Edgar Filing: SCUDDER MUNICIPAL INCOME TRUST

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A

INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

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Scudder High Income Trust
Scudder Intermediate Government & Agency Trust
Scudder Multi-Market Income Trust
Scudder Municipal Income Trust
Scudder Strategic Municipal Income Trust
Scudder Strategic Income Trust
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SEC 1913 (02-02)

SCUDDER HIGH INCOME TRUST

SCUDDER INTERMEDIATE GOVERNMENT & AGENCY TRUST

SCUDDER MULTI-MARKET INCOME TRUST
SCUDDER MUNICIPAL INCOME TRUST
SCUDDER STRATEGIC MUNICIPAL INCOME TRUST
SCUDDER STRATEGIC INCOME TRUST
222 South Riverside Plaza
Chicago, Illinois 60606

NOTICE OF JOINT ANNUAL MEETING OF SHAREHOLDERS

JUNE 29, 2004 AND PROXY STATEMENT

May 24, 2004

To the Shareholders:

You are invited to attend a joint annual meeting of the shareholders of Scudder
High Income Trust ("KHI"), Scudder Intermediate Government & Agency Trust
(formerly Scudder Intermediate Government Trust) ("KGT"), Scudder Multi-Market
Income Trust ("KMM"), Scudder Municipal Income Trust ("KTF"), Scudder Strategic
Municipal Income Trust ("KSM") and Scudder Strategic Income Trust ("KST")
(individually, a "Fund" and collectively, the "Funds"). The meeting will be held
at the offices of Deutsche Investment Management Americas Inc. ("DeIM" or the
"Advisor"), 13th Floor, Two International Place, Boston, Massachusetts
02110-4103, on Tuesday, June 29, 2004 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 meeting:

1. To elect Trustees to the Board of each Fund as outlined below:

(a) For KHI, KGT, KMM and KST only, to elect nine Trustees to the Board of
each Fund; and

(b) For KTF and KSM only, to elect nine Trustees to the Board of each Fund
with seven 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.

2. To ratify the selection of Ernst & Young LLP as independent auditors of each
Fund for the current fiscal year.

3. To approve the modification or elimination of certain investment policies and
the elimination of the shareholder approval requirement as to certain other
matters.

The Board of each Fund has fixed the close of business on March 31, 2004 as the
record date (the "Record Date") for determining the shareholders of each Fund
entitled to notice of and to vote at the meeting

or any adjournments or postponements thereof. Shareholders are entitled to one
vote for each share held.

THE BOARD OF EACH FUND RECOMMENDS THAT YOU VOTE FOR ALL ITEMS.

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PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD. SIGN, DATE
AND RETURN YOUR PROXY CARD IN THE ENVELOPE PROVIDED. TO SAVE YOUR FUND THE COST
OF ADDITIONAL SOLICITATIONS, PLEASE MAIL YOUR PROXY CARD. IF YOU WISH TO ATTEND
THE MEETING AND VOTE YOUR SHARES IN PERSON AT THAT TIME, YOU WILL STILL BE ABLE
TO DO SO.
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The accompanying proxy is solicited by the Board of each Fund for voting at the
joint annual meeting of shareholders to be held on June 29, 2004, and at any and
all postponements or adjournments thereof (the "Meeting"). The shareholders of
each Fund will vote separately on the items presented at the Meeting. This proxy
statement was first mailed to shareholders on or about May 25, 2004.

The Board of each Fund recommends shareholders vote FOR ITEMS 1, 2 AND 3. The
vote required to approve all three items is described under "Miscellaneous."

