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. |_|
VALUE EQUITY TRUST
(Exact Name of Registrant as Specified in Charter)
Two International Place
Boston, MA 02110-4103
(Address of Principal Executive Offices) (Zip Code)
John Millette
Scudder Kemper Investments, Inc.
Two International Place
Boston, MA 02110-4103
(Name and Address of Agent for Service)
(617) 295-1000
(Registrant's Area Code and Telephone Number)
with copies to:
Caroline Pearson, Esq. Sheldon A. Jones, Esq.
Scudder Kemper Investments, Inc. Dechert Price & Rhoads
Two International Place Ten Post Office Square - South
Boston, MA 02110-4103 Boston, MA 02109-4603
Approximate Date of Proposed Public Offering:
As soon as practicable after this
Registration Statement is declared effective.
Title of Securities Being Registered:
Shares of Beneficial Interest ($.01 par value)
of Scudder Select 500 Index Fund, 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.
2
PART A
INFORMATION REQUIRED IN THE PROXY STATEMENT/PROSPECTUS
3
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF
INVESTMENT TRUST
SCUDDER TAX MANAGED GROWTH FUND
Please take notice that a Special Meeting of Shareholders (the "Meeting")
of Scudder Tax Managed Growth Fund (the "Fund"), a series of Investment 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 Select
500 Index Fund in exchange for shares of the Class S shares
class of Scudder Select 500 Index Fund; and
Proposal 3: To ratify the selection of PricewaterhouseCoopers LLP as
the independent accountants for the Fund for the Fund's
current fiscal year.
The appointed proxies will vote in their discretion on any other business
that may properly come before the Meeting or any adjournments thereof.
Holders of record of shares of the Fund at the close of business on April
17, 2000 are entitled to vote at the Meeting and at any adjournments thereof.
In the event that the necessary quorum to transact business or the vote
required to approve any Proposal is not obtained at the Meeting, the persons
named as proxies may propose one or more adjournments of the Meeting in
accordance with applicable law to permit further solicitation of proxies. Any
such adjournment as to a matter will require the affirmative vote of the holders
of a majority of the Fund's shares present in person or by proxy at the Meeting.
The persons named as proxies will vote FOR any such adjournment those proxies
which they are entitled to vote in favor of that Proposal and will vote AGAINST
any such adjournment those proxies to be voted against that Proposal.
By Order of the Board,
[Signature]
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
4
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.
5
Table of Contents
Introduction....................
Proposal 1: Election of Trustees/Directors for the Acquired
Trust/Corporation........
Nominees for Election..............
Trustees/Directors Not Standing for Re-election............
Responsibilities of the Board -- Board and Committee Meetings........
Audit Committee........
Committee on Independent Trustees/Directors........
Attendance............
Honorary Trustees/Directors.........
Officers.............
Compensation of Trustees/Directors and Officers.........
Proposal 2: Approval of Agreement and Plan of Reorganization......
I. SYNOPSIS.........
Introduction.........
Background of the Reorganization...........
Reasons for the Proposed Transaction; Board Approval.......
Investment Objectives, Policies and Restrictions of the
Funds........
Portfolio Turnover..........
Performance...........
Investment Manager; Fees and Expenses......
Administrative Fee..........
Comparison of Expenses.........
Financial Highlights.........
Distribution of Shares........
Purchase, Redemption and Exchange Information.........
Dividends and other Distributions..........
Tax Consequences........
II. PRINCIPAL RISK FACTORS......
III. THE PROPOSED TRANSCTION..........
Description of the Plan........
Board Approval of the Proposed Transaction......
Description of the Securities to be Issued.....
Federal Income Tax Consequences.........
Capitalization...........
Proposal 3: Ratification or Rejection of the Selection of Independent
Accountants
Additional Information
Exhibit A
Exhibit B
Appendix 1
Appendix 2
Part B: Statement of Additional Information
Part C: Other Information
6
PROXY STATEMENT/PROSPECTUS
[DATE]
Relating to the acquisition of the assets of
SCUDDER TAX MANAGED GROWTH FUND (the "Acquired Fund"),
a separate series of
INVESTMENT TRUST (the "Acquired Trust")
Two International Place
Boston, Massachusetts 02110-4103
(800) 728-3337
by and in exchange for shares of beneficial interest
of the Class S shares class of
SCUDDER SELECT 500 INDEX FUND (the "Acquiring Fund"),
a separate series of
VALUE EQUITY 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 August 28, 2000.
Proposals 1 and 2 relate to a restructuring program proposed by Scudder
Kemper Investments, Inc. ("Scudder Kemper" or the "Investment Manager"), and
described in more detail below.
In the descriptions of the Proposals below, the word "fund" is sometimes
used to mean investment companies or series thereof in general, and not the
Acquired Fund whose proxy statement this is. In addition, for simplicity,
actions are described in this Proxy Statement as being taken by either the
Acquired Fund or the Acquiring Fund (each a "Fund" and collectively the
"Funds"), although all actions are actually taken either by the Acquired Trust
or the Acquiring Trust (together with the Acquired Trust, the "Trusts"), on
behalf of the applicable Fund.
7
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES NOR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Proxy Statement/Prospectus sets forth concisely the information about
the Acquiring Fund that a prospective investor should know before investing and
should be retained for future reference. For a more detailed discussion of the
investment objective, policies, restrictions and risks of the Acquiring Fund,
see the Acquiring Fund's prospectus, dated March 31, 2000, as supplemented from
time to time, which is included herewith and incorporated herein by reference.
For a more detailed discussion of the investment objectives, policies,
restrictions and risks of the Acquired Fund, see the Acquired Fund's prospectus,
dated March 1, 2000, as supplemented from time to time, which is incorporated
herein by reference and a copy of which may be obtained upon request and without
charge by calling or writing the Acquired Fund at the telephone number or
address set forth on the preceding page.
The Acquiring Fund's Statement of Additional Information, dated March 31,
2000, is incorporated herein by reference and may be obtained upon request and
without charge by calling or writing the Acquiring Fund at the telephone number
or address set forth on the preceding page. A Statement of Additional
Information, dated ___________________, containing additional information about
the Reorganization and the parties thereto has been filed with the Securities
and Exchange Commission (the "SEC" or the "Commission") and is incorporated by
reference into this Proxy Statement/Prospectus. A copy of the Statement of
Additional Information relating to the Reorganization is available upon request
and without charge by calling or writing the Acquiring Fund at the telephone
number or address set forth on the preceding page. Shareholder inquiries
regarding either Fund may 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 March 31, 2000, except as otherwise described herein.
The Acquiring Fund and the Acquired Fund are diversified series of shares
of beneficial interest of, respectively, the Acquiring Trust and the Acquired
Trust. The Acquiring Trust and the Acquired Trust are open-end management
investment companies organized as Massachusetts business trusts.
The Board of Trustees (except as otherwise noted, "Trustees" refers to
Trustees of the Acquired Trust and "Board" refers to the Board of Trustees of
the Acquired Trust) is soliciting proxies from the 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").
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
8
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 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)*
9
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.
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
10
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
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
11
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
- ---- -----------------
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
12
* Nominee or Trustee considered by the Acquired Trust and its counsel to be
an "interested person" (as defined in the Investment Company Act of 1940,
as amended (the "1940 Act")) of the Acquired Trust, the Investment Manager
or AARP because of his or her employment by the Investment Manager or
AARP, and, in some cases, holding offices with the Acquired Trust.
Appendix 1 hereto sets forth the number of shares of each series of the
Acquired Trust owned directly or beneficially by the Trustees of the Acquired
Trust and by the nominees for election.
Responsibilities of the Board -- Board and Committee Meetings
A fund's board is responsible for the general oversight of fund business.
The board that is proposed for shareholder voting at this Meeting is comprised
of two individuals who are considered "interested" Trustees, and seven
individuals who have no affiliation with Scudder Kemper and who are called
"independent" Trustees (the "Independent Trustees"). The SEC has recently
proposed a rule that would require a majority of the board members of a fund to
be "independent" if the fund were to take advantage of certain exemptive rules
under the 1940 Act. On the proposed Board of Trustees, if approved by
shareholders, nearly 78% will be Independent Trustees. The Independent Trustees
have been nominated solely by the current Independent Trustees of the Acquired
Trust, a practice also favored by the SEC. The Independent Trustees have primary
responsibility for assuring that the Acquired Fund is managed in the best
interests of its shareholders.
The Trustees meet several times during the year to review the investment
performance of each fund of the Acquired Trust and other operational matters,
including policies and procedures designed to assure compliance with regulatory
and other requirements. 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 Committee on
Independent Trustees, the responsibilities of which are described below. In
addition, the Acquired Trust has an Executive Committee and a Valuation
Committee.
Audit Committee
The Audit Committee reviews with management and the independent public
accountants for each series of the Acquired Trust, among other things, the scope
of the audit and the internal controls of each series of the Acquired Trust and
its agents, reviews and approves in advance the type of services to be rendered
by independent accountants, recommends the selection of independent accountants
for each series of the Acquired Trust to the Board, reviews the independence of
such firm and, in general,
13
considers and reports to the Board on matters regarding the accounting and
financial reporting practices of each series of the Acquired Trust.
As suggested by the Advisory Group Report, the Acquired Trust's Audit
Committee is comprised entirely of Independent Trustees, meets privately with
the independent accountants of each series of the Acquired Trust, will receive
representations for the accountants as to their annual 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 Trustees' 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.
Officers
The following persons are officers of the Acquired Trust:
- --------------------------------------------------------------------------------
Present Office with the
Acquired Trust; Principal Year First Became
Name (Age) Occupation or Employment(1) an Officer(2)
- ---------- --------------------------- -------------
- --------------------------------------------------------------------------------
Linda C. Coughlin (48) Trustee and President; 2000
Managing Director of
Scudder Kemper
- --------------------------------------------------------------------------------
Kathryn L. Quirk (47) Trustee, Vice President 1997
and Assistant Secretary;
Managing Director of
Scudder Kemper
- --------------------------------------------------------------------------------
Bruce F. Beaty (41) Vice President; Managing 1995
Director of Scudder
Kemper
- --------------------------------------------------------------------------------
Jennifer P. Carter (37) Vice President; Vice 1999
President of Scudder
Kemper
- --------------------------------------------------------------------------------
- ----------
(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.
14
- --------------------------------------------------------------------------------
James Eysenbach (38) Vice President; Managing 1999
Director of Scudder
Kemper
- --------------------------------------------------------------------------------
William F. Gadsden (45) Vice President; Managing 1996
Director of Scudder
Kemper
- --------------------------------------------------------------------------------
Valerie F. Malter (41) Vice President; Managing 1995
Director of Scudder
Kemper
- --------------------------------------------------------------------------------
Kathleen T. Millard (40) Vice President; Managing 1999
Director of Scudder
Kemper
- --------------------------------------------------------------------------------
Robert Tymoczko (30) Vice President; Assistant 1999
Vice President of Scudder
Kemper Investments, Inc.
- --------------------------------------------------------------------------------
Ann M. McCreary (43) Vice President; Managing 1998
Director of Scudder
Kemper
- --------------------------------------------------------------------------------
John Millette (38) Vice President and 1999
Secretary; Assistant Vice
President of Scudder
Kemper
- --------------------------------------------------------------------------------
John R. Hebble (41) Treasurer; Senior Vice 1998
President of Scudder
Kemper
- --------------------------------------------------------------------------------
Caroline Pearson (38) Assistant Secretary; 1997
Senior Vice 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 $2,400 per fund if the fund's total net assets do not
exceed $100 million, $4,800 per fund if the fund's total net assets exceed $100
million but do not exceed $1 billion and $7,200 per fund if the fund's total net
assets exceed $1 billion. The lead Trustee receives an additional annual
retainer fee of $500 per fund. Each Independent Trustee also receives fees of
$150 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.]
