SCUDDER HIGH INCOME TRUST
SCUDDER INTERMEDIATE GOVERNMENT TRUST
SCUDDER MULTI-MARKET INCOME TRUST
SCUDDER MUNICIPAL INCOME TRUST
SCUDDER STRATEGIC INCOME TRUST
SCUDDER STRATEGIC MUNICIPAL INCOME TRUST
IMPORTANT NEWS
FOR SCUDDER FUND SHAREHOLDERS
While we encourage you to read the full text of the enclosed Proxy
Statement, here's a brief overview of some matters affecting your Fund that will
be the subject of a shareholder vote.
Q & A: QUESTIONS AND ANSWERS
Q. WHAT IS HAPPENING?
A. On December 3, 2001, Zurich Financial Services ("Zurich Financial") the
majority owner of Zurich Scudder Investments, Inc., your Fund's
investment manager ("Scudder"), entered into a Transaction Agreement
with Deutsche Bank AG ("Deutsche Bank"). Under the Transaction
Agreement, Deutsche Bank will acquire 100% of Scudder, not including
certain U.K. operations, which will be retained by the Zurich Financial
entities. Following this transaction (the "Transaction"), Scudder will
become part of Deutsche Asset Management and will change its name.
As a result of the sale of Scudder to Deutsche Bank, your Fund's
investment management agreement with Scudder will terminate. In order
for Scudder to continue to serve as investment manager of your Fund,
the Fund's shareholders must approve a new investment management
agreement. The enclosed Proxy Statement gives you additional
information on Deutsche Bank and the proposed new investment management
agreement as well as certain other matters. You are being asked to vote
on the new investment management agreement for your Fund, the election
of Trustees that act on behalf of your Fund, the ratification of the
selection of Ernst & Young LLP as your Fund's independent auditors and,
if you are a shareholder of Scudder Multi-Market Income Trust or
Scudder Strategic Income Trust, new sub-advisory agreements. The Board
members of your Fund, including those who are not affiliated with your
Fund, Scudder or Deutsche Bank, recommend that you vote FOR the
approval of the new investment management agreement for your Fund, the
election of the Trustees and each other proposal applicable to your
Fund.
Q. WHY AM I BEING ASKED TO VOTE ON THE PROPOSED NEW INVESTMENT MANAGEMENT
AGREEMENT?
A. The Investment Company Act of 1940, which regulates mutual funds in the
United States such as your Fund, requires a shareholder vote to approve
a new investment management agreement whenever there is a "change in
control" of a fund's investment manager. The proposed sale of Scudder
to Deutsche Bank will result in such a change of control and therefore
requires shareholder approval of a new investment management agreement
with your Fund in order for Scudder to continue serving as your Fund's
investment manager.
Q. HOW WILL THE TRANSACTION WITH DEUTSCHE BANK AFFECT ME AS A FUND
SHAREHOLDER?
A. Your investment in your Fund will not change as a result of the
Transaction. You will still own the same shares in the same Fund, and
the value of your investment will not change as a result of the
Transaction with Deutsche Bank. Your Fund will continue to be branded
and marketed as a "Scudder" Fund. Your Fund's investment management
agreement will still be with Scudder and the terms of the new
investment management agreement are substantially identical to the
terms of the current investment management agreement, except that, to
the extent permissible, pursuant to the new investment management
agreement, Scudder would be authorized to adjust the duties, the amount
of assets to be managed and the fees paid to any advisory entity that
Scudder controls, is controlled by, or is under common control with,
upon the approval of the board members of your Fund, including those
who are not affiliated with your Fund, Scudder or Deutsche Bank.
Scudder, though, will be combined with and integrated into Deutsche
Bank's investment management organization and, as described more fully
in the enclosed Proxy Statement, many of the personnel and resources of
Deutsche Asset Management will be involved in managing your Fund.
Q. WHAT WILL HAPPEN IF SHAREHOLDERS DO NOT APPROVE THE NEW INVESTMENT
MANAGEMENT AGREEMENT?
A. If shareholders do not approve the new investment management agreement
and the Transaction with Deutsche Bank is completed, the current
investment management agreement will terminate and your Fund's Board
will take such action as it deems to be in the best interests of your
Fund and its shareholders, including entering into an interim
investment management agreement with Scudder. This is discussed in more
detail in the enclosed Proxy Statement under "Information Concerning
the Transaction and Deutsche Bank" in Proposal 2.
Q. WILL THE INVESTMENT MANAGEMENT FEE RATE BE THE SAME UPON APPROVAL OF
THE NEW INVESTMENT MANAGEMENT AGREEMENT?
A. Yes, the investment management fee rate applicable to your Fund under
the new investment management agreement is the same as that currently
in effect.
Q. HOW DOES MY FUND'S BOARD RECOMMEND THAT I VOTE?
A. After careful consideration, the members of your Fund's Board,
including those who are not affiliated with your Fund, Scudder or
Deutsche Bank, unanimously recommend that you vote in favor of the
new investment management agreement. The reasons for their
recommendation are discussed in more detail in the enclosed Proxy
Statement under "Board Approval and Recommendation" and "Board
Considerations" in Proposal 2.
Q. WILL MY FUND PAY FOR THE PROXY SOLICITATION AND LEGAL COSTS ASSOCIATED
WITH THIS TRANSACTION?
A. No, neither you nor your Fund will bear any costs associated with the
proposed Transaction. Scudder has agreed to bear these costs.
Q. WHAT SHOULD I DO IF I RECEIVE MORE THAN ONE PROXY CARD?
A. Because each Fund must vote separately, you are being sent a proxy card
for each Fund account that you have. Please vote on all applicable
proposals shown on each proxy card that you receive.
Q. WHOM SHOULD I CALL FOR ADDITIONAL INFORMATION ABOUT THIS PROXY
STATEMENT?
A. Please call Georgeson Shareholder Communications, your Fund's
information agent, at [ ].
February 25, 2002
Dear Shareholder:
The Zurich Financial Services ("Zurich Financial") entities that
currently own a majority of Zurich Scudder Investments, Inc. ("Scudder") have
entered into a Transaction Agreement with Deutsche Bank AG ("Deutsche Bank").
Under the Transaction Agreement, Deutsche Bank will acquire 100% of Scudder, not
including certain Scudder U.K. operations, which will be retained by the Zurich
Financial entities (the "Transaction"). Following the Transaction, Scudder will
become part of Deutsche Asset Management, the marketing name in the United
States for the asset management activities of Deutsche Bank and certain of its
subsidiaries, and will change its name. Because of the Transaction, it is
necessary for the shareholders of each of the funds for which Scudder acts as
investment manager, including your Fund, to approve a new investment management
agreement in order for Scudder to continue serving as investment manager.
The following important facts about the Transaction are outlined below:
o The Transaction will have no effect on the number of shares you own or
the value of those shares.
o The investment management fee rate applicable to your Fund under the
new investment management agreement is the same as that currently in
effect.
o Your Fund's investment management agreement will still be with Scudder,
and the terms of the new investment management agreement will be
substantially identical to the terms of the current investment
management agreement, except for the addition of certain language that,
to the extent permissible, pursuant to the new investment management
agreement, Scudder would be authorized to adjust the duties, the amount
of assets to be managed and the fees paid to any advisory entity that
Scudder controls, is controlled by, or is under common control with,
upon the approval of the board members of your Fund, including those
who are not affiliated with your Fund, Scudder or Deutsche Bank.
o Scudder will be combined with and integrated into Deutsche Bank's
investment management organization, and many of the personnel and
resources of Deutsche Asset Management will be involved in managing
your Fund.
o The members of your Fund's Board, including those who are not
affiliated with your Fund, Scudder or Deutsche Bank, have carefully
reviewed the proposed Transaction and unanimously recommend you vote
in favor of the new investment management agreement.
You are also being asked to vote on the election of your Fund's Board
as well as the ratification of the selection of your Fund's independent
auditors.
Please take the time to read the enclosed materials.
The question and answer section that begins on the front cover of the
Proxy Statement discusses the proposals that require shareholder approval. The
Proxy Statement itself provides greater detail about the proposals, why they are
being made and how they apply to your Fund. The Board recommends that you read
the enclosed materials carefully and vote in favor of each proposal.
To vote, simply fill out the enclosed proxy card(s) -- be sure to sign
and date it -- and return it to us in the enclosed postage-paid envelope.
Because all of the funds for which Scudder acts as investment manager are
holding shareholder meetings regarding these and other issues, you may receive
more than one proxy card. If so, please vote each one.
Your vote is very important to us. If we do not hear from you by
[date], our proxy solicitor may contact you. Thank you for your response and for
your continued investment with Scudder.
Respectfully,
Mark S. Casady
President
PRELIMINARY COPY
SCUDDER HIGH INCOME TRUST
SCUDDER INTERMEDIATE GOVERNMENT TRUST
SCUDDER MULTI-MARKET INCOME TRUST
SCUDDER MUNICIPAL INCOME TRUST
SCUDDER STRATEGIC INCOME TRUST
SCUDDER STRATEGIC MUNICIPAL INCOME TRUST
NOTICE OF JOINT ANNUAL MEETING OF SHAREHOLDERS
Please take notice that a joint annual meeting (each, a "Meeting") of
the shareholders of Scudder High Income Trust ("KHI"), Scudder Intermediate
Government Trust ("KGT"), Scudder Multi-Market Income Trust ("KMM"), Scudder
Municipal Income Trust ("KTF"), Scudder Strategic Income Trust ("KST"), and
Scudder Strategic Municipal Income Trust ("KSM") (each, a "Fund" and
collectively, the "Funds") will be held at the offices of Zurich Scudder
Investments, Inc., 13th Floor, Two International Place, Boston, Massachusetts
02110-4103, on March 28, 2002, at 4:00 p.m., Eastern time, for the following
purposes and to transact such other business, if any, as may properly come
before the Meetings:
Proposal 1: To elect Trustees to the Board of each Fund as outlined below:
a. For KHI, KGT, KMM and KST only, to elect twelve
Trustees to the Board of each Fund; and
b. For KTF and KSM only, to elect twelve Trustees to the
Board of each Fund with ten Trustees to be elected by
the holders of Preferred and Common Shares voting
together and two Trustees to be elected by holders of
the Preferred Shares only.
Proposal 2: For each Fund, to approve a new investment management agreement for
the Fund with Zurich Scudder Investments, Inc.;
Proposal 3: (For shareholders of KMM and KST only) to approve a new sub-advisory
agreement for each Fund between Zurich Scudder Investments,
Inc.and Deutsche Asset Management Investment Services Limited; and
Proposal 4: To ratify or reject the selection of Ernst & Young LLP as the
independent auditors for each Fund for the Fund's current fiscal
year.
The Board of each Fund recommends that shareholders vote FOR all
applicable Proposals.
The persons named as proxies will vote in their discretion on any other
business that may properly come before a Meeting or any adjournments or
postponements thereof.
Holders of record of shares of each Fund at the close of business on
February 8, 2002 are entitled to vote at a Meeting and at any adjournments or
postponements thereof. Shareholders are entitled to one vote for each share
held.
In the event that the necessary quorum to transact business or the vote
required to approve any Proposal is not obtained at a Meeting with respect to
one or more Funds, 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 shares of the concerned Fund present in person or by proxy at a
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 Boards,
John Millette
Secretary
February 25, 2002
IMPORTANT - We urge you to sign and date the enclosed proxy card(s) and return
it in the enclosed addressed envelope which requires no postage. Your prompt
return of the enclosed proxy card(s) may save the necessity of further
solicitations. If you wish to attend the Meetings and vote your shares in person
at that time, you will still be able to do so.
PRELIMINARY COPY
February 25, 2002
SCUDDER HIGH INCOME TRUST
SCUDDER INTERMEDIATE GOVERNMENT TRUST
SCUDDER MULTI-MARKET INCOME TRUST
SCUDDER MUNICIPAL INCOME TRUST
SCUDDER STRATEGIC INCOME TRUST
SCUDDER STRATEGIC MUNICIPAL INCOME TRUST
222 South Riverside Plaza
Chicago, Illinois 60606
JOINT PROXY STATEMENT
General
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Trustees (the "Board," the Trustees of each of which are
referred to as the "Trustees" of the relevant Board) of each of Scudder High
Income Trust ("KHI"), Scudder Intermediate Government Trust ("KGT"), Scudder
Multi-Market Income Trust ("KMM"), Scudder Municipal Income Trust ("KTF"),
Scudder Strategic Income Trust ("KST"), and Scudder Strategic Municipal Income
Trust ("KSM") (each, a "Fund" and collectively, the "Funds"). These proxies will
be used at the joint annual meeting of shareholders of each Fund to be held at
the offices of Zurich Scudder Investments, Inc., the investment manager of each
Fund ("Scudder" or the "Investment Manager"), 13th Floor, Two International
Place, Boston Massachusetts 02110-4103, on March 28, 2002, at 4:00 p.m., Eastern
time, or at such later time made necessary by any and all adjournments or
postponements thereof (each, a "Meeting"). The shareholders of each Fund will
vote separately on the items presented at the Meetings. This Proxy Statement,
the Notice of Annual Meeting and the proxy card(s) are first being mailed to
shareholders on or about February 25, 2002 or as soon as practicable thereafter.
Proposal 1 relates to the election of Trustees, Proposal 2 relates to the
approval of a new investment management agreement for each Fund, Proposal 3 is
only relevant to the shareholders of KMM and KST and relates to the approval of
a new sub-advisory agreement for each Fund with Deutsche Asset Management
Investment Services Limited and Proposal 4 relates to the ratification of the
selection of each Fund's independent auditors. As discussed below, shareholder
approval of Proposal 2 will have no effect upon the investment management fee
rates currently in effect.
The Board of each Fund recommends that shareholders vote FOR all Proposals.
The vote required to approve these Proposals is described below under
"Additional Information."
KTF AND KSM ONLY. Pursuant to the Amended and Restated Agreement and
Declaration of Trust of each Fund, the Board may authorize separate classes of
shares of beneficial interest. The Board of each Fund has authorized, and each
Fund has issued, common shares of beneficial interest (the "Common Shares") and
preferred shares of beneficial interest (the "Preferred Shares"). The Common
Shares and the Preferred Shares have different powers, rights, preferences and
privileges, qualifications, limitations and restrictions with respect to, among
other things, dividends, liquidation, redemption and voting as more fully set
forth in the Certificate of Designation for Preferred Shares that established
the Preferred Shares. For KTF, the Common Shares were first issued on October
20, 1988 and the Preferred Shares were first issued on July 24, 1989 (Series A,
B, C and D) and November 24, 1999 (Series E). For KSM, the Common Shares were
first issued on March 22, 1989 and the Preferred Shares were first issued on
September 21, 1999. At the Meeting, the holders of the Preferred Shares, voting
as a separate class, are entitled to elect two Trustees, and the holders of the
Common Shares and the Preferred Shares, voting together as a single class, are
entitled to elect the ten remaining Trustees. On Proposals 2, 3 and 4, the
holders of the Common Shares and Preferred Shares will vote together as a single
class.
Each Fund provides periodic reports to its shareholders that highlight
relevant information, including investment results and a review of portfolio
changes. You may receive an additional copy of the most recent annual report for
a Fund and a copy of any more recent semi-annual report, without charge, by
calling [ ] or writing the Fund, c/o Zurich Scudder Investments, Inc., at the
address shown at the beginning of this Proxy Statement.
Proposal 1: Election of Trustees
At the Meeting, shareholders of each Fund will be asked to elect twelve
individuals (ten individuals for holders of Common Shares of KTF and KSM only)
to constitute the Board of Trustees of each Fund. All of the nominees were last
elected to each Board at the 2001 joint annual meeting of shareholders. The
individuals who have been nominated for election as Trustees of each Fund were
nominated after careful consideration by the present Board of Trustees of each
Fund. The nominees are listed below.
Upon consummation of the transaction described below in Proposal 2, it is
expected that Ms. Coughlin will resign from each Board and that a senior
executive of Deutsche Bank will be proposed to fill the vacancy. In the event
that the transaction described below in Proposal 2 does not, for any reason,
occur, the current Board of Trustees of each Fund as currently constituted will
continue to serve in such capacity.
The persons named as proxies on the enclosed proxy card(s) will vote for
the election of all of the nominees (as to each relevant Fund) 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 respective Fund until (i) the next
meeting of shareholders, if any, called for the purpose of electing Trustees and
until the election and qualification of a successor, or (ii) until such Trustee
sooner dies, resigns or is removed as provided in the governing documents of the
applicable Fund. Each of the nominees has indicated that he or she is willing to
serve as a Trustee, if elected, except that Ms. Coughlin has indicated that if
the transaction described below in Proposal 2 does occur, as expected, she will
resign immediately following its consummation. If any or all of the nominees
should become unavailable for election due to events not now known or
anticipated, the persons named as proxies will vote for such other nominee or
nominees as the current Trustees may recommend.
KTF AND KSM ONLY. As indicated above, holders of the Preferred Shares are
entitled to elect two Trustees. Messrs. Glavin and Weithers are nominees for
election by holders of the Preferred Shares of KTF and KSM. In addition, ten
other Trustees are to be elected by holders of the Common Shares and the
Preferred Shares, voting together as a single class. Mmes. Peterson and Coughlin
and Messrs. Ballantine, Burnham, Casady, Dunaway, Edgar, Hoffman, Renwick and
Sommers are nominees for election by all shareholders.
The following tables present information about the Trustees. Each Trustee's
age is in parentheses after his or her name. Unless otherwise noted, (i) each of
the Trustees has engaged in the principal occupation(s) noted in the following
tables for at least the most recent five years, although not necessarily in the
same capacity, and (ii) the address of each Trustee is c/o Zurich Scudder
Investments, Inc., 222 South Riverside Plaza, Chicago, Illinois 60606. Each
Trustee listed under "Current Interested Trustees" below is an "interested
person" (an "Interested Person") of the Investment Manager or of the Fund within
the meaning of the Investment Company Act of 1940, as amended (the "1940 Act"),
due to the fact that they are each officers of the Investment Manager and each
is referred to as an "Interested Trustee." Each Trustee who is not an Interested
Person of the Investment Manager, Deutsche Bank or of the Fund within the
meaning of the 1940 Act is referred to as a "Non-interested Trustee."
Nominees for Election as Trustees
Name (Age) of Position(s) Held with Year First Became Principal Occupation(s)
Current Trustee the Trust Board Member and Other Directorships
- ---------------------------------- ------------------------ ---------------------- ------------------------------
Current Interested Trustees
Mark S. Casady [(age)] Trustee and President 2001 - All Managing Director, Scudder;
formerly, Institutional
Sales Manager of an
unaffiliated mutual fund
distributor.
Linda C. Coughlin [(age)] Trustee 2000 - All Managing Director, Scudder.
William F. Glavin [(age)] Trustee 2001 - All Managing Director, Scudder;
formerly, Executive Vice
President of Market and
Product Development, The
Dreyfus Corporation.
Current Non-interested Trustees
John W. Ballantine [(age)] Trustee 2001 - All Retired; formerly,
Executive Vice President
and Chief Risk Management
Officer, First Chicago NBD
Corporation/The First
National Bank of Chicago,
1996-1998; Executive Vice
President and Head of
International Banking,
1995-1996; Director, First
Oak Brook Bancshares, Inc.,
Oak Brook Bank and Tokheim
Corporation (designer,
manufacturer and servicer
of electronic and
mechanical petroleum
marketing systems).
Lewis A. Burnham [(age)] Trustee 2001 - All Retired; formerly, Partner,
Business Resources Group;
formerly, Executive Vice
President, Anchor Glass
Container Corporation.
Donald L. Dunaway [(age)] Trustee 2001 - All Retired; formerly,
Executive Vice President,
A.O. Smith Corporation
(diversified manufacturer).
James R. Edgar [(age)] Trustee 1999 - All Distinguished Fellow,
University of Illinois
Institute of Government and
Public Affairs; Director,
Kemper Insurance Companies;
Director, John B.
