolio transactions is supervised by Scudder.
REQUIRED VOTE
Approval of the New Investment Management Agreement for any Fund requires
the affirmative vote of a "majority of the outstanding voting securities" of the
Fund, as defined above. The Trustees of the Trust recommend that the
shareholders of each Fund vote in favor of this Proposal 1.
PROPOSAL 2: ELECTION OF TRUSTEES
At the Special Meeting, five Trustees are to be elected to constitute the
Trust's Board. For election of Trustees at the Special Meeting, the Board of
Trustees has approved the nomination of the following individuals: Dr. Rosita P.
Chang, Edgar R. Fiedler, Peter B. Freeman, Dr. J. D. Hammond and Richard M.
Hunt.
The persons named as proxies on the enclosed proxy card will vote for the
election of the nominees named above unless authority to vote for any or all of
the nominees is withheld in the proxy. Each Trustee so elected will serve as a
Trustee of the 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 Declaration of Trust of the 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 table sets forth certain information concerning the current Trustees
and the nominees. Unless otherwise noted, each of the Trustees and nominees has
engaged in the principal occupation listed in the following table for more than
five years, but not necessarily in the same capacity.
16
<PAGE> 26
NOMINEES:
<TABLE>
<CAPTION>
PRESENT OFFICE WITH THE TRUST
(DATE NOMINEE BECAME TRUSTEE),
PRINCIPAL OCCUPATION OR
NAME (AGE) EMPLOYMENT AND DIRECTORSHIPS
---------------------------------------------------------------
<S> <C>
DR. ROSITA P. CHANG (42) Professor of Finance, University of Rhode Island. Dr. Chang
serves on the Boards of an additional Trust whose Funds are
advised by Scudder.
EDGAR R. FIEDLER* (68) Trustee (1995). Senior Fellow and Economic Counsellor, The
Conference Board, Inc.; Formerly Assistant Secretary of the
Treasury for Economic Policy. Director: The Stanley Works;
Harris Insight Funds; and Emerging Mexico Fund. Mr. Fiedler
serves on the Boards of an additional 8 Trusts or Corporations
whose Funds are advised by Scudder.
PETER B. FREEMAN (65) Director, The A. H. Belo Company; Trustee, Eastern Utilities
Associates (electric utility holding company); Director, AMICA
Life Insurance Co.; Director, AMICA Insurance Co. Formerly:
President, Fields Point Management Co. and Goelet Estate Co.
(private investment management companies); Former Director, The
Providence Journal Company (multi-media company). Mr. Freeman
serves on the Boards of an additional 9 Trusts or Corporations
whose Funds are advised by Scudder.
DR. J. D. HAMMOND (63) Trustee (1995). Dean, Smeal College of Business Administration,
Pennsylvania State University; Member of the Board, The
Atlantic Mutual Insurance Co. Former Trustee, President Mutual
Life Insurance Company. Dr. Hammond serves on the Board of an
additional Trust whose Funds are advised by Scudder.
RICHARD M. HUNT (70) Trustee (1995). University Marshall and Senior Lecturer,
Harvard University; Vice Chairman, American Council on Germany;
Director, Council on the United States and Italy; Life Trustee,
American Field Service; and Partner, Elmhurst Investment Trust
(family investment firm). Mr. Hunt serves on the Boards of an
additional 2 Trusts or Corporations whose Funds are advised by
Scudder.
</TABLE>
- ------------------------------
* Trustee considered by the Trust and its counsel to be an "interested person"
(as defined in the 1940 Act) of the Trust or of its investment manager because
of their employment by the Investment Manager and, in some cases, holding
offices with the Trust. Although the Trustees do not currently intend to
permit a Fund to borrow for investment leverage purposes, such borrowings
would increase the Fund's volatility and the risk of loss in a declining
market. Although Mr. Fiedler is currently not an "interested person," he may
be deemed to be so in the future by the Commission because of his prior
service as a director of Zurich American Insurance Company, a subsidiary of
Zurich. Mr. Fiedler resigned from that position in July 1997 and has had no
further affiliation with Zurich or any of its subsidiaries since that date.
17
<PAGE> 27
CURRENT TRUSTEES NOT STANDING FOR RE-ELECTION:
<TABLE>
<CAPTION>
PRESENT OFFICE WITH THE TRUST
(DATE NOMINEE BECAME TRUSTEE),
NAME (AGE) PRINCIPAL OCCUPATION OR
----------- EMPLOYMENT AND DIRECTORSHIPS
---------------------------------------------------------------
<S> <C>
DAVID S. LEE* (63) President and Trustee (1994). Managing Director, Scudder,
Stevens & Clark, Inc.; Trustee Emeritus, New England Medical
Center. Mr. Lee serves on the Boards of an additional 16 Trusts
or Corporations whose Funds are advised by Scudder.
DANIEL PIERCE* (63) Vice President and Trustee (1995). Chairman of the Board and
Managing Director of Scudder, Stevens & Clark, Inc. Director,
Fiduciary Trust Company (bank and trust company) and Fiduciary
Company Incorporated (bank and trust company). Mr. Pierce
serves on the Boards of an additional 18 Trusts or Corporations
whose Funds are advised by Scudder.
</TABLE>
- ------------------------------
* Trustees considered by the Trust and its counsel to be "interested persons"
(as defined in the 1940 Act) of the Trust or of its investment manager because
of their employment by the Investment Manager and, in some cases, holding
offices with the Trust.
The table below sets forth the number of shares of each Fund owned directly
or beneficially by the nominees to and the Trustees of the Board of Trustees as
of June 30, 1997. Nominees or Trustees who do not own any Shares have been
omitted from the table.
<TABLE>
<CAPTION>
ALL CURRENT TRUSTEES
AND OFFICERS AS A
FUND NAME(1) FIEDLER HAMMOND GROUP
--------------------- ------- ------- --------------------
<S> <C> <C> <C>
Scudder Pathway
Series
Balanced Portfolio -- 3,968 24,338(2)
Conservative
Portfolio -- -- 208(3)
Growth Portfolio -- 1,927 33,459(4)
International
Portfolio 410 -- 15,425(5)
</TABLE>
- ------------------------------
(1) The information as to beneficial ownership is based on statements furnished
to the Trust by each Trustee and nominee. Unless otherwise noted, beneficial
ownership is based on sole voting and investment power. Each Trustee's and
nominee's individual shareholdings of any Fund constitutes less than 1/4 of
1% of the shares outstanding of such Fund. As a group, the Trustees and
officers own less than 1/4 of 1% of the shares of each Fund except Scudder
Pathway Growth Portfolio and Scudder Pathway International Portfolio (see
notes 4 and 5 below).
(2) As a group, the Trustees and officers' total includes 20,370 shares held
with sole voting but no investment power. Shares held with sole voting but
no investment power are shares held in profit sharing and 401(k) plans for
which Jerard K. Hartman serves as Trustee.
18
<PAGE> 28
(3) As a group on June 30, 1997, the Trustees and officers' total shares in
Scudder Pathway Conservative Portfolio were held with sole voting but no
investment power. Shares held with sole voting but no investment power are
shares held in profit sharing and 401(k) plans for which Jerard K. Hartman
serves as Trustee.
(4) As a group on June 30, 1997, the Trustees and officers owned 1.07% of the
outstanding shares of Scudder Pathway Growth Portfolio of which 1,927 shares
were held with sole voting and investment power, and 31,532 shares were held
with sole voting but no investment power. Shares held with sole voting but
no investment power are shares held in profit sharing and 401(k) plans for
which Jerard K. Hartman serves as Trustee.
(5) As a group on June 30, 1997, the Trustees and officers owned 2.31% of the
outstanding shares of Scudder Pathway International Portfolio which were
held with sole voting but no investment power. Shares held with sole voting
but no investment power are shares held in profit sharing and 401(k) plans
for which Jerard K. Hartman serves as Trustee.
As of June 30, 1997, 1,466,492 shares in the aggregate, 11.37% of the
outstanding shares of Scudder Pathway Balanced Portfolio were held in the name
of Scudder, Stevens & Clark Trustee, Scudder Defined Benefit Plan & Trust, 345
Park Avenue, New York, NY 10154, who may be deemed to be the beneficial owner of
certain of these shares, but disclaims any beneficial ownership therein.
As of June 30, 1997, 217,782 shares in the aggregate, 19.98% of the
outstanding shares of Scudder Pathway Conservative Portfolio, were held in the
name of Trustees of the ACR Defined Contribution Retirement Plan & Trust, 747
Locus Street, Pasadena, CA 91101, who may be deemed to be the beneficial owner
of certain of these shares, but disclaims any beneficial ownership therein.
As of June 30, 1997, 198,629 shares in the aggregate, 6.32% of the
outstanding shares of Scudder Pathway Growth Portfolio, were held in the name of
Scudder Trust Company Trustee, O'Neil & Associates Inc. Profit Sharing and
Savings Plan Trust, 425 North Findlay Street, Dayton, OH 45404, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
As of June 30, 1997, 39,827 shares in the aggregate, 5.97% of the
outstanding shares of Scudder Pathway International Portfolio, were held in the
name of Farmers Fire Insurance Co., P.O. Box 2336,York, PA 17405, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
To the best of the Trust's knowledge, as of June 30, 1997, no person owned
beneficially more than 5% of any Fund's outstanding shares, except as stated
above.
19
<PAGE> 29
RESPONSIBILITIES OF THE BOARD--BOARD AND COMMITTEE MEETINGS
The Board of Trustees of the Trust is responsible for the general oversight
of Fund business. A majority of the Board's members are not affiliated with
Scudder. These Non-interested Trustees have primary responsibility for assuring
that each Fund is managed in a manner consistent with the best interests of its
shareholders. The Board met once during 1996.
The Board of Trustees meets at least quarterly to review the investment
performance of the Funds and other operational matters, including policies and
procedures designed to assure compliance with various regulatory requirements.
At least annually, the Non-interested Trustees review the fees paid to the
Investment Manager and its affiliates for investment advisory services and
other administrative and shareholder services. In this regard, they evaluate,
among other things, each Fund's investment performance, the quality and
efficiency of the various other services provided, costs incurred by the
Investment Manager and its affiliates, and comparative information regarding
fees and expenses of competitive funds. They are assisted in this process by
the Funds' independent public accountants and by independent legal counsel
selected by the Non-interested Trustees. In addition, the Non-interested
Trustees from time to time have established and served on task forces and
subcommittees focusing on particular matters such as investment, accounting and
shareholder service issues.
The Board of the Trust has both an Audit Committee and a Committee on
Independent Trustees, the responsibilities of which are described below.
AUDIT COMMITTEE
The Board of the Trust has an Audit Committee consisting of the Non-
interested Trustees. The Audit Committee reviews with management and the
independent accountants for each Fund, among other things, the scope of the
audit and the controls of each Fund and its agents, reviews and approves in
advance the type of services to be rendered by independent accountants,
recommends the selection of independent accountants for each Fund to the Board
and, in general, considers and reports to the Board on matters regarding each
Fund's accounting and bookkeeping practices. The Audit Committee did not meet in
1996.