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,
15
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 Compensation Total Compensation from
Trustee (number of funds) Fund Complex Paid to Trustee
- --------------------------------------------------------------------------------
Henry P. Becton Jr. $31,110 (8 funds) $140,000 (28 funds)
- --------------------------------------------------------------------------------
Dawn-Marie Driscoll $33,218 (8 funds) $150,000 (28 funds)
- --------------------------------------------------------------------------------
Peter B. Freeman $34,134 (8 funds) $179,783 (53 funds)
- --------------------------------------------------------------------------------
George M. Lovejoy, Jr. $31,025 (8 funds) $153,200 (30 funds)
- --------------------------------------------------------------------------------
Wesley W. Marple, Jr. $31,025 (8 funds) $140,000 (28 funds)
- --------------------------------------------------------------------------------
Jean C. Tempel $31,025 (8 funds) $140,000 (28 funds)
- --------------------------------------------------------------------------------
The Board of Trustees of Investment Trust recommends
that the shareholders of Scudder Select 500 Index 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 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
16
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. 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 have 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. Scudder Kemper has proposed that the Acquiring Fund implement
such an administrative fee upon the Closing, as described in "Administrative
Fee" below.
17
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 "The Proposed Transaction - Board Approval of
the Proposed Transaction" below.
The Trustees believe that the Reorganization may provide shareholders of
the Acquired Fund with the following benefits:
- - LOWER EXPENSES. If the Reorganization is approved, Acquired Fund
shareholders may benefit from lower total Fund operating expenses. Please
refer to "Comparison of Expenses" below.
- - GREATER PREDICTABILITY OF EXPENSES. On or prior to Closing, the Acquiring
Fund and Scudder Kemper will enter into an administrative services
agreement pursuant to which Scudder Kemper will provide or pay others to
provide substantially all of the administrative services required by the
Acquiring Fund, and most Acquiring Fund expenses, in return for payment by
the Acquiring Fund of a single administrative fee rate. This agreement,
which has an initial three year term, will protect the Acquiring Fund's
shareholders from increases in the Acquiring Fund's expense ratio
attributed to any increases in the costs of providing these services.
- - SIMILAR INVESTMENT OBJECTIVES AND POLICIES. Although the Acquiring Fund
does not have tax efficiency as an explicit goal, Scudder Kemper has
advised the Trustees that the Funds have compatible investment policies
and objectives, as both seek long-term growth of capital through
investment in domestic equities. The Funds are currently managed by the
same lead portfolio manager.
- - TAX-FREE REORGANIZATION. Shareholders of the Acquired Fund will exchange
their shares for shares of the Acquiring Fund of equal value. It is
expected that the transaction will be tax-free for Acquired Fund
shareholders.
For these reasons, as more fully described below under "The Proposed
Transaction - Board Approval of the Proposed Transaction," the Trustees of the
Acquired Trust, including the Independent Trustees, have concluded that:
- - the Reorganization is in the best interests of the Acquired Fund and its
shareholders; and
- - the interests of the existing shareholders of the Acquired Fund will not
be diluted as a result of the Reorganization.
Accordingly, the Trustees recommend approval of the Plan effecting the
Reorganization. If the Plan is not approved, the Acquired Fund will continue in
existence unless other action is taken by the Trustees.
18
Investment Objectives, Policies and Restrictions of the Funds
Although the investment objectives, policies and restrictions of the
Acquired Fund and the Acquiring Fund (and, consequently, the risks of investing
in either Fund) are similar, there are differences between the Funds. The
investment objective of the Acquiring Fund is to provide long-term growth and
income through investment in selected stocks of the S&P 500 Composite Stock
Price Index (the "S&P 500 Index"). The investment objective of the Acquired Fund
is to seek long-term growth of capital on an after-tax basis. There can be no
assurance that either Fund will achieve its investment objective. Both Funds
have the same lead portfolio manager.
The Acquired Fund invests at least 80% of its total assets in equity
securities of established, medium- to large-sized U.S. companies that, in the
opinion of the Investment Manager, offer potential for long-term growth of
capital. The Acquiring Fund invests at least 80% of its assets in selected
stocks of companies in the S&P 500 Index.
The Funds have different formulas for determining which securities in
their respective indices to purchase. The Acquired Fund's portfolio management
team uses a quantitative model that assigns proprietary ratings to companies in
the Russell 1000 Index, favoring those with strong and sustainable earnings
growth and positive stock price momentum. The Acquired Fund's portfolio
management team then analyzes each company's relative valuation from multiple
perspectives with the intent to diversify the Acquired Fund's holdings across
industries and companies. The Acquired Fund typically invests no more than 3% of
its total assets in any one security. The Acquiring Fund's portfolio management
team uses a multi-step process in which (i) a proprietary computer model ranks
the stocks of companies, (ii) certain stocks are excluded from the portfolio,
(iii) the remaining stocks are weighted, and (iv) the portfolio is rebalanced on
an ongoing basis.
The Acquiring Fund generally will sell securities that fall within the
lowest 20% (based on expected return and expected risk) of its benchmark index.
Although the Acquired Fund generally will sell a security when its future return
prospects have diminished, it does not have a policy of selling securities that
fall past a certain percentage mark of its benchmark index.
The Acquired Fund, in selecting securities, focuses on after-tax return,
while the Acquiring Fund does not. The Acquiring Fund may invest up to 20% of
its total assets in investment grade debt securities, while the Acquired Fund
normally does not invest in debt securities. The Acquired Fund may make
index-based investments such as S&P Depository Receipts, while the Acquiring
Fund does not have a stated policy in this regard. For temporary defensive
purposes, each Fund may invest without limit in cash and cash equivalents when
the Investment Manager deems such a position advisable in light of economic or
market conditions. The Acquiring Fund may also invest without limit in U.S.
government securities, money market instruments and high quality debt
instruments without equity features for such purposes.
The Acquiring Fund's investment restrictions are identical to the Acquired
Fund's investment restrictions, as set forth in its Statement of Additional
Information. 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.
19
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 February 29, 2000 (i.e., prior to the creation of Class S
Shares) was ___%. The average annual portfolio turnover rate for the Acquired
Fund for the fiscal year ended October 31, 1999 was 60.8%.
Performance
The following table compares the investment performance of each Fund, and
may provide some indication of the risks of investing in each Fund by showing
changes in each Fund's performance from year to year and how the Fund's average
annual return for the periods indicated compare with those of a broad measure of
market performance. Neither Fund's past performance is an indication of how the
Fund will perform in the future.
Average Annual Total Return
For the Periods Ending December 31, 1999
- --------------------------------------------------------------------------------
Acquiring Fund+ Acquired Fund Benchmark Index**
--------------- ------------- -----------------
- --------------------------------------------------------------------------------
Past year N/A 0.48% 21.04%
- --------------------------------------------------------------------------------
Since Inception* N/A# 14.18% 35.88%
- --------------------------------------------------------------------------------
+ Class S Shares were not offered during the periods covered. Performance shown
is for shares of the Acquiring Fund existing during the periods covered.
* The inception date for the Acquiring Fund was May 17, 1999. The inception date
for the Acquired Fund was September 18, 1998.
# The Acquiring Fund has been in existence for less than a full calendar year.
As of December 31, 1999, the Acquiring Fund's total return since inception was
12.66%.
**Each Fund's benchmark index is the S&P 500 Index, an unmanaged,
capitalization-weighted index that includes 500 large-cap U.S. stocks. 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 both
periods if the Investment Manager had not maintained expenses.
For management's discussion of the Acquiring Fund's performance for the
fiscal period ended February 29, 2000 (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
20
Fund's Trustees. Shareholders pay no direct charges or fees for investment
management or other services. Scudder Kemper is a Delaware corporation located
at Two International Place, Boston, Massachusetts 02110-4103.
The Investment Manager receives a fee for its services pursuant to its
investment management agreement with the Acquiring Fund. For these services, the
Acquiring Fund pays the Investment Manager a fee at an annual rate of 0.70% of
average daily net assets. As of February 29, 2000, the Acquiring Fund had total
net assets of $____________. For the fiscal period ended February 29, 2000, the
Acquiring Fund paid the Investment Manager a fee of __% of average daily net
assets. By contract, the total annual Fund operating expenses of the Acquiring
Fund are maintained at no more than 0.75% of average daily net assets until June
30, 2001.
Scudder Kemper has proposed a new investment management agreement for the
Acquiring Fund. The proposed new investment management agreement includes a new
fee rate, which, at all asset levels, is the same or lower than the current rate
applicable to the Acquiring Fund. The proposed new fee rate is 0.50% of the
first $500 million of average daily net assets, 0.475% of the next $500 million,
and 0.45% on average daily net assets in excess of $1 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 for its services pursuant to its
investment management agreement with the Acquired Fund. For these services, the
Acquired Fund pays the Investment Manager a fee at an annual rate of 0.80% of
average daily net assets. As of October 31, 1999, the Acquired Fund had total
net assets of $4,050,136. For the fiscal year ended October 31, 1999, the
Acquired Fund paid the Investment Manager a fee of 0.00% of average daily net
assets. The Investment Manager waived the entire management fee and also
reimbursed the Acquired Fund's expenses in the amount of $122,840. By contract,
the total annual Fund operating expenses of the Acquired Fund are maintained at
no more than 1.25% of average daily net assets until February 28, 2001.
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 0.25% of average daily net assets. One effect of this
arrangement is to make the Acquiring Fund's future expense ratio more
predictable. The details of the proposal (including expenses that are not
covered) are set out below.
Various third-party service providers (the "Service Providers"), some of
which are affiliated with Scudder Kemper, provide certain services to the
Acquiring Fund pursuant to separate agreements with the Fund, subject to
oversight and approval by the Acquiring Trust's trustees. Scudder Fund
Accounting Corporation, a subsidiary of Scudder Kemper, computes net asset value
for the Acquiring Fund and maintains its accounting records. Scudder Service
Corporation, also a subsidiary of Scudder Kemper, is the transfer, shareholder
servicing and dividend-paying agent for the shares of the Acquiring Fund.
Scudder Trust Company, an affiliate of Scudder Kemper, provides subaccounting
and recordkeeping services for shareholder accounts in certain retirement and
employee benefit plans. As custodian, State Street Bank and Trust Company holds
the portfolio securities of the Acquiring Fund, pursuant to a custodian
agreement. PricewaterhouseCoopers LLP audits the financial statements of the
Acquiring Fund and provides other audit, tax, and related services. Dechert
Price & Rhoads acts as general counsel for
21
the Acquiring Fund. In addition to the fees it pays under its current investment
management agreement with Scudder Kemper, the Acquiring Fund pays the expenses
associated with these service arrangements, as well as the Acquiring Fund's
insurance, registration, printing, postage and other costs.
Once the Administration Agreement becomes effective, each Service Provider
will continue to provide the services that it currently provides to the
Acquiring Fund, as described above, under the current arrangements, except that
Scudder Kemper will pay these entities for the provision of their services to
the Acquiring Fund and will pay most other Fund expenses, including insurance,
registration, printing and postage fees. In return, the Acquiring Fund will pay
Scudder Kemper the Administrative Fee.
The proposed Administration Agreement will have an initial term of three
years, subject to earlier termination by the Acquiring Trust's trustees. The fee
payable by the Acquiring Fund to Scudder Kemper pursuant to the Administration
Agreement would be reduced by the amount of any credit received from the
Acquiring Fund's custodian for cash balances.