The Board of each Fund has fixed the close of business on March 31, 2004 as the
Record Date for the determination of shareholders entitled to notice of and to
vote at the Meeting. As of the Record Date, shares of the Funds were issued and
outstanding as follows:

FUND SHARES
---- ------

KHI....................................................... 31,468,895
KGT....................................................... 33,996,171
KMM....................................................... 20,432,247
KTF
Common.................................................. 38,832,628
Preferred............................................... 53,000
KSM
Common.................................................. 10,820,367
Preferred............................................... 2,800
KST....................................................... 3,484,320

KTF AND KSM ONLY. Pursuant to the Amended and Restated Agreement and Declaration
of Trust of each Fund, the Boards 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 seven
remaining Trustees. On Items 2 and 3, the holders of the Common Shares and
Preferred Shares will vote together as a single class.

The following table identifies the Funds entitled to vote on each Proposal.

PROPOSAL PAGE
-------- ----

Item 1: 1.a. To elect nine Trustees to the Board of the Fund.
4
KHI, KGT, KMM and KST..................................
1.b. To elect nine Trustees to the Board of the Fund with seven
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.
5
KTF and KSM............................................
Item 2:
To ratify the selection of Ernst & Young LLP as the
independent auditors for the Fund for the Fund's current
fiscal year.
16
All Funds..............................................
Item 3:
To approve the modification or elimination of certain
investment policies and the elimination of the shareholder
approval requirement as to certain other matters.
18
All Funds..............................................
ELIMINATION OF SHAREHOLDER APPROVAL REQUIREMENT TO AMEND
INVESTMENT OBJECTIVES AND INVESTMENT POLICIES
3.0 Investment Objectives
20
All Funds..............................................
3.1 Investment Policies
20
KHI, KGT, KMM, KTF and KST.............................
REVISION OF FUNDAMENTAL POLICIES MANDATED BY THE 1940 ACT
3.2 Diversification
21
(a) KHI, KGT, KMM, KTF and KST.............................
22
(b) KSM....................................................
3.3 Borrowing
22
All Funds..............................................
3.4 Senior Securities
23
All Funds..............................................

PROPOSAL PAGE
-------- ----

3.5 Concentration
23
All Funds..............................................
3.6 Underwriting of Securities
24
All Funds..............................................
3.7 Investment in Real Estate
24
All Funds..............................................
3.8 Purchase of Commodities
25
All Funds..............................................
3.9 Lending
25
All Funds..............................................
ELIMINATION OF SHAREHOLDER APPROVAL REQUIREMENT TO CHANGE OTHER
FUNDAMENTAL POLICIES
3.10 Margin Purchases and Short Sales
26
All Funds..............................................
3.11 Restricted and Illiquid Securities
27
KGT, KTF and KSM.......................................
3.12 Investment in Other Investment Companies
27
KHI, KGT, KMM and KST..................................
3.13 Investment other than in Municipal Securities and Temporary
Investments
27
KSM and KTF............................................

ITEM 1. ELECTION OF TRUSTEES TO THE BOARDS

THE BOARD OF EACH FUND RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE NOMINEES
NAMED BELOW.

At the Meeting, shareholders of each Fund will be asked to elect nine
individuals to constitute the Board of Trustees of each Fund. Board members are
elected annually pursuant to each Trust's Declaration of Trust and By-Laws. The
nine individuals nominated for election as Trustees of each Fund were nominated
after careful consideration by each Fund's present Board of Trustees. The
nominees are listed below. Eight of the nine nominees are currently Trustees of
each Fund and are currently trustees or directors of other funds advised by
DeIM. One of the nominees, Mr. Shiebler, is a senior executive officer of DeIM
and is an "interested person" (an "Interested Person") of the Advisor of the
Funds within the meaning of the Investment Company Act of 1940, as amended (the
"1940 Act"), due to the fact that he is an officer of the Advisor. He is
referred to as an "Interested Nominee." Each of the remaining eight nominees is
not an Interested Person of the Advisor of the Funds within the meaning of the
1940 Act and is referred to as a "Non-interested Trustee" or "Independent
Trustee." These eight nominees, together with one Independent Trustee who will
be retiring from the Funds' Boards coincident with the Meeting (Mr. Fred
Renwick), and one Trustee who is an Interested Person of the Advisor
("Interested Trustee") who will be

retiring from the Funds' Boards on June 18, 2004 (Mr. Richard Hale), currently
oversee 82 fund portfolios in the Scudder Fund Complex, and are often referred
to as the "Chicago Board."