Sanfilippo & Son, Inc.;
Director, Horizon Group
Properties, Inc.; formerly,
Governor, State of Illinois.
Robert B. Hoffman [(age)] Trustee 2001 - All Retired; formerly,
Chairman, Harnischfeger
Industries, Inc. (machinery
for the mining and paper
industries); formerly, Vice
Chairman and Chief
Financial Officer, Monsanto
Company (agricultural,
pharmaceutical and
nutritional/food products);
formerly, Vice President,
Head of International
Operations, FMC Corporation
(manufacturer of machinery
and chemicals); Director,
Harnischfeger Industries,
Inc.
Shirley D. Peterson [(age)] Trustee 2001 - All Retired; formerly,
President, Hood College;
formerly, Partner, Steptoe
& Johnson (attorneys);
prior thereto,
Commissioner, Internal
Revenue Service; prior
thereto, Assistant Attorney
General (Tax), U.S.
Department of Justice;
Director, Bethlehem Steel
Corp.
Fred B. Renwick [(age)] Trustee 1995 - All Professor Emeritus of
Finance, New York
University, Stern School of
Business; Director, the
Wartburg Foundation;
Chairman, Finance Committee
of Morehouse College Board
of Trustees; Director,
American Bible Society
Investment Committee;
previously, member of the
Investment Committee of
Atlanta University Board of
Trustees; formerly,
Director of Board of
Pensions Evangelical
Lutheran Church in America.
William P. Sommers [(age)] Trustee 2001 - All Retired; formerly,
President and Chief
Executive Officer, SRI
International (research and
development); prior
thereto, Executive Vice
President, Iameter (medical
information and educational
service provider); prior
thereto, Senior Vice
President and Director,
Booz, Allen & Hamilton Inc.
(management consulting
firm); Director, PSI Inc.,
Evergreen Solar, Inc. and
Litton Industries; Advisor,
Guckenheimer Enterprises;
Consultant and Director,
SRI/Atomic Tangerine.
John G. Weithers (68) Trustee 1993 - All Funds Director, Federal Life
except KST Insurance Company and
1994 - KST Chairman of the Members of
the Corporation and Trustee,
DePaul University; formerly,
Chairman of the Board and
Chief Executive Officer,
Chicago Stock Exchange;
formerly, Director,
International Federation
of Stock Exchanges and
Director, Records
Management Systems.
Each Trustee, with the exception of Ms. Coughlin, serves as a board
member of [33] investment companies, with [85] portfolios, managed by Scudder.
Ms. Coughlin serves as a board member of [51] investment companies, with [134]
portfolios, managed by Scudder.
Appendix 8 lists the dollar range and amount of shares of each Fund
owned directly or beneficially by the Trustees and executive officers.
Positions Held by Interested Trustees with Affiliates of the Fund
[TO BE PROVIDED]
Positions Held by Non-interested Trustees with Affiliates of the Fund
[TO BE PROVIDED]
Voting Arrangements Between Trustees and Others
[TO BE PROVIDED]
Holdings in Scudder, Deutsche Bank and Certain Affiliates by Non-interested
Trustees
The following table discloses as of [ ] the beneficial or record ownership
of the securities of the Investment Manager, Deutsche Bank or any entity other
than another registered investment company, controlling, controlled by or under
common control with the Investment Manager or Deutsche Bank. This information is
provided for each Non-interested Trustee, and his or her immediate family
members.
Name of Owners
and
Relationships to Value of
Name of Trustee Trustee Company Title of Class Securities Percent of Class
Other Material Interests in Scudder, Deutsche Bank and Certain Affiliates by
Non-interested Trustees
[TO BE PROVIDED]
Material Interests in Certain Transactions by Non-interested Trustees
[TO BE PROVIDED]
Certain Relationships Between Non-interested Trustees and Others
[TO BE PROVIDED]
Responsibilities of each Board - Board and Committee Meetings
The primary responsibility of each Board is to represent the interests of
the shareholders of each Fund and to provide oversight of the management of the
Fund. Each Board is comprised of three individuals who are considered Interested
Trustees and nine individuals who are considered Non-interested Trustees. Upon
consummation of the transaction described below in Proposal 2, it is expected
that Ms. Coughlin will resign from each Board and that a senior executive of
Deutsche Bank will be proposed to fill the vacancy. If the proposed Boards of
Trustees are approved by shareholders, at least 75% of each Board will be
Non-interested Trustees. Each of the nominees that will be considered a
Non-interested Trustee, if elected, has been selected and nominated by the
current Non-interested Trustees of each Fund.
Each Board of Trustees meets multiple times during the year to review the
investment performance of each Fund and other operational matters, including
policies and procedures with respect to compliance with regulatory and other
requirements. Furthermore, the Trustees review the fees paid to Scudder and its
affiliates for investment advisory services and other administrative and
shareholder services. The Trustees have adopted specific policies and guidelines
that, among other things, seek to further enhance the effectiveness of the
Non-interested Trustees in performing their duties. Many of these are similar to
those suggested in the Investment Company Institute's 1999 Report of the
Advisory Group on Best Practices for Fund Directors (the "Advisory Group
Report").
Each Board has an Audit Committee, a Nominating and Governance Committee, a
Valuation Committee, an Operations Committee and a Fixed-Income Oversight
Committee. The responsibilities of each Committee are described below. Each
Committee has a written charter that delineates the Committee's duties and
powers. During calendar year 2001, the Board of each Fund met [ ] times. [Each
then current Trustee attended 75% or more of the respective meetings of the
Board and the Committees (if a member thereof) held during calendar year 2001.]
Audit Committee
The Committee makes recommendations regarding the selection of independent
auditors for each Fund, confers with the independent auditors regarding each
Fund's financial statements, the results of audits and related matters, reviews
and discusses each Fund's audited financial statements with Scudder and performs
such other tasks as the full Board deems necessary or appropriate. Based on
review with Scudder and the independent auditors of each Fund's financial
statements, the Committee recommended to each Board that the audited financial
statements be included in the annual report provided to shareholders for each
Fund's 2001 fiscal year. As suggested by the Advisory Group Report, the
Committee is comprised of only Non-interested Trustees, receives annual
representations from the auditors as to their independence, and has a written
charter adopted by each Board (a copy of the charter is attached hereto as
Appendix 10), as noted above. In addition, as required by Section
303.01(B)(2)(a) of the New York Stock Exchange ("NYSE") listing standards, none
of the Committee members has a relationship with a Fund that may interfere with
the exercise of their independence from management and the Fund, and each
Committee member meets the independence requirements of Section 303.01(B)(3).
The members of the Committee are Donald L. Dunaway (Chairman), Robert B. Hoffman
and William P. Sommers. The Audit Committee held [ ] meetings during calendar
year 2001.
Nominating and Governance Committee
Each Board has a Nominating and Governance Committee, comprised of only
Non-interested Trustees, that seeks and reviews candidates for consideration as
nominees for membership on the Board and oversees the administration of each
Trust's Governance Procedures and Guidelines. Currently, the members of the
Nominating and Governance Committee are Lewis A. Burnham (Chairman), James R.
Edgar and Shirley D. Peterson. The Nominating and Governance Committee held [ ]
meetings during calendar year 2001. Shareholders wishing to submit the name of a
candidate for consideration as a Board member by the Committee should submit
their recommendation(s) to the Secretary of the applicable Trust.
Valuation Committee
Each Board has a Valuation Committee, comprised of both Interested and
Non-interested Trustees, which reviews Valuation Procedures adopted by each
Board, determines fair value of each Fund's securities as needed in accordance
with the Valuation Procedures and performs such other tasks as the full Board
deems necessary. Currently, the members of the Valuation Committee are John W.
Ballantine and Linda C. Coughlin. Alternative members are Lewis A. Burnham,
Donald L. Dunaway, John G. Weithers, Mark S. Casady and William F. Glavin. The
Valuation Committee held [ ] meetings during calendar year 2001.
Operations Committee
Each Board has an Operations Committee, comprised of only Non-interested
Trustees, which oversees the operations of the Funds, such as reviewing each
Fund's administrative fees and expenses, distribution arrangements, portfolio
transaction policies, custody and transfer agency arrangements, shareholder
services and proxy voting policies. Currently, the members of the Operations
Committee are John W. Ballantine (Chairman), Fred B. Renwick and John G.
Weithers. The Operations Committee held [ ] meetings during calendar year 2001.
Fixed-Income Oversight Committee
Each Board has a Fixed-Income Oversight Committee, comprised of only
Non-interested Trustees, which oversees investment activities of the Fund, such
as investment performance and risk, expenses and services provided under the
investment management agreement. Currently, the members of the Fixed-Income
Oversight Committee are William P. Sommers (Chairman), Donald L. Dunaway and
James R. Edgar. The Fixed-Income Oversight Committee held [ ] meetings during
calendar year 2001.
Officers
The officers of each Fund are listed in Appendix 9.
Section 30(h) of the 1940 Act and Section 16(a) of the Securities Exchange
Act of 1934 require each Fund's officers and Trustees, the Investment Manager,
affiliated persons of the Investment Manager and persons who own more than ten
percent of a registered class of the Fund's equity securities to file forms
reporting their affiliation with that Fund and reports of ownership and changes
in ownership of that Fund's shares with the Securities and Exchange Commission
(the "SEC") and the NYSE. These persons and entities are required by SEC
regulation to furnish the Funds with copies of all Section 16(a) forms they
file. Based solely upon its review of the copies of such forms received by it,
and written representations from certain reporting persons that no year-end
reports were required for those persons, each Fund believes that during the
fiscal year ended November 30, 2000 (December 31, 2000 for KGT), such reporting
persons complied with all applicable filing requirements [, except that
______________________].
Compensation of Trustees
Each Fund pays its Non-interested Trustees a monthly retainer, paid on a
quarterly basis, and an attendance fee, plus expenses, for each Board meeting
and Committee meeting attended. The current Trustees serve as board members of
various other funds managed by Scudder. Scudder supervises each Fund's
investments, pays the compensation and expenses of its personnel who serve as
Trustees and officers on behalf of each Fund and receives a management fee for
its services. Several of the officers and Trustees are also officers, directors,
employees or stockholders of Scudder and participate in the fees paid to that
firm, although no Fund makes direct payments to them. Trustees and officers of a
Fund who are Interested Persons receive no compensation from such Fund. The
Non-interested Trustees are not entitled to benefits under any pension or
retirement plan. The Board of Trustees of each Fund established a deferred
compensation plan for the Non-interested Trustees ("Deferred Compensation
Plan"). Under the Deferred Compensation Plan, the Non-interested Trustees may
defer receipt of all, or a portion, of the compensation they earn for their
services to the Funds in lieu of receiving current payments of such
compensation. Any deferred amount is treated as though an equivalent dollar
amount has been invested in shares of one or more [eligible] funds managed by
Scudder ("Shadow Shares"). Mr. Edgar currently has elected to defer at least a
portion of his fees. In addition, previously, Mr. Dunaway elected to defer fees
that were payable, which are now included under the Deferred Compensation Plan.
The equivalent Shadow Shares are reflected in Appendix 8 in the Trustees' share
ownership. No Fund will bear any costs of the Trustees associated with attending
special meetings of each Board in connection with the transaction described
below in Proposal 2.
The following Compensation Table provides in tabular form the following
data:
(1) All Trustees who receive compensation from one or more Funds (columns 1
through 9).
(2) Aggregate compensation received by each Trustee from each Fund during
calendar year 2001 (rows corresponding with columns 1 through 9).
(3) Total compensation received by each Trustee from funds managed by Scudder
(collectively, the "Fund Complex") during calendar year 2001 (bottom row).
Compensation Table
1 2 3 4
------------------- ----------------- --------------------- -----------------
John W. Ballantine* Lewis A. Burnham* Donald L. Dunaway(1)* James R.Edgar(2)
------------------- ---------------- --------------------- -----------------
Compensation from Fund
----------------------
Scudder High Income Trust
Scudder Intermediate Government Trust
Scudder Multi-Market Income Trust
Scudder Municipal Income Trust
Scudder Strategic Municipal Income Trust
Scudder Strategic Income Trust
Total Compensation from Fund Complex(4)(5)
5 6 7 8 9
------------------- ----------------------- ----------------- ------------------- ------------------
Robert B. Hoffman* Shirley D. Peterson(3)* Fred B. Renwick William P. Sommers* John G. Weithers
------------------- ----------------------- ----------------- ------------------- ------------------
Compensation from Fund
----------------------
Scudder High Income Trust
Scudder Intermediate Government Trust
Scudder Multi-Market Income Trust
Scudder Municipal Income Trust
Scudder Strategic Municipal Income Trust
Scudder Strategic Income Trust
Total Compensation from Fund Complex(4)(5)
* Newly elected Trustee effective July 2001.
(1) Pursuant to a Deferred Compensation Plan, as discussed above, Mr.
Dunaway previously elected, in prior years, to defer fees. Deferred
amounts are treated as though an equivalent dollar amount has been
invested in Shadow Shares (as defined above) of funds managed by
Scudder. [Total deferred fees (including interest thereon and the
return from the assumed investment in such Fund) payable from [KHI]
[KGT] [KMM] [KTF] [KSM] [KST] to Mr. Dunaway are [$_____] [$_____]
[$_____] [$_____] [$_____] [$_____] [, respectively].]
(2) Includes deferred fees. Pursuant to Deferred Compensation Plan, as
discussed above, deferred amounts are treated as though an equivalent
dollar amount has been invested in Shadow Shares (as defined above) of
funds managed by Scudder in which compensation may be deferred by Mr.
Edgar. Total deferred fees (including interest thereon and the return
from the assumed investment in such Fund) payable from [KHI] [KGT]
[KMM] [KTF][KSM] [KST] to Mr. Edgar are [$_____] [$_____] [$_____]
[$_____] [$_____] [$_____] [, respectively].
(3) [Ms. Peterson received an additional amount of $18,960 in annual
retainer fees in her role as Coordinating Trustee.]
(4) Includes compensation for service on the boards of [33]
trusts/corporations comprised of [85] fund portfolios.
(5) Total compensation includes $10,340.00 in fees paid to each Trustee by
Scudder for numerous special meetings in connection with the proposed sale
of Scudder to Deutsche Bank.
The Trustees of each Fund unanimously recommend that shareholders of each Fund
vote FOR each nominee.
Proposal 2: Approval of New
Investment Management Agreement
Introduction
Scudder acts as the investment manager to each Fund pursuant to an
investment management agreement entered into by each Fund and Scudder (each, a
"Current Investment Management Agreement" and collectively, the "Current
Investment Management Agreements"). On December 3, 2001, Zurich Financial
Services ("Zurich Financial"), which through subsidiaries currently owns a
majority of the common stock of Scudder, entered into a Transaction Agreement
with Deutsche Bank AG ("Deutsche Bank"). The Transaction Agreement contemplates
that the Zurich Financial entities currently owning a majority of Scudder's
common stock will acquire the balance of the common stock of Scudder so that the
Zurich Financial entities as a group comprise the sole stockholder of Scudder.
Deutsche Bank will then acquire 100% of Scudder, not including certain Scudder
U.K. operations (known as Threadneedle Investments), from the Zurich Financial
entities. Following this transaction, Scudder will become part of Deutsche Asset
Management, the marketing name in the U.S. for the asset management activities
of Deutsche Bank and certain of its subsidiaries. The foregoing is referred to
as the "Transaction." Deutsche Bank, a global financial institution, manages,
directly and through its wholly owned subsidiaries, more than $500 billion in
assets (as of December 31, 2001), including approximately $53 billion in
open-end mutual fund assets managed in the United States.
Consummation of the Transaction would constitute an "assignment," as that
term is defined in the 1940 Act, of each Fund's Current Investment Management
Agreement with Scudder. As required by the 1940 Act, each of the Current
Investment Management Agreements provides for its automatic termination in the
event of its assignment. In anticipation of the Transaction, a new investment
management agreement (each, a "New Investment Management Agreement" and
collectively, the "New Investment Management Agreements" and, together with the
Current Investment Management Agreements, the "Investment Management
Agreements") between each Fund and Scudder is being proposed for approval by
shareholders of each Fund. The form of New Investment Management Agreement is
attached hereto as Exhibit A. The terms of the New Investment Management
Agreement for each Fund are substantially identical to the terms of the
corresponding Current Investment Management Agreement, except for the addition
of certain language that may provide more flexibility in integrating Scudder
with the Deutsche Bank organization and managing the Funds going forward, as
discussed below under "Differences Between the Current and New Investment
Management Agreements." The material terms of each Current Investment Management
Agreement are described under "Description of the Current Investment Management
Agreements" below.
In the event that the Transaction does not, for any reason, occur, each
Current Investment Management Agreement will continue in effect in accordance
with its terms.
The information set forth in this Proxy Statement and any accompanying
materials concerning the Transaction, the Transaction Agreement, Zurich
Financial, Deutsche Bank and their respective affiliates has been provided to
the Trusts by Zurich Financial and Deutsche Bank.
Board Approval and Recommendation
On February 4, 2002, the Board of each Fund, including the Non-interested
Trustees, voted unanimously to approve the New Investment Management
Agreements and to recommend their approval to shareholders.
For information about the Boards' deliberations and the reasons for their
recommendation, please see "Board Considerations" below.
The Board of each Fund unanimously recommends that its shareholders vote
in favor of the approval of the New Investment Management Agreement for each
Fund.
Information Concerning the Transaction and Deutsche Bank
Description of the Transaction
On December 3, 2001, the majority owners of Scudder entered into a
Transaction Agreement with Deutsche Bank. Under the Transaction Agreement,
Deutsche Bank will acquire 100% of Scudder, not including certain Scudder U.K.
operations (known as Threadneedle Investments), for approximately $2.5 billion.
Following this Transaction, Scudder will change its name and will become part of
Deutsche Asset Management, expected to be the world's fourth largest asset
management firm based on assets under management.
The Transaction will take place in three steps:
o First, in a merger pursuant to a separate Merger Agreement, the Zurich
Financial entities that now own approximately 82% of Scudder's common
stock will acquire the approximately 18% of Scudder's common stock now
owned by Scudder's employee and retired employee stockholders. The
employee and retired employee stockholders will receive cash for their
shares, and the Security Holders Agreement among the current Scudder
stockholders will terminate.
o Second, Scudder will transfer its ownership interest in Threadneedle
Investments to the Zurich Financial entities that will then own 100%
of Scudder's common stock. As a result, Threadneedle Investments will
no longer be a part of Scudder.
o Finally, the Zurich Financial entities will sell 100% of the common
stock of Scudder to Deutsche Bank for $2.5 billion, subject to certain
adjustments.
In connection with the Transaction, Zurich Financial has also agreed to
acquire Deutsche Bank's European insurance businesses for EUR 1.5 billion;
Deutsche Bank has agreed to acquire Zurich Financial's German and Italian asset
management businesses in exchange for a financial agent network and a real
estate and mutual fund consulting business owned by Deutsche Bank; and Deutsche
Bank and Zurich Financial have entered into a broad strategic cooperation
agreement. Information about Deutsche Bank is provided below under "Investment
Manager."
As discussed in the "Introduction" above, under the 1940 Act, the
Transaction will cause all the current investment management agreements with
registered funds managed by Scudder to terminate automatically. Client consents
also will be required for the continuation of other Scudder advisory agreements.
If a New Investment Management Agreement is not approved by a Fund's
shareholders, the Current Investment Management Agreement would terminate upon
completion of the acquisition of Scudder by Deutsche Bank. If such a termination
were to occur, the Board of the affected Fund would make such arrangements for
the management of that Fund's investments as it deems appropriate and in the
best interests of that Fund and its shareholders.
The Transaction by which Deutsche Bank intends to acquire Scudder is
subject to a number of conditions that are contained in the Transaction
Agreement, including the approval of clients, including the Funds, representing
at least 80% of Scudder's assets under management as of June 30, 2001. In
addition, these conditions include, among others, the receipt of all material
consents, approvals, permits and authorizations from appropriate governmental
entities; the absence of any temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the Transaction;
that certain key agreements relating to the strategic partnership between
Deutsche Bank and Zurich Financial are in full force and effect and all of the
conditions in those agreements have been satisfied or waived; the
representations and warranties of the parties to the Transaction are true and
correct in all material respects; the parties to the Transaction have performed
in all material respects all obligations and covenants that they are required to
perform; and the parties to the Transaction have delivered appropriate
certificates and resolutions as to the authorizations in connection with the
Transaction. The Transaction is expected to close on or about April [ ], 2002.
Under the Transaction Agreement and the Merger Agreement, Scudder and its
majority owners have agreed that they will, and will cause each of Scudder's
subsidiaries engaged in the investment management business to, use their
reasonable best efforts to ensure the satisfaction of the conditions set forth
in Section 15(f) of the 1940 Act, as discussed under "Board Considerations,"
above.
Appendix 1 provides information regarding Scudder's current business,
including its stockholders, directors and officers.
Deutsche Bank
Deutsche Bank is a leading integrated provider of financial services to
institutions and individuals throughout the world. It is organized in Germany
and is a publicly traded entity. Its shares trade on many exchanges including
the New York Stock Exchange and Xetra (German Stock Exchange). It is engaged in
a wide range of financial services, including retail, private and commercial
banking, investment banking and insurance. Deutsche Bank has combined all of its
investment management businesses to form Deutsche Asset Management which, as of
December 31, 2001, had more than $231 billion in assets under management.
Deutsche Asset Management acts as investment manager to [ ] U.S. mutual funds
which in the aggregate have $[ ] in assets.
Deutsche Asset Management is comprised of several entities that are
separately incorporated and registered as investment advisers. As proposed,
Scudder will for the immediate future remain a separate entity within the
Deutsche Asset Management group. Deutsche Bank intends to utilize a dual
employee structure to integrate Scudder into Deutsche Asset Management. Deutsche
Bank has guaranteed the obligations of each of its subsidiaries that has a
contractual relationship with the Funds, which, following the Transaction, will
include Scudder.
As discussed above, following the Transaction, Scudder will be a part of
Deutsche Asset Management, which is part of the broader Private Client and Asset
Management ("PCAM") group at Deutsche Bank. At that point, Thomas Hughes will
continue to be the President of Deutsche Asset Management and the Chief
Executive Officer of PCAM Americas Region. Edmond D. Villani will be Chairman of
Deutsche Asset Management, will join the existing Deutsche Asset Management
Global Executive Committee and will become a member of the PCAM Americas Region
leadership team. Mr. Villani is the President and Chief Executive Officer of
Scudder.
Following the Transaction, 100% of the outstanding voting securities of
Scudder will be held by Deutsche Bank.
Board Considerations
On April 27, 2001, Zurich Financial announced its intent to seek a
strategic transaction involving its majority owned subsidiary, Scudder. Over the
course of the following months, the Non-interested Trustees met numerous times
by themselves, with their legal counsel and with senior Scudder and Zurich
Financial personnel to discuss Scudder's organizational structure, expectations
with respect to potential transactions and the potential benefits and risks to
the Funds and other funds managed by Scudder and their shareholders from a
strategic transaction. The Non-interested Trustees identified a list of basic
principles, which they believed should serve as the foundation for their review
of the organizational, operational and strategic issues involved with any
potential change in control of Scudder. These basic principles were communicated
to Scudder and were intended to be shared with any potential strategic partner.
On September 23, 2001, Zurich Financial and Deutsche Bank entered into a
"heads of agreement" whereby Deutsche Bank agreed, subject to a number of
contingencies (including the execution of a definitive transaction agreement),
to acquire 100% of Scudder (not including certain of Scudder's UK operations)
from Zurich Financial. At a meeting on September 24, 2001, the Trustees met with
senior Scudder and Deutsche Bank personnel to discuss the proposed acquisition
of Scudder by Deutsche Bank, the general corporate structure of Deutsche Bank,
the background of certain key employees of Deutsche Bank and Scudder's views on
the proposed acquisition.
As part of their due diligence, the Non-interested Trustees separately
discussed items they wanted to raise with Deutsche Bank and Scudder in
connection with the proposed transaction and directed their counsel to create
lists of issues for discussion, which were provided to Scudder and Deutsche
Bank. In addition, the Non-interested Trustees engaged various consultants to
help them evaluate the proposed transaction.
On October 9, 2001, the Non-interested Trustees met with the chief
executive officer of Deutsche Asset Management to discuss the proposed
acquisition of Scudder, Deutsche Bank's strategic views of the mutual fund
business and Deutsche Bank's proposed strategy for managing the Funds and other
funds managed by Scudder.
On December 3, 2001, Zurich Financial and Deutsche Bank signed a definitive
agreement finalizing Deutsche Bank's agreement to acquire Scudder in accordance
with the "heads of agreement." Thereafter, on many occasions, the Non-interested
Trustees were given extensive information about the Transaction, and Scudder and
Deutsche Bank responded to numerous issues and questions raised by the
Non-interested Trustees. The Non-interested Trustees met many times between
December 3, 2001 and February 4, 2002 with legal counsel to discuss the
Transaction and Deutsche Bank's and Scudder's responses to their issues lists
and questions. They carefully reviewed the materials presented by Deutsche Bank
and Scudder and met with many senior Deutsche Bank and Scudder personnel,
including a meeting on January 14, 2002 with certain members of the Group
Executive Committee of Deutsche Bank.
Throughout the process, the Non-interested Trustees had the assistance of
legal counsel, who advised them on, among other things, their duties and
obligations. As a result of their review and consideration of the Transaction
and the proposed New Investment Management Agreements, at a meeting on February
4, 2002, the Board of each Fund voted unanimously to approve the New
Investment Management Agreements and to recommend them to the shareholders of
each Fund for their approval.
In connection with its review, each Board obtained substantial information
regarding: the management, financial position and business of Deutsche Bank; the
history of Deutsche Bank's business and operations; the investment performance
of the investment companies advised by Deutsche Asset Management; the proposed
structure, operations and investment processes of the combined investment
management organization after the Transaction; and the future plans of Deutsche
Bank and Scudder with respect to Scudder's affiliated entities and the Funds.
Each Board also received information regarding the terms of the Transaction,
anticipated management of the combined organization, the resources that Deutsche
Bank intends to bring to the combined organization and the process being
followed by Deutsche Bank and Scudder to integrate their organizations. Each
Board also reviewed current and pro forma staffing and financial information for
the combined organization, along with Deutsche Bank's plans to reduce its
expenses through reduction of organizational redundancies and the achievement of
synergies and efficiencies. Deutsche Bank represented that although it expects
to achieve significant savings over the combined stand-alone expense bases for
the Deutsche Asset Management and Scudder organizations, it will be able to
spend more than Scudder spent independently, and that Deutsche Bank's expense
savings could be achieved without adversely affecting the Funds.
In responding to the Non-interested Trustees' inquiries, Deutsche Bank
identified as one of its main goals the maximization of value for the Funds'
shareholders and for the shareholders of other funds managed by Scudder through
its efforts to deliver superior investment performance, distinctive shareholder
service experiences and competitive expense ratios.
Deutsche Bank identified as one of the key focuses of the Transaction the
creation of a single disciplined, globally integrated investment management
organization combining the strengths of the various investment advisory entities
that comprise Deutsche Asset Management and Scudder. The Non-interested Trustees
met with the chief global investment officer of the proposed combined
organization, who articulated Deutsche Bank's plan to create a global
research-centric investment management organization. He informed the Trustees
that Deutsche Bank intended to streamline and upgrade the combined
organization's portfolio management teams, while providing them with improved
portfolio analytics and tools, and implementing close management oversight. He
said that all investment personnel for the combined organization, with some
exceptions for specialized fixed-income and international equity products, will
be located in New York.
Each Board considered that Deutsche Bank proposed a new chief global
investment officer and other significant personnel changes for Scudder. Each
Board also considered that, for a number of funds managed by Scudder, Deutsche
Bank intended to change the Fund's portfolio managers after consummation of the
Transaction. See Appendix 2 for a list of proposed portfolio manager changes
affecting the Funds. Each Board considered the experience and track records of
identified senior investment personnel that would be part of the combined
investment management organization. Each Board also considered the proposed
structure of the combined trading platform, including the use of brokerage
commissions to generate "soft dollars" to pay for research-related services and
proposed policies, procedures and practices with respect to trading with
Deutsche Bank and its affiliates.
Each Board considered Deutsche Bank's plans for distribution and marketing,
shareholder servicing, and investment operations, accounting and administration.
Each Board noted that Deutsche Bank represented that it expected the management
teams and personnel currently providing these services to the Funds, and the
systems currently used by them to support these functions, to remain largely in
place.
In connection with its deliberations, each Board obtained certain
assurances from Deutsche Bank, including the following:
o Deutsche Bank has provided each Board with such information as is
reasonably necessary to evaluate the New Investment Management
Agreements.
o Deutsche Bank's acquisition of Scudder enhances its core focus of
expanding its global asset management business. With that focus,
Deutsche Bank will devote to Scudder and its affairs the attention and
resources designed to provide for each Fund top quality investment
management, shareholder, administrative and product distribution
services.
o The Transaction is not expected to result in any adverse change in the
investment management or operations of the Funds; and Deutsche Bank
does not anticipate making any material change in the manner in which
investment advisory services or other services are rendered to each
Fund which has the potential to have a material adverse effect upon
any Fund.
o Deutsche Bank is committed to the continuance, without interruption,
of services to the Funds of at least the type and quality currently
provided by Scudder and its affiliates, or superior thereto.
o In order to retain and attract key personnel, Deutsche Bank intends to
maintain overall compensation and performance incentive policies and
practices at market levels or better.
o Deutsche Bank intends to maintain the distinct brand quality of the
funds managed by Scudder and is committed to strengthening and
enhancing the brand and the intermediary distribution channels.
o Deutsche Bank will promptly advise each Board of decisions materially
affecting the Deutsche Bank organization as they relate to the Funds.
Deutsche Bank has represented to each Board that neither this, nor any
of the other above commitments, will be altered by Deutsche Bank
without the Board's prior consideration.
Deutsche Bank and Zurich Financial each assured each Board that they intend
to comply with Section 15(f) of the 1940 Act. Section 15(f) provides a
non-exclusive safe harbor for an investment adviser to an investment company or
any of its affiliated persons to receive any amount or benefit in connection
with a change in control of the investment adviser so long as two conditions are
met. First, for a period of three years after the transaction, at least 75% of
the board members of the investment company must not be Interested Persons of
such investment adviser. The composition of the Board of each Fund is in
compliance with this provision of Section 15(f). Upon consummation of the
Transaction, it is expected that Linda C. Coughlin, currently an Interested
Trustee of each Board, will resign from each Board and that a senior executive
of Deutsche Bank will be appointed by the Board of each Fund to fill the vacancy
created by Ms. Coughlin's resignation. In addition, after careful review and
consideration, the Non-interested Trustees of each Board determined that it
would be in the best interests of the Fund to add to the Board an individual who
currently acts as a non-interested board member of certain funds managed by
Deutsche Asset Management. Deutsche Bank believes, and the Board members of each
Fund agreed, that these changes in the Board composition will facilitate the
integration of Scudder into Deutsche Asset Management by providing perspective
and insight relating to experience working with the Deutsche Bank organization.
The Nominating and Governance Committee intends to consider a number of
candidates and, as a result, the Non-interested Trustees expect to appoint an
additional Board member from those candidates who currently act as
non-interested board members of funds managed by Deutsche Asset Management. If
reconstituted as proposed, the Board of each Fund will continue to be in
compliance with Section 15(f).
To meet the second condition of Section 15(f), an "unfair burden" must not
be imposed upon the investment company as a result of such transaction or any
express or implied terms, conditions or understandings applicable thereto. The
term "unfair burden" is defined in Section 15(f) to include any arrangement
during the two-year period after the transaction, whereby the investment
adviser, or any interested person of such adviser, receives or is entitled to
receive any compensation, directly or indirectly, from the investment company or
its shareholders (other than fees for bona fide investment advisory or other
services) or from any person in connection with the purchase or sale of
securities or other property to, from or on behalf of the investment company
(other than bona fide ordinary compensation as principal underwriter for such
investment company).
Deutsche Bank and Zurich Financial are not aware of any express or implied
term, condition, arrangement or understanding that would impose an "unfair
burden" on any Fund as a result of the Transaction. Deutsche Bank and Zurich
Financial have agreed that they, and their affiliates, will take no action that
would have the effect of imposing an "unfair burden" on any Fund in connection
with the Transaction. In furtherance thereof, Scudder has undertaken to pay the
costs of preparing and distributing proxy materials to, and of holding the
Meetings of, the Funds' shareholders, as well as other fees and expenses in
connection with the Transaction, including the fees and expenses of legal
counsel and consultants to the Funds and the Non-interested Trustees. In
addition, because it is possible that the Board of each Fund may hold a series
of special Board meetings following the closing of the Transaction in order to
facilitate the integration of the management of the Funds into Deutsche Asset
Management, Scudder has undertaken to waive or reimburse each Fund a portion of
its management fee payable during the first year following the closing of the
Transaction to ensure that the expenses associated with such meetings would not
be borne by the Funds. Furthermore, Deutsche Bank has agreed to indemnify each
Fund and the Non-interested Trustees for and against any liability and expenses
based upon any misstatements and omissions by Deutsche Bank to the
Non-interested Trustees in connection with their consideration of the
Transaction.
Each Board noted that, in previously approving the continuation of the
Current Investment Management Agreements, the Board had considered numerous
factors, including the nature and quality of services provided by Scudder;
investment performance, both of the Funds themselves and relative to appropriate
peer groups and one or a combination of market indices; investment management
fees, expense ratios and asset sizes of the Funds and relative peer groups;
Scudder's profitability from managing the Funds; fall-out benefits to Scudder
from its relationship to the Funds, including revenues derived from services
provided to the Funds by affiliates of Scudder; and the potential benefits to
Scudder, the Funds and their shareholders of receiving research services from
broker/dealer firms in connection with the allocation of portfolio transactions
to such firms.
In addition, in considering whether to approve the New Investment
Management Agreement for each Fund (the terms of which are substantially
identical to the terms of the Current Investment Management Agreement for each
Fund except as described below under "Differences Between the Current and New
Investment Management Agreements"), each Board considered the potential benefit
to the Funds of providing the Investment Manager more flexibility in structuring
portfolio management services for each Fund. Each Board recognized that it may
be beneficial to the Funds to allow the Investment Manager to take advantage of
the strengths of other entities within the Deutsche Bank organization by
permitting the Investment Manager to delegate certain portfolio management
services to such entities, and to do so, to the extent permissible, without
incurring the expense of obtaining further shareholder approval. In addition,
the Board considered that (i) any restructuring of the provision of portfolio
management services provided to the Funds would require the prior approval of a
majority of the members of a Fund's Board of Trustees, including a majority of
the Non-interested Trustees; and (ii) the management expenses incurred by the
Funds would not be affected by any action taken to delegate services to other
Deutsche Bank entities in reliance on the New Investment Management Agreements
because any fees paid to a sub-adviser would be paid by the Investment Manager
and not by the Funds. Scudder will retain full responsibility for the actions of
any such sub-advisers.
As a result of their review and consideration of the Transaction and the
New Investment Management Agreements, at a meeting on February 4, 2002, the
Board of each Fund, including the Non-interested Trustees of each Fund, voted
unanimously to approve the New Investment Management Agreements and to
recommend them to the Funds' shareholders for their approval.
Accounting Agent, Transfer Agent and Shareholder Service Agent
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of Scudder,
serves as fund accounting agent to each Fund and, as such, computes net asset
value and maintains related records. State Street Bank and Trust Company ("SSB")
is the transfer agent, registrar and dividend disbursing agent for each Fund's
shares. Pursuant to a services agreement with SSB, Scudder Investments Service
Company ("SISC"), an affiliate of Scudder, serves as the "Shareholder Service
Agent" of each Fund and, as such, performs all of SSB's duties as transfer agent
and dividend-paying agent. Appendix 3 sets forth for each Fund the fees paid to
SFAC and SISC during the last fiscal year of each Fund.
SFAC, SISC and SSB will continue to provide fund accounting, transfer
agency and subaccounting and recordkeeping, respectively, to the Funds, as
described above, under the current arrangements if the New Investment Management
Agreements are approved.
Exhibit B sets forth (as of each fund's last fiscal year end) the fees and
other information regarding investment companies managed by Scudder that have
similar investment objectives to any of the Funds. (See Appendix 4 for
information regarding the management fee rate, net assets and aggregate
management fee paid for each Fund.)
Brokerage Commissions on Portfolio Transactions
Scudder places orders for portfolio transactions on behalf of the
Funds with issuers, underwriters or other brokers and dealers. When it can be
done consistently with the policy of obtaining the most favorable net results,
Scudder may place such orders with brokers and dealers who supply brokerage and
research services to Scudder or a Fund. The term "research services" includes
advice as to the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or purchasers
or sellers of securities; and analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio strategy and the
performance of accounts. Scudder is authorized when placing portfolio
transactions for equity securities to pay a brokerage commission (to the extent
applicable) in excess of that which another broker might charge for executing
the same transaction because of the receipt of research services. In selecting
brokers and dealers with which to place portfolio transactions for a Fund,
Scudder may consider sales of shares of the Funds and of any funds managed by
Scudder. The placement of portfolio transactions is supervised by Scudder.
Following the closing of the Transaction, it is expected that Scudder's trading
system and related brokerage policies will be conformed to those of Deutsche
Bank. Deutsche Bank has represented that its policies are similar in all
material aspects to those of Scudder, and that it does not expect that the types
and levels of portfolio transactions/placements will materially differ from
those of Scudder.]
Description of the Current Investment Management Agreements
General. Under each Current Investment Management Agreement, Scudder
provides each Fund with continuing investment management services. The
Investment Manager also determines which securities shall be purchased, held or
sold, and what portion of each Fund's assets shall be held uninvested, subject
to each Fund's Declaration of Trust, By-Laws, the investment objectives,
policies and restrictions set forth in each Fund's registration statement, the
provisions of the 1940 Act and the Internal Revenue Code of 1986, as amended
(the "Code"), and such policies and instructions as the Trustees may determine.
Investment Manager's Responsibilities. Each Current Investment Management
Agreement states that the Investment Manager will provide portfolio management
services, place portfolio transactions in accordance with policies expressed in
each Fund's registration statement, pay each Fund's office rent, render
significant administrative services on behalf of each Fund (not otherwise
provided by third parties) necessary for each Fund's operating as a closed-end
investment company including, but not limited to, preparing reports to and
meeting materials for each Trust's Board and reports and notices to Fund
shareholders; supervising, negotiating contractual arrangements with, and to the
extent appropriate, monitoring the performance of various third-party and
affiliated service providers to each Fund (such as each Fund's transfer and
pricing agents, fund accounting agents, custodians, accountants and others) and
other persons in any capacity deemed necessary or desirable to Fund operations;
preparing and making filings with the SEC and other regulatory and
self-regulatory organizations, including, but not limited to, preliminary and
definitive proxy materials, post-effective amendments to the registration
statement, and semi-annual reports on Form N-SAR; overseeing the tabulation of
proxies by each Fund's transfer agent; assisting in the preparation and filing
of each Fund's federal, state and local tax returns; preparing and filing each
Fund's federal excise tax return pursuant to Section 4982 of the Code; providing
assistance with investor and public relations matters; monitoring the valuation
of portfolio securities and the calculation of net asset value; monitoring the
registration of shares of each Fund under applicable federal and state
securities laws; maintaining or causing to be maintained for each Fund all
books, records and reports and any other information required under the 1940
Act, to the extent that such books, records and reports and other information
are not maintained by each Fund's custodian or other agents of each Fund;
assisting in establishing accounting policies of each Fund; assisting in the
resolution of accounting issues that may arise with respect to each Fund's
operations and consulting with each Fund's independent accountants, legal
counsel and other agents as necessary in connection therewith; establishing and
monitoring each Fund's operating expense budgets; reviewing each Fund's bills;
processing the payment of bills that have been approved by an authorized person;
assisting each Fund in determining the amount of dividends and distributions
available to be paid by each Fund to its shareholders, preparing and arranging
for the printing of dividend notices to shareholders, and providing the transfer
and dividend paying agent, the custodian, and the accounting agent with such
information as is required for such parties to effect the payment of dividends
and distributions; and otherwise assisting each Fund, as it may reasonably
request, in the conduct of each applicable Fund's business, subject to the
direction and control of each Fund's Board.
Fund Expenses. Under each Current Investment Management Agreement, each
Fund is responsible for other expenses, such as organizational expenses
(including out-of-pocket expenses, but excluding the Investment Manager's
overhead or employee costs); brokers' commissions or other costs of acquiring or
disposing of any portfolio securities of each Fund; legal, auditing and
accounting expenses; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; taxes and
governmental fees; the fees and expenses of each Fund's transfer agent; expenses
of preparing share certificates and any other expenses in connection with the
issuance, offering, distribution, sale, redemption or repurchase of shares; the
expenses of and fees for registering or qualifying securities for sale;
compensation and expenses of Non-interested Trustees; the cost of printing and
distributing reports, notices and dividends to current shareholders; the fees
and expenses of each Funds' accounting agent for which each of the Funds is
responsible pursuant to the applicable Fund Accounting Services Agreement; and
the fees and expenses of each Fund's custodians, subcustodians, dividend
disbursing agents and registrars. Each Fund may arrange to have third parties
assume all or part of the expenses of sale, underwriting and distribution of
shares of that Fund. Each Fund is also responsible for expenses of shareholders'
and other meetings, the cost of responding to shareholders' inquiries, and its
expenses incurred in connection with litigation, proceedings and claims and the
legal obligation it may have to indemnify officers and Trustees of each Fund
with respect thereto. Each Fund is also responsible for the maintenance of books
and records which are required to be maintained by each Fund's custodian or
other agents of each Fund; telephone, telex, facsimile, postage and other
communications expenses; any fees, dues and expenses incurred by each Fund in
connection with membership in investment company trade organizations; expenses
of printing and mailing prospectuses and statements of additional information of
each Fund and supplements thereto to current shareholders; costs of stationery;
fees payable to the Investment Manager; expenses relating to investor and public
relations; interest charges, bond premiums and other insurance expense; freight,
insurance and other charges in connection with the shipment of each Fund's
portfolio securities; and other expenses.
Expenses Paid by the Investment Manager. The Investment Manager is
responsible for the payment of the compensation and expenses of all Trustees,
officers and executive employees of each Fund (including each Fund's share of
payroll taxes) who are affiliated with the Investment Manager and making
available, without expense to each Fund, the services of such Trustees, officers
and employees as may be duly elected officers of each Fund, subject to their
individual consent to serve and to any limitations imposed by law. Each Fund is
responsible for the compensation and the fees and expenses (specifically
including travel expenses relating to Fund business) of Trustees, officers and
employees not affiliated with the Investment Manager. Under each Current
Investment Management Agreement, the Investment Manager also pays each Fund's
share of payroll taxes, as well as expenses, such as travel expenses (or an
appropriate portion thereof), of Trustees and officers of each Fund who are
directors, officers or employees of the Investment Manager. During each Fund's
most recent fiscal year, no compensation, direct or otherwise (other than
through fees paid to the Investment Manager), was paid or became payable by a
Fund to any of its officers or Trustees who were affiliated with the Investment
Manager.
Compensation Paid to the Investment Manager. In return for the services
provided by Scudder as investment manager, and the expenses it assumes under
each Current Investment Management Agreement, each Fund pays the Investment
Manager a management fee which is accrued daily and payable monthly. The
management fee rate for each Fund is set forth in Appendix 4.
Liability of the Investment Manager. Each Current Investment Management
Agreement further provides that the Investment Manager shall not be liable for
any error of judgment or mistake of law or for any loss suffered by any Fund in
connection with matters to which such Agreement relates, except a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of the
Investment Manager in the performance of its duties or from reckless disregard
by the Investment Manager of its obligations and duties under such Agreement.
Termination of the Agreement. Each Current Investment Management Agreement
may be terminated without penalty upon sixty (60) days' written notice by either
party. Each Fund may agree to terminate its Current Investment Management
Agreement either by the vote of a majority of the outstanding voting securities
of the Fund or by a vote of the Board. In addition, each Current Investment
Management Agreement may also be terminated at any time without penalty by the
vote of a majority of the outstanding voting securities of the Fund or by a vote
of the Board if a court establishes that the Investment Manager or any of its
officers or directors has taken any action resulting in a breach of the
Investment Manager's covenants under the Investment Management Agreement. As
stated above, each Current Investment Management Agreement automatically
terminates in the event of its assignment.
Additional Information About the Current Agreements
The date of each Current Investment Management Agreement, the date when
each Current Investment Management Agreement was last approved by the Trustees
and the shareholders of each Fund and the date to which each Current Investment
Management Agreement was last continued is included in Appendix 5.
The New Investment Management Agreements
The New Investment Management Agreement for each Fund will be dated as of
the date of the consummation of the Transaction, which is expected to occur in
the first half of 2002. Each New Investment Management Agreement will be in
effect for an initial term ending on September 30, 2002 (the same term as would
apply under the corresponding Current Investment Management Agreement but for
the Transaction), and may be continued thereafter from year to year only if
specifically approved at least annually by the vote of "a majority of the
outstanding voting securities" (as defined below under "Additional Information")
of each Fund, or by the Board and, in either event, the vote of a majority of
the Non-interested Trustees, cast in person at a meeting called for such
purpose. In the event that shareholders of a Fund do not approve the New
Investment Management Agreement, the Current Investment Management Agreement
will terminate if the Transaction is consummated. In such event, the Board of
such Fund will take such action, if any, as it deems to be in the best interests
of the Fund and its shareholders, including (without limitation) re-submitting
this Proposal for shareholder approval, or entering into an interim investment
management agreement with Scudder. In the event the Transaction is not
consummated, Scudder will continue to provide services to each Fund in
accordance with the terms of each Current Investment Management Agreement for
such periods as may be approved at least annually by the Board, including a
majority of the Non-interested Trustees.
Differences Between the Current and New Investment Management Agreements
The terms of the New Investment Management Agreement for each Fund are
substantially identical to the terms of the corresponding Current Investment
Management Agreement, except that each New Investment Management Agreement would
authorize the Investment Manager to delegate certain portfolio management
services with respect to all or a portion of the assets of the Fund to any
advisory entity that the Investment Manager controls, is controlled by, or is
under common control with, to the extent permissible by law, and to establish
the fees to be paid for such services, provided that the Investment Manager
obtains the prior approval of a majority of the members of the Fund's Board of
Trustees, including a majority of the Non-interested Trustees. Shareholders of a
Fund affected by any such delegation would receive prompt notice of this change
following approval by the Board. The management fee rate paid by the Fund would
not change as a result of any such delegation; all fees paid to the sub-adviser
would be paid by the Investment Manager. The investment management fee rates
paid by the Funds under the New Investment Management Agreements are the same as
those currently in effect. The Investment Manager will retain full
responsibility for the actions of any such sub-advisers.
The Trustees of each Fund unanimously recommend that shareholders of each Fund
vote FOR the approval of a New Investment Management Agreement for that Fund.
Proposal 3: Approval of New Sub-Advisory Agreements with Deutsche Asset
Management Investment Services Limited with respect to Scudder Multi-Market
Income Trust and Scudder Strategic Income Trust
Scudder has proposed entering into a sub-advisory agreement (each, a
"Sub-Advisory Agreement"), on behalf of Scudder Multi-Market Income Trust and
Scudder Strategic Income Trust (each, a "DSA Fund"), respectively, with Deutsche
Asset Management Investment Services Limited ("DeAMIS") pursuant to which DeAMIS
would furnish information, investment recommendations, advice and assistance to
Scudder. Each Sub-Advisory Agreement was unanimously approved by the Board of
Trustees for each DSA Fund, including the Non-interested Trustees, at a meeting
held on February 4, 2002. The form of each Sub-Advisory Agreement is attached
hereto as Exhibit C. A description of the Sub-Advisory Agreement is set forth
below and is qualified in its entirety by reference to Exhibit C.
It is anticipated that following the closing of the Transaction, the
portfolio management teams that are responsible for managing all or a portion of
the DSA Funds' assets will transition from the United States to London and will
become employees of DeAMIS. It is expected that this transition will allow the
portfolio management teams to access the global reach of Deutsche Asset
Management more effectively.
Following the closing of the Transaction, a certain amount of time will be
necessary to permit Scudder and Deutsche Asset Management to prepare and
institute the necessary arrangements for the portfolio managers to transition to
DeAMIS. As such, the Sub-Advisory Agreements will go into effect at different
times following the closing of the Transaction (and in any case not more than
two years following such date) upon the approval of the relevant Board and its
Non-interested Trustees. In addition, the fees to be paid to DeAMIS will at that
time be determined, again upon the approval of the relevant Board and its
Non-interested Trustees. Any such fees payable under the Sub-Advisory Agreements
are paid by Scudder and have no effect on management fees paid by the DSA Funds
to Scudder pursuant to the Investment Management Agreements. In no case will the
sub-advisory fees paid to DeAMIS by Scudder be greater than those paid by the
DSA Funds to Scudder pursuant to the Investment Management Agreements.
Each Sub-Advisory Agreement as unanimously approved by the Board is now
being submitted for approval by the shareholders of each DSA Fund. If it is
approved by the shareholders of a DSA Fund, the Sub-Advisory Agreement relating
to that DSA Fund would continue in effect until [the next September 30 following
its date of effectiveness] unless earlier terminated, and will continue from
year to year thereafter, subject to approval annually by the applicable Board or
by a vote of a majority of the outstanding voting securities of that DSA Fund,
and also, in either event, approval by a majority of the applicable Board's
Non-Interested Trustees at a meeting called for the purpose of voting on such
approval. If the shareholders of a DSA Fund should fail to approve that Fund's
Sub-Advisory Agreement, the Board shall consider appropriate action with respect
to such non-approval of that Sub-Advisory Agreement.
Board Considerations
On February 4, 2002, the Board, including the Non-interested Trustees, of
each DSA Fund unanimously voted to approve the applicable Sub-Advisory
Agreement proposed by Scudder and to recommend its approval to the shareholders
of the particular DSA Fund.
[In considering whether to approve the Sub-Advisory Agreements, the Boards
considered similar factors to those they considered in approving the New
Investment Management Agreements relating to the DSA Funds, to the extent
applicable. (See Proposal 2 for more information regarding the Board's
evaluation.) In addition, the Boards considered the recommendation of Scudder
and various information and materials provided by each of Scudder and DeAMIS.
The Boards also considered that approval of the Sub-Advisory Agreements would
not result in significant changes to the portfolio management teams responsible
for the DSA Funds. As discussed above, the Sub-Advisory Agreements will allow
the portfolio managers to integrate with DeAMIS' London facilities. Furthermore,
the Boards considered that approval of the Sub-Advisory Agreements would not
affect management fees paid by the DSA Funds.]
[The Boards were apprised that the deferral in implementing the
Sub-Advisory Agreements is needed to permit Scudder and Deutsche Asset
Management a sufficient amount of time (which may vary for each DSA Fund) to
plan, prepare and institute the necessary arrangements for the transition of
portfolio management teams to DeAMIS. Scudder also emphasized to the Boards that
the Sub-Advisory Agreements would be implemented only upon the approval of the
applicable DSA Fund's Non-interested Trustees based on information they then
deemed adequate and necessary to consider these arrangements, including fee
arrangements.]
Each applicable Board unanimously recommends that shareholders of the
applicable DSA Fund vote in favor of the approval of the applicable Sub-Advisory
Agreement.
Description of the Sub-Advisory Agreements
Under each Sub-Advisory Agreement, DeAMIS will provide sub-advisory
services relating to the management of the particular DSA Fund's assets,
including developing, recommending and implementing an investment program and
strategy for the DSA Fund, providing research and analysis relative to the
investment program and investments of the DSA Fund, determining which securities
should be purchased and sold and monitoring on a continuing basis the
performance of the portfolio securities of the DSA Fund to meet its stated
investment objective and placing orders for execution of the DSA Fund's
portfolio transactions. DeAMIS is required to provide reports upon request on
portfolio transactions and reports on assets held in a DSA Fund and will also
inform Scudder, the officers and Trustees of the DSA Fund on a current basis of
changes in investment strategy or tactics or any other developments materially
affecting a DSA Fund.
Pursuant to each Sub-Advisory Agreement, DeAMIS, at its expense, will
furnish all necessary investment facilities, including salaries of personnel
required for it to execute its duties under the Agreement. Also pursuant to each
Sub-Advisory Agreement, Scudder and the applicable DSA Fund will assume and pay
their respective organizational, operational and business expenses not
specifically assumed or agreed to be paid by DeAMIS pursuant to the Agreement.
DeAMIS will pay its own organizational, operational and business expenses but
will not be obligated to pay any expenses of Scudder or the applicable DSA Fund.
As noted above, the investment management fee payable under each
Sub-Advisory Agreement would be paid by the Investment Manager, not the
particular DSA Fund, and will be set, and may vary from time to time thereafter,
subject to the approval of the applicable DSA Fund's Board, including a majority
of its Non-interested Trustees.
Each Sub-Advisory Agreement provides that DeAMIS shall not be liable for
any error of judgment or law or for any loss suffered by the DSA Funds or
Scudder in connection with the matters to which the Sub-Advisory Agreement
relates, except loss resulting from willful misconduct, bad faith or gross
negligence on the part of DeAMIS in the performance of its duties or by reason
of its reckless disregard of its obligations and duties under the Sub-Advisory
Agreement.
Each Sub-Advisory Agreement provides that DeAMIS agrees to indemnify and
hold harmless Scudder against any losses, claims, damages, liabilities or
litigation (including reasonable legal and other expenses) to which Scudder may
become subject arising out of or as a result of certain breaches by DeAMIS of
its responsibilities under the Sub-Advisory Agreement. Similarly, Scudder agrees
to indemnify and hold harmless DeAMIS against any losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) to
which DeAMIS may become subject arising out of or as a result of certain
breaches by Scudder of its responsibilities under the Sub-Advisory Agreement or
the applicable Investment Management Agreement.
Each Sub-Advisory Agreement may be terminated without penalty at any time
by the applicable Trustees, by vote of a majority of the outstanding voting
securities of the applicable DSA Fund, or by Scudder or by DeAMIS upon 60 days'
written notice, and will automatically terminate in the event of its assignment
by either party to the particular Sub-Advisory Agreement, as defined in the 1940
Act, or upon termination of Scudder's Investment Management Agreement with the
applicable DSA Fund. In addition, Scudder or the applicable DSA Fund may
terminate the applicable Sub-Advisory Agreement upon immediate notice if DeAMIS
becomes statutorily disqualified from performing its duties under the Agreement
or otherwise is legally prohibited from operating as an investment adviser.
Each Sub-Advisory Agreement may be amended only in accordance with
applicable law, and only by a written instrument signed by all parties to the
Agreement.
Information about DeAMIS
DeAMIS, with headquarters at One Appold Street, London, EC2A 2UU, England,
provides a full range of international investment advisory services to
institutional and retail clients, and as of December 31, 2001, managed more than
$6 billion in assets. DeAMIS is an indirect wholly-owned subsidiary of Deutsche
Bank.
The principal occupations of each director and principal executive officer
of DeAMIS are set forth in the table below. The principal business address of
each director and principal executive officer, as it relates to his or her
duties at DeAMIS, is One Appold Street, London, EC2A 2UU, England. No trustees
or officers of any DSA Fund are employees, officers, directors or shareholders
of DeAMIS.
Alexander Tedder. Director, DeAMIS.
Richard Charles Wilson. Director, DeAMIS.
Annette Jane Fraser. Chief Executive Officer, DeAMIS.
Stephen John Maynard. Finance Officer, DeAMIS.
Matthew Alan Linsey. Director, DeAMIS.
Adrian Dyke. Secretary, DeAMIS.
Exhibit D sets forth (as of each fund's last fiscal year end) the fees and
other information regarding investment companies advised or sub-advised by
DeAMIS that have similar investment objectives to the DSA Funds. (See above for
information regarding the sub-advisory fee rate and aggregate sub-advisory fee
paid for each DSA Fund.)
Brokerage Commissions on Fund Transactions
DeAMIS will place all orders for portfolio transactions of the DSA Funds'
securities. In selecting brokers and dealers with which to place portfolio
transactions for a DSA Fund, DeAMIS may consider its affiliates and also firms
that sell shares of mutual funds advised by DeAMIS or recommend the purchase of
such funds. When it can be done consistently with the policy of obtaining the
most favorable net results, DeAMIS may place such orders with brokers and
dealers who provide market, statistical and other research information to a DSA
Fund or DeAMIS. DeAMIS is authorized, under certain circumstances, when placing
portfolio transactions for equity securities to pay a brokerage commission (to
the extent applicable) in excess of that which another broker might charge for
executing the same transaction on account of the receipt of market, statistical
and other research information. Allocation of portfolio transactions is
supervised by DeAMIS.
Required Vote
Approval of each Sub-Advisory Agreement requires the affirmative vote of a
"majority of the outstanding voting securities" (as defined below under
"Additional Information") of the applicable DSA Fund.
The Trustees of Scudder Multi-Market Income Trust and Scudder Strategic Income
Trust unanimously recommend that shareholders of each such Fund vote FOR the
approval of the Sub-Advisory Agreement.
Proposal 4: Ratification or Rejection of the Selection of Independent Auditors
The Board of Trustees of each Fund, including all of the Non-interested
Trustees, has selected Ernst & Young LLP ("E&Y") to act as independent auditors
of each Fund with respect to its financial statements for its most recently
completed fiscal year and recommends that shareholders ratify such selection.
E&Y has served each Fund in this capacity since the Fund was organized [and has
no direct or indirect financial interest in any Fund except as independent
auditors]. One or more representatives of E&Y are expected to be present at the
Meetings 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 table provided in Appendix 11 shows the fees paid to E&Y by each Fund
during that Fund's most recent fiscal year. The information in the column "Audit
Fees" shows the amounts paid for professional services rendered for the audit of
each Fund's annual financial statements for its most recent fiscal year. The
fees disclosed under the captions "Financial Information Systems Design and
Implementation Fees" and "All Other Fees" include aggregate fees billed for
services rendered, if any, during the most recent calendar year to each Fund,
Scudder and all entities controlling, controlled by, or under common control
with Scudder that provide services to that Fund.
The Audit Committee will review, at least annually, whether E&Y's receipt
of non-audit fees from the Funds, Scudder and all entities controlling,
controlled by, or under common control with Scudder that provide services to the
Funds is compatible with maintaining E&Y's independence.
The Trustees of each Fund unanimously recommend that shareholders of each Fund
vote FOR the ratification of the selection of independent auditors.
Additional Information
General
The cost of preparing, printing and mailing the enclosed proxy card(s) and
this Proxy Statement, and all other costs incurred in connection with the
solicitation of proxies, including any additional solicitation made by letter,
telephone, facsimile or telegraph, will be paid by Scudder. In addition to
solicitation by mail, certain officers and representatives of each Fund,
officers and employees of Scudder and certain financial services firms and their
representatives, who will receive no extra compensation for their services, may
solicit proxies by telephone, telegram or personally.
Any shareholder of a Fund giving a proxy has the power to revoke it by mail
(addressed to the Secretary at the principal executive office of the applicable
Fund, c/o Zurich Scudder Investments, Inc., at the address for the Fund shown at
the beginning of this Proxy Statement) or in person at a Meeting, by executing a
superseding proxy or by submitting a notice of revocation to the applicable
Fund. All properly executed proxies received in time for the Meetings will be
voted as specified in the proxy or, if no specification is made, in favor of
each Proposal referred to in the Proxy Statement.