Certain expenses of the Acquiring Fund would not be borne by Scudder
Kemper under the Administration Agreement, such as taxes, brokerage, interest
and extraordinary expenses; and the fees and expenses of the Independent
Trustees (including the fees and expenses of their independent counsel). In
addition, the Acquiring Fund would continue to pay the fees required by its
investment management agreement with Scudder Kemper.
Comparison of Expenses
The tables and examples below are designed to assist you in understanding
the various costs and expenses that you will bear directly or indirectly as an
investor in the Acquiring Fund, and comparing these with the expenses of the
Acquired Fund. As indicated below, it is expected that the total expense ratio
of the Acquiring Fund following the Reorganization will be substantially lower
than the current expense ratio of the Acquired Fund. Unless otherwise noted, the
information is based on each Fund's expenses and average daily net assets 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.
22
Shareholder Transaction Expenses
- --------------------------------------------------------------------------------
Pro Forma
Acquiring Fund Acquired Fund (Combined)
- --------------------------------------------------------------------------------
Maximum sales charge
(load) imposed on
purchases (as a percentage None None None
of offering price)
- --------------------------------------------------------------------------------
Maximum deferred sales
charge (load) (as a
percentage of purchase None None None
price or redemption
proceeds)
- --------------------------------------------------------------------------------
Maximum deferred sales
charge (load) imposed on
reinvested dividends None None None
- --------------------------------------------------------------------------------
Redemption fee (as a
percentage of amount
redeemed, if applicable)+ None 2.00% None
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses (Unaudited)
- --------------------------------------------------------------------------------
Pro Forma**
Acquiring Acquired Fund (Combined)
Fund
- --------------------------------------------------------------------------------
Management fees 0.70% 0.80% 0.50%
- --------------------------------------------------------------------------------
Distribution and/or None None None
service (12b-1) fees
- --------------------------------------------------------------------------------
Other expenses 1.48% 4.60% 0.25%
- --------------------------------------------------------------------------------
Total annual Fund 2.18% 5.40% 0.75%
operating expenses
- --------------------------------------------------------------------------------
Expense reimbursement 1.43% 4.15% N/A
- --------------------------------------------------------------------------------
Net annual Fund operating
expenses 0.75%* 1.25%# N/A
- --------------------------------------------------------------------------------
+ There is a $5 wire service fee for receiving redemption proceeds via wire.
23
* By contract, the total annual Fund operating expenses of the Acquiring Fund
are maintained at no more than 0.75% of average daily net assets until June 30,
2001. There is no guarantee that this expense waiver will continue beyond June
30, 2001.
# By contract, the total annual Fund operating expenses of the Acquired Fund
are maintained at no more than 1.25% of average daily net assets until February
28, 2001. There is no guarantee that this expense waiver will continue beyond
February 28, 2001.
** Pro Forma expenses reflect the implementation of an Administrative Fee and
of a new investment management fee for the Acquiring Fund to be effective upon
the Reorganization.
In evaluating the Proposals, the Independent Trustees focused their
consideration on the Acquiring Fund's and the Acquired Fund's estimated
expense ratios calculated utilizing Fund net assets at December 31, 1999
(rather than average daily net assets for a full year, as used in the table
above), the number of shareholder accounts at that date, and other relevant
factors. This calculation resulted in an estimated expense ratio (without
reflecting any expense reimbursements) of 1.65% for the Acquiring Fund and
4.35% for the Acquired Fund.
Examples (Unaudited)
Based on the costs above (including one year of capped expenses in each
period included in the Acquiring Fund and Acquired Fund columns), the following
examples are intended to help you compare the cost of investing in the Funds
with the cost of investing in other mutual funds. The examples assume that you
invest $10,000 in each Fund for the time periods indicated and then redeem all
of your shares at the end of those periods. The examples also assume that your
investment has a 5% return each year and that each Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be as follows:
- ------------------------------------------------------------------
Pro Forma
Year Acquiring Fund Acquired Fund (Combined)**
- ---- -------------- ------------- ------------
- ------------------------------------------------------------------
1st $ 77 $ 127 $ 77
- ------------------------------------------------------------------
3rd $ 544 $1,243 $240
- ------------------------------------------------------------------
5th $1,038 $2,350 $417
- ------------------------------------------------------------------
10th $2,401 $5,080 $930
- ------------------------------------------------------------------
** Pro Forma expenses reflect the implementation of an Administrative Fee and of
a new investment management fee for the Acquiring Fund to be effective upon the
Reorganization.
Financial Highlights
The financial highlights table for the Acquiring Fund prior to the
creation of Class S Shares, which is intended to help you understand the
Acquiring Fund's financial performance since its inception on May 17, 1999, is
included in the Acquiring Fund's prospectus, dated March 31, 2000, which is
included herewith and incorporated herein by reference.
24
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 with
respect to the Acquired Fund are identical to those of the Class S Shares except
that shareholders of the Acquired Fund who exchange or redeem shares that have
been held for less than one year will receive 98% of the then current net asset
value per share. Shareholders of the Class S Shares who exchange or redeem
shares are not subject to a redemption fee.
Dividends and other Distributions
Each of the Funds intends to distribute net realized capital gains after
utilization of capital loss carryforwards, if any, annually. The Acquiring Fund
intends to income dividends quarterly in March, June, September and December.
The Acquired Fund intends to distribute dividends annually in November or
December. Additional distributions 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 styles, 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 and market risk. Management risk refers to the fact that
securities selected by the Investment Manager in which a Fund is invested might
not perform as well as the securities held by other mutual funds. Market risk
refers to the fact that the market values of common stock can fluctuate based on
business performance of the issuing companies, investor perception and general
economic or financial market movements. Also, while each Fund invests primarily
in the selected stocks of the companies that are included in their respective
benchmark index, neither Fund is an
25
index fund, and there is no assurance that investment results of either Fund
will correspond to the price and yield performance of its relevant index.
Finally, as noted above under "Investment Objectives, Policies and
Restrictions of the Funds," unlike the Acquired Fund, the Acquiring Fund does
not explicitly consider the effect of portfolio adjustments on after-tax total
return. As a result, there may be a greater differential between total return
and after-tax total return for the Acquiring Fund than for the Acquired Fund.
For a further discussion of the investment techniques and risk factors
applicable to the Acquired Fund and the Acquiring Fund, see the "Investment
Objectives, Policies and Restrictions of the Funds" herein, and the Prospectuses
and Statements of Additional Information for the Funds, which are incorporated
by reference herein.
III. THE PROPOSED TRANSACTION
Description of the Plan
As stated above, the Plan provides for the transfer of all or
substantially all of the assets of the Acquired Fund to the Acquiring Fund in
exchange for that number of full and fractional 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 immediately as of the close of
business on the Valuation Date. Such shares will be held in an account with the
Acquiring Trust identical in all material respects to the account currently
maintained by the Acquired Trust for such shareholder. 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
26
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.
Scudder Kemper will pay the Acquiring Fund's allocable share of expenses
associated with the Reorganization. The Acquired 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 $2,437 for the Acquired Fund
(approximately $0.0096 per share, based on December 31, 1999 net assets for the
Acquired 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:
(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
27
7, 2000 meeting, the Independent Trustees also agreed to recommend that the
Reorganization be approved by the Acquired Fund's shareholders.
In determining to recommend that the shareholders of the Acquired Fund
approve the Reorganization, the Board considered, among other factors: (a)
the fees and expense ratios of the Funds, including comparisons between the
expenses of the Acquired Fund and the estimated operating expenses of the
Acquiring Fund, and between the estimated operating expenses of the Acquiring
Fund and other mutual funds with similar investment objectives; (b) the terms
and conditions of the Reorganization and whether the Reorganization would
result in the dilution of shareholder interests; (c) the compatibility of the
Acquired Fund's and the Acquiring Fund's investment objectives, policies,
restrictions and portfolios; (d) the agreement by Scudder Kemper to provide
services to the Acquiring Fund for a fixed fee rate under the Administration
Agreement with an initial three year term; (e) the service features available
to shareholders of the Acquired Fund and the Acquiring Fund; (f) the costs to
be borne by the Acquired Fund, the Acquiring Fund and Scudder Kemper as a
result of the Reorganization; (g) prospects for the Acquiring Fund to attract
additional assets; (h) the tax consequences of the Reorganization on the
Acquired Fund, the Acquiring Fund and their respective shareholders; and (i)
the investment performance of the Acquired Fund and the Acquiring Fund.
The Trustees also gave extensive consideration to possible economies of
scale that might be realized by Scudder Kemper in connection with the
Reorganization, as well as the other fund combinations included in Scudder
Kemper's restructuring proposal. The Trustees concluded that these economies
were appropriately reflected in the fee and expense arrangements of the
Acquiring Fund, as proposed to be revised upon completion of the Reorganization.
In particular, the Trustees considered the benefits to shareholders resulting
from locking in the rate of the Acquiring Fund's Administrative Fee for an
initial three-year period. Because the Acquiring Fund will pay only its stated
Administrative Fee rate for such services and expenses regardless of changes in
actual costs, the Acquiring Fund's shareholders will be protected from increases
in the Acquiring Fund's expense ratio attributable to increases in such actual
costs. The Board also considered the protection this would afford shareholders
if the Acquiring Fund's net assets declined as a result of market fluctuations
or net redemptions.
The Trustees also considered the impact of the Reorganization on the total
expenses to be borne by shareholders of the Acquired Fund. As noted above under
"Comparison of Expenses," the pro forma expense ratio (reflecting the
Administrative Fee) for the combined Fund following the Reorganization is
substantially lower than the current expense ratio for the Acquired Fund. The
Board also considered that the Reorganization would permit the shareholders of
the Acquired Fund to pursue substantially similar investment goals in a larger
fund.
Finally, the Trustees concluded that the shareholders of the Acquired Fund
would be better served by having their interests represented by a single board
of trustees with responsibility for overseeing substantially all of the funds to
be marketed as a "family of funds" through Scudder's no-load distribution
channels. Accordingly, the Trustees agreed to recommend the election of a new
consolidated board comprised of representatives of each of the various boards
currently serving as Trustees of these funds.
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.
28
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 October 16, 1985,
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 seven 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.
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
29
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.
Capitalization
The following table shows on an unaudited basis the capitalization of each
Fund as of October 31, 1999 (i.e., prior to the creation of Class S Shares), and
on a pro forma basis as of that date giving effect to the Reorganization:
- --------------------------------------------------------------------------------------------
Pro Forma Pro Forma
Acquiring Fund Acquired Fund Adjustments Combined(1)
-------------- ------------- ----------- -----------
- --------------------------------------------------------------------------------------------
Net Assets $34,576,055 $4,050,136 ($2,437)(3) $38,623,754(2)
- --------------------------------------------------------------------------------------------
Net Asset Value Per Share $12.26 $13.66 -- $12.26
- --------------------------------------------------------------------------------------------
Shares Outstanding 2,820,836 296,592 33,563 3,150,991
- --------------------------------------------------------------------------------------------
(1) Assumes the Reorganization had been consummated on October 31, 1999, and is
for information purposes only. No assurance can be given as to how many shares
of the Acquiring Fund will be received by the shareholders of the Acquired Fund
on the date the Reorganization takes place, and the foregoing 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 $2,437 to be borne by the Acquired Fund.
The Board of Trustees of Investment Trust recommends that the shareholders of
the Scudder Tax Managed Growth Fund vote in favor of this Proposal 2.