The persons named as proxies on the enclosed proxy card(s) will vote for the
election of all 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 the next meeting of
shareholders, if any, called for the purpose of electing Trustees and until the
election and qualification of a successor or until such Trustee sooner dies,
resigns or is removed as provided in the organizational documents of each Fund.

KTF AND KSM ONLY. As indicated above, holders of the Preferred Shares are
entitled to elect two Trustees. Messrs. Shiebler and Weithers are nominees for
election by holders of the Preferred Shares of each Fund. In addition, seven
other Trustees are to be elected by holders of the Common Shares and the
Preferred Shares, voting together as a single class. Ms. Peterson and Messrs.
Ballantine, Burnham, Dunaway, Edgar, Freeman and Hoffman are nominees for
election by all shareholders.

All the nominees listed below have consented to serve as Trustees of the
respective Funds, if elected. In case any nominee shall be unable or shall fail
to act as a Trustee by virtue of an unexpected occurrence, persons named as
proxies will vote in their discretion for such other nominee or nominees as the
current Trustees may recommend. The nominees, eight of whom are current Trustees
standing for re-election, are listed below. The address of each nominee is c/o
Deutsche Investment Management Americas Inc., 222 South Riverside Plaza,
Chicago, Illinois 60606.

NOMINEES FOR ELECTION AS TRUSTEES

NON-INTERESTED PERSONS

NAME, AGE, POSITION WITH FUNDS, NUMBER OF FUNDS IN
PRINCIPAL OCCUPATION(S) FOR YEAR FIRST BECAME A SCUDDER FUND
PAST 5 YEARS, AND OTHER DIRECTORSHIPS BOARD MEMBER(1) COMPLEX OVERSEEN
------------------------------------- ------------------- ------------------

JOHN W. BALLANTINE (58), Trustee; 2001-All Funds 82
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, Enron
Corporation (energy trading firm)
(effective May 30, 2002); First Oak
Brook Bancshares, Inc.; Oak Brook Bank;
American Healthways, Inc. (provider of
disease and care management services);
Portland General Electric (utility
company).

LEWIS A. BURNHAM (71), Trustee; 2001-All Funds 82
Retired; formerly, Director of
Management Consulting, McNulty &
Company (1990-1998); prior thereto,
Executive Vice President, Anchor Glass
Container Corporation.
DONALD L. DUNAWAY (67), Trustee; 2001-All Funds 82
Retired; formerly, Executive Vice
President, A.O. Smith Corporation
(diversified manufacturer) (1963-1994).
JAMES R. EDGAR (57), Trustee; 1999-All Funds 82
Distinguished Fellow, University of
Illinois Institute of Government and
Public Affairs (1999-present);
formerly, Governor, State of Illinois
(1991-1999); Director, Kemper Insurance
Companies; John B. Sanfilippo & Son,
Inc. (processor/packager/marketer of
nuts, snacks and candy products);
Horizon Group Properties, Inc.;
Youbet.com (online wagering platform);
Alberto-Culver Company (manufactures,
distributes and markets health and
beauty-care products).
PAUL K. FREEMAN (53), Trustee; 2002-All Funds 82
President, Cook Street Holdings
(consulting); Senior Visiting Research
Scholar, Graduate School of
International Studies, University of
Denver; Consultant, World Bank/Inter-
American Development Bank; formerly,
Project Leader, International Institute
for Applied Systems Analysis
(1998-2001); Chief Executive Officer,
The Eric Group, Inc. (environmental
insurance) (1986-1998).
ROBERT B. HOFFMAN (67), Trustee; 2001-All Funds 82
Retired; formerly, Chairman,
Harnischfeger Industries, Inc.
(machinery for the mining and paper
industries) (1999-2000); prior thereto,
Vice Chairman and Chief Financial
Officer, Monsanto Company
(agricultural, pharmaceutical and
nutritional/food products) (1994-1999);
Director, RCP Advisors, LLC.