COMMITTEE ON INDEPENDENT TRUSTEES
The Board of the Trust has a Committee on Independent Trustees consisting
of all the Non-interested Trustees. The Committee is charged with the duty of
making all nominations for Non-interested Trustees and consideration of other
related matters. Shareholders' recommendations as to nominees received by
management are referred to the Committee for its consideration and action. The
Committee on Independent Trustees did not meet in 1996.
20
<PAGE> 30
In addition to attending Board and committee meetings, the Trustees attend
various other meetings on behalf of the Trust, including meetings with their
independent legal counsel and informational meetings.
EXECUTIVE OFFICERS
In addition to Messrs. Lee and Pierce, Trustees who are also officers of
the Trust, the following persons are Executive Officers of Scudder Pathway
Series:
<TABLE>
<CAPTION>
PRESENT OFFICE WITH THE
TRUST;
PRINCIPAL OCCUPATION OR YEAR FIRST BECAME
NAME (AGE) EMPLOYMENT(1) AN OFFICER(2)
------------------------- -----------------
<S> <C> <C>
Jerard K. Hartman(64) Vice President; Managing
Director of Scudder,
Stevens & Clark, Inc. 1995
Thomas W. Joseph(58) Vice President; Principal
of Scudder, Stevens &
Clark, Inc. 1994
Thomas F. McDonough(50) Vice President and
Secretary; Principal of
Scudder, Stevens & Clark,
Inc. 1994
Pamela A. McGrath(43) Vice President and
Treasurer; Managing
Director of Scudder,
Stevens & Clark, Inc. 1994
Edward J. O'Connell(52) Vice President and
Assistant Treasurer;
Principal of Scudder,
Stevens & Clark, Inc. 1995
Kathryn L. Quirk(44) Vice President and
Assistant Secretary;
Managing Director of
Scudder, Stevens & Clark,
Inc. 1995
</TABLE>
- ------------------------------
(1) Unless otherwise stated, all of the Executive 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 Trust.
COMPENSATION OF TRUSTEES AND OFFICERS
Scudder supervises each Fund's investments, pays the compensation and
certain expenses of its personnel who serve as Trustees and officers of the
Trust and receives no management fee for its services. Several of the Trust's
officers and Trustees are also officers, Directors, employees or shareholders of
Scudder and participate in fees paid to that firm, although such Trust makes no
direct
21
<PAGE> 31
payments to them other than for reimbursement of travel expenses in connection
with their attendance at Trustees' and committee meetings.
The following Compensation Table provides in tabular form the following
data:
Column (1) All Trustees who receive compensation from the Trust.
Column (2) Estimated aggregate compensation received by each Trustee
of the Trust for the current fiscal year.
Column (3) Total compensation received by each Trustee from funds
managed by Scudder (collectively, the "Fund Complex") during the calendar
year 1996.
The Trustees do not receive any pension or retirement benefits from any
Trust in the Fund Complex, unless otherwise noted.
COMPENSATION TABLE
<TABLE>
<CAPTION>
(3)
TOTAL COMPENSATION
FROM THE TRUST AND
(2) FUND
(1) AGGREGATE COMPENSATION COMPLEX PAID TO
NAME OF TRUSTEE FROM THE TRUST* TRUSTEE
- ------------------ ---------------------- ----------------------
<S> <C> <C>
Edgar R. Fiedler** $ 12,620 $ 108,083 (24 Funds)
Dr. J. D. Hammond $ 11,820 $ 26,333 (11 Funds)
Richard M. Hunt $ 12,620 $ 24,750 (6 Funds)
Dr. Rosita P.
Chang -- $ 26,233 (7 Funds)
Peter B. Freeman -- $ 131,734 (33 Funds)
</TABLE>
- ------------------------------
* Since the Trust has not completed its first full year of operations,
compensation information provided in the above table is estimated for the
current fiscal year based upon payments made during the period from November
15, 1996 (commencement of operations) through June 30, 1997 (excluding
voluntary compensation deferrals).
** As of December 31, 1996, Mr. Fiedler had a total of $420,490 accrued over a
number of years in a deferred compensation program for serving on the Boards
of Directors of Scudder Fund, Inc. and Scudder Institutional Fund, Inc.
REQUIRED VOTE
Election of each of the listed nominees for Trustee requires the
affirmative vote of a plurality of the votes of the Trust cast at the Special
Meeting in person or by proxy. This means that the five nominees receiving the
largest number of votes will be elected. The Trustees of the Trust recommend
that the shareholders of the Trust vote in favor of each of the nominees listed
in this Proposal 2.
22
<PAGE> 32
PROPOSAL 3: APPROVAL OR DISAPPROVAL OF
THE BOARD'S DISCRETIONARY AUTHORITY TO
CONVERT EACH FUND TO A MASTER-FEEDER STRUCTURE
If this Proposal 3 is approved by shareholders, the Board could determine
that the objectives of a Fund would be achieved more efficiently, while
retaining its current distribution arrangements, by investing in a master fund
in a master/feeder fund structure as described below, and in that case cause the
Fund to do so without further approval by shareholders.
A master/feeder fund structure is one in which a fund (a feeder) invests
all of its investment assets in another investment company (the master) with
substantially the same investment objectives and policies as the feeder. Such a
structure permits the pooling of assets of two or more feeder funds in the
master fund in an effort to achieve possible economies of scale and efficiencies
in portfolio management, while preserving separate identities, management and
distribution channels at the feeder level. An existing investment company could
convert to a feeder by selling all of its investments, which involves brokerage
and other transaction costs and the realization of taxable gain or loss, or by
contributing its assets to the master fund and avoiding transaction costs and,
if proper procedures are followed, the realization of taxable gain or loss.
Under the Trust's Declaration of Trust, the affirmative vote of a majority
of the shares of a Fund is required to sell or transfer substantially all of the
assets of the Fund. One way to convert a Fund to a master/feeder fund structure
is through a sale or transfer of assets. Thus, approval of the Board's
discretionary authority to convert a Fund to a master/feeder fund structure
through a sale or transfer of assets requires, under a conservative
interpretation of the Trust's Declaration of Trust, the affirmative vote of a
majority of the shares of the Fund. In addition, because of the special
provisions of the 1940 Act relating to a "fund of funds," regulatory approval
would be required for any Fund to convert to a master/feeder structure. There is
no assurance that such approval, if sought, would be granted.
A master fund must have the identical investment objective and
substantially the same investment policies as its feeder funds. This means that
the assets of the master fund are invested in the same types of securities in
which its feeder funds are authorized to invest.
Management of the Trust believes that, generally, the larger the pool of
assets being managed the more efficiently and cost-effectively it can be
managed. Because a master fund pools the assets of multiple feeder funds, it
provides an effective means of creating larger asset pools. Whether the Board
would exercise its discretionary authority to convert a Fund to a master/feeder
fund structure would depend upon the existence of appropriate opportunities to
pool the Fund's assets with those of other feeder funds. The primary motivation
for considering a master/feeder fund structure is to seek to achieve the achieve
possible economies of scale and efficiencies in portfolio management, while
23
<PAGE> 33
preserving separate identities, management and/or distribution channels at the
feeder fund level. The Trustees' decision to convert a Fund would be based upon
their determination that it would be in the best interests of both the Fund and
its shareholders after consideration of all relevant factors, including the
relative fund expenses associated with a master/feeder fund structure.
A feeder fund can withdraw its investment in a master fund at any time if
its board determines that it is in the best interests of the shareholders to do
so or if the investment policies or restrictions of the master fund were changed
so that they were inconsistent with the policies and restrictions of the feeder
fund. Upon any such withdrawal, the board of the fund would consider what action
might be taken, including the investment of all of the assets of the fund in
another pooled investment entity having substantially the same investment
objectives and policies as the fund or the investment of the fund's assets
directly in a portfolio of investments in accordance with its investment
objective and policies.
REQUIRED VOTE
Shareholders of each Fund will vote separately with respect to this
Proposal 3. Approval of this Proposal 3 by a Fund requires the affirmative vote
of a majority of the shares of the Fund. The Trustees of the Trust recommend
that the shareholders of each Fund vote in favor of this Proposal 3.
PROPOSAL 4: APPROVAL OR DISAPPROVAL OF
AMENDMENTS TO THE DECLARATION OF TRUST
Changes and regulatory developments in the investment company industry have
occurred since the current form of the Trust's Declaration of Trust was adopted.
Because consummation of the Transactions described in Proposal 1 requires the
holding of this Special Meeting, the Trustees of the Trust have determined to
seek at the same time shareholder approval of amendments to the Declaration of
Trust (with such amendments, the "Amended Declaration") designed to reflect
those changes and developments. The principal changes in the current Declaration
of Trust which would be effected by shareholder approval of the Amended
Declaration are described below. A copy of the amendments to the Declaration of
Trust is attached to this proxy statement as Exhibit C.
Master/Feeder Structure. A new Section 2.2(i) would be added to give the
Trustees the express power to accomplish each Fund's objective by investing all
or a portion of its assets in another investment company in a "master/feeder"
fund structure, by transferring assets of the Fund to the other investment
company or otherwise, without further shareholder approval. This section of the
Amended Declaration would grant to the Trustees power which is similar to that
included in Proposal 3, but differs from it as described in the next paragraph.
A master/feeder fund structure is described in Proposal 3. Management of
the Trust believes the Trustees currently have the power to enter into a
master/feeder fund structure, although a conservative interpretation of the
24
<PAGE> 34
current Declaration of Trust is that shareholder approval is required for the
transfer of substantially all of a Fund's assets to a master fund to accomplish
that objective. Such a vote is not required to sell all of the Fund's portfolio
securities and to purchase its interest in the master fund with the proceeds.
The express grant to the Trustees of the power in the Amended Declaration to
enter into a master/feeder fund structure would remove any doubt as to the
Trustees' power to transfer assets to a master fund without shareholder
approval, and differs from the approval of entry into a master/feeder fund
structure sought in Proposal 3 primarily in that a power contained in any
trust's declaration of trust is effective in perpetuity unless the declaration
of trust is amended or terminated. Thus, if Proposal 3 is approved but if it
were concluded in the future that the approval had lapsed due to the passage of
time, the power of the Trustees to enter into a master/feeder fund structure
would nevertheless continue under proposed Section 2.2(i) of the Amended
Declaration, if approved.
Shareholder Voting. Under the Amended Declaration, shareholders would
continue to have the same rights as they now have to elect and remove Trustees,
to further amend the Declaration of Trust and to vote on certain other matters.
Section 5.9 would be amended to eliminate shareholder voting under the
Declaration with respect to investment advisory or management contracts and Rule
12b-1 plans; each of these matters must be voted on under provisions of the 1940
Act or the rules thereunder, and a separate requirement in the Trust's governing
instrument is unnecessary. The Amended Declaration would also eliminate
shareholder voting on a merger, consolidation, sale of assets or incorporation
of the Trust. Although the Trustees ordinarily would not expect to take such an
action without shareholder approval, there are situations, as with a very small,
uneconomical fund, a sufficient number of whose shareholders cannot be located,
where Trustee action alone would be in the best interest of shareholders.
REQUIRED VOTE
Approval of this Proposal 4 with respect to the Trust requires the vote of
two-thirds of the shares of the Trust outstanding and entitled to vote. If the
shareholders of the Trust fail to approve this Proposal 4, the Trust's current
Declaration of Trust would not be amended as described in this Proposal 4. The
Trustees of the Trust recommend that the shareholders of the Trust vote in favor
of this Proposal 4.
PROPOSAL 5: APPROVAL OR DISAPPROVAL OF
THE REVISION OF CERTAIN FUNDAMENTAL
INVESTMENT POLICIES
The 1940 Act requires an investment company to have adopted certain
specified investment policies which can be changed only by a shareholder vote.
Those policies are often referred to as "fundamental" policies. In the past,
fundamental policies were adopted by the Trust on behalf of its Funds, and in
25
<PAGE> 35
some cases amended by vote of the shareholders of the affected Fund, in order to
reflect regulatory, business or industry conditions which were in effect at the
time the particular action was taken. Because of the opportunity afforded by
this Special Meeting, there has been a review of each Fund's fundamental
policies with the goal of simplifying, modernizing and making consistent as far
as possible the fundamental policies of all open-end investment companies
managed by Scudder.
This Proposal seeks shareholder approval of changes which are intended to
accomplish that goal. The proposed changes to the fundamental policies are
discussed in detail below. Please refer to the proposed policies as set forth in
Exhibit D. Each Fund's current fundamental investment policies are set forth in
Exhibit E.
Each of the fundamental policies proposed for adoption with respect to each
Fund is in an area in which the 1940 Act requires that the Fund adopt a
fundamental policy. Except for the policy on borrowing as discussed below, none
of the proposed policies differs from the respective Fund's current comparable
policy in a material way, although the formulation of the policy may differ from
the current one in the interest of uniformity and simplicity. The policies with
respect to the issuance of senior securities, and the underwriting of securities
issued by others differ from the current policies of each Fund in that the
requirements of the 1940 Act, which of course apply, are not spelled out in
detail. Under such new policies, the limitation on each Fund would, therefore,
be determined by reference to the provisions of the 1940 Act, the rules
thereunder, and applicable interpretations of the Commission or its staff rather
than the express terms of the policies.
Shareholders will be asked to vote on each proposed fundamental policy
separately on the proxy card.
PROPOSAL 5.1: BORROWING
The current policy of each Fund prohibits borrowing money, except as a
temporary measure for extraordinary or emergency purposes and except in
connection with reverse repurchase agreements, provided that the Fund maintains
asset coverage of 300% for all borrowings. Under the proposed policy, each Fund
would not be limited to borrowing for temporary or emergency purposes; however,
if the Trustees determine with respect to any Fund to permit borrowing for other
purposes, which they currently do not intend to do, the applicable Fund's
disclosure documents would be amended to disclose that fact. Although the
Trustees do not currently intend to permit a Fund to borrow for investment
leverage purposes, such borrowings would increase the Fund's volatility and the
risk of loss in a declining market. Borrowings under reverse repurchase
agreements are now permitted, and would be permitted under the proposed policy.
The 1940 Act requires borrowings to have 300% asset coverage, which requirement
would, therefore, remain unchanged under the proposed policy, except to the
extent that reverse repurchase agreements would
26
<PAGE> 36
not be subject, under the proposed policy, to the 300% asset coverage
requirement. Consequently, the proposed policy would permit a Fund to engage in
reverse repurchase agreements to a greater extent than under the current policy.
PROPOSAL 5.2: SENIOR SECURITIES
None of the Funds currently has an express policy which prohibits the
issuance of senior securities (i.e., securities which are obligations or
instruments evidencing indebtedness). The issuance of senior securities by each
Fund generally is nonetheless limited by the 1940 Act and applicable
interpretations of the SEC or its staff. Accordingly, in the opinion of
management of the Trust, the adoption of an express prohibition on the issuance
of senior securities represents no substantive change in the senior security
policy of each Fund.
PROPOSALS 5.3 THROUGH 5.6: OTHER POLICIES
Each of the other proposed fundamental policies regarding underwriting of
securities (Proposal 5.3), investment in real estate (Proposal 5.4), purchase of
physical commodities (Proposal 5.5) and lending (Proposal 5.6) is not materially
different from the current comparable policy of each Fund except that these
policies have been reworded or clarified.
REQUIRED VOTE
Approval of the proposed fundamental policies with respect to any Fund
requires the affirmative vote of a majority of the outstanding voting
securities, as defined above, of that Fund. If the shareholders of any Fund fail
to approve any proposed fundamental policy, the current such policy will remain
in effect. The Trustees of the Trust recommend that the shareholders of each
Fund vote in favor of each item in this Proposal 5.
PROPOSAL 6: RATIFICATION OR REJECTION
OF THE SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Trustees of the Trust, including a majority of the Non-
interested Trustees, has selected Coopers & Lybrand L.L.P. to act as independent
accountants for each of the Funds for each Fund's current fiscal year. Coopers &
Lybrand L.L.P. are independent accountants and have advised the Funds that they
have no direct financial interest or material indirect financial interest in the
Funds. One or more representatives of Coopers & Lybrand L.L.P. are expected to
be present at the Special 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.
27
<PAGE> 37
REQUIRED VOTE
Ratification of the selection of independent accountants requires the
affirmative vote of a majority of the votes of each Fund cast at the Special
Meeting in person or by proxy. The Trustees of the Trust recommend that the
shareholders of each Fund vote in favor of this Proposal 6.
ADDITIONAL INFORMATION
GENERAL
The cost of preparing, printing and mailing the enclosed proxy,
accompanying notice and proxy statement and all other costs in connection with
the solicitation of proxies, including any additional solicitation made by
letter, telephone or telegraph, will be paid by Scudder. In addition to
solicitation by mail, certain officers and representatives of the Trust,
officers and employees of Scudder and certain financial services firms and their
representatives, who will receive no extra compensation for their services, may
solicit proxies by telephone, telegram or personally.
Shareholder Communications Corporation ("SCC") has been engaged to assist
in the solicitation of proxies. As the Special Meeting date approaches, certain
shareholders of each Fund may receive a telephone call from a representative of
SCC if their vote has not yet been received. Authorization to permit SCC to
execute proxies may be obtained by telephonic or electronically transmitted
instructions from shareholders of each 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 the identity of the shareholder casting the vote is accurately
determined and that 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 statement card in the
mail. If the information solicited agrees with the information provided to SCC,
then the SCC representative has the responsibility to explain the process, read
the proposals listed on the proxy card, and ask for the shareholder's
instructions on each proposal. The SCC representative, although he or she is
permitted to answer questions about the process, is not permitted to recommend
to the 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.
28
<PAGE> 38
If the shareholder wishes to participate in the Special Meeting, but does
not wish to give his or her proxy by telephone, 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 1-800-733-8481, ext.
488. Any proxy given by a shareholder, whether in writing or by telephone, is
revocable.
PROPOSALS OF SHAREHOLDERS
Shareholders wishing to submit proposals for inclusion in a proxy statement
for a shareholder meeting subsequent to the Special Meeting, if any, should send
their written proposals to the Secretary of the Trust, c/o Scudder, Stevens &
Clark, Inc., Two International Place, Boston, Massachusetts 02110 within a
reasonable time before the solicitation of proxies for such meeting. The timely
submission of a proposal does not guarantee its inclusion.
OTHER MATTERS TO COME BEFORE THE SPECIAL MEETING
The Board of Trustees is not aware of any matters that will be presented
for action at the Special Meeting other than the matters set forth herein.
Should any other matters requiring a vote of 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 each Fund.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) PROMPTLY. NO POSTAGE
IS REQUIRED IF MAILED IN THE UNITED STATES.
By order of the Board of Trustees,
/s/ Thomas F. McDonough
- ----------------------------------
Thomas F. McDonough
Secretary
29
<PAGE> 39
EXHIBIT A
[NAME OF FUND]
TWO INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110
, 199
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
INVESTMENT MANAGEMENT AGREEMENT
[NAME OF SERIES]
Ladies and Gentlemen:
[Name of Trust] (the "Trust") has been established as a Massachusetts
business Trust to engage in the business of an investment company. Pursuant to
the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees has divided the Trust's shares of
beneficial interest, par value $ per share, (the "Shares") into
separate series, or funds, including [name of series] (the "Fund"). Series may
be abolished and dissolved, and additional series established, from time to time
by action of the Trustees.
The Trust, on behalf of the Fund, has selected you to act as the sole
investment manager of the Fund and to provide certain other services, as more
fully set forth below, and you have indicated that you are willing to act as
such investment manager and to perform such services under the terms and
conditions hereinafter set forth. Accordingly, the Trust on behalf of the Fund
agrees with you as follows:
1. Delivery of Documents. The Trust engages in the business of
investing and reinvesting the assets of the Fund in the manner and in
accordance with the investment objectives, policies and restrictions
specified in the currently effective Prospectus (the "Prospectus") and
Statement of Additional Information (the "SAI") relating to the Fund
included in the Trust's Registration Statement on Form N-1A, as amended
from time to time, (the "Registration Statement") filed by the Trust under
the Investment Company Act of 1940, as amended, (the "1940 Act") and the
Securities Act of 1933, as amended. Copies of the documents referred to in
the preceding sentence have been furnished to you by the Trust. The Trust
has also furnished you with copies properly certified or authenticated of
each of the following additional documents related to the Trust and the
Fund:
(a) The Declaration dated , 19 , as amended to
date.
A-1
<PAGE> 40
(b) By-Laws of the Trust as in effect on the date hereof (the
"By-Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders
of the Fund selecting you as investment manager and approving the form
of this Agreement.
(d) Establishment and Designation of Series of Shares of Beneficial
Interest dated , 19 relating to the Fund.
The Trust will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements, if any, to the
foregoing, including the Prospectus, the SAI and the Registration Statement.
2. Sublicense to Use the Scudder Trademarks. As exclusive licensee
of the rights to use and sublicense the use of the "Scudder" and ["Scudder
Kemper Investments, Inc."/"Scudder, Stevens & Clark, Inc."] trademarks
(together, the "Scudder Marks"), you hereby grant the Trust a nonexclusive
right and sublicense to use (i) the "Scudder" name and mark as part of the
Trust's name (the "Fund Name"), and (ii) the Scudder Marks in connection
with the Trust's investment products and services, in each case only for so
long as this Agreement, any other investment management agreement between
you and the Trust, or any extension, renewal or amendment hereof or thereof
remains in effect, and only for so long as you are a licensee of the
Scudder Marks, provided however, that you agree to use your best efforts to
maintain your license to use and sublicense the Scudder Marks. The Trust
agrees that it shall have no right to sublicense or assign rights to use
the Scudder Marks, shall acquire no interest in the Scudder Marks other
than the rights granted herein, that all of the Trust's uses of the Scudder
Marks shall inure to the benefit of Scudder Trust Company as owner and
licensor of the Scudder Marks (the "Trademark Owner"), and that the Trust
shall not challenge the validity of the Scudder Marks or the Trademark
Owner's ownership thereof. The Trust further agrees that all services and
products it offers in connection with the Scudder Marks shall meet
commercially reasonable standards of quality, as may be determined by you
or the Trademark Owner from time to time, provided that you acknowledge
that the services and products the Trust rendered during the one-year
period preceding the date of this Agreement are acceptable. At your
reasonable request, the Trust shall cooperate with you and the Trademark
Owner and shall execute and deliver any and all documents necessary to
maintain and protect (including but not limited to in connection with any
trademark infringement action) the Scudder Marks and/or enter the Trust as
a registered user thereof. At such time as this Agreement or any other
investment management agreement shall no longer be in effect between you
(or your successor) and the Trust, or you no longer are a licensee of the
Scudder Marks, the Trust shall (to the extent that, and as soon as, it
lawfully can) cease to use the Fund Name or any other name indicating that
it is advised by, managed by or otherwise
A-2
<PAGE> 41
connected with you (or any organization which shall have succeeded to your
business as investment manager) or the Trademark Owner. In no event shall
the Trust use the Scudder Marks or any other name or mark confusingly
similar thereto (including, but not limited to, any name or mark that
includes the name "Scudder") if this Agreement or any other investment
advisory agreement between you (or your successor) and the Fund is
terminated.
3. Portfolio Management Services. As manager of the assets of the
Fund, you shall provide continuing investment management of the assets of
the Fund in accordance with the investment objectives, policies and
restrictions set forth in the Prospectus and SAI; the applicable provisions
of the 1940 Act and the Internal Revenue Code of 1986, as amended, (the
"Code") relating to regulated investment companies and all rules and
regulations thereunder; and all other applicable federal and state laws and
regulations of which you have knowledge; subject always to policies and
instructions adopted by the Trust's Board of Trustees. In connection
therewith, you shall use reasonable efforts to manage the Fund so that it
will qualify as a regulated investment company under Subchapter M of the
Code and regulations issued thereunder. The Fund shall have the benefit of
the investment analysis and research, the review of current economic
conditions and trends and the consideration of long-range investment policy
generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 3, you
shall be entitled to receive and act upon advice of counsel to the Trust or
counsel to you. You shall also make available to the Trust promptly upon
request all of the Fund's investment records and ledgers as are necessary
to assist the Trust in complying with the requirements of the 1940 Act and
other applicable laws. To the extent required by law, you shall furnish to
regulatory authorities having the requisite authority any information or
reports in connection with the services provided pursuant to this Agreement
which may be requested in order to ascertain whether the operations of the
Trust are being conducted in a manner consistent with applicable laws and
regulations.
You shall determine the securities, instruments, investments,
currencies, repurchase agreements, futures, options and other contracts
relating to investments to be purchased, sold or entered into by the Fund
and place orders with broker-dealers, foreign currency dealers, futures
commission merchants or others pursuant to your determinations and all in
accordance with Fund policies as expressed in the Registration Statement.
You shall determine what portion of the Fund's portfolio shall be invested
in securities and other assets and what portion, if any, should be held
uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on
the investment performance of the Fund and on the performance of your
obligations pursuant to this Agreement, and you shall supply such
additional
A-3
<PAGE> 42
reports and information as the Trust's officers or Board of Trustees shall
reasonably request.
4. Administrative Services. In addition to the portfolio management
services specified above in section 3, you shall furnish at your expense
for the use of the Fund such office space and facilities in the United
States as the Fund may require for its reasonable needs, and you (or one or
more of your affiliates designated by you) shall render to the Trust
administrative services on behalf of the Fund necessary for operating as an
open-end investment company and not provided by persons not parties to this
Agreement including, but not limited to, preparing reports to and meeting
materials for the Trust's Board of Trustees and reports and notices to Fund
shareholders; supervising, negotiating contractual arrangements with, to
the extent appropriate, and monitoring the performance of, accounting
agents, custodians, depositories, transfer agents and pricing agents,
accountants, attorneys, printers, underwriters, brokers and dealers,
insurers and other persons in any capacity deemed to be necessary or
desirable to Fund operations; preparing and making filings with the
Securities and Exchange Commission (the "SEC") and other regulatory and
self-regulatory organizations, including, but not limited to, preliminary
and definitive proxy materials, post-effective amendments to the
Registration Statement, semi-annual reports on Form N-SAR and notices
pursuant to Rule 24f-2 under the 1940 Act; overseeing the tabulation of
proxies by the Fund's transfer agent; assisting in the preparation and
filing of the Fund's federal, state and local tax returns; preparing and
filing the Fund's federal excise tax return pursuant to Section 4982 of the
Code; providing assistance with investor and public relations matters;
monitoring the valuation of portfolio securities and the calculation of net
asset value; monitoring the registration of Shares of the Fund under
applicable federal and state securities laws; maintaining or causing to be
maintained for the Fund all books, records and reports and any other
information required under the 1940 Act, to the extent that such books,
records and reports and other information are not maintained by the Fund's
custodian or other agents of the Fund; assisting in establishing the
accounting policies of the Fund; assisting in the resolution of accounting
issues that may arise with respect to the Fund's operations and consulting
with the Fund's independent accountants, legal counsel and the Fund's other
agents as necessary in connection therewith; establishing and monitoring
the Fund's operating expense budgets; reviewing the Fund's bills;
processing the payment of bills that have been approved by an authorized
person; assisting the Fund in determining the amount of dividends and
distributions available to be paid by the Fund to its shareholders,
preparing and arranging for the printing of dividend notices to
shareholders, and providing the transfer and dividend paying agent, the
custodian, and the accounting agent with such information as is required
for such parties to effect the payment of dividends and distributions; and
otherwise assisting the Trust as it may reasonably request in the conduct
of the Fund's business,
A-4
<PAGE> 43
subject to the direction and control of the Trust's Board of Trustees.
Nothing in this Agreement shall be deemed to shift to you or to diminish
the obligations of any agent of the Fund or any other person not a party to
this Agreement which is obligated to provide services to the Fund.
5. Allocation of Charges and Expenses. Except as otherwise
specifically provided in this section 5, you shall pay the compensation and
expenses of all Trustees, officers and executive employees of the Trust
(including the Fund's share of payroll taxes) who are affiliated persons of
you, and you shall make available, without expense to the Fund, the
services of such of your directors, officers and employees as may duly be
elected officers of the Trust, subject to their individual consent to serve
and to any limitations imposed by law. You shall provide at your expense
the portfolio management services described in section 3 hereof and the
administrative services described in section 4 hereof.
You shall not be required to pay any expenses of the Fund other than
those specifically allocated to you in this section 5 and under the terms
of the Special Servicing Agreement dated November 15, 1996 ("Special
Servicing Agreement") among you, the Trust, Scudder Fund Accounting
Corporation, Scudder Service Corporation, Scudder Trust Company, Scudder
Investor Services, Inc. and the various funds in which the Portfolios may
invest (the "Underlying Funds"). In particular, but without limiting the
generality of the foregoing, you shall not be responsible, except to the
extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may
be involved, for the following expenses of the Fund: organization expenses
of the Fund (including out-of-pocket expenses, but not including your
overhead or employee costs); fees payable to you and to any other Fund
advisors or consultants; legal expenses; auditing and accounting expenses;
maintenance of books and records which are required to be maintained by the
Fund's custodian or other agents of the Trust; telephone, telex, facsimile,
postage and other communications expenses; taxes and governmental fees;
fees, dues and expenses incurred by the Fund in connection with membership
in investment company trade organizations; fees and expenses of the Fund's
accounting agent, custodians, subcustodians, transfer agents, dividend
disbursing agents and registrars; payment for portfolio pricing or
valuation services to pricing agents, accountants, bankers and other
specialists, if any; expenses of preparing share certificates and, except
as provided below in this section 5, other expenses in connection with the
issuance, offering, distribution, sale, redemption or repurchase of
securities issued by the Fund; expenses relating to investor and public
relations; expenses and fees of registering or qualifying Shares of the
Fund for sale; interest charges, bond premiums and other insurance expense;
freight, insurance and other charges in connection with the shipment of the
Fund's portfolio securities; the compensation and all expenses
(specifically including travel expenses relating to Trust business) of
Trustees, officers and employees of the Trust
A-5
<PAGE> 44
who are not affiliated persons of you; brokerage commissions or other costs
of acquiring or disposing of any portfolio securities of the Fund; expenses
of printing and distributing reports, notices and dividends to
shareholders; expenses of printing and mailing Prospectuses and SAIs of the
Fund and supplements thereto; costs of stationery; any litigation expenses;
indemnification of Trustees and officers of the Trust; costs of
shareholders' and other meetings; and travel expenses (or an appropriate
portion thereof) of Trustees and officers of the Trust who are directors,
officers or employees of you to the extent that such expenses relate to
attendance at meetings of the Board of Trustees of the Trust or any
committees thereof or advisors thereto held outside of Boston,
Massachusetts or New York, New York.
Except as provided in the Special Servicing Agreement, you shall not
be required to pay expenses of any activity which is primarily intended to
result in sales of Shares of the Fund if and to the extent that (i) such
expenses are required to be borne by a principal underwriter which acts as
the distributor of the Fund's Shares pursuant to an underwriting agreement
which provides that the underwriter shall assume some or all of such
expenses, or (ii) the Trust on behalf of the Fund shall have adopted a plan
in conformity with Rule 12b-1 under the 1940 Act providing that the Fund
(or some other party) shall assume some or all of such expenses. You shall
be required to pay such of the foregoing sales expenses as are not required
to be paid by the principal underwriter pursuant to the underwriting
agreement or are not permitted to be paid by the Fund (or some other party)
pursuant to such a plan.
6. Management Fee. For all services to be rendered, payments to be
made and costs to be assumed by you as provided in sections 3, 4 and 5
hereof, the Trust on behalf of the Fund shall pay you in United States
Dollars on the last day of each month the unpaid balance of a fee equal to
the excess of (a) 1/12 of of 1 percent of the average daily net
assets as defined below of the Fund for such month; [provided that, for any
calendar month during which the average of such values exceeds $ ,
the fee payable for that month based on the portion of the average of such
values in excess of $ shall be 1/12 of of 1 percent of such
portion;] [and provided that, for any calendar month during which the
average of such values exceeds $ , the fee payable for that month
based on the portion of the average of such values in excess of $
shall be 1/12 of of 1 percent of such portion;] over any
compensation waived by you from time to time (as more fully described
below). You shall be entitled to receive during any month such interim
payments of your fee hereunder as you shall request, provided that no such
payment shall exceed 75 percent of the amount of your fee then accrued on
the books of the Fund and unpaid.
The "average daily net assets" of the Fund shall mean the average of
the values placed on the Fund's net assets as of 4:00 p.m. (New York time)
A-6
<PAGE> 45
on each day on which the net asset value of the Fund is determined
consistent with the provisions of Rule 22c-1 under the 1940 Act or, if the
Fund lawfully determines the value of its net assets as of some other time
on each business day, as of such time. The value of the net assets of the
Fund shall always be determined pursuant to the applicable provisions of
the Declaration and the Registration Statement. If the determination of net
asset value does not take place for any particular day, then for the
purposes of this section 6, the value of the net assets of the Fund as last
determined shall be deemed to be the value of its net assets as of 4:00
p.m. (New York time), or as of such other time as the value of the net
assets of the Fund's portfolio may be lawfully determined on that day. If
the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall
be deemed to be the sole determination thereof on that day for the purposes
of this section 6.
You may waive all or a portion of your fees provided for hereunder and
such waiver shall be treated as a reduction in purchase price of your
services. You shall be contractually bound hereunder by the terms of any
publicly announced waiver of your fee, or any limitation of the Fund's
expenses, as if such waiver or limitation were fully set forth herein.
7. Avoidance of Inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other
investments for the account of the Fund, neither you nor any of your
directors, officers or employees shall act as a principal or agent or
receive any commission. You or your agent shall arrange for the placing of
all orders for the purchase and sale of portfolio securities and other
investments for the Fund's account with brokers or dealers selected by you
in accordance with Fund policies as expressed in the Registration
Statement. If any occasion should arise in which you give any advice to
clients of yours concerning the Shares of the Fund, you shall act solely as
investment counsel for such clients and not in any way on behalf of the
Fund.
Your services to the Fund pursuant to this Agreement are not to be
deemed to be exclusive and it is understood that you may render investment
advice, management and services to others. In acting under this Agreement,
you shall be an independent contractor and not an agent of the Trust.
Whenever the Fund and one or more other accounts or investment companies
advised by the Manager have available funds for investment, investments
suitable and appropriate for each shall be allocated in accordance with
procedures believed by the Manager to be equitable to each entity.
Similarly, opportunities to sell securities shall be allocated in a manner
believed by the Manager to be equitable. The Fund recognizes that in some
cases this procedure may adversely affect the size of the position that may
be acquired or disposed of for the Fund.
8. Limitation of Liability of Manager. As an inducement to your
undertaking to render services pursuant to this Agreement, the Trust agrees
A-7
<PAGE> 46
that you shall not be liable under this Agreement for any error of judgment
or mistake of law or for any loss suffered by the Fund in connection with
the matters to which this Agreement relates, provided that nothing in this
Agreement shall be deemed to protect or purport to protect you against any
liability to the Trust, the Fund or its shareholders to which you would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of your duties, or by reason of your reckless
disregard of your obligations and duties hereunder. Any person, even though
also employed by you, who may be or become an employee of and paid by the
Fund shall be deemed, when acting within the scope of his or her employment
by the Fund, to be acting in such employment solely for the Fund and not as
your employee or agent.
9. Duration and Termination of This Agreement. This Agreement shall
remain in force until September 30, 1998, and continue in force from year
to year thereafter, but only so long as such continuance is specifically
approved at least annually (a) by the vote of a majority of the Trustees
who are not parties to this Agreement or interested persons of any party to
this Agreement, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by the Trustees of the Trust, or by the
vote of a majority of the outstanding voting securities of the Fund. The
aforesaid requirement that continuance of this Agreement be "specifically
approved at least annually" shall be construed in a manner consistent with
the 1940 Act and the rules and regulations thereunder and any applicable
SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time,
without the payment of any penalty, by the vote of a majority of the
outstanding voting securities of the Fund or by the Trust's Board of
Trustees on 60 days' written notice to you, or by you on 60 days' written
notice to the Trust. This Agreement shall terminate automatically in the
event of its assignment.
10. Amendment of this Agreement. No provision of this Agreement may
be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought, and no amendment of
this Agreement shall be effective until approved in a manner consistent
with the 1940 Act and rules and regulations thereunder and any applicable
SEC exemptive order therefrom.
11. Limitation of Liability for Claims. The Declaration, a copy of
which, together with all amendments thereto, is on file in the Office of
the Secretary of the Commonwealth of Massachusetts, provides that the name
"Scudder Trust" refers to the Trustees under the Declaration
collectively as Trustees and not as individuals or personally, and that no
shareholder of the Fund, or Trustee, officer, employee or agent of the
Trust,
A-8
<PAGE> 47
shall be subject to claims against or obligations of the Trust or of the
Fund to any extent whatsoever, but that the Trust estate only shall be
liable.
You are hereby expressly put on notice of the limitation of liability
as set forth in the Declaration and you agree that the obligations assumed
by the Trust on behalf of the Fund pursuant to this Agreement shall be
limited in all cases to the Fund and its assets, and you shall not seek
satisfaction of any such obligation from the shareholders or any
shareholder of the Fund or any other series of the Trust, or from any
Trustee, officer, employee or agent of the Trust. You understand that the
rights and obligations of each Fund, or series, under the Declaration are
separate and distinct from those of any and all other series.
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
In interpreting the provisions of this Agreement, the definitions contained
in Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust on behalf of the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
[NAME OF TRUST], on behalf of
Scudder Fund
By:
---------------------------------------------------------------
A-9
<PAGE> 48
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By:
---------------------------------------------------------------
Managing Director
A-10
<PAGE> 49
EXHIBIT B
INVESTMENT OBJECTIVES AND ADVISORY FEES
FOR FUNDS ADVISED BY SCUDDER, STEVENS & CLARK, INC.
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS*
- ----------------------------- --------------------------------- ------------------- --------------
<S> <C> <C> <C>
MONEY MARKET
Scudder U.S. Treasury Money Safety, liquidity, and stability 0.500% of $ 398,597,054
Fund of capital and, consistent net assets+
therewith, current income.
Scudder Cash Investment Stability of capital while 0.500% to $1,430,623,516
Trust maintaining liquidity of capital $250 million
and providing current income from 0.450% next
money market securities. $250 million
0.400% next
$500 million
0.350%
thereafter+
Scudder Money Market Series High level of current income 0.250% of $ 384,509,425**
consistent with preservation of net assets
capital and liquidity by
investing in a broad range of
short-term money market
instruments.
Scudder Government Money High level of current income 0.250% of $ 36,794,563**
Market Series consistent with preservation of net assets
capital and liquidity by
investing exclusively in
obligations issued or guaranteed
by the U.S. Government or its
agencies or instrumentalities and
in certain repurchase agreements.
TAX FREE MONEY MARKET
Scudder Tax Free Money Fund Income exempt from regular 0.500% to $ 220,245,241
federal income taxes and $500 million
stability of principal through 0.480%
investments in municipal thereafter+
securities.
Scudder Tax Free Money High level of current income, 0.250% of $ 79,695,218**
Market Series consistent with preservation of net assets
capital and liquidity, exempt
from federal income tax by
investing primarily in high
quality municipal obligations.
Scudder California Tax Free Stability of capital and the 0.500% of $ 68,695,680
Money Fund maintenance of a constant net net assets+
asset value of $1.00 per share
while providing California tax
payers income exempt from both
California state personal and
regular federal income tax
through investment in high
quality, short-term tax-exempt
California municipal securities.
</TABLE>
- ---------------
* Assets are shown as of a Fund's most recent fiscal year end unless otherwise
indicated.
** Assets as of 7/31/97.
+ Subject to waivers and/or expense limitations.
B-1
<PAGE> 50
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS*
- ----------------------------- --------------------------------- ------------------- --------------
<S> <C> <C> <C>
Scudder New York Tax Free Stability of capital and income 0.500% of $ 59,538,652
Money Fund exempt from New York state and net assets+
New York City personal income
taxes and regular federal income
tax through investment in high
quality, short-term municipal
securities in New York.
TAX FREE
Scudder Limited Term Tax High level of income exempt from 0.600% of $ 123,660,431
Free Fund regular federal income tax net assets+
consistent with a high degree of
principal stability.
Scudder Medium Term Tax Free High level of income exempt from 0.600% to $ 650,504,081
Fund regular federal income tax and $500 million
limited principal fluctuation 0.500% thereafter
through investment primarily in
high grade intermediate term
municipal securities.
Scudder Managed Municipal Income exempt from regular 0.550% to $ 737,422,861
Bonds federal income tax primarily $200 million
through investments in high-grade 0.500% next
long-term municipal securities. $500 million
0.475% thereafter
Scudder High Yield Tax Free High level of income, exempt from 0.650% to $ 293,101,021
Fund regular federal income tax, from $300 million
an actively managed portfolio 0.600% thereafter
consisting primarily of
investment grade municipal
securities.
Scudder California Tax Free Income exempt from both 0.625% to $ 288,576,041
Fund California state personal income $200 million
tax and regular federal income 0.600% thereafter
tax primarily through investment
grade municipal securities.
Scudder Massachusetts A high level of income exempt 0.600% of $ 65,505,088
Limited Term Tax Free Fund from both Massachusetts personal net assets+
income tax and regular federal
income tax as is consistent with
a high degree of price stability.
Scudder Massachusetts Tax A high level of income exempt 0.600% of $ 329,842,169
Free Fund from both Massachusetts personal net assets
income tax and regular federal
income tax through investment
primarily in long-term
investment-grade municipal
securities in Massachusetts.
Scudder New York Tax Free Income exempt from New York state 0.625% to $ 180,647,157
Fund and New York City personal income $200 million
taxes and regular federal income 0.600% thereafter
tax through investment primarily
in long-term investment-grade
municipal securities in New York.
</TABLE>
- ---------------
* Assets are shown as of a Fund's most recent fiscal year end unless otherwise
indicated.
+ Subject to waivers and/or expense limitations.
B-2
<PAGE> 51
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS*
- ----------------------------- --------------------------------- ------------------- --------------
<S> <C> <C> <C>
Scudder Ohio Tax Free Fund Income exempt from Ohio personal 0.600% of $ 84,109,009
income tax and regular federal net assets+
income tax through investment
primarily in investment-grade
municipal securities in Ohio.
Scudder Pennsylvania Tax Income exempt from Pennsylvania 0.600% of $ 74,177,997
Free Fund personal income tax and regular net assets+
federal income tax through
investment primarily in
investment-grade municipal
securities in Pennsylvania.
U.S. INCOME
Scudder Short Term Bond Fund High level of income consistent 0.600% to $1,468,170,885
with a high degree of principal $500 million
stability through investments 0.500% next
primarily in high quality $500 million
short-term bonds. 0.450% next
$500 million
0.400% next
$500 million
0.375% next
$1 billion
0.350% thereafter
Scudder Zero Coupon 2000 High investment returns over a 0.600% of $ 25,440,414
Fund selected period as is consistent net assets+
with investment in U.S.
Government securities and the
minimization of reinvestment
risk.
Scudder GNMA Fund High current income and safety of 0.650% to $ 383,008,164
principal primarily from $200 million
investment in U.S. Government 0.600% next
guaranteed mortgage-backed GNMA $300 million
securities. 0.550% thereafter
Scudder Income Fund A high level of income, 0.650% to $ 578,519,502
consistent with the prudent $200 million
investment of capital, through a 0.600% next
flexible investment program $300 million
emphasizing high-grade bonds. 0.550% thereafter
Scudder High Yield Bond Fund A high level of current income 0.700% of $ 73,523,094
and capital appreciation through net assets
investment primarily in below
investment-grade domestic debt
securities.
GLOBAL INCOME
Scudder Global Bond Fund Total return with an emphasis on 0.750% to $ 217,403,907
current income by investing $1 billion
primarily in high-grade bonds 0.700%
denominated in foreign currencies thereafter+
and the U.S. dollar.
</TABLE>
- ---------------
* Assets are shown as of a Fund's most recent fiscal year end unless otherwise
indicated.
+ Subject to waivers and/or expense limitations.
B-3
<PAGE> 52
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS*
- ----------------------------- --------------------------------- ------------------- --------------
<S> <C> <C> <C>
Scudder International Bond Income primarily by investing in 0.850% to $ 235,993,183
Fund high-grade international bonds $1 billion
and protection and possible 0.800% thereafter
enhancement of principal value by
actively managing currency, bond
market and maturity exposure and
by security selection.
Scudder Emerging Markets High current income and, 1.000% of $ 304,607,984
Income Fund secondarily, long-term capital net assets
appreciation by investing
primarily in high-yielding debt
securities issued in emerging
markets.
ASSET ALLOCATION
Scudder Pathway Conservative Current income and, secondarily, There will be no $ 13,928,759***
Portfolio long-term growth of capital by fee as the Manager
investing substantially in will receive a fee
Scudder bond mutual funds, but from the underlying
will have some exposure to funds.
Scudder equity mutual funds.
Scudder Pathway Balanced Balance of growth and income by There will be no $ 167,721,722***
Portfolio investing in a mix of Scudder fee as the Manager
money market, bond and equity will receive a fee
mutual funds. from the underlying
funds.
Scudder Pathway Growth Long-term growth of capital by There will be no $ 42,234,535***
Portfolio investing predominantly in fee as the Manager
Scudder equity mutual funds will receive a fee
designed to provide long-term from the underlying
growth. funds.
Scudder Pathway Maximize total return by There will be no $ 8,983,598***
International Portfolio investing in a select mix of fee as the Manager
established international and will receive a fee
global Scudder Funds. from the underlying
funds.
U.S. GROWTH AND INCOME
Scudder Balanced Fund A balance of growth and income 0.700% of $ 109,541,542
from a diversified portfolio of net assets+
equity and fixed income
securities and long-term
preservation of capital through a
quality oriented investment
approach designed to reduce risk.
</TABLE>
- ---------------
* Assets are shown as of a Fund's most recent fiscal year end unless otherwise
indicated.
*** Assets as of 6/30/97.
+ Subject to waivers and/or expense limitations.
B-4
<PAGE> 53
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS*
- ----------------------------- --------------------------------- ------------------- --------------
<S> <C> <C> <C>
Scudder Growth and Income Long-term growth of capital, 0.600% to $4,186,481,205
Fund current income and growth of $500 million
income primarily from common 0.550% next
stocks, preferred stocks and $500 million
securities convertible into 0.500% next
common stocks. $500 million
0.475% next
$500 million
0.450% next
$1 billion
0.425% next
$1.5 billion
0.405% thereafter
U.S. GROWTH
Scudder Large Company Value Maximize long-term capital 0.750% to $1,651,459,797
Fund (formerly Scudder appreciation through a value $500 million
Capital Growth Fund) driven investment program 0.650% next
emphasizing common stocks and $500 million
preferred stocks. 0.600% next
$500 million
0.550% thereafter
Scudder Value Fund Long-term growth of capital 0.700% of $ 88,874,292
through investment in undervalued net assets
equity securities.
Scudder Small Company Value Long-term growth of capital by 0.750% of $ 41,187,186
Fund investing primarily in net assets+
undervalued equity securities of
small U.S. companies.
Scudder Micro Cap Fund Long-term growth of capital by 0.750% of $ 72,048,339***
investing primarily in a net assets+
diversified portfolio of U.S.
micro-cap common stocks.
Scudder Classic Growth Fund Long-term growth of capital while 0.700% of $ 33,867,066
keeping the value of its shares net assets+
more stable than other growth
mutual funds.
Scudder Large Company Growth Long-term growth of capital 0.700% of $ 221,253,633
Fund (formerly Scudder through investment primarily in net assets
Quality Growth Fund) the equity securities of
seasoned, financially strong U.S.
growth companies.
Scudder Development Fund Long-term growth of capital by 1.000% to $ 861,564,138
investing primarily in equity $500 million
securities of emerging growth 0.950% next
companies. $500 million
0.900% thereafter
</TABLE>
- ---------------
* Assets are shown as of a Fund's most recent fiscal year end unless otherwise
indicated.
*** Assets as of 6/30/97.
+ Subject to waivers and/or expense limitations.
B-5
<PAGE> 54
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS*
- ----------------------------- --------------------------------- ------------------- --------------
<S> <C> <C> <C>
Scudder 21st Century Growth Long-term growth of capital by 1.000% of $ 20,942,531***
Fund investing primarily in the net assets+
securities of emerging growth
companies poised to be leaders in
the 21st century.
GLOBAL GROWTH
Scudder Global Fund Long-term growth of capital 1.000% to $1,604,465,769
through investment in a $500 million
diversified portfolio of 0.950% next
marketable foreign and domestic $500 million
securities, primarily equity 0.900% thereafter
securities.
Institutional International Long-term growth of capital 0.900% of $ 17,897,508
Equity Portfolio primarily through a diversified net assets+
portfolio of marketable foreign
equity securities.
Scudder International Growth Long-term growth of capital and 1.000% of $ 25,631,898***
and Income Fund current income primarily from net assets+
foreign equity securities
Scudder International Fund Long-term growth of capital 0.900% to $2,583,030,686
primarily through a diversified $500 million
portfolio of marketable foreign 0.850% next
equity securities. $500 million
0.800% next
$1 billion
0.750% next
$1 billion
0.700% thereafter
Scudder Global Discovery Above-average capital 1.100% of $ 350,829,980
Fund appreciation over the long-term net assets
by investing primarily in the
equity securities of small
companies located throughout the
world.
Scudder Emerging Markets Long-term growth of capital 1.25% of $ 75,793,693
Growth Fund primarily through equity net assets+
investments in emerging markets
around the globe.
Scudder Gold Fund Maximum return consistent with 1.000% of $ 163,932,814
investing in a portfolio of gold- net assets
related equity securities and
gold.
Scudder Greater Europe Long-term growth of capital 1.000% of $ 120,300,058
Growth Fund through investment primarily in net assets
the equity securities of European
companies.
Scudder Pacific Long-term growth of capital 1.100% of $ 329,391,540
Opportunities Fund primarily through investment in net assets
the equity securities of Pacific
Basin companies, excluding Japan.
Scudder Latin America Fund Long-term capital appreciation Effective 9/11/97: $ 621,914,690
through investment primarily in 1.250% to
the securities of Latin American $1 billion
issuers. 1.150% thereafter
</TABLE>
- ---------------
* Assets are shown as of a Fund's most recent fiscal year end unless otherwise
indicated.
*** Assets as of 6/30/97.
+ Subject to waivers and/or expense limitations.
B-6
<PAGE> 55
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS*
- ----------------------------- --------------------------------- ------------------- --------------
<S> <C> <C> <C>
The Japan Fund, Inc. Long-term capital appreciation 0.850% to $ 385,963,962
through investment primarily in $100 million
equity securities of Japanese 0.750% next
companies. $200 million
0.700% next
$300 million
0.650% thereafter
CLOSED-END FUNDS
The Argentina Fund, Inc. Long-term capital appreciation Adviser: $ 117,596,046
through investment primarily in Effective 11/1/97:
equity securities of Argentine 1.100% of
issuers. net assets
Sub-Adviser:
Paid by Adviser.
0.160% of
net assets
The Brazil Fund, Inc. Long-term capital appreciation 1.200% to $ 417,981,869
through investment primarily in $150 million
equity securities of Brazilian 1.050% next
issuers. $150 million
1.000% thereafter
Effective 10/29/97:
1.200% to
$150 million
1.050% next
$150 million
1.000% next
$200 million
0.900% thereafter
Administrator:
Receives an annual
fee of $50,000
</TABLE>
- ---------------
* Assets are shown as of a Fund's most recent fiscal year end unless otherwise
indicated.
B-7
<PAGE> 56
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS*
- ----------------------------- --------------------------------- ------------------- --------------
<S> <C> <C> <C>
The Korea Fund, Inc. Long-term capital appreciation Adviser: $ 661,690,073
through investment primarily in 1.150% to
equity securities of Korean $50 million
companies. 1.100% next
$50 million
1.000% next
$250 million
0.950% next
$400 million
0.900% thereafter
Sub-Adviser -
Daewoo:
Paid by Adviser.
0.2875% to
$50 million
0.275% next
$50 million
0.250% next
$250 million
0.2375% next
$400 million
0.225% thereafter
The Latin America Dollar High level of current income and, 1.200% of $ 94,748,606
Income Fund, Inc. secondarily, capital appreciation net assets
through investment principally in
dollar-denominated Latin American
debt instruments.
Montgomery Street Income High level of current income 0.500% to $ 198,465,822
Securities, Inc. consistent with prudent $150 million
investment risks through a 0.450% next
diversified portfolio primarily $50 million
of debt securities. 0.400% thereafter
Scudder New Asia Fund, Inc. Long-term capital appreciation 1.250% to $ 133,363,686
through investment primarily in $75 million
equity securities of Asian 1.150% next
companies. $125 million
1.100% thereafter
Scudder New Europe Fund, Long-term capital appreciation 1.250% to $ 266,418,730
Inc. through investment primarily in $75 million
equity securities of companies 1.150% next
traded on smaller or emerging $125 million
European markets and companies 1.100% thereafter
that are viewed as likely to
benefit from changes and
developments throughout Europe.
Scudder Spain and Portugal Long-term capital appreciation Adviser: $ 75,127,194
Fund, Inc. through investment primarily in 1.000% of
equity securities of Spanish & net assets
Portuguese issuers. Administrator:
0.200% of
net assets
Scudder World Income High income and, consistent 1.200% of $ 54,488,637
Opportunities Fund, Inc. therewith, capital appreciation. net assets
</TABLE>
- ---------------
* Assets are shown as of a Fund's most recent fiscal year end unless otherwise
indicated.
B-8
<PAGE> 57
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS*
- ----------------------------- --------------------------------- ------------------- --------------
<S> <C> <C> <C>
INSURANCE PRODUCTS
Balanced Portfolio Balance of growth and income 0.475% of $ 88,342,837
consistent with long-term net assets
preservation of capital through a
diversified portfolio of equity
and fixed income securities.
Bond Portfolio High level of income consistent 0.475% of $ 65,769,421
with a high quality portfolio of net assets
debt securities.
Capital Growth Portfolio Long-term capital growth from a 0.475% to $ 440,481,308
portfolio consisting primarily of $500 million
equity securities. 0.450% thereafter
Global Discovery Portfolio Above-average capital 0.975% of $ 16,757,264
appreciation over the long-term net assets+
by investing primarily in the
equity securities of small
companies located throughout the
world.
Growth and Income Portfolio Long-term growth of capital, 0.475% of $ 91,091,547
current income and growth of net assets
income.
International Portfolio Long-term growth of capital 0.875% to $ 726,038,527
primarily through diversified $500 million
holdings of marketable foreign 0.775% thereafter
equity investments.
Money Market Portfolio Stability of capital and current 0.370% of $ 97,785,626
income from a portfolio of money net assets
market instruments.
AARP FUNDS
AARP High Quality Money Fund Current income and liquidity, 0.350% to $ 412,126,193
consistent with maintaining $2 billion
stability and safety of 0.330% next
principal, through investment in $2 billion
high quality securities. 0.300% next
$2 billion
0.280% next
$2 billion
0.260% next
$3 billion
0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND FEE
0.100% of
net assets
</TABLE>
- ---------------
* Assets are shown as of a Fund's most recent fiscal year end unless otherwise
indicated.
+ Subject to waivers and/or expense limitations.
B-9
<PAGE> 58
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS*
- ----------------------------- --------------------------------- ------------------- --------------
<S> <C> <C> <C>
AARP Balanced Stock and Bond Long-term growth of capital and 0.350% to $ 403,179,939
Fund income, consistent with a stable $2 billion
share price, through investment 0.330% next
in a combination of stocks, bonds $2 billion
and cash reserves. 0.300% next
$2 billion
0.280% next
$2 billion
0.260% next
$3 billion
0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND FEE
0.190% of
net assets
AARP Capital Growth Fund Long-term capital growth, 0.350% to $ 826,136,713
consistent with a share price $2 billion
more stable than other capital 0.330% next
growth funds, through investment $2 billion
primarily in common stocks and 0.300% next
securities convertible into $2 billion
common stocks. 0.280% next
$2 billion
0.260% next
$3 billion
0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND FEE
0.320% of
net assets
AARP Global Growth Fund Long-term growth of capital, 0.350% to $ 77,651,978
consistent with a share price $2 billion
more stable than other global 0.330% next
equity funds, through investment $2 billion
primarily in a diversified 0.300% next
portfolio of equity securities of $2 billion
corporations worldwide. 0.280% next
$2 billion
0.260% next
$3 billion
0.250% next
$3 billion
0.240%
thereafter+
INDIVIDUAL FUND FEE
0.550% of
net assets
</TABLE>
- ---------------
* Assets are shown as of a Fund's most recent fiscal year end unless otherwise
indicated.
+ Subject to waivers and/or expense limitations.
B-10
<PAGE> 59
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS*
- ----------------------------- --------------------------------- ------------------- --------------
<S> <C> <C> <C>
AARP Growth and Income Fund Long-term growth of capital and 0.350% to $4,218,983,398
income, consistent with a stable $2 billion
share price, through investment 0.330% next
primarily in common stocks and $2 billion
securities convertible into 0.300% next
common stocks. $2 billion
0.280% next
$2 billion
0.260% next
$3 billion
0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND FEE
0.190% of
net assets
AARP International Stock Long-term growth of capital, 0.350% to $ 12,699,109***
Fund consistent with a share price $2 billion
more stable than other 0.330% next
international equity funds, $2 billion
through investment primarily in a 0.300% next
diversified portfolio of foreign $2 billion
equity securities. 0.280% next
$2 billion
0.260% next
$3 billion
0.250% next
$3 billion
0.240%
thereafter+
INDIVIDUAL FUND FEE
0.600% of
net assets
AARP Small Company Stock Long-term growth of capital, 0.350% to $ 25,425,137***
Fund consistent with a share price $2 billion
more stable than other small 0.330% next
company stock funds, through $2 billion
investment primarily in stocks of 0.300% next
small U.S. companies. $2 billion
0.280% next
$2 billion
0.260% next
$3 billion
0.250% next
$3 billion
0.240%
thereafter+
INDIVIDUAL FUND FEE
0.550% of
net assets
</TABLE>
- ---------------
* Assets are shown as of a Fund's most recent fiscal year end unless otherwise
indicated.
*** Assets as of 6/30/97.
+ Subject to waivers and/or expense limitations.
B-11
<PAGE> 60
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS*
- ----------------------------- --------------------------------- ------------------- --------------
<S> <C> <C> <C>
AARP U.S. Stock Index Fund Long-term capital growth and 0.350% to $ 23,917,674***
income, consistent with greater $2 billion
share price stability than a S&P 0.330% next
500 index fund, by taking an $2 billion
indexing approach to investing in 0.300% next
common stocks, emphasizing higher $2 billion
dividend stocks while maintaining 0.280% next
investment characteristics $2 billion
otherwise similar to the S&P 500 0.260% next
index. $3 billion
0.250% next
$3 billion
0.240%
thereafter+
INDIVIDUAL FUND FEE
0.000% of
net assets
AARP Bond Fund for Income High level of current income, 0.350% to $ 34,951,973***
consistent with greater share $2 billion
price stability than a long term 0.330% next
bond, through investment $2 billion
primarily in investment-grade 0.300% next
debt securities. $2 billion
0.280% next
$2 billion
0.260% next
$3 billion
0.250% next
$3 billion
0.240%
thereafter+
INDIVIDUAL FUND FEE
0.280% of
net assets
AARP GNMA and U.S. Treasury High level of current income, 0.350% to $4,904,439,844
Fund consistent with greater share $2 billion
price stability than a long-term 0.330% next
bond, through investment $2 billion
principally in U.S. 0.300% next
Government-guaranteed GNMA $2 billion
securities and U.S. Treasury 0.280% next
obligations. $2 billion
0.260% next
$3 billion
0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND FEE
0.120% of
net assets
</TABLE>
- ---------------
* Assets are shown as of a Fund's most recent fiscal year end unless otherwise
indicated.
*** Assets as of 6/30/97.
+ Subject to waivers and/or expense limitations.
B-12
<PAGE> 61
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS*
- ----------------------------- --------------------------------- ------------------- --------------
<S> <C> <C> <C>
AARP High Quality Bond Fund High level of income, consistent 0.350% to $ 511,905,166
with greater share price $2 billion
stability than a long-term bond, 0.330% next
through investment primarily in a $2 billion
portfolio of high quality 0.300% next
securities $2 billion
0.280% next
$2 billion
0.260% next
$3 billion
0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND FEE
0.190% of
net assets
AARP Diversified Growth Long-term growth of capital There will be no $ 36,411,938***
Portfolio through investment primarily in fee as the manager
AARP stock mutual funds. will receive a fee
from the underlying
funds.
AARP Diversified Income Current income with modest long- There will be no $ 34,230,023***
Portfolio term appreciation through fee as the manager
investment primarily in AARP bond will receive a fee
mutual funds. from the underlying
funds.
AARP High Quality Tax Free Current income free from federal 0.350% to $ 111,264,728
Money Fund income taxes and liquidity, $2 billion
consistent with maintaining 0.330% next
stability and safety of $2 billion
principal, through investment in 0.300% next
high-quality municipal $2 billion
securities. 0.280% next
$2 billion
0.260% next
$3 billion
0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND FEE
0.100% of
net assets
</TABLE>
- ---------------
* Assets are shown as of a Fund's most recent fiscal year end unless otherwise
indicated.
*** Assets as of 6/30/97.
B-13
<PAGE> 62
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS*
- ----------------------------- --------------------------------- ------------------- --------------
<S> <C> <C> <C>
AARP Insured Tax Free High level of income free from 0.350% to $1,755,412,222
General Bond Fund federal income taxes, consistent $2 billion
with greater share price 0.330% next
stability than a long-term $2 billion
municipal bond, through 0.300% next
investment primarily in municipal $2 billion
securities covered by insurance. 0.280% next
$2 billion
0.260% next
$3 billion
0.250% next
$3 billion
0.240% thereafter
INDIVIDUAL FUND FEE
0.190% of
net assets
</TABLE>
- ---------------
* Assets are shown as of a Fund's most recent fiscal year end unless otherwise
indicated.
*** Assets as of 6/30/97.
B-14
<PAGE> 63
EXHIBIT C
PROPOSED AMENDMENTS TO THE
DECLARATION OF TRUST
SCUDDER PATHWAY SERIES
Following are proposed amendments to the Trust's Declaration of Trust, as
described in the proxy statement. Additions are shown in BOLD TYPE and deletions
by a [ ].
Section 2.2. Investments.
The Trustees shall have the power:
(i) TO INVEST, THROUGH A TRANSFER OF CASH, SECURITIES AND OTHER ASSETS
OR OTHERWISE, ALL OR A PORTION OF THE TRUST PROPERTY, OR TO SELL ALL OR A
PORTION OF THE TRUST PROPERTY AND INVEST THE PROCEEDS OF SUCH SALES, IN
ANOTHER INVESTMENT COMPANY THAT IS REGISTERED UNDER THE 1940 ACT.
Section 5.9. Voting Powers.
The Shareholders shall have power to vote only (i) for the election of
Trustees as provided in Section 2.12; (ii) for the removal of Trustees as
provided in Section 2.13; (iii) with respect to any [ ] amendment of this
Declaration to the extent and as provided in Section 8.3; [ ] (iv) to the same
extent as the stockholders of Massachusetts business corporation as to whether
or not a court action, proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the Trust or any
Series or Class thereof or the Shareholders (provided, however, that a
Shareholder of a particular Series or Class shall not be entitled to BRING a
derivative or class action on behalf of any other Series or Class (or
Shareholder of any other Series or Class) of the Trust); [ ] AND (v) with
respect to such additional matters relating to the Trust as may be required by
this Declaration, the By-laws or any registration of the [ ] TRUST as an
investment company under the 1940 Act with the Commission (or any successor
agency) or as the Trustees may consider necessary or desirable. Each whole Share
shall be entitled to one vote as to any matter on which it is entitled to vote
and each fractional Share shall be entitled to a proportionate fractional vote,
except that the Trustees may, in conjunction with the establishment of any
Series or Class of Shares, establish or reserve the right to establish
conditions under which the several Series or Classes shall have separate voting
rights or [ ] no voting rights. There shall be no cumulative voting in the
election of Trustees. Until Shares are issued, the Trustees may exercise all
rights of Shareholders and may take any action required by law, this Declaration
or the By-laws to be taken by Shareholders. The By-laws may include further
provisions for Shareholders' votes and meetings and related matters.
C-1
<PAGE> 64
EXHIBIT D
PROPOSED FUNDAMENTAL INVESTMENT POLICIES
SCUDDER PATHWAY SERIES
BALANCED PORTFOLIO
CONSERVATIVE PORTFOLIO
GROWTH PORTFOLIO
INTERNATIONAL PORTFOLIO
In addition, as a matter of fundamental policy, each Fund (or "Portfolio")
will not:
5.1. borrow money, except as permitted under the Investment Company
Act of 1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time;
5.2. issue senior securities, except as permitted under the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time;
5.3. engage in the business of underwriting securities issued by
others, except to the extent that the Portfolio may be deemed to be an
underwriter in connection with the disposition of portfolio securities;
(x) concentrate its investments in investment companies, as the term
"concentrate" is used in the Investment Company Act of 1940, as amended and
interpreted by regulatory authority having jurisdiction from time to time;
except that the Fund may concentrate in an underlying Fund. However, each
Underlying Scudder Fund in which each Portfolio will invest may concentrate
its investments in a particular industry;
5.4. purchase or sell real estate, which term does not include
securities of companies which deal in real estate or mortgages or
investments secured by real estate or interests therein, except that the
Portfolio reserves freedom of action to hold and to sell real estate
acquired as a result of the Portfolio's ownership of securities;
5.5. purchase physical commodities or contracts relating to physical
commodities; or
5.6. make loans to other persons, except (i) loans of portfolio
securities, and (ii) to the extent that entry into repurchase agreements
and the purchase of debt instruments or interests in indebtedness in
accordance with the Portfolio's investment objective and policies may be
deemed to be loans.
D-1
<PAGE> 65
EXHIBIT E
CURRENT FUNDAMENTAL INVESTMENT POLICIES
SCUDDER PATHWAY SERIES
CONSERVATIVE PORTFOLIO
BALANCED PORTFOLIO
GROWTH PORTFOLIO
INTERNATIONAL PORTFOLIO
As a matter of fundamental policy, each Portfolio may not:
(1) borrow money, except as a temporary measure for extraordinary or
emergency purposes or except in connection with reverse repurchase
agreements; provided that a Portfolio maintains asset coverage of 300% for
all borrowings;
(2) purchase or sell real estate (except that an Underlying Scudder
Fund may invest in (i) securities of companies which deal in real estate or
mortgages, and (ii) securities secured by real estate or interests therein,
and that an Underlying Scudder Fund reserves freedom of action to hold and
to sell real estate acquired as a result of an Underlying Scudder Fund's
ownership of securities); and
(3) purchase or sell physical commodities or contracts relating to
physical commodities;
(4) make loans to other persons, except to the extent that the entry
into repurchase agreements in accordance with its investment objectives and
investment policies may be deemed to be loans;
(5) act as an underwriter of securities issued by others, except to
the extent that it may be deemed an underwriter in connection with the
disposition of portfolio securities of a Portfolio.
In addition, as a matter of fundamental policy, each Portfolio may:
(1) concentrate more than 25% of their assets in mutual funds. In
accordance with the Portfolios' investment programs set forth in the
Portfolios' prospectuses, each Portfolio may invest more than 25% of its
assets in certain of the Underlying Scudder Funds. However, each Underlying
Scudder Fund in which each Portfolio will invest, with the exception of
Scudder Gold Fund, will not concentrate more than 25% of its total assets
in any one industry.
E-1
<PAGE> 66
SCUDDER PATHWAY SERIES
PROXY BALANCED PORTFOLIO PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
SPECIAL MEETING OF SHAREHOLDERS -- OCTOBER 24, 1997
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 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, Stevens & Clark, Inc., Two International Place, Boston, Massachusetts
02110, on October 24, 1997 at 10:30 a.m., eastern time, and at any adjournments
thereof.
UNLESS OTHERWISE SPECIFIED IN THE SQUARES PROVIDED, THE UNDERSIGNED'S VOTE
WILL BE CAST FOR EACH NUMBERED ITEM LISTED BELOW.
The Board members of your Fund, including those who are not affiliated with
the Fund or Scudder, recommend that you vote FOR each item.
1. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. The election of Trustees;
[ ] FOR all nominees listed below
(except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY
to vote for all nominees listed below
Nominees: Dr. Rosita P. Chang, Edgar R. Fiedler, Peter B. Freeman, Dr. J.D.
Hammond and Richard M. Hunt.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
------------------------------------------------------------
(continued on other side)
<PAGE> 67
3. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To approve certain amendments to the Declaration of Trust;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. To approve changes to certain of the fundamental investment policies and
restrictions.
<TABLE>
<S> <C> <C>
5.1 borrowing; 5.3 underwriting of securities; 5.5 commodities;
5.2 senior securities; 5.4 investment in real estate; 5.6 loans.
</TABLE>
TO VOTE AGAINST OR ABSTAIN WITH RESPECT TO A PARTICULAR PROPOSED CHANGE,
REFER TO THE PROXY STATEMENT FOR THE CHANGES APPLICABLE TO THE FUND AND
WRITE THE NUMBER OF THE SUB-PROPOSAL ON THE LINE BELOW.
- --------------------------------------------------------------------------------
6. Ratification of the selection of Coopers & Lybrand L.L.P. as the Fund's
independent accountants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The proxies are authorized to vote in their discretion on any other business
which may properly come before the meeting and any adjournments thereof.
Please sign exactly as your name or names
appear. When signing as attorney,
executor, administrator, trustee or
guardian, please give your full title as
such.
------------------------------------------
(Signature of Shareholder)
------------------------------------------
(Signature of joint owner, if any)
Dated , 1997
------------------------------------
PLEASE SIGN AND RETURN PROMPTLY IN ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.
<PAGE> 68
SCUDDER PATHWAY SERIES
PROXY CONSERVATIVE PORTFOLIO PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
SPECIAL MEETING OF SHAREHOLDERS -- OCTOBER 24, 1997
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 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, Stevens & Clark, Inc., Two International Place, Boston, Massachusetts
02110, on October 24, 1997 at 10:30 a.m., eastern time, and at any adjournments
thereof.
UNLESS OTHERWISE SPECIFIED IN THE SQUARES PROVIDED, THE UNDERSIGNED'S VOTE
WILL BE CAST FOR EACH NUMBERED ITEM LISTED BELOW.
The Board members of your Fund, including those who are not affiliated with
the Fund or Scudder, recommend that you vote FOR each item.
1. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. The election of Trustees;
[ ] FOR all nominees listed below
(except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY
to vote for all nominees listed below
Nominees: Dr. Rosita P. Chang, Edgar R. Fiedler, Peter B. Freeman, Dr. J.D.
Hammond and Richard M. Hunt.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
------------------------------------------------------------
(continued on other side)
<PAGE> 69
3. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To approve certain amendments to the Declaration of Trust;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. To approve changes to certain of the fundamental investment policies and
restrictions.
<TABLE>
<S> <C> <C>
5.1 borrowing; 5.3 underwriting of securities; 5.5 commodities;
5.2 senior securities; 5.4 investment in real estate; 5.6 loans.
</TABLE>
TO VOTE AGAINST OR ABSTAIN WITH RESPECT TO A PARTICULAR PROPOSED CHANGE,
REFER TO THE PROXY STATEMENT FOR THE CHANGES APPLICABLE TO THE FUND AND
WRITE THE NUMBER OF THE SUB-PROPOSAL ON THE LINE BELOW.
- --------------------------------------------------------------------------------
6. Ratification of the selection of Coopers & Lybrand L.L.P. as the Fund's
independent accountants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The proxies are authorized to vote in their discretion on any other business
which may properly come before the meeting and any adjournments thereof.
Please sign exactly as your name or names
appear. When signing as attorney,
executor, administrator, trustee or
guardian, please give your full title as
such.
------------------------------------------
(Signature of Shareholder)
------------------------------------------
(Signature of joint owner, if any)
Dated , 1997
---------------------------------------
PLEASE SIGN AND RETURN PROMPTLY IN ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.
<PAGE> 70
SCUDDER PATHWAY SERIES
PROXY GROWTH PORTFOLIO PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
SPECIAL MEETING OF SHAREHOLDERS -- OCTOBER 24, 1997
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 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, Stevens & Clark, Inc., Two International Place, Boston, Massachusetts
02110, on October 24, 1997 at 10:30 a.m., eastern time, and at any adjournments
thereof.
UNLESS OTHERWISE SPECIFIED IN THE SQUARES PROVIDED, THE UNDERSIGNED'S VOTE
WILL BE CAST FOR EACH NUMBERED ITEM LISTED BELOW.
The Board members of your Fund, including those who are not affiliated with
the Fund or Scudder, recommend that you vote FOR each item.
1. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. The election of Trustees;
[ ] FOR all nominees listed below
(except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY
to vote for all nominees listed below
Nominees: Dr. Rosita P. Chang, Edgar R. Fiedler, Peter B. Freeman, Dr. J.D.
Hammond and Richard M. Hunt.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
------------------------------------------------------------
(continued on other side)
<PAGE> 71
3. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To approve certain amendments to the Declaration of Trust;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. To approve changes to certain of the fundamental investment policies and
restrictions.
<TABLE>
<S> <C> <C>
5.1 borrowing; 5.3 underwriting of securities; 5.5 commodities;
5.2 senior securities; 5.4 investment in real estate; 5.6 loans.
</TABLE>
TO VOTE AGAINST OR ABSTAIN WITH RESPECT TO A PARTICULAR PROPOSED CHANGE,
REFER TO THE PROXY STATEMENT FOR THE CHANGES APPLICABLE TO THE FUND AND
WRITE THE NUMBER OF THE SUB-PROPOSAL ON THE LINE BELOW.
- --------------------------------------------------------------------------------
6. Ratification of the selection of Coopers & Lybrand L.L.P. as the Fund's
independent accountants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The proxies are authorized to vote in their discretion on any other business
which may properly come before the meeting and any adjournments thereof.
Please sign exactly as your name or names
appear. When signing as attorney,
executor, administrator, trustee or
guardian, please give your full title as
such.
------------------------------------------
(Signature of Shareholder)
------------------------------------------
(Signature of joint owner, if any)
Dated
-----------------------------, 1997
PLEASE SIGN AND RETURN PROMPTLY IN ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.
<PAGE> 72
SCUDDER PATHWAY SERIES
PROXY INTERNATIONAL PORTFOLIO PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
SPECIAL MEETING OF SHAREHOLDERS -- OCTOBER 24, 1997
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 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, Stevens & Clark, Inc., Two International Place, Boston, Massachusetts
02110, on October 24, 1997 at 10:30 a.m., eastern time, and at any adjournments
thereof.
UNLESS OTHERWISE SPECIFIED IN THE SQUARES PROVIDED, THE UNDERSIGNED'S VOTE
WILL BE CAST FOR EACH NUMBERED ITEM LISTED BELOW.
The Board members of your Fund, including those who are not affiliated with
the Fund or Scudder, recommend that you vote FOR each item.
1. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. The election of Trustees;
[ ] FOR all nominees listed below
(except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY
to vote for all nominees listed below
Nominees: Dr. Rosita P. Chang, Edgar R. Fiedler, Peter B. Freeman, Dr. J.D.
Hammond and Richard M. Hunt.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
------------------------------------------------------------
(continued on other side)
<PAGE> 73
3. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To approve certain amendments to the Declaration of Trust;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. To approve changes to certain of the fundamental investment policies and
restrictions.
<TABLE>
<S> <C> <C>
5.1 borrowing; 5.3 underwriting of securities; 5.5 commodities;
5.2 senior securities; 5.4 investment in real estate; 5.6 loans.
</TABLE>
TO VOTE AGAINST OR ABSTAIN WITH RESPECT TO A PARTICULAR PROPOSED CHANGE,
REFER TO THE PROXY STATEMENT FOR THE CHANGES APPLICABLE TO THE FUND AND
WRITE THE NUMBER OF THE SUB-PROPOSAL ON THE LINE BELOW.
- --------------------------------------------------------------------------------
6. Ratification of the selection of Coopers & Lybrand L.L.P. as the Fund's
independent accountants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The proxies are authorized to vote in their discretion on any other business
which may properly come before the meeting and any adjournments thereof.
Please sign exactly as your name or names
appear. When signing as attorney,
executor, administrator, trustee or
guardian, please give your full title as
such.
------------------------------------------
(Signature of Shareholder)
------------------------------------------
(Signature of joint owner, if any)
Dated
, 1997
------------------------------
PLEASE SIGN AND RETURN PROMPTLY IN ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.