30
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 Investment Trust recommends that the shareholders of
the Scudder Tax Managed Growth 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 Trusts 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
Proxy Solicitation. Proxy solicitation costs will be considered
Reorganization expenses and will be allocated accordingly. In
31
addition to solicitation by mail, certain officers and representatives of the
Acquired Trust, officers and employees of Scudder Kemper and certain financial
services firms and their representatives, who will receive no extra compensation
for their services, may solicit proxies by telephone, telegram or personally.
This Proxy Statement/Prospectus, the Notice of Special Meeting and the
proxy card(s) are first being mailed to shareholders on or about April 18, 2000
or as soon as practicable thereafter. Any Acquired Fund shareholder giving a
proxy has the power to revoke it by mail (addressed to the Secretary at the
principal executive office of the Acquired Fund, c/o Scudder Kemper Investments,
Inc., at the address for the Acquired Fund shown at the beginning of this Proxy
Statement/Prospectus) or in person at the Meeting, by executing a superseding
proxy or by submitting a notice of revocation to the Acquired Fund. All properly
executed proxies received in time for the Meeting will be voted as specified in
the proxy or, if no specification is made, in favor of each Proposal.
The presence at any shareholders' meeting, in person or by proxy, of the
holders of one-third of the shares of the Acquired Trust (for a trust-wide vote)
or the Acquired Fund (for a fund-wide vote) entitled to be cast shall be
necessary and sufficient to constitute a quorum for the transaction of business.
In the event that the necessary quorum to transact business or the vote required
to approve any Proposal is not obtained at the Meeting, the persons named as
proxies may propose one or more adjournments of the Meeting in accordance with
applicable law to permit further solicitation of proxies with respect to that
Proposal. Any such adjournment as to a matter will require the affirmative vote
of the holders of a majority of the Acquired Trust's (for a trust-wide vote) or
the Acquired Fund's (for a fund-wide vote) shares present in person or by proxy
at the Meeting. The persons named as proxies will vote in favor of any such
adjournment those proxies which they are entitled to vote in favor of that
Proposal and will vote against any such adjournment those proxies to be voted
against that Proposal. For purposes of determining the presence of a quorum for
transacting business at the Meeting, abstentions and broker "non-votes" will be
treated as shares that are present but which have not been voted. Broker
non-votes are proxies received by the Acquired Fund from brokers or nominees
when the broker or nominee has neither received instructions from the beneficial
owner or other persons entitled to vote nor has discretionary power to vote on a
particular matter. Accordingly, shareholders are urged to forward their voting
instructions promptly.
Approval of Proposal 1 requires the affirmative vote of a plurality of the
shares of the Acquired Trust voting at the Meeting. Approval of Proposal 2
requires the affirmative vote of the holders of a majority of the Acquired
Fund's shares outstanding and entitled to vote thereon. Approval of Proposal 3
requires the affirmative vote of a majority of the shares of the Acquired Fund
voting at the Meeting. Abstentions and broker non-votes will not be counted in
favor of, but will have no other effect on, Proposal 1 and will have the effect
of a "no" vote on Proposals 2 and 3.
Holders of record of the shares of the Acquired Fund at the close of
business on April 17, 2000 (the "Record Date") will be entitled to one vote per
share on all business of the Meeting. As of [date], there were ____________
shares of the Acquired Fund outstanding.
As of [date], the officers and Trustees of the Acquiring Trust as a group
owned beneficially [less than 1%][___%] of the outstanding shares of the
Acquiring Fund. [Appendix 2 hereto sets forth the beneficial owners of at least
5% of each Fund's shares.] To the best of each Trust's knowledge, as of
_______________, no person owned beneficially more than 5% of either Fund's
outstanding shares[, except as stated on Appendix 2.]
Shareholder Communications Corporation ("SCC") has been engaged to assist
in the solicitation of proxies, at an estimated cost of $2,713. As the Meeting
date approaches, certain shareholders of the
32
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.
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.
33
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 [TO BE PROVIDED].
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 Value Equity Trust (the
"Acquiring Trust"), a Massachusetts business trust, on behalf of Scudder Select
500 Index Fund (the "Acquiring Fund"), a separate series of the Acquiring Trust,
and Investment 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 Tax Managed Growth 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 of the Class S Shares class ($.01 par value
per share) of the Acquiring Fund (the "Acquiring Fund Shares"), the assumption
by the Acquiring Fund of all of the liabilities of the Acquired Fund and the
distribution of the Acquiring Fund Shares to the 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
36
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.
37
2.2. The net asset value of an Acquiring Fund share shall be the net asset
value per share computed as of the Valuation Time using the valuation procedures
referred to in section 2.1.
2.3. The number of the Acquiring Fund Shares to be issued (including
fractional shares, if any) in exchange for the Assets shall be determined by
dividing the value of the Assets with respect to shares of the Acquired Fund
determined in accordance with section 2.1 by the net asset value of an Acquiring
Fund Share determined in accordance with section 2.2.
2.4. All computations of value hereunder shall be made by or under the
direction of each Fund's respective accounting agent, if applicable, in
accordance with its regular practice and the requirements of the 1940 Act and
shall be subject to confirmation by each Fund's respective independent
accountants upon the reasonable request of the other Fund.
3. CLOSING AND CLOSING DATE
3.1. The Closing of the transactions contemplated by this Agreement shall
be August 28, 2000, or such later date as the parties may agree in writing (the
"Closing Date"). All acts taking place at the Closing shall be deemed to take
place simultaneously as of 9:00 a.m.., Eastern time, on the Closing Date, unless
otherwise agreed to by the parties. The Closing shall be held at the offices of
Dechert Price & Rhoads, Ten Post Office Square - South, Boston, MA 02109, or at
such other place and time as the parties may agree.
3.2. The Acquired Fund shall deliver to Acquiring Fund on the Closing Date
a schedule of Assets.
3.3. State Street Bank and Trust Company ("State Street"), custodian for
the Acquired Fund, shall deliver at the Closing a certificate of an authorized
officer stating that (a) the Assets shall have been delivered in proper form to
State Street, custodian for the Acquiring Fund, prior to or on the Closing Date
and (b) all necessary taxes in connection with the delivery of the Assets,
including all applicable federal and state stock transfer stamps, if any, have
been paid or provision for payment has been made. The Acquired Fund's portfolio
securities represented by a certificate or other written instrument shall be
presented by the custodian for the Acquired Fund to the custodian for the
Acquiring Fund for examination no later than five business days preceding the
Closing Date and transferred and delivered by the Acquired Fund as of the
Closing Date by the Acquired Fund for the account of Acquiring Fund duly
endorsed in proper form for transfer in such condition as to constitute good
delivery thereof. The Acquired Fund's portfolio securities and instruments
deposited with a securities depository, as defined in Rule 17f-4 under the 1940
Act, shall be delivered as of the Closing Date by book entry in accordance with
the customary practices of such depositories and the custodian for the Acquiring
Fund. The cash to be transferred by the Acquired Fund shall be delivered by wire
transfer of federal funds on the Closing Date.
3.4. Scudder Service Corp. (the "Transfer Agent"), on behalf of the
Acquired Fund, shall deliver at the Closing a certificate of an authorized
officer stating that its records contain the names and addresses of the Acquired
Fund Shareholders and the number and percentage ownership (to three decimal
places) of outstanding Acquired Fund shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver a
confirmation evidencing the Acquiring Fund Shares to be credited on the Closing
Date to the Acquired Fund or provide evidence satisfactory to the Acquired Fund
that such Acquiring Fund Shares have been credited to the Acquired Fund's
account on the books of the Acquiring Fund. At the Closing, each party shall
deliver to the other such bills of sale,
38
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
39
October 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 October 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;
40
(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
41
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 February 29, 2000, 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 February 29, 2000, 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
42
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.
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
43
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
contemplated herein; provided, however, that the Acquiring Fund may take such
actions it reasonably deems advisable after the Closing Date as circumstances
change.
44
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 Fund has been duly formed and is an existing business
trust; (b) the Acquiring Fund has the power to carry on its business as
presently conducted in accordance with the description thereof in the Acquiring
Fund's registration statement under the 1940 Act; (c) the Agreement has been
duly authorized, executed and delivered by the Acquiring 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 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
45
pursuant to the Agreement will not, violate the Acquiring Fund'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 Fund has the power to carry on its business as presently
conducted in accordance with the description thereof in the Acquired Trust's
registration statement under the 1940 Act; (c) the Agreement has been duly
authorized, executed and delivered by the Acquired Trust, on behalf of the
Acquired Fund, and constitutes a valid and legally binding obligation of the
Acquired Trust, on behalf of the Acquired
46
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 fee arrangement 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
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
47
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. Scudder Kemper will pay the Acquiring Fund's allocable share of
expenses associated with the Reorganization. The Acquired 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 $2,437 for the Acquired
Fund (approximately $0.0096 per share, based on December 31, 1999 net assets for
the Acquired Fund). Any such expenses which are so borne by Scudder Kemper will
be solely and directly related to the Reorganization within the meaning of
Revenue Ruling 73-54, 1973-1 C.B. 187. The Acquired Fund shareholders will pay
their own expenses, if any, incurred in connection with the Reorganization.
11. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
11.1. The Acquiring Fund and the Acquired Fund agree that neither party
has made any representation, warranty or covenant not set forth herein and that
this Agreement constitutes the entire agreement between the parties.
11.2. Except as specified in the next sentence set forth in this section
11.2, the representations, warranties and covenants contained in this Agreement
or in any document delivered pursuant hereto or in connection herewith shall not
survive the consummation of the transactions contemplated hereunder. The
covenants to be performed after the Closing and the obligations of each of the
Acquiring Fund and Acquired Fund in Sections 9.1 and 9.2 shall survive the
Closing.
12. TERMINATION
12.1. This Agreement may be terminated and the transactions contemplated
hereby may be abandoned by either party by (i) mutual agreement of the parties,
or (ii) by either party if the Closing shall not have occurred on or before
August 28, 2000, unless such date is extended by mutual agreement of the
parties, or (iii) by either party if the other party shall have materially
breached its obligations under this Agreement or made a material and intentional
misrepresentation herein or in connection herewith. In the event of any such
termination, this Agreement shall become void and there shall be no liability
hereunder on the part of any party or their respective Board members or
officers, except for any such material breach or intentional misrepresentation,
as to each of which all remedies at law or in equity of the party adversely
affected shall survive.
13. AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by any authorized officer of the Acquired
Fund and any authorized officer of the Acquiring Fund; provided, however, that
following the meeting of the Acquired Fund Shareholders called by the Acquired
Fund pursuant to section 5.2 of this Agreement, no such amendment may have the
effect of changing the provisions for determining the number of the Acquiring
Fund Shares to be issued to the Acquired Fund shareholders under this Agreement
to the detriment of such shareholders without their further approval.
14. NOTICES
49
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 the 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.
50
15.5. This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Massachusetts, without regard to its
principles of conflicts of laws.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by an authorized officer and its seal to be affixed thereto and
attested by its Secretary or Assistant Secretary.
Attest: INVESTMENT TRUST
on behalf of Scudder Tax Managed Growth Fund
_________________________
Secretary
________________________________
By:_____________________________
Its:____________________________
Attest: VALUE EQUITY TRUST
on behalf of Scudder Select 500 Index Fund
_________________________
Secretary
________________________________
By:_____________________________
Its:____________________________
AGREED TO AND ACKNOWLEDGED
ONLY WITH RESPECT TO
PARAGRAPH 10.2 HERETO
SCUDDER KEMPER INVESTMENTS, INC.
____________________________________
By:_________________________________
Its:________________________________
51
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 SCUDDER SCUDDER SCUDDER TAX
SCUDDER GROWTH LARGE REAL SCUDDER TAX MANAGED
CLASSIC DIVIDEND AND COMPANY ESTATE S&P 500 MANAGED SMALL
GROWTH & GROWTH INCOME GROWTH INVESTMENT INDEX GROWTH COMPANY
FUND FUND FUND FUND FUND FUND FUND 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 March 31, 2000, which was previously filed with the
Commission via EDGAR on ____________________ (File No. 2-78724) and is
incorporated by reference herein.
PART B
VALUE EQUITY TRUST
- --------------------------------------------------------------------------------
Statement of Additional Information
[date]
- --------------------------------------------------------------------------------
Acquisition of the Assets of By and in Exchange for Shares of
Scudder Tax Managed Growth Fund Scudder Select 500 Index Fund
(the "Acquired Fund"), (the "Acquiring Fund"),
a series of Investment Trust a series of Value Equity Trust
Two International Place (the "Acquiring Trust")
Boston, MA 02110-4103 Two International Place
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 March 31,
1999, which was previously filed with the Securities and Exchange Commission
(the "Commission") via EDGAR on March 30, 1999 (File No. 2-78724) and is
incorporated by reference herein.
2. The Acquiring Fund's semi-annual report to shareholders for the six months
ended February 29, 2000, which was previously filed with the Commission via
EDGAR on October 28, 1999 (File No. 811-01444) and is incorporated by reference
herein.
3. The Acquired Fund's prospectus dated March 1, 2000, which was previously
filed with the Commission via EDGAR on February 28, 2000 (File No. 2-13628) and
is incorporated by reference herein.
4. The Acquired Fund's statement of additional information dated March 1, 2000,
which was previously filed with the Commission via EDGAR on February 28, 2000
(File No. 2-13628) and is incorporated by reference herein.
5. The Acquired Fund's annual report to shareholders for the fiscal year ended
October 31, 1999, which was previously filed with the Commission via EDGAR on
December 30, 1999 (File No. 811-00043) 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.
54
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 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)
Select 500 Tax Managed Pro Forma Pro Forma
Fund Growth Combined Select 500 Tax Managed Combined
Per/Share Per/Share Per/Share Fund Market Growth Market Market
Amount Amount Amount Value($) Value($) Value($)
-------- --------- --------- ---------- ------------- ---------
REPURCHASE AGREEMENTS 0.9%
- ---------------------------
Repurchase Agreement with State Street 214,000 214,000 214,000 214,000
Bank and Trust Company, 5.200%,
11/1/1999
--------------------------------------------
REPURCHASE AGREEMENTS TOTAL 214,000 214,000
=============================================
Repurchase Agreements (Total Cost of $214,000 $0 and $214,000 respectively)
COMMON STOCKS 99.1%
- --------------------
Consumer Discretionary 8.2%
Apparel & Shoes 0.7%
Jones Apparel Group, Inc.* 1,000 1,000 31,625 31,625
Liz Claiborne, Inc. 1,300 400 1,700 52,000 16,000 68,000
Nike, Inc. "B" 2,500 2,500 141,094 141,094
Payless ShoeSource Inc. 300 300 13,744 13,744
Russell Corp. 1,900 1,900 28,856 28,856
Too Inc. 142 85 227 2,272 1,360 3,632
----------------------------------------------
224,222 62,729 286,951
----------------------------------------------
Department & Chain Stores 5.9%
Best Buy Co., Inc. 600 600 33,338 33,338
Fastenal Co. 700 700 25,375 25,375
Dayton Hudson Corp. 2,000 2,000 129,250 129,250
Federated Department Stores, Inc. 1,000 700 1,700 42,688 29,881 72,569
Gap, Inc. 2,850 675 3,525 105,806 25,059 130,865
Home Depot, Inc. 6,500 300 6,800 490,750 22,650 513,400
Kmart Corp. 3,200 600 3,800 32,200 6,038 38,238
Kohl's Corp. 800 800 59,850 59,850
Longs Drug Stores, Inc. 3,700 1,000 4,700 100,825 27,250 128,075
Lowe's Companies, Inc. 2,000 2,000 110,000 110,000
Neiman Marcus Group, Inc. 600 600 14,363 14,363
Ross Stores, Inc. 1,200 1,200 24,750 24,750
TJX Companies, Inc. (New) 500 500 13,563 13,563
The Limited, Inc. 1,000 600 1,600 41,125 24,675 65,800
Wal-Mart Stores, Inc. 15,600 900 16,500 884,325 51,019 935,344
----------------------------------------------
1,996,819 297,961 2,294,780
----------------------------------------------
Home Furnishings 0.1%
Furniture Brands International Inc. 500 500 9,688 9,688
Mohawk Industries Inc. 600 600 13,763 13,763
----------------------------------------------
23,451 23,451
----------------------------------------------
Hotels & Casinos 0.7%
Carnival Corp. "A" 2,800 2,800 124,600 124,600
Harrah's Entertainment, Inc. 1,100 1,100 31,831 31,831
MGM Grand, Inc. 300 300 15,300 15,300
Marriott International, Inc. "A" 1,800 200 2,000 60,638 6,738 67,376
Promus Hotel Corp. 600 600 20,550 20,550
----------------------------------------------
185,238 74,419 259,657
----------------------------------------------
Recreational Products 0.2%
Brunswick Corp. 2,100 2,100 47,513 47,513
Harley-Davidson Inc. 300 300 17,794 17,794
International Game Technology 700 700 13,038 13,038
----------------------------------------------
47,513 30,832 78,345
----------------------------------------------
Restaurants 0.1%
Brinker International Inc.* 700 700 16,319 16,319
Outback Steakhouse Inc.* 1,200 1,200 27,600 27,600
----------------------------------------------
43,919 43,919
----------------------------------------------
Specialty Retail 0 .4%
BJ's Wholesale Club Inc. 300 300 9,244 9,244
Circuit City Stores, Inc. 800 800 34,150 34,150
Family Dollar Stores Inc. 1,400 1,400 28,875 28,875
Intimate Brands, Inc. 700 700 28,700 28,700
Tandy Corp. 700 700 44,056 44,056
Zale Corp. 200 200 8,375 8,375
----------------------------------------------
78,206 75,194 153,400
----------------------------------------------
Miscellaneous 0.1%
Lancaster Colony Corporation 1,100 1,100 38,431 38,431
----------------------------------------------
CONSUMER STAPLES 8.2%
Alcohol & Tobacco 1.5%
Anheuser-Busch Companies, Inc. 2,500 2,500 179,531 179,531
Brown-Forman Corp. "B" 800 800 54,000 54,000
Philip Morris Companies, Inc. 8,800 8,800 221,650 221,650
Seagram Co., Ltd. 2,500 2,500 123,438 123,438
----------------------------------------------
578,619 578,619
----------------------------------------------
Consumerv Electronics & Photographic 0.4%
Eastman Kodak Co. 2,300 2,300 158,556 158,556
----------------------------------------------
Consumer Specialties 0.2%
American Greeting Corp., "A" 1,700 700 2,400 43,988 18,113 62,101
----------------------------------------------
Food & Beverage 3.4%
Albertson's, Inc. 2,245 2,245 81,522 81,522
Dean Foods Co. 900 900 41,625 41,625
General Mills, Inc. 1,100 1,100 95,906 95,906
IBP, Inc. 1,600 1,600 38,300 38,300
Kroger Co. 5,300 5,300 110,306 110,306
Nabisco Group Holdings 2,700 2,700 34,594 34,594
Quaker Oats Co. 2,800 2,800 196,000 196,000
Ralston Purina Group 7,300 7,300 229,494 229,494
Safeway, Inc. 4,500 4,500 158,906 158,906
Unilever NV(New York Shares) 3,500 3,500 233,406 233,406
Winn-Dixie Stores, Inc. 3,300 3,300 89,306 89,306
----------------------------------------------
1,229,440 79,925 1,309,365
----------------------------------------------
Package Goods/Cosmetics 2.6%
Avon Products, Inc. 2,100 2,100 67,725 67,725
Kimberly-Clark Corp. 2,900 2,900 183,063 183,063
Procter & Gamble Co. 7,300 7,300 765,588 765,588
----------------------------------------------
1,016,376 1,016,376
----------------------------------------------
Textiles 0.1%
VF Corp. 600 600 18,038 18,038
----------------------------------------------
HEALTH 8.2%
Biotechnolgy 0.9%
Amgen, Inc. 3,600 200 3,800 287,100 15,950 303,050
Biogen, Inc. 600 600 44,475 44,475
----------------------------------------------
287,100 60,425 347,525
----------------------------------------------
Health Industry Services 0.5%
Cardinal Health, Inc. 100 100 4,313 4,313
Medical Manager Corp. 100 100 5,013 5,013
Shared Medical Systems Corp. 400 400 15,100 15,100
United Healthcare Corp. 2,200 2,200 113,713 113,713
Wellpoint Health Networks, Inc. 800 400 1,200 46,400 23,200 69,600
----------------------------------------------
160,113 47,626 207,739
----------------------------------------------
Hospital Management 0.3%
Columbia/HCA Healthcare Corp. 3,500 3,500 84,438 84,438
Trigon Healthcare, Inc. 1,000 1,000 28,375 28,375
----------------------------------------------
84,438 28,375 112,813
----------------------------------------------
Medical Supply & Specialty 0.8%
Bausch & Lomb, Inc. 700 700 37,800 37,800
Baxter International, Inc. 3,400 3,400 220,575 220,575
C.R. Bard, Inc. 400 400 21,575 21,575
St. Jude Medical, Inc. 400 400 10,950 10,950
----------------------------------------------
258,375 32,525 290,900
----------------------------------------------
Pharmaceuticals 5.7%
Allergan, Inc. 800 800 85,900 85,900
Bristol-Myers Squibb Co. 13,900 13,900 1,067,694 1,067,694
Johnson & Johnson 8,300 8,300 869,425 869,425
Watson Pharmaceuticals, Inc. 6,400 6,400 203,200 203,200
----------------------------------------------
2,226,219 2,226,219
----------------------------------------------
COMMUNICATIONS 9.2%
Cellular Telephone 0.7%
Nextel Communications, Inc. "A" 1,400 1,400 120,663 120,663
Vodafone Group PLC (ADR) 2,750 2,750 131,828 131,828
----------------------------------------------
252,491 252,491
----------------------------------------------
Telephone/Communications 8.5%
ADC Telecommunications, Inc. 1,000 1,000 47,688 47,688
AT&T Corp. 16,200 400 16,600 757,330 18,700 776,030
Alltel Corp. 600 600 49,950 49,950
Bell Atlantic Corp. 7,400 7,400 480,538 480,538
BellSouth Corp. 8,100 1,200 9,300 364,500 54,000 418,500
GTE Corp. 3,600 3,600 270,000 270,000
Nortel Networks Corp. 5,400 5,400 334,463 334,463
SBC Communicatons, Inc. 12,679 200 12,879 645,837 10,188 656,025
Sprint Corp. 2,300 2,300 170,919 170,919
US West, Inc. 1,800 1,800 109,913 109,913
----------------------------------------------
3,181,188 132,838 3,314,026
----------------------------------------------
FINANCIAL 15.5%
Banks 5.1%
Bank of America Corp. 700 700 45,063 45,063
Chase Manhattan Corp. 3,400 800 4,200 297,075 69,900 366,975
Commerce Bankshares Inc. 525 525 20,344 20,344
Fleet Boston Corp. 2,013 2,013 87,817 87,817
Golden West Financial Corp. 1,800 300 2,100 201,150 33,525 234,675
Huntington Bancshares, Inc. 3,370 3,370 99,836 99,836
J.P. Morgan & Co., Inc. 1,900 1,900 248,663 248,663
PNC Bank Corp. 6,700 6,700 399,488 399,488
Regions Financial Corp. 4,300 4,300 129,269 129,269
Republic New York Corp. 1,600 1,600 101,100 101,100
SouthTrust Corp. 3,200 3,200 128,000 128,000
State Street Corp. 1,500 1,500 114,188 114,188
U.S. Trust Corporation 200 200 16,225 16,225
----------------------------------------------
1,806,586 185,057 1,991,643
----------------------------------------------
Insurance 4.2%
Aetna, Inc. 1,000 400 1,400 50,250 20,100 70,350
American International Group, Inc. 5,125 5,125 527,555 527,555
Aon Corp. 2,000 2,000 71,000 71,000
Chubb Corp. 1,400 1,400 76,825 76,825
Cigna Corp. 1,000 1,000 74,750 74,750
Conseco, Inc. 5,900 5,900 143,444 143,444
Financial Security Assurance Holdings 300 300 16,913 16,913
Ltd.
Hartford Financial Services Group, 1,800 1,800 93,263 93,263
Inc.
Jefferson Pilot Corp. 600 600 45,038 45,038
Lincoln National Corp. 2,200 2,200 101,475 101,475
MGIC Investment Corp. 1,300 1,300 77,675 77,675
Marsh & McLennan Companies, Inc. 1,700 1,700 134,406 134,406
PMI Group, Inc. 750 750 38,906 38,906
Progressive Corp. 200 200 18,513 18,513
Protective life Corp. 700 700 25,331 25,331
Transatlantic Holdings, Inc. 800 800 60,300 60,300
Travelers Property Casualty Corp. "A" 600 600 21,600 21,600
Unitrin, Inc. 1,000 1,000 37,438 37,438
----------------------------------------------
1,350,643 284,139 1,634,782
----------------------------------------------
Consumer Finance 3.1%
American Express Co. 1,100 1,100 169,400 169,400
Citigroup, Inc. 13,650 1,500 15,150 738,806 81,188 819,994
Mellon Financial Corp. 5,300 5,300 195,769 195,769
SLM Holding Corp. 600 600 29,363 29,363
----------------------------------------------
1,103,975 110,551 1,214,526
----------------------------------------------
Other Financial Companies 3.0%
Edwards (A.G.) Inc. 600 600 18,038 18,038
Federal Home Loan Mortgage Corp. 4,500 200 4,700 243,281 10,813 254,094
Federal National Mortgage Association 6,900 6,900 488,175 488,175
GreenPoint Financial Corp. 1,000 1,000 28,500 28,500
Legg Mason Inc. 1,100 1,100 40,013 40,013
Morgan Stanley Dean Witter & Co. 2,600 100 2,700 286,813 11,031 297,844
TCF Financial Corporation 900 900 26,550 26,550
----------------------------------------------
1,018,269 134,945 1,153,214
----------------------------------------------
Real Estate 0.1%
Catellus Development Corp. 1,200 1,200 14,100 14,100
----------------------------------------------
MEDIA 2.2%
Advertising 0.1%
Omnicom Group, Inc. 500 500 44,000 44,000
----------------------------------------------
Broadcasting & Entertainment 0.1%
King World Productions, Inc. 400 400 15,500 15,500
----------------------------------------------
Cable Television 1.2%
Comcast Corp. "A" 3,200 3,200 134,800 134,800
Media One Group, Inc. 4,600 4,600 326,888 326,888
----------------------------------------------
461,688 461,688
----------------------------------------------
Print Media 0.8%
Gannett Co., Inc. 1,500 1,500 115,688 115,688
Knight-Ridder, Inc. 800 800 50,800 50,800
Times Mirror Co. "A" 2,200 2,200 158,675 158,675
----------------------------------------------
274,363 50,800 325,163
----------------------------------------------
SERVICE INDUSTRIES 2.1%
Edp Services 1.0%
Affiliated Computer Services 1,100 1,100 41,800 41,800
Automatic Data Processing, Inc. 2,600 2,600 125,288 125,288
Electronic Data Systems Corp. 2,000 2,000 117,000 117,000
First Data Corp. 2,100 100 2,200 95,944 4,569 100,513
----------------------------------------------
338,232 46,369 384,601
----------------------------------------------
Investment 0.8%
Bear Stearns Companies, Inc. 600 630 1,230 25,575 26,854 52,429
Charles Schwab Corp. 1,200 1,200 46,725 46,725
Donaldson, Lufkin & Jenrette 500 500 25,875 25,875
Securities Corp.
Franklin Resources, Inc. 1,800 1,800 63,000 63,000
Lehman Brothers Holdings, Inc. 1,500 1,500 110,531 110,531
Paine Webber Group, Inc. 600 600 24,450 24,450
----------------------------------------------
245,831 77,179 323,010
----------------------------------------------
Miscellaneous Commercial 0.1%
Kelly Services, Inc. "A" 1,300 1,300 38,106 38,106
----------------------------------------------
Printing/Publishing 0.2%
Dow Jones & Co., Inc. 1,000 1,000 61,500 61,500
Houghton Mifflin Co. 300 300 12,713 12,713
----------------------------------------------
61,500 12,713 74,213
----------------------------------------------
DURABLES 5.1%
Aerospace 1.6%
AlliedSignal Inc. 2,100 100 2,200 119,569 5,694 125,263
Boeing Co. 4,700 4,700 216,494 216,494
Northrop Grumman Corp. 900 500 1,400 49,388 27,438 76,826
Rockwell International Corp. 1,600 1,600 77,500 77,500
United Technologies Corp. 1,700 279 1,979 102,850 16,880 119,730
---------------------------------------------
565,801 50,012 615,813
---------------------------------------------
Automobiles 1.4%
Borg-Warner Automotive Inc. 500 500 19,750 19,750
Cummins Engine Co., Inc. 300 300 15,206 15,206
Eaton Corp. 400 400 30,100 30,100
Ford Motor Co. 3,800 1,000 4,800 208,525 54,875 263,400
General Motors Corp. 2,700 400 3,100 189,675 10,425 200,100
Navistar International Corp. 600 600 25,013 25,013
---------------------------------------------
398,200 155,369 553,569
---------------------------------------------
Construction/Agricultural 0.1%
PACCAR, Inc. 600 600 28,275 28,275
---------------------------------------------
Leasing Companies 0.1%
Hertz Corp. 400 400 17,350 17,350
---------------------------------------------
Telecommunications Equipment 1.9%
General Instrument Corp. 600 600 32,288 32,288
Lucent Technologies, Inc. 8,600 8,600 552,550 552,550
Scientific-Atlanta, Inc. 700 700 40,075 40,075
Tellabs, Inc. 2,000 2,000 126,500 126,500
---------------------------------------------
711,338 40,075 751,413
---------------------------------------------
MANUFACTURING 9.7%
Chemicals 1.1%
Dow Chemical Co. 400 400 47,300 47,300
E.I. du Pont de Nemours & Co. 3,000 3,000 193,313 193,313
Praxair, Inc. 1,000 1,000 46,750 46,750
Rohm & Haas Co. 600 600 22,950 22,950
Sigma-Aldrich Corp. 1,500 1,500 42,750 42,750
W.R. Grace & Co. 4,200 4,200 62,738 62,738
---------------------------------------------
345,551 70,250 415,801
---------------------------------------------
Containers & Paper 0.6%
Champion International Corp. 1,100 1,100 63,594 63,594
International Paper Co. 1,800 1,800 94,725 94,725
Sealed Air Corp. 1,100 1,100 60,913 60,913
---------------------------------------------
219,232 219,232
---------------------------------------------
Diversified Manufacturing 5.8%
Ball Corporation 400 400 16,125 16,125
Cooper Industries, Inc. 1,000 500 1,500 43,063 21,531 64,594
Fortune Brands, Inc. 1,900 1,900 67,331 67,331
General Electric Co. 9,700 9,700 1,314,956 1,314,956
Honeywell, Inc. 700 100 800 73,806 10,544 84,350
Loews Corp. 800 800 56,700 56,700
Minnesota Mining & Manufacturing Co. 3,000 3,000 285,188 285,188
National Service Industries, Inc. 500 500 16,125 16,125
Pentair, Inc. 500 500 18,813 18,813
Tenneco, Inc. 2,200 2,200 35,200 35,200
Textron, Inc. 1,000 1,000 77,188 77,188
Tyco International Ltd. (New) 4,800 456 5,256 191,700 18,212 209,912
---------------------------------------------
2,145,132 101,350 2,246,482
---------------------------------------------
Electrical Products 0.4%
Emerson Electric Co. 2,300 2,300 138,144 138,144
Thomas & Betts Corp. 800 800 35,900 35,900
---------------------------------------------
138,144 35,900 174,044
---------------------------------------------
Industrial Specialty 1.1%
Corning, Inc. 1,000 1,000 78,625 78,625
Carlisle Companies Inc. 600 600 19,950 19,950
Centex Corp. 900 900 24,131 24,131
Fleetwood Enterprises 300 300 6,544 6,544
Johns Manville Corp. 600 600 6,563 6,563
Johnson Controls Inc. 600 600 36,450 36,450
PPG Industries, Inc. 1,600 1,600 97,000 97,000
QUALCOMM Inc. 200 200 44,550 44,550
Sherwin-Williams Co. 2,700 500 3,200 60,413 11,188 71,601
Teleflex Incorporated 600 600 20,438 20,438
The Valspar Corp. 1,200 1,200 36,225 36,225
---------------------------------------------
280,588 161,489 442,077
---------------------------------------------
Machinery/Components/Controls 0.6%
Millipore Corp. 2,400 2,400 76,500 76,500
Ingersoll-Rand Co. 700 700 36,575 36,575
PE Corp-PE Biosystems Group 1,200 1,200 77,850 77,850
Pitney Bowes, Inc. 500 500 22,781 22,781
Tecumseh Products Co., Class A 500 500 23,969 23,969
---------------------------------------------
177,131 60,544 237,675
---------------------------------------------
Miscellaneous 0.1%
Hon Industries, Inc. 2,000 2,000 39,250 39,250
---------------------------------------------
TECHNOLOGY 19.2%
Computer Software 7.2%
Adobe Systems Inc. 1,200 1,200 83,925 83,925
America Online, Inc. 3,500 3,500 453,906 453,906
BMC Software, Inc. 2,600 2,600 166,888 166,888
Computer Associates International, 2,100 2,100 118,650 118,650
Inc.
Compuware Corp. 2,600 300 2,900 72,313 8,344 80,657
Comverse Technologies Inc. 500 500 56,750 56,750
Electronic Arts Inc. 200 200 16,163 16,163
Microsoft Corp. 16,300 16,300 1,508,769 1,508,769
Oracle Systems Corp. 5,100 5,100 242,569 242,569
Symantec Corp. 200 200 9,550 9,550
Synopsys Ltd. 600 600 37,388 37,388
---------------------------------------------
2,563,095 212,120 2,775,215
---------------------------------------------
Diverse Electronic Products 1.4%
Applied Materials, Inc. 1,700 1,700 152,681 152,681
KLA Tencor Corp. 1,100 1,100 87,106 87,106
Motorola, Inc. 2,500 2,500 243,594 243,594
Solectron Corp. 600 600 45,150 45,150
---------------------------------------------
483,381 45,150 528,531
---------------------------------------------
Edp Peripherals 0.8%
EMC Corp. 4,100 4,100 299,300 299,300
---------------------------------------------
Electronic Components/Distributors 2.6%
Cisco Systems, Inc. 10,200 10,200 754,800 754,800
Gateway, Inc. 2,400 1,100 3,500 158,550 72,669 231,219
Tech Data Corp. 400 400 7,525 7,525
---------------------------------------------
913,350 80,194 993,544
---------------------------------------------
Electronic Data Processing 3.9%
Apple Computer, Inc. 2,100 200 2,300 168,263 16,025 184,288
Hewlett-Packard Co. 4,200 800 5,000 311,063 59,250 370,313
International Business Machines Corp. 6,200 6,200 609,925 609,925
Sun Microsystems, Inc. 2,400 2,400 253,950 253,950
Unisys Corp. 4,700 4,700 113,975 113,975
---------------------------------------------
1,457,176 75,275 1,532,451
---------------------------------------------
Military Electronics 0.2%
Raytheon Co. "B" 1,400 1,400 40,775 40,775
Litton Industries Inc. 700 700 32,856 32,856
---------------------------------------------
40,775 32,856 73,631
---------------------------------------------
Office/Plant Automation 0.1%
3Com Corp. 1,700 1,700 49,300 49,300
---------------------------------------------
Semiconductors 3.0%
Intel Corp. 10,200 1,100 11,300 789,863 85,181 875,044
Micron Technology, Inc. 400 400 28,525 28,525
Texas Instruments, Inc. 2,600 2,600 233,350 233,350
Xilinx, Inc. 400 400 31,450 31,450
---------------------------------------------
1,051,738 116,631 1,168,369
---------------------------------------------
ENERGY 6.7%
Engineering 0.2%
Fluor Corp. 1,600 1,600 63,800 63,800
---------------------------------------------
Oil & Gas Production 2.0%
Apache Corp. 1,400 1,400 54,600 54,600
Burlington Resources, Inc. 1,300 1,300 45,338 45,338
Kerr-McGee Corp. 1,000 1,000 53,750 53,750
Royal Dutch Petroleum Co. (New York 9,900 9,900 593,381 593,381
shares)
Union Pacific Resources Group 3,200 3,200 46,400 46,400
---------------------------------------------
793,469 793,469
---------------------------------------------
Oil Companies 3.7%
Ashland Inc. 1,600 1,600 52,800 52,800
Atlantic Richfield Co. 1,100 1,100 102,506 102,506
Chevron Corp. 2,700 2,700 246,544 246,544
Exxon Corp. 8,900 8,900 659,156 659,156
Mobil Corp. 2,200 2,200 212,300 212,300
Texaco, Inc. 2,200 2,200 135,025 135,025
USX Marathon Group 1,600 1,600 46,600 46,600
---------------------------------------------
1,402,131 52,800 1,454,931
---------------------------------------------
Oil / Gas Transmission 0.5%
Enron Corp. 2,600 2,600 103,838 103,838
El Paso Energy Corporation 700 700 28,700 28,700
Noble Drilling Corp. 500 500 11,094 11,094
Sunoco Inc. 500 500 12,063 12,063
Tidewater Inc. 900 900 27,000 27,000
--------------------------------------------
103,838 78,857 182,695
--------------------------------------------
Oilfield Services/Equipment 0.3%
Baker Hughes, Inc. 2,900 2,900 81,019 81,019
Schlumberger Ltd. 900 900 54,506 54,506
--------------------------------------------
135,525 135,525
--------------------------------------------
METALS & MINERALS 0.5%
Precious Metals 0.2%
Barrick Gold Corp. 4,700 4,700 86,069 86,069
--------------------------------------------
Steel & Metals 0.3%
Alcoa, Inc. 1,400 200 1,600 85,050 12,150 97,200
--------------------------------------------
CONSTRUCTION 0.5%
Building Materials 0.1%
LaFarge Corp. 500 500 14,844 14,844
Vulcan Materials Co. 900 900 37,181 37,181
--------------------------------------------
52,025 52,025
--------------------------------------------
Building Products 0.2%
Georgia Pacific Group 1,200 1,200 47,625 47,625
Masco Corp. 700 700 21,350 21,350
--------------------------------------------
47,625 21,350 68,975
--------------------------------------------
Forest Products 0.2%
Weyerhaeuser Co. 1,400 1,400 83,563 83,563
--------------------------------------------
TRANSPORTATION 0.9%
Air Freight 0.1%
FDX Corp. 1,000 200 1,200 43,063 8,613 51,676
--------------------------------------------
Airlines 0.4%
Delta Air Lines, Inc. 2,900 2,900 157,869 157,869
Southwest Airlines Co. 900 900 15,131 15,131
--------------------------------------------
157,869 15,131 173,000
--------------------------------------------
Railroads 0.3%
Burlington Northern Santa Fe Corp. 500 500 15,938 15,938
Trinity Industries, Inc. 600 600 17,888 17,888
Union Pacific Corp. 1,800 1,800 100,350 100,350
--------------------------------------------
100,350 33,826 134,176
--------------------------------------------
Trucking 0.1%
CNF Transportation, Inc. 400 400 13,225 13,225
--------------------------------------------
UTILITIES 2.9%
Electric Utilities 2.4%
AES Corp. 900 1,300 2,200 50,794 73,350 124,144
Allegheny Energy, Inc. 1,300 1,300 41,356 41,356
DTE Energy Co. 500 500 16,594 16,594
Duke Energy Corp. 5,000 5,000 282,500 282,500
FPL Group, Inc. 2,800 2,800 140,875 140,875
Florida Progress Corp. 1,600 1,600 73,300 73,300
GPU, Inc. 300 300 10,181 10,181
MidAmerican Energy Holdings Co. 800 800 26,900 26,900
NSTAR 1,255 1,255 47,768 47,768
OGE Energy Corp. 500 500 11,344 11,344
Pudget Sound Energy, Inc. 1,800 1,800 39,825 39,825
Southern Co. 2,900 2,900 77,031 77,031
Texas Utilities Co., Inc. 900 900 34,875 34,875
--------------------------------------------
551,200 375,493 926,693
--------------------------------------------
Natural Gas Distribution 0.5%
Eastern Enterprises 3,300 3,300 168,713 168,713
Reliant Energy, Inc. 600 600 16,350 16,350
--------------------------------------------
185,063 185,063
--------------------------------------------
============================================
COMMON STOCKS TOTAL 34,391,835 4,019,820 38,411,655
============================================
Common Stocks (Cost of $32,835,397 $3,589,251 and $36,424,648 respectively)
============================================
TOTAL INVESTMENT PORTFOLIO 34,605,835 4,019,820 38,625,655
============================================
Investment Portfolio (Total Cost of $33,049,397 $3,589,251 and 36,638,648 respectively)
PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
PRO FORMA COMBINING CONDENSED STATEMENT OF ASSETS AND LIABILITIES
AS OF OCTOBER 31, 1999 (UNAUDITED)
SELECT 500 TAX MANAGED PRO FORMA PRO FORMA
FUND GROWTH FUND ADJUSTMENTS COMBINED
------------------ ----------------- --------------- ----------------
Investments, at value $ 34,605,835 $ 4,019,820 $ 38,625,655
Cash 620 84,302 84,922
Other assets less liabilities (30,400) (53,986) $ (2,437)(2) (86,823)
================== ================= =============== ================
Net assets $ 34,576,055 $ 4,050,136 $ (2,437) $ 38,623,754
================== ================= =============== ================
Shares outstanding 2,820,836 296,592 33,563 3,150,991
Net asset value per share $ 12.26 $ 13.66 $ 12.26
PRO FORMA COMBINING CONDENSED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTH PERIOD ENDED OCTOBER 31, 1999 (UNAUDITED)
SELECT 500 (6) TAX MANAGED PRO FORMA PRO FORMA
FUND GROWTH FUND ADJUSTMENTS COMBINED
----------------------------------------------------------------------------
Investment Income:
Interest and dividend income $ 229,820 56,664 $ -- $ 286,484
----------------------------------------------------------------------------
Total Investment Income 229,820 56,664 286,484
Expenses
Management fees 102,685 29,423 (40,369)(3) 91,739
Trustee fees 7,181 28,800 (28,800)(4) 7,181
All other expenses 210,320 140,017 (304,467)(5) 45,870
------------------------------------------------------ ------------------
----------------------------------------------------------------------------
Total expenses before reductions 320,186 198,240 (373,636) 144,790
Expense reductions (210,166) (152,263) 362,429 (7) -
----------------------------------------------------------------------------
Expenses, net 110,020 45,977 (11,207) 144,790
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net investment income (loss) 119,800 10,687 11,207 141,694
----------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss)
on Investments:
Net realized gain (loss) from investments (600,907) (132,486) -- (733,393)
Net unrealized appreciation (depreciation)
of investments 1,556,438 277,558 -- 1,833,996
----------------------------------------------------------------------------
Net increase in net assets from operations $ 1,075,331 $ 155,759 $ 11,207 $ 1,242,297
============================================================================
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 Select 500 Fund and
Scudder Tax Managed Growth 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 $2,437 to be borne by the Acquired Fund.
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. Commenced operations on May 17, 1999
7. 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
57
ultimately determined that he is not entitled to
indemnification under this Section 4.3, provided that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security provided by the recipient, or the Trust shall
be insured against losses arising out of any such advances; or
(ii) a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees act
on the matter) or an independent legal counsel in a written opinion
shall determine, based upon a review of readily available facts (as
opposed to a full trial-type inquiry), that there is 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
March 17, 1988. Incorporated by reference to
Post-Effective Amendment No. 25 to the
Registrant's Registration Statement on Form N-1A,
as amended (the "Registration Statement").
(a)(2) Establishment and Designation of Series dated
December 15, 1986.
(Incorporated by reference to Exhibit 1(b) to
Post-Effective Amendment No. 25 to the
Registration Statement.)
(a)(3) Amended Establishment and Designation of Series
dated May 4, 1987.
(Incorporated by reference to Exhibit 1(c) to
Post-Effective Amendment No. 25 to the
Registration Statement.)
(a)(4) Certificate of Amendment dated December 13, 1990.
(Incorporated by reference to Exhibit 1(d) to
Post-Effective Amendment No. 25 to the
Registration Statement.)
(a)(5) Establishment and Designation of Series dated
October 6, 1992.
(Incorporated by reference to Exhibit 1(e) to
Post-Effective Amendment No. 25 to the
Registration Statement.)
(a)(6) Redesignation of Series by the Registrant on
behalf of Scudder Capital Growth Fund, dated
December 2, 1996.
(Incorporated by reference to Exhibit 1(f) to
Post-Effective Amendment No. 25 to the
Registration Statement.)
(a)(7) Establishment and Designation of Classes of Shares
of Beneficial Interest, $0.01 Par Value, Kemper A,
B & C Shares, and Scudder Shares.
(Incorporated by reference to Post-Effective
Amendment No. 30 to the
58
Registration Statement.)
(a)(8) Redesignation of Series, Scudder Value Fund to
Value Fund.
(Incorporated by reference to Post-Effective
Amendment No. 30 to the Registration Statement.)
(2) (b)(1) By-Laws as of October 16, 1985.
(Incorporated by reference to Exhibit 2(a) to
Post-Effective Amendment No. 25 to the
Registration Statement.)
(b)(2) Amendment to the By-Laws of Registrant as amended
through December 9, 1985.
(Incorporated by reference to Exhibit 2(b) to
Post-Effective Amendment No. 25 to the
Registration Statement.)
(b)(3) Amendment to the Registrant's By-Laws dated
December 12, 1991.
(Incorporated by reference to Exhibit 2(c) to
Post-Effective Amendment No. 25 to the
Registration Statement.)
(b)(4) Amendment to the Registrant's By-Laws dated
September 17, 1992.
(Incorporated by reference to the Exhibit 2(d) to
Post-Effective Amendment No. 25 to the
Registration Statement.)
(3) Inapplicable.
(4) Agreement and Plan of Reorganization filed as
Exhibit A to Part A hereof.
(5) Inapplicable.
(6) (d)(1) Investment Management Agreement between the
Registrant, on behalf of Scudder Large Company
Value Fund, and Scudder Kemper Investments, Inc.
dated September 7, 1998.
(Incorporated by reference to Post-Effective
Amendment No. 30 to the Registration Statement.)
(d)(2) Investment Management Agreement between the
Registrant, on behalf of Value Fund, and Scudder
Kemper Investment, Inc. dated September 7, 1998.
(Incorporated by reference to Post-Effective
Amendment No. 30 to the Registration Statement.)
(d)(3) Investment Management Agreement between the
Registrant on behalf of Scudder Select 500 Fund
and Scudder Kemper Investments, Inc., dated March
31, 1999.
(Incorporated by reference to Post-Effective
Amendment No. 33 to the Registration Statement.)
(d)(4) Investment Management Agreement between the
Registrant on behalf of Scudder Select 1000 Growth
Fund and Scudder Kemper Investments, Inc., dated
March 31, 1999.
(Incorporated by reference to Post-Effective
Amendment No. 33 to the
59
Registration Statement.)
(7) (e)(1) Underwriting and Distribution Services Agreement
between the Registrant, on behalf of Value Fund,
and Kemper Distributors, Inc. dated September 7,
1998.
(Incorporated by reference to Post-Effective
Amendment No. 30 to the Registration Statement.)
(e)(2) Underwriting Agreement between the Registrant and
Scudder Investor Services, Inc. dated September 7,
1998.
(Incorporated by reference to Post-Effective
Amendment No. 30 to the Registration Statement.)
(e)(3) Amendment dated September 30, 1999 to the
Underwriting and Distribution Services Agreement
between the Registrant, on behalf of Value Fund,
and Kemper Distributors, Inc.
(Incorporated by reference to Post-Effective
Amendment No. 35 to the Registration Statement.)
(e)(4) Form of Amendment dated December 7, 1999 to the
Underwriting and Distribution Services Agreement
between the Registrant, on behalf of Value Fund,
and Kemper Distributors, Inc.
Filed herein.
(8) Inapplicable.
(9) (g)(1) Custodian Agreement between the Registrant and
State Street Bank and Trust Company ("State Street
Bank") dated October 1, 1982.
(Incorporated by reference to Exhibit 8(a)(1) to
Post-Effective Amendment No. 25 to the
Registration Statement.)
(g)(1)(a) Fee schedule for Exhibit (g)(1).
(Incorporated by reference to Exhibit 8(a)(2) to
Post-Effective Amendment No. 25 to the
Registration Statement.)
(g)(2) Amendment to Custodian Contract dated March 31,
1986.
(Incorporated by reference to Exhibit 8(a)(3) to
Post-Effective Amendment No. 25 to the
Registration Statement.)
(g)(3) Amendment to Custodian Contract dated October 1,
1982.
(Incorporated by reference to Exhibit 8(a)(4)to
Post-Effective Amendment No. 25 to the
Registration Statement.)
(g)(4) Amendment to Custodian Contract dated September
16, 1988.
(Incorporated by reference to Exhibit 8(a)(5) to
Post-Effective Amendment No. 25 to the
Registration Statement.)
(g)(5) Amendment to Custodian Contract dated December 13,
1990.
(Incorporated by reference to Exhibit 8(a)(6) to
Post-Effective Amendment No. 25 to the
Registration Statement.)
60
(g)(5)(a) Fee schedule for Exhibit (g)(5) dated August 1,
1994.
(Incorporated by reference to Exhibit 8(a)(7) to
Post-Effective Amendment No. 25 to the
Registration Statement.)
(g)(6) Amendment to Custodian Contract dated March 1,
1999.
(Incorporated by reference to Post-Effective
Amendment No. 35 to the Registration Statement.)
(g)(6)(a) Form of Fee schedule for Exhibit (g)(6).
(Incorporated by reference to Post-Effective
Amendment No. 35 to the Registration Statement.)
(g)(7) Agency Agreement between State Street Bank and
Trust Company and The Bank of New York, London
office dated January 1, 1979.
(Incorporated by reference to Exhibit (b)(1) to
Post-Effective Amendment No. 25 to the
Registration Statement.)
(g)(8) Subcustodian Agreement between State Street Bank
and the Chase Manhattan Bank, N.A. dated September
1, 1986.
(Incorporated by reference to Exhibit 8(c)(1) to
Post-Effective Amendment No. 25 to the
Registration Statement.)
(10) Mutual Funds Multi-Distribution System Plan, Rule
18f-3 Plan.
(Incorporated by reference to Exhibit 18 to
Post-Effective Amendment No. 29 to the
Registration Statement.)
(11) Opinion and Consent of Dechert Price & Rhoads
filed herein.
(12) Opinion of Willkie Farr & Gallagher to be filed by
post-effective amendment.
(13) (h)(1) Transfer Agency and Service Agreement between the
Registrant and Scudder Service Corporation dated
October 2, 1989.
(Incorporated by reference to Exhibit 9(a)(1) to
Post-Effective Amendment No. 25 to the
Registration Statement.)
(h)(1)(a) Fee schedule for Exhibit (h)(1).
(Incorporated by reference to Exhibit 9(a)(2) to
Post Effective Amendment No. 25 to the
Registration Statement.)
(h)(1)(b) Form of revised fee schedule for Exhibit (h)(1).
(Incorporated by reference to Exhibit 9(a)(3) to
Post-Effective Amendment No. 23 to the
Registration Statement.)
(h)(2) Transfer Agency Fee Schedule between the
Registrant and Kemper Service Company on behalf of
Scudder Value Fund dated January 1, 1999.
(Incorporated by reference to Post-Effective
Amendment No. 35 to the Registration Statement.)
61
(h)(3) Agency Agreement between the Registrant on behalf
of Value Fund and Kemper Service Company dated
April 16, 1998.
(Incorporated by reference to Post-Effective No.
30 to the Registration Statement.)
(h)(4) Amendment No. 1 dated September 30, 1999 to the
Agency Agreement between the Registrant, on behalf
of Value Fund, and Kemper Service Company.
(Incorporated by reference to Post-Effective
Amendment No. 35 to the Registration Statement.)
(h)(5) COMPASS Service Agreement between Scudder Trust
Company and the Registrant dated October 1, 1995.
(Incorporated by reference to Exhibit 9(b)(3)to
Post-Effective Amendment No. 24 to this
Registration Statement.)
(h)(6) Shareholder Services Agreement between the
Registrant and Charles Schwab & Co., Inc. dated
June 1, 1990.
(Incorporated by reference to Exhibit 9(c) to
Post-Effective Amendment No. 25 to the
Registration Statement.)
(h)(7) Service Agreement between Copeland Associates,
Inc. and Scudder Service Corporation, on behalf of
Scudder Equity Trust, dated June 8, 1995.
(Incorporated by reference to Exhibit 9(c)(1) to
Post-Effective Amendment No. 23 to this
Registration Statement.)
(h)(8) Fund Accounting Services Agreement between the
Registrant, on behalf of Scudder Capital Growth
Fund, and Scudder Fund Accounting Corporation
dated October 19, 1994.
(Incorporated by reference to Exhibit 9(e)(1) to
Post-Effective Amendment No. 25 to the
Registration Statement.)
(h)(9) Fund Accounting Services Agreement between the
Registrant, on behalf of Scudder Value Fund, and
Scudder Fund Accounting Corporation dated October
24, 1994.
(Incorporated by reference to Exhibit 9(e)(2) to
Post-Effective Amendment No. 25 to the
Registration Statement.)
(h)(10) Amendment No. 1 dated September 30, 1999 to the
Fund Accounting Service Agreement between the
Registrant, on behalf of Value Fund, and Scudder
Fund Accounting Corporation.
(Incorporated by reference to Post-Effective
Amendment No. 35 to the Registration Statement.)
62
(h)(11) Special Servicing Agreement dated November 15,
1996 between Scudder Pathway Series and the
Registrant, on behalf of Scudder Capital Growth
Fund and Scudder Value Fund.
(Incorporated by reference to Exhibit 9(f) to
Post-Effective Amendment No. 25 to the
Registration Statement.)
(h)(12) Administrative Services Agreement between the
Registrant and Kemper Distributors, Inc. dated
April 1998.
(Incorporated by reference to Post-Effective
Amendment No. 30 to the Registration Statement.)
(h)(12)(a) Amendment No. 1 dated September 14, 1999 to the
Administrative Services Agreement between the
Registrant on behalf of Value Fund and Kemper
Distributors, Inc.
(Incorporated by reference to Post-Effective
Amendment No. 35 to the Registration Statement.)
(h)(13) Fund Accounting Services Agreement between the
Registrant, on behalf of Scudder Select 500 Fund,
and Scudder Fund Accounting Corporation dated
March 31, 1999.
(Incorporated by reference to Post-Effective
Amendment No. 33 to the Registration Statement.)
(h)(14) Fund Accounting Services Agreement between the
Registrant, on behalf of Scudder Select 1000
Growth Fund, and Scudder Fund Accounting
Corporation dated March 31, 1999.
(Incorporated by reference to Post-Effective
Amendment No. 33 to the Registration Statement.)
(h)(15) License Agreement between the Registrant, on
behalf of Scudder Select 500 Fund, and Standard &
Poor's Corporation, dated March 31, 1999.
(Incorporated by reference to Post-Effective
Amendment No. 34 to the Registration Statement.)
(h)(16) Research License Agreement between the Registrant,
on behalf of Scudder Select 1000 Growth Fund, and
Frank Russell Company dated March 31, 1999.
(Incorporated by reference to Post-Effective
Amendment No. 34 to the Registration Statement.)
(14) Consent of PricewaterhouseCoopers LLP filed
herein.
(15) Inapplicable.
(16) Powers of Attorney filed herein.
(17) Form of Proxy filed herein.
63
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.
64
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Value Equity 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.
VALUE EQUITY 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 March 3, 2000
- ----------------------
Linda C. Coughlin
/s/ Sheryle J. Bolton* Trustee March 3, 2000
- ----------------------
Sheryle J. Bolton
/s/ William T. Burgin* Trustee March 3, 2000
- ----------------------
William T. Burgin
/s/ Keith R. Fox* Trustee March 3, 2000
- -----------------
Keith R. Fox
/s/ William H. Luers* Trustee March 3, 2000
- ---------------------
William H. Luers
/s/ Kathryn L. Quirk* Trustee, Vice President March 3, 2000
- --------------------- and Assistant Secretary
Kathryn L. Quirk
/s/ Joan E. Spero* Trustee March 3, 2000
- ------------------
Joan E. Spero
/s/ John R. Hebble Treasurer (Principal Financial March 3, 2000
- ------------------- and Accounting Officer)
John R. Hebble
*By: /s/ Sheldon A. Jones March 3, 2000
--------------------
Sheldon A. Jones
Attorney-in-fact
65
*Executed pursuant to powers of attorney filed with the Registrant's
Registration Statement on Form N-14 as filed with the Commission electronically
herewith.
66