The presence at a Meeting, in person or by proxy, of the holders of a
majority, with respect to each Fund, of the shares entitled to be cast of such
Fund 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 a
Meeting with respect to one or more Funds, 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 concerned Fund's shares present in person or by proxy at a
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 a 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 a 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, with respect to each Fund, requires the affirmative
vote of a plurality of the shares of that Fund voting at the Meeting (i.e., the
twelve nominees receiving the greatest number of votes will be elected). As
noted previously, the holders of the Preferred Shares of KTF and KSM, voting as
a separate class for those Funds, are entitled to elect two Trustees and the
holders of the Common Shares and Preferred Shares of KTF and KSM, voting
together as a single class for each Fund, are entitled to elect the ten
remaining Trustees. Approval of Proposals 2 and 3, with respect to each Fund,
requires the affirmative vote of the holders of a "majority of the outstanding
voting securities" of that Fund. The term "majority of the outstanding voting
securities," as defined in the 1940 Act and as used in this Proxy Statement
means: the affirmative vote of the lesser of (i) 67% of the voting securities of
a Fund present at a Meeting if more than 50% of the outstanding voting
securities of the Fund are present in person or by proxy or (ii) more than 50%
of the outstanding voting securities of the Fund. Approval of Proposal 4, with
respect to each Fund, requires the affirmative vote of a majority of the shares
of that Fund voting at a Meeting.
Abstentions and broker non-votes will not be counted in favor of, but will
have no other effect on, the vote for Proposals 1 and 4. Abstentions will have
the effect of a "no" vote on Proposals 2 and 3. Broker non-votes will have the
effect of a "no" vote for Proposals 2 and 3 if such vote is determined on the
basis of obtaining the affirmative vote of more than 50% of the outstanding
shares of a Fund. Broker non-votes will not constitute "yes" or "no" votes for
Proposals 2 and 3 and will be disregarded in determining the voting securities
"present" if such vote is determined on the basis of the affirmative vote of 67%
of the voting securities of a Fund present at a Meeting. Broker non-votes are
not likely to be relevant to the Meetings because the Funds have been advised by
the NYSE that each of the Proposals to be voted upon by the shareholders
involves matters that the NYSE considers to be routine and within the discretion
of brokers to vote if no customer instructions are received. Shareholders of
each Fund will vote separately with respect to each Proposal.
If shareholder approval is not obtained prior to the closing of the
Transaction, Scudder would propose to enter into an interim advisory agreement
with your Fund, pursuant to Rule 15a-4 under the 1940 Act. The interim
agreement, which would take effect upon completion of the acquisition of Scudder
by Deutsche Bank, would be in substantially the same form as the New Investment
Management Agreement, but would not include the new provisions regarding
flexibility in managing assets and would include special provisions required by
Rule 15a-4, including:
o a maximum term of 150 days;
o a provision that the Board or holders of a majority of your
Fund's shares may terminate the agreement at any time without
penalty on not more than 10 days' written notice; and
o a provision that the compensation earned by Scudder under the
agreement would be held in an interest-bearing escrow account
until shareholder approval of the New Investment Management
Agreement is obtained, after which the amount in the escrow
account (together with any interest) would be paid to Scudder.
If any Fund relying on Rule 15a-4 has not received the requisite
shareholder approval for the New Investment Management Agreement within 150 days
after completion of the acquisition of Scudder by Deutsche Bank, fees (less
reasonable expenses) would be returned and the Board of the affected Fund will
consider other appropriate arrangements subject to approval in accordance with
the 1940 Act.
Holders of record of the shares of each Fund at the close of business on
February 8, 2002, as to any matter on which they are entitled to vote, will be
entitled to one vote per share on all business of a Meeting. The table provided
in Appendix 6 hereto sets forth the number of shares outstanding for each Fund
as of [ ], 2002.
To the best of each Trust's knowledge, as of [ ], 2001, no person owned
beneficially more than 5% of any Fund's outstanding shares, except as stated in
Appendix 7.
Appendix 8 lists the amount of shares and dollar range of each Fund owned
directly or beneficially by the Trustees of the relevant Board.
Georgeson Shareholder Communications, Inc. ("Georgeson") has been engaged
to assist in the solicitation of proxies, at an estimated cost of $[ ] per Fund,
plus expenses. As the Meeting date approaches, certain shareholders of each Fund
may receive a telephone call from a representative of Georgeson if their votes
have not yet been received. Authorization to permit Georgeson to execute proxies
may be obtained by telephonic or electronically transmitted instructions from
shareholders of each Fund. Proxies that are obtained telephonically will be
recorded in accordance with the procedures described below. The Trustees believe
that these procedures are reasonably designed to ensure that both the identity
of the shareholder casting the vote and the voting instructions of the
shareholder are accurately determined.
If a shareholder wishes to participate in a Meeting, but does not wish to
give a proxy by telephone or electronically, the shareholder may still submit
the proxy card(s) originally sent with this Proxy Statement or attend in person.
Should shareholders require additional information regarding the proxy or
replacement proxy card(s), they may contact Georgeson toll free at [ ]. Any
proxy given by a shareholder is revocable until voted at a Meeting.
Shareholder Proposals for Subsequent Meetings
It is currently anticipated that the 2003 annual meeting of shareholders
will be held in [ ]. A shareholder wishing to submit a proposal for inclusion in
a Fund's proxy statement for the 2003 annual meeting of shareholders pursuant to
Rule 14a-8 under the Securities Exchange Act of 1934 should send such written
proposal to the Secretary of the Fund within a reasonable time before the
solicitation of proxies for such meeting. A Fund will treat any such proposal
received no later than [ ] as timely. A shareholder wishing to provide notice in
the manner prescribed by Rule 14a-4(c)(1) to a Fund of a proposal submitted
outside the process of Rule 14a-8 must submit such written notice to the
Secretary of the Fund within a reasonable time before the solicitation of
proxies for such meeting. A Fund will treat any such notice received no later
than [ ] as timely. The timely submission of a proposal, however, does not
guarantee its inclusion under either rule.
Other Matters to Come Before the Meetings
The Boards are not aware of any matters that will be presented for action
at the Meetings other than the matters described in this material. Should any
other matters requiring a vote of shareholders arise, the proxy in the
accompanying form will confer upon the person or persons entitled to vote the
shares represented by such proxy the discretionary authority to vote the shares
as to any such other matters in accordance with their best judgment in the
interest of each Fund.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) PROMPTLY. NO POSTAGE
IS REQUIRED IF MAILED IN THE UNITED STATES.
By Order of the Boards,
John Millette
Secretary
INDEX OF EXHIBITS AND APPENDICES
EXHIBIT A: FORM OF NEW INVESTMENT MANAGEMENT AGREEMENT
EXHIBIT B: MANAGEMENT FEE RATES FOR FUNDS MANAGED BY
SCUDDER WITH SIMILAR INVESTMENT OBJECTIVES
EXHIBIT C: INFORMATION REGARDING OTHER FUNDS ADVISED OR
SUB-ADVISED BY DeAMIS
EXHIBIT D: FORM OF DeAMIS SUB-ADVISORY AGREEMENT
APPENDIX 1: INFORMATION REGARDING SCUDDER
APPENDIX 2: PROPOSED PORTFOLIO MANAGER CHANGES
APPENDIX 3: FEES PAID TO SFAC AND SISC
APPENDIX 4: FUND MANAGEMENT FEE RATES, NET ASSETS
AND AGGREGATE MANAGEMENT FEES
APPENDIX 5: DATES RELATING TO INVESTMENT MANAGEMENT
AGREEMENTS
APPENDIX 6: FUND SHARES OUTSTANDING
APPENDIX 7: BENEFICIAL OWNERS OF 5% OR MORE OF FUND SHARES
APPENDIX 8: FUND SHARES OWNED BY TRUSTEES AND EXECUTIVE OFFICERS
APPENDIX 9: OFFICERS
APPENDIX 10: AUDIT COMMITTEE CHARTER
APPENDIX 11: FEES PAID TO INDEPENDENT AUDITORS OF THE FUNDS
Exhibit A
Form of New
INVESTMENT MANAGEMENT AGREEMENT
[Name of Fund]
222 South Riverside Plaza
Chicago, Illinois 60606
[Date], 2002
[Zurich Scudder Investments, Inc.]
[address]
Investment Management Agreement
Ladies and Gentlemen:
[Name of Fund] (the "Fund") has been established as a Massachusetts
business trust to engage in the business of an investment company. The Fund has
issued shares of beneficial interest (the "Shares").
The Fund has selected you to act as the investment manager of the Fund and
to provide certain other services, as more fully set forth below, and you have
indicated that you are willing to act as such investment manager and to perform
such services under the terms and conditions hereinafter set forth. Accordingly,
the Fund agrees with you as follows:
1. Delivery of Documents. The Fund engages in the business of investing and
reinvesting its assets in the manner and in accordance with its investment
objectives, policies and restrictions. The Fund has furnished you with copies
properly certified or authenticated of each of the following documents related
to the Fund:
(a) The Declaration of Trust ("Declaration"), as amended to date.
(b) By-Laws of the Fund as in effect on the date hereof (the "By-Laws").
(c) Resolutions of the Trustees of the Fund and the shareholders of the
Fund selecting you as investment manager and approving the form of
this Agreement.
The Fund will furnish you from time to time with copies, properly certified
or authenticated, of all amendments of or supplements, if any, to the foregoing.
2. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with its investment objectives, policies and restrictions; the
applicable provisions of the Investment Company Act of 1940 (the "1940 Act") and
the Internal Revenue Code of 1986, as amended, (the "Code") relating to
regulated investment companies and all rules and regulations thereunder; and all
other applicable federal and state laws and regulations of which you have
knowledge; subject always to policies and instructions adopted by the Fund's
Board of Trustees. In connection therewith, you shall use reasonable efforts to
manage the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 2, you shall
be entitled to receive and act upon advice of counsel to the Fund. You shall
also make available to the Fund promptly upon request all of the Fund's
investment records and ledgers as are necessary to assist the Fund in complying
with the requirements of the 1940 Act and other applicable laws. To the extent
required by law, you shall furnish to regulatory authorities having the
requisite authority any information or reports in connection with the services
provided pursuant to this Agreement which may be requested in order to ascertain
whether the operations of the Fund are being conducted in a manner consistent
with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies.
You shall determine what portion of the Fund's portfolio shall be invested in
securities and other assets and what portion, if any, should be held uninvested.
You shall furnish to the Fund's Board of Trustees periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Fund's officers or Board of Trustees shall reasonably
request.
3. Delegation of Portfolio Management Services. Subject to the prior
approval of a majority of the members of the Fund's Board of Trustees, including
a majority of the Trustees who are not "interested persons," as defined in the
1940 Act, you may, through a sub-advisory agreement or other arrangement,
delegate to any other company that you control, are controlled by, or are under
common control with, or to specified employees of any such companies, or to more
than one such company, certain of your duties enumerated in section 2 hereof;
provided, that you shall continue to supervise the services provided by such
company or employees and any such delegation shall not relieve you of any of
your obligations hereunder.
Subject to the provisions of this Agreement, the duties of any sub-adviser
or delegate, the portion of portfolio assets of the Fund that the sub-adviser or
delegate shall manage and the fees to be paid to the sub-adviser or delegate by
you under and pursuant to any sub-advisory agreement or other arrangement
entered into in accordance with this Agreement may be adjusted from time to time
by you, subject to the prior approval of a majority of the members of the Fund's
Board of Trustees, including a majority of the Trustees who are not "interested
persons," as defined in the 1940 Act.
4. Administrative Services. In addition to the portfolio management
services specified above in section 2, you shall furnish at your expense for the
use of the Fund such office space and facilities in the United States as the
Fund may require for its reasonable needs, and you (or one or more of your
affiliates designated by you) shall render to the Fund administrative services
on behalf of the Fund necessary for operating as a closed-end investment company
and not provided by persons not parties to this Agreement including, but not
limited to, preparing reports to and meeting materials for the Fund's Board of
Trustees and reports and notices to Fund shareholders; supervising, negotiating
contractual arrangements with, to the extent appropriate, and monitoring the
performance of, accounting agents, custodians, depositories, transfer agents and
pricing agents, accountants, attorneys, printers, underwriters, brokers and
dealers, insurers and other persons in any capacity deemed to be necessary or
desirable to Fund operations; preparing and making filings with the Securities
and Exchange Commission (the "SEC") and other regulatory and self-regulatory
organizations, including, but not limited to, preliminary and definitive proxy
materials, post-effective amendments to the Fund's Registration Statement and
semi-annual reports on Form N-SAR; overseeing the tabulation of proxies by the
Fund's transfer agent; assisting in the preparation and filing of the Fund's
federal, state and local tax returns; preparing and filing the Fund's federal
excise tax return pursuant to Section 4982 of the Code; providing assistance
with investor and public relations matters; monitoring the valuation of
portfolio securities and the calculation of net asset value; monitoring the
registration of Shares of the Fund under applicable federal and state securities
laws; maintaining or causing to be maintained for the Fund all books, records
and reports and any other information required under the 1940 Act, to the extent
that such books, records and reports and other information are not maintained by
the Fund's custodian or other agents of the Fund; assisting in establishing the
accounting policies of the Fund; assisting in the resolution of accounting
issues that may arise with respect to the Fund's operations and consulting with
the Fund's independent accountants, legal counsel and the Fund's other agents as
necessary in connection therewith; establishing and monitoring the Fund's
operating expense budgets; reviewing the Fund's bills; processing the payment of
bills that have been approved by an authorized person; assisting the Fund in
determining the amount of dividends and distributions available to be paid by
the Fund to its shareholders, preparing and arranging for the printing of
dividend notices to shareholders, and providing the transfer and dividend paying
agent, the custodian, and the accounting agent with such information as is
required for such parties to effect the payment of dividends and distributions;
and otherwise assisting the Fund as it may reasonably request in the conduct of
the Fund's business, subject to the direction and control of the Fund's Board of
Trustees. Nothing in this Agreement shall be deemed to shift to you or to
diminish the obligations of any agent of the Fund or any other person not a
party to this Agreement which is obligated to provide services to the Fund.
5. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this section 5, you shall pay the compensation and expenses of all
Trustees, officers and executive employees of the Fund (including the Fund's
share of payroll taxes) who are affiliated persons of you, and you shall make
available, without expense to the Fund, the services of such of your directors,
officers and employees as may duly be elected officers of the Fund, subject to
their individual consent to serve and to any limitations imposed by law. You
shall provide at your expense the portfolio management services described in
section 2 hereof and the administrative services described in section 4 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 5. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out-of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Fund; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent for which the
Fund is responsible pursuant to the terms of the Fund Accounting Services
Agreement, custodians, subcustodians, transfer agents, dividend disbursing
agents and registrars; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates and, except as provided below in this section 5,
other expenses in connection with the issuance, offering, distribution, sale,
redemption or repurchase of securities issued by the Fund; expenses relating to
investor and public relations; expenses and fees of registering or qualifying
Shares of the Fund for sale; interest charges, bond premiums and other insurance
expense; freight, insurance and other charges in connection with the shipment of
the Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Fund business) of Trustees, officers and
employees of the Fund who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
statements of additional information of the Fund and supplements thereto; costs
of stationery; any litigation expenses; indemnification of Trustees and officers
of the Fund; and costs of shareholders' and other meetings.
6. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 2, 3, 4 and 5 hereof, the
Fund shall pay you in United States Dollars on the last day of each month the
unpaid balance of a fee equal to the excess of (a) [see Appendix 6 to this Proxy
Statement for the investment management fee rate paid by each Fund]; over (b)
any compensation waived by you from time to time (as more fully described
below). You shall be entitled to receive during any month such interim payments
of your fee hereunder as you shall request, provided that no such payment shall
exceed 75 percent of the amount of your fee then accrued on the books of the
Fund and unpaid.
The net asset value of the Fund shall be calculated at such time or times
as the Trustees may determine in accordance with the provisions of the 1940 Act.
On each day when net asset value is not calculated, the net asset value shall be
deemed to be the net asset value as of the close of business on the last day on
which such calculation was made for the purpose of the foregoing computations.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
7. Avoidance of Inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other investments
for the account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies. If any
occasion should arise in which you give any advice to clients of yours
concerning the Shares of the Fund, you shall act solely as investment counsel
for such clients and not in any way on behalf of the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed
to be exclusive and it is understood that you may render investment advice,
management and services to others. In acting under this Agreement, you shall be
an independent contractor and not an agent of the Fund. Whenever the Fund and
one or more other accounts or investment companies advised by you have available
funds for investment, investments suitable and appropriate for each shall be
allocated in accordance with procedures believed by you to be equitable to each
entity. Similarly, opportunities to sell securities shall be allocated in a
manner believed by you to be equitable. The Fund recognizes that in some cases
this procedure may adversely affect the size of the position that may be
acquired or disposed of for the Fund.
8. Limitation of Liability of Manager. As an inducement to your undertaking
to render services pursuant to this Agreement, the Fund agrees that you shall
not be liable under this Agreement for any error of judgment or mistake of law
or for any loss suffered by the Fund in connection with the matters to which
this Agreement relates, provided that nothing in this Agreement shall be deemed
to protect or purport to protect you against any liability to the Fund or its
shareholders to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of your duties, or
by reason of your reckless disregard of your obligations and duties hereunder.
9. Duration and Termination of This Agreement. This Agreement shall remain
in force until September 30, 2002, and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Trustees who are not parties
to this Agreement or interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Trustees of the Fund, or by the vote of a majority of the outstanding
voting securities of the Fund. The aforesaid requirement that continuance of
this Agreement be "specifically approved at least annually" shall be construed
in a manner consistent with the 1940 Act and the rules and regulations
thereunder and any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time,
without the payment of any penalty, by the vote of a majority of the outstanding
voting securities of the Fund or by the Fund's Board of Trustees on 60 days'
written notice to you, or by you on 60 days' written notice to the Fund. This
Agreement shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to the Fund at any time
without the payment of any penalty by the Board of Trustees or by vote of a
majority of the outstanding voting securities of the Fund in the event that it
shall have been established by a court of competent jurisdiction that you or any
of your officers or directors has taken any action which results in a breach of
your covenants set forth herein.
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
11. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "[Name of Fund]"
refers to the Trustees under the Declaration collectively as Trustees and not as
individuals or personally, and that no shareholder of the Fund, or Trustee,
officer, employee or agent of the Fund, shall be subject to claims against or
obligations of the Fund to any extent whatsoever, but that the Fund estate only
shall be liable.
You are hereby expressly put on notice of the limitation of liability as
set forth in the Declaration and you agree that the obligations assumed by the
Fund pursuant to this Agreement shall be limited in all cases to the Fund and
its assets, and you shall not seek satisfaction of any such obligation from the
shareholders or any shareholder of the Fund, or from any Trustee, officer,
employee or agent of the Fund.
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
In interpreting the provisions of this Agreement, the definitions contained
in Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of The
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Fund, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
[Name of Fund]
By: _____________________________________
Vice President
The foregoing Agreement is hereby accepted as of the date hereof.
[ZURICH SCUDDER INVESTMENTS, INC.]
By: _____________________________________
Name
-------------------------------------
Title
Exhibit B
Management Fee Rates for Funds Managed by Scudder
with Similar Investment Objectives*
Fund Objective Fee Rate+ Net Assets
---- --------- -------- ----------
U.S. Income Funds
Scudder Floating Rate Fund As high a level of current income as is 0.500% to $1 billion $ 172,334,773
consistent with the preservation of capital. 0.490% next $2 billion
0.480% next $2 billion
0.470% next $5 billion
0.450% over $10 billion
Scudder GNMA Fund High level of income while actively seeking to 0.400% to $5 billion $ 4,273,399,626
reduce downside risk compared with other GNMA 0.385% next $1 billion
mutual funds. 0.370% over $6 billion
Scudder High-Yield Fund Highest level of current income obtainable from a 0.580% to $250 million $ 2,616,954,464
diversified portfolio of fixed-income securities 0.550% next $750 million
which the fund's investment manager considers 0.530% next $1.5 billion
consistent with reasonable risk. As a secondary 0.510% next $2.5 billion
objective, the fund will seek capital gain where 0.480% next $2.5 billion
consistent with its primary objective. 0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% over $12.5 billion
Scudder High-Yield Opportunity Total return through high current income and 0.600% to $500 million $ 129,687,812
Fund capital appreciation. 0.575% next $500 million
0.550% next $500 million
0.525% next $500 million
0.500% next $1 billion
0.475% over $3 billion++
Scudder Income Fund High income while managing its portfolio in a way 0.550% to $250 million $ 835,783,924
that is consistent with the prudent investment of 0.520% next $750 million
shareholders' capital. 0.500% next $1.5 billion
0.480% next $2.5 billion
0.450% next $2.5 billion
0.430% next $2.5 billion
0.410% next $2.5 billion
0.400% over $12.5 billion++
Scudder Short Term Bond Fund High income while managing its portfolio in a way 0.450% to $1.5 billion $ 1,144,505,490
that is consistent with maintaining a high degree 0.425% next $500 million
of stability. 0.400% next $1 billion
0.385% next $1 billion
0.370% next $1 billion
0.355% next $1 billion
0.340% over $6 billion
Scudder Strategic Income High current return. 0.580% to $250 million $ 438,621,367
Fund 0.550% next $750 million
0.530% next $1.5 billion
0.510% next $2.5 billion
0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% over $12.5 billion
Scudder U.S. Government High current income, liquidity and security of 0.450% to $250 million $ 4,211,460,035
Securities Fund principal. 0.430% next $750 million
0.410% next $1.5 billion
0.400% next $2.5 billion
0.380% next $2.5 billion
0.360% next $2.5 billion
0.340% next $2.5 billion
0.320% over $12.5 billion
Global Income Funds
Scudder Emerging Markets High current income and, secondarily, long-term 1.000% to $500 million $ 120,468,131
Income Fund capital appreciation. 0.950% over $500 million
Scudder Global Bond Fund Total return with an emphasis on current income; 0.750% to $250 million $ 180,288,837
capital appreciation is a secondary goal. 0.720% next $750 million
0.700% next $1.5 billion
0.680% next $2.5 billion
0.650% next $2.5 billion
0.640% next $2.5 billion
0.630% next $2.5 billion
0.620% over $12.5 billion
Asset Allocation Funds Series
Scudder Pathway Series: Current income and, as a secondary objective, There will be no fee as the $ 112,874,335
Conservative Portfolio long-term growth of capital. Investment Manager will
receive a fee from the underlying funds.
Scudder Pathway Series: Balance of current income and growth of capital. There will be no fee as the $ 268,370,642
Moderate Portfolio Investment Manager will receive
a fee from theunderlying funds.
U.S. Growth and Income Funds
Scudder Balanced Fund Balance of growth and income from a diversified 0.470% to $1.5 billion $ 934,277,783
portfolio of equity and fixed-income securities. 0.445% next $500 million
0.420% over $2 billion
Scudder Dividend & High current income and long-term growth of 0.750% to $500 million $ 31,675,170
Growth Fund capital by investing primarily in common stocks, 0.700% over $500 million
convertible securities and real estate investment
trusts.
Scudder Growth and Income Long-term growth of capital, current income and 0.450% to $14 billion $ 6,890,176,215
Fund growth of income while actively seeking to reduce 0.425% next $2 billion
downside risk as compared with other growth and 0.400% next $2 billion
income funds. 0.385% over $18 billion
Closed-End Funds
Scudder High Income Trust Highest current income obtainable consistent with 0.850% to $250 million $ 172,641,703
reasonable risk with capital gains secondary. 0.750% over $250 million(1)
Scudder Intermediate Government High current income consistent with preservation 0.800% of net assets(1) $ 248,728,544
Trust of capital by investing in U.S. and foreign
government securities.
Scudder Multi-Market Income High current income consistent with prudent total 0.850% of net assets(1) $ 162,810,924
Trust return asset management by investing in a
diversified portfolio of investment grade
tax-exempt securities.
Scudder Municipal Income Trust High level of current income exempt from federal 0.550% of net assets(1) $ 726,129,144
income tax.
Scudder Strategic Income Trust [High current income by investing its assets in a 0.850% of net assets(1) $ 40,839,186
combination of lower-rated
corporate fixed-income securities,
fixed-income securities of
emerging market and other foreign
issuers and, fixed-income
securities of the U.S. government
and its agencies and
instrumentalities and private
mortgage-backed issuers.]
Scudder Strategic Municipal High level of current income exempt from federal 0.600% of net assets(1) $ 197,223,147
Income Trust income tax by investing in a diversified
portfolio of tax-exempt municipal securities.
Montgomery Street Income High level of current income consistent with 0.500% to $150 million $ 195,533,218
Securities, Inc prudent investment risks through a diversified 0.450% next $50 million
portfolio primarily of debt securities. 0.400% over $200 million
Scudder Global High Income High level of current income and, secondarily, 1.200% of net assets(1) $ 56,235,145
Fund, Inc. capital appreciation through investment
principally in dollar-denominated Latin American
debt instruments.
Insurance/Annuity Products
Bond Portfolio High level of income consistent with a high 0.475% of net assets $ 181,899,319
quality portfolio of debt securities.
Scudder Blue Chip Portfolio Growth of capital and of income. 0.650% of net assets $ 239,669,789
Scudder Government Securities High current income consistent with preservation 0.550% of net assets $ 305,227,432
Portfolio of capital.
Scudder High Yield Portfolio High level of current income. 0.600% of net assets $ 335,090,389
Portfolio
Scudder Investment Grade Bond High current income. 0.600% of net assets $ 133,759,440
SVS Growth and Income Portfolio Long-term capital growth and current income. 0.950% to $250 million $ 178,848,733
0.925% next $250 million
0.900% next $500 million
0.875% next $1.5 billion
0.850% over $2.5 billion
* Unless otherwise noted, the information provided below is shown as of the
end of each Fund's most recent fiscal year.
+ Unless otherwise noted, the investment management fee rates provided below
are based on the average daily net assets of a Fund.
++ Subject to waiver and/or expense limitations.
(1) Based on average weekly net assets.
Exhibit C
Similar Funds Advised or Sub-Advised
by DeAMIS
Net Assets
(Millions) as of Advisory Fee
Name of Fund December 31, 2001 (% of average daily net assets)
- ------------ ----------------- -------------------------------
International Select Equity Fund $258,283,127.47 0.70%
Emerging Markets Debt Fund $74,401,141.11 1.00%
Emerging Markets Equity Fund $122,395,262.20 1.00%
Exhibit D
Form of
DeAMIS Sub-Advisory Agreement
FORM OF
SUBADVISORY AGREEMENT
AGREEMENT made as of the [Date], between ZURICH SCUDDER INVESTMENTS, INC.,
a Delaware corporation (hereinafter called the "Manager"), and DEUTSCHE ASSET
MANAGEMENT INVESTMENT SERVICES LIMITED, [type of entity, state of organization]
(hereinafter called the "Subadviser").
WITNESSETH:
WHEREAS, [Name of Trust] (the "Trust") is a Massachusetts business trust
organized with one or more series of shares, and is registered as an investment
company under the Investment Company Act of 1940 (the "Investment Company Act");
WHEREAS, the Manager desires to utilize the services of the Subadviser to
provide subadvisory services with respect to the [Name of Series] (the
"Series"), being one of the series of the Trust, which is under the management
of the Manager pursuant to an Investment Management Agreement between the
Manager and the Trust dated [date]; and
WHEREAS, the Subadviser is willing to perform such services on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual agreements herein contained,
it is agreed as follows:
1. The Subadviser's Services. The Subadviser shall serve the Manager as
investment counsel with respect to the Series.
The Subadviser is hereby authorized and directed and hereby agrees, subject
to the stated investment policies and restrictions of the Series as set forth in
the current Prospectus and Statement of Additional Information of the Trust
relating to the Series (including amendments), and in accordance with the
Declaration of Trust and By-laws of the Trust, as both may be amended from time
to time, governing the offering of its shares and subject to such resolutions,
policies and procedures as from time to time may be adopted by the Board and
furnished to the Subadviser in writing, and in accordance with the instructions
and procedures of the Manager furnished to the Subadviser in writing, to
develop, recommend and implement such investment program and strategy for the
Series, to provide research and analysis relative to the investment program and
securities and other investments ("investments") of the Series, to determine
what investments should be purchased, sold and, if applicable, loaned by the
Series and to monitor on a continuing basis the performance of the investments
of the Series. In addition, the Subadviser shall place orders for the purchase
and sale of investments for the Series and, subject to the provisions of this
section, shall take reasonable steps to assure that those portfolio transactions
are effected subject to the best execution under the circumstances. The
Subadviser shall advise the custodian for the Series ("Custodian") and the
Manager on a prompt basis of each purchase and sale of an investment specifying
the name of the issuer, the CUSIP number (if available), the description and
amount (or number of shares) of the investment purchased, the market price,
commission and gross or net price, trade date, settlement date and identity of
the effecting broker or dealer. From time to time as the Board or the Manager
may reasonably request, the Subadviser shall furnish to the Manager, the Trust's
officers and to each of its Trustees reports on portfolio transactions and
reports on assets held in the Series, all in such detail as the Trust or the
Manager may reasonably request. The Subadviser shall also inform the Manager,
the Trust's officers and the Board on a current basis of changes in investment
strategy or tactics or any other developments materially affecting the Series.
The Subadviser shall make its officers and employees available to meet with the
Manager, the Trust's officers and the Board at least quarterly on due notice and
at such other times as may be mutually agreeable, to review the investments and
investment performance of the Series in the light of the Series' investment
objectives and policies and market conditions.
Absent written instructions to the Manager to the contrary, the Subadviser
shall place all orders for the purchase and sale of investment instruments for
the Series with brokers or dealers selected by the Subadviser consistent with
best execution, which, subject to and consistent with the policies and
procedures of the Trust relating to Rule 17e-l under the Investment Company Act,
may include brokers or dealers affiliated with the Subadviser. Purchase or sell
orders for the Series may be aggregated with contemporaneous purchase or sell
orders of other clients of the Subadviser. The Subadviser shall use its best
efforts to obtain execution of portfolio transactions at prices that are
advantageous to the Series and at commission rates that are reasonable in
relation to the benefits received. The Subadviser may select brokers or dealers
on the basis that they provide brokerage, research or other services or products
to the Series and/or other accounts serviced by the Subadviser. The Subadviser
may place portfolio transactions with a broker or dealer with which it has
negotiated a commission in excess of the commission another broker or dealer
would have charged for effecting that transaction if the Subadviser determines
in good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research provided by such broker or dealer, viewed in
terms of either that particular transaction or the overall responsibilities that
the Subadviser has with respect to the Series and to accounts over which it
exercises investment discretion, and not all such services or products will
necessarily be used by the Subadviser in managing the Series. In addition,
consistent with best execution, the Subadviser may execute portfolio
transactions through brokers and dealers that sell shares of mutual funds
advised by the Subadviser or recommend to their customers that they purchase
shares of such funds. If the Subadviser determines that any product or service
furnished by a broker--dealer has a mixed use, such that it also serves
functions that do not assist the Subadviser in carrying out its investment
decision--making process, the Subadviser shall be responsible for making and
documenting a reasonable allocation of the costs of such service or product. The
portion of the product or service that the Subadviser determines will assist it
in carrying out its investment decision--making process may be paid for in
brokerage commission dollars.
It shall be the duty of the Subadviser to furnish to the Trustees such
information as may reasonably be requested in order for the Board to evaluate
this Agreement or any proposed amendments thereto for the purposes of casting a
vote pursuant to Section 9 hereof, including any information requested pursuant
to section 15(c) of the Investment Company Act. Any information reasonably
deemed proprietary by the Subadviser shall be subject to the provisions of
Section 6 hereof.
The Subadviser shall not be responsible for fund accounting nor shall it be
required to generate fund accounting data.
The Series assets shall be maintained in the custody of the custodian
identified by the Manager in writing (the "Custodian") . Any assets added to the
Series shall be delivered directly to the Custodian. The Subadviser shall have
no liability for the acts or omissions of any Custodian, other than (subject to
Section 11) for acts or omissions arising in reliance on instructions from the
Subadviser.
In the performance of its duties hereunder, the Subadviser is and shall be
an independent contractor and except as otherwise expressly provided herein or
otherwise authorized in writing, shall have no authority to act for or represent
the Trust, the Series or the Manager in any way or otherwise be deemed to be an
agent of the Trust, the Series or the Manager.
In furnishing the services under this Agreement, the Subadviser shall
comply with the requirements of the Investment Company Act and of the Investment
Advisers Act of 1940 ("Advisers Act") applicable to it, the regulations
promulgated thereunder, and all other applicable laws and regulations. The
Subadviser shall immediately notify the Manager and the Trust in the event that
the Subadviser: (1) becomes subject to a statutory disqualification that
prevents the Subadviser from serving as an investment adviser pursuant to this
Agreement; or (2) is or expects to become the subject of an administrative
proceeding or enforcement action by the Securities and Exchange Commission
("SEC") or other regulatory authority (including, without limitation, any
self-regulatory organization) which proceeding or action could reasonably be
deemed material to the Subadviser's performance of its duties under this
Agreement (unless the Subadviser is prohibited by applicable law or regulation
from disclosing such proceeding or action). The Subadviser shall immediately
forward, upon receipt, to the Manager any correspondence from the SEC or other
regulatory authority that relates to the Series.
The Subadviser shall be responsible for the preparation and filing of
reports on Schedule l3G and Form 13F with respect to securities held by the
Series, but unless otherwise expressly agreed to in writing, the Subadviser
shall not be responsible for the preparation or filing of any other reports
required of the Series by any governmental or regulatory agency.
The Subadviser may request information from the Manager or from the fund
accountant, the Custodian or other service providers to the Series to enable the
Subadviser to monitor compliance with portfolio restrictions of the Series. In
the event such information is not made available to the Subadviser reasonably
promptly upon request, the Subadviser shall notify the Manager in writing. If
the Manager does not provide (or arrange for the provision of) such information
to the Subadviser reasonably promptly upon receipt of written notice from the
Subadviser, the Manager shall assume responsibility for the monitoring to which
the requested information relates.
The Subadviser's primary consideration in effecting a security transaction
shall be to obtain the best execution under the circumstances for the Series,
taking into account the factors specified in the Prospectus and Statement of
Additional Information of the Trust relating to the Series. Subject to such
policies as the Board may determine and consistent with Section 28(e) of the
Securities Exchange Act of 1934, the Subadviser shall not be deemed to have
acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of its having caused the Series to pay a
broker-dealer for effecting a portfolio investment transaction an amount of
commission in excess of the amount of commission another broker-dealer would
have charged for effecting that transaction, if the Subadviser determines in
good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker-dealer
viewed in terms of either that particular transaction or its overall
responsibilities with respect to accounts as to which it exercises investment
discretion.
2. Delivery of Documents to the Subadviser. The Manager shall furnish to the
Subadviser copies of each of the following documents:
(i) The Declaration of Trust of the Trust as in effect on the date hereof;
(ii) The By-laws of the Trust in effect on the date hereof;
(iii) The resolutions of the Board approving the engagement of the
Subadviser as subadviser for the Series and approving the form of this
agreement;
(iv) The resolutions of the Board selecting the Manager as investment
manager to the Series and approving the form of the Investment Management
Agreement with the Trust, on behalf of the Series;
(v) The Investment Management Agreement with the Trust on behalf of the
Series;
(vi) The Code of Ethics of the Trust and of the Manager as currently in
effect;
(vii) Current copies of the Prospectus and Statement of Additional
Information of the Trust relating to the Series; and
(viii) Resolutions, policies and procedures adopted by the Board in respect
of the management or operation of the Series.
(ix) Such other information as the Subadviser may reasonably request in
connection with the performance of its duties under this Agreement.
The Manager shall furnish the Subadviser from time to time with copies,
properly certified or otherwise authenticated, of all amendments of or
supplements to the foregoing, if any. Such amendments or supplements as to Items
(a) through (g) above shall be provided within 30 days of the time such
materials became available to the Manager and, until so provided, the Subadviser
may continue to rely on those documents previously provided.
During the term of this Agreement, the Manager also shall furnish to the
Subadviser prior to use thereof copies of all Trust documents, proxy statements,
reports to shareholders, sales literature, or other material prepared for
distribution to shareholders of the Series or the public that refer in any way
to the Subadviser, and shall not use such material if the Subadviser reasonably
objects in writing after reasonable opportunity to review such material after
receipt thereof. However, the Manager and the Subadviser may mutually agree that
certain of the above-mentioned documents do not need to be furnished to the
Subadviser prior to the document's use.
In the event of termination of this Agreement, the Manager shall continue
to furnish to the Subadviser copies of any of the above-mentioned materials that
refer in any way to the Subadviser. The Manager shall furnish or otherwise make
available to the Subadviser such other information relating to the business
affairs of the Trust as the Subadviser at any time, or from time to time,
reasonably requests in order to discharge its obligations hereunder.
3. Delivery of Documents to the Manager. The Subadviser shall furnish
the Manager with copies of each of the following documents:
The Manager will cooperate with the Subadviser in establishing and
maintaining brokerage and other accounts that the Subadviser deems advisable to
allow for the purchase and sale of various forms of securities or other
instruments by the Series pursuant to this Agreement.
(i) The Subadviser's most recent balance sheet;
(ii) Separate lists of persons whom the Subadviser wishes to have
authorized to give written and/or oral instructions to the Custodian and the
fund accounting agent of Trust assets for the Series;
(iii) The Code of Ethics of the Subadviser as currently in effect;
and
(iv) Any compliance policies, trading, commission and other
reports, confirmation of the Subadviser's insurance coverage (in form and
substance satisfactory to the Manager), and such other management or operational
documents as the Manager may reasonably request in writing (on behalf of itself
or the Board) in assessing the Subadviser.
The Subadviser will maintain a written code of ethics complying with the
requirements of Rule 17j-1 under the Investment Company Act and will provide the
Trust with a copy of the code of ethics, including any amendments thereto,
together with evidence of its adoption and a certification to the effect that
the Subadviser has adopted procedures reasonably necessary to prevent its
"access persons" from violating its code of ethics. The Subadviser will be
subject to its code of ethics and will not be subject to any other code of
ethics, including that of the Manager, unless specifically adopted by the
Subadviser. At least annually (or more frequently if required by Rule 17j-1 or
as the Trust or the Manager may reasonably request), the Subadviser shall
provide a written report as to the matters required to be provided to the Trust
by the Subadviser under Rule 17j-l, including the certification provided for
therein. Upon the written request of the Trust, the Subadviser shall permit
Trust to examine the policies and procedures the Subadviser maintains pursuant
to Rule 17j-l to the extent material to the assessment of the Subadviser's
performance of its duties under this Agreement.
The Subadviser shall furnish the Manager from time to time with copies,
properly certified or otherwise authenticated, of all material amendments of or
supplements to the foregoing, if any. Additionally, the Subadviser shall provide
to the Manager such other documents relating to its services under this
Agreement as the Manager may reasonably request on a periodic basis. Such
amendments or supplements as to items (a) through (c) above shall be provided
within 30 days of the time such materials became available to the Subadviser.
Any information reasonably deemed proprietary by the Subadviser shall be
subject to the provisions of Section 6 hereof.
The Subadviser shall promptly notify the Manager of any transaction or
other event that results in an "assignment" of this Agreement within the meaning
of the Investment Company Act. In addition, the Subadviser shall promptly
complete and return to the Manager or the Trust any compliance questionnaires or
other inquiries submitted to the Subadviser in writing.
4. Other Agreements, etc. It is understood that any of the shareholders,
the Trustees, officers and employees of the Trust or the Series may be a
shareholder, director, officer or employee of, or be otherwise interested in,
the Subadviser, any interested person of the Subadviser, any organization in
which the Subadviser may have an interest or any organization which may have an
interest in the Subadviser, and that any such interested person or any such
organization may have an interest in the Trust or the Series. It is also
understood that the Subadviser, the Manager and the Trust may have advisory,
management, service or other contracts with other individuals or entities, and
may have other interests and businesses.
Scudder Strategic Income Fund, Scudder Worldwide 2004 Fund: When a security
proposed to be purchased or sold for the Series is also to be purchased or sold
for other accounts managed by the Subadviser at the same time, the Subadviser
shall make such purchases or sales on a pro-rata, rotating or other equitable
basis so as to avoid any one account's being preferred over any other account.
The Subadviser may give advice and take action with respect to other funds
or clients, or for its own account which may differ from the advice or the
timing or nature of action taken with respect to the Series. The Subadviser
makes no representation or warranty, express or implied, that any level of
investment performance or investment results will be achieved by the Series or
that the Series will perform comparably with any standard or index, including
other clients of the Subadviser, whether public or private.
Nothing in this Agreement shall be implied to prevent (1) the Manager from
engaging other subadvisers to provide investment advice and other services in
relation to other series of the Trust for which the Subadviser does not provide
such services, or to prevent the Manager from providing such services itself in
relation to such series; or (2) the Subadviser from providing investment advice
and other services to other funds or clients.
5. Fees, Expenses and Other Charges.
(i) Subject to the provisions of this Agreement, the duties of the
Subadviser, the portion of portfolio assets that the Subadviser shall manage,
and the fees to be paid the Subadviser by the Manager under and pursuant to this
Agreement may be adjusted from time to time by the Manager with and upon the
approval of the Board and the members of the Trust's Board of Trustees who are
not "interested persons," as defined in the Investment Company Act.
(ii) The Subadviser, at its expense, shall furnish all necessary investment
facilities, including salaries of personnel required for it to execute its
duties under this Agreement.
(iii) The Manager, the Series and the Trust shall assume and pay their
respective organizational, operational and business expenses not specifically
assumed or agreed to be paid by the Subadviser pursuant to this Agreement. The
Subadviser shall pay its own organizational, operational and business expenses
but shall not be obligated to pay any expenses of the Manager, the Trust, or the
Series, including without limitation (i) interest and taxes, (ii) brokerage
commissions and other costs in connection with the purchase or sale of
securities or other investment instruments for the Series, and (iii) custodian
fees and expenses. Any reimbursement to the Series of management fees required
by any expense limitation provision set forth in the Prospectus or Statement of
Additional Information of the Series, and any liability to the Series arising
out of a violation of Section 36(b) of the Investment Company Act by the
Manager, shall be the sole responsibility of the Manager.
6. Confidential Treatment. It is understood that any information or
recommendation supplied by the Subadviser in connection with the performance of
its obligations hereunder is to be regarded as confidential and for use only by
the Manager, the Trust or such persons as the Manager may designate in
connection with the Series and further understood that any information
reasonably designated as proprietary by the Subadviser shall be subject to such
limitations on access or use as the Subadviser and the Manager or the Trust
shall reasonably agree. It is also understood that any information supplied to
the Subadviser in connection with the performance of its obligations hereunder,
particularly, but not limited to, any list of investments which, on a temporary
basis, may not be bought or sold for the Series, is to be regarded as
confidential and for use only by the Subadviser in connection with its
obligation to provide investment advice and other services to the Series.
The Manager will not, directly or indirectly, use, disclose or furnish, to
any person or entity, records or information concerning the business of the
Subadviser, except as necessary for the performance of its duties under this
Agreement or the Investment Management Agreement, or as required by applicable
law or regulation, upon prior written notice to the Subadviser. Subadviser is
the sole owner of the name and mark "Janus." Other than as permitted by Section
2 hereof, the Manager will not, and will not permit the Series to, without prior
written consent of the Subadviser, use the name or mark "Janus" or make
representations regarding the Subadviser or its affiliates. Upon termination of
this Agreement for any reason, the Manager shall cease, and the Manager shall
cause the Series to cease, as promptly as practicable, all use of the Janus name
or any Janus mark (except to the extent necessary in describing the management
of the Series during the term of this Agreement).
The Subadviser shall maintain and enforce adequate security procedures with
respect to all materials, records, documents and data relating to any of its
responsibilities pursuant to this Agreement including all means for the
effecting of investment transactions.
7. Representations and Covenants of the Parties. The Subadviser hereby
acknowledges that it is registered as an investment adviser under the Advisers
Act and that neither it nor any affiliated person of it, as such term is defined
in Section 2(a)(3) of the Investment Company Act ("affiliated person"), is
subject to any disqualification that would make the Subadviser unable to serve
as an investment adviser to a registered investment company under Section 9 of
the Investment Company Act. The Subadviser covenants that it will carry out
appropriate compliance procedures necessary to the operation of the Series as
the Subadviser and the Manager may agree The Subadviser also covenants that it
will manage the Series in conformity with all applicable rules and regulations
of the SEC in all material respects and so that the Series will qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code
("Code") and will be adequately diversified for purposes of Section 817(h) of
the Code and the Treasury regulations thereunder.
The Manager hereby represents and warrants that (a) it is registered as an
investment adviser under the Advisers Act, (b) it is validly existing and in
good standing as a corporation under the laws of Delaware, (c) it has all
requisite corporate power and authority to execute, deliver and perform this
Agreement, (d) such execution, delivery and performance have been duty
authorized by all necessary corporate proceedings of the Manager, (e) it has
authority under the Investment Management Agreement to execute, deliver and
perform this Agreement, and (f) it has received a copy of Part II of the
Subadviser's Form ADV.
8. Reports by the Subadviser and Records of the Series. The Subadviser
shall furnish the Manager monthly, quarterly and annual reports concerning the
transactions and performance of the Series, including information required to be
disclosed in the Trust's registration statement, in such form as may be mutually
agreed, to review the Series and discuss the management of it. If requested by
the Manager, the Subadviser shall also furnish the Manager quarterly compliance
certifications. The Subadviser shall permit its financial statements, books and
records with respect to the Series to be inspected and audited by the Trust, the
Manager or their agents at all reasonable times during normal business hours.
The Subadviser shall immediately notify and forward to both the Manager and
legal counsel for the Series any legal process served upon it on behalf of the
Manager or the Trust. The Subadviser shall promptly notify the Manager of any
changes in any information concerning the Subadviser of which the Subadviser
becomes aware that would be required to be disclosed in the Trust's registration
statement.
In compliance with the requirements of Rule 3la-3 under the Investment
Company Act, the Subadviser agrees that all records it maintains for the Trust
with respect to the Series are the property of the Trust and further agrees to
surrender promptly to the Trust or the Manager any such records upon the Trust's
or the Manager's request. However, the Subadviser may retain copies of such
records to comply with the recordkeeping requirements of the Investment Advisers
Act and Investment Company Act. The Subadviser further agrees to maintain for
the Trust the records the Trust is required to maintain under Rule 3la-l(b)
insofar as such records relate to the investment affairs of the Series. The
Subadviser further agrees to preserve for the periods prescribed by Rule 3la-2
under the Investment Company Act the records it maintains for the Trust.
9. Continuance and Termination. This Agreement shall remain in full force
and effect through September 30, 2002, and is renewable annually thereafter by
specific approval of the Board or by the affirmative vote of a majority of the
outstanding voting securities of the Series. Any such renewal shall be approved
by the vote of a majority of the Trustees who are not interested persons under
the Investment Company Act, cast in person at a meeting called for the purpose
of voting on such renewal. This Agreement may be terminated without penalty at
any time by the Board, by vote of a majority of the outstanding voting
securities of the Series, or by the Manager or by the Subadviser upon 60 days'
written notice. This Agreement shall automatically terminate in the event of its
assignment by either party to this Agreement, as defined in the Investment
Company Act, or upon termination of the Manager's Investment Management
Agreement with the Trust, on behalf of the Series. In addition, the Manager or
the Trust may terminate this Agreement upon immediate notice if the Subadviser
becomes statutorily disqualified from performing its duties under this Agreement
or otherwise is legally prohibited from operating as an investment adviser.
10. Amendment. No provision of this Agreement may be changed, waived,
discharged or terminated orally, except by an instrument in writing signed by
the party against whom enforcement of the change, waiver, discharge or
termination is sought. No amendment of this Agreement shall be effective until
approved in a manner consistent with the Investment Company Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom, SEC
no-action letter or SEC interpretive guidance.
This Agreement may be amended only in accordance with applicable law, and
only by a written instrument signed by all the parties to this Agreement.
11. Voting Rights. The Manager shall be responsible for exercising any
voting rights of any investments of the Series.
12. Indemnification. The Subadviser agrees to indemnify and hold harmless
the Manager, any affiliated person of the Manager and each person, if any, who,
within the meaning of Section 15 of the Securities Act of 1933 (the "1933 Act"),
controls ("controlling person") the Manager, against any and all losses, claims
damages, liabilities or litigation (including reasonable legal and other
expenses), to which the Manager or such affiliated person or controlling person
may become subject under the 1933 Act, the Investment Company Act, the Advisers
Act, or under any other statute, at common law or otherwise, arising out of the
Subadviser's responsibilities as manager of the Series (1) to the extent of and
as a result of the willful misconduct, bad faith, or gross negligence by the
Subadviser, any of the Subadviser's employees or representatives or any
affiliate of or any person acting on behalf of the Subadviser; (2) as a result
of any untrue statement or alleged untrue statement of a material fact contained
in the Prospectus and Statement of Additional Information of the Trust relating
to the Series or any amendment thereof or any supplement thereto or the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statement therein not misleading, if such a
statement or omission was made in reliance upon written information furnished by
the Subadviser to the Manager, the Trust or any affiliated person of the Manager
or the Trust expressly for use in the Trust's registration statement, or upon
verbal information confirmed by the Subadviser in writing expressly for use in
the Trust's registration statement; or (3) to the extent of, and as a result of,
the failure of the Subadviser to execute, or cause to be executed, portfolio
transactions according to the standards and requirements of the Investment
Company Act, the Advisers Act and the Securities Exchange Act of 1934.
In no case shall the Subadviser's indemnity in favor of the Manager or any
affiliated person or controlling person of the Manager, or any other provision
of this Agreement, be deemed to protect such person against any liability to
which any such person would otherwise be subject by reason of willful
misconduct, bad faith or gross negligence in the performance of its duties or by
reason of its reckless disregard of its obligations and duties under this
Agreement.
Except as may otherwise be provided under the 1933 Act, the Investment
Company Act, the Advisers Act, under any other statute, at common law or
otherwise, neither the Subadviser nor any of its affiliates, officers,
directors, shareholders, employees or agents shall be liable to the Manager for
any loss, liability, cost, damage or expense, including reasonable attorneys'
fees and costs (collectively referred to in this Agreement as "Losses"),
including without limitation Losses in connection with pricing information or
other information provided by Subadviser, except for Losses resulting from the
gross negligence, bad faith or willful misconduct, or reckless disregard of
obligations and duties under this Agreement, of the Subadviser or of its
affiliates, officers, directors, shareholders, employees or agents, as the case
may be.
The Manager agrees to indemnify and hold harmless the Subadviser and any
affiliated person or controlling person of the Subadviser against any and all
losses, claims, damages, liabilities or litigation (including reasonable legal
and other expenses), to which the Subadviser or such affiliated person or
controlling person may become subject under the 1933 Act, the Investment Company
Act, the Advisers Act, or under any other statute, at common law or otherwise,
arising out of the Manager's responsibilities as investment manager of the
Series (1) to the extent of and as a result of the willful misconduct, bad
faith, or gross negligence by the Manager, any of the Manager's employees or
representatives or any affiliate of or any person acting on behalf of the
Manager; or (2) as a result of any untrue statement or alleged untrue statement
of a material fact contained in the Prospectus and Statement of Additional
Information of the Trust relating to the Series or any amendment thereof or any
supplement thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statement
therein not misleading, if such a statement or omission was made by the Trust
other than in reliance upon written information furnished by the Subadviser, or
any affiliated person of the Subadviser, expressly for use in the Trust's
registration statement or other than upon verbal information confirmed by the
Subadviser in writing expressly for use in the Trust's registration statement.
In no case shall the Manager's indemnity in favor of the Subadviser or any
affiliated person or controlling person of the Subadviser, or any other
provision of this Agreement, be deemed to protect such person against any
liability to which any such person would otherwise be subject by reason of
willful misconduct, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
under this Agreement.
Except as may otherwise be provided under the 1933 Act, the Investment
Company Act, the Advisers Act, under any other statute, at common law or
otherwise, neither' the Manager nor any of its affiliates, officers, directors,
shareholders, employees or agents shall be liable to the Subadviser for any
Losses, including without limitation Losses in connection with information
provided by the Manager, except for Losses resulting from the gross negligence,
bad faith or willful misconduct, or reckless disregard of obligations and duties
under this Agreement, of the Manager or of its affiliates, officers, directors,
shareholders, employees or agents, as the case may be.
The obligations of this Section 11 shall survive the termination of this
Agreement.
13. Certain Definitions. For the purposes of this Agreement, the "vote of a
majority of the outstanding voting securities of the Series" means the
affirmative vote, at a duly called and held meeting of shareholders of the
Series, (1) of the holders of 67% or more of the shares of the Series present
(in person or by proxy) and entitled to vote at such meeting, if the holders of
more than 50% of the outstanding shares of the Series entitled to vote at such
meeting are present in person or by proxy; or (2) of the holders of more than
50% of the outstanding shares of the Series entitled to vote at such meeting,
whichever is less.
For the purposes of this Agreement, the terms "affiliated person,"
"interested person" and "assignment" shall have their respective meanings
defined in the Investment Company Act, and the term "controlling person" shall
have the meaning defined in the 1933 Act, subject, however, to such exemptions
as may be granted by the SEC under such Acts.
14. Notices. All notices or other communications required or permitted to
be given hereunder shall be in writing and shall be delivered or sent by
pre-paid first class letter post to the following addresses or to such other
address as the relevant addressee provides in writing to the others for the
delivery of such notices and communications, and shall be deemed to have been
given at the time of delivery.
If to the Manager: ZURICH SCUDDER INVESTMENTS, INC.
[Address]
If to the Trust: [NAME OF TRUST]
[Name of Series]
[Address]
If to the Subadviser: DEUTSCHE ASSET MANAGEMENT
INVESTMENT SERVICES LIMITED
[Address]
15. Instructions. The Subadviser is authorized to honor and act on any
notice, instruction or confirmation given by the Trust or Manager in writing
signed or sent by one of the persons whose names, addresses and specimen
signatures shall be provided by the Trust or Manager from time to time.
16. Law. This Agreement is governed by and shall be construed in accordance
with the laws of the State of New York in a manner not in conflict with the
provisions of the Investment Company Act, except with respect to Section 16,
which shall be construed in accordance with the laws of the Commonwealth of
Massachusetts.
17. Limitation of Liability of the Trust, Trustees, and Shareholders. It is
understood and expressly stipulated that none of the Trustees, officers, agents,
or shareholders of the Trust shall be personally liable hereunder. It is
understood and acknowledged that all persons dealing with the Series must look
solely to the property of the Series for the enforcement of any claims against
the Series as neither the Trustees, officers, agents or shareholders assume any
personal liability for obligations entered into on behalf of the Trust or the
Series. No series of the Trust shall be liable for the obligations of any other
series.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all such
counterparts shall constitute a single instrument.
IN WITNESS WHEREOF, the parties hereto have each caused this instrument to
be signed in duplicate on its behalf by the officer designated below thereunto
duly authorized.
ZURICH SCUDDER INVESTMENTS, INC.
By:
Attest: Name:
--------------------------
Name: Title:
Title:
DEUTSCHE ASSET MANAGEMENT
INVESTMENT SERVICES LIMITED
Attest: By:
Name ------------------------- Name:
Title: Title:
Appendix 1
Information Regarding Scudder
Zurich Scudder Investments, Inc., located at 345 Park Avenue, New York, New
York 10154, is one of the largest and most experienced investment management
firms in the United States. It was established as a partnership in 1919 and
restructured as a Delaware corporation in 1985. Its first fund was launched in
1928. As of December 31, 2001, Scudder had approximately $328 billion in assets
under management. The principal source of Scudder's income is professional fees
received from providing continuing investment advice. Scudder provides
investment counsel for many individuals and institutions, including insurance
companies, endowments, industrial corporations and financial and banking
organizations.
As of December 31, 2001, the outstanding securities of Scudder are held of
record as follows: 1.31% by Zurich Insurance Company, 54 Thompson Street, Third
Floor, New York, New York 10012; 37.78% and 16.06% by Zurich Holding Company of
America ("ZHCA"), 1400 American Lane, Schaumburg, Illinois, 60196 and Zurich
Financial Services (UKISA) Limited, 22 Arlington Street, London SW1A, 1RW United
Kingdom, respectively, each a wholly owned subsidiary of Zurich Insurance
Company; 27.14% by ZKI Holding Corporation ("ZKIH"), 222 South Riverside Plaza,
Chicago, Illinois 60606, a wholly owned subsidiary of ZHCA; 13.91% by Stephen R.
Beckwith, Lynn S. Birdsong, Kathryn L. Quirk and Edmond D. Villani in their
capacity as representatives (the "Management Representatives") of Scudder's
employee and retired employee stockholders pursuant to a Second Amended and
Restated Security Holders Agreement among Scudder, Zurich Insurance Company,
ZHCA, ZKIH, the Management Representatives, the employee stockholders, the
retired employee stockholders and Edmond D. Villani, as trustee of Zurich
Scudder's Executive Defined Contribution Plan Trust (the "Plan Trust"); and
3.80% by the Plan Trust.
On October 17, 2000, the dual holding company structure of Zurich Financial
Services Group was unified under a single Swiss holding company called Zurich
Financial Services, Mythenquai 2, 8002 Zurich, Switzerland. Zurich Insurance
Company is an indirect wholly owned subsidiary of Zurich Financial. The
transaction did not affect Zurich Insurance Company's ownership interest in
Scudder or Scudder's operations.
The names and principal occupations of the principal executive officers and
directors of Scudder are shown below.
Directors and Officers of Scudder
Steven M. Gluckstern, 105 East 17th Street, Fourth Floor, New York, New
York 10003. Chairman of the Board and Director, Scudder. Chief Executive
Officer, Zurich Global Asset, LLC.
Edmond D. Villani, 345 Park Avenue, New York, New York 10154. President,
Chief Executive Officer and Director, Scudder. Managing Director, Scudder.
Kathryn L. Quirk, 345 Park Avenue, New York, New York 10154. General
Counsel, Chief Compliance Officer and Secretary, Scudder. Managing Director,
Scudder.
Farhan Sharaff, 345 Park Avenue, New York, New York 10154. Chief Investment
Officer, Scudder. Managing Director, Scudder.
Chris C. DeMaio, 345 Park Avenue, New York, New York 10154. Treasurer,
Scudder. Managing Director, Scudder.
Nicholas Bratt, 345 Park Avenue, New York, New York 10154. Corporate Vice
President and Director, Scudder. Managing Director, Scudder.
Lynn S. Birdsong, 345 Park Avenue, New York, New York, 10154. Corporate
Vice President and Director, Scudder. Managing Director, Scudder.
Laurence W. Cheng, 54 Thompson Street, New York, New York 10012. Director,
Scudder. Chairman and Chief Executive Officer, Capital Z Management, LLC.
Martin Feinstein, 4680 Wilshire Boulevard, Los Angeles, California 90010.
Director, Scudder. Chairman of the Board, President and Chief Executive Officer,
Farmers Group, Inc.
Gunther Gose, Mythenquai 2, P.O. Box CH-8022, Zurich, Switzerland.
Director, Scudder. Chief Financial Officer, Zurich Financial.
Appendix 3 includes information regarding each officer of each Fund who is
associated with Scudder.
Certain senior executives of Scudder are expected to take positions at
Deutsche Asset Management, including Edmond D. Villani, Scudder's President and
Chief Executive Officer, who is expected to become Chairman of Deutsche Asset
Management. Deutsche Bank has represented that it does not anticipate that the
Transaction will have any adverse effect on Scudder's ability to fulfill its
obligations under the New Investment Management Agreements or on its ability to
operate its businesses in a manner consistent with its current practices.
Edmond Villani, Nicholas Bratt and Lynn Birdsong, each a director of
Scudder, are parties to employment agreements with Scudder, entered into in 1997
when Scudder was acquired by Zurich Financial, which would provide each
executive, if his employment is terminated by Scudder without cause or by the
executive for good reason, with a severance payment equal to two times the sum
of his base salary and the higher of his two most recent annual bonuses, in the
case of Messrs. Villani and Bratt, and equal to the sum of his base salary and
the higher of his two most recent annual bonuses, in the case of Mr. Birdsong.
[In addition, Messrs. Villani, Bratt and Birdsong are participants in the Zurich
Scudder Investments Supplemental Employee Retirement Plan, the Zurich Scudder
Investments Excess Retirement Plan, the Zurich Scudder Investments Long-Term
Incentive Plan, the Zurich Scudder Investments Executive Defined Contribution
Plan, the Zurich Scudder Investments Special Incentive Compensation Plan and the
Zurich Kemper Investments Supplemental Profit Sharing Plan (collectively, the
"Plans"). Pursuant to the terms of each Plan, upon consummation of the
Transaction, the respective accounts of each participant in the Plans will
become fully vested to the extent that such amounts were not vested prior to the
consummation of the Transaction.]
Scudder also informed the Funds that as of December 31, 2001, Scudder
shared power to vote and dispose of 1,634,248 shares of Deutsche Bank common
stock (approximately 0.26 of 1% of the shares outstanding). All of those shares
were held by various investment companies managed by Scudder. On that date,
Scudder also shared power to vote and/or dispose of other securities of Deutsche
Bank and its affiliates, some of which were also held by various investment
companies managed by Scudder. To the extent required by the 1940 Act, prior to,
or within a reasonable time after the Transaction, Scudder will dispose of the
Deutsche Bank (and affiliates') securities held by various investment companies
managed by Scudder, and Deutsche Bank will pay the transactional costs
associated with such disposition.
Appendix 2
Proposed Portfolio Manager Changes
Below is a table that shows, as of [February 4], 2002, the anticipated
changes to the lead portfolio management of the Funds after the Transaction. The
information contained in the table is subject to change prior to or following
the close of the Transaction. Shareholders of a Fund will be notified following
a change in their Fund's lead portfolio manager(s).
Fund Lead Portfolio Managers as of Lead Portfolio Managers After the
12/31/01 Transaction
Scudder High Income Trust Harry E. Resis, Jr. Andrew Cestone, Harry E. Resis
Scudder Intermediate Government Trust Scott E. Dolan John Dugenske
Scudder Multi-Market Income Trust J. Patrick Beimford, Jan C. Faller Greg Boal, Jan C. Faller
Scudder Municipal Income Trust Philip G. Condon Philip G. Condon
Scudder Strategic Income Trust J. Patrick Beimford, Jan C. Faller Greg Boal, Jan C. Faller
Scudder Strategic Municipal Income Trust Philip G. Condon Philip G. Condon
Appendix 3
Fees Paid to SFAC and SISC
Aggregate Fee to Aggregate Fee to SISC
Fund Fiscal Year SFAC
Scudder High Income Trust 11/30/01
Scudder Intermediate Government Trust 12/31/01
Scudder Multi-Market Income Trust 11/30/01
Scudder Municipal Income Trust 11/30/01
Scudder Strategic Income Trust 11/30/01
Scudder Strategic Municipal Income Trust 11/30/01
Appendix 4
Fund Management Fee Rates, Net Assets
and Aggregate Management Fees
Fiscal Management Aggregate Management
Fund Year Net Assets Fee Rate+ Fee Paid*
Scudder High Income Trust 11/30/01 $172,641703 0.850% to $250 million $1,585,165
0.750% over $250 million
Scudder Intermediate Government Trust 12/31/01 $248,728,544 0.800% of net assets $2,008,924
Scudder Multi-Market Income Trust 11/30/01 $162,810,924 0.850% of net assets $9,133,315
Scudder Municipal Income Trust 11/30/01 $726,129,144 0.550% of net assets $1,411,523
Scudder Strategic Income Trust 11/30/01 $ 40,839,186 0.850% of net assets $ 354,399
Scudder Strategic Municipal Income Trust 11/30/01 $197,223,147 0.600% of net assets $1,184,882
* The management fee rates shown are for the Fund's most recently completed
fiscal year, unless otherwise noted. + Aggregate management fees disclosed in
this table may include fees paid to successors and affiliates of Scudder.
Appendix 5
Dates Relating to Investment Management Agreements
Current Investment Termination Date
Management New Investment (Unless Continued)
Date of Current Agreement Last Management For New Investment
Investment Approved By Agreement Approved Management Agreement
Management Shareholders By Trustees
Fund Agreement
Scudder High Income Trust 9/7/98 12/17/98 2/4/02 9/30/02
Scudder Intermediate Government Trust 9/7/98 12/17/98 2/4/02 9/30/02
Scudder Multi-Market Income Trust 9/7/98 12/17/98 2/4/02 9/30/02
Scudder Municipal Income Trust 9/7/98 12/17/98 2/4/02 9/30/02
Scudder Strategic Income Trust 9/7/98 12/17/98 2/4/02 9/30/02
Scudder Strategic Municipal Income Trust 9/7/98 12/17/98 2/4/02 9/30/02
Appendix 6
Fund Shares Outstanding
The table below sets forth the number of shares outstanding
for each class of each Fund as of [ ], 2002.
Fund Number of Shares Outstanding
Scudder High Income Trust
Scudder Intermediate Government Trust
Scudder Multi-Market Income Trust
Scudder Municipal Income Trust
Scudder Strategic Income Trust
Scudder Strategic Municipal
Income Trust
Appendix 7
Beneficial Owners of 5% or More of Fund Shares
Appendix 8
Fund Shares Owned by Nominees, Trustees and Executive Officers
Many of the nominees, Trustees and executive officers own shares of the
series of each Trust and of other funds in the Scudder and Deutsche Bank
Families of Funds, allocating their investments among such funds based on their
individual investment needs. The following table sets forth, for each nominee
and Trustee, the dollar range of equity securities owned in each series of each
Trust owned as of December 31, 2001. In addition, the last column in the table
represents the aggregate dollar range of equity securities owned as of December
31, 2001 in all funds overseen or to be overseen by each nominee or Trustee in
the Scudder and Deutsche Bank Families of Funds. The information as to
beneficial ownership is based on statements furnished to each Trust by each
nominee, Trustee and executive officer. Unless otherwise noted, each nominee's
and Trustee's individual shareholdings of each class of any series of each Trust
constitute less than 1% of the outstanding shares of such class. Unless
otherwise noted, as a group, the Trustees and executive officers of each Trust
own less than 1% of the shares of each class of any series of each Trust.
Names of Nominees
and Trustees
John W. Lewis A. Mark S. Linda C. Donald L. James R.
Ballantine Burnham Casady Coughlin Dunaway Edgar
Fund
Scudder High
Income Trust
Scudder
Intermediate
Government Trust
Scudder
Multi-Market
Income Trust
Scudder Municipal
Income Trust
Scudder Strategic
Income Trust
Aggregate Dollar
Range of Equity
Securities
Names of
Nominees and
Trustees
William F. Robert B. Shirley D. Fred B. William P. John G.
Glavin Hoffman Peterson Renwick Sommers Weithers
Fund
Scudder High
Income Trust
Scudder
Intermediate
Government Trust
Scudder
Multi-Market
Income Trust
Scudder
Municipal Income
Trust
Scudder
Strategic Income
Trust
Aggregate Dollar
Range of Equity
Securities*
Appendix 9
Officers
The following persons are officers of each Fund noted in the table
below:
Present Office with the Trust; Trust (Year First Became
Name (age) Principal Occupation or Employment(1) an Officer)(2)
Mark S. Casady ([age]) Trustee and President; Managing Scudder High Income
Director, Scudder; formerly, Trust ([ ])
Institutional Sales Manager of an Scudder Intermediate Government
unaffiliated mutual fund distributor. Trust ([ ])
Scudder Multi-Market Income Trust
([ ])
Scudder Municipal Income Trust ([
])
Scudder Strategic Income Trust ([
])
Scudder Strategic Municipal Income
Trust ([ ])
Linda C. Coughlin ([age]) Trustee, Vice President and Scudder High Income
Chairperson; Managing Director, Trust ([ ])
Scudder. Scudder Intermediate Government
Trust ([ ])
Scudder Multi-Market Income Trust
([ ])
Scudder Municipal Income Trust ([
])
Scudder Strategic Income Trust ([
])
Scudder Strategic Municipal Income
Trust ([ ])
Philip J. Collora ([age]) Vice President and Assistant Scudder High Income
Secretary; Attorney, Senior Vice Trust ([ ])
President, Scudder. Scudder Intermediate Government
Trust ([ ])
Scudder Multi-Market Income Trust
([ ])
Scudder Municipal Income Trust ([
])
Scudder Strategic Income Trust ([
])
Scudder Strategic Municipal Income
Trust ([ ])
Kathryn L. Quirk ([age]) Vice President; Managing Director, Scudder High Income
Scudder. Trust ([ ])
Scudder Intermediate Government
Trust ([ ])
Scudder Multi-Market Income Trust
([ ])
Scudder Municipal Income Trust ([
])
Scudder Strategic Income Trust ([
])
Scudder Strategic Municipal Income
Trust ([ ])
Harry E. Resis, Jr. ([age]) Vice President; Managing Director, Scudder High Income
Scudder. Trust ([ ])
Daniel J. Doyle ([age]) Vice President; [ ], Scudder. Scudder High Income
Trust ([ ])
Richard L. Vandenberg ([age]) Vice President; Managing Director, Scudder Intermediate Government
Scudder; formerly, Senior Vice Trust ([ ])
President and portfolio manager with
an unaffiliated investment
management firm.
Scott E. Dolan Vice President; [ ], Scudder. Scudder Intermediate Government
Trust ([ ])
Philip G. Condon Vice President; [ ], Scudder. Scudder Municipal Income Trust ([
])
Scudder Strategic Municipal Income
Trust ([ ])
J. Patrick Beimford, Jr. ([age]) Vice President; Managing Director, Scudder Multi-Market Income Trust
Scudder. ([ ])
Scudder Strategic Income Trust ([
])
Jan C. Faller ([age]) Vice President; Senior Vice Scudder Multi-Market Income Trust
President, Scudder. ([ ])
Scudder Strategic Income Trust ([
])
Linda J. Wondrack ([age]) Vice President; Managing Director, Scudder High Income
Scudder. Trust ([ ])
Scudder Intermediate Government
Trust ([ ])
Scudder Multi-Market Income Trust
([ ])
Scudder Municipal Income Trust ([
])
Scudder Strategic Income Trust ([
])
Scudder Strategic Municipal Income
Trust ([ ])
Gary French ([age]) Treasurer; [Senior Vice President], Scudder High Income
Scudder. Trust ([ ])
Scudder Intermediate Government
Trust ([ ])
Scudder Multi-Market Income Trust
([ ])
Scudder Municipal Income Trust ([
])
Scudder Strategic Income Trust ([
])
Scudder Strategic Municipal Income
Trust ([ ])
John R. Hebble ([age]) Assistant Treasurer; Senior Vice Scudder High Income
President, Scudder. Trust ([ ])
Scudder Intermediate Government
Trust ([ ])
Scudder Multi-Market Income Trust
([ ])
Scudder Municipal Income Trust ([
])
Scudder Strategic Income Trust ([
])
Scudder Strategic Municipal Income
Trust ([ ])
Brenda Lyons ([age]) Assistant Treasurer; Senior Vice Scudder High Income
President, Scudder. Trust ([ ])
Scudder Intermediate Government
Trust ([ ])
Scudder Multi-Market Income Trust
([ ])
Scudder Municipal Income Trust ([
])
Scudder Strategic Income Trust ([
])
Scudder Strategic Municipal Income
Trust ([ ])
Thomas Lally ([age]) Assistant Treasurer; [Senior Vice Scudder High Income
President], Scudder. Trust ([ ])
Scudder Intermediate Government
Trust ([ ])
Scudder Multi-Market Income Trust
([ ])
Scudder Municipal Income Trust ([
])
Scudder Strategic Income Trust ([
])
Scudder Strategic Municipal Income
Trust ([ ])
John Millette ([age]) Secretary; Vice President, Scudder High Income
Scudder[./; ] Trust ([ ])
Scudder Intermediate Government
Trust ([ ])
Scudder Multi-Market Income Trust
([ ])
Scudder Municipal Income Trust ([
])
Scudder Strategic Income Trust ([
])
Scudder Strategic Municipal Income
Trust ([ ])
Caroline Pearson ([age]) Assistant Secretary; Senior Vice Scudder High Income
President, Scudder; formerly, Trust ([ ])
Associate, Dechert Price & Rhoads Scudder Intermediate Government
(law firm) 1989 to 1997. Trust ([ ])
Scudder Multi-Market Income Trust
([ ])
Scudder Municipal Income Trust ([
])
Scudder Strategic Income Trust ([
])
Scudder Strategic Municipal Income
Trust ([ ])
(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 the
first meeting of Trustees in each calendar year and until his or her
successor has been duly elected and qualified, and all other officers
hold office as the Trustees permit in accordance with the By-laws of
the applicable Fund.
Appendix 10
AUDIT COMMITTEE CHARTER
ADOPTED JULY 18, 2001
I. PURPOSE
The Audit Committee is a committee of the Board of the Fund. Its primary
function is to assist the Board in fulfilling certain of its responsibilities.
The Audit Committee serves as an independent and objective party to monitor
the Fund's accounting policies, financial reporting and internal control system.
The Audit Committee also serves to provide an open avenue of communication among
the independent accountants, Fund management, and the Board.
o Fund management has the primary responsibility to establish and
maintain systems for accounting, reporting, and internal control.
o The independent accountants have the primary responsibility to plan
and implement a proper audit of the accounting, reporting, and
internal control practices.
The Audit Committee may have additional functions and responsibility as
deemed appropriate by the Board and the Audit Committee.
II. COMPOSITION
The Audit Committee shall be comprised of three or more board members1 as
determined by the Board, each of whom shall be an independent board member, and
free from any relationship that, in the opinion of the Board, would interfere
with the exercise of his or her independent judgment as a member of the Audit
Committee. For purposes of the Audit Committee, a board member is independent if
he or she is not an "interested person" of the Fund as that term is defined in
the Investment Company Act of 1940 and meets the independence requirements set
forth in New York Stock Exchange Rule 303.01(B)(3). Each member of the Audit
Committee shall be financially literate, as such qualification is interpreted by
the Board in its business judgment (or must become financially literate within a
reasonable time after his or her appointment to the Audit Committee). At least
one member of the Audit Committee must have accounting or related financial
management expertise, as the Board interprets such qualification in its business
judgment
The members and chairman of the Audit Committee shall be elected by the
Board annually and serve until their successors shall be duly elected and
qualified.
III. MEETINGS
The Audit Committee shall meet four times annually, or more frequently as
circumstances dictate. Special meetings (including telephone meetings) may be
called by the Chair or a majority of the members of the Audit Committee upon
reasonable notice to the other members of the Audit Committee. As part of its
job to foster open communication, the Audit Committee should meet annually with
senior Fund management responsible for accounting and financial reporting and
the independent accountants in separate executive sessions to discuss any
matters that the Audit Committee, or any of such other persons, believes should
be discussed privately.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
A. Duties/Reports/Review
1. Review this Charter, annually, and recommend changes, if any, to
the Board.
2. Review, annually, with Fund management and the independent
accountants, the organizational structure, reporting
relationship, adequacy of resources and qualifications of the
senior Fund management personnel responsible for accounting and
financial reporting.
3. Review, annually, with Fund management and the independent
accountants, their separate evaluation of the adequacy of the
Fund's system of internal controls.
4. Review, with Fund management and the independent accountants, the
SAS 70 prepared by Fund management's independent accountants and
those sections of the internal reports, if any, to Fund
management prepared by the Manager's internal auditing department
related solely to the Fund's systems for accounting, reporting
and internal controls and Fund management's response.
5. Review, annually, with Fund management and the independent
accountants, policies for valuation of Fund portfolio securities,
and the frequency and magnitude of pricing errors.
6. Review with Fund management and the independent accountants, the
Fund's audited financial statements (including, but not limited
to, the matters required to be discussed by statement on Auditing
Standards No. 61), and recommend to the Board, if appropriate,
that the audited financial statements be included in the Fund's
annual report to shareholders required by Section 30(e) of the
Investment Company Act of 1940 and Rule 30d-1 thereunder.
B. Independent Accountants
1. Recommend to the Board the selection of the independent
accountants, considering independence, performance and
effectiveness, and approve the fees and other compensation to be
paid to the independent accountants, on the condition that the
independent accountants are ultimately accountable to the Board
and the Audit Committee and that the Audit Committee and the
Board, consistent with the requirements of the Investment Company
Act of 1940 and relevant state law, have the ultimate authority
and responsibility to select, evaluate and, where appropriate,
replace the independent accountants (or to nominate the
independent accountants to be proposed for shareholder approval
in any proxy statement). On an annual basis, request, receive and
review the independent accountants' specific representations as
to their independence, including identification of all
significant relationships the accountants have with the Fund,
Fund management and any affiliate and any material service
provider of the Fund (including, but not limited to, disclosures
regarding the independent accountants' independence required by
Independence Standards Board Standard No. 1), and recommend that
the Board take appropriate action, if any, in response to the
independent accountants' report to satisfy itself of the
independent accountants' independence.
2. Meet with the independent accountants and Fund management to
review the scope of the proposed audit for the current year, and
at the conclusion thereof review such audit, including any
comments or recommendations of the independent accountants or
Fund management including their assessment about significant
risks or exposures and the steps taken by Fund management to
minimize such risks to the Fund.
3. Review the management letter prepared by the independent
accountants and Fund management's response.
4. Consider for approval any significant special projects for the
Fund by the independent accountants.
C. Financial Reporting Processes
1. Consider the independent accountants' judgment about the quality
and appropriateness of the Fund's accounting policies as applied
in its financial reporting.
2. Review any major changes to the Fund's accounting policies as
suggested by the independent accountants or Fund management.
3. Review any significant disagreement among Fund management and the
independent accountants in connection with the preparation of the
Fund's annual and semi-annual reports, including any difficulties
encountered and any restrictions on the scope of the work or
access to information.
D. Process Improvements
Review with the independent accountants and Fund management significant
changes or improvements in accounting and auditing processes that have been
implemented.
E. Other Responsibilities
1. Investigate any other matter brought to its attention within the
scope of its duties, with the power to retain outside counsel or
other experts for this purpose at the expense of the Fund, if, in
its judgment, that is appropriate.
2. Perform any other activities consistent with this Charter, the
Fund's Charter, By-Laws and governing law, as the Audit Committee
or the Board deems necessary or appropriate.
Maintain minutes of committee meetings; report its significant activities
to the Board; and make such recommendations to the Board as the Audit Committee
may deem necessary or appropriate.
(1) To the extent the Fund is organized as a Massachusetts business trust, any
references to "directors" or "board members" shall be deemed to mean
"trustees."
Appendix 11
Fees Paid to Independent Auditors of the Funds
Financial
Information Systems
Design and
Fund Audit Fees Implementation Fees All Other Fees(1)
Scudder High Income Trust
Scudder Intermediate Government Trust
Scudder Multi-Market Income Trust
Scudder Municipal Income Trust
Scudder Strategic Income Trust
Scudder Strategic Municipal Income Trust
(1) In addition to the amounts shown in the table for the Funds, E&Y received
an aggregate amount of $[ ], which include $[ ] for services performed on
behalf of the Funds and other Scudder-advised funds and $[ ] for services
performed for Scudder and other related entities that provide support for
the operations of the funds.