SHIRLEY D. PETERSON (62), Trustee; 2001-All Funds 82
Retired; formerly, President, Hood
College (1995-2000); formerly, Partner,
Steptoe & Johnson (law firm);
Commissioner, Internal Revenue Service;
Assistant Attorney General (Tax), U.S.
Department of Justice; Director,
Federal Mogul Corp. (supplier of
automotive components and subsystems);
AK Steel (steel production); Goodyear
Tire & Rubber Co.; Trustee, Bryn Mawr
College; formerly, Director, Bethlehem
Steel Corp.
JOHN G. WEITHERS (70), Trustee; 1993-All Funds 82
Retired; formerly, Chairman of the except KST
Board and Chief Executive Officer, 1994-KST
Chicago Stock Exchange; Director,
Federal Life Insurance Company;
Chairman of the Members of the
Corporation and Trustee, DePaul
University; formerly, Director,
International Federation of Stock
Exchanges, Records Management Systems.

---------------

(1) Each Trustee currently serves on the boards of 31 trusts/corporations
comprised of 82 funds.

INTERESTED PERSON(1)

NAME, AGE, POSITION WITH FUNDS,(2) NUMBER OF FUNDS IN
PRINCIPAL OCCUPATION(S) FOR YEAR FIRST BECAME A SCUDDER FUND COMPLEX
PAST 5 YEARS, AND OTHER DIRECTORSHIPS BOARD MEMBER TO BE OVERSEEN IF ELECTED(3)
------------------------------------- ------------------- ----------------------------

WILLIAM N. SHIEBLER(62), Chief N/A 148
Executive Officer in the Americas for
Deutsche Asset Management ("DeAM")
and a member of the DeAM Global
Executive Committee (since 2002);
formerly, Vice Chairman of Putnam
Investments, Inc. (1999); Director
and Senior Managing Director of
Putnam Investments, Inc. and
President, Chief Executive Officer
and Director of Putnam Mutual Funds
Inc. (1990-1999).

---------------

(1) Interested person of the Advisor as defined in the 1940 Act due to his
position with the Advisor.

(2) Mr. Shiebler has been appointed Trustee and Chairman of each Board as of
June 18, 2004.

(3) It is anticipated that Mr. Shiebler will be appointed to the boards of 52
trusts/ corporations comprised of 148 funds on June 18, 2004.

As of December 31, 2003, none of the Non-interested Trustees owned securities
beneficially of the Advisor, or any person directly or indirectly controlling,
controlled by or under common control with, the Advisor.

RESPONSIBILITIES OF THE BOARD OF TRUSTEES--BOARD AND COMMITTEE MEETINGS

The primary responsibility of each Board is to represent the interests of the
shareholders of the Funds and to provide oversight of the management of the
Funds. Each Board proposed for election at the Meeting is comprised of one
individual who would be an Interested Trustee, and eight individuals who are
Independent Trustees. SEC rules require a majority of the board members of a
fund to be "independent" if the fund takes advantage of certain exemptive rules
under the 1940 Act. If the proposed Board of Trustees is approved by
shareholders, 89% will be Independent Trustees. Each of the nominees that will
be considered an Independent Trustee, if elected, has been selected and
nominated solely by the current Independent Trustees of each Fund.

Each Board meets multiple times during the year to review the investment
performance of each Fund and other operational matters, including policies and
procedures designed to assure compliance with regulatory and other requirements.
Furthermore, the Independent Trustees review the fees paid to the Advisor and
its affiliates for investment advisory services and other administrative and
shareholder services. Each Board has adopted specific policies and guidelines
that, among other things, seek to further enhance the effectiveness of the
Independent 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 "ICI Best Practices
Report"). For example, the Independent Trustees select independent legal counsel
to work with them in reviewing fees, advisory and other contracts and overseeing
fund matters, and regularly meet privately with their counsel.

During calendar year 2003, the Board of each Fund met 8 times. Each then current
Trustee attended 100% of the respective meetings of the Board and the Committees
(if a member thereof) held during calendar year 2003, except for one former
Trustee who resigned on January 1, 2004, who attended 75% of the Board meetings.

Each Board has an Audit Committee, a Nominating and Governance Committee, a
Valuation Committee, an Operations Committee and a Fixed-Income Oversight
Committee (each a "Committee" and collectively, the "Committees"). The
responsibilities of each Committee are described below. Each Committee has a
written charter that delineates the Committee's duties and powers.

AUDIT COMMITTEE

The Audit 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 management and
performs such other tasks as the full Board deems necessary or appropriate. For
the 2003 fiscal year for each Fund, the Committee reviewed and discussed the
audited financial statements with management. The Committee also discussed with
the independent auditors the matters required to be discussed by Statement on
Auditing Standards No. 61 (Communications with Audit Committees). The Funds'
independent auditors provided the Committee the written disclosure required by
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees), and the Committee discussed with representatives of the independent
auditors their firm's independence. Based on its review and discussions with
management and the independent auditors of each Fund's financial statements and
other written disclosure provided by the independent auditors, the Committee
recommended to each Board that the audited financial statements be included in
the annual report provided to shareholders for each Fund's 2003 fiscal year. The
Committee is comprised of only Non-interested Trustees who are "independent" as
defined in the New York Stock Exchange ("NYSE") and the Chicago Stock Exchange
("CHX") listing standards applicable to closed-end funds. The members of the
Committee are Donald L. Dunaway (Chairman), Lewis A. Burnham and Robert B.
Hoffman. The Audit Committee held 10 meetings for all Funds except KHI, KMM,
KTF, KSM and KST, which held 11 meetings, during calendar year 2003. A copy of
the Audit Committee Charter for each Fund is attached as Appendix 1 hereto.

NOMINATING AND GOVERNANCE COMMITTEE

Each Board has a Nominating and Governance Committee, comprised of only
Non-interested Trustees. Its primary function is to identify and recommend
individuals for membership on the Board and oversee the administration of the
Board 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 6
meetings during calendar year 2003. Each Fund's Nominating and Governance
Committee is governed by the Nominating and Governance Committee Charter, a copy
of which is attached as Appendix 2 hereto. The Charter is not currently
available on a website. Each member of the Committee is "independent," which
means that he or she is not an "interested person" of the Fund, as defined in
the 1940 Act.

The Nominating and Governance Committee receives and reviews information on
individuals qualified to be recommended to the full Board as nominees for
election as Trustees, including any recommendations by shareholders.
Shareholders may recommend candidates for Board positions by forwarding their
correspondence by U.S. mail or courier service to the Fund's Secretary for the
attention of the Chairman of the Nominating and Governance Committee, Two
International Place, Boston, MA 02110. Suggestions for candidates must include a
resume of the candidate.

The Nominating and Governance Committee's principal criterion for selection of
candidates is their ability to carry out the responsibilities of the Board. In
addition, the following factors are taken into consideration: (a) the Board
collectively should represent a broad cross section of backgrounds, functional
disciplines and experience, (b) candidates should exhibit stature commensurate
with the responsibility of representing shareholders, (c) candidates should
commit to strive for high attendance levels at regular and special Board
meetings, and participate in committee meetings as needed, and (d) candidates
should represent the best choices available based upon thorough identification,
investigation and recruitment of candidates.

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 the 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 Richard T. Hale. Alternate members are Donald L.
Dunaway and John G. Weithers. The Valuation Committee held 2 meetings for all
Funds during calendar year 2003.

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, portfolio transaction policies, and
custody and transfer agency arrangements. Currently, the members of the
Operations Committee are John W. Ballantine (Chairman), Paul K. Freeman, Fred B.
Renwick and John G. Weithers. The Operations Committee held 7 meetings during
calendar year 2003.

FIXED-INCOME OVERSIGHT COMMITTEE

Each Board has a Fixed-Income Oversight Committee, comprised of only
Non-interested Trustees, which oversees investment activities of the

Funds, 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 Paul K. Freeman (Chairman), Donald L.
Dunaway and Shirley D. Peterson. The Fixed-Income Oversight Committee held 5
meetings during calendar year 2003.

SHAREHOLDER COMMUNICATION WITH THE TRUSTEES

The Board of each Fund provides a process for shareholders to send
communications to the Board. (These communications do not include shareholders'
proposals described below under "Miscellaneous--Proposals of Shareholders.")
Correspondence should be sent by U.S. mail or courier service to the Funds'
Secretary, Two International Place, Boston, Massachusetts 02110-4103, who will
forward it to the Lead Independent Trustee (currently Ms. Peterson) if addressed
to the Board, or to a specific Trustee if addressed to that Trustee.

COMPENSATION OF TRUSTEES

Each Fund pays its Independent Trustees a monthly retainer, paid on a quarterly
basis, plus expenses, and an attendance fee for each Board meeting and Committee
meeting attended. As reflected above, the Trustees currently serve as board
members of various investment companies for which DeIM serves as investment
manager. DeIM 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
one of the Trustees are also officers, directors, employees or stockholders of
DeIM and participate in the fees paid to DeIM, although the Funds make no direct
payments to them. The Trustee 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 funds managed by the Advisor ("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 3 in the Trustees' share ownership.

The table below shows, for each Trustee entitled to receive compensation from
the Funds, the aggregate compensation paid or accrued during the 2003 calendar
year and the total compensation that the funds advised by DeIM or its affiliates
(collectively, the "Scudder Fund Complex") paid or accrued during calendar year
2003.

AGGREGATE
COMPENSATION
AGGREGATE COMPENSATION FROM FUND FROM
--------------------------------------------------- SCUDDER FUND
NAME OF TRUSTEE KHI KGT KMM KTF KSM KST COMPLEX(3)(4)
--------------- ------ ------ ------ ------ ------ ------ -------------

John W. Ballantine........... $2,542 $3,018 $2,542 $3,864 $2,369 $1,495 $218,350
Lewis A. Burnham............. $2,650 $3,180 $2,610 $4,000 $2,500 $1,620 $209,620
Donald L. Dunaway............ $2,768 $3,205 $2,690 $4,290 $2,538 $1,585 $239,200
James R. Edgar(1)............ $2,190 $2,610 $2,190 $3,330 $2,100 $1,350 $175,210
Paul K. Freeman.............. $2,463 $2,936 $2,464 $3,762 $2,318 $1,471 $194,280
Robert B. Hoffman............ $2,371 $2,772 $2,371 $3,603 $2,261 $1,460 $189,160
Shirley D. Peterson(2)....... $2,585 $3,183 $2,586 $4,018 $2,492 $1,569 $207,790
Fred B. Renwick.............. $2,280 $2,700 $2,280 $3,420 $2,160 $1,380 $183,940
John G. Weithers............. $2,305 $2,773 $2,306 $3,588 $2,212 $1,419 $185,380

---------------

(1) Includes deferred fees for Governor Edgar. Pursuant to a 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 selected funds managed by the Advisor. Total deferred fees
(including interest thereon and the return from the assumed investment in
Shadow Shares) payable from the Funds to Governor Edgar are as follows:
$6,415, $7,508, $6,184, $10,544, $6,474 and $4,061 from KHI, KGT, KMM, KTF,
KSM and KST, respectively.

(2) Includes $19,020 in annual retainer fees in Ms. Peterson's role as Lead
Independent Trustee.

(3) For each Trustee, total compensation includes compensation for service on
the boards of 31 trusts/corporations comprised of 81 funds. Each Trustee
currently serves on the boards of 31 trusts/corporations in the Scudder Fund
Complex, comprised of 82 funds.

(4) Aggregate compensation reflects amounts paid to the Trustees for numerous
special meetings of the Chicago Board in connection with amending the
administrative services agreements and the transfer agency agreements and
the delegation of certain fund accounting functions to State Street Bank and
Trust Company. Such amounts totaled $15,510 for Messrs. Ballantine and
Dunaway, $8,560 for Messrs. Freeman, Hoffman, Renwick and Weithers, and
$5,170 for Messrs. Burnham and Edgar and Ms. Peterson. These meeting fees
were borne by the Advisor.

Each Fund recently adopted a policy that the Board generally should be
represented at annual shareholder meetings by at least one Trustee. No Trustee
attended the Funds' annual meeting held on May 29, 2003.

FUND OFFICERS

Information about the executive officers of each Fund, with their respective
ages, terms as Fund officers indicated and principal occupation for the past
five years, is set forth below.

Richard T. Hale(1) (58), Chief Executive Officer of each Fund since 11/19/03.
Mr. Hale is a Managing Director of Deutsche Investment Management Americas,
Inc., Deutsche Asset Management (1999-present) and Deutsche Bank Securities,
Inc. (1999-present); Director and President, Investment Company Capital Corp.
(registered investment adviser) (1996-present); Director, Deutsche Global Funds,
Ltd. (2000-present), CABEI Fund (2000-present), North American Income Fund
(2000-present) (registered investment companies); Director, Scudder Global
Opportunities Funds (since 2003); Director/Officer, Deutsche/ Scudder Mutual
Funds (various dates); President, Montgomery Street Income Securities, Inc.
(registered investment companies); Vice President, Deutsche Asset Management
Inc. (2000-present); formerly, President of each Fund (2003); Director, ISI
Family of Funds (registered investment companies; 4 funds overseen) (1992-1999).

Julian F. Sluyters (43)(1), Chief Executive Officer of each Fund effective
6/18/04. Mr. Sluyters is a Managing Director, Deutsche Asset Management (since
May 2004); President and Chief Executive Officer of The Korea Fund, Inc., The
Brazil Fund, Inc., Scudder Global High Income Fund, Inc. and Scudder New Asia
Fund, Inc. (since May 2004); formerly, President and Chief Executive Officer of
UBS Fund Services (2001-2003); Chief Administrative Officer (1998-2001) and
Senior Vice President and Director of Mutual Fund Operations of UBS Global Asset
Management (1991-1998).

Brenda Lyons (40), President of each Fund since 12/01/03. Ms. Lyons is also a
Managing Director of Deutsche Asset Management.

Philip J. Collora (58), Vice President of each Fund except KST since 2/1/90 and
KST since 3/2/90, and Assistant Secretary of each Fund since 1/24/01. Mr.
Collora is also a Director of Deutsche Asset Management.

Kenneth Murphy (40), Vice President of each Fund since 1/15/03. Mr. Murphy is
also a Vice President of Deutsche Asset Management (2001-present) and formerly,
a Director of John Hancock Signature Services (1992-2001).

Charles A. Rizzo (46), Treasurer of each Fund since 11/20/02. Mr. Rizzo is also
a Managing Director of Deutsche Asset Management (February 2004-present) and
formerly, Director of Deutsche Asset Man-

---------------

(1) Mr. Hale will retire on June 18, 2004. Mr. Sluyters has been elected Chief
Executive Officer of each Fund, effective June 18, 2004.

agement (2000-2004); Vice President and Fund Accounting Department Head of BT
Alex. Brown Incorporated (now Deutsche Bank Securities, Inc.) (1998-1999); and a
Senior Manager of Coopers & Lybrand L.L.P. (now PricewaterhouseCoopers LLP)
(1993-1998).

Salvatore Schiavone (37), Assistant Treasurer of each Fund since 5/14/03. Mr.
Schiavone is also a Director of Deutsