As filed with the Securities and Exchange Commission
on March 3, 2000.
Securities Act File No.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. |_| Post-Effective Amendment No. |_|
SCUDDER MUNICIPAL TRUST
(Exact Name of Registrant as Specified in Charter)
Two International Place
Boston, Massachusetts 02110-4103
(Address of Principal Executive Offices) (Zip Code)
John Millette
Scudder Kemper Investments, Inc.
Two International Place
Boston, MA 02110-4103
(Name and Address of Agent for Service)
(617) 295-1000
(Registrant's Area Code and Telephone Number)
with copies to:
Caroline Pearson, Esq. Sheldon A. Jones, Esq.
Scudder Kemper Investments, Inc. Dechert Price & Rhoads
Two International Place Ten Post Office Square - South
Boston, MA 02110-4103 Boston, MA 02109-4603
Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement is declared effective.
Title of Securities Being Registered:
Shares of Beneficial Interest ($.01 par value)
of Scudder Managed Municipal Bonds, a series of the Registrant
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It is proposed that this filing will become effective on April 3, 2000 pursuant
to Rule 488 under the Securities Act of 1933.
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No filing fee is required because the Registrant has previously registered an
indefinite number of its shares under the Securities Act of 1933, as amended,
pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended.
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PART A
INFORMATION REQUIRED IN THE PROXY STATEMENT/PROSPECTUS
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF
SCUDDER STATE TAX FREE TRUST
SCUDDER OHIO TAX FREE FUND
Please take notice that a Special Meeting of Shareholders (the "Meeting")
of Scudder Ohio Tax Free Fund (the "Fund"), a series of Scudder State Tax Free
Trust (the "Trust"), will be held at the offices of Scudder Kemper Investments,
Inc., Floor 13, Two International Place, Boston, MA 02110-4103, on July 13,
2000, at 3:00 p.m., Eastern time, for the following purposes:
Proposal 1: To elect Trustees of the Trust;
Proposal 2: To approve an Agreement and Plan of Reorganization for the
Fund whereby all or substantially all of the assets and
liabilities of the Fund would be acquired by Scudder Managed
Municipal Bonds in exchange for shares of the Class S shares
class of Scudder Managed Municipal Bonds; and
Proposal 3: To ratify the selection of PricewaterhouseCoopers LLP as
the independent accountants for the Fund for the Fund's
current fiscal year.
The appointed proxies will vote in their discretion on any other business
that may properly come before the Meeting or any adjournments thereof.
Holders of record of shares of the Fund at the close of business on April
17, 2000 are entitled to vote at the Meeting and at any adjournments thereof.
In the event that the necessary quorum to transact business or the vote
required to approve any Proposal is not obtained at the Meeting, the persons
named as proxies may propose one or more adjournments of the Meeting in
accordance with applicable law to permit further solicitation of proxies. Any
such adjournment as to a matter will require the affirmative vote of the holders
of a majority of the Fund's shares present in person or by proxy at the Meeting.
The persons named as proxies will vote FOR any such adjournment those proxies
which they are entitled to vote in favor of that Proposal and will vote AGAINST
any such adjournment those proxies to be voted against that Proposal.
By Order of the Board,
[Signature]
John Millette,
Secretary
[date]
IMPORTANT -- We urge you to sign and date the enclosed proxy card(s) and return
it in the enclosed envelope which requires no postage (or to take advantage of
the electronic or telephonic voting procedures described on the proxy card(s)).
Your prompt return of the enclosed proxy card(s) (or your voting by other
available means) may save the necessity and expense of further solicitations. If
you wish to attend the Meeting and vote your shares in person at that time, you
will still be able to do so.
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Table of Contents
Introduction....................
Proposal 1: Election of Trustees/Directors for the Acquired
Trust/Corporation........
Nominees for Election..............
Trustees/Directors Not Standing for Re-election............
Responsibilities of the Board -- Board and Committee Meetings........
Audit Committee........
Committee on Independent Trustees/Directors........
Attendance............
Honorary Trustees/Directors.........
Officers.............
Compensation of Trustees/Directors and Officers.........
Proposal 2: Approval of Agreement and Plan of Reorganization......
I. SYNOPSIS.........
Introduction.........
Background of the Reorganization...........
Reasons for the Proposed Transaction; Board Approval.......
Investment Objectives, Policies and Restrictions of the
Funds........
Portfolio Turnover..........
Performance...........
Investment Manager; Fees and Expenses......
Administrative Fee..........
Comparison of Expenses.........
Financial Highlights.........
Distribution of Shares........
Purchase, Redemption and Exchange Information.........
Dividends and other Distributions..........
Tax Consequences........
II. PRINCIPAL RISK FACTORS......
III. THE PROPOSED TRANSACTION..........
Description of the Plan........
Board Approval of the Proposed Transaction......
Description of the Securities to be Issued.....
Federal Income Tax Consequences.........
Capitalization...........
Proposal 3: Ratification or Rejection of the Selection of Independent
Accountants
Additional Information
Exhibit A
Exhibit B
Appendix 1
Appendix 2
Part B: Statement of Additional Information
Part C: Other Information
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PROXY STATEMENT/PROSPECTUS
[DATE]
Relating to the acquisition of the assets of
SCUDDER OHIO TAX FREE FUND (the "Acquired Fund"),
a separate series of
SCUDDER STATE TAX FREE TRUST (the "Acquired Trust")
Two International Place
Boston, Massachusetts 02110-4103
(800) 728-3337
by and in exchange for the Class S shares class of shares of
beneficial interest of SCUDDER MANAGED MUNICIPAL BONDS (the
"Acquiring Fund"),
a separate series of
SCUDDER MUNICIPAL TRUST (the "Acquiring Trust")
Two International Place
Boston, Massachusetts 02110-4103
(800) 728-3337
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to shareholders of the
Acquired Fund in connection with three proposals (each a "Proposal"). Proposal 1
describes the election of Trustees, and Proposal 3 proposes the ratification of
the Acquired Fund's accountants.
In Proposal 2, shareholders are asked to approve a proposed reorganization
in which all or substantially all of the assets of the Acquired Fund would be
acquired by the Acquiring Fund, in exchange for shares of beneficial interest of
the Class S shares class of the Acquiring Fund (known as "Class S Shares") and
the assumption by the Acquiring Fund of all of the liabilities of the Acquired
Fund, as described more fully below (the "Reorganization"). Shares of the
Acquiring Fund thereby received would then be distributed to the shareholders of
the Acquired Fund in complete liquidation of the Acquired Fund. As a result of
the Reorganization, each shareholder of the Acquired Fund would receive that
number of Class S Shares having an aggregate net asset value equal to the
aggregate net asset value of such shareholder's shares of the Acquired Fund held
as of the close of business on the business day preceding the closing of the
Reorganization (the "Valuation Date"). Shareholders of the Acquired Fund will
vote on an Agreement and Plan of Reorganization (the "Plan") pursuant to which
the Reorganization would be consummated. A copy of the Plan is attached hereto
as Exhibit A. The closing of the Reorganization (the "Closing") is contingent
upon shareholder approval of the Plan. The Reorganization is expected to occur
on or about July 31, 2000.
Proposals 1 and 2 relate to a restructuring program proposed by Scudder
Kemper Investments, Inc. ("Scudder Kemper" or the "Investment Manager") and
described in more detail below.
It is being proposed to shareholders of AARP Insured Tax Free General Bond
Fund, another fund advised by Scudder Kemper, the investment manager for each of
the Acquiring Fund and the Acquired Fund, that the Acquiring Fund acquire the
assets of that other fund. Each of the closing of this other acquisition and the
Closing is contingent upon the other.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES NOR PASSED UPON THE ACCURACY OR
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ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
In the descriptions of the Proposals below, the word "fund" is sometimes
used to mean investment companies or series thereof in general, and not the
Acquired Fund whose proxy statement this is. In addition, for simplicity,
actions are described in this Proxy Statement as being taken by either the
Acquired Fund or the Acquiring Fund (each a "Fund" and collectively the
"Funds"), although all actions are actually taken either by the Acquired Trust
or the Acquiring Trust (together with the Acquired Trust, the "Trusts"), on
behalf of the applicable Fund.
This Proxy Statement/Prospectus sets forth concisely the information about
the Acquiring Fund that a prospective investor should know before investing and
should be retained for future reference. For a more detailed discussion of the
investment objective, policies, restrictions and risks of the Acquiring Fund,
see the Acquiring Fund's prospectus, dated October 1, 1999, as supplemented from
time to time, which is included herewith and incorporated herein by reference.
For a more detailed discussion of the investment objective, policies,
restrictions and risks of the Acquired Fund, see the Acquired Fund's prospectus
dated August 1, 1999, as supplemented from time to time, which is incorporated
herein by reference and a copy of which may be obtained upon request and without
charge by calling or writing the Acquired Fund at the telephone number or
address set forth on the preceding page.
The Acquiring Fund's Statement of Additional Information, dated October 1,
1999, is incorporated herein by reference and may be obtained upon request and
without charge by calling or writing the Acquiring Fund at the telephone number
or address set forth on the preceding page. A Statement of Additional
Information, dated ___________________, containing additional information about
the Reorganization and the parties thereto has been filed with the Securities
and Exchange Commission (the "SEC" or the "Commission") and is incorporated by
reference into this Proxy Statement/Prospectus. A copy of the Statement of
Additional Information relating to the Reorganization is available upon request
and without charge by calling or writing the Acquiring Fund at the telephone
number or address set forth on the preceding page. Shareholder inquiries
regarding either Fund may be made by calling (800) 728-3337. The information
contained herein concerning the Acquired Fund has been provided by, and is
included herein in reliance upon, the Acquired Fund. The information contained
herein concerning the Acquiring Fund has been provided by, and is included
herein in reliance upon, the Acquiring Fund. The Class S Shares will be a
newly-established class of shares of the Acquiring Fund and will be identical in
all material respects to the Acquiring Fund shares currently offered and sold,
as described in the prospectus and statement of additional information for the
Acquiring Fund, dated _________, except as otherwise described herein.
The Acquiring Fund is a diversified series of shares of beneficial
interest of the Acquiring Trust. The Acquired Fund is a non-diversified series
of shares of beneficial interest of the Acquired Trust. The Acquiring Trust and
the Acquired Trust are open-end management investment companies organized as
Massachusetts business trusts.
The Board of Trustees (except as otherwise noted, "Trustees" refers to the
Trustees of the Acquired Trust and "Board" refers to the Board of Trustees of
the Acquired Trust) is soliciting proxies from shareholders of the Acquired Fund
on behalf of the Acquired Fund, for the Special Meeting of Shareholders to be
held on July 13, 2000, at Scudder Kemper's offices at Floor 13, Two
International Place, Boston, MA 02110-4103 at 3:00 p.m. (Eastern time), or at
such later time made necessary by adjournment (the "Meeting").
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The Board of Trustees recommends that shareholders vote for the nominees
listed in Proposal 1, and for Proposals 2 and 3.
PROPOSAL 1: ELECTION OF TRUSTEES FOR THE ACQUIRED TRUST
At the Meeting, shareholders will be asked to elect nine individuals to
constitute the Board of Trustees of the Acquired Trust. These individuals were
nominated after a careful and deliberate selection process by the present Board
of Trustees of the Acquired Trust. The nominees for election, who are listed
below, include seven persons who currently serve as Independent Trustees (as
defined below) of the Acquired Trust, the Acquiring Trust or as independent
trustees or directors of other no-load funds advised by Scudder Kemper and who
have no affiliation with Scudder Kemper or AARP. The nominees listed below are
also being nominated for election as Trustees of the Acquiring Trust and as
trustees or directors of most of the other no-load funds advised by Scudder
Kemper.
Currently five different boards of trustees or directors are responsible
for overseeing different groups of no-load funds advised by Scudder Kemper. As
part of a broader restructuring effort described below under Proposal 2, Scudder
Kemper has recommended, and the Board of Trustees has agreed, that shareholder
interests can more effectively be represented by a single board with
responsibility for overseeing substantially all of the Scudder no-load funds.
Creation of a single, consolidated board should also provide certain
administrative efficiencies and potential future cost savings for both the Funds
and Scudder Kemper.
Election of each of the listed nominees for Trustee on the Board of the
Acquired Trust requires the affirmative vote of a plurality of the votes cast at
the Meeting, in person or by proxy. The persons named as proxies on the enclosed
proxy card will vote for the election of the nominees named below unless
authority to vote for any or all of the nominees is withheld in the proxy. Each
Trustee so elected will serve as a Trustee of the Acquired Trust until the next
meeting of shareholders, if any, called for the purpose of electing Trustees and
until the election and qualification of a successor or until such Trustee sooner
dies, resigns or is removed as provided in the governing documents of the
Acquired Trust. Each of the nominees has indicated that he or she is willing to
serve as a Trustee. If any or all of the nominees should become unavailable for
election due to events not now known or anticipated, the persons named as
proxies will vote for such other nominee or nominees as the Trustees may
recommend. The following paragraphs and table set forth information concerning
the nominees and the Trustees not standing for re-election. Each nominee's or
Trustee's age is in parentheses after his or her name. Unless otherwise noted,
(i) each of the nominees and Trustees has engaged in the principal occupation
listed in the following paragraphs and table for more than five years, but not
necessarily in the same capacity, and (ii) the address of each nominee is c/o
Scudder Kemper Investments, Inc., Two International Place, Boston, MA
02110-4103.
Nominees for Election as Trustees:
Henry P. Becton, Jr. (56)
Henry P. Becton, Jr. graduated from Yale University in 1965, where he was
elected to Phi Beta Kappa and was Chairman of the Yale Broadcasting Corporation.
He received his J.D. degree from Harvard Law School in 1968. He joined the staff
of WGBH Educational Foundation in 1970, was appointed General Manager in 1978,
and was elected President and General Manager in 1984. Mr. Becton is a member of
the PBS Board of Directors, a Trustee of American Public Television, the New
England Aquarium, the Boston Museum of Science, Concord Academy, and the
Massachusetts Corporation for Educational Telecommunications, an Overseer of the
Boston Museum of Fine Arts, and a member of the Board of
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Governors of the Banff International Television Festival Foundation. He is also
a Director of Becton Dickinson and Company and A.H. Belo Company, a Trustee of
the Committee for Economic Development, and a member of the Board of Visitors of
the Dimock Community Health Center, the Dean's Council of Harvard University's
Graduate School of Education, and the Massachusetts Bar. Mr. Becton has served
as a trustee of various mutual funds advised by Scudder Kemper since 1990.
Linda C. Coughlin (48)*
Linda C. Coughlin, a Managing Director of Scudder Kemper, is head of Scudder
Kemper's U.S. Retail Mutual Funds Business. Ms. Coughlin joined Scudder Kemper
in 1986 and was a member of the firm's Board of Directors. She currently
oversees the marketing, service and operations of Scudder Kemper retail
businesses in the United States, which include the Scudder, Kemper, AARP, and
closed-end fund families, and the direct and intermediary channels. She also
serves as Chairperson of the AARP Investment Program from Scudder and as a
Trustee of the Program's mutual funds. Ms. Coughlin is also a member of the
Mutual Funds Management Group. Previously, she served as a regional Marketing
Director in the retail banking division of Citibank and at the American Express
Company as Director of Consumer Marketing for the mutual fund group. Ms.
Coughlin received a B.A. degree in economics (summa cum laude) from Fordham
University. Ms. Coughlin has served on the boards of various funds advised by
Scudder Kemper, including the AARP Investment Program Funds, since 1996.
Dawn-Marie Driscoll (53)
Dawn-Marie Driscoll is an Executive Fellow and Advisory Board member of the
Center for Business Ethics at Bentley College, one of the nation's leading
institutes devoted to the study and practice of business ethics. Ms. Driscoll is
also president of Driscoll Associates, a consulting firm. She is a member of the
Board of Governors of the Investment Company Institute and serves as Chairman of
the Directors Services Committee. She has been a director, trustee and overseer
of many civic and business institutions, including The Massachusetts Bay United
Way and Regis College. Ms. Driscoll was formerly a law partner at Palmer & Dodge
in Boston and served for over a decade as Vice President of Corporate Affairs
and General Counsel of Filene's, the Boston-based department store chain. Ms.
Driscoll received a B.A. from Regis College, a J.D. from Suffolk University Law
School, a D.H.L. (honorary) from Suffolk University and a D.C.S. (honorary) from
Bentley College Graduate School of Business. Ms. Driscoll has served as a
trustee of various mutual funds advised by Scudder Kemper since 1987.
Edgar R. Fiedler (70)
Edgar R. Fiedler is Senior Fellow and Economic Counsellor at The Conference
Board. He served as the Board's Vice President, Economic Research from 1975 to
1986 and as Vice President and Economic Counsellor from 1986 to 1996. Mr.
Fiedler's business experience includes positions at Eastman Kodak in Rochester
(1956-59), Doubleday and Company in New York City (1959-60), and Bankers Trust
Company in New York City (1960-69). He also served as Assistant Secretary of the
Treasury for Economic Policy from 1971 to 1975. Mr. Fiedler graduated from the
University of Wisconsin in 1951. He received his M.B.A. from the University of
Michigan and his doctorate from New York University. During the 1980's, Mr.
Fiedler was an Adjunct Professor of Economics at the Columbia University
Graduate School of Business. From 1990 to 1991, he was the Stephen Edward Scarff
Distinguished Professor at Lawrence University in Wisconsin. Mr. Fiedler is a
Director of The Stanley Works, Harris Insight Funds, Brazil Fund, and PEG
Capital Management, Inc. He has served as a board member of various mutual funds
advised by Scudder Kemper, including the AARP Investment Program Funds, since
1984.
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Keith R. Fox (46)
Keith R. Fox is the managing partner of the Exeter Group of Funds, a series of
private equity funds with offices in New York and Boston, which he founded in
1986. The Exeter Group invests in a wide range of private equity situations,
including venture capital, expansion financings, recapitalizations and
management buyouts. Prior to forming Exeter, Mr. Fox was a director and vice
president of BT Capital Corporation, a subsidiary of Bankers Trust New York
Corporation organized as a small business investment company and based in New
York City. Mr. Fox graduated from Oxford University in 1976, and in 1981
received an M.B.A. degree from the Harvard Business School. Mr. Fox is also a
qualified accountant. He is a board member and former Chairman of the National
Association of Small Business Investment Companies, and a director of Golden
State Vintners, K-Communications, Progressive Holding Corporation and Facts On
File, as well as a former director of over twenty companies. Mr. Fox has served
as a trustee of various mutual funds advised by Scudder Kemper since 1996.
Joan Edelman Spero (55)
Joan E. Spero is the president of the Doris Duke Charitable Foundation, a
position to which she was named in January 1997. From 1993 to 1997, Ms. Spero
served as Undersecretary of State for Economic, Business and Agricultural
Affairs under President Clinton. From 1981 to 1993, she was an executive at the
American Express Company, where her last position was executive vice president
for Corporate Affairs and Communications. Ms. Spero served as U.N. Ambassador to
the United Nations Economic and Social Council under President Carter from 1980
to 1981. She was an assistant professor at Columbia University from 1973 to
1979. She graduated Phi Beta Kappa from the University of Wisconsin and holds a
master's degree in international affairs and a doctorate in political science
from Columbia University. Ms. Spero is a member of the Council on Foreign
Relations and the Council of American Ambassadors. She also serves as a trustee
of the Wisconsin Alumni Research Foundation, The Brookings Institution and
Columbia University and is a Director of First Data Corporation. Ms. Spero has
served as a trustee of various mutual funds advised by Scudder Kemper since
1998.
Jean Gleason Stromberg (56)
Ms. Stromberg acts as a consultant on regulatory matters. From 1996 to 1997, Ms.
Stromberg represented the U.S. General Accounting Office before Congress and
elsewhere on issues involving banking, securities, securities markets, and
government-sponsored enterprises. Prior to that, Ms. Stromberg was a corporate
and securities law partner at the Washington, D.C. law office of Fulbright and
Jaworski, a national law firm. She served as Associate Director of the SEC's
Division of Investment Management from 1977 to 1979 and prior to that was
Special Counsel for the Division of Corporation Finance from 1972 to 1977. Ms.
Stromberg graduated Phi Beta Kappa from Wellesley College and received her law
degree from Harvard Law School. From 1988 to 1991 and 1993 to 1996, she was a
Trustee of the American Bar Retirement Association, the funding vehicle for
American Bar Association-sponsored retirement plans. Ms. Stromberg serves on the
Wellesley College Business Leadership Council and the Council for Mutual Fund
Director Education at Northwestern University Law School and was a panelist at
the SEC's Investment Company Director's Roundtable. Ms. Stromberg has served as
a board member of the AARP Investment Program Funds since 1997.
Jean C. Tempel (56)
Jean C. Tempel is a venture partner for Internet Capital Group, a strategic
network of Internet partnership companies whose principal offices are in Wayne,
Pennsylvania. Ms. Tempel concentrates on investment opportunities in the Boston
area. She spent 25 years in technology/operations executive management at
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various New England banks, building custody operations and real time
financial/securities processing systems, most recently as Chief Operations
Officer at The Boston Company. From 1991 until 1993 she was president/COO of
Safeguard Scientifics, a Pennsylvania technology venture company. In that role
she was a founding investor, director and vice chairman of Cambridge Technology
Partners. She is a director of XLVision, Inc., Marathon Technologies, Inc.,
Aberdeen Group and Sonesta Hotels International, and is a Trustee of
Northeastern University, Connecticut College, and The Commonwealth Institute.
She received a B.A. from Connecticut College, an M.S. from Rensselaer
Polytechnic Institute of New York, and attended Harvard Business School's
Advanced Management Program. Ms. Tempel has served as a trustee of various
mutual funds advised by Scudder Kemper since 1994.
Steven Zaleznick (45)*
Steven Zaleznick is President and CEO of AARP Services, Inc., a wholly-owned and
independently-operated subsidiary of AARP which manages a range of products and
services offered to AARP members, provides marketing services to AARP and its
member service providers and establishes an electronic commerce presence for
AARP members. Mr. Zaleznick previously served as AARP's general counsel for nine
years. He was responsible for the legal affairs of the AARP, which included tax
and legal matters affecting non-profit organizations, contract negotiations,
publication review and public policy litigation. In 1979, he joined the AARP as
a legislation representative responsible for issues involving taxes, pensions,
age discrimination, and other national issues affecting older Americans. Mr.
Zaleznick is President of the Board of Cradle of Hope Adoption Center in
Washington, D.C. He is a former treasurer and currently a board member of the
National Senior Citizens Law Center. Mr. Zaleznick received his B.A. in
economics from Brown University. He received his J.D. degree from Georgetown
University Law Center and is a member of the District of Columbia Bar
Association.
Trustees Not Standing for Re-election:
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Present Office with the Acquired Trust;
Principal Occupation or Employment
Name and Directorships
- ---- -----------------
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Peter B. Freeman (67) Trustee; Corporate Director and Trustee.
Mr. Freeman serves on the Boards of an
additional 13 trusts or corporations
whose funds are advised by Scudder
Kemper.
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George M. Lovejoy, Jr. (69) Trustee; President and Director, Fifty
Associates (real estate corporation).
Mr. Lovejoy serves on the Boards of an
additional 11 trusts or corporations
whose funds are advised by Scudder
Kemper.
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Wesley W. Marple, Jr. (68) Trustee; Professor of Business
Administration, Northeastern University,
College of Business Administration. Mr.
Marple serves on the Boards of an
additional 10 trusts or corporations
whose funds are advised by Scudder
Kemper.
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-11-
- --------------------------------------------------------------------------------
Kathryn L. Quirk (47)* Trustee, Vice President and Assistant
Secretary; Managing Director of Scudder
Kemper Investments, Inc. Ms. Quirk
serves on the Boards of an additional 18
trusts or corporations whose funds are
advised by Scudder Kemper.
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* Nominee or Trustee considered by the Trust and its counsel to be an
"interested person" (as defined in the Investment Company Act of 1940, as
amended (the "1940 Act")) of the Trust, the Investment Manager or AARP
because of his or her employment by the Investment Manager or AARP, and,
in some cases, holding offices with the Trust.
Appendix 1 hereto sets forth the number of shares of each series of the
Acquired Trust owned directly or beneficially by the Trustees of the Acquired
Trust and by the nominees for election.
Responsibilities of the Board -- Board and Committee Meetings
A fund's board is responsible for the general oversight of fund business.
The board that is proposed for shareholder voting at this Meeting is comprised
of two individuals who are considered "interested" Trustees, and seven
individuals who have no affiliation with Scudder Kemper and who are called
"independent" Trustees (the "Independent Trustees"). The SEC has recently
proposed a rule that would require a majority of the board members of a fund to
be "independent" if the fund were to take advantage of certain exemptive rules
under the 1940 Act. On the proposed Board of Trustees, if approved by
shareholders, nearly 78% will be Independent Trustees. The Independent Trustees
have been nominated solely by the current Independent Trustees of the Acquired
Trust, a practice also favored by the SEC. The Independent Trustees have primary
responsibility for assuring that the Acquired Fund is managed in the best
interests of its shareholders.
The Trustees meet several times during the year to review the investment
performance of each fund of the Acquired Trust and other operational matters,
including policies and procedures designed to assure compliance with regulatory
and other requirements. In 1999, the Trustees conducted over 20 meetings to deal
with fund issues (including committee meetings and special meetings of the
Independent Trustees). Furthermore, the Independent Trustees review the fees
paid to the Investment Manager and its affiliates for investment advisory
services and other administrative and shareholder services. The Trustees have
adopted several policies and practices which help ensure their effectiveness and
independence in reviewing fees and representing shareholders. Many of these are
similar to those suggested in the 1999 Advisory Group Report on Best Practices
for Fund Directors (the "Advisory Group Report"). For example, the Independent
Trustees select independent legal counsel to work with them in reviewing fees,
advisory and other contracts and overseeing fund matters. The Trustees are also
assisted in this regard by the funds' independent public accountants and other
independent experts retained for this purpose. The Independent Trustees
regularly meet privately with their counsel and other advisors. In addition, the
Independent Trustees from time to time have appointed task forces and
subcommittees from their members to focus on particular matters such as
investment, accounting and shareholder servicing issues.
The Board of the Acquired Trust has an Audit Committee and a Committee on
Independent Trustees, the responsibilities of which are described below. In
addition, the Acquired Trust has an Executive Committee and a Valuation
Committee.
-12-
Audit Committee
The Audit Committee reviews with management and the independent public
accountants for each series of the Acquired Trust, among other things, the scope
of the audit and the internal controls of each series of the Acquired Trust and
its agents, reviews and approves in advance the type of services to be rendered
by independent accountants, recommends the selection of independent accountants
for each series of the Acquired Trust to the Board, reviews the independence of
such firm and, in general, considers and reports to the Board on matters
regarding the accounting and financial reporting of each series of the Acquired
Trust.
As suggested by the Advisory Group Report, the Acquired Trust's Audit
Committee is comprised entirely of Independent Trustees, meets privately with
the independent accountants of each series of the Acquired Trust, will receive
annual representations from the accountants as to their independence, and has a
written charter that delineates the committee's duties and powers.
Committee on Independent Trustees
The Board of Trustees of the Acquired Trust has a Committee on Independent
Trustees, comprised solely of Independent Trustees, charged with the duty of
making all nominations of Independent Trustees, establishing Trustees'
compensation policies, retirement policies and fund ownership policies,
reviewing Trustee' affiliations and relationships annually, and periodically
assessing and reviewing evaluations of the Board of Trustees' effectiveness.
Attendance
As noted above, the Trustees conducted over 20 meetings in calendar year
1999 to deal with fund matters, including various committee meetings and special
meetings of the Independent Trustees. The full Board of Trustees of the Acquired
Trust met eleven times, the Audit Committee met two times and the Committee on
Independent Trustees met one time during calendar year 1999. Each then current
Trustee attended 100% of the total meetings of the full Board of Trustees and
each above-named committee on which he or she served as a regular member that
were held during that period, except
Officers
The following persons are officers of the Acquired Trust:
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Present Office with the Acquired
Trust; Principal Occupation or
Name (Age) Employment(1) Year First Became an Officer(2)
- ---------- ------------- -------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- --------
(1) Unless otherwise stated, all of the officers have been associated with
their respective companies for more than five years, although not
necessarily in the same capacity.
(2) The President, Treasurer and Secretary each holds office until his or her
successor has been duly elected and qualified, and all other officers hold
offices in accordance with the By-laws of the Acquired Trust.
-13-
- ----------------------------------------------------------------------------------------------------------------------
Linda C. Coughlin (48) Trustee, President; Managing Director 2000
of Scudder Kemper
- ----------------------------------------------------------------------------------------------------------------------
Kathryn L. Quirk (47) Trustee, Vice President and Assistant 1997
Secretary; Managing Director of
Scudder Kemper
- ----------------------------------------------------------------------------------------------------------------------
Philip G. Condon (49) Vice President; Managing Director of 1997
Scudder Kemper
- ----------------------------------------------------------------------------------------------------------------------
Eleanor R. Brennan (36) Vice President; Senior Vice President 1999
of Scudder Kemper
- ----------------------------------------------------------------------------------------------------------------------
Ashton P. Goodfield (36) Vice President; Senior Vice President 1999
of Scudder Kemper
- ----------------------------------------------------------------------------------------------------------------------
Frank J. Rachwalski, Jr. (55) Vice President; Managing Director of 1999
Scudder Kemper
- ----------------------------------------------------------------------------------------------------------------------
Rebecca Wilson (38) Vice President; Vice President of 1995
Scudder Kemper
- ----------------------------------------------------------------------------------------------------------------------
Ann M. McCreary (43) Vice President; Managing Director of 1998
Scudder Kemper
- ----------------------------------------------------------------------------------------------------------------------
John Millette (38) Vice President and Secretary; 1999
Assistant Vice President of Scudder
Kemper
- ----------------------------------------------------------------------------------------------------------------------
John R. Hebble (41) Treasurer; Senior Vice President of 1998
Scudder Kemper
- ----------------------------------------------------------------------------------------------------------------------
Caroline Pearson (38) Assistant Secretary; Senior Vice 1997
President of Scudder Kemper;
Associate, Dechert Price & Rhoads
(law firm) 1989 to 1997
- ----------------------------------------------------------------------------------------------------------------------
Compensation of Trustees and Officers
The Acquired Trust pays each Independent Trustee an annual Trustee's fee
for each series of the Acquired Trust plus specified amounts for Board and
committee meetings attended and reimburses expenses related to the business of
any series of the Acquired Trust. Each such unaffiliated Trustee receives an
annual Trustee's fee of $1,800 if total net assets do not exceed $100 million
per fund and $3,600 per fund if the fund's total net assets exceed $100 million.
The lead Trustee receives an additional annual retainer fee of $500 per fund.
Each Independent Trustee also receives fees of $75 per fund for attending each
Board meeting, Audit Committee meeting or other meeting held for the purpose of
considering arrangements between the Acquired Trust and Scudder Kemper, or any
of its other affiliates. Each Independent Trustee also receives $75 per fund for
all other committee meetings attended. The newly-constituted Board may determine
to change its compensation structure.
The Independent Trustees of the Acquired Trust are not entitled to
benefits under any pension or retirement plan. It is currently anticipated that
a one-time benefit will be provided to those Independent Trustees who have
volunteered to leave the board prior to their normal retirement date in order to
facilitate the nomination of a consolidated board. The amount of such benefit
has not been finally determined, but is expected to be based on a Trustee's
years of service and remaining years to normal retirement. [Further detail to be
provided when available.] [Inasmuch as Scudder Kemper will also benefit from the
administrative efficiencies of a consolidated board, Scudder Kemper has agreed
to bear one-half of the cost of any such benefit.]
-14-
Scudder Kemper supervises the Acquired Trust's investments, pays the
compensation and certain expenses of its personnel who serve as Trustees and
officers of the Acquired Trust and receives a management fee for its services.
Several of the Acquired Trust's officers and Trustees are also officers,
directors, employees or stockholders of Scudder Kemper and participate in the
fees paid to that firm, although the Acquired Trust makes no direct payments to
them other than for reimbursement of travel expenses in connection with their
attendance at Board and committee meetings.
The following Compensation Table provides in tabular form the following
data:
Column (1) All Trustees who receive compensation from the Acquired Trust.
Column (2) Aggregate compensation received by each Trustee of the Acquired
Trust during calendar year 1999.
Column (3) Total compensation received by each Trustee from funds managed
by Scudder Kemper (collectively, the "Fund Complex") during calendar year 1999.
Compensation Table
- -------------------------------------------------------------------------
Aggregate Total Compensation
Compensation (number from Fund Complex
Trustee of funds) Paid to Trustee
- -------------------------------------------------------------------------
Henry P. Becton Jr. $16,750 (5 funds) $140,000 (28 funds)
- -------------------------------------------------------------------------
Dawn-Marie Driscoll $18,510 (5 funds) $150,000 (28 funds)
- -------------------------------------------------------------------------
Peter B. Freeman $16,560 (5 funds) $179,783 (53 funds)
- -------------------------------------------------------------------------
George M. Lovejoy, Jr. $16,560 (5 funds) $153,200 (30 funds)
- -------------------------------------------------------------------------
Wesley W. Marple, Jr. $16,560 (5 funds) $140,000 (28 funds)
- -------------------------------------------------------------------------
Jean C. Tempel $16,560 (5 funds) $140,000 (28 funds)
- -------------------------------------------------------------------------
The Board of Trustees of Scudder State Tax Free Trust recommends that
the shareholders of the Scudder Ohio Tax Free Fund vote for each nominee.
PROPOSAL 2: APPROVAL OF
AGREEMENT AND PLAN OF REORGANIZATION
I. SYNOPSIS
The following is a summary of certain information contained in this Proxy
Statement/Prospectus relating to the Reorganization. This summary is qualified
by reference to the more complete information contained elsewhere in this Proxy
Statement/Prospectus, the Prospectuses and Statements of Additional Information
of the Funds, and the Plan. Shareholders should read this entire Proxy
Statement/Prospectus carefully.
Introduction
The Board of the Acquired Trust, including all of the Independent
Trustees, approved the Plan at a meeting held on February 7, 2000. Subject to
its approval by the shareholders of the Acquired Fund, the Plan provides for (a)
the transfer of all or substantially all of the assets and all of the
liabilities of the Acquired Fund to the Acquiring Fund in exchange for Class S
Shares; (b) the distribution of such shares
-15-
to the shareholders of the Acquired Fund in complete liquidation of the Acquired
Fund; and (c) the abolition of the Acquired Fund as a series of the Acquired
Trust. As a result of the Reorganization, each shareholder of the Acquired Fund
will become a shareholder of the Class S Shares and will hold, immediately after
the Reorganization, Class S Shares having an aggregate net asset value equal to
the aggregate net asset value of such shareholder's shares of the Acquired Fund
on the Valuation Date.
Scudder Kemper is the investment manager of both Funds. If the
Reorganization is completed, the Acquired Fund's shareholders will continue to
enjoy all of the same shareholder privileges as they currently enjoy, such as
the ability to buy, exchange and sell shares without paying a sales commission,
access to professional service representatives, and automatic dividend
reinvestment. Services provided to shareholders of the Acquiring Fund are
identical to those provided to shareholders of the Acquired Fund. See "Purchase,
Redemption and Exchange Information."
Background of the Reorganization
The Reorganization is part of a broader restructuring program proposed by
Scudder Kemper to respond to changing industry conditions and investor needs.
The mutual fund industry has grown dramatically over the last ten years. During
this period of rapid growth, investment managers expanded the range of fund
offerings that they make available to investors in an effort to meet the growing
and changing needs and desires of an increasingly large and dynamic group of
investors. With this expansion has come increased complexity and competition
among mutual funds, as well as increased confusion among investors. The group of
no-load funds advised by Scudder Kemper has followed this pattern, increasing
from 44 no-load funds in 1990 to 77 no-load funds at present.
As a result, Scudder Kemper has sought ways to restructure and streamline
the management and operations of the funds it advises. Scudder Kemper believes,
and has advised the boards, that the consolidation of certain funds advised by
it would benefit fund shareholders. Scudder Kemper has, therefore, proposed the
consolidation of a number of no-load funds advised by it that Scudder Kemper
believes have similar or compatible investment objectives and policies. In many
cases, the proposed consolidations are designed to eliminate the substantial
overlap in current offerings by the Scudder Funds and the funds offered through
the AARP Investment Program (the "AARP Funds"), all of which are advised by
Scudder Kemper. Consolidation plans are proposed for other funds that have not
gathered enough assets to operate efficiently and, in turn, have relatively high
expense ratios. Scudder Kemper believes that these consolidations may help to
enhance investment performance of funds and increase efficiency of operations.
The Reorganization is also expected to result in lower operating expenses for
Acquired Fund shareholders, as described in "Comparison of Expenses" below.
There are currently five different boards for the no-load funds advised by
Scudder Kemper. Scudder Kemper believes, and has proposed to the boards, that
creating a single board responsible for most of the no-load funds advised by
Scudder Kemper would increase efficiency and benefit fund shareholders. (See
Proposal 1 above.)
As part of this restructuring effort, Scudder Kemper has also proposed the
adoption of an administrative fee for most of the no-load funds advised by
Scudder Kemper. Under this fee structure, in exchange for payment by the
Acquiring Fund of an administrative fee, Scudder Kemper would agree to provide
or pay for substantially all services that a fund normally requires for its
operations, other than those provided under the fund's investment management
agreement and certain other expenses. Such an administrative fee would enable
investors to determine with greater certainty the expense level that a fund will
experience, and would transfer substantially all of the risk of increased costs
to Scudder Kemper.
-16-
Scudder Kemper has proposed that the Acquiring Fund implement such an
administrative fee upon the Closing, as described in "Administrative Fee" below.
The fund consolidations, the adoption of an administrative fee and the
creation of a single board are expected to have a positive impact on Scudder
Kemper, as well. These changes are likely to result in reduced costs (and the
potential for increased profitability) for Scudder Kemper in advising or
servicing funds.
Reasons for the Proposed Reorganization; Board Approval
Since receiving Scudder Kemper's proposals on October 5, 1999, the
Independent Trustees have conducted a thorough review of all aspects of the
proposed restructuring program. They have been assisted in this regard by their
independent counsel and by independent consultants with special expertise in
financial and mutual fund industry matters. In the course of discussions with
representatives of Scudder Kemper, the Independent Trustees have requested, and
Scudder Kemper has accepted, numerous changes designed to protect and enhance
the interests of shareholders. See "Board Approval of the Proposed Transaction"
below.
The Trustees believe that the Reorganization will provide shareholders of
the Acquired Fund with the following benefits:
o LOWER EXPENSES. If the Reorganization is approved, Acquired Fund
shareholders may benefit from lower total Fund operating expenses. Please
refer to "Comparison of Expenses" below.
o GREATER PREDICTABILITY OF EXPENSES. On or prior to Closing, the Acquiring
Fund and Scudder Kemper will enter into an administrative services
agreement pursuant to which Scudder Kemper will provide or pay others to
provide substantially all of the administrative services required by the
Acquiring Fund, and most Fund expenses, in return for payment by the
Acquiring Fund of a single administrative fee rate. This agreement, which
has an initial three year term, will protect the Acquiring Fund's
shareholders from increases in the Acquiring Fund's expense ratio
attributed to any increases in the costs of providing these services.
o INVESTMENT IN A LARGER FUND. Scudder Kemper has advised the Trustees that
the Acquired Fund's shareholders will benefit from an investment in a
larger fund which will likely have the ability to effect portfolio
transactions on more favorable terms and provide Scudder Kemper with
greater investment flexibility and the ability to select a larger number
of portfolio securities for the combined fund, with the attendant ability
to spread investment risks among a larger number of portfolio securities.
o TAX-FREE REORGANIZATION. Shareholders of the Acquired Fund will exchange
their shares for shares of the Acquiring Fund of equal value. It is
expected that the transaction will be tax-free for Acquired Fund
shareholders.
For these reasons, as more fully described below under "The Proposed
Transaction - Board Approval of the Proposed Transaction," the Trustees of the
Acquired Trust, including the Independent Trustees, have concluded that:
o the Reorganization is in the best interests of the Acquired Fund and its
shareholders; and
-17-
o the interests of the existing shareholders of the Acquired Fund will not
be diluted as a result of the Reorganization.
Accordingly, the Trustees recommend approval of the Plan effecting the
Reorganization. If the Plan is not approved, the Acquired Fund will continue in
existence unless other action is taken by the Trustees.
Investment Objectives, Policies and Restrictions of the Funds
The investment objectives, policies and restrictions of the Acquired Fund
and the Acquiring Fund (and, consequently, the risks of investing in either
Fund) are somewhat similar. Some differences do exist. The investment objective
of the Acquiring Fund is to seek income exempt from regular federal income tax.
The investment objective of the Acquired Fund is to seek income exempt from Ohio
personal and regular federal income taxes. Unlike the Acquired Fund, the
Acquiring Fund does not seek income exempt from Ohio personal income tax. There
can be no assurance that either Fund will achieve its investment objective.
Both Funds invest at least 80% of their assets in municipal securities.
The Acquired Fund invests at least 80% of its assets in Ohio municipal
securities, while the Acquiring Fund invests at least 80% of its assets in
municipal securities across the United States. The Acquiring Fund expects 100%
of its portfolio to contain such securities under normal conditions. In
addition, each Fund may invest more than 25% of its assets in industrial
development or other private activity bonds, subject to certain restrictions.
Shareholders of the Acquiring Fund may be subject to state and local taxes,
including Ohio state tax, on distributions from the Acquiring Fund.
The Acquiring Fund has the flexibility to invest in municipal securities
with short-, medium- and long-term maturities. During recent years, its
portfolio has been invested primarily in long-term municipal bonds. Under normal
market condition, the Acquired Fund expects to invest principally in Ohio
municipal securities with long-term maturities (i.e., more than 10 years). The
Acquired Fund has the flexibility, however, to invest in Ohio municipal
securities with short- and medium-term maturities as well.
The Acquiring Fund normally invests at least 65% of its net assets in
municipal securities of the top three grades of credit quality, and may invest
up to 10% of its assets in "high yield" or "junk" bonds rated as low as B. The
Acquired Fund normally invests at least 75% of its total assets in securities of
the top four grades of credit quality. While the Acquired Fund expects to invest
principally in Ohio municipal securities rated A or better, it may invest up to
25% of its total assets in bonds rated as low as grade B.
The Acquiring Fund may invest in municipal notes, including tax
anticipation notes, revenue anticipation notes, bond anticipation notes and
construction loan notes, and municipal bonds, including general obligation
bonds, revenue bonds, prerefunded bonds industrial development and pollution
control bonds. The Acquiring Fund may also invest in variable rate demand
instruments, stand-by commitments and other puts, repurchase agreements,
municipal lease obligations, when-issued or forward delivery securities and
warrants to purchase debt securities, and may engage in strategic transactions.
The Acquiring Fund as a 20% limitation on investing in municipal securities
whose investment income is taxable or is subject to the Alternative Minimum Tax.
Securities in which the Acquired Fund may invest include: municipal bonds,
including general obligation bonds and revenue bonds, variable rate demand
instruments, municipal notes including tax anticipation notes, revenue
anticipation notes and bond anticipation notes, when-issued or forward
-18-
delivery securities, repurchase agreements and reverse repurchase agreements.
The Acquired Fund may also engage in strategic transactions.
Upon the Closing of the Reorganization, the Acquiring Fund will modify its
investment objective to seek income exempt from regular federal income tax while
actively seeking to reduce downside risk as compared with other tax-free income
funds. In addition, the Acquiring Fund will adopt the policy of excluding
investment in securities issued by tobacco-producing companies.
The Acquiring Fund's investment restrictions, as set forth in its
Statement of Additional Information, are very similar to the Acquired Fund's
investment restrictions, with two exceptions. First, as a fundamental policy,
the Acquiring Fund must have 80% of its net assets invested in municipal
securities under normal market conditions, while the Acquired Fund must have 80%
of its net assets invested in Ohio municipal securities under normal market
conditions. The other exception is that the Acquiring Fund has elected to be
classified as a diversified series of an open-end investment company, while the
Acquired Fund has elected to be classified as a non-diversified series of an
open-end investment company. This means that the Acquiring Fund will invest in
securities that cover a wider range of markets than do the securities purchased
by the Acquired Fund.
Investment restrictions of each Fund that are fundamental policies may not
be changed without the approval of Fund shareholders. Investors should refer to
the respective Statements of Additional Information of the Acquiring Fund and
the Acquired Fund for a fuller description of each Fund's investment policies
and restrictions.
Portfolio Turnover
The average annual portfolio turnover rate for the Acquiring Fund, i.e.,
the ratio of the lesser of annual sales or purchases to the monthly average
value of the portfolio (excluding from both the numerator and the denominator
securities with maturities at the time of acquisition of one year or less), for
the fiscal year ended December 31, 1998 was 8.6% and for the five months ended
May 31, 1999 (i.e., prior to the creation of Class S Shares) was 13.8%
(annualized). The average annual portfolio turnover rate for the Acquired Fund
for the fiscal year ended March 31, 1999 was 20.5%.
Performance
The following table compares the investment performance of each Fund, and
may provide some indication of the risks of investing in each Fund by showing
changes in each Fund's performance from year to year and how the Fund's average
annual return for the periods indicated compare with those of a broad measure of
market performance. Neither Fund's past performance is an indication of how the
Fund will perform in the future.
-19-
Average Annual Total Return
For the Periods Ending December 31, 1999
- --------------------------------------------------------------------------------
Acquiring Fund+ Acquired Fund Benchmark Index*
--------------- ------------- ----------------
- --------------------------------------------------------------------------------
Past year (1.96%) (1.78%) (2.06%)
- --------------------------------------------------------------------------------
Past 5 years 6.78% 6.64% 6.91%
- --------------------------------------------------------------------------------
Past 10 years 6.80% 6.62% 6.89%
- --------------------------------------------------------------------------------
+ Class S Shares were not offered during the periods covered. Performance shown
is for shares of the Acquiring Fund existing during the periods covered.
*Each Fund's benchmark index is the Lehman Brothers Municipal Bond Index, a
market value-weighted measure of municipal bonds issued across the United
States. Index issues have a credit rating of at least a Baa and a maturity of at
least two years. Index returns are calculated monthly, assume reinvestment of
dividends and, unlike Fund returns, do not reflect any fees or expenses.
Total return for the Acquired Fund would have been lower during all
periods if the Investment Manager had not maintained expenses.
For management's discussion of the Acquiring Fund's performance for the
fiscal year ended May 31, 1999 (prior to the creation of Class S Shares), see
Exhibit B attached hereto.
Investment Manager; Fees and Expenses
Each Fund retains the investment management firm of Scudder Kemper,
pursuant to separate contracts, to manage its daily investment and business
affairs, subject to the policies established by the Fund's Trustees.
Shareholders pay no direct charges or fees for investment management or other
services. Scudder Kemper is a Delaware corporation located at Two International
Place, Boston, Massachusetts 02110-4103.
The Investment Manager receives a fee for its services pursuant to its
investment management agreement with the Acquiring Fund. For these services, the
Acquiring Fund pays the Investment Manager a fee at an annual rate of 0.55% of
the first $200 million of average daily net assets, 0.50% of the next $500
million and 0.475% on average daily net assets in excess of $700 million. The
fee is graduated so that increases in the Acquiring Fund's net assets may result
in a lower annual fee rate and decreases in its net assets may result in a
higher annual fee rate. As of May 31, 1999, the Acquiring Fund had total net
assets of $713,401,169. For the fiscal year ended December 31, 1998 and the five
months ended May 31, 1999, the Acquiring Fund paid the Investment Manager a fee
of 0.51% and 0.51% (annualized), respectively, of average daily net assets.
Scudder Kemper has proposed a new investment management agreement for the
Acquiring Fund. The proposed new investment management agreement includes a new
fee rate, which is, in all cases, effectively the same as or lower than the
current rate applicable to the Acquiring Fund. The proposed new fee rate is
0.49% of the first $2 billion of average daily net assets, 0.465% of the next $1
billion and
-20-
0.44% of such net assets in excess of $3 billion. The effectiveness of each of
the new investment management agreement and the Closing is contingent upon the
other.
The Investment Manager receives a fee pursuant to the investment
management agreement as compensation for its services on behalf of the Acquired
Fund. For these services, the Acquired Fund pays the Investment Manager a fee at
an annual rate of 0.60% of average daily net assets. As of March 31, 1999, the
Acquired Fund had total net assets of $97,483,837. For the fiscal year ended
March 31, 1999, the Acquired Fund paid the Investment Manager a fee of 0.37% of
average daily net assets. By contract, the total annual Fund operating expenses
of the Acquired Fund are maintained at no more than 0.75% of average daily net
assets until July 31, 2000.
Administrative Fee
On or prior to the Closing, the Acquiring Fund will have entered into an
administrative services agreement with Scudder Kemper (the "Administration
Agreement"), pursuant to which Scudder Kemper will provide or pay others to
provide substantially all of the administrative services required by the
Acquiring Fund (other than those provided by Scudder Kemper under its investment
management agreement with the Fund, as described above) in exchange for the
payment by the Acquiring Fund of an administrative services fee (the
"Administrative Fee") of 0.15% of average daily net assets. One effect of this
arrangement is to make the Acquiring Fund's future expense ratio more
predictable. The details of the proposal (including expenses that are not
covered) are set out below.
Various third-party service providers (the "Service Providers"), some of
which are affiliated with Scudder Kemper, provide certain services to the
Acquiring Fund pursuant to separate agreements with the Fund, subject to
oversight and approval by the Trustees. Scudder Fund Accounting Corporation, a
subsidiary of Scudder Kemper, computes net asset value for the Acquiring Fund
and maintains its accounting records. Scudder Service Corporation, also a
subsidiary of Scudder Kemper, is the transfer, shareholder servicing and
dividend-paying agent for the shares of the Acquiring Fund. Scudder Trust
Company, an affiliate of Scudder Kemper, provides subaccounting and
recordkeeping services for shareholder accounts in certain retirement and
employee benefit plans. As custodian, State Street Bank and Trust Company holds
the portfolio securities of the Acquiring Fund, pursuant to a custodian
agreement. PricewaterhouseCoopers LLP audits the financial statements of the
Acquiring Fund and provides other audit, tax, and related services. Willkie Farr
& Gallagher acts as general counsel for the Acquiring Fund. In addition to the
fees it pays under its current investment management agreement with Scudder
Kemper, the Acquiring Fund pays the fees and expenses associated with these
service arrangements, as well as the Acquiring Fund's insurance, registration,
printing, postage and other costs.
Once the Administration Agreement becomes effective, each Service Provider
will continue to provide the services that it currently provides to the
Acquiring Fund, as described above, under the current arrangements, except that
Scudder Kemper will pay these entities for the provision of their services to
the Acquiring Fund and will pay most other Fund expenses, including insurance,
registration, printing and postage fees. In return, the Acquiring Fund will pay
Scudder Kemper the Administrative Fee.
The proposed Administration Agreement will have an initial term of three
years, subject to earlier termination by the Acquiring Trust's trustees. The fee
payable by the Acquiring Fund to Scudder Kemper pursuant to the Administration
Agreement would be reduced by the amount of any credit received from the
Acquiring Fund's custodian for cash balances.
-21-
Certain expenses of the Acquiring Fund would not be borne by Scudder
Kemper under the Administration Agreement, such as taxes, brokerage, interest
and extraordinary expenses; and the fees and expenses of the Independent
Trustees (including the fees and expenses of their independent counsel). In
addition, the Acquiring Fund would continue to pay the fees required by its
investment management agreement with Scudder Kemper.
Comparison of Expenses
The tables and examples below are designed to assist you in understanding
the various costs and expenses that you will bear directly or indirectly as an
investor in the Acquiring Fund, and comparing these with the expenses of the
Acquired Fund. As indicated below, it is expected that the total expense ratio
of the Acquiring Fund following the Reorganization will be substantially lower
than the current gross expense ratio of the Acquired Fund (before giving effect
to expense reimbursements and waivers). Unless otherwise noted, the information
is based on each Fund's expenses and average daily net assets during the twelve
months ended October 31, 1999 and on a pro forma basis as of that date and for
the period then ended, giving effect to the Reorganization. Information in the
tables and examples relating to the Acquiring Fund relates to the Acquiring Fund
as a whole prior to the creation of the Class S Shares. Pro Forma information in
the tables and examples relates to the Class S Shares and the AARP Shares class
of shares of the Acquiring Fund.
Shareholder Transaction Expenses
- ---------------------------------------------------------------------------------------------
Pro Forma
Acquiring Fund Acquired Fund (Combined)@
- ---------------------------------------------------------------------------------------------
Maximum sales charge (load)
imposed on purchases (as a
percentage of offering price) None None None
- ---------------------------------------------------------------------------------------------
Maximum deferred sales charge
(load) (as a percentage of
purchase price or redemption
proceeds) None None None
- ---------------------------------------------------------------------------------------------
Maximum deferred sales charge
(load) imposed on reinvested
dividends None None None
- ---------------------------------------------------------------------------------------------
Redemption fee (as a percentage
of amount redeemed, if
applicable)+ None None None
- ---------------------------------------------------------------------------------------------
-22-
Annual Fund Operating Expenses (Unaudited)
- --------------------------------------------------------------------------------
Pro Forma*@
Acquiring Fund Acquired Fund (Combined)
-------------- ------------- ----------
- --------------------------------------------------------------------------------
Management fees 0.51% 0.60% 0.49%
- --------------------------------------------------------------------------------
Distribution and/or service
(12b-1) fees None None None
- --------------------------------------------------------------------------------
Other expenses 0.16% 0.23% 0.15%
- --------------------------------------------------------------------------------
Total annual Fund operating
expenses 0.67% 0.83% 0.64%
- --------------------------------------------------------------------------------
Expense reimbursements N/A 0.08% N/A
- --------------------------------------------------------------------------------
Net annual Fund operating
expenses N/A 0.75%# N/A
- --------------------------------------------------------------------------------
+ There is a $5 wire service fee for receiving redemption proceeds via wire.
# By contract, the total annual Fund operating expenses of the Acquired Fund
are maintained at no more than 0.75% of average daily net assets until July 31,
2000. Annual Fund operating expenses in the table above have been restated to
reflect the Acquired Fund's net annual Fund operating expenses at 0.75% of
average daily net assets. There is no guarantee that this expense waiver will
continue beyond July 31, 2000.
* Pro Forma expenses reflect the implementation of the Administrative Fee and
of a new investment management fee for the Acquiring Fund to be effective upon
the Reorganization.
@ It is being proposed to shareholders of AARP Insured Tax Free General Bond
Fund, another fund advised by Scudder Kemper, that the Acquiring Fund acquire
the assets of that other fund. Each of the closing of this other acquisition and
the Closing is contingent upon the other. Pro Forma expenses reflect the
acquisition by the Acquiring Fund of both this other fund and the Acquired Fund.
In evaluating the Proposals, the Independent Trustees focused their
consideration on the Acquiring Fund's and the Acquired Fund's estimated
expense ratios calculated utilizing Fund net assets at December 31, 1999
(rather than average daily net assets for a full year, as used in the table
above), the number of shareholder accounts at that date, and other relevant
factors. This calculation resulted in an estimated expense ratio of 0.64%
for the Acquiring Fund and 0.83% (without reflecting any expense
reimbursements) for the Acquired Fund.
Examples (Unaudited)
Based on the costs above (including one year of capped expenses in each
period included in the Acquired Fund column), the following examples are
intended to help you compare the cost of investing in
-23-
the Funds with the cost of investing in other mutual funds. The examples assume
that you invest $10,000 in each Fund for the time periods indicated and then
redeem all of your shares at the end of those periods. The examples also assume
that your investment has a 5% return each year and that each Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions, your costs would be as follows:
- ------------------------------------------------------------------
Pro Forma
Year Acquiring Fund Acquired Fund (Combined)**@
- ---- -------------- ------------- ------------
- ------------------------------------------------------------------
1st $ 68 $ 77 $ 65
- ------------------------------------------------------------------
3rd $214 $257 $205
- ------------------------------------------------------------------
5th $373 $453 $357
- ------------------------------------------------------------------
10th $835 $1,018 $798
- ------------------------------------------------------------------
** Pro Forma expenses reflect the implementation of the Administrative Fee and
of a new investment management fee for the Acquiring Fund to be effective upon
the Reorganization.
@ It is being proposed to shareholders of AARP Insured Tax Free General Bond
Fund, another fund advised by Scudder Kemper, that the Acquiring Fund acquire
the assets of that other fund. Each of the closing of this other acquisition and
the Closing is contingent upon the other. Pro Forma expenses reflect the
acquisition by the Acquiring Fund of both this other fund and the Acquired Fund.
Financial Highlights
The financial highlights table for the Acquiring Fund prior to the
creation of Class S Shares, which is intended to help you understand the
Acquiring Fund's financial performance for the past five years, is included in
the Acquiring Fund's prospectus dated October 1, 1999, which is included
herewith and incorporated herein by reference.
Distribution of Shares
Scudder Investor Services, Inc. ("SIS"), Two International Place, Boston,
Massachusetts 02110, a subsidiary of the Investment Manager, is the principal
underwriter of each Fund. SIS charges no direct fees in connection with the
distribution of shares of the Funds. Following the Reorganization, Acquiring
Fund shareholders will continue to be able to purchase shares of the funds in
the Scudder Family of Funds on a no-load basis.
Purchase, Redemption and Exchange Information
The purchase, redemption and exchange procedures and privileges of the
Acquired Fund are identical to those of the Class S Shares.
-24-
Dividends and other Distributions
Each of the Funds intends to declare dividends from its net investment
income daily and distribute them monthly. Each Fund intends to distribute net
realized capital gains after utilization of capital loss carryforwards, if any,
in November or December of each year. An additional distribution may be made if
necessary. Dividends and distributions of each Fund will be invested in
additional shares of the Fund at net asset value and credited to the
shareholder's account on the payment date or, at the shareholder's election,
paid in cash.
If the Plan is approved by the Acquired Fund's shareholders, the Acquired
Fund will pay its shareholders a distribution of all undistributed net
investment income and undistributed realized net capital gains immediately prior
to the Closing.
Tax Consequences
As a condition to the Reorganization, the Acquiring Fund and the Acquired
Fund will have received an opinion of Willkie Farr & Gallagher in connection
with the Reorganization, to the effect that, based upon certain facts,
assumptions and representations, the Reorganization will constitute a tax-free
reorganization within the meaning of section 368(a)(1) of the Internal Revenue
Code of 1986, as amended (the "Code"). If the Reorganization constitutes a
tax-free reorganization, no gain or loss will be recognized by the Acquired Fund
or its shareholders as a direct result of the Reorganization. See "The Proposed
Transaction - Federal Income Tax Consequences."
II. PRINCIPAL RISK FACTORS
Because of their similar investment objectives, policies and strategies,
the principal risks presented by the Acquiring Fund are similar to those
presented by the Acquired Fund. The main risks applicable to each Fund include,
among others, management risk, risk associated with interest rates, and risk
associated with credit quality. Management risk refers to the fact that
securities selected by Scudder Kemper on behalf of a Fund might not perform as
well as the securities held by other mutual funds, the investment objectives of
which are similar to those of the Fund. Risk associated with interest rates
refers to the link between interest rates and debt security performance. A rise
in interest rates generally means a fall in bond prices, and therefore in the
value of an investment in a Fund. An increase in a Fund's dollar-weighted
average maturity could make it more sensitive to this risk. Risk associated with
credit quality refers to the fact that, if a portfolio security declines in
credit quality or goes into default, it could hurt a Fund's performance. The
fact that a Fund may emphasize investments in certain geographic regions or
sectors of the municipal market increases this risk, because any factors
affecting these regions or sectors could affect a large portion of the Fund's
securities. This risk is particularly relevant to the Acquired Fund, because it
is not diversified and invests primarily in securities from a single state, thus
intensifying the impact of any economic or other problems affecting that state.
For a further discussion of the investment techniques and risk factors
applicable to the Acquired Fund and the Acquiring Fund, see "Investment
Objectives, Policies and Restrictions of the Funds" herein, and the Prospectuses
and Statements of Additional Information for the Funds, which are incorporated
by reference herein.
III. THE PROPOSED TRANSACTION
Description of the Plan
-25-
As stated above, the Plan provides for the transfer of all or
substantially all of the assets of the Acquired Fund to the Acquiring Fund in
exchange for that number of full and fractional Class S Shares having an
aggregate net asset value equal to the aggregate net asset value of the Acquired
Fund as of the close of business on the Valuation Date. The Acquiring Fund will
assume all of the liabilities of the Acquired Fund. The Acquired Fund will
distribute the Class S Shares received in the exchange to the shareholders of
the Acquired Fund in complete liquidation of the Acquired Fund. The Acquired
Fund will be abolished as a series of the Acquired Trust.
Upon completion of the Reorganization, each shareholder of the Acquired
Fund will own that number of full and fractional Class S Shares having an
aggregate net asset value equal to the aggregate net asset value of such
shareholder's shares held in the Acquired Fund as of the close of business on
the Valuation Date. Such shares will be held in an account with the Acquiring
Trust identical in all material respects to the account currently maintained by
the Acquired Trust for such shareholder. In the interest of economy and
convenience, Class S Shares issued to the Acquired Fund's shareholders will be
in uncertificated form.
Until the Closing, shareholders of the Acquired Fund will continue to be
able to redeem their shares at the net asset value next determined after receipt
by the Acquired Fund's transfer agent of a redemption request in proper form.
Redemption requests received by the transfer agent after the Closing will be
treated as requests received for the redemption of Class S Shares received by
the shareholder in connection with the Reorganization.
The obligations of each Trust on behalf of each of the Acquired Fund and
the Acquiring Fund under the Plan are subject to various conditions, as stated
therein. Among other things, the Plan requires that all filings be made with,
and all authority be received from, the SEC and state securities commissions as
may be necessary in the opinion of counsel to permit the parties to carry out
the transactions contemplated by the Plan. The Acquired Fund and the Acquiring
Fund are in the process of making the necessary filings. To provide against
unforeseen events, the Plan may be terminated or amended at any time prior to
the Closing by action of the Trustees of either Trust, notwithstanding the
approval of the Plan by the shareholders of the Acquired Fund. However, no
amendment may be made that materially adversely affects the interests of the
shareholders of the Acquired Fund without obtaining the approval of the Acquired
Fund's shareholders. The Acquired Fund and the Acquiring Fund may at any time
waive compliance with certain of the covenants and conditions contained in the
Plan. For a complete description of the terms and conditions of the
Reorganization, see the Plan at Exhibit A.
Each Fund will pay its own allocable share of expenses associated with the
Reorganization, except that Scudder Kemper will bear any such expenses in excess
of $25,202 for the Acquiring Fund and $15,382 for the Acquired Fund
(approximately $0.0003 and $0.0022 per share, respectively, based on December
31, 1999 net assets for each Fund).
Board Approval of the Proposed Transaction
Scudder Kemper first proposed the Reorganization to the Independent
Trustees of the Acquired Fund at a meeting held on October 5, 1999. The
Reorganization was presented to the Trustees and considered by them as part of a
broader initiative by Scudder Kemper to restructure many of the mutual funds
advised by it that are currently offered to retail investors (see "Synopsis -
Background of the Reorganization"). This initiative includes four major
components:
-26-
(i) The combination of funds with similar investment objectives and
policies, including in particular the combination of the AARP Funds
with similar Scudder Funds currently offered to the general public;
(ii) The liquidation of certain small funds which have not achieved
market acceptance and which are unlikely to reach an efficient
operating size;
(iii) The implementation of an administration agreement for each fund,
covering, for a single fee rate, substantially all services required
for the operation of the fund (other than those provided under the
fund's investment management agreement) and most expenses; and
(iv) The consolidation of the separate boards currently responsible for
overseeing several groups of no-load funds managed by Scudder Kemper
into a single board.
The Independent Trustees of the Acquired Fund reviewed the potential
implications of these proposals for the Acquired Fund as well as the various
other funds for which they serve as trustees or directors. They were assisted in
this review by their independent legal counsel and by independent consultants
with special expertise in financial and mutual fund industry matters. Following
the October 5 meeting, the Independent Trustees met in person or by telephone on
seven occasions (including committee meetings) to review and discuss these
proposals, both among themselves and with representatives of Scudder Kemper. On
a number of occasions, these meetings included representatives of the
independent trustees or directors of other funds affected by these proposals. In
the course of their review, the Independent Trustees requested and received
substantial additional information and suggested numerous changes to Scudder
Kemper's proposals, many of which were accepted.
Following the conclusion of this process, the Independent Trustees of the
Acquired Fund, the independent trustees/directors of other funds involved and
Scudder Kemper reached general agreement on the elements of a restructuring plan
as it affects shareholders of various funds and, where required, agreed to
submit elements of the plan for approval to shareholders of those funds.
On February 7, 2000, the Board of the Acquired Fund, including the
Independent Trustees of the Acquired Fund, approved the terms of the
Reorganization and certain related proposals. At the February 7, 2000 meeting,
the Independent Trustees also agreed to recommend that the Reorganization be
approved by the Acquired Fund's shareholders.
In determining to recommend that the shareholders of the Acquired Fund
approve the Reorganization, the Board considered, among other factors: (a) the
fees and expense ratios of the Funds, including comparisons between the expenses
of the Acquired Fund and the estimated operating expenses of the Acquiring
Fund, and between the estimated operating expenses of the Acquiring Fund and
other mutual funds with similar investment objectives; (b) the terms and
conditions of the Reorganization and whether the Reorganization would result
in the dilution of shareholder interests; (c) the compatibility of the
Acquired Fund's and the Acquiring Fund's investment objectives, policies,
restrictions and portfolios; (d) the agreement by Scudder Kemper to provide
services to the Acquiring Fund for a fixed fee rate under the Administration
Agreement with an initial three year term; (e) the service features available
to shareholders of the Acquired Fund and the Acquiring Fund; (f) the costs to
be borne by the Acquired Fund, the Acquiring Fund and Scudder Kemper as a
result of the Reorganization; (g) prospects for the Acquiring Fund to attract
additional assets; (h) the tax consequences of the Reorganization on the
Acquired Fund, the Acquiring Fund and their respective shareholders; and (i)
the investment performance of the Acquired Fund and the Acquiring Fund.
-27-
The Trustees also gave extensive consideration to possible economies of
scale that might be realized by Scudder Kemper in connection with the
Reorganization, as well as the other fund combinations included in Scudder
Kemper's restructuring proposal. The Trustees concluded that these economies
were appropriately reflected in the fee and expense arrangements of the
Acquiring Fund, as proposed to be revised upon completion of the Reorganization.
In particular, the Trustees considered the benefits to shareholders resulting
from locking in the rate of the Acquiring Fund's Administrative Fee for an
initial three-year period. Because the Acquiring Fund will pay only its stated
Administrative Fee rate for such services and expenses regardless of changes in
actual costs, the Acquiring Fund's shareholders will be protected from increases
in the Acquiring Fund's expense ratio attributable to increases in such actual
costs. The Board also considered the protection this would afford shareholders
if the Acquiring Fund's net assets declined as a result of market fluctuations
or net redemptions.
The Trustees also considered the impact of the Reorganization on the total
expenses to be borne by shareholders of the Acquired Fund. As noted above under
"Comparison of Expenses," the pro forma expense ratio (reflecting the
Administrative Fee) for the combined Fund following the Reorganization is
substantially lower than the current expense ratio for the Acquired Fund. The
Board also considered that the Reorganization would permit the shareholders of
the Acquired Fund to pursue substantially similar investment goals in a larger
fund. In this regard, Scudder Kemper advised the Trustees of the Acquired Fund
that the Acquired Fund's shareholders will benefit from being in a larger fund
which will likely have the ability to effect portfolio transactions on more
favorable terms and provide Scudder Kemper with greater investment flexibility
and the ability to select a larger number of portfolio securities for the
combined Fund, with the ability to spread investment risks among a larger number
of portfolio securities.
Finally, the Trustees concluded that the shareholders of the Acquired Fund
would be better served by having their interests represented by a single board
of trustees with responsibility for overseeing substantially all of the funds to
be marketed as a "family of funds" through Scudder's no-load distribution
channels. Accordingly, the Trustees agreed to recommend the election of a new
consolidated board comprised of representatives of each of the various boards
currently serving as Trustees of these funds.
Based on all of the foregoing, the Board concluded that the Acquired
Fund's participation in the Reorganization would be in the best interests of the
Acquired Fund and would not dilute the interests of the Acquired Fund's
shareholders. The Board of Trustees, including the Independent Trustees,
recommends that shareholders of the Acquired Fund approve the Reorganization.
Description of the Securities to be Issued
The Acquiring Fund is a series of the Acquiring Trust, a Massachusetts
business trust established under a Declaration of Trust dated September 24,
1976, as amended. The Acquiring Trust's authorized capital consists of an
unlimited number of shares of beneficial interest, par value $0.01 per share.
The Trustees of the Acquiring Trust are authorized to divide the Acquiring
Trust's shares into separate series. The Acquiring Fund is one of two series of
the Acquiring Trust that the Board has created to date. The Trustees of the
Acquiring Trust are also authorized to further divide the shares of the series
of the Acquiring Trust into classes. The Trustees of the Acquiring Trust have
authorized the division of the Acquiring Fund into two classes, Class S Shares
and AARP Shares. It is anticipated that this division will occur prior to the
Closing and that shares of the Acquiring Fund existing at that time will be
redesignated as Class S Shares of the Acquiring Fund. If Class S Shares are not
created prior to the Closing, then the Reorganization will not be consummated.
Although shareholders of different classes of a series have an interest in the
same portfolio of assets, shareholders of different classes may bear different
expenses in connection with different methods of distribution.
-28-
Each share of each class of the Acquiring Fund represents an interest in
the Acquiring Fund that is equal to and proportionate with each other share of
that class of the Acquiring Fund. Acquiring Fund shareholders are entitled to
one vote per share (and a proportionate fractional vote per each fractional
share) held on matters on which they are entitled to vote. The Acquiring Trust
is not required to hold shareholder meetings annually, although shareholder
meetings may be called for purposes such as electing or removing Trustees,
changing fundamental policies or approving an investment management contract. In
the event that shareholders of the Acquiring Trust wish to communicate with
other shareholders concerning the removal of any Trustee, such shareholders
shall be assisted in communicating with other shareholders for the purpose of
obtaining signatures to request a meeting of shareholders, all in the manner
provided in Section 16(c) of the 1940 Act as if Section 16(c) were applicable.
In the areas of shareholder voting and the powers and conduct of the
Trustees, there are no material differences between the rights of shareholders
of the Acquired Fund and the rights of shareholders of the Acquiring Fund.
Federal Income Tax Consequences
The Reorganization is conditioned upon the receipt by the Acquired Trust,
on behalf of the Acquired Fund, and the Acquiring Trust, on behalf of the
Acquiring Fund, of an opinion from Willkie Farr & Gallagher, substantially to
the effect that, based upon certain facts, assumptions and representations of
the parties, for federal income tax purposes: (i) the transfer to the Acquiring
Fund of all or substantially all of the assets of the Acquired Fund in exchange
solely for Class S Shares and the assumption by the Acquiring Fund of all of the
liabilities of the Acquired Fund, followed by the distribution of such shares to
the Acquired Fund's shareholders in exchange for their shares of the Acquired
Fund in complete liquidation of the Acquired Fund, will constitute a
"reorganization" within the meaning of Section 368(a)(1) of the Code, and the
Acquiring Fund and the Acquired Fund will each be "a party to a reorganization"
within the meaning of Section 368(b) of the Code; (ii) no gain or loss will be
recognized by the Acquired Fund upon the transfer of all or substantially all of
its assets to the Acquiring Fund in exchange solely for Class S Shares and the
assumption by the Acquiring Fund of all of the liabilities of the Acquired Fund
or upon the distribution of the Class S Shares to the Acquired Fund shareholders
in exchange for their shares of the Acquired Fund; (iii) the basis of the assets
of the Acquired Fund in the hands of the Acquiring Fund will be the same as the
basis of such assets of the Acquired Fund immediately prior to the transfer;
(iv) the holding period of the assets of the Acquired Fund in the hands of the
Acquiring Fund will include the period during which such assets were held by the
Acquired Fund; (v) no gain or loss will be recognized by the Acquiring Fund upon
the receipt of the assets of the Acquired Fund in exchange for Class S Shares
and the assumption by the Acquiring Fund of all of the liabilities of the
Acquired Fund; (vi) no gain or loss will be recognized by the shareholders of
the Acquired Fund upon the receipt of the Class S Shares solely in exchange for
their shares of the Acquired Fund as part of the transaction; (vii) the basis of
the Class S Shares received by the shareholders of the Acquired Fund will be the
same as the basis of the shares of the Acquired Fund exchanged therefor; and
(viii) the holding period of Class S Shares received by the shareholders of the
Acquired Fund will include the holding period during which the shares of the
Acquired Fund exchanged therefor were held, provided that at the time of the
exchange the shares of the Acquired Fund were held as capital assets in the
hands of the shareholders of the Acquired Fund.
While the Acquired Trust is not aware of any adverse state or local tax
consequences of the proposed Reorganization, it has not requested any ruling or
opinion with respect to such consequences and shareholders may wish to consult
their own tax adviser with respect to such matters.
-29-
Capitalization
The following table shows on an unaudited basis the capitalization
of the Acquiring Fund, the Acquired Fund and AARP Insured Tax Free General Bond
Fund@ as of October 31, 1999 (i.e., prior to the creation of Class S Shares) and
on a pro forma basis as of that date giving effect to the Reorganization:
- ------------------------------------------------------------------------------------------------------
Acquiring AARP Insured Tax Pro Forma Pro Forma
Fund Free General Bond Acquired Fund Adjustments Combined(1)
---- ----------------- ------------- ----------- -----------
- ------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------
Class S Shares $706,598,558 $91,883,566 (40,584)(3) $798,441,540
- ------------------------------------------------------------------------------------------------------
AARP Shares $1,556,333,468 (748,040)(4) $1,555,585,428
- ------------------------------------------------------------------------------------------------------
Total Net Assets $2,354,026,968(2)
- ------------------------------------------------------------------------------------------------------
Shares
Outstanding
- ------------------------------------------------------------------------------------------------------
Class S Shares 82,235,127 7,220,299 3,474,484 92,929,910
- ------------------------------------------------------------------------------------------------------
AARP Shares 89,098,171 91,994,428 181,092,599
- ------------------------------------------------------------------------------------------------------
Net Asset Value
per Share
- ------------------------------------------------------------------------------------------------------
Class S Shares 8.59 $12.73 $8.59
- ------------------------------------------------------------------------------------------------------
AARP Shares $17.47 $8.59
- ------------------------------------------------------------------------------------------------------
@ It is being proposed to shareholders of AARP Insured Tax Free General Bond
Fund, another fund advised by Scudder Kemper, that the Acquiring Fund acquire
the assets of that other fund. Each of the closing of this other acquisition and
the Closing is contingent upon the other. Pro Forma capitalization reflects the
acquisition by the Acquiring Fund of both this other fund and the Acquired Fund.
(1) Assumes the Reorganization had been consummated on October 31, 1999, and is
for information purposes only. No assurance can be given as to how many shares
of the Acquiring Fund will be received by the shareholders of the Acquired Fund
and AARP Insured Tax Free General Bond Fund on the date the Reorganization takes
place, and the foregoing should not be relied upon to reflect the number of
shares of the Acquiring Fund that actually will be received on or after such
date.
(2) Pro forma combined net assets do not reflect expense reductions that would
result from the implementation of the Administrative Fee and a new investment
management fee for the Acquiring Fund.
(3) Represents one-time proxy, legal, accounting and other costs of the
Reorganization of $25,202 and $15,382 to be borne by the Acquiring Fund and the
Acquired Fund, respectively.
(4) Represents one-time proxy, legal, accounting and other costs of the
Reorganization of $748,040 to be borne by AARP Insured Tax Free General Bond
Fund.
-30-
The Board of Trustees of Scudder State Tax Free Trust recommends that the
shareholders of the Scudder Ohio Tax Free Fund vote in favor of this Proposal 2.
PROPOSAL 3: RATIFICATION OR REJECTION OF THE SELECTION OF INDEPENDENT
ACCOUNTANTS
The Board of the Acquired Trust, including a majority of the Independent
Trustees, has selected PricewaterhouseCoopers LLP to act as independent
accountants of the Acquired Fund for the Acquired Fund's current fiscal year.
One or more representatives of PricewaterhouseCoopers LLP are expected to be
present at the Meeting and will have an opportunity to make a statement if they
so desire. Such representatives are expected to be available to respond to
appropriate questions posed by shareholders or management.
The Board of Trustees of Scudder State Tax Free Trust recommends that the
shareholders of the Scudder Ohio Tax Free Fund vote in favor of this Proposal 3.
ADDITIONAL INFORMATION
Information about the Funds
Additional information about the Trusts, the Funds and the Reorganization
has been filed with the SEC and may be obtained without charge by writing to
Scudder Investor Services, Inc., Two International Place, Boston, MA 02110-4103,
or by calling 1-800-225-2470.
The Trusts are subject to the informational requirements of the Securities
Exchange Act of 1934 and the 1940 Act, and in accordance therewith, file
reports, proxy material and other information about each of the Funds with the
Securities and Exchange Commission. Such reports, proxy material and other
information filed by the Acquiring Trust, and those filed by the Acquired Trust,
can be inspected and copied at the Public Reference Room maintained by the
Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 and at the following SEC Regional Offices: Northeast Regional Office, 7
World Trade Center, Suite 1300, New York, NY 10048; Southeast Regional Office,
1401 Brickell Avenue, Suite 200, Miami, FL 33131; Midwest Regional Office,
Citicorp Center, 500 W. Madison Street, Chicago, IL, 60661-2511; Central
Regional Office, 1801 California Street, Suite 4800, Denver, CO 80202-2648; and
Pacific Regional Office, 5670 Wilshire Boulevard, 11th Floor, Los Angeles, CA
90036-3648. Copies of such material can also be obtained from the Public
Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. The SEC maintains an Internet World Wide Web site (at
http://www.sec.gov) which contains the Statements of Additional Information for
the Acquiring Trust and the Acquired Trust, materials that are incorporated by
reference into the prospectuses and Statements of Additional Information, and
other information about the Acquiring Trust, the Acquired Trust and the Funds.
Interests of Certain Persons
The Investment Manager has a financial interest in the Reorganization,
arising from the fact that its fee under its investment management agreement
with the Acquiring Fund will increase as the amount of the Acquiring Fund's
assets increases. The amount of those assets will increase by virtue of the
Reorganization. See "Synopsis - Fees and Expenses."
General
-31-
Proxy Solicitation. Proxy solicitation costs will be considered
Reorganization expenses and will be allocated accordingly. In addition to
solicitation by mail, certain officers and representatives of the Acquired
Trust, officers and employees of Scudder Kemper and certain financial
services firms and their representatives, who will receive no extra
compensation for their services, may solicit proxies by telephone, telegram
or personally.
This Proxy Statement/Prospectus, the Notice of Special Meeting and the
proxy card(s) are first being mailed to shareholders on or about April 18, 2000
or as soon as practicable thereafter. Any Acquired Fund shareholder giving a
proxy has the power to revoke it by mail (addressed to the Secretary at the
principal executive office of the Acquired Fund, c/o Scudder Kemper Investments,
Inc., at the address for the Acquired Fund shown at the beginning of this Proxy
Statement/Prospectus) or in person at the Meeting, by executing a superseding
proxy or by submitting a notice of revocation to the Acquired Fund. All properly
executed proxies received in time for the Meeting will be voted as specified in
the proxy or, if no specification is made, in favor of each Proposal.
The presence at any shareholders' meeting, in person or by proxy, of the
holders of one-third of the shares of the Trust (for a trust-wide vote) or the
Acquired Fund (for a fund-wide vote) entitled to be cast shall be necessary and
sufficient to constitute a quorum for the transaction of business. In the event
that the necessary quorum to transact business or the vote required to approve
any Proposal is not obtained at the Meeting, the persons named as proxies may
propose one or more adjournments of the Meeting in accordance with applicable
law to permit further solicitation of proxies with respect to that Proposal. Any
such adjournment as to a matter will require the affirmative vote of the holders
of a majority of the Trust's (for a trust-wide vote) or the Acquired Fund's (for
a fund-wide vote) shares present in person or by proxy at the Meeting. The
persons named as proxies will vote in favor of any such adjournment those
proxies which they are entitled to vote in favor of that Proposal and will vote
against any such adjournment those proxies to be voted against that Proposal.
For purposes of determining the presence of a quorum for transacting business at
the Meeting, abstentions and broker "non-votes" will be treated as shares that
are present but which have not been voted. Broker non-votes are proxies received
by the Acquired Fund from brokers or nominees when the broker or nominee has
neither received instructions from the beneficial owner or other persons
entitled to vote nor has discretionary power to vote on a particular matter.
Accordingly, shareholders are urged to forward their voting instructions
promptly.
Approval of Proposal 1 requires the affirmative vote of a plurality of the
shares of the Acquired Trust voting at the Meeting. Approval of Proposal 2
requires the affirmative vote of the holders of a majority of the Acquired
Fund's shares outstanding and entitled to vote thereon. Approval of Proposal 3
requires the affirmative vote of a majority of the shares of the Acquired Fund
voting at the Meeting. Abstentions and broker non-votes will not be counted in
favor of, but will have no other effect on, Proposal 1 and will have the effect
of a "no" vote on Proposals 2 and 3.
Holders of record of the shares of the Acquired Fund at the close of
business on April 17, 2000 (the "Record Date") will be entitled to one vote per
share on all business of the Meeting. As of [date], there were ____________
shares of the Acquired Fund outstanding.
As of [date], the officers and Trustees of the Acquiring Trust as a group
owned beneficially [less than 1%][___%] of the outstanding shares of the
Acquiring Fund. [Appendix 2 hereto sets forth the beneficial owners of at least
5% of each Fund's shares.] To the best of each Trust's knowledge, as of
_______________, no person owned beneficially more than 5% of either Fund's
outstanding shares[, except as stated on Appendix 2.]
-32-
Shareholder Communications Corporation ("SCC") has been engaged to assist
in the solicitation of proxies, at an estimated cost of $9,244. As the Meeting
date approaches, certain shareholders of the Acquired Fund may receive a
telephone call from a representative of SCC if their votes have not yet been
received. Authorization to permit SCC to execute proxies may be obtained by
telephonic or electronically transmitted instructions from shareholders of the
Acquired Fund. Proxies that are obtained telephonically will be recorded in
accordance with the procedures set forth below. The Trustees believe that these
procedures are reasonably designed to ensure that both the identity of the
shareholder casting the vote and the voting instructions of the shareholder are
accurately determined.
In all cases where a telephonic proxy is solicited, the SCC representative
is required to ask for each shareholder's full name, address, social security or
employer identification number, title (if the shareholder is authorized to act
on behalf of an entity, such as a corporation), and the number of shares owned,
and to confirm that the shareholder has received the proxy materials in the
mail. If the information solicited agrees with the information provided to SCC,
then the SCC representative has the responsibility to explain the process, read
the Proposals on the proxy card, and ask for the shareholder's instructions on
the Proposals. Although the SCC representative is permitted to answer questions
about the process, he or she is not permitted to recommend to the shareholder
how to vote, other than to read any recommendation set forth in the proxy
statement. SCC will record the shareholder's instructions on the card. Within 72
hours, the shareholder will be sent a letter or mailgram to confirm his or her
vote and asking the shareholder to call SCC immediately if his or her
instructions are not correctly reflected in the confirmation.
If a shareholder wishes to participate in the Meeting, but does not wish
to give a proxy by telephone or electronically, the shareholder may still submit
the proxy card originally sent with the proxy statement or attend in person.
Should shareholders require additional information regarding the proxy or
replacement proxy cards, they may contact SCC toll-free at 1-800-603-1915. Any
proxy given by a shareholder is revocable until voted at the Meeting.
Shareholders may also provide their voting instructions through telephone
touch-tone voting or Internet voting. These options require shareholders to
input a control number which is located on each voting instruction card. After
inputting this number, shareholders will be prompted to provide their voting
instructions on the Proposals. Shareholders will have an opportunity to review
their voting instructions and make any necessary changes before submitting their
voting instructions and terminating their telephone call or Internet link.
Shareholders who vote on the Internet, in addition to confirming their voting
instructions prior to submission, will also receive an e-mail confirming their
instructions.
Shareholder Proposals for Subsequent Meetings. Shareholders wishing to
submit proposals for inclusion in a proxy statement for a shareholder meeting
subsequent to the Meeting, if any, should send their written proposals to the
Secretary of the Trust, c/o Scudder Kemper Investments, Inc., Two International
Place, Boston, Massachusetts 02110, within a reasonable time before the
solicitation of proxies for such meeting. The timely submission of a proposal
does not guarantee its inclusion.
Other Matters to Come Before the Meeting. No Trustee is aware of any
matters that will be presented for action at the Meeting other than the matters
set forth herein. Should any other matters requiring a vote of shareholders
arise, the proxy in the accompanying form will confer upon the person or persons
entitled to vote the shares represented by such proxy the discretionary
authority to vote the shares as to any such other matters in accordance with
their best judgment in the interest of the Trust and/or the Acquired Fund.
-33-
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) (OR TAKE ADVANTAGE
OF AVAILABLE ELECTRONIC OR TELEPHONIC VOTING PROCEDURES) PROMPTLY. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
By Order of the Board,
[signature]
John Millette,
Secretary
-34-
INDEX OF EXHIBITS
EXHIBIT A: AGREEMENT AND PLAN OF REORGANIZATION
EXHIBIT B: MANAGEMENT'S DISCUSSION OF THE ACQUIRING FUND'S PERFORMANCE FOR
ITS MOST RECENT FISCAL YEAR.
-35-
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this ____ day of ________, 2000, by and between Scudder Municipal Trust (the
"Acquiring Trust"), a Massachusetts business trust, on behalf of Scudder Managed
Municipal Bonds (the "Acquiring Fund"), a separate series of the Acquiring
Trust, and Scudder State Tax Free Trust (the "Acquired Trust" and, together with
the Acquiring Trust, each a "Trust" and collectively the "Trusts"), a
Massachusetts business trust, on behalf of Scudder Ohio Tax Free Fund (the
"Acquired Fund" and, together with the Acquiring Fund, each a "Fund" and
collectively the "Funds"), a separate series of the Acquired Trust. The
principal place of business of each Trust is Two International Place, Boston,
Massachusetts 02110-4103
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"). The reorganization (the
"Reorganization") will consist of the transfer of all or substantially all of
the assets of the Acquired Fund to the Acquiring Fund in exchange solely for
voting shares of beneficial interest ($.01 par value per share) of the Class S
Shares class of the Acquiring Fund (the "Acquiring Fund Shares"), the assumption
by the Acquiring Fund of all of the liabilities of the Acquired Fund and the
distribution of the Acquiring Fund Shares to the shareholders of the Acquired
Fund in complete liquidation of the Acquired Fund as provided herein, all upon
the terms and conditions hereinafter set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND TO THE ACQUIRING FUND IN EXCHANGE
FOR ACQUIRING FUND SHARES, THE ASSUMPTION OF ALL ACQUIRED FUND LIABILITIES
AND THE LIQUIDATION OF THE ACQUIRED FUND
1.1. Subject to the terms and conditions herein set forth and on the basis
of the representations and warranties contained herein, the Acquired Fund agrees
to transfer to the Acquiring Fund all or substantially all of the Acquired
Fund's assets as set forth in section 1.2, and the Acquiring Fund agrees in
exchange therefor (i) to deliver to the Acquired Fund that number of full and
fractional Acquiring Fund Shares determined by dividing the value of the
Acquired Fund's net assets, computed in the manner and as of the time and date
set forth in section 2.1, by the net asset value of one Acquiring Fund Share,
computed in the manner and as of the time and date set forth in section 2.2; and
(ii) to assume all of the liabilities of the Acquired Fund. Such transactions
shall take place at the closing provided for in section 3.1 (the "Closing").
1.2. The assets of the Acquired Fund to be acquired by the Acquiring Fund
(the "Assets") shall consist of all assets, including, without limitation, all
cash, cash equivalents, securities, commodities and futures interests and
dividends or interest or other receivables that are owned by the Acquired Fund
and any deferred or prepaid expenses shown on the unaudited statement of assets
and liabilities of the Acquired Fund prepared as of the effective time of the
closing in accordance with generally accepted accounting principles ("GAAP")
applied consistently with those of the Acquired Fund's most recent audited
balance sheet. The Assets shall constitute at least 90% of the fair market value
of the net assets, and at least 70% of the fair market value of the gross
assets, held by Acquired Fund immediately before
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the Closing (excluding for these purposes assets used to pay the dividends and
other distributions paid pursuant to section 1.4).
1.3. The Acquired Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date as defined in section 3.1.
1.4. On or as soon as practicable prior to the Closing Date as defined in
section 3.1, the Acquired Fund will declare and pay to its shareholders of
record one or more dividends and/or other distributions so that it will have
distributed substantially all of its investment company taxable income (computed
without regard to any deduction for dividends paid) and realized net capital
gain, if any, for the current taxable year through the Closing Date.
1.5. Immediately after the transfer of Assets provided for in section 1.1,
the Acquired Fund will distribute to the Acquired Fund's shareholders of record
(the "Acquired Fund Shareholders"), determined as of the Valuation Time (as
defined in section 2.1), on a pro rata basis, the Acquiring Fund Shares received
by the Acquired Fund pursuant to section 1.1 and will completely liquidate. Such
distribution and liquidation will be accomplished by the transfer of the
Acquiring Fund Shares then credited to the account of the Acquired Fund on the
books of the Acquiring Fund to open accounts on the share records of the
Acquiring Fund in the names of the Acquired Fund Shareholders. The aggregate net
asset value of Acquiring Fund Shares to be so credited to Acquired Fund
Shareholders shall be equal to the aggregate net asset value of the Acquired
Fund shares owned by such shareholders as of the Valuation Time. All issued and
outstanding shares of the Acquired Fund will simultaneously be cancelled on the
books of the Acquired Fund, although share certificates representing interests
in shares of the Acquired Fund will represent a number of Acquiring Fund Shares
after the Closing Date as determined in accordance with section 2.3. The
Acquiring Fund will not issue certificates representing Acquiring Fund Shares in
connection with such exchange.
1.6. Ownership of Acquiring Fund Shares will be shown on the books of the
Acquiring Fund. Shares of the Acquiring Fund will be issued in the manner
described in the Acquiring Fund's then-current prospectus and statement of
additional information.
1.7. Any reporting responsibility of the Acquired Fund including, without
limitation, the responsibility for filing of regulatory reports, tax returns, or
other documents with the Securities and Exchange Commission (the "Commission"),
any state securities commission, and any federal, state or local tax authorities
or any other relevant regulatory authority, is and shall remain the
responsibility of the Acquired Fund.
1.8. All books and records of the Acquired Fund, including all books and
records required to be maintained under the 1940 Act and the rules and
regulations thereunder, shall be available to the Acquiring Fund from and after
the Closing Date and shall be turned over to the Acquiring Fund as soon as
practicable following the Closing Date.
2. VALUATION
2.1. The value of the Assets shall be computed as of the close of regular
trading on The New York Stock Exchange, Inc. (the "NYSE") on the business day
immediately preceding the Closing Date, as defined in Section 3.1 (such time and
date being hereinafter called the "Valuation Time") after the declaration and
payment of any dividends and/or other distributions on that date, using the
valuation procedures set forth in the Acquiring Trust's Declaration of Trust, as
amended, and then-current prospectus or statement of additional information.
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2.2. The net asset value of an Acquiring Fund share shall be the net asset
value per share computed as of the Valuation Time using the valuation procedures
referred to in section 2.1.
2.3. The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Assets shall be determined by
dividing the value of the Assets with respect to shares of the Acquired Fund
determined in accordance with section 2.1 by the net asset value of an Acquiring
Fund Share determined in accordance with section 2.2.
2.4. All computations of value hereunder shall be made by or under the
direction of each Fund's respective accounting agent, if applicable, in
accordance with its regular practice and the requirements of the 1940 Act and
shall be subject to confirmation by each Fund's respective independent
accountants upon the reasonable request of the other Fund.
3. CLOSING AND CLOSING DATE
3.1. The Closing of the transactions contemplated by this Agreement shall
be July 31, 2000, or such later date as the parties may agree in writing (the
"Closing Date"). All acts taking place at the Closing shall be deemed to take
place simultaneously as of 9:00 a.m.., Eastern time, on the Closing Date, unless
otherwise agreed to by the parties. The Closing shall be held at the offices of
Dechert Price & Rhoads, Ten Post Office Square - South, Boston, MA 02109, or at
such other place and time as the parties may agree.
3.2. The Acquired Fund shall deliver to Acquiring Fund on the Closing Date
a schedule of Assets.
3.3. State Street Bank and Trust Company ("State Street"), custodian for
the Acquired Fund, shall deliver at the Closing a certificate of an authorized
officer stating that (a) the Assets shall have been delivered in proper form to
State Street, custodian for the Acquiring Fund, prior to or on the Closing Date
and (b) all necessary taxes in connection with the delivery of the Assets,
including all applicable federal and state stock transfer stamps, if any, have
been paid or provision for payment has been made. The Acquired Fund's portfolio
securities represented by a certificate or other written instrument shall be
presented by the custodian for the Acquired Fund to the custodian for the
Acquiring Fund for examination no later than five business days preceding the
Closing Date and transferred and delivered by the Acquired Fund as of the
Closing Date by the Acquired Fund for the account of Acquiring Fund duly
endorsed in proper form for transfer in such condition as to constitute good
delivery thereof. The Acquired Fund's portfolio securities and instruments
deposited with a securities depository, as defined in Rule 17f-4 under the 1940
Act, shall be delivered as of the Closing Date by book entry in accordance with
the customary practices of such depositories and the custodian for the Acquiring
Fund. The cash to be transferred by the Acquired Fund shall be delivered by wire
transfer of federal funds on the Closing Date.
3.4. Scudder Service Corp. (the "Transfer Agent"), on behalf of the
Acquired Fund, shall deliver at the Closing a certificate of an authorized
officer stating that its records contain the names and addresses of the Acquired
Fund Shareholders and the number and percentage ownership (to three decimal
places) of outstanding Acquired Fund shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver a
confirmation evidencing the Acquiring Fund Shares to be credited on the Closing
Date to the Acquired Fund or provide evidence satisfactory to the Acquired Fund
that such Acquiring Fund Shares have been credited to the Acquired Fund's
account on the books of the Acquiring Fund. At the Closing, each party shall
deliver to the other such bills of sale,
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checks, assignments, share certificates, if any, receipts or other documents as
such other party or its counsel may reasonably request to effect the
transactions contemplated by this Agreement.
3.5. In the event that immediately prior to the Valuation Time (a) the
NYSE or another primary trading market for portfolio securities of the Acquiring
Fund or the Acquired Fund shall be closed to trading or trading thereupon shall
be restricted, or (b) trading or the reporting of trading on such Exchange or
elsewhere shall be disrupted so that, in the judgment of the Board members of
either party to this Agreement, accurate appraisal of the value of the net
assets with respect to the Acquiring Fund Shares or the Acquired Fund shares is
impracticable, the Closing Date shall be postponed until the first business day
after the day when trading shall have been fully resumed and reporting shall
have been restored.
4. REPRESENTATIONS AND WARRANTIES
4.1. The Acquired Trust, on behalf of the Acquired Fund, represents and
warrants to the Acquiring Fund as follows:
(a) The Acquired Trust is a business trust duly organized and validly
existing under the laws of the Commonwealth of Massachusetts with power under
the Acquired Trust's Declaration of Trust, as amended, to own all of its
properties and assets and to carry on its business as it is now being conducted;
(b) The Acquired Trust is registered with the Commission as an open-end
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"), and such registration is in full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquired Fund of
the transactions contemplated herein, except such as have been obtained under
the Securities Act of 1933, as amended (the "1933 Act"), the Securities Exchange
Act of 1934, as amended (the "1934 Act") and the 1940 Act and such as may be
required by state securities laws;
(d) Other than with respect to contracts entered into in connection with
the portfolio management of the Acquired Fund which shall terminate on or prior
to the Closing Date, the Acquired Trust is not, and the execution, delivery and
performance of this Agreement by the Acquired Trust will not result, in
violation of Massachusetts law or of the Acquired Trust's Declaration of Trust,
as amended, or By-Laws, or of any material agreement, indenture, instrument,
contract, lease or other undertaking known to counsel to which the Acquired Fund
is a party or by which it is bound, and the execution, delivery and performance
of this Agreement by the Acquired Fund will not result in the acceleration of
any obligation, or the imposition of any penalty, under any agreement,
indenture, instrument, contract, lease, judgment or decree to which the Acquired
Fund is a party or by which it is bound;
(e) No material litigation or administrative proceeding or investigation
of or before any court or governmental body is presently pending or to its
knowledge threatened against the Acquired Fund or any properties or assets held
by it. The Acquired Fund knows of no facts which might form the basis for the
institution of such proceedings which would materially and adversely affect its
business and is not a party to or subject to the provisions of any order, decree
or judgment of any court or governmental body which materially and adversely
affects its business or its ability to consummate the transactions herein
contemplated;
(f) The Statements of Assets and Liabilities, Operations, and Changes in
Net Assets, the Financial Highlights, and the Investment Portfolio of the
Acquired Fund at and for the fiscal year ended
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March 31, 1999, have been audited by PricewaterhouseCoopers LLP, independent
accountants, and are in accordance with GAAP consistently applied, and such
statements (a copy of each of which has been furnished to the Acquiring Fund)
present fairly, in all material respects, the financial position of the Acquired
Fund as of such date in accordance with GAAP, and there are no known contingent
liabilities of the Acquired Fund required to be reflected on a balance sheet
(including the notes thereto) in accordance with GAAP as of such date not
disclosed therein;
(g) Since March 31, 1999, there has not been any material adverse change
in the Acquired Fund's financial condition, assets, liabilities or business
other than changes occurring in the ordinary course of business, or any
incurrence by the Acquired Fund of indebtedness maturing more than one year from
the date such indebtedness was incurred except as otherwise disclosed to and
accepted in writing by the Acquiring Fund. For purposes of this subsection (g),
a decline in net asset value per share of the Acquired Fund due to declines in
market values of securities in the Acquired Fund's portfolio, the discharge of
Acquired Fund liabilities, or the redemption of Acquired Fund shares by Acquired
Fund Shareholders shall not constitute a material adverse change;
(h) At the date hereof and at the Closing Date, all federal and other tax
returns and reports of the Acquired Fund required by law to have been filed by
such dates (including any extensions) shall have been filed and are or will be
correct in all material respects, and all federal and other taxes shown as due
or required to be shown as due on said returns and reports shall have been paid
or provision shall have been made for the payment thereof, and, to the best of
the Acquired Fund's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns;
(i) For each taxable year of its operation (including the taxable year
ending on the Closing Date), the Acquired Fund has met the requirements of
Subchapter M of the Code for qualification as a regulated investment company and
has elected to be treated as such, has been eligible to and has computed its
federal income tax under Section 852 of the Code, and will have distributed all
of its investment company taxable income and net capital gain (as defined in the
Code) that has accrued through the Closing Date;
(j) All issued and outstanding shares of the Acquired Fund (i) have been
offered and sold in every state and the District of Columbia in compliance in
all material respects with applicable registration requirements of the 1933 Act
and state securities laws, (ii) are, and on the Closing Date will be, duly and
validly issued and outstanding, fully paid and non-assessable (recognizing that,
under Massachusetts law, Acquired Fund Shareholders, under certain
circumstances, could be held personally liable for obligations of the Acquired
Fund), and (iii) will be held at the time of the Closing by the persons and in
the amounts set forth in the records of the Transfer Agent, as provided in
section 3.4. The Acquired Fund does not have outstanding any options, warrants
or other rights to subscribe for or purchase any of the Acquired Fund shares,
nor is there outstanding any security convertible into any of the Acquired Fund
shares;
(k) At the Closing Date, the Acquired Fund will have good and marketable
title to the Acquired Fund's assets to be transferred to the Acquiring Fund
pursuant to section 1.2 and full right, power, and authority to sell, assign,
transfer and deliver such assets hereunder free of any liens or other
encumbrances, except those liens or encumbrances as to which the Acquiring Fund
has received notice at or prior to the Closing, and upon delivery and payment
for such assets, the Acquiring Fund will acquire good and marketable title
thereto, subject to no restrictions on the full transfer thereof, including such
restrictions as might arise under the 1933 Act and the 1940 Act, except those
restrictions as to which the Acquiring Fund has received notice and necessary
documentation at or prior to the Closing;
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(l) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action on the
part of the Board members of the Acquired Trust, and, subject to the approval of
the Acquired Fund Shareholders, this Agreement constitutes a valid and binding
obligation of the Acquired Trust, on behalf of the Acquired Fund, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and other laws
relating to or affecting creditors' rights and to general equity principles;
(m) The information to be furnished by the Acquired Fund for use in
applications for orders, registration statements or proxy materials or for use
in any other document filed or to be filed with any federal, state or local
regulatory authority (including the National Association of Securities Dealers,
Inc. (the "NASD")), which may be necessary in connection with the transactions
contemplated hereby, shall be accurate and complete in all material respects and
shall comply in all material respects with federal securities and other laws and
regulations applicable thereto;
(n) The current prospectus and statement of additional information of the
Acquired Fund conform in all material respects to the applicable requirements of
the 1933 Act and the 1940 Act and the rules and regulations of the Commission
thereunder and do not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not materially misleading; and
(o) The proxy statement of the Acquired Fund to be included in the
Registration Statement referred to in section 5.7 (the "Proxy Statement"),
insofar as it relates to the Acquired Fund, will, on the effective date of the
Registration Statement and on the Closing Date, not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which such statements are made, not materially misleading;
provided, however, that the representations and warranties in this section shall
not apply to statements in or omissions from the Proxy Statement and the
Registration Statement made in reliance upon and in conformity with information
that was furnished or should have been furnished by the Acquiring Fund for use
therein.
4.2. The Acquiring Trust, on behalf of the Acquiring Fund, represents and
warrants to the Acquired Fund as follows:
(a) The Acquiring Trust is a business trust duly organized and validly
existing under the laws of the Commonwealth of Massachusetts with power under
the Acquiring Trust's Declaration of Trust, as amended, to own all of its
properties and assets and to carry on its business as it is now being conducted;
(b) The Acquiring Trust is registered with the Commission as an open-end
management investment company under the 1940 Act, and such registration is in
full force and effect;
(c) No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquiring Fund of
the transactions contemplated herein, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act and such as may be required by state
securities laws;
(d) The Acquiring Trust is not, and the execution, delivery and
performance of this Agreement by the Acquiring Trust will not result, in
violation of Massachusetts law or of the Acquiring Trust's Declaration of Trust,
as amended, or By-Laws, or of any material agreement, indenture, instrument,
contract, lease or other undertaking known to counsel to which the Acquiring
Fund is a party
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or by which it is bound, and the execution, delivery and performance of this
Agreement by the Acquiring Fund will not result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement, indenture,
instrument, contract, lease, judgment or decree to which the Acquiring Fund is a
party or by which it is bound;
(e) No material litigation or administrative proceeding or investigation
of or before any court or governmental body is presently pending or to its
knowledge threatened against the Acquiring Fund or any properties or assets held
by it. The Acquiring Fund knows of no facts which might form the basis for the
institution of such proceedings which would materially and adversely affect its
business and is not a party to or subject to the provisions of any order, decree
or judgment of any court or governmental body which materially and adversely
affects its business or its ability to consummate the transactions herein
contemplated;
(f) The Statements of Assets and Liabilities, Operations, and Changes in
Net Assets, the Financial Highlights, and the Investment Portfolio of the
Acquiring Fund at and for the fiscal year ended December 31, 1999, have been
audited by PricewaterhouseCoopers LLP, independent accountants, and are in
accordance with GAAP consistently applied, and such statements (a copy of each
of which has been furnished to the Acquired Fund) present fairly, in all
material respects, the financial position of the Acquiring Fund as of such date
in accordance with GAAP, and there are no known contingent liabilities of the
Acquiring Fund required to be reflected on a balance sheet (including the notes
thereto) in accordance with GAAP as of such date not disclosed therein;
(g) Since December 31, 1999, there has not been any material adverse
change in the Acquiring Fund's financial condition, assets, liabilities or
business other than changes occurring in the ordinary course of business, or any
incurrence by the Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred except as otherwise disclosed to
and accepted in writing by the Acquired Fund. For purposes of this subsection
(g), a decline in net asset value per share of the Acquiring Fund due to
declines in market values of securities in the Acquiring Fund's portfolio, the
discharge of Acquiring Fund liabilities, or the redemption of Acquiring Fund
shares by Acquiring Fund shareholders shall not constitute a material adverse
change;
(h) At the date hereof and at the Closing Date, all federal and other tax
returns and reports of the Acquiring Fund required by law to have been filed by
such dates (including any extensions) shall have been filed and are or will be
correct in all material respects, and all federal and other taxes shown as due
or required to be shown as due on said returns and reports shall have been paid
or provision shall have been made for the payment thereof, and, to the best of
the Acquiring Fund's knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns;
(i) For each taxable year of its operation, the Acquiring Fund has met the
requirements of Subchapter M of the Code for qualification as a regulated
investment company and has elected to be treated as such, has been eligible to
and has computed its federal income tax under Section 852 of the Code, and will
do so for the taxable year including the Closing Date;
(j) All issued and outstanding shares of the Acquiring Fund (i) have been
offered and sold in every state and the District of Columbia in compliance in
all material respects with applicable registration requirements of the 1933 Act
and state securities laws and (ii) are, and on the Closing Date will be, duly
and validly issued and outstanding, fully paid and non-assessable (recognizing
that, under Massachusetts law, Acquiring Fund Shareholders, under certain
circumstances, could be held personally liable for the obligations of the
Acquired Fund). The Acquiring Fund does not have outstanding any options,
warrants
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or other rights to subscribe for or purchase any of the Acquiring Fund shares,
nor is there outstanding any security convertible into any of the Acquiring Fund
shares;
(k) The Acquiring Fund Shares to be issued and delivered to the Acquired
Fund, for the account of the Acquired Fund Shareholders, pursuant to the terms
of this Agreement, will at the Closing Date have been duly authorized and, when
so issued and delivered, will be duly and validly issued and outstanding
Acquiring Fund Shares, and will be fully paid and non-assessable (recognizing
that, under Massachusetts law, Acquiring Fund Shareholders, under certain
circumstances, could be held personally liable for the obligations of the
Acquired Fund).
(l) At the Closing Date, the Acquiring Fund will have good and marketable
title to the Acquiring Fund's assets, free of any liens or other encumbrances,
except those liens or encumbrances as to which the Acquired Fund has received
notice at or prior to the Closing;
(m) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action on the
part of the Board members of the Acquiring Fund and this Agreement will
constitute a valid and binding obligation of the Acquiring Fund enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and other laws
relating to or affecting creditors' rights and to general equity principles;
(n) The information to be furnished by the Acquiring Fund for use in
applications for orders, registration statements or proxy materials or for use
in any other document filed or to be filed with any federal, state or local
regulatory authority (including the NASD), which may be necessary in connection
with the transactions contemplated hereby, shall be accurate and complete in all
material respects and shall comply in all material respects with federal
securities and other laws and regulations applicable thereto;
(o) The current prospectus and statement of additional information of the
Acquiring Fund conform in all material respects to the applicable requirements
of the 1933 Act and the 1940 Act and the rules and regulations of the Commission
thereunder and do not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not materially misleading;
(p) The Proxy Statement to be included in the Registration Statement, only
insofar as it relates to the Acquiring Fund, will, on the effective date of the
Registration Statement and on the Closing Date, not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not materially misleading;
provided, however, that the representations and warranties in this section shall
not apply to statements in or omissions from the Proxy Statement and the
Registration Statement made in reliance upon and in conformity with information
that was furnished or should have been furnished by the Acquired Fund for use
therein; and
(q) The Acquiring Fund agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and such of
the state securities laws as may be necessary in order to continue its
operations after the Closing Date.
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5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1. The Acquiring Fund and the Acquired Fund each covenants to operate
its business in the ordinary course between the date hereof and the Closing
Date, it being understood that (a) such ordinary course of business will include
(i) the declaration and payment of customary dividends and other distributions
and (ii) such changes as are contemplated by the Funds' normal operations; and
(b) each Fund shall retain exclusive control of the composition of its portfolio
until the Closing Date.
5.2. Upon reasonable notice, the Acquiring Fund's officers and agents
shall have reasonable access to the Acquired Fund's books and records necessary
to maintain current knowledge of the Acquired Fund and to ensure that the
representations and warranties made by the Acquired Fund are accurate.
5.3. The Acquired Fund covenants to call a meeting of the Acquired Fund
Shareholders entitled to vote thereon to consider and act upon this Agreement
and to take all other reasonable action necessary to obtain approval of the
transactions contemplated herein. Such meeting shall be scheduled for no later
than July 13, 2000.
5.4. The Acquired Fund covenants that the Acquiring Fund Shares to be
issued hereunder are not being acquired for the purpose of making any
distribution thereof other than in accordance with the terms of this Agreement.
5.5. The Acquired Fund covenants that it will assist the Acquiring Fund in
obtaining such information as the Acquiring Fund reasonably requests concerning
the beneficial ownership of the Acquired Fund shares and will provide the
Acquiring Fund with a list of affiliates of the Acquired Fund.
5.6. Subject to the provisions of this Agreement, the Acquiring Fund and
the Acquired Fund will each take, or cause to be taken, all actions, and do or
cause to be done, all things reasonably necessary, proper, and/or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.7. Each Fund covenants to prepare in compliance with the 1933 Act, the
1934 Act and the 1940 Act the Registration Statement on Form N-14 (the
"Registration Statement") in connection with the meeting of the Acquired Fund
Shareholders to consider approval of this Agreement and the transactions
contemplated herein. The Acquiring Fund will file the Registration Statement,
including the Proxy Statement, with the Commission. The Acquired Fund will
provide the Acquiring Fund with information reasonably necessary for the
preparation of a prospectus, which will include the Proxy Statement referred to
in section 4.1(o), all to be included in the Registration Statement, in
compliance in all material respects with the 1933 Act, the 1934 Act and the 1940
Act.
5.8. The Acquired Fund covenants that it will, from time to time, as and
when reasonably requested by the Acquiring Fund, execute and deliver or cause to
be executed and delivered all such assignments and other instruments, and will
take or cause to be taken such further action as the Acquiring Fund may
reasonably deem necessary or desirable in order to vest in and confirm the
Acquiring Fund's title to and possession of all the assets and otherwise to
carry out the intent and purpose of this Agreement.
5.9. The Acquiring Fund covenants to use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act and 1940 Act, and such
of the state securities laws as it deems appropriate in order to continue its
operations after the Closing Date and to consummate the transactions
-44-
contemplated herein; provided, however, that the Acquiring Fund may take such
actions it reasonably deems advisable after the Closing Date as circumstances
change.
5.10. The Acquiring Fund covenants that it will, from time to time, as and
when reasonably requested by the Acquired Fund, execute and deliver or cause to
be executed and delivered all such assignments, assumption agreements, releases,
and other instruments, and will take or cause to be taken such further action,
as the Acquired Fund may reasonably deem necessary or desirable in order to (i)
vest and confirm to the Acquired Fund title to and possession of all Acquiring
Fund shares to be transferred to Acquired Fund pursuant to this Agreement and
(ii) assume the liabilities from the Acquired Fund.
5.11. As soon as reasonably practicable after the Closing, the Acquired
Fund shall make a liquidating distribution to its shareholders consisting of the
Acquiring Fund Shares received at the Closing.
5.12. The Acquiring Fund and the Acquired Fund shall each use its
reasonable best efforts to fulfill or obtain the fulfillment of the conditions
precedent to effect the transactions contemplated by this Agreement as promptly
as practicable.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date, and, in addition thereto, the following further
conditions:
6.1. All representations and warranties of the Acquired Trust, with
respect to the Acquired Fund, contained in this Agreement shall be true and
correct in all material respects as of the date hereof and, except as they may
be affected by the transactions contemplated by this Agreement, as of the
Closing Date, with the same force and effect as if made on and as of the Closing
Date; and there shall be (i) no pending or threatened litigation brought by any
person (other than Acquiring Fund, its adviser or any of their affiliates)
against the Acquired Fund or its investment adviser(s), Board members or
officers arising out of this Agreement and (ii) no facts known to the Acquired
Fund which the Acquired Fund reasonably believes might result in such
litigation.
6.2. The Acquiring Fund shall have delivered to the Acquired Fund on the
Closing Date a certificate executed in its name by its President or a Vice
President, in a form reasonably satisfactory to the Acquired Fund and dated as
of the Closing Date, to the effect that the representations and warranties of
the Acquiring Fund made in this Agreement are true and correct on and as of the
Closing Date, except as they may be affected by the transactions contemplated by
this Agreement, and as to such other matters as the Acquired Fund shall
reasonably request;
6.3. The Acquired Fund shall have received on the Closing Date an opinion
of Dechert Price & Rhoads, in a form reasonably satisfactory to the Acquired
Fund, and dated as of the Closing Date, to the effect that:
(a) The Acquiring Trust has been duly formed and is an existing business
trust; (b) the Acquiring Trust has the power to carry on its business as
presently conducted in accordance with the description thereof in the Acquiring
Trust's registration statement under the 1940 Act; (c) the Agreement has been
duly authorized, executed and delivered by the Acquiring Fund and constitutes a
valid and legally binding obligation of the Acquiring Fund enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and laws of general applicability
-45-
relating to or affecting creditors' rights and to general equity principles; (d)
the execution and delivery of the Agreement did not, and the exchange of the
Acquired Fund's assets for Acquiring Fund Shares pursuant to the Agreement will
not, violate the Acquiring Trust's Declaration of Trust, as amended, or By-laws;
and (e) to the knowledge of such counsel, all regulatory consents,
authorizations, approvals or filings required to be obtained or made by the
Acquiring Fund under the Federal laws of the United States or the laws of the
Commonwealth of Massachusetts for the exchange of the Acquired Fund's assets for
Acquiring Fund Shares, pursuant to the Agreement have been obtained or made; and
6.4. The Acquiring Fund shall have performed all of the covenants and
complied with all of the provisions required by this Agreement to be performed
or complied with by the Acquiring Fund on or before the Closing Date.
6.5 The Acquiring Fund shall have (i) adopted a new investment management
agreement and (ii) entered into an administrative services agreement with
Scudder Kemper Investments, Inc. ("Scudder Kemper"), each in a form reasonably
satisfactory to the Acquired Fund.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
Acquired Fund of all of the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following further
conditions:
7.1. All representations and warranties of the Acquired Trust, with
respect to the Acquired Fund, contained in this Agreement shall be true and
correct in all material respects as of the date hereof and, except as they may
be affected by the transactions contemplated by this Agreement, as of the
Closing Date, with the same force and effect as if made on and as of the Closing
Date; and there shall be (i) no pending or threatened litigation brought by any
person (other than Acquired Fund, its adviser or any of their affiliates)
against the Acquiring Fund or its investment adviser(s), Board members or
officers arising out of this Agreement and (ii) no facts known to the Acquiring
Fund which the Acquiring Fund reasonably believes might result in such
litigation.
7.2. The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets and liabilities as of the Closing Date,
certified by the Treasurer of the Acquired Fund;
7.3. The Acquired Fund shall have delivered to the Acquiring Fund on the
Closing Date a certificate executed in its name by its President or a Vice
President, in a form reasonably satisfactory to the Acquiring Fund and dated as
of the Closing Date, to the effect that the representations and warranties of
the Trust with respect to the Acquired Fund made in this Agreement are true and
correct on and as of the Closing Date, except as they may be affected by the
transactions contemplated by this Agreement, and as to such other matters as the
Acquiring Fund shall reasonably request;
7.4. The Acquiring Fund shall have received on the Closing Date an opinion
of Dechert Price & Rhoads, in a form reasonably satisfactory to the Acquiring
Fund, and dated as of the Closing Date, to the effect that:
(a) The Acquired Trust has been duly formed and is an existing business
trust; (b) the Acquired Trust has the power to carry on its business as
presently conducted in accordance with the description thereof in the Acquired
Trust's registration statement under the 1940 Act; (c) the Agreement
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has been duly authorized, executed and delivered by the Acquired Trust, on
behalf of the Acquired Fund, and constitutes a valid and legally binding
obligation of the Acquired Trust, on behalf of the Acquired Fund, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and laws of general applicability relating
to or affecting creditors' rights and to general equity principles; (d) the
execution and delivery of the Agreement did not, and the exchange of the
Acquired Fund's assets for Acquiring Fund Shares pursuant to the Agreement will
not, violate the Acquired Trust's Declaration of Trust, as amended, or By-laws;
and (e) to the knowledge of such counsel, all regulatory consents,
authorizations, approvals or filings required to be obtained or made by the
Acquired Fund under the Federal laws of the United States or the laws of the
Commonwealth of Massachusetts for the exchange of the Acquired Fund's assets for
Acquiring Fund Shares, pursuant to the Agreement have been obtained or made; and
7.5. The Acquired Fund shall have performed all of the covenants and
complied with all of the provisions required by this Agreement to be performed
or complied with by the Acquired Fund on or before the Closing Date.
7.6 The Acquiring Fund shall have (i) adopted a new investment management
agreement and (ii) entered into an administrative services agreement with
Scudder Kemper.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND THE
ACQUIRED FUND
If any of the conditions set forth below have not been met on or before
the Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement:
8.1. This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Acquired Fund in accordance with the provisions of the Acquired Trust's
Declaration of Trust, as amended, and By-Laws, applicable Massachusetts law and
the 1940 Act, and certified copies of the resolutions evidencing such approval
shall have been delivered to the Acquiring Fund. Notwithstanding anything herein
to the contrary, neither the Acquiring Fund nor the Acquired Fund may waive the
conditions set forth in this section 8.1;
8.2. On the Closing Date, no action, suit or other proceeding shall be
pending or to its knowledge threatened before any court or governmental agency
in which it is sought to restrain or prohibit, or obtain material damages or
other relief in connection with, this Agreement or the transactions contemplated
herein;
8.3. All consents of other parties and all other consents, orders and
permits of Federal, state and local regulatory authorities deemed necessary by
the Acquiring Fund or the Acquired Fund to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or permit would not
involve a risk of a material adverse effect on the assets or properties of the
Acquiring Fund or the Acquired Fund, provided that either party hereto may for
itself waive any of such conditions;
8.4. The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act; and
-47-
8.5. The parties shall have received an opinion of Willkie Farr &
Gallagher addressed to each of the Acquiring Trust and the Acquired Trust, in a
form reasonably satisfactory to each such party to this Agreement, substantially
to the effect that, based upon certain facts, assumptions and representations of
the parties, for federal income tax purposes: (i) the transfer to the Acquiring
Fund of all or substantially all of the assets of the Acquired Fund in exchange
solely for Acquiring Fund shares and the assumption by the Acquiring Fund of all
of the liabilities of the Acquired Fund, followed by the distribution of such
shares to the Acquired Fund's shareholders in exchange for their shares of the
Acquired Fund in complete liquidation of the Acquired Fund, will constitute a
"reorganization" within the meaning of Section 368(a)(1) of the Code, and the
Acquiring Fund and the Acquired Fund will each be "a party to a reorganization"
within the meaning of Section 368(b) of the Code; (ii) no gain or loss will be
recognized by the Acquired Fund upon the transfer of all or substantially all of
its assets to the Acquiring Fund in exchange solely for Acquiring Fund shares
and the assumption by the Acquiring Fund of all of the liabilities of the
Acquired Fund; (iii) the basis of the assets of the Acquired Fund in the hands
of the Acquiring Fund will be the same as the basis of such assets of the
Acquired Fund immediately prior to the transfer; (iv) the holding period of the
assets of the Acquired Fund in the hands of the Acquiring Fund will include the
period during which such assets were held by the Acquired Fund; (v) no gain or
loss will be recognized by the Acquiring Fund upon the receipt of the assets of
the Acquired Fund in exchange for Acquiring Fund shares and the assumption by
the Acquiring Fund of all of the liabilities of the Acquired Fund; (vi) no gain
or loss will be recognized by the shareholders of the Acquired Fund upon the
receipt of the Acquiring Fund shares solely in exchange for their shares of the
Acquired Fund as part of the transaction; (vii) the basis of the Acquiring Fund
shares received by the shareholders of the Acquired Fund will be the same as the
basis of the shares of the Acquired Fund exchanged therefor; and (viii) the
holding period of Acquiring Fund shares received by the shareholders of the
Acquired Fund will include the holding period during which the shares of the
Acquired Fund exchanged therefor were held, provided that at the time of the
exchange the shares of the Acquired Fund were held as capital assets in the
hands of the shareholders of the Acquired Fund. The delivery of such opinion is
conditioned upon receipt by Willkie Farr & Gallagher of representations it shall
request of each of the Acquiring Fund and Acquired Trust. Notwithstanding
anything herein to the contrary, neither the Acquiring Fund nor the Acquired
Fund may waive the condition set forth in this section 8.5.
9. INDEMNIFICATION
9.1. The Acquiring Fund agrees to indemnify and hold harmless the Acquired
Fund and each of the Acquired Fund's Board members and officers from and against
any and all losses, claims, damages, liabilities or expenses (including, without
limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which jointly and severally, the Acquired Fund or any of its
Board members or officers may become subject, insofar as any such loss, claim,
damage, liability or expense (or actions with respect thereto) arises out of or
is based on any breach by the Acquiring Fund of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
9.2. The Acquired Fund agrees to indemnify and hold harmless the Acquiring
Fund and each of the Acquiring Fund's Board members and officers from and
against any and all losses, claims, damages, liabilities or expenses (including,
without limitation, the payment of reasonable legal fees and reasonable costs of
investigation) to which jointly and severally, the Acquiring Fund or any of its
Board members or officers may become subject, insofar as any such loss, claim,
damage, liability or expense (or actions with respect thereto) arises out of or
is based on any breach by the Acquired Fund of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
-48-
10. FEES AND EXPENSES
10.1. Each of the Acquiring Fund on behalf of the Acquiring Fund, and the
Acquired Trust, on behalf of the Acquired Fund, represents and warrants to the
other that it has no obligations to pay any brokers or finders fees in
connection with the transactions provided for herein.
10.2. Each Fund will pay its own allocable share of expenses associated
with the Reorganization, except that Scudder Kemper will bear any such expenses
in excess of $25,202 for the Acquiring Fund and $15,382 for the Acquired Fund
(approximately $0.0003 and $0.0022 per share, respectively, based on December
31, 1999 net assets for each Fund). Any such expenses which are so borne by
Scudder Kemper will be solely and directly related to the Reorganization within
the meaning of Revenue Ruling 73-54, 1973-1 C.B. 187. The Acquired Fund
shareholders will pay their own expenses, if any, incurred in connection with
the Reorganization.
11. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
11.1. The Acquiring Fund and the Acquired Fund agree that neither party
has made any representation, warranty or covenant not set forth herein and that
this Agreement constitutes the entire agreement between the parties.
11.2. Except as specified in the next sentence set forth in this section
11.2, the representations, warranties and covenants contained in this Agreement
or in any document delivered pursuant hereto or in connection herewith shall not
survive the consummation of the transactions contemplated hereunder. The
covenants to be performed after the Closing and the obligations of each of the
Acquiring Fund and Acquired Fund in Sections 9.1 and 9.2 shall survive the
Closing.
12. TERMINATION
12.1. This Agreement may be terminated and the transactions contemplated
hereby may be abandoned by either party by (i) mutual agreement of the parties,
or (ii) by either party if the Closing shall not have occurred on or before July
31, 2000, unless such date is extended by mutual agreement of the parties, or
(iii) by either party if the other party shall have materially breached its
obligations under this Agreement or made a material and intentional
misrepresentation herein or in connection herewith. In the event of any such
termination, this Agreement shall become void and there shall be no liability
hereunder on the part of any party or their respective Board members or
officers, except for any such material breach or intentional misrepresentation,
as to each of which all remedies at law or in equity of the party adversely
affected shall survive.
13. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by any authorized officer of the Acquired
Fund and any authorized officer of the Acquiring Fund; provided, however, that
following the meeting of the Acquired Fund Shareholders called by the Acquired
Fund pursuant to section 5.2 of this Agreement, no such amendment may have the
effect of changing the provisions for determining the number of the Acquiring
Fund Shares to be issued to the Acquired Fund shareholders under this Agreement
to the detriment of such shareholders without their further approval.
14. NOTICES
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Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be deemed duly given
if delivered by hand (including by Federal Express or similar express courier)
or transmitted by facsimile or three days after being mailed by prepaid
registered or certified mail, return receipt requested, addressed to the
Acquired Fund, Two International Place, Boston, MA 02110-4103, with a copy to
Dechert Price & Rhoads, Ten Post Office Square South, Boston, MA 02109-4603,
Attention: Sheldon A. Jones, Esq., or to the Acquiring Fund, Two International
Place, Boston, MA 02110-4103, with a copy to Dechert Price & Rhoads, Ten Post
Office Square South, Boston, MA 02109-4603, Attention: Sheldon A. Jones, Esq.,
or to any other address that the Acquired Fund or the Acquiring Fund shall have
last designated by notice to the other party.
15. HEADINGS; COUNTERPARTS; ASSIGNMENT; LIMITATION OF LIABILITY
15.1. The Article and section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
15.2. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
15.3. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and the shareholders of the
Acquiring Fund and the Acquired Fund and their respective successors and
assigns, any rights or remedies under or by reason of this Agreement.
15.4. References in this Agreement to each Trust mean and refer to the
Board members of the Trust from time to time serving under its Declaration of
Trust on file with the Secretary of State of the Commonwealth of Massachusetts,
as the same may be amended from time to time, pursuant to which the Trust
conducts its business. It is expressly agreed that the obligations of each Trust
hereunder shall not be binding upon any of the Board members, shareholders,
nominees, officers, agents, or employees of the Trusts or the Funds personally,
but bind only the respective property of the Funds, as provided in each Trust's
Declaration of Trust. Moreover, no series of either Trust other than the Funds
shall be responsible for the obligations of the Trust hereunder, and all persons
shall look only to the assets of the Funds to satisfy the obligations of the
Trusts hereunder. The execution and the delivery of this Agreement have been
authorized by each Trust's Board members, on behalf of the applicable Fund, and
this Agreement has been signed by authorized officers of each Fund acting as
such, and neither such authorization by such Board members, nor such execution
and delivery by such officers, shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but shall
bind only the property of the applicable Fund, as provided in each Trust's
Declaration of Trust.
Notwithstanding anything to the contrary contained in this Agreement, the
obligations, agreements, representations and warranties with respect to each
Fund shall constitute the obligations, agreements, representations and
warranties of that Fund only (the "Obligated Fund"), and in no event shall any
other series of the Acquiring Trust or the Acquired Trust or the assets of any
such series be held liable with respect to the breach or other default by the
Obligated Fund of its obligations, agreements, representations and warranties as
set forth herein.
15.5. This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Massachusetts, without regard to its
principles of conflicts of laws.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by an authorized officer and its seal to be affixed thereto and
attested by its Secretary or Assistant Secretary.
Attest: SCUDDER STATE TAX FREE TRUST
on behalf of Scudder Ohio Tax Free Fund
______________________________
Secretary
________________________________
By:_____________________________
Its:____________________________
Attest: SCUDDER MUNICIPAL TRUST
on behalf of Scudder Managed Municipal Bonds
______________________________
Secretary
________________________________
By:_____________________________
Its:____________________________
AGREED TO AND ACKNOWLEDGED
ONLY WITH RESPECT TO
PARAGRAPH 10.2 HERETO
SCUDDER KEMPER INVESTMENTS, INC.
________________________________
By:_____________________________
Its:____________________________
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EXHIBIT B
Scudder Managed Municipal Bonds
Annual Report
May 31, 1999
- --------------------------------------------------------------------------------
Portfolio Management Discussion
Dear Shareholders,
Following a series of overseas and domestic financial crises that prompted
uncertainty, volatility, and a "flight to quality," bond yields plummeted, then
returned to July 1998 levels by the close of Scudder Managed Municipal Bonds'
most recent fiscal year. During its abbreviated fiscal year beginning January 1,
1999, through May 31, 1999, the Fund returned -0.17%. Over the 12 months ended
May 31, the Fund posted a 4.04% total return, outpacing the 3.26% average
performance of the Fund's peers over the same period as tracked by Lipper
Analytical Services, Inc., an independent analyst of investment performance. As
of May 31, 1999, Scudder Managed Municipal Bonds' 30-day net annualized SEC
yield was 4.16%, equivalent to a 6.89% taxable yield for investors subject to
the 39.6% maximum federal income tax rate.
Scudder Managed Municipal Bonds' long-term performance record remains highly
competitive: As shown in the accompanying table, the Fund's average annual total
returns placed it in the top one-third of its peers over one-, three-, five-,
and ten-year periods. Please turn to the Performance Update on page 4 for more
information on the Fund's long-term progress, including comparisons with the
unmanaged Lehman Brothers Municipal Bond Index.
A Market Roller Coaster
Market turmoil hit a peak in the wake of the Russian currency devaluation late
last summer, followed by the near collapse of the Long Term Capital
- --------------------------------------------------------------------------------
Competitive Long-Term Returns
(Average annual returns for periods ended May 31, 1999)
- --------------------------------------------------------------------------------
Scudder
Managed Lipper Number
Municipal average of
Bonds annual Funds Percentile
Period return return Rank tracked Ranking
1 year 4.04% 3.26% 32 of 260 Top 12%
3 years 7.13% 6.68% 55 of 202 Top 27%
5 years 6.88% 6.42% 39 of 153 Top 25%
10 years 7.47% 7.17% 17 of 76 Top 22%
Past performance does not guarantee future results.
Lipper Analytical Services, Inc., is an independent analyst of investment
performance. Performance includes reinvestment of dividends and capital gains.
- --------------------------------------------------------------------------------
Management hedge fund. Volatility in the U.S. stock market increased greatly
while a massive reallocation to U.S. Treasury bonds led to substantially lower
yields. The Federal Reserve's three interest rate cuts during the third and
fourth quarters of 1998 helped to gradually restore market stability. During
this period, the U.S. economy continued to grow beyond all expectations, with a
dramatic 6% annualized increase in GDP for the fourth quarter of 1998 and a
strong start in 1999 that seemed to assure at least 4% GDP growth this year.
This show of strength, in turn, worried bond investors, who responded by sending
30-year Treasury bond yields back up to July 1998 levels.
Over the twelve months ended May 31, yields of
- --------------------------------------------------------------------------------
Municipals Provided Greater Stability
Monthly prices of 30-year AAA-rated municipal bonds
compared with prices of 30-year U.S. Treasury bonds,
5/31/98-5/31/99.
- --------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA
30-year 30-year
U.S. AAA-rated
Treasury Bonds municipal bonds
5/31/98 100.14 100.77
103.47 100.00
7/31/98 101.57 100.00
107.12 102.33
9/31/98 114.87 105.57
111.47 102.33
11/31/98 109.83 102.33
111.47 102.33
1/31/99 111.14 103.13
103.32 101.55
3/31/99 102.11 100.77
104.665 100.31
5/31/99 100.00 98.19
Past performance is not indicative of future results.
Source: Scudder Kemper Investments, Inc.
- --------------------------------------------------------------------------------
30-year Treasury bonds ended slightly higher, beginning at 5.60% and ending at
5.84%. Over the same time frame, yields of 30-year AAA insured municipal bonds
also rose slightly, from 5.10% to 5.22%.
In addition to high tax free yields, municipal bonds have historically offered
greater price stability over time than Treasury bonds of comparable maturity.
The accompanying chart demonstrates the record over the past 12 months, when
most financial markets were at a peak of volatility.
Tax-Free Income and
Below-Average Risk
Scudder Managed Municipal Bonds' primary goals are to generate high federally
tax-free income through investments in high-grade, long-term municipal
securities. During the Fund's abbreviated fiscal year, we maintained a two-part
strategy: First, we focused on premium "cushion" bonds -- bonds with high
coupons that compensate investors for the fact that they can be redeemed by
their issuer prior to maturity. At the same time, we continued the Fund's strong
emphasis on call protection. (Generally a bond is called in by its issuer so
that it can be refinanced at a lower prevailing rate.) Our call-protection
strategy provides a more reliable income stream for the Fund than would exist if
the portfolio held a significant proportion of bonds that could be called in
before their stated maturities. In terms of maturity, we focused on six- to
13-year bonds, because we believe they offer the best total return potential,
based on our outlook for interest rates and the yield differentials among bonds
across the maturity spectrum.
The Fund continues its cautious stance on the market with respect to interest
rate risk, maintaining an average duration similar to that of its competitive
universe. As of May 31, 1999, the Fund's average duration was 6.9 years.
(Duration gives relative weight to both principal and interest payments through
the life of a bond and has replaced average maturity as the standard measure of
interest rate sensitivity among professional investors. Generally, the shorter
the duration, the less sensitive a portfolio will be to changes in interest
rates.)
The Fund's overall level of portfolio quality remains high, with over 65% of the
Fund's portfolio rated AAA or AA. Diversification remains an important strategy
for the Fund, allowing us to spread risk over a large number of sectors,
maturities, and geographic areas. As of May 31, 1999, the Fund held securities
issued in 27 states plus the District of Columbia and the Virgin Islands. The
Portfolio Summary on page 17 provides more information about the Fund's
holdings, including quality, maturity, and sector representation.
Outlook
In light of recent increases in short-term interest rates -- including an
increase in the Federal Funds target rate following the close of the period -- a
long-predicted slowdown in U.S. economic activity seems more likely to occur
during the second half of 1999. At the same time, we expect that inflation will
remain restrained, which should place an upper limit on interest rate increases.
Though as a general rule we maintain a portfolio duration in line with our
market, we will take a cautious approach during the coming months. We will also
monitor the level of worldwide economic activity closely over the remainder of
the year: The United States has been the only significant engine of economic
growth for some time. If the incipient economic recovery in Asia and other parts
of the world gathers steam, we will watch for additional upward pressure on
inflation and short-term interest rates and adjust our strategy accordingly. In
terms of the Fund's day-to-day strategy, we will continue to seek competitive
returns by purchasing eight- to 13-year premium cushion bonds and noncallable
bonds over the coming months. And rather than attempting to make investment
decisions based on short-term market movements, we will search for the most
attractively valued bonds as we seek a high level of tax-free income for our
shareholders.
Performance Update as of May 31, 1999
- --------------------------------------------------------------------------------
Fund Index Comparisons
- --------------------------------------------------------------------------------
Total Return
-------------------------------------------------------------
Period Ended Growth of Average
5/31/1999 $10,000 Cumulative Annual
-------------------------------------------------------------
Scudder Managed Municipal Bonds
-------------------------------------------------------------
1 Year $ 10,404 4.04% 4.04%
5 Year $ 13,946 39.46% 6.88%
10 Year $ 20,546 105.46% 7.47%
-------------------------------------------------------------
Lehman Brothers Municipal Bond Index
-------------------------------------------------------------
1 Year $ 10,467 4.67% 4.67%
5 Year $ 14,147 41.47% 7.18%
10 Year $ 21,062 110.62% 7.73%
- --------------------------------------------------------------------------------
Growth of a $10,000 Investment
- --------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA
Scudder Managed Lehman Brothers
Municipal Bonds Municipal Bond Index
'89 10000 10000
'90 10557 10733
'91 11645 11814
'92 12787 12976
'93 14457 14529
'94 14732 14888
'95 15978 16243
'96 16712 16986
'97 18084 18395
'98 19748 20121
'99 20546 21062
Yearly periods ended May 31
The unmanaged Lehman Brothers Municipal Bond Index is a market value-weighted
measure of the long-term, investment grade tax-exempt bond market consisting of
municipal bonds with a maturity of at least two years. Index returns assume
dividends are reinvested and, unlike Fund returns, do not reflect any fees or
expenses.
APPENDIX 1
FUND SHARES OWNED BY NOMINEES AND TRUSTEES
Many of the Nominees and Trustees own shares of the series of the
Acquired Trust and of other funds in the Scudder Family of Funds and AARP Funds,
allocating their investments among such funds based on their individual
investment needs. The following table sets forth, for each Nominee and Trustee,
the number of shares owned in each series of the Acquired Trust as of January
31, 2000. The information as to beneficial ownership is based on statements
furnished to the Acquired Trust by each Nominee and Trustee. Unless otherwise
noted, beneficial ownership is based on sole voting and investment power. [Each
Nominee's and Trustee's individual shareholdings of any series of the Acquired
Trust constitute less than 1% of the shares outstanding of such fund.] [As a
group, the Trustees and officers own less than 1% of the shares of any series of
the Acquired Trust.]
- ----------------------------- ----------------- ---------------- ----------------- ---------------- -----------------
SCUDDER SCUDDER
MASSACHUSETTS SCUDDER SCUDDER NEW YORK
LIMITED TERM MASSACHUSETTS NEW YORK TAX FREE SCUDDER OHIO
TAX FREE FUND TAX FREE FUND TAX FREE FUND MONEY FUND TAX FREE FUND
- ----------------------------- ----------------- ---------------- ----------------- ---------------- -----------------
Henry P. Becton, Jr.(1)
- ----------------------------- ----------------- ---------------- ----------------- ---------------- -----------------
Linda C. Coughlin(2)
- ----------------------------- ----------------- ---------------- ----------------- ---------------- -----------------
Dawn-Marie Driscoll(3)
- ----------------------------- ----------------- ---------------- ----------------- ---------------- -----------------
Edgar R. Fiedler(4)
- ----------------------------- ----------------- ---------------- ----------------- ---------------- -----------------
Peter B. Freeman(5)
- ----------------------------- ----------------- ---------------- ----------------- ---------------- -----------------
Keith R. Fox(6)
- ----------------------------- ----------------- ---------------- ----------------- ---------------- -----------------
George M. Lovejoy, Jr.(7)
- ----------------------------- ----------------- ---------------- ----------------- ---------------- -----------------
Wesley W. Marple, Jr.(8)
- ----------------------------- ----------------- ---------------- ----------------- ---------------- -----------------
Kathryn L. Quirk(9)
- ----------------------------- ----------------- ---------------- ----------------- ---------------- -----------------
Joan Edelman Spero(10)
- ----------------------------- ----------------- ---------------- ----------------- ---------------- -----------------
Jean Gleason Stromberg(11)
- ----------------------------- ----------------- ---------------- ----------------- ---------------- -----------------
Jean C. Tempel(12)
- ----------------------------- ----------------- ---------------- ----------------- ---------------- -----------------
Steven Zaleznick(13)
- ----------------------------- ----------------- ---------------- ----------------- ---------------- -----------------
[All Trustees and Officers
as a Group]
- ----------------------------- ----------------- ---------------- ----------------- ---------------- -----------------
(1) As of January 31, 2000, Mr. Becton's total aggregate holdings in each series
of the Acquired Trust listed above and all other funds in the Scudder Family of
Funds and AARP Funds ranged between $___________ and $___________.
(2) As of January 31, 2000, Ms. Coughlin's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
(3) As of January 31, 2000, Ms. Driscoll's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
(4) As of January 31, 2000, Mr. Fiedler's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
(5) As of January 31, 2000, Mr. Freeman's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
(6) As of January 31, 2000, Mr. Fox's total aggregate holdings in each series
of the Acquired Trust listed above and all other funds in the Scudder Family
of Funds and AARP Funds ranged between $___________ and $___________.
(7) As of January 31, 2000, Mr. Lovejoy's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
(8) As of January 31, 2000, Mr. Marple's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
(9) As of January 31, 2000, Ms. Quirk's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
(10) As of January 31, 2000, Ms. Spero's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
(11) As of January 31, 2000, Ms. Stromberg's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
(12) As of January 31, 2000, Ms. Tempel's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
(13) As of January 31, 2000, Mr. Zaleznick's total aggregate holdings in each
series of the Acquired Trust listed above and all other funds in the Scudder
Family of Funds and AARP Funds ranged between $___________ and $___________.
APPENDIX 2
Beneficial Ownership of Fund Shares
-53-
This proxy statement/prospectus is accompanied by the Acquiring Fund's
prospectus dated October 1, 1999, which was previously filed with the
Commission via EDGAR on September 29, 1999 (File No. 2-57139) and is
incorporated by reference herein.
PART B
SCUDDER MUNICIPAL TRUST
- --------------------------------------------------------------------------------
Statement of Additional Information
[date]
- --------------------------------------------------------------------------------
Acquisition of the Assets of By and in Exchange for Shares of
Scudder Ohio Tax Free Fund (the Scudder Managed Municipal Bonds (the
"Acquired Fund"), a series of Scudder "Acquiring Fund"), a series of Scudder
State Tax Free Trust Municipal Trust (the "Acquiring Trust")
Two International Place Two International Place
Boston, MA 02110-4103 Boston, MA 02110-4103
This Statement of Additional Information is available to the shareholders of the
Acquired Fund in connection with a proposed transaction whereby the Acquiring
Fund will acquire all or substantially all of the assets and all of the
liabilities of the Acquired Fund in exchange for shares of the Acquiring Fund
(the "Reorganization").
This Statement of Additional Information of the Acquiring Trust contains
material which may be of interest to investors but which is not included in the
Prospectus/Proxy Statement of the Acquiring Trust relating to the
Reorganization. This Statement of Additional Information consists of this cover
page and the following documents:
1. The Acquiring Fund's statement of additional information dated October 1,
1999, which was previously filed with the Securities and Exchange Commission
(the "Commission") via EDGAR on September 29, 1999 (File No. 2-57139) and is
incorporated by reference herein.
2. The Acquiring Fund's annual report to shareholders for the fiscal year ended
May 31, 1999, which was previously filed with the Commission via EDGAR on July
26, 1999 (File No. 811-02671) and is incorporated by reference herein.
3. The Acquired Fund's prospectus dated August 1, 1999, which was previously
filed with the Commission via EDGAR on July 30, 1999 (File No. 2-84021) and is
incorporated by reference herein.
4. The Acquired Fund's statement of additional information dated August 1, 1999,
which was previously filed with the Commission via EDGAR on July 30, 1999 (File
No. 2-84021) and is incorporated by reference herein.
5. The Acquired Fund's annual report to shareholders for the fiscal year ended
March 31, 1999, which was previously filed with the Commission via EDGAR on May
25, 1999 (File No. 811-03749) and is incorporated by reference herein.
6. The financial statements and schedules of the Acquiring Fund and the Acquired
Fund required by Regulation S-X for the periods specified in Article 3 thereof,
which are filed herein.
This Statement of Additional Information is not a prospectus. A Prospectus/Proxy
Statement dated ____________________ relating to the Reorganization may be
obtained by writing the Acquired Fund at
-54-
Two International Place, Boston, MA 02110-4103 or by calling Scudder Investor
Services, Inc. at 1-800-225-2470. This Statement of Additional Information
should be read in conjunction with the Prospectus/Proxy Statement.
-55-
PRO FORMA
PORTFOLIO OF INVESTMENTS
AS OF OCTOBER 31, 1999 (UNAUDITED)
AARP
Scudder Scudder Insured
Managed AARP Scudder Managed Tax Free Scudder
Municipal Insured Ohio Tax Pro Forma Municipal General Ohio Tax Pro Forma
Bond Tax Free Free Fund Combined Bond Bond Free Fun Combined
Principal General Bond Principal Principal Market Market Market Market
Amount ($) Principal Amount ($) Amount ($) Value ($) Value ($) Value ($) Value ($)(1)
------------------------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL
INVESTMENTS 1.5%
- --------------------
ALASKA
Valdez, AK, Marine Terminal 1,500,000 1,500,000 1,500,000 1,500,000
Revenue, Exxon Pipeline
Project B, 3.750%,12/1/2033
ARIZONA
Maricopa County, AZ, Pollution 700,000 700,000 700,000 700,000
Control Revenue, Series A,
Variable Rate, 5.100%,
05/01/2029
MASSACHUSETTS
Massachusetts Health & 6,500,000 6,500,000 6,500,000 6,500,000
Educational Facilities
Authority, Series B, Daily
Demand Note, MBIA Insured,
3.850%, 7/1/2005
NEW YORK
New York City, NY, General 500,000 500,000 500,000 500,000
Obligation, Series B, Daily
Demand Note, FGIC Insured,
4.050%, 10/01/2020
New York Municipal Water 3,000,000 3,000,000 3,000,000 3,000,000
Authority, Series 1994 G,
Variable Rate Demand
Note, 3.750%, 06/15/2024
Long Island, NY, Power 5,000,000 5,000,000 5,000,000 5,000,000
Authority New York
Electricity, Revenue, Series
6,3.750%, 05/01/2033
New York State Energy Research 5,000,000 5,000,000 5,000,000 5,000,000
& Development Authority,
Pollution Control Revenue,
Niagara Mohawk Co., Daily
Demand Note, 3.950%,
07/01/2015
OHIO
Ohio Air Quality Development 1,200,000 1,200,000 1,200,000 1,200,000
Authority, Cincinnati Gas
and Electric, Daily Demand
Note, 4.150%, 12/1/2015
Ohio Air Quality Development 3,400,000 3,400,000 3,400,000 3,400,000
Authority Revenue, Cincinnati
Gas and Electric, Daily
Demand Note, 3.700%,
09/01/2030
Ohio Water Development 400,000 400,000 400,000 400,000
Authority, Environmental Mead
Corporation, Series 1986 B,
Daily Demand Note, 3.750%,
11/1/2015
TEXAS
Harris County, TX, Health 2,000,000 5,000,000 7,000,000 2,000,000 5,000,000 7,000,000
Facilities, Revenue, Saint
Lukes Episcopal Hospital,
Series A, 3.700%, 02/15/2027
Harris County, TX, Health 1,500,000 1,500,000 1,500,000 1,500,000
Facilities, Revenue, St Lukes
Episcopal Hospital, Series B,
3.800%, 02/15/2027
SHORT-TERM MUNICIPAL INVESTMENTS ---------------------------------------------
SHORT-TERM MUNICIPAL INVESTMENTS (Cost of $20,000,000
$10,700,000 $5,000,000 and $35,700,000 respectively) 20,000,000 10,700,000 5,000,000 35,700,000
=============================================
LONG-TERM MUNICIPAL
INVESTMENTS 98.5%
- -------------------
ALASKA
Anchorage, AK, Electric Utility 2,620,000 2,620,000 2,860,475 2,860,475
Revenue, 6.500%, 12/01/2007
North Slope Borough, AK, 7,000,000 4,000,000 11,000,000 4,967,340 2,838,480 7,805,820
General Obligation, Capital
Appreciation, Series A, Zero
Coupon, 06/30/2006
North Slope Borough, AK, 5,000,000 5,000,000 3,345,100 3,345,100
General Obligation, Capital
Appreciation, Series A, Zero
Coupon, 06/30/2007
North Slope Borough, AK, 7,000,000 7,000,000 4,406,710 4,406,710
General Obligation, Series
1997A, Zero Coupon, 6/30/2008
North Slope Borough, AK, 18,200,000 25,600,000 43,800,000 13,672,022 19,230,976 32,902,998
General Obligation, Capital
Appreciation, Series B, Zero
Coupon, 06/30/2005
North Slope Borough, AK, 8,000,000 11,000,000 19,000,000 6,871,760 9,448,670 16,320,430
General Obligation, Series B,
Zero Coupon, 1/1/2003
North Slope Borough, AK, 15,000,000 15,500,000 30,500,000 11,910,900 12,307,930 24,218,830
General Obligation,
Capital Appreciation, Series
B, Zero Coupon, 06/30/2004
ARIZONA
Arizonia Municipal Finance 3,500,000 3,500,000 4,193,630 4,193,630
Program, Certificate of
Participation, Series 25,
MBIA, 7.875%, 08/01/2014
Maricopa County, AZ, School 4,000,000 4,000,000 3,264,480 3,264,480
District #28, Kyrene
Elementary, Series B, Zero
Coupon, FGIC, 01/01/2004
Maricopa County, AZ, School 2,950,000 2,950,000 2,440,152 2,440,152
District #6, Washington
Elementary, Series B, FGIC,
4.100%, 07/01/2013
Maricopa County, AZ, Unified 5,280,000 5,280,000 4,081,546 4,081,546
School District #41, Gilbert
School, FGIC, Zero Coupon,
01/01/2005
Maricopa County, AZ, School 4,905,000 4,905,000 3,585,898 3,585,898
District No. 28, Kyrene
Elementary School, Series B,
Zero Coupon, 01/01/2006
CALIFORNIA
Alameda County, CA, Certificate 8,995,000 8,995,000 9,242,183 9,242,183
of Participation, Santa Rita
Jail Project, 5.375%,
06/01/2009
Banning, CA, Wastewater, 960,000 960,000 1,182,202 1,182,202
Certificate of Participation,
AMBAC, 8.000%, 1/1/2019
Banning, CA, Wastewater, 1,080,000 1,080,000 1,316,639 1,316,639
Certificate of Participation,
AMBAC, 8.000%, 1/1/2019
Big Bear Lake, CA , MBIA 3,800,000 3,800,000 4,055,816 4,055,816
Insured, Series 1996, 6.000%,
04/01/2011
California General Obligation, 4,000,000 4,000,000 4,389,360 4,389,360
6.250%, 10/1/2007
California General Obligation, 5,000,000 5,000,000 5,468,200 5,468,200
6.250%, 4/1/2008
California, General Obligation, 15,600,000 15,600,000 17,405,388 17,405,388
6.600%, 02/01/2009
California Housing Finance 1,000,000 1,000,000 1,079,340 1,079,340
Agency, Multi-Unit Rental
Housing Revenue, Series A,
7.700%, 08/01/2010
California Pollution Control 12,000,000 12,000,000 12,914,760 12,914,760
Financing Authority, Solid
Waste Disposal Revenue,
Canadian Fibre of Riverside
PJ, Series 1997 A, 9.000%,
07/01/2019
California Statewide Community 2,250,000 2,250,000 2,304,675 2,304,675
Development Authority,
Certificate of Participation,
Lutheran Homes, 5.500%,
11/15/2008
Foothill Eastern Transportation 6,250,000 6,250,000 5,259,500 5,259,500
Corridor Agency, CA , Toll Road
Revenue, Senior Lien, Series A,
Step-up Coupon 0% to 1/1/2005,
7.15% to 1/1/2014, 01/01/2014
Foothill Eastern Transportation 4,000,000 4,000,000 3,354,560 3,354,560
Corridor Agency, CA, Toll Road
Revenue, Senior Lien, Series A,
Step-up Coupon, 0% to 1/1/2005,
7.1% to 1/1/2011, 01/01/2011
Foothill Eastern Transportation 4,000,000 4,000,000 3,359,440 3,359,440
Corridor Agency, CA, Toll Road
Revenue, Senior Lien, Series A,
Step-up Coupon, 0% to 1/1/2005,
7.1% to 1/1/2012, 01/01/2012
Foothill Eastern Transportation 11,000,000 11,000,000 4,599,760 4,599,760
Corridor Agency, CA, Toll Road
Revenue, Senior Lien, Series A,
Zero Coupon, 01/01/2015
Foothill Eastern Transportation 5,000,000 5,000,000 4,110,500 4,110,500
Corridor Agency, CA, Toll Road
Revenue, Senior Lien, Series A,
Step-up Coupon, 0% to 1/1/2005,
7.05% to 1/1/2009, 01/01/2009
Los Angeles County, CA, 4,030,000 4,030,000 2,649,967 2,649,967
Certificate of Participation,
Disney Parking Project, Zero
Coupon, 09/01/2007
Los Angeles County, CA, 5,425,000 5,425,000 3,129,618 3,129,618
Certificate of Participation,
Disney Parking Project, Zero
Coupon, 09/01/2009
California Housing Finance 2,015,000 2,015,000 2,039,039 2,039,039
Agency, MBIA Insured, 5.300%,
08/01/2014
California State Public Works 8,095,000 8,095,000 8,876,006 8,876,006
Board, Lease Revenue, Series A,
AMBAC insured, 6.300%,
12/01/2006
Los Angeles County, CA , 3,000,000 3,000,000 2,991,930 2,991,930
Public Works Authority, MBIA
Insured, Series 1996B, 5.250%,
09/01/2011
Los Angeles County, CA, Capital 9,000,000 9,000,000 9,653,220 9,653,220
Asset Leasing, AMBAC, 6.000%,
12/01/2006
Los Angeles County, CA, Public 11,140,000 11,140,000 10,739,294 10,739,294
Works Finance Authority, Lease
Revenue, Multiple Projects IV,
MBIA, 4.750%, 12/1/2010
Madera County, CA, Certificates 2,840,000 2,840,000 3,154,700 3,154,700
of Participation, Valley
Childrens Hospital, 6.500%,
03/15/2010
Oakland, CA, Redevelopment 2,000,000 2,000,000 2,150,480 2,150,480
Agency, Tax Allocation, AMBAC,
6.000%, 02/01/2007
Roseville, CA, Unified High 1,830,000 1,830,000 1,032,797 1,032,797
School District, General
Obligation, Series B, Zero
Coupon, 08/01/2010
Roseville, CA, Unified High 1,000,000 1,000,000 399,450 399,450
School District, General
Obligation, Series B, Zero
Coupon, 08/01/2015
San Joaquin Hills, CA, 2,000,000 2,000,000 1,015,280 1,015,280
Transportation, Revenue, Series
A, Zero Coupon, 1/15/2012
San Joaquin, CA, Certificate of 3,895,000 3,895,000 3,917,630 3,917,630
Participation, County Public
Facilities Project, 5.500%,
11/15/2013
San Diego County, CA, Water 6,300,000 6,300,000 6,613,110 6,613,110
Authority Revenue, Certificate
of Participation, FGIC, 5.632%,
04/25/2007
San Diego, CA, Water Authority, 4,500,000 4,500,000 4,701,240 4,701,240
Certificate of Participation,
FGIC, 5.681%, 04/22/2009
San Francisco, CA, Bay Area 2,000,000 2,000,000 2,265,300 2,265,300
Rapid Transit District, Sales
Tax Revenue Refunding, AMBAC,
6.750%, 07/01/2010
San Joaquin Hills, CA, 3,000,000 3,000,000 1,522,920 1,522,920
Transportation, Revenue, Series
A, Zero Coupon, 1/15/2012
San Joaquin, CA, Certificate of 2,000,000 2,000,000 2,011,620 2,011,620
Participation, County Public
Facilities Project, 5.500%,
11/15/2013
Sweetwater Authority, CA, Water 10,000,000 10,000,000 10,111,600 10,111,600
Revenue, AMBAC insured, 5.250%,
4/1/2010
COLORADO
Colorado Housing Finance 2,030,000 2,030,000 2,205,209 2,205,209
Authority Revenue, 8.100%,
10/01/2005
Colorado Housing Finance 2,145,000 2,145,000 2,332,988 2,332,988
Authority Revenue, 8.150%,
10/01/2006
Colorado Housing Finance 2,320,000 2,320,000 2,523,325 2,523,325
Authority Revenue, Multi-Family
Mortgage, Series A, 8.150%,
10/01/2007
Colorado Housing Finance 2,510,000 2,510,000 2,733,315 2,733,315
Authority Revenue, Multi-Family
Mortgage, Series A, 8.200%,
10/01/2008
Colorado Housing Finance 2,725,000 2,725,000 2,967,443 2,967,443
Authority Revenue, Multi-Family
Mortgage, Series A, 8.200%,
10/01/2009
Colorado Housing Finance 1,940,000 1,940,000 2,115,201 2,115,201
Authority Revenue, 8.250%,
10/01/2010
Colorado Housing Finance 1,680,000 1,680,000 1,831,721 1,831,721
Authority Revenue, 8.250%,
10/01/2011
Colorado Housing Finance 1,945,000 1,945,000 2,120,653 2,120,653
Authority Revenue, 8.250%,
10/01/2012
Denver, CO, Urban Renewal 945,000 945,000 990,029 990,029
Authority, Tax Increment
Revenue, Pavilions-Convention,
AMT, Series 1989, 7.500%,
09/01/2004
Mesa County, CO, Residual 6,435,000 6,435,000 3,288,864 3,288,864
Revenue, Single Family Housing,
ETM, Series 1992, Zero Coupon,
12/01/2011
CONNECTICUT
Connecticut Resource Recovery 2,000,000 2,000,000 2,149,460 2,149,460
Authority , MBIA Insured,
Series 1996, 6.250%,
11/15/2005
Connecticut Resource Recovery 4,525,000 4,525,000 4,882,294 4,882,294
Authority , MBIA Insured,
Series 1996A, 6.250%,
11/15/2006
Connecticut State Health 5,000,000 5,000,000 5,136,250 5,136,250
Facility Authority, Series
1992B, 6.150%, 11/15/2004
DISTRICT OF COLUMBIA
District of Columbia, General 9,000,000 9,000,000 9,056,970 9,056,970
Obligation, Series B, 5.500%,
6/1/2010
District of Columbia, 350,000 350,000 368,060 368,060
Prerefunded, Series A, 5.875%,
06/01/2005
District of Columbia, 4,400,000 4,400,000 4,583,304 4,583,304
Unrefunded Balance, Series A,
5.875%, 06/01/2005
District of Columbia, 2,160,000 2,160,000 2,327,897 2,327,897
Unrefunded Balance, MBIA
Insured, 6.250%, 6/1/2010
District of Columbia, General 110,000 110,000 121,525 121,525
Obligation, Prerefunded 8/1/99
at 100, MBIA Insured, 6.500%,
06/01/2010
District of Columbia, General 3,500,000 3,500,000 3,417,680 3,417,680
Obligation, Series B, MBIA,
Zero Coupon, 06/01/2000
District of Columbia, General 2,000,000 2,000,000 1,686,940 1,686,940
Obligation, Series B, Zero
Coupon, 6/1/2003
District of Columbia, General 1,350,000 1,350,000 1,368,819 1,368,819
Obligation, Series B3, 5.300%,
6/1/2005
District of Columbia, General 1,000,000 1,000,000 1,017,940 1,017,940
Obligation, Series B3, 5.500%,
6/1/2007
District of Columbia, General 3,225,000 3,225,000 3,266,677 3,266,677
Obligation, Series B3, 5.500%,
6/1/2008
District of Columbia, Water 5,000,000 5,000,000 4,714,600 4,714,600
and Sewer Authority, Public
Utility Revenue, 5.500%,
10/01/2023
District of Columbia, General 3,300,000 3,300,000 3,437,478 3,437,478
Obligation, Series A, 5.875%,
6/1/2005
District of Columbia, General 2,500,000 12,500,000 12,618,250 12,618,250
Obligation, Inverse Floating
Rate Note, Series 1999B,
6.818%, 06/01/2010
District of Columbia, 1,780,000 1,780,000 1,816,704 1,816,704
Certificate of Participation,
6.875%, 01/01/2003
District of Columbia, 1,000,000 1,000,000 1,047,830 1,047,830
Certificate of Participation,
7.300%, 01/01/2013
District of Columbia, 3,905,000 3,905,000 4,082,014 4,082,014
Unrefunded Balance, Series B,
6.125%, 06/01/2003
District of Columbia, General 95,000 95,000 100,565 100,565
Obligation, Prerefunded 6/1/02
at 102, Series B, 6.125%,
06/01/2003
District of Columbia, General 18,905,000 18,905,000 19,207,480 19,207,480
Obligation, Series B, AMBAC,
5.400%, 6/1/2006
District of Columbia, General 10,000,000 10,000,000 10,160,000 10,160,000
Obligation, Series B3, MBIA,
5.400%, 6/1/2006
District of Columbia, General 25,000,000 25,000,000 25,448,500 25,448,500
Obligation, Series B, AMBAC,
5.500%, 6/1/2007
District of Columbia, General 21,300,000 21,300,000 21,575,196 21,575,196
Obligation, Series B, AMBAC,
5.500%, 6/1/2008
District of Columbia, General 16,150,000 16,150,000 16,280,815 16,280,815
Obligation, Series B, AMBAC,
5.500%, 6/1/2009
District of Columbia, General 2,840,000 2,840,000 2,863,004 2,863,004
Obligation, Series B, MBIA,
5.500%, 6/1/2009
District of Columbia, General 1,050,000 1,050,000 1,034,030 1,034,030
Obligation, Series B, MBIA,
5.500%, 6/1/2012
Washington DC Convention 4,000,000 4,000,000 3,858,000 3,858,000
Center, Authority Dedicated
Tax Revenue, 5.250%,
10/01/2012
GEORGIA
Cobb County, GA, Kennestone 2,305,000 2,305,000 2,350,639 2,350,639
Hospital Authority, Series A,
MBIA, 5.625%, 4/1/2011
Burke County, GA, Development 5,000,000 5,000,000 5,599,450 5,599,450
Authority, Pollution Control
Revenue, Votgle Project,
7.700%, 01/01/2006
Georgia Municipal Electric 5,000,000 5,000,000 5,429,650 5,429,650
Authority, Power Revenue,
Series V, 6.500%, 1/1/2012
Georgia Municipal Electricity 3,500,000 3,500,000 3,800,755 3,800,755
Authority, Power Revenue,
Fourth Crossover, Project
No. 1, Series 1997X, 6.500%,
01/01/2012
Georgia, General Obligation, 4,000,000 4,000,000 4,134,960 4,134,960
Series B, 5.750%, 08/01/2012
Macon-Bibb County, GA, Hospital 3,000,000 3,000,000 2,971,230 2,971,230
Authority, Medical Center of
Central Georgia, Series C,
FGIC, 5.250%, 8/1/2011
Municipal Electric Authority 3,500,000 3,500,000 3,764,880 3,764,880
Power Revenue, Series Y,
6.400%, 01/01/2013
HAWAII
State of Hawaii, General 18,095,000 18,095,000 18,217,322 18,217,322
Obligation, Series CT,
5.700%, 09/01/2013
State of Hawaii, General 2,000,000 2,000,000 2,113,180 2,113,180
Obligation, Series 1992 BZ,
FGIC Insured, 6.000%, 10/1/2009
ILLINOIS
Central Lake County, IL, Joint 2,245,000 2,245,000 1,995,872 1,995,872
Action Water Agency, Refunding
Revenue, MBIA, Zero Coupon,
05/01/2002
Central Lake County, IL, Joint 2,445,000 2,445,000 1,954,655 1,954,655
Action Water Agency, Refunding,
Zero Coupon, 5/1/2004
Chicago, IL, Public Building 4,000,000 4,000,000 2,598,200 2,598,200
Commission, Capital
Appreciation, ETM, Series 1990
A, Zero Coupon, 01/01/2008
Chicago, IL, Public Building 2,655,000 2,655,000 2,664,399 2,664,399
Commission, Building Revenue,
Series A, 5.250%, 12/01/2008
Chicago, IL, Wastewater 11,990,000 11,990,000 12,231,239 12,231,239
Transmission Revenue, FGIC,
5.500%, 01/01/2009
Chicago, IL, Wastewater 7,220,000 7,220,000 7,264,114 7,264,114
Transmission Revenue, FGIC,
5.500%, 01/01/2010
Chicago, IL, General Obligation 26,000,000 26,000,000 27,301,560 27,301,560
Lease, Board of Education,
Series A, 6.250%, 1/1/2015
Chicago, IL, Board of 36,625,000 36,625,000 36,920,564 36,920,564
Education, Certificates of
Participation, Series A,
6.000%, 01/01/2020
Chicago, IL, Motor Fuel 5,000,000 5,000,000 4,810,150 4,810,150
Tax Revenue, 5.375%,
01/01/2014
Chicago, IL, Wastewater 3,215,000 3,215,000 3,123,180 3,123,180
Transmission Revenue, 5.375%,
01/01/2013
Chicago, IL, General 7,200,000 7,200,000 7,481,952 7,481,952
Obligation, Emergency Telephone
Systems, 5.600%, 1/1/2009
Chicago, IL, General 1,620,000 1,620,000 1,547,716 1,547,716
Obligation, Series B,
5.000%, 01/01/2011
Chicago, IL, General 5,200,000 5,200,000 5,018,728 5,018,728
Obligation, Series B, AMBAC,
5.000%, 01/01/2010
Chicago, IL, General 9,550,000 9,550,000 8,850,081 8,850,081
Obligation, Series B, AMBAC,
5.125%, 01/01/2015
Chicago, IL, General 15,410,000 15,410,000 14,969,890 14,969,890
Obligation, Series A, MBIA,
5.375%, 01/01/2013
Chicago, IL, General 3,000,000 3,000,000 3,188,250 3,188,250
Obligation, AMBAC, 6.250%,
01/01/2011
Chicago, IL, General 3,750,000 3,750,000 3,948,300 3,948,300
Obligation, Series 1996 A2,
6.250%, 01/01/2014
Chicago, IL, General 11,025,000 11,025,000 11,253,328 11,253,328
Obligation Lease, Board of
Education, Series A, MBIA
Insured, 6.000%, 01/01/2016
Chicago, IL, General 1,600,000 1,600,000 1,706,304 1,706,304
Obligation Lease, Board of
Education, MBIA Insured,
Series 1996, 6.250%,
12/01/2011
Chicago, IL, General 11,550,000 11,550,000 12,291,048 12,291,048
Obligation Lease, Board of
Education, Series A, MBIA,
6.250%, 01/01/2010
Chicago, IL, General 2,725,000 2,725,000 2,861,414 2,861,414
Obligation Lease, Board of
Education, Series A, 6.250%,
1/1/2015
Chicago, IL, O'Hare 2,255,000 2,255,000 2,369,644 2,369,644
International Airport,
Refunding Revenue, AMBAC
Insured, Series 1996A,
6.000%, 1/1/2006
Chicago, IL, O'Hare 2,250,000 2,250,000 1,966,433 1,966,433
International Airport, Special
Facilities Revenue, United
Airlines Project, Series A,
5.350%, 09/01/2016
Chicago, IL, Public Building 9,705,000 9,705,000 9,542,732 9,542,732
Commission, Building Revenue,
Series A, MBIA, 5.250%,
12/01/2011
Chicago, IL, Public Building 10,420,000 10,420,000 10,403,328 10,403,328
Commission, Building Revenue,
Series A, MBIA, 5.250%,
12/01/2009
Chicago, IL, Public Building 3,500,000 3,500,000 3,534,265 3,534,265
Commission, Building Revenue,
Series A, MBIA Insured, 5.250%,
12/01/2007
Chicago, IL, Public Building 2,430,000 2,430,000 1,776,500 1,776,500
Commission, Board of Education,
Series A, MBIA, Zero Coupon,
01/01/2006
Chicago,IL, O'Hare International 6,500,000 6,500,000 6,209,970 6,209,970
Airport, Revenue Refunding,
Series C, MBIA, 5.000%,
01/01/2011
Cook & Dupage Counties, IL, 2,550,000 2,550,000 1,664,972 1,664,972
Housing Development Authority,
Zero Coupon, FSA Insured,
12/01/2007
Cook & Dupage Counties, IL, 2,625,000 2,625,000 1,611,645 1,611,645
Housing Development Authority,
Zero Coupon, FSA Insured,
12/01/2008
Cook & Dupage Counties, IL, 2,860,000 2,860,000 1,652,765 1,652,765
Housing Development Authority,
Zero Coupon, FSA Insured,
12/01/2009
Cook County, IL, Community 1,700,000 1,700,000 1,043,732 1,043,732
High School District #233,
Capital Appreciation Series
1993 B, FGIC Insured, Zero
Coupon, 12/01/2008
Cook County, IL, General 3,205,000 3,205,000 2,511,630 2,511,630
Obligation, Zero Coupon, ETM,
AMBAC Insured, 11/1/2004
Cook County, IL, General 5,000,000 5,000,000 5,290,400 5,290,400
Obligation, Series C, FGIC,
6.000%, 11/15/2007
Decatur, IL, General 1,455,000 1,455,000 1,204,304 1,204,304
Obligation, Series 1991, AMBAC,
Zero Coupon,10/1/2003
Decatur, IL, General 1,415,000 1,415,000 1,108,058 1,108,058
Obligation, Series 1991, AMBAC,
Zero Coupon, 10/1/2004
Decatur, IL, Public Building 1,725,000 1,725,000 1,819,530 1,819,530
Commission, General
Obligation, Certificate of
Participation, FGIC,
6.500%, 01/01/2003
Decatur, IL, Public Building 1,500,000 1,500,000 1,617,270 1,617,270
Commission, General Obligation,
Certificate of Participation,
FGIC, 6.500%, 01/01/2006
Du-Page, IL, Industrial 3,600,000 3,600,000 3,648,600 3,648,600
Development Revenue,
Weyerhaeuser Company Project,
Series 1983, 8.650%, 11/01/2008
Hoffman Estates, IL, Tax 8,500,000 8,500,000 6,005,250 6,005,250
Increment Revenue, Capital
Appreciation, Junior
Lien, Series 1991, Zero
Coupon, 5/15/2006
Hoffman Estates, IL, Tax 17,460,000 17,460,000 11,611,948 11,611,948
Increment Revenue, Capital
Appreciation, Junior
Lien, Series 1991, Zero
Coupon, 5/15/2007
Illinois, Dedicated Tax 3,000,000 3,000,000 3,199,740 3,199,740
Revenue, Civic Center Project,
AMBAC, 6.250%, 12/15/2011
Illinois, Dedicated Tax 6,975,000 6,975,000 7,215,638 7,215,638
Revenue, Civic Center Project,
AMBAC, 6.250%, 12/15/2020
Illinois Dedicated Tax Revenue, 4,765,000 4,765,000 5,230,588 5,230,588
Civic Center Project, Series A,
6.500%, 12/15/2007
Illinois Dedicated Tax Revenue, 5,255,000 5,255,000 5,782,182 5,782,182
Civic Center Project, Series A,
AMBAC, 6.500%, 12/15/2008
Illinois Development Finance 5,000,000 5,000,000 5,052,450 5,052,450
Authority, Commonwealth Edison,
Refunding, 5.850%, 01/15/2014
Illinois Educational Facilities 3,100,000 2,860,000 5,960,000 2,337,462 2,277,933 4,615,395
Authority, Loyola University,
1991 Series A, MBIA, Zero
Coupon, 7/1/2004
Illinois Educational Facilities 4,000,000 4,000,000 3,016,080 3,016,080
Authority, Loyola University,
Zero Coupon, 07/01/2005
Illinois Health Facilities 1,640,000 1,640,000 1,722,853 1,722,853
Authority, Brokaw-Mennonite
Healthcare, FGIC, 6.000%,
08/15/2009
Illinois Health Facilities 1,380,000 1,380,000 1,453,678 1,453,678
Authority, Brokaw-Mennonite
Healthcare, FGIC, 6.000%,
08/15/2006
Illinois Health Facilities 1,460,000 1,460,000 1,538,709 1,538,709
Authority, Brokaw-Mennonite
Healthcare, FGIC, 6.000%,
08/15/2007
Illinois Health Facilities 1,550,000 1,550,000 1,630,910 1,630,910
Authority, Brokaw-Mennonite
Healthcare, FGIC, 6.000%,
08/15/2008
Illinois Health Facilities 3,400,000 3,400,000 3,569,966 3,569,966
Authority, Children's Memorial
Hospital, MBIA, 6.250%,
08/15/2013
Illinois Health Facilities 17,000,000 17,000,000 18,154,640 18,154,640
Authority, Felician Healthcare
Inc., Series A, AMBAC, 6.250%,
12/01/2015
Illinois Health Facilities 1,350,000 1,350,000 1,455,179 1,455,179
Authority, SSM Healthcare
System, MBIA, 6.400%, 6/1/2008
Illinois Health Facilities 2,135,000 2,135,000 2,231,203 2,231,203
Authority, Memorial Medical
Center, MBIA, 6.750%, 10/1/2011
Illinois Health Facilities 2,700,000 2,700,000 2,864,376 2,864,376
Authority, Sherman Hospital,
MBIA, 6.750%, 8/1/2011
Illinois Health Facilities 1,000,000 1,000,000 903,560 903,560
Authority, Centegra Health
System, 5.200%, 9/1/2012
Illinois Health Facilities 1,725,000 1,725,000 1,715,702 1,715,702
Authority, Memorial Medical
Certer-Springfield, 5.250%,
10/01/2009
Illinois Health Facilities 2,500,000 2,500,000 2,530,675 2,530,675
Authority, University of
Chicago Hospital, Refunding,
Series A, 5.500%, 8/15/2008
Illinois State Toll Highway 3,665,000 3,665,000 3,610,758 3,610,758
Authority, Toll Highway
Priority Revenue Bond,
Series A, 5.500%, 01/01/2013
Illinois State Sales Tax 2,100,000 2,100,000 2,280,453 2,280,453
Revenue, Series P, 6.500%,
06/15/2013
Joliet, IL, Junior College 2,500,000 2,500,000 2,770,575 2,770,575
Assistance Corp., Lease
Revenue, North Campus
Extension Center, MBIA,
6.700%, 9/1/2012
Kane County, IL, MBIA Insured, 1,775,000 1,775,000 1,924,118 1,924,118
Series 1996A, 6.500%,
02/01/2010
Kane, Cook and Dupage Counties, 1,040,000 1,040,000 554,455 554,455
IL, School District #46 Elgin,
Series 1996B, FSA Insured, Zero
Coupon, 1/1/2011
Kane, Cook and Dupage Counties, 1,300,000 1,300,000 647,413 647,413
IL, School District #46 Elgin,
Series 1996B, FSA Insured, Zero
Coupon, 1/1/2012
Kane, Cook and Dupage Counties, 2,095,000 2,095,000 972,729 972,729
IL, School District #46 Elgin,
Series 1996B, FSA Insured, Zero
Coupon, 1/1/2013
Kendall, Kane and Will Counties, 1,055,000 1,055,000 945,291 945,291
IL, Community Unit School
District Number 308, Oswego,
FGIC, Zero Coupon, 3/1/2002
Kendall, Kane and Will Counties, 1,540,000 1,540,000 1,174,481 1,174,481
IL, Community Unit School
District Number 308, Oswego,
FGIC, Zero Coupon, 3/1/2005
Kendall, Kane and Will Counties, 1,595,000 1,595,000 1,149,118 1,149,118
IL, Community Unit School
District Number 308, Oswego,
FGIC, Zero Coupon, 3/1/2006
Metropolitan Pier & Exposition 5,625,000 5,625,000 2,543,344 2,543,344
Authority, IL , McCormick
Project, Series 1994, Zero
Coupon, 06/15/2013
Metropolitan Pier & Exposition 3,200,000 3,200,000 2,622,528 2,622,528
Authority, IL, McCormick Place
Expansion Project, MBIA, Zero
Coupon, 12/15/2003
Metropolitan Pier & Exposition 10,300,000 10,300,000 8,184,483 8,184,483
Authority, IL, McCormick Place
Expansion Project, MBIA, Zero
Coupon, 6/15/2004
Northwest Suburban Municipal 2,575,000 2,575,000 2,788,210 2,788,210
Joint Action Water Agency, IL,
Supply System Revenue, MBIA,
6.450%, 05/01/2007
Northern Illinois University, 1,865,000 1,865,000 1,416,337 1,416,337
Board of Regents, Zero Coupon,
04/01/2005
Northern Illinois University, 1,865,000 1,865,000 1,380,865 1,380,865
Board of Regents, Zero Coupon,
10/01/2005
Northern Illinois University, 1,865,000 1,865,000 1,337,858 1,337,858
Board of Regents, Zero Coupon,
04/01/2006
Northern Illinois University, 1,865,000 1,865,000 1,303,710 1,303,710
Board of Regents, Zero Coupon,
10/01/2006
Northern Illinois University, 1,865,000 1,865,000 1,261,262 1,261,262
Board of Regents, Zero Coupon,
04/01/2007
Northern Illinois University, 1,865,000 1,865,000 1,228,457 1,228,457
Board of Regents, Zero Coupon,
10/01/2007
Oak Lawn, IL, Water and Sewer 1,295,000 1,295,000 1,070,641 1,070,641
Revenue, Zero Coupon,
10/01/2003
Oak Lawn, IL, Water and Sewer 1,295,000 1,295,000 1,014,568 1,014,568
Revenue, Zero Coupon,
10/01/2004
Oak Lawn, IL, Water and Sewer 1,295,000 1,295,000 959,375 959,375
Revenue, Zero Coupon,
10/01/2005
Oak Lawn, IL, Water and Sewer 1,295,000 1,295,000 905,257 905,257
Revenue, Zero Coupon,
10/01/2006
Rosemont, IL, Tax Increment, 2,655,000 2,655,000 1,733,529 1,733,529
Series C, FGIC, Zero Coupon,
12/01/2007
Rosemont, IL, Tax Increment, 7,060,000 4,455,000 11,515,000 5,183,240 3,270,727 8,453,967
Series C, FGIC, Zero Coupon,
12/01/2005
Rosemont, IL, Tax Increment 6,000,000 6,000,000 4,659,720 4,659,720
Revenue, Zero Coupon,
12/1/2004
State University Retirement 7,000,000 7,000,000 5,182,870 5,182,870
System, IL, Special Revenue,
Zero Coupon, 10/1/2005
Skokie, IL, Park District, 3,000,000 3,000,000 1,518,930 1,518,930
Series 1994B, AMBAC Insured,
Zero Coupon, 12/1/2011
State University Retirement 2,750,000 2,750,000 2,276,175 2,276,175
System, IL, Special Revenue,
MBIA, Zero Coupon, 10/01/2003
University of Illinois, Board 3,890,000 3,890,000 3,301,599 3,301,599
of Trustees, Series 1991, AMBAC,
Zero Coupon, 04/01/2003
University of Illinois, Board 3,830,000 3,830,000 2,913,251 2,913,251
of Trustees, Series 1991, AMBAC,
Zero Coupon, 04/01/2005
Will County, IL, Community Unit 1,325,000 1,325,000 1,264,938 1,264,938
School District #201-U,
Crete-Monee, Capital
Appreciation, MBIA, Zero
Coupon, 12/15/2000
Will County, IL, Community Unit 1,730,000 1,730,000 1,572,397 1,572,397
School District #201-U,
Crete-Monee, Capital
Appreciation, MBIA, Zero
Coupon, 12/15/2001
Will County, IL, Capital 3,725,000 3,725,000 2,594,314 2,594,314
Appreciation, School
District No. 201-U, Zero
Coupon, 12/15/2006
Winnebago County, IL, School 1,675,000 1,675,000 1,847,944 1,847,944
District No. 122, 6.550%,
06/01/2009
Winnebago County, IL, School 1,825,000 1,825,000 1,989,086 1,989,086
District No. 122, 6.550%,
06/01/2010
INDIANA
Fort Wayne, IN, Parkview 1,400,000 1,400,000 1,429,638 1,429,638
Memorial Hospital, Series A,
FGIC, 6.500%, 11/15/2012
Indiana Health Facilities 5,000,000 5,000,000 5,252,850 5,252,850
Finance Authority, Hospital
Revenue, Community
Hospitals Project, MBIA,
6.400%, 5/1/2012
Indiana Health Facilities 4,660,000 4,660,000 4,655,620 4,655,620
Financing Authority, Charity
Obligation Group, Series D,
5.750%, 11/15/2012
Indiana Health Facilities 230,000 1,570,000 1,800,000 239,803 1,636,913 1,876,716
Financing Authority, Hospital
Revenue, Series 1990 A, 6.000%,
07/01/2003
Indiana Health Facilities 240,000 1,665,000 1,905,000 251,602 1,745,486 1,997,088
Financing Authority, Hospital
Revenue, Series 1990A, 6.000%,
07/01/2004
Indiana Health Facilities 255,000 1,765,000 2,020,000 267,694 1,852,862 2,120,556
Financing Authority, Hospital
Revenue, Series 1990A, 6.000%,
07/01/2005
Indiana Health Facilities 270,000 1,875,000 2,145,000 283,886 1,971,431 2,255,317
Financing Authority, Hospital
Revenue, Series 1990A, 6.000%,
07/01/2006
Indiana Health Facilities 285,000 1,985,000 2,270,000 299,618 2,086,811 2,386,429
Financing Authority, Hospital
Revenue, Series 1990A, 6.000%,
07/01/2007
Indiana Health Facilities 165,000 1,125,000 1,290,000 172,875 1,178,696 1,351,571
Financing Authority, Hospital
Revenue, Series 1990A, 6.000%,
07/01/2009
Indiana Health Facilities 175,000 1,185,000 1,360,000 181,977 1,232,246 1,414,223
Financing Authority, Hospital
Revenue, Series 1990A, 6.000%,
07/01/2010
Indiana Health Facilities 185,000 1,260,000 1,445,000 191,904 1,307,023 1,498,927
Financing Authority, Hospital
Revenue, Series 1990A,
6.000%, 07/01/2011
Indiana Health Facilities 190,000 1,345,000 1,535,000 195,943 1,387,072 1,583,015
Financing Authority, Hospital
Revenue, Series 1990A,
6.000%, 07/01/2012
Indiana Health Facilities 200,000 1,420,000 1,620,000 205,052 1,455,869 1,660,921
Financing Authority, Hospital
Revenue, Series 1990A,
6.000%, 07/01/2013
Indiana Health Facilities 215,000 1,505,000 1,720,000 219,188 1,534,317 1,753,505
Financing Authority, Hospital
Revenue, Series 1990A,
6.000%, 07/01/2014
Indiana Health Facilities 225,000 1,600,000 1,825,000 227,489 1,617,696 1,845,185
Financing Authority, Hospital
Revenue, Series 1990A,
6.000%, 07/01/2015
Indiana Health Facilities 235,000 1,700,000 1,935,000 237,200 1,715,912 1,953,112
Financing Authority, Hospital
Revenue, Series 1990A,
6.000%, 07/01/2016
Indiana Health Facilities 250,000 1,800,000 2,050,000 251,875 1,813,500 2,065,375
Financing Authority, Hospital
Revenue, Series 1990A,
6.000%, 07/01/2017
Indiana Health Facilities 265,000 1,910,000 2,175,000 266,754 1,922,644 2,189,398
Financing Authority, Hospital
Revenue, Series 1990A,
6.000%, 07/01/2018
Indiana Health Facilities 160,000 1,085,000 1,245,000 167,920 1,138,708 1,306,628
Financing Authority, Hospital
Revenue, Series 1997A,
6.000%, 07/01/2008
Indiana Health Facilities 205,000 1,395,000 1,600,000 210,285 1,430,963 1,641,248
Financing Authority, Hospital
Revenue, Tax Exempt
Custodian Receipts Refund,
Series 1997 A, 6.000%,
07/01/2001
Indiana Health Facilities 215,000 1,480,000 1,695,000 222,581 1,532,185 1,754,766
Financing Authority, Hospital
Revenue, Tax Exempt
Custodian Receipts Refund,
Series 1997 A, 6.000%,
07/01/2002
Indiana Municipal Power 8,960,000 8,960,000 8,679,552 8,679,552
Agency, Power Supply System,
Series B, 5.500%, 1/1/2016
Indiana Municipal Power 1,750,000 1,750,000 1,822,013 1,822,013
Agency, Power Supply System,
Series B, 6.000%, 1/1/2012
Indiana Transportation Finance 5,000,000 5,000,000 5,098,550 5,098,550
Authority, Highway Revenue,
Series A, 5.750%, 06/01/2012
Rockport, IN, Pollution Control 4,500,000 4,500,000 4,692,285 4,692,285
Revenue, Series B, Refunding,
7.600%, 3/1/2016
Indiana University, Revenue 8,500,000 8,500,000 5,993,265 5,993,265
Refunding, Series H, AMBAC,
Zero Coupon, 8/1/2006
Indiana University, Revenue 10,000,000 10,000,000 6,250,400 6,250,400
Refunding, Student Fee Revenue,
Series H, Zero Coupon,
AMBAC, 08/01/2008
Merrillville, IN, Multiple 4,000,000 4,000,000 2,127,840 2,127,840
School Building Corp., First
Mortgage, MBIA, Zero Coupon,
01/15/2011
IOWA
Polk County, IA, Mercy 5,000,000 5,000,000 5,289,750 5,289,750
Hospital, MBIA,
6.750%, 11/01/2005
KANSAS
Kansas City, KS, Utility 4,095,000 4,095,000 3,861,012 3,861,012
System Revenue, Capital
Appreciation, AMBAC Insured,
Prerefunded, Zero Coupon,
3/1/2001
Kansas City, KS, Utility System 3,575,000 3,575,000 2,827,074 2,827,074
Revenue, ETM, Zero Coupon,
09/01/2004
Kansas City, KS, Utility System 5,300,000 5,300,000 3,967,792 3,967,792
Revenue, ETM, Zero Coupon,
09/01/2005
Kansas City, KS, Utility System 1,875,000 1,875,000 1,326,919 1,326,919
Revenue, ETM, Zero Coupon,
09/01/2006
Kansas City, KS, Utility System 2,640,000 2,640,000 2,083,752 2,083,752
Revenue, Zero Coupon, 09/01/2004
Kansas City, KS, Utility System 3,950,000 3,950,000 2,950,413 2,950,413
Revenue, Zero Coupon, 09/01/2005
Kansas City, KS, Utility System 1,375,000 1,375,000 970,489 970,489
Revenue, Zero Coupon, 09/01/2006
LOUISIANA
Louisiana Public Facilities 5,765,000 5,765,000 5,671,549 5,671,549
Authority, Prerefunded 2/15/08
at 100, 4.750%, 5/1/2016
Bastrop, LA, Industrial 10,250,000 10,250,000 10,769,368 10,769,368
Development Board, Pollution
Control Revenue, International
Paper Co. Project, 6.900%,
03/01/2007
New Orleans, LA, General 2,500,000 2,500,000 1,866,275 1,866,275
Obligation, Zero Coupon,
09/01/2005
New Orleans, LA, General 10,000,000 10,000,000 6,651,400 6,651,400
Obligation, AMBAC, Zero Coupon,
09/01/2007
New Orleans, LA, General 4,850,000 4,850,000 3,250,422 3,250,422
Obligation, Zero Coupon,
07/15/2006
Orleans, LA, Levee District, 1,765,000 1,765,000 1,788,369 1,788,369
Levee Improvement Bonds,
Series 1986, 5.950%,
11/01/2014
MARYLAND
Baltimore, MD, Revenue 3,100,000 3,100,000 3,237,764 3,237,764
Exchanged, Auto Parking Revenue,
Series 1996A, 5.900%, 7/1/2012
Northeast Maryland Waste 3,390,000 3,390,000 3,736,085 3,736,085
Disposal Authority, Southwest
Resource Recovery System
Revenue, 7.200%, 01/01/2007
Northeast Maryland Waste 3,440,000 3,440,00 3,791,190 3,791,190
Disposal Authority Revenue,
Southwest Resource Recovery
System, 7.200%, 01/01/2006
MASSACHUSETTS
Massachusetts General 5,750,000 5,750,000 5,613,783 5,613,783
Obligation, Series C, 5.250%,
08/01/2012
Massachusetts Health & 2,920,000 2,920,000 2,815,084 2,815,084
Educational Facilities Authority,
Boston Medical Center, Series A,
5.250%, 07/01/2012
Massachusetts Bay Transportation 2,500,000 2,500,000 2,591,025 2,591,025
Authority, Revenue, Series B,
6.200%, 3/1/2016
Massachusetts College Building 4,110,000 4,110,000 4,813,139 4,813,139
Authority Project, Series A,
7.500%, 5/1/2010
Massachusetts College Building 3,750,000 3,750,000 4,443,938 4,443,938
Authority Project, Series A,
7.500%, 5/1/2014
Massachusetts Health & 3,000,000 3,000,000 3,231,570 3,231,570
Educational Facilities
Authority, Massachusetts
General Hospital, Series F,
6.250%, 7/1/2012
Massachusetts Port Authority 2,000,000 2,000,000 1,972,940 1,972,940
Revenue, Series B, AMT,
5.500%, 07/01/2012
Massachusetts State Development 2,000,000 2,000,000 1,927,360 1,927,360
Financial Agency, Revenue,
Health Care Facilities,
Series A, 7.100%, 7/1/2032
Massachusetts Water Resource 10,000,000 10,000,000 10,472,700 10,472,700
Authority, General Revenue,
Series C, 6.000%, 12/01/2011
Massachusetts Water Resource 2,625,000 2,625,000 2,855,213 2,855,213
Authority, Series A, 6.500%,
7/15/2009
Massachusetts Water Resource 13,445,000 13,445,000 14,367,596 14,367,596
Authority, Series A, 6.500%,
7/15/2019
MICHIGAN
Detroit, MI, General Obligation, 1,000,000 1,000,000 952,190 952,190
City School District, Series
1998 C, 5.250%, 05/01/2014
Michigan, Hospital Finance 3,000,000 3,000,000 2,888,340 2,888,340
Authority, Series 1999A,
6.000%, 11/15/2019
Michigan Municipal Bond 4,000,000 4,000,000 4,050,280 4,050,280
Authority Revenue, Clean
Water Revolving Funding,
5.625%, 10/01/2011
Michigan Municipal Bond Authority 5,000,000 5,000,000 5,026,100 5,026,100
Revenue, Clean Water Revolving
Funding, 5.625%, 10/01/2012
Wayne Charter County, MI, 4,040,000 4,040,000 3,954,958 3,954,958
Airport Revenue, Detroit Metro
Wayne County Airport, Series B,
5.250%, 12/01/2011
Wayne Charter County, MI, 3,165,000 3,165,000 3,065,872 3,065,872
Airport Revenue, Series 1998 B,
5.250%, 12/1/2012
MONTANA
Montana Board Housing Revenue, 1,510,000 1,510,000 467,723 467,723
Capital Appreciation, Single-
Family Revenue, Series A, Zero
Coupon, 06/01/2010
MISSOURI
Missouri Health & Educational 8,125,000 8,125,000 8,736,081 8,736,081
Facilities Authority, SSM
Healthcare, 1992 Series AA,
MBIA, 6.350%, 6/1/2008
Missouri Health & Educational 8,640,000 8,640,000 9,327,917 9,327,917
Facilities Authority, SSM
Healthcare, 1992 Series AA,
MBIA, 6.400%, 6/1/2009
NEVADA
Clark County, NV, School 8,070,000 8,070,000 6,164,270 6,164,270
District, General Obligation,
Series B, FGIC, Zero Coupon,
03/01/2005
Clark County, NV, School 4,350,000 4,350,000 2,625,530 2,625,530
District, Series 1991B, Zero
Coupon, 03/01/2009
Nevada State Housing Division, 3,050,000 3,050,000 3,087,820 3,087,820
Single Family Mortgage Revenue,
Series R, 5.950%, 10/01/2011
NEW HAMPSHIRE
New Hampshire State Housing 1,370,000 1,370,000 1,475,257 1,475,257
Finance Authority, Single
Family Revenue, AMT, Series
1997 C, 5.900%, 07/01/2019
NEW JERSEY
New Jersey Highway Authority, 4,371,000 4,371,000 4,670,457 4,670,457
ETM, 6.500%, 01/01/2011
New Jersey Turnpike Authority, 1,250,000 1,250,000 1,279,138 1,279,138
MBIA Insured, Series 1991A,
6.300%, 1/1/2001
NEW YORK
Metropolitan Transportation 6,775,000 6,775,000 6,857,655 6,857,655
Authority of New York, Transit
Facilities Revenue, Series O,
5.750%, 07/01/2013
Metropolitan Transportation 1,595,000 1,595,000 1,684,304 1,684,304
Authority of New York, Transit
Facilities Revenue, 7.000%,
07/01/2002
Monroe County, NY, Airport 4,515,000 4,515,000 4,568,683 4,568,683
Authority, Series 1999, 5.750%,
01/01/2013
New York City, NY, General 5,500,000 5,500,000 5,769,830 5,769,830
Obligation, 5.900%, 02/01/2005
New York City, NY, General 9,000,000 9,000,000 8,651,160 8,651,160
Obligation, Series 1991 A,
3.000%, 08/15/2002
New York City, NY, General 3,425,000 3,425,000 3,591,421 3,591,421
Obligation, Series B, 6.000%,
08/15/2004
New York City, NY, General 5,000,000 5,000,000 5,257,100 5,257,100
Obligation, Series A, 6.375%,
08/01/2004
New York City, NY, General 7,000,000 7,000,000 7,475,790 7,475,790
Obligation, Series 1995 E,
6.500%, 02/15/2005
New York City, NY, General 6,500,000 6,500,000 6,971,640 6,971,640
Obligation, Series 1995 E,
6.600%, 08/01/2004
New York City, NY, General 2,000,000 2,000,000 2,197,500 2,197,500
Obligation, Series 1996 G,
6.750%, 02/01/2009
New York City, NY, General 3,000,000 3,000,000 3,204,540 3,204,540
Obligation, Series B, 6.750%,
08/15/2003
New York City, NY, General 5,000 5,000 5,347 5,347
Obligation, Prerefunded,
Series H, 7.000%, 2/1/2005
New York City, NY, General 480,000 480,000 509,270 509,270
Obligation, Series H, 7.000%,
02/01/2005
New York City, NY, General 165,000 165,000 168,671 168,671
Obligation, Unrefunded
Balance, Series 1989 D,
7.000%, 08/01/2002
New York City, NY, General 655,000 655,000 669,318 669,318
Obligation, Unrefunded
Balance, Series 1989 D,
7.000%, 08/01/2002
New York City, NY, General 2,005,000 2,005,000 2,080,348 2,080,348
Obligation, Series H,
7.200%, 08/01/2001
New York City, NY, General 3,510,000 3,510,000 3,700,418 3,700,418
Obligation, Series B,
6.100%, 08/15/2005
New York State Dormitory 2,000,000 2,000,000 2,011,700 2,011,700
Authority, City University
System, Consolidated Revenue,
Series F, 5.375%, 07/01/2007
New York State Dormitory 4,000,000 4,000,000 4,113,280 4,113,280
Authority, City University
System, Consolidated Revenue,
Series A, 5.750%, 07/01/2006
New York State Dormitory 3,000,000 3,000,000 3,134,730 3,134,730
Authority, City University
System, Consolidated Revenue,
Series A, 5.750%, 07/01/2006
New York State Dormitory 3,085,000 3,085,000 3,172,367 3,172,367
Authority, City University
System, Consolidated Revenue,
Series E, 5.750%, 07/01/2006
Onondaga County, NY, Industrial 3,500,000 3,500,000 3,507,945 3,507,945
Development Agency, Solid Waste
Disposal Facility, Solvay
Paperboard LLC, Series 1998,
7.000%, 11/01/2030
Port Authority of New York & 2,000,000 2,000,000 2,110,600 2,110,600
New Jersey, Special Obligation
Revenue, Series 1996, 7.000%,
10/01/2007
New York City, NY, General 55,000 55,000 55,270 55,270
Obligation, Unrefunded Balance,
Series D, 1998, 6.000%,
08/01/2008
New York City, NY, General 225,000 225,000 237,692 237,692
Obligation, Series C, AMBAC,
6.400%, 08/01/2004
New York City, NY, General 195,000 195,000 205,275 205,275
Obligation, Series C, AMBAC,
6.400%, 08/01/2005
New York City, NY, General 10,235,000 10,235,000 10,904,369 10,904,369
Obligation, Series C, AMBAC,
Prerefunded 8/01/02 at 101.50,
6.400%, 08/01/2005
New York City, NY, General 275,000 275,000 292,985 292,985
Obligation, Series C, AMBAC,
Prerefunded 8/1/02 at 101.50,
6.400%, 08/01/2004
New York City, NY, General 1,385,000 1,385,000 1,388,795 1,388,795
Obligation, Series E, ETM,
MBIA, 7.000%, 12/1/2007
New York City, NY, General 740,000 740,000 753,956 753,956
Obligation, Series A, ETM,
8.000%, 11/01/2001
New York City, NY, General 5,000 5,000 5,099 5,099
Obligation, Series D, 8.000%,
08/01/2005
New York, NY, General 14,460,000 14,460,000 14,197,840 14,197,840
Obligation, Series A, 5.250%,
08/01/2011
New York, NY, General 10,000,000 10,000,000 9,885,700 9,885,700
Obligation, Series A, 5.200%,
08/01/2010
New York City, New York 20,000 20,000 20,093 20,093
General Obligation,
Unrefunded Balance 1997,
Series D, 6.000%, 08/01/2006
New York State Dormitory 2,000,000 2,000,000 2,118,680 2,118,680
Authority, State University
of New York, AMBAC insured,
6.000%, 07/01/2009
New York State Dormitory 1,845,000 1,845,000 1,878,173 1,878,173
Authority, College and
University Pooled Capital
Program, 7.800%, 12/01/2005
New York State Dormitory 4,000,000 4,000,000 4,443,400 4,443,400
Authority Revenue, City
University, FGIC, Series D,
7.000%, 07/01/2009
New York State Dormitory 5,750,000 5,750,000 6,643,205 6,643,205
Authority Revenue, City
University, Series C,
FGIC, 7.500%, 07/01/2010
New York State Energy 5,300,000 5,300,000 5,604,167 5,604,167
Research and Development
Authority, Pollution Control
Revenue, Electric and Gas,
5.900%, 12/01/2006
New York State, Urban 4,500,000 4,500,000 4,906,845 4,906,845
Development Authority,
Correctional Facilities,
6.500%, 01/01/2011
Suffolk County, NY, Industrial 8,000,000 8,000,000 8,441,280 8,441,280
Development Agency, Southwest
Sewer System, FGIC, 6.000%,
02/01/2007
NORTH CAROLINA
North Carolina Eastern 2,000,000 2,000,000 2,036,580 2,036,580
Municipal Power Agency, AMBAC
insured, 5.500%, 1/1/2007
North Carolina Eastern 8,775,000 8,775,000 8,803,080 8,803,080
Municipal Power Agency, Power
System Revenue, Series B,
FGIC, 6.000%, 01/01/2018
North Carolina Municipal Power 8,500,000 8,500,000 8,426,220 8,426,220
Agency No. 1, Catawba Electric
Revenue, 5.250%, 01/01/2009
North Carolina Municipal Power 2,500,000 2,500,000 2,493,250 2,493,250
Agency No. 1, Catawba Electric
Revenue, MBIA, 5.250%,
01/01/2008
North Carolina Municipal Power 8,235,000 8,235,000 8,546,695 8,546,695
Agency No. 1, Catawba Electric
Revenue, MBIA, 6.000%,
01/01/2011
North Carolina Municipal Power 5,000,000 5,000,000 5,593,950 5,593,950
Agency No. 1, Catawba
Electricity, Revenue, Series
1992, 7.250%, 01/01/2007
North Carolina Municipal Power 2,585,000 2,585,000 2,705,280 2,705,280
Agency, Number 1, Catawba
Electric Power Revenue, Series
1997, AMBAC Insured, 6.000%,
01/01/2008
NORTH DAKOTA
Bismarck, ND, Hospital Revenue, 2,850,000 2,850,000 2,537,270 2,537,270
St. Alexius Medical Center,
Series 1991, AMBAC, Zero
Coupon, 05/01/2002
OHIO
Cleveland, OH, Water Works 10,000,000 10,000,000 9,971,300 9,971,300
Revenue, MBIA Insured, Series
1993G, 5.500%, 1/1/2013
Beavercreek, OH, Local School 1,000,000 1,000,000 1,096,786 1,096,786
District, General Obligation,
Series 1996, 6.600%,
12/01/2015
Butler County, OH, 1,500,000 1,500,000 1,586,880 1,586,880
Transportation Improvement
District, Series 1997 A,
6.000%, 04/01/2010
Cleveland, OH, Non Taxable 820,000 820,000 405,055 405,055
Revenue Bond, Cleveland
Stadium, Series A, 12/1/2011
Cleveland, OH, Public Power 2,250,000 2,250,000 1,316,205 1,316,205
System Improvement Revenue,
Series 1994 A, Zero Coupon,
11/15/2009
Cleveland, OH, Revenue Bond, 820,000 820,000 332,141 332,141
Cleveland Stadium, Series A,
12/01/2014
Cleveland, OH, Revenue Bond, 820,000 820,000 269,362 269,362
Cleveland Stadium, Series A,
12/01/2017
Cleveland, OH, Revenue Bond, 810,000 810,000 456,743 456,743
Cleveland Stadium, Series B,
12/01/2009
Cleveland, OH, Revenue Bond, 815,000 815,000 306,114 306,114
Cleveland Stadium, Series B,
12/01/2015
Cleveland, OH, Revenue Bond, 815,000 815,000 251,273 251,273
Cleveland Stadium, Series B,
12/01/2018
Cleveland, OH, Waterworks 1,000,000 1,000,000 896,610 896,610
Revenue, Series I, 5.000%,
01/01/2017
Cleveland, OH, Waterworks 50,000 50,000 52,600 52,600
Revenue, Unrefunded, First
Mortgage Revenue, Series F
1992A, 6.250%, 01/01/2007
Cleveland, OH, Urban Renewal 1,000,000 1,000,000 1,008,390 1,008,390
Tax Increment Rock & Roll Hall
of Fame and Museum Project,
6.750%, 03/15/2018
Cleveland, OH, General 1,000,000 1,000,000 1,065,660 1,065,660
Obligation, Series A,
Prerefunded 07/01/2002,
6.300%, 07/01/2006
Cleveland, OH, Parking 1,385,000 1,385,000 1,478,474 1,478,474
Facility Revenue, 6.000%,
09/15/2009
Cleveland, OH, Public Power 750,000 750,000 795,300 795,300
System Improvement Revenue,
Series B Prerefunded
11/15/2001, 7.000%, 11/15/2017
Cleveland, OH, Public Power 1,050,000 1,050,000 1,109,997 1,109,997
System Revenue, Series
1996-1, 6.000%, 11/15/2011
Cleveland, OH, Waterworks 950,000 950,000 1,004,264 1,004,264
Revenue, Prerefunded 1/1/2002,
First Mortgage Revenue, Series
F 1992A, 6.250%, 1/1/2007
Cleveland-Cuyahoga County, OH, 1,000,000 1,000,000 976,190 976,190
Port Development Revenue, C&P
Docks Project, 6.000%,
03/01/2007
Cleveland, OH Public Power 2,250,000 2,250,000 1,080,900 1,080,900
Systems Revenue, Capital
Appreciation, First Mortgage,
Series 1994A, Zero Coupon,
11/15/2012
Columbus, OH, General 1,000,000 1,000,000 1,065,590 1,065,590
Obligation, Unlimited Tax,
Sewer Improvement, Prerefunded
05/01/2003, 6.000%, 5/1/2013
Cuyahoga County, OH, General 1,500,000 1,500,000 1,308,915 1,308,915
Obligation, Jail Facilities,
Series 1991, ETM, Zero Coupon,
10/01/2002
Cuyahoga County, OH, Hospital 1,000,000 1,000,000 1,047,020 1,047,020
Facilities Revenue, Health
Cleveland Inc., Series 1993,
6.250%, 08/15/2010
Dublin, OH, City School 1,000,000 1,000,000 512,900 512,900
District, Capital
Appreciation, Series 1998,
Zero Coupon, 12/01/2011
Fairfield, OH, City School 1,000,000 1,000,000 1,138,120 1,138,120
District, 7.200%, 12/01/2009
Franklin County, OH, Health 500,000 500,000 471,275 471,275
Care Facilities, Revenue
Refunding, Ohio Presbyterian
Services, Series 1997, 5.250%,
07/02/2008
Franklin County, OH, Riverside 1,950,000 1,950,000 1,953,608 1,953,608
United Methodist Hospital,
Series A, 5.750%, 5/15/2012
Franklin County, OH, Health 1,000,000 1,000,000 866,440 866,440
Care Facilities, Revenue
Refunding, Ohio Presbyterian
Services, Series 1997, 5.500%,
07/01/2017
Gateway Economic Development 4,000,000 4,000,000 3,965,800 3,965,800
Corporation of Cleveland,
OH, Stadium Revenue, 6.500%,
09/15/2014
Gateway Economic Development 2,550,000 2,550,000 2,621,451 2,621,451
Corporation of Greater
Cleveland, OH, Excise Tax,
Series 1990, 7.200%, 9/1/2001
Hamilton County, OH, Sewer 1,000,000 1,000,000 1,025,700 1,025,700
System Revenue, Improvement
and Refunding, FGIC Insured,
5.450%, 12/01/2009
Hamilton County, OH, Sewer 530,000 530,000 555,795 555,795
System Revenue, Series 1991 A,
6.400%, 12/1/2005
Hamilton County, OH, Sewer 220,000 220,000 231,473 231,473
System Revenue, Series 1991
A, Prerefunded 06/01/2001,
6.400%, 12/01/2005
Hamilton County, OH, Health 2,000,000 2,000,000 2,143,980 2,143,980
System Revenue, Franciscan
Sisters of the Poor Health
System, Providence Hospital,
Series 1992, 6.800%, 7/1/2008
Hamilton County, OH, Hospital 1,000,000 1,000,000 1,027,960 1,027,960
Facilities Revenue, Christ
Hospital, Series 1991 B,
Prerefunded 01/01/2001,
6.625%, 01/01/2006
Hilliard, OH, School District, 1,655,000 1,655,000 793,076 793,076
Series 1996A, Zero Coupon,
FGIC Insured, 12/1/2012
Huber Heights, OH, Water 1,005,000 1,005,000 481,596 481,596
System Revenue, Capital
Appreciation, Zero Coupon,
12/01/2012
Lorain County, OH, Hospital 1,000,000 1,000,000 1,049,990 1,049,990
Refunding Revenue, Humility
of Mary Health Care System,
Series A, Prerefunded
12/15/2005, 5.900%, 12/15/2008
Lorain, OH, Hospital Authority 1,000,000 1,000,000 1,075,820 1,075,820
Refunding Revenue, Lakeland
Community Hospital Inc.,
6.500%, 11/15/2012
Lucas County, OH, Toledo Port 500,000 500,000 434,380 434,380
Authority Development, Revenue
Bond, Northwest Ohio Bond Fund,
Series A, 5.400%, 05/15/2019
Lucas County, OH, Hospital 1,375,000 1,375,000 1,466,493 1,466,493
Revenue, Flower Hospital,
Series 1993, Prerefunded
12/01/2004, 6.125%, 12/1/2013
Mahoning County, OH, General 1,100,000 1,100,000 1,168,508 1,168,508
Obligation, Limited Tax,
6.600%, 12/1/2006
Medina, OH, City School 1,500,000 1,500,000 1,040,985 1,040,985
District, General Obligation,
12/01/2006
Miami County, OH, Revenue 1,000,000 1,000,000 959,100 959,100
Refunding, Hospital Upper
Valley, Series 1996 C,
6.250%, 05/15/2013
North Olmstead, OH, General 2,000,000 2,000,000 2,133,020 2,133,020
Obligation, 6.200%, 12/01/2011
North Olmsted, OH, General 1,500,000 1,500,000 1,589,130 1,589,130
Obligation,, 6.250%,
12/15/2012
Northeast Ohio Regional Sewer 1,550,000 1,550,000 1,557,952 1,557,952
District, Wastewater
Improvement Revenue Refunding,
5.500%, 11/15/2012
Northeast Ohio Regional Sewer 1,000,000 1,000,000 1,005,110 1,005,110
District, Wastewater
Improvement Revenue Refunding,
5.600%, 11/15/2013
Ohio Air Quality Development 1,250,000 1,250,000 1,372,925 1,372,925
Authority, Pollution Control
Revenue, Cleveland Electric
Company, 8.000%, 12/1/2013
Ohio Gateway Economic 1,500,000 1,500,000 1,582,830 1,582,830
Development Corp., Revenue,
Cuyahoga County Annual
Gateway, 7.500%, 09/01/2005
Ohio General Obligation, 1,000,000 1,000,000 1,066,880 1,066,880
Series 1994, 6.000%,
08/01/2010
Ohio Higher Education 2,250,000 2,250,000 2,416,770 2,416,770
Facilities Revenue, Case
Western Reserve University,
Series B, 6.500%, 10/1/2020
Ohio Higher Educational 1,000,000 1,000,000 1,035,940 1,035,940
Facility Commission, Refunding
Revenue, Case Western Reserve
University, 6.000%, 10/1/2014
Ohio Housing Finance Agency, 730,000 730,000 752,557 752,557
Single-Family Mortgage
Revenue, Series 1990 F,
7.600%, 09/01/2016
Ohio Public Facilities 1,500,000 1,500,000 1,529,280 1,529,280
Commission, Higher Educational
Capital Facilities Revenue,
Series 2B, 5.400%, 11/01/2007
Ohio State Building Authority, 2,000,000 2,000,000 1,949,260 1,949,260
5.375%, 10/1/2013
Ohio State Building Authority, 1,000,000 1,000,000 986,680 986,680
Administration Building,
Series A, 5.375%, 10/01/2012
Ohio State Building Authority, 750,000 750,000 762,285 762,285
Revenue Bond, Adult
Correctional Facilities,
Series A, 5.500%, 10/01/2010
Ohio State Building Authority, 1,000,000 1,000,000 1,056,270 1,056,270
Correctional Facilites Revenue,
Series 1991 A, 6.500%,
10/01/2004
Ohio State Building Authority, 500,000 500,000 554,570 554,570
Toledo Government Office
Building, Series A,
Prerefunded 04/01/2003, 8.000%,
10/1/2027
Ohio State Higher Education 2,325,000 2,325,000 2,437,205 2,437,205
Facility, Series 1997 A,
Step-up Coupon 0% to 7/1/00,
6.5 to, 07/01/2008
Ohio State Higher Education 200,000 200,000 210,994 210,994
Facility, Prefunded 12/01/2000,
FGIC, 7.250%, 12/1/2012
Ohio State Higher Education 800,000 800,000 843,976 843,976
Facility, Prerefunded on
12/01/2000, Series 1989,
7.250%, 12/01/2012
Ohio State Higher Educational 1,000,000 1,000,000 957,070 957,070
Facilities Commission, Higher
Educational Facilities-Oberlin
College-Revenue Bonds, 5.250%,
10/1/2014
Ohio State Water Development 500,000 500,000 450,865 450,865
Authority, Revenue, Bay Shore
Project, Series A, 5.875%,
09/01/2020
Ohio Water Development 1,000,000 1,000,000 998,290 998,290
Authority Revenue Bond,
5.250%, 12/01/2010
Olmsted Falls, OH, City School 1,000,000 1,000,000 1,076,700 1,076,700
District, General Obligation,
Series 1991, Prerefunded
12/15/2001, 7.050%, 12/15/2011
Rocky River, OH, City School 1,000,000 1,000,000 946,290 946,290
District, School Improvement,
Series 1998, 5.375%,
12/01/2017
Strongsville, OH, City School 1,000,000 1,000,000 1,002,950 1,002,950
District, General Obligation,
5.350%, 12/1/2011
Summit County, OH, General 1,000,000 1,000,000 1,094,750 1,094,750
Obligation, Prerefunded
12/01/2004, 6.400%, 12/1/2014
University of Akron, General 1,365,000 1,365,000 1,382,841 1,382,841
Receipts, Revenue, 5.750%,
01/01/2013
Warren County, OH, Water 1,720,000 1,720,000 1,611,107 1,611,107
Improvement, General
Obligation, The P&G Project,
Series 1995, 5.250%,
12/01/2016
OKLAHOMA
Oklahoma Development Financial 2,500,000 2,500,000 2,146,350 2,146,350
Authority, Revenue Bond,
Hillcrest Health Center Inc.,
5.625%, 08/15/2019
Tulsa, OK, Industrial 6,430,000 6,430,000 4,474,701 4,474,701
Development Authority,
Hospital Revenue, St. John's
Medical Center, MBIA Insured,
Zero Coupon, 12/01/2006
Tulsa, OK, Industrial 5,430,000 5,430,000 4,229,644 4,229,644
Development Authority,
Hospital Revenue, St. John's
Medical Center, MBIA, Zero
Coupon, 12/01/2004
Tulsa, OK, Industrial 3,930,000 3,930,000 3,404,638 3,404,638
Development Authority, St.
John's Medical Center, MBIA,
Zero Coupon, 12/01/2002
OREGON
Chemeketa, OR, Community 2,385,000 2,385,000 2,361,293 2,361,293
College District, 5.500%,
06/01/2014
PENNSYLVANIA
Allegheny County, PA, Airport 1,500,000 1,500,000 1,499,865 1,499,865
Revenue, Pittsburgh
International Airport, Series
1997 A, 5.750%, 01/01/2013
PENNSYLVANIA
Allegheny County, PA, 1,500,000 1,500,000 1,499,865 1,499,865
Airport Revenue,
Pittsburgh International
Airport, Series 1997 A,
5.750%, 01/01/2013
Armstrong County, PA, 1,000,000 1,000,000 1,050,540 1,050,540
Hospital Authority,
Revenue, St Francis Medical
Center Project, Series A,
6.250%, 6/1/2013
Berks County, PA, 1,000,000 1,000,000 1,022,180 1,022,180
Municipal Authority
Hospital Revenue,
Reading Hospital and
Medical Center Project,
5.500%, 10/1/2008
Berks County, PA, 1,000,000 1,000,000 1,012,500 1,012,500
Municipal Authority
Hospital Revenue,
Reading Hospital
Medical Center Project,
5.700%, 10/1/2014
Bethlehem, PA, 1,000,000 1,000,000 1,039,932 1,039,932
Water Revenue,
Series 1992, Prerefunded
11/15/01, 6.250%, 11/15/2001
Blair County, PA, 1,500,000 1,500,000 1,490,955 1,490,955
Hospital Authority,
Altoona Hospital,
Series 1998 PJ-A,
5.500%, 07/01/2011
Blair County, PA, 3,590,000 3,590,000 3,598,329 3,598,329
Hospital Authority,
Altoona Hospital,
Project A, 5.500%, 7/1/2010
Bucks County, PA, 425,000 425,000 450,730 450,730
Water and Sewer
Authority Revenue,
ETM, 6.375%, 12/1/2008
Commonwealth of Pennsylvania, 4,250,000 4,250,000 4,420,553 4,420,553
Industrial Development
Authority, Economic
Development Revenue,
5.800%, 1/1/2008
Commonwealth of Pennsylvania, 4,875,000 4,875,000 5,080,140 5,080,140
Industrial Development
Authority, Economic
Development Revenue, AMBAC,
5.800%, 07/01/2008
Commonwealth of 2,000,000 20,000,000 22,000,000 2,054,460 20,544,600 22,599,060
Philadelphia, PA, Water &
Wastewater Refunding Revenue,
5.625%, 06/15/2009
Delaware County, PA, 1,000,000 1,000,000 996,580 996,580
White Horse Village,
NC Series 1996 A, 6.600%,
7/1/2006
Delaware County, PA, 1,500,000 1,500,000 1,593,030 1,593,030
Health Facilities Revenue,
Mercy Health Corporation of
Southeastern Pennsylvania,
Series B, 6.000%, 11/15/2007
Delaware County, PA, 1,750,000 1,750,000 1,705,305 1,705,305
Hospital Revenue,
Memorial Hospital,
5.500%, 08/15/2013
Erie County, PA, 1,000,000 1,000,000 943,940 943,940
Pollution Control,
5.300%, 04/01/2012
Erie County, PA, 1,000,000 1,000,000 1,039,230 1,039,230
Prison Authority,
Commonwealth Lease Revenue,
Prerefunded 11/1/01, 6.250%,
11/1/2001
Gettysburgh, PA, 1,020,000 1,020,000 999,498 999,498
Gettysburgh College,
Revenue Bond, 5.375%,
08/15/2013
Harrisburg, PA, 1,000,000 1,000,000 514,140 514,140
General Obligation,
Refunding, Zero Coupon,
Series 1997 D,9/15/2011
Indiana County, PA, 1,000,000 1,000,000 1,004,130 1,004,130
Industrial Development Authority
Pennsylvania Electric Company,
Pollution Control
Revenue, 5.350%, 11/01/2010
Latrobe, PA, Industrial 1,000,000 1,000,000 934,810 934,810
Development Authority,
ST. Vincent College
Project, 5.375%, 05/01/2013
Lebanon County, PA, 600,000 600,000 612,138 612,138
Good Samaritan Hospital
Authority Revenue, Series
1989 B, Prerefunded 11/1/1999,
8.250%, 11/1/2018
Luzerne County, PA, 1,400,000 1,400,000 1,340,696 1,340,696
Flood Protection Authority,
Series 1998 A, 5.250%, 1/15/2013
Montgomery County, PA, 1,500,000 1,500,000 1,500,180 1,500,180
Redevelopment Authority,
Multi-Family Housing
Revenue, KBF Associates L.P.
Project, 6.375%, 07/01/2012
Pennsylvania Convention 2,200,000 2,200,000 2,240,832 2,240,832
Center Authority,
Funding Revenue, 6.000%,
9/1/2009
Pennsylvania General 1,000,000 1,000,000 1,076,590 1,076,590
Obligation, 6.250%, 07/01/2010
Pennsylvania General 2,500,000 2,500,000 2,814,400 2,814,400
Obligation, 10.000%, 04/15/2002
Pennsylvania Housing 840,000 840,000 873,919 873,919
Finance Agency, Single Family
Mortgage Revenue, Series
1992-33, 6.850%, 10/01/2009
Pennsylvania Housing 865,000 865,000 893,164 893,164
Finance Agency, Single Family
Mortgage Revenue, Series
1991-32, 7.150%, 04/01/2015
Pennsylvania Intergovernmental 1,000,000 1,000,000 1,059,030 1,059,030
Cooperation Authority,
Special Tax Revenue,
City of Philadelphia,
Prerefunded 6/15/2002, 6.800%,
6/15/2012
Pennsylvania State 1,525,000 1,525,000 1,459,776 1,459,776
Higher Education
Facilities Authority,
Temple University,
Series 1998, 5.250%, 4/1/2013
Philadelphia, PA, 2,000,000 2,000,000 2,062,380 2,062,380
Port Authority Lease
Revenue, Series 1993,
6.200%, 9/1/2013
Philadelphia, PA, 1,000,000 1,000,000 1,075,200 1,075,200
General Obligation,
School District,
Series A, 6.250%, 9/1/2009
Philadelphia, PA, 1,000,000 1,000,000 846,910 846,910
Authority for Industrial
Development Health Care
Facilities Revenue,
Baptist Home of Philadelphia,
Series A, 5.500%, 11/15/2018
Philadelphia, PA, Authority 1,000,000 1,000,000 993,160 993,160
for Industrial Development,
Commercial Development
Revenues, 6.500%, 10/1/2027
Philadelphia, PA, Hospital and 1,000,000 1,000,000 1,055,170 1,055,170
Higher Education Facilities
Authority, Hospital Revenue,
Children's Seashore House,
Series A, 7.000%, 08/15/2012
Philadelphia, PA, 1,000,000 1,000,000 1,072,780 1,072,780
Water Revenue,
6.250%, 08/01/2010
Commonwealth of 5,000,000 5500,000 5,127,950 5,127,950
Philadelphia, PA,
Water & Wastewater
Revenue, MBIA, 5.500%,
06/15/2007
Philadelphia, PA, 5,500,000 5,500,000 5,367,230 5,367,230
Water and Wastewater
Revenue, 5.250%, 12/15/2012
Pittsburgh, PA, 1,500,000 1,500,000 1,468,635 1,468,635
General Obligation,
Series 1993 A, 5.500%,
09/01/2014
Pittsburgh, PA, 150,000 150,000 171,048 171,048
Water and Sewer System
Revenue, ETM, 7.250%,
09/01/2014
Somerset County, PA, 1,000,000 1,000,000 1,038,380 1,038,380
General Authority,
Commonwealth Lease Revenue,
Prerefunded 10/15/2001, 6.250%,
10/15/2011
Union County, PA, 1,000,000 1,000,000 1,044,160 1,044,160
Higher Education Facilities
Authority, University Revenue,
Bucknell University, 6.200%,
4/1/2007
University Area, PA, 1,750,000 1,750,000 1,678,093 1,678,093
Sewer Revenue,5.250%,
11/01/2014
Westmoreland County, PA, 7,300,000 7,300,000 7,293,138 7,293,138
Industrial Development Revenue,
Westmoreland Health System,
AMBAC, 5.375%, 7/1/2011
PUERTO RICO
Puerto Rico Aqueduct and 1,000,000 1,000,000 1,056,23 1,056,230
Sewer Authority, Revenue Refundig
6.000%, 7/1/2009
Puerto Rico Commonwealth, 1,000,000 1,000,000 1,001,82 1,001,820
Highway & Transportation
Authority, Series 1993W,
5.500%, 07/01/2013
Puerto Rico Electric 2,000,000 2,000,000 2,166,74 2,166,740
Power Authority, Series 1994S,
6.125%, 07/01/2009
Puerto Rico, General 1,000,000 1,000,000 1,074,73 1,074,730
Obligation, Public Improvement,
Prerefunded 07/01/2002, 6.600%,
07/01/2013
University Area, PA, 1,000,000 1,000,000 1,073,320 1,073,320
Sewer Revenue, 5.250%,
11/01/2014
University of Puerto Rico, 1,000,000 1,000,000 1,089,28 1,089,280
University Systems, Series N,
6.250%, 06/01/2008
RHODE ISLAND
Rhode Island Clean Water 2,000,000 2,000,000 1,909,880 1,909,880
Protection Agency, Pollution
Control Revenue, Revolving
Fund, Series A, MBIA,
5.400%, 10/01/2015
Rhode Island Convention 5,000,000 5,000,000 4,856,300 4,856,300
Center Authority, Refunding
Revenue, Series 1993 B, MBIA,
5.000%, 05/15/2010
Rhode Island Convention Center 2,750,000 2,750,000 2,375,203 2,375,203
Authority, Series B, 5.000%,
5/15/2020
Rhode Island Convention 22,000,000 22,000,000 20,663,720 20,663,720
Center Authority, Refunding
Revenue, 1993 Series B,
MBIA Insured, 5.250%,
5/15/2015
Rhode Island Depositors 6,200,000 6,200,000 6,529,096 6,529,096
Economic Protection Corp.,
Special Obligation,
Series B, MBIA, 5.800%,
08/01/2010
Rhode Island Depositors 4,525,000 4,525,000 4,740,843 4,740,843
Economic Protection Corp.,
Special Obligation, Series B,
MBIA, 5.800%, 08/01/2011
Rhode Island Depositors 2,500,000 2,500,000 2,602,800 2,602,800
Economic Protection Corp.,
Special Obligation,
Series B, MBIA, 5.800%,
08/01/2012
Rhode Island Depositors 7,340,000 7,340,000 7,585,670 7,585,670
Economic Protection Corp.,
Special Obligation,
Series B, MBIA, 5.800%,
08/01/2013
SOUTH CAROLINA
Piedmont, SC, Municipal Power 840,000 840,000 870,114 870,114
Agency, Electric Revenue,
Series 1993, ETM,
MBIA Insured, 5.500%,
01/01/2008
Piedmont, SC, Municipal Power 2,190,000 2,190,000 2,220,879 2,220,879
Agency, Electric Revenue,
Series 1993, ETM,
MBIA Insured, 5.500%,
01/01/2012
Piedmont, SC, Municipal Power 430,000 430,000 466,464 466,464
Agency, Electric Revenue,
Series 1991 A, ETM,
FGIC Insured, 6.500%,
01/01/2016
Piedmont, SC, Municipal Power 2,810,000 2,810,000 2,780,326 2,780,326
Agency, Electric Revenue, MBIA
Insured, 5.500%, 01/01/2012
TENNESSEE
Knox County, TN, Health & 15,405,000 15,405,000 15,657,642 15,657,642
Educational Hospital Facilities
Board, Fort Sanders Alliance,
MBIA, 5.750%, 1/1/2011
Knox County, TN, Health & 17,880,000 17,880,000 18,049,860 18,049,860
Educational Hospital Facilities
Board, Fort Sanders Alliance,
MBIA, 5.750%, 1/1/2012
Knox County, TN, Health, 2,000,000 2,000,000 1,994,060 1,994,060
Education and Housing
Facilities Board, MBIA
insured, 5.750%, 01/01/2014
Knox County, TN, Health & 4,000,000 4,000,000 4,197,680 4,197,680
Educational Facilities Board,
Fort Sanders Alliance, MBIA,
6.250%, 01/01/2013
Knox County, TN, Health, 3,250,000 3,750,000 7,000,000 3,711,695 4,282,725 7,994,420
Education & Housing Facilities
Board, Hospital Facilities
Revenue, Fort Sanders
Alliance, 7.250%, 01/01/2009
TEXAS
Austin, TX, Combined Utility 5,020,000 5,020,000 2,916,570 2,916,570
System Revenue, Zero Coupon,
11/15/2009
Austin, TX, Independant School 2,000,000 2,000,000 1,836,020 1,836,020
District, Series 1998, 5.000%,
8/1/2015
Austin, TX, Bergstrom Landhost 4,000,000 4,000,000 3,729,800 3,729,800
Enterprises, Revenue, Series A,
6.750%, 04/01/2027
Austin, TX, Utility Systems 3,460,000 3,460,000 2,134,993 2,134,993
Revenue Refunding, MBIA
Insured, Series A, Zero Coupon,
11/15/2008
Bexar County, TX, Health 3,000,000 3,000,000 3,095,880 3,095,880
Facilities Development Corp.,
Baptist Health System, Series
1997, 6.000%, 11/15/2012
Bexar County, TX, Health 2,000,000 2,000,000 2,076,440 2,076,440
Facilities Development Corp.,
Baptist Health System, Series
1997A, 6.000%, 11/15/2011
Brownsville, TX, Utility 4,085,000 4,085,000 4,377,118 4,377,118
System Revenue, AMBAC Insured,
6.250%, 9/1/2010
Cedar Hill, TX , Zero Coupon, 1,500,000 1,500,000 883,335 883,335
Series 1996, 08/15/2009
Cedar Hill, TX , Zero Coupon, 3,130,000 3,130,000 1,727,979 1,727,979
Series 1996, 08/15/2010
Conroe Texas, Independant 1,250,000 1,250,000 1,237,125 1,237,125
School District, 5.500%,
02/15/2013
Dallas-Fort Worth, TX, 4,500,000 4,500,000 5,023,575 5,023,575
Airport Revenue, 7.375%,
11/01/2009
Dallas-Fort Worth, TX, 14,250,000 14,250,000 14,799,195 14,799,195
Airport Revenue, American
Airlines, AMT, 7.500%,
11/01/2025
Dallas-Fort Worth, TX, Airport 2,390,000 2,390,000 2,713,941 2,713,941
Revenue, 7.800%, 11/01/2007
Dallas, TX, Housing Finance 6,535,000 6,535,000 1,159,505 1,159,505
Corp., Single Family Mortgage
Revenue, MBIA, Zero Coupon,
10/01/2016
Dallas-Fort Worth, TX, Airport 4,500,000 4,500,000 5,023,575 5,023,575
Revenue, FGIC, 7.375%,
11/01/2008
Dallas-Fort Worth, TX, Airport 3,500,000 3,500,000 3,892,175 3,892,175
Revenue, FGIC, 7.375%,
11/01/2010
Dallas-Fort Worth, TX, Airport 1,000,000 1,000,000 1,111,220 1,111,220
Revenue, FGIC, 7.750%,
11/01/2003
Dallas-Fort Worth, TX, Airport 2,000,000 2,000,000 2,267,420 2,267,420
Revenue, FGIC, 7.800%,
11/01/2005
Dallas-Fort Worth, TX, Airport 2,025,000 2,025,000 2,299,469 2,299,469
Revenue, FGIC, 7.800%,
11/01/2006
Harris County, TX , Health 2,965,000 2,965,000 3,157,784 3,157,784
Facilities Development,
MBIA Insured, 6.250%, 5/15/2009
Harris County, TX, General 1,000,000 1,000,000 963,190 963,190
Obligation, Flood Control
District, MBIA, Zero Coupon,
10/01/2000
Harris County, TX, General 4,025,000 4,025,000 3,004,622 3,004,622
Obligation, Toll Road Authority,
Subordinate Lien,
Series A, Zero Coupon, 08/15/2005
Harris County, TX, General 2,050,000 2,050,000 1,617,799 1,617,799
Obligation,Toll Road Authority,
Subordinate Lien, Unlimited Tax,
Series A, Zero Coupon, 08/15/2004
Harris County, TX, General 9,035,000 9,035,000 6,328,566 6,328,566
Obligation,
Capital Appreciation Bond, Zero
Coupon, FGIC, 10/01/2006
Harris County, TX, Health Facilities , 2,785,000 2,785,000 2,966,805 2,966,805
Texas Medical Center Project, MBIA
Insured, 6.250%, 05/15/2008
Harris County, TX, Toll Road 4,010,000 4,010,000 2,827,331 2,827,331
Authority, Toll Road Revenue,
Subordinate Lien, Series A, Zero
Coupon, 08/15/2006
Harris County, TX, Toll Road 4,050,000 4,050,000 3,196,139 3,196,139
Authority, Zero Coupon,
08/15/2004
Harris County, TX, AMT, Series 3,070,000 3,070,000 3,128,913 3,128,913
1998, 5.500%, 08/15/2006
Harris County, TX, Health 3,000,000 3,000,000 3,183,060 3,183,060
Facilities, Texas Medical Center
Project, Series 1996, 6.250%,
05/15/2010
Houston, TX, Water and Sewer 15,000,000 15,000,000 11,032,200 11,032,200
System Authority, Series C,
Zero Coupon, 12/1/2005
Houston, TX, Water and Sewer 3,400,000 3,400,000 2,225,232 2,225,232
System Authority, Series C,
Zero Coupon, 12/1/2007
Houston, TX, Water Conveyance 2,500,000 2,500,000 2,650,075 2,650,075
System Contract, Certificate of
Participation, Series J, 6.125%,
12/15/2005
Houston, TX, Water & Sewer System 14,575,000 14,575,000 10,121,900 10,121,900
Authority, Series C, AMBAC, Zero
Coupon, 12/01/2006
Houston, TX, Water & Sewer System 19,000,000 19,000,000 11,696,210 11,696,210
Authority, Series C, AMBAC, Zero
Coupon, 12/01/2008
Houston, TX, Water & Sewer System 14,750,000 14,750,000 8,548,953 8,548,953
Authority, Series C, Zero Coupon,
AMBAC, 12/01/2009
Houston, TX, Water & Sewer System 5,000,000 5,000,000 2,716,000 2,716,000
Authority, Zero Coupon, AMBAC Insured,
12/1/2010
Houston, TX, Water & Sewer System 3,350,000 3,350,000 1,589,073 1,589,073
Authority, Zero Coupon, AMBAC Insured,
Series 1991C, 12/01/2012
Hurst Euless Bedford, TX, 4,925,000 4,925,000 2,900,283 2,900,283
Independent School District,
Capital Appreciation Refunding,
Series 1994, Zero Coupon, 8/15/2009
Laredo TX, Independent School 2,465,000 2,465,000 2,571,981 2,571,981
District, 6.000%, 08/01/2011
Lower Colorado River Authority, 8,900,000 8,900,000 7,659,073 7,659,073
TX, Refunding, Zero Coupon,
01/01/2003
Lower Colorado River Authority, 5,000,000 5,000,000 5,250,950 5 ,250,950
TX, 6.000%, 05/15/2010
Lubbock, TX, Health Facilities 3,945,000 3,945,000 4,085,126 4,085,126
Development Corp., Methodist
Hospital, Series B, AMBAC,
5.500%, 12/01/2006
Lubbock, TX, Health Facilities 2,415,000 2,415,000 2,516,841 2,516,841
Development Corp., Methodist
Hospital, Series B, AMBAC,
5.600%, 12/01/2007
Lubbock, TX, Health Facilities 4,400,000 4,400,000 4,588,892 4,588,892
Development Corp., Methodist
Hospital, Series B, AMBAC,
5.625%, 12/01/2008
Lubbock, TX, Health Facilities 4,640,000 4,640,000 4,826,296 4,826,296
Development Corporation,
Series B, 5.625%, 12/01/2009
Montgomery County, TX, 800,000 800,000 667,072 667,072
Prerefunded, Capital
Appreciation, Zero Coupon,
9/1/2003
Montgomery County, TX, 795,000 795,000 628,384 628,384
Prerefunded, Capital
Appreciation, Zero Coupon,
9/1/2004
Montgomery County, TX, 2,675,000 2,675,000 2,225,520 2,225,520
Unrefunded Balance,
Capital Appreciation, Zero
Coupon, 09/01/2003
Montgomery County, TX, 2,680,000 2,680,000 2,110,339 2,110,339
Unrefunded Balance, Capital
Appreciation, Zero
Coupon, 09/01/2004
Montgomery County, TX, 2,790,000 2,790,000 2,078,048 2,078,048
Unrefunded Balance, Capital
Appreciation, Zero
Coupon, 09/01/2005
Montgomery County, TX, 685,000 685,000 512,531 512,531
Prerefunded, Capital
Appreciation, Zero Coupon,
9/1/2005
Northeast, TX, Hospital 2,180,000 2,180,000 2,266,263 2,266,263
Authority, Revenue Refunding,
Northeast Medical Center,
Series 1997, 6.000%, 5/15/2010
Northwest Texas Independent 3,690,000 3,690,000 2,037,138 2,037,138
School District, Capital
Appreciation Bonds, Series
1991, Zero Coupon, 08/15/2010
San Antonio, TX, Airport 1,695,000 1,695,000 1,801,751 1,801,751
Systems Revenue, Refunding,
7.000%, 07/01/2002
San Antonio, TX, Electric & Gas, 17,900,000 17,900,000 13,038,897 13,038,897
Revenue Refunding, Series A,
FGIC, Zero Coupon, 02/01/2006
San Antonio, TX, Electric 7,000,000 2,500,000 9,500,000 5,369,420 1,917,650 7,287,070
and Gas Revenue, Refunding,
Series A, Zero Coupon,
02/01/2005
San Antonio, TX, Electric 5,000,000 8,000,000 13,000,000 3,835,300 6,136,480 9,971,780
and Gas Revenue, Refunding,
Series A, Zero
Coupon, 02/01/2005
San Antonio, TX, Zero 4,400,000 4,400,000 2,679,776 2,679,776
Coupon, FGIC Insured,
Series 1991B, 02/01/2009
San Antonio, TX, Hotel 2,000,000 2,000,000 2,116,200 2,116,200
Revenue, FGIC Insured,
Series 1996, 6.000%, 8/15/2006
San Antonio, TX, Electric 3,000,000 3,000,000 2,920,470 2,920,470
& Gas, Revenue, Series A,
5.250%, 02/01/2012
State of Texas, General 7,540,000 7,540,000 5,759,504 5,759,504
Obligation, Capital
Appreciation, Prerefunded,
Series C, 04/01/2005
State of Texas, General 850,000 850,000 646,544 646,544
Obligation, Capital
Appreciation, Series C, 4/1/2005
State of Texas, General 7,385,000 7,385,000 5,340,906 5,340,906
Obligation, Capital
Appreciation Bond, Super
Collider, Series C, Zero
Coupon, FGIC, 4/1/2006
Tarrant County, TX, Health 4,615,000 4,615,000 4,842,289 4,842,289
Facilities Development Corp.,
Hospital Refunding Revenue,
Fort Worth Osteopathic
Hospital, MBIA, 6.000%,
05/15/2011
Tarrant County, TX, Health 6,235,000 6,235,000 6,227,269 6,227,269
Facilities Development Corp.,
Hospital Refunding
Revenue, Fort-Worth Osteopathic
Hospital, MBIA, 6.000%,
05/15/2021
Texas Municipal Power Agency, 9,250,000 9,250,000 9,875,300 9,875,300
MBIA, 6.100%, 09/01/2007
Texas Municipal Power Agency, 4,435,000 4,435,000 4,788,647 4,788,647
MBIA, 6.100%, 09/01/2009
Texas Public Finance Authority, 13,915,000 13,915,000 10,086,844 10,086,844
Building Authority, Zero Coupon,
MBIA, 2/1/2006
Texas Public Finance Authority, 5,190,000 5,190,000 5,569,493 5,569,493
Building Authority, Series B,
AMBAC, 6.250%, 02/01/2008
Texas Municipal Power Agency, 5,150,000 5,150,000 2,477,923 2,477,923
Series 1989, 09/01/2012
Travis County, TX, Health 1,720,000 1,720,000 1,770,448 1,770,448
Facilities Development Corp.,
Ascension Health, Inverse
Floating Rate Note, 7.320%,
11/15/2011
Travis County, TX, Health 1,390,000 1,390,000 1,447,671 1,447,671
Facilities Development Corp.,
Ascension Health, Inverse
Floating Rate Note, Series
1999A, 8.290%, 11/15/2015
Travis County, TX, Health 6,885,000 6,885,000 7,137,266 7,137,266
Facilities Development Corp.,
Ascension Health, Inverse
Floating Rate Note, 8.320%,
11/15/2016
Trinity River, Texas, 6,040,000 6,040,000 5,880,786 5,880,786
Wastewater Systems Revenue,
Series B, 5.250%, 8/1/2012
UTAH
Associated Municipal Power 2,755,000 2,755,000 2,681,111 2,681,111
System, UT, Hunter Project,
Refunding Revenue, AMBAC,
Zero Coupon, 07/01/2000
Associated Municipal Power 5,200,000 5,200,000 4,590,508 4,590,508
System, UT, Hunter Project,
Refunding Revenue,
AMBAC, Zero Coupon, 07/01/2002
Associated Municipal Power 5,895,000 5,895,000 4,680,335 4,680,335
System, UT, Hunter Project,
Refunding Revenue,
AMBAC, Zero Coupon, 07/01/2004
Associated Municipal Power 5,900,000 5,900,000 4,431,549 4,431,549
System, UT, Hunter Project,
Refunding Revenue,
AMBAC, Zero Coupon, 07/01/2005
Associated Municipal Power 5,895,000 5,895,000 4,182,620 4,182,620
System, UT, Hunter Project,
Refunding Revenue,
AMBAC, Zero Coupon, 07/01/2006
Associated Municipal Power 3,750,000 3,750,000 2,508,488 2,508,488
System, UT, Hunter Project,
Refunding Revenue,
AMBAC, Zero Coupon, 07/01/2007
Intermountain Power Agency, 1,000,000 1,000,000 838,640 838,640
UT, Power Supply Revenue,
Series A, MBIA, Zero
Coupon, 07/01/2003
Intermountain Power Agency, 1,730,000 1,730,000 1,373,534 1,373,534
UT, Power Supply Revenue,
Series A, MBIA, Zero
Coupon, 07/01/2004
Intermountain Power Agency, 8,230,000 8,230,000 7,265,362 7,265,362
UT, Power Supply Revenue,
Series B, Zero Coupon,
7/1/2002
Intermountain Power Agency, 3,000,000 7,000,000 10,000,000 3,002,640 7,006,160 10,008,800
UT, Power Supply Revenue,
Series 1993, 5.550%,
7/1/2011
Intermountain Power Agency, 4,000,000 4,000,000 4,364,760 4,364,760
UT, Power Supply Revenue,
Series A, 6.500%,
7/1/2008
Intermountain Power Supply 1,655,000 1,655,000 1,461,017 1,461,017
Agency, UT, Power Supply
Revenue, Series A, AMBAC,
Zero Coupon, 07/01/2002
Intermountain Power Supply 1,000,000 1,000,000 945,120 945,120
Agency, UT, Power Supply
Revenue, FGIC, 5.000%,
7/1/2012
Intermountain Power Agency, 4,000,000 4,000,000 3,769,200 3,769,200
UT, Power Supply Revenue,
Series C, 5.250%,
7/1/2014
Provo, UT, Electric System 1,800,000 1,800,000 2,475,216 2,475,216
Revenue, ETM, AMBAC,
10.375%, 09/15/2015
Salt Lake City, UT, Hospital 1,500,000 1,500,000 1,575,120 1,575,120
Revenue, Intermountain
Health Care, Inversed
Inflow, 5.660%, 02/15/2012
VIRGINIA
Roanoke, VA, Industrial 5,500,000 5,500,000 5,658,565 5,658,565
Development Authority,
Roanoke Memorial Hospital,
Series B, MBIA, 6.125%,
07/01/2017
Southeastern Public Service 7,380,000 7,380,000 7,290,481 7,290,481
Authority, VA, Refunding
Revenue, Series A, MBIA,
5.250%, 07/01/2010
Virginia Beach, VA, Development 1,595,000 1,595,000 1,684,655 1,684,655
Authority, Virginia Beach General
Hospital Project, AMBAC, 6.000%,
2/15/2011
Virginia Beach, VA, Development 3,000,000 3,000,000 2,695,200 2,695,200
Authority, VA Beach General
Hospital Project,
5.125%, 02/15/2018
Winchester County, VA, Industrial 5,700,000 5,700,000 5,539,716 5,539,716
Development Authority, Hospital
Revenue, AMBAC, 6.000%, 01/01/2015
VIRGIN ISLANDS
Virgin Islands Public 1,500,000 1,000,000 2,500,000 1,652,400 1,101,600 2,754,000
Financial Authority Revenue,
Series A, Prerefunded
10/01/2002, 7.250%, 10/1/2018
Virgin Islands, Public Finance 1,500,000 1,500,000 1,489,500 1,489,500
Authority, Matching Fund Loan
Notes, Senior Lien, Series C,
5.500%, 10/1/2008
WASHINGTON
Clark County, WA, Public 7,500,000 7,500,000 7,893,450 7,893,450
Utility District #1, FGIC
Insured, 6.000%, 1/1/2006
Clark County, WA, Public 2,200,000 2,200,000 2,315,786 2,315,786
Utility District, FGIC
Insured, Series 1995, 6.000%,
01/01/2008
Cowlitz County, WA, General 1,560,000 1,560,000 1,495,198 1,495,198
Obligation, Series 1999,
5.500%, 11/1/2016
King & Snohomish Counties, 1,650,000 1,650,000 1,695,194 1,695,194
WA, General Obligation,
School District #417,
FGIC, 5.600%, 12/01/2010
King County, WA, Public 3,500,000 3,500,000 3,280,515 3,280,515
Hospital District #1, Valley
Medical Center, Series 1992,
AMBAC, 5.500%, 09/01/2017
Seattle, WA, General 6,200,000 6,200,000 6,064,964 6,064,964
Obligation, Library
Facilities, Series A, 5.375%,
12/1/2013
Snohomish County, WA, School 3,325,000 3,325,000 3,625,613 3,625,613
District #6, FGIC, 6.500%,
12/01/2007
State of Washington, General 2,625,000 2,625,000 1,452,281 1,452,281
Obligation Series AT-5, MBIA
Insured, Zero Coupon,
08/01/2010
Washington Health Care 2,645,000 2,645,000 2,709,723 2,709,723
Facilities Authority,
Franciscan Health System -
St. Joseph's Hospital,
5.400%, 1/1/2008
Washington Health Care 2,000,000 2,000,000 2,052,420 2,052,420
Facilities Authority,
Franciscan Health System -
St. Joseph's Hospital,
5.400%, 1/1/2007
Washington Health Care 4,865,000 4,865,000 5,051,524 5,051,524
Facilities Authority, Empire
Health Services-Spokane,
5.800%, 11/01/2008
Washington Health Care 2,155,000 2,155,000 2,231,416 2,231,416
Facilities Authority, Empire
Health Services-Spokane, MBIA,
5.650%, 11/1/2005
Washington Health Care 3,440,000 3,440,000 3,568,484 3,568,484
Facilities Authority, Empire
Health Services-Spokane, MBIA,
5.700%, 11/1/2006
Washington Health Care 7,350,000 7,350,000 7,631,432 7,631,432
Facilities Authority, Empire
Health Services-Spokane, MBIA,
5.750%, 11/1/2007
Washington Health Care 4,595,000 4,595,000 4,753,573 4,753,573
Facilities Authority, Empire
Health Services-Spokane, MBIA,
5.800%, 11/1/2009
Washington Health Care 2,100,000 2,100,000 2,165,499 2,165,499
Facilities Authority, Empire
Health Services-Spokane, MBIA,
5.800%, 11/1/2010
Washington Public Power Supply 7,000,000 7,000,000 7,390,740 7,390,740
System Nuclear Project No. 2,
Refunding, Series A, 6.0%,
07/01/2007
Washington Public Power Supply 8,570,000 8,570,000 5,719,875 5,719,875
System, Nuclear Project No. 1,
Refunding, Series A, Zero
Coupon, 07/01/2007
Washington Public Power Supply 5,555,000 5,555,000 3,933,662 3,933,662
System, Nuclear Project No. 3,
Refunding, Series B, Zero
Coupon, 07/01/2006
Washington Public Power Supply 11,925,000 11,925,000 10,519,043 10,519,043
System, Nuclear Project No. 3,
Refunding, Series B, Zero
Coupon, 07/01/2002
Washington Public Power Supply 3,000,000 3,000,000 3,090,930 3,090,930
System, Nuclear Project No. 3,
Refunding, Series 1993 B,
5.650%, 07/01/2008
Washington Public Power Supply 12,350,000 12,350,000 14,137,786 14,137,786
System, Nuclear Project No. 1,
Refunding, Series 1990 B,
7.250%, 07/01/2009
Washington Public Power Supply 7,000,000 7,000,000 7,820,470 7,820,470
System, Nuclear Project No. 2,
Refunding, Series A, 7.250%,
07/01/2006
Washington Public Power Supply 750,000 750,000 778,920 778,920
System, Nuclear Project No. 3,
Refunding, Series B, 7.375%,
07/01/2004
Washington Public Power Supply 1,380,000 1,380,000 977,219 977,219
System, Nuclear Project No. 3,
Refunding, Series A, Zero
Coupon, 7/1/2006
Washington Public Power Supply 3,625,000 3,625,000 2,874,118 2,874,118
System, Revenue Refunding,
Nuclear Project #3, Series A,
MBIA, Zero Coupon, 7/1/2004
Washington Public Power Supply 4,125,000 4,125,000 3,093,173 3,093,173
System, Revenue Refunding,
Nuclear Project #3, Series A,
MBIA, Zero Coupon, 7/1/2005
Washington Public Power Supply 5,000,000 5,000,000 5,168,800 5,168,800
System, Revenue Refunding,
Nuclear Project #2, Series A,
MBIA, 5.700%, 07/01/2008
Washington Public Power Supply 5,000,000 5,000,000 5,272,400 5,272,400
System, Nuclear Power Project
#1, AMBAC Insured, 6.000%,
07/01/2008
Washington Public Power Supply 3,830,000 3,830,000 3,981,591 3,981,591
System, Revenue Refunding,
Nuclear Project #1, Series A,
FGIC, 7.000%, 07/01/2011
Washington Public Power Supply 10,000,000 10,000,000 10,428,700 10,428,700
System, Revenue Refunding,
Nuclear Project #2, Series C,
FGIC, 7.000%, 07/01/2001
Washington Public Power Supply 10,895,000 10,895,000 11,343,329 11,343,329
System, Revenue Refunding,
Nuclear Project #1, Series B,
FGIC, 7.250%, 07/01/2012
Washington Public Power Supply 2,000,000 2,000,000 2,082,300 2,082,300
System, Revenue Refunding,
Nuclear Project #2, Series A,
FGIC, 7.250%, 07/01/2003
Washington Public Power Supply 1,370,000 1,370,000 1,444,090 1,444,090
System, Revenue Refunding,
Nuclear Project #2, Series C,
FGIC, 7.375%, 07/01/2011
Washington Public Power Supply 5,860,000 5,860,000 3,246,850 3,246,850
System, Nuclear Power Project
#3, Series 1989A, MBIA/BIG
Insured, 07/01/2010
Washington Public Power Supply 4,200,000 4,200,000 2,229,528 2,229,528
System, Nuclear Project #2,
Series 1992A, MBIA/BIG Insured,
Zero Coupon, 7/1/2011
Washington Public Power Supply 2,000,000 2,000,000 2,307,800 2,307,800
System, Refunding Revenue,
Nuclear Project #3, 7.500%,
07/01/2008
WEST VIRGINIA
West Virginia, School Building 4,000,000 4,000,000 4,154,200 4,154,200
Authority Revenue, Series B,
MBIA Insured, 6.750%,
07/01/2010
WISCONSIN
Kenosha, WI, General 3,475,000 3,475,000 2,770,340 2,770,340
Obligation, Series C, MBIA,
Zero Coupon, 6/1/2004
Wisconsin Health & Educational 1,500,000 1,500,000 1,554,630 1,554,630
Facilities Authority, Aurora
Medical, FSA Insured, 5.750%,
11/15/2007
Wisconsin Health & Educational 2,000,000 2,000,000 2,077,260 2,077,260
Facilities Authority, Aurora
Medical, FSA Insured, 5.750%,
11/15/2006
Wisconsin Health & Educational 4,330,000 4,330,000 4,539,529 4,539,529
Facilities Authority, Aurora
Medical, FSA Insured, 6.000%,
11/15/2009
Wisconsin Health & Educational 4,085,000 4,085,000 4,291,252 4,291,252
Facilities Authority, Aurora
Medical, FSA Insured, 6.000%,
11/15/2008
Wisconsin Health & Educational 2,000,000 2,000,000 2,108,640 2,108,640
Facilities Authority , MBIA
Insured, 6.100%, 08/15/2009
Wisconsin Health & Educational 4,580,000 4,580,000 4,835,152 4,835,152
Facilities Authority, Wheaton
Franciscan Services, MBIA,
6.100%, 8/15/2008
Wisconsin Health & Educational 5,285,000 5,285,000 5,536,619 5,536,619
Facilities Authority, Felician
Healthcare Inc., Series B,
AMBAC, 6.250%, 01/01/2022
Wisconsin Health & Educational 9,230,000 9,230,000 9,669,440 9,669,440
Facilities Authority, Villa St.
Francis Inc., Series C, AMBAC,
6.250%, 1/1/2022
Wisconsin Health & Educational 2,335,000 2,335,000 2,510,242 2,510,242
Facilities Authority, SSM
Healthcare, Series 1992 AA,
MBIA, 6.400%, 6/1/2008
Wisconsin Health & Educational 2,650,000 2,650,000 2,898,888 2,898,888
Facilities Authority, SSM
Healthcare, Series 1992 AA,
6.450%, 06/01/2010
Wisconsin Health & Educational 2,485,000 2,485,000 2,683,179 2,683,179
Facilities Authority, SSM
Healthcare, Series 1992 AA,
MBIA, 6.450%, 6/1/2009
Wisconsin Health & Educational 2,820,000 2,820,000 3,044,077 3,044,077
Facilities Authority, SSM
Healthcare, Series 1992 AA,
MBIA, 6.500%, 6/1/2011
Wisconsin Health & Educational 3,000,000 3,000,000 3,284,070 3,284,070
Facilities Authority, SSM
Healthcare, Series 1992 AA,
MBIA, 6.500%, 6/1/2012
Wisconsin Health & Educational 2,000,000 2,000,000 2,135,340 2,135,340
Facilities Authority, St.
Luke's Medical Center, MBIA,
7.100%, 8/15/2011
Wisconsin Health and Educational 4,800,000 4,800,000 4,395,984 4,395,984
Facilities Authority, Hospital
Sisters Services Inc. -
Obligated Group, 5.375%,
06/01/2018
Green Bay, WI, Industrial 1,700,000 1,700,000 1,721,063 1,721,063
Development Revenue,
Weyerhaeuser Company Project,
Series A, 9.000%, 09/01/2006
Wisconsin Health and Educational 1,500,000 1,500,000 1,437,825 1,437,825
Facilities Authority, Hospital
Sisters Inc., 5.375%,
06/01/2013
Wisconsin State Health & 2,500,000 2,500,000 2,145,450 2,145,450
Educational Facilities, Revenue,
Series B, 5.625%, 2/15/2029
Wisconsin State Health & 4,000,000 4,000,000 3,420,040 3,420,040
Educational Facilities
Authority, Revenue Bond, Aurora
Health Care Inc., Series A,
5.600%, 02/15/2029
WYOMING
Wyoming Community Development 3,000,000 3,000,000 2,998,710 2,998,710
Authority, Single Family
Mortgage Revenue, Series A,
5.850%, 06/01/2013
LONG-TERM MUNICIPAL INVESTMENTS
Long-term Municipal Investments (Cost of $661,326,129, $1,466,359,907, ===========================================================
$84,356,000 and $2,212,042,036, respectively) 693,354,919 1,527,500,473 85,749,816 2,306,605,208
===========================================================
TOTAL INVESTMENT PORTFOLIO-100%
Investment Portfolio (Cost of $681,326,129, $1,477,059,907, ===========================================================
$89,356,000 and $2,247,742,036, respectively) 713,354,919 1,538,200,473 90,749,816 2,342,305,208
===========================================================
1) Certain securities that do not conform to the investment policies to be in
effect after the Reorganization will be disposed of prior to the Reorganization.
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINING CONDENSED STATEMENT OF ASSETS AND LIABILITIES
AS OF OCTOBER 31, 1999 (UNAUDITED)
SCUDDER SCUDDER
MANAGED AARP INSURED TAX OHIO TAX PRO FORMA PRO FORMA
MUNICIPAL BOND FREE GENERAL BOND FREE FUND ADJUSTMENTS COMBINED
------------------------------------------------------- ---------------- -----------------
Investments, at value $ 713,354,919 $ 1,538,200,473 $ 90,749,816 $2,342,305,208
Cash 301,905 380,484 248,909 931,298
Other assets less liabilities (7,058,266) 17,752,511 884,841 $ (788,624) (2) 10,790,462
------------------------------------------------------- ---------------- -----------------
Net assets $ 706,598,558 $ 1,556,333,468 $ 91,883,566 $ (788,624) $2,354,026,968
======================================================= ================ =================
NET ASSETS
Scudder Shares $ 798,441,540
AARP Shares $1,555,585,428
SHARES OUTSTANDING
Scudder Shares 82,235,127 7,220,299 3,474,484 92,929,910
AARP Shares 89,098,171 91,994,428 181,092,599
NET ASSET VALUE PER SHARE
Scudder Shares $ 8.59 $ 12.73 $ 8.59
AARP Shares $ 17.47 $ 8.59
PRO FORMA COMBINING CONDENSED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTH PERIOD ENDED OCTOBER 31, 1999 (UNAUDITED)
SCUDDER SCUDDER
MANAGED AARP INSURED TAX OHIO TAX PRO FORMA PRO FORMA
MUNICIPAL BOND FREE GENERAL BOND FREE FUND ADJUSTMENTS COMBINED
------------------------------------------------------------------------------------
Investment Income:
Interest income $ 42,412,818 $ 89,228,402 5,254,408 $ -- $136,895,628
------------------------------------------------------------------------------------
Total Investment Income 42,412,818 89,228,402 5,254,408 136,895,628
Expenses
Management fees 3,684,568 7,848,756 577,472 (65,381) (3) 12,045,415
Trustee fees 59,796 26,377 11,444 (37,821) (4) 59,796
All other expenses 1,056,763 3,422,871 207,528 (962,835) (5) 3,724,327
------------------------------------------------------------------------------------
Total expenses before reductions 4,801,127 11,298,004 796,444 (1,066,037) 15,829,538
Expense reductions -- -- (111,936) 111,936 (6) --
------------------------------------------------------------------------------------
Expenses, net 4,801,127 11,298,004 684,508 (954,101) 15,829,538
------------------------------------------------------------------------------------
Net investment income (loss) 37,611,691 77,930,398 4,569,900 954,101 121,066,090
------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss):
Net realized gain (loss) from
investments and futures (137,427) 10,567,083 (409,992) -- 10,019,664
Net unrealized appreciation (depreciation)
of investments and futures (47,879,710) (120,778,206) (5,779,605) -- (174,437,521)
------------------------------------------------------------------------------------
Net increase in net assets from operations $(10,405,446) $ (32,280,725) $(1,619,697) $ 954,101 $ (43,351,767)
====================================================================================
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS (UNAUDITED)
OCTOBER 31, 1999
1. These financial statements set forth the unaudited pro forma condensed
Statement of Assets and Liabilities as of October 31, 1999, and the
unaudited pro forma condensed Statement of Operations for the twelve month
period ended October 31, 1999 for Scudder Managed Municipal Bond Fund, AARP
Insured Tax Free General Bond Fund and Scudder Ohio Tax Free Fund as
adjusted giving effect to the Reorganization as if it had occurred as of the
beginning of the period. These statements have been derived from the books
and records utilized in calculating daily net asset value for each fund.
2. Represents one-time proxy, legal, accounting and other costs of the
Reorganization of $25,202, $748,040 and $15,382 to be borne by the
Acquiring Fund, AARP Insured Tax Free General Bond Fund and Scudder
Ohio Tax Free Fund, respectively.
3. Represents reduction in management fees resulting from a new management
agreement.
4. Reduction in trustee fees resulting from the Reorganization.
5. Represents reduction in other expenses resulting from the implementation
of an administrative fee contract.
6. Represents the elimination of expense reimbursements.
PART C. OTHER INFORMATION
Item 15. Indemnification.
A policy of insurance covering Scudder Kemper Investments, Inc., its
subsidiaries including Scudder Investor Services, Inc., and all of
the registered investment companies advised by Scudder Kemper
Investments, Inc. insures the Registrant's trustees and officers and
others against liability arising by reason of an alleged breach of
duty caused by any negligent act, error or accidental omission in
the scope of their duties.
Article IV, Sections 4.1 - 4.3 of the Registrant's Declaration of
Trust provide as follows:
Section 4.1. No Personal Liability of Shareholders, Trustees, Etc.
No Shareholder shall be subject to any personal liability whatsoever
to any Person in connection with Trust Property or the acts,
obligations or affairs of the Trust. No Trustee, officer, employee
or agent of the Trust shall be subject to any personal liability
whatsoever to any Person, other than to the Trust or its
Shareholders, in connection with Trust Property or the affairs of
the Trust, save only that arising from bad faith, willful
misfeasance, gross negligence or reckless disregard of his duties
with respect to such Person; and all such Persons shall look solely
to the Trust Property for satisfaction of claims of any nature
arising in connection with the affairs of the Trust. If any
Shareholder, Trustee, officer, employee, or agent, as such, of the
Trust, is made a party to any suit or proceeding to enforce any such
liability of the Trust, he shall not, on account thereof, be held to
any personal liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims and liabilities, to
which such Shareholder may become subject by reason of his being or
having been a Shareholder, and shall reimburse such Shareholder for
all legal and other expenses reasonably incurred by him in
connection with any such claim or liability. The indemnification and
reimbursement required by the preceding sentence shall be made only
out of the assets of the one or more Series of which the Shareholder
who is entitled to indemnification or reimbursement was a
Shareholder at the time the act or event occurred which gave rise to
the claim against or liability of said Shareholder. The rights
accruing to a Shareholder under this Section 4.1 shall not impair
any other right to which such Shareholder may be lawfully entitled,
nor shall anything herein contained restrict the right of the Trust
to indemnify or reimburse a Shareholder in any appropriate situation
even though not specifically provided herein.
Section 4.2. Non-Liability of Trustees, Etc. No Trustee, officer,
employee or agent of the Trust shall be liable to the Trust, its
Shareholders, or to any Shareholder, Trustee, officer, employee, or
agent thereof for any action or failure to act (including without
limitation the failure to compel in any way any former or acting
Trustee to redress any breach of trust) except for his own bad
faith, willful misfeasance, gross negligence or reckless disregard
of the duties involved in the conduct of his office.
Section 4.3. Mandatory Indemnification. (a) Subject to the
exceptions and limitations contained in paragraph (b) below:
(i) every person who is, or has been, a Trustee or officer of
the Trust shall be indemnified by the Trust to the fullest extent
permitted by law against all liability and
-56-
against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he
becomes involved as a party or otherwise by virtue of his being or
having been a Trustee or officer and against amounts paid or
incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil,
criminal, administrative or other, including appeals), actual or
threatened; and the words "liability" and "expenses" shall include,
without limitation, attorneys' fees, costs, judgments, amounts paid
in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a
Trustee or officer:
(i) against any liability to the Trust, a Series thereof, or
the Shareholders by reason of a final adjudication by a court or
other body before which a proceeding was brought that he engaged in
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office;
(ii) with respect to any matter as to which he shall have been
finally adjudicated not to have acted in good faith in the
reasonable belief that his action was in the best interest of the
Trust;
(iii) in the event of a settlement or other disposition not
involving a final adjudication as provided in paragraph (b)(i) or
(b)(ii) resulting in a payment by a Trustee or officer, unless there
has been a determination that such Trustee or officer did not engage
in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office:
(A) by the court or other body approving the settlement
or other disposition; or
(B) based upon a review of readily available facts (as
opposed to a full trial-type inquiry) by (x) vote of a
majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then
in office act on the matter) or (y) written opinion of
independent legal counsel.
(c) The rights of indemnification herein provided may be
insured against by policies maintained by the Trust, shall be
severable, shall not affect any other rights to which any Trustee or
officer may now or hereafter be entitled, shall continue as to a
person who has ceased to be such Trustee or officer and shall insure
to the benefit of the heirs, executors, administrators and assigns
of such a person. Nothing contained herein shall affect any rights
to indemnification to which personnel of the Trust other than
Trustees and officers may be entitled by contract or otherwise under
law.
(d) Expenses of preparation and presentation of a defense to
any claim, action, suit or proceeding of the character described in
paragraph (a) of this Section 4.3 may be advanced by the Trust prior
to final disposition thereof upon receipt of an undertaking by or on
behalf of the recipient to repay such amount if it is ultimately
determined that he is not entitled to indemnification under this
Section 4.3, provided that either:
-57-
(i) such undertaking is secured by a surety bond or some other
appropriate security provided by the recipient, or the Trust shall
be insured against losses arising out of any such advances; or
(ii) a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees act
on the matter) or an independent legal counsel in a written opinion
shall determine, based upon a review of readily available facts (as
opposed to a full trial-type inquiry), that there is reason to
believe that the recipient ultimately will be found entitled to
indemnification.
As used in this Section 4.3, a "Disinterested Trustee" is one who is not (i) an
"Interested Person" of the Trust (including anyone who has been exempted from
being an "Interested Person" by any rule, regulation or order of the
Commission), or (ii) involved in the claim, action, suit or proceeding.
Item 16. Exhibits.
(1) (a) (1) Amended and Restated Declaration of Trust, dated
December 8, 1987, is incorporated by reference to
Post-Effective Amendment No. 33 to the
Registrant's Registration Statement on Form N-1A,
as amended (the "Registration Statement").
(2) Amendment to Amended and Restated Declaration of
Trust, dated December 11, 1990, is incorporated by
reference to Post-Effective Amendment No. 33 to
the Registration Statement.
(3) Instrument, dated October 29, 1986, Establishing
and Designating an Additional Series of Shares is
incorporated by reference to Post-Effective
Amendment No. 33 to the Registration Statement.
(4) Establishment and Designation of Series dated
November 6, 1987, is incorporated by reference to
Post-Effective Amendment No. 33 to the
Registration Statement.
(2) (b) (1) By-laws of the Registrant, dated September 24,
1976 as amended through December 31, 1979, is
incorporated by reference to Post-Effective
Amendment No. 33 to the Registration Statement.
(2) Amendment to the By-laws of the Registrant as
amended through December 8, 1987, is incorporated
by reference to Post-Effective Amendment No. 33 to
the Registration Statement.
(3) Amendment to the By-laws of Registrant, dated
August 13, 1991, is incorporated by reference to
Post-Effective Amendment No. 33 to the
Registration Statement.
(4) Amendment to the By-laws of Registrant,dated
December 10, 1991, is incorporated by reference to
Post-Effective Amendment No. 33 to the
Registration Statement.
-58-
(3) Inapplicable.
(4) Agreement and Plan of Reorganization filed
herein as Exhibit A to Part A.
(5) Inapplicable.
(6) (d) (1) Investment Management Agreement between the
Registrant (on behalf of Scudder Managed Municipal
Bonds) and Scudder Kemper Investments, Inc., dated
September 7, 1998, is incorporated by reference to
Post-Effective Amendment No. 36 to the
Registration Statement.
(2) Investment Management Agreement between the
Registrant (on behalf of Scudder High Yield Tax
Free Fund) and Scudder Kemper Investments, Inc.,
dated September 7, 1998, is incorporated by
reference to Post-Effective Amendment No. 36 to
the Registration Statement.
(7) Underwriting Agreement between the Registrant and
Scudder Investor Services, Inc., dated September
7, 1998, is incorporated by reference to
Post-Effective Amendment No. 36 to the
Registration Statement.
(8) Inapplicable.
(9) (g) (1) Custodian Contract between the Registrant and
State Street Bank and Trust Company, dated March
17, 1980, is incorporated by reference to
Post-Effective Amendment No. 33 to the
Registration Statement.
(2) Fee schedule for Exhibit (9)(g)(1) is incorporated
by reference to Post-Effective Amendment No. 33 to
the Registration Statement.
(3) Amendment No. 1 to the Custodian Contract between
the Registrant and State Street Bank and Trust
Company, dated March 17, 1980, incorporated by
reference to Post-Effective Amendment No. 33 to
the Registration Statement.
(4) Amendment to the Custodian Contract between the
Registrant and State Street Bank and Trust
Company, dated August 9, 1988, is incorporated by
reference to Post-Effective Amendment No. 33 to
the Registration Statement.
(5) Amendment to the Custodian Contract between the
Registrant and State Street Bank and Trust
Company, dated December 11, 1990, is incorporated
by reference to Post-Effective Amendment No. 33 to
the Registration Statement.
(6) Subcustodian Agreement and Fee Schedule between
State Street Bank and Trust Company and The Bank
of New York, London office, dated December 31,
1978, is incorporated by reference to
Post-Effective Amendment No. 33 to the
Registration Statement.
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(7) Subcustodian Agreement between Irving Trust
Company and State Street Bank, dated November 30,
1987, is incorporated by reference to
Post-Effective Amendment No. 33 to the
Registration Statement.
(9) Subcustodian Agreement between State Street Bank
and Trust Company and Morgan Guaranty Trust
Company of New York, dated November 25, 1985, is
incorporated by reference to Post-Effective
Amendment No. 33 to the Registration Statement.
(10) Subcustodian Agreement between Chemical Bank and
State Street Bank and Trust Company, dated May 31,
1988, is incorporated by reference to
Post-Effective Amendment No. 33 to the
Registration Statement.
(11) Subcustodian Agreement between and Security
Pacific National Bank and Trust Company (New York)
and State Street Bank and Trust Company, dated
February 18, 1988, is incorporated by reference to
Post-Effective Amendment No. 33 to the
Registration Statement.
(12) Subcustodian Agreement between Bankers Trust
Company and State Street Bank and Trust Company,
dated August 15, 1989, is incorporated by
reference to Post-Effective Amendment No. 33 to
the Registration Statement.
(10) Inapplicable.
(11) Opinion and Consent of Dechert Price & Rhoads
filed herein.
(12) Opinion and Consent of Willkie Farr & Gallagher
to be filed by post-effective amendment.
(13) (h) (1) Transfer Agency, Service Agreement and Fee
Schedule between the Registrant and Scudder
Service Agreement, dated October 2, 1989, is
incorporated by reference to Post-Effective
Amendment No. 33 to the Registration Statement.
(2) Revised Fee Schedule dated October 1, 1996 for
Exhibit (13)(h)(1) is incorporated by reference to
Post-Effective Amendment No. 32 to the
Registration Statement.
(3) Fund Accounting Services Agreement between the
Registrant (on behalf of Scudder High Yield Tax
Free Fund) and Scudder Fund Accounting
Corporation, dated January 23, 1995, is
incorporated by reference to Post-Effective
Amendment No. 29 to the Registration Statement.
(4) Fund Accounting Services Agreement between the
Registrant (on behalf of Scudder Managed Municipal
Bonds) and Scudder Fund Accounting Corporation,
dated February 9, 1995, is incorporated by
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reference to Post-Effective Amendment No. 29 to
the Registration Statement.
(14) Consent of PricewaterhouseCoopers LLP filed
herein.
(15) Inapplicable.
(16) Powers of Attorney are filed herein.
(17) Form of Proxy filed herein.
Item 17. Undertakings.
(1) The undersigned registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this registration statement by any
person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act [17 CFR 230.145c],
the reoffering prospectus will contain the information called for
by the applicable registration form for C-8 350 reofferings by
persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The undersigned registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an
amendment to the registration statement and will not be used until
the amendment is effective, and that, in determining any liability
under the 1933 Act, each post-effective amendment shall be deemed
to be a new registration statement for the securities offered
therein, and the offering of the securities at that time shall be
deemed to be the initial bona fide offering of them.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Scudder Municipal Trust has duly caused this
Registration Statement on Form N-14 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston and the
Commonwealth of Massachusetts on the 3rd day of March, 2000.
SCUDDER MUNICIPAL TRUST
By: /s/ Linda C. Coughlin
---------------------
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form N-14 has been signed below by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Linda C. Coughlin President & Trustee March 3, 2000
- ----------------------
Linda C. Coughlin
/s/ Henry P. Becton, Jr.* Trustee March 3, 2000
- -------------------------
Henry P. Becton, Jr.
/s/ Dawn-Marie Driscoll* Trustee March 3, 2000
- ------------------------
Dawn-Marie Driscoll
/s/ Peter B. Freeman* Trustee March 3, 2000
- ---------------------
Peter B. Freeman
/s/ George M. Lovejoy, Jr.* Trustee March 3, 2000
- ---------------------------
George M. Lovejoy, Jr.
/s/ Wesley W. Marple, Jr.* Trustee March 3, 2000
- --------------------------
Wesley W. Marple, Jr.
/s/ Kathryn L. Quirk* Trustee, Vice President March 3, 2000
- --------------------- & Assistant Secretary
Kathryn L. Quirk
/s/ Jean C. Tempel Trustee March 3, 2000
- -------------------
Jean C. Tempel
/s/ John R. Hebble Treasurer (Principal March 3, 2000
- ------------------- Financial and Accounting
John R. Hebble Officer)
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*By: /s/ Sheldon A. Jones March 3, 2000
--------------------
Sheldon A. Jones
Attorney-in-fact
*Executed pursuant to powers of attorney filed with the Registrant's
Registration Statement on Form N-14 as filed with the Commission electronically
herewith.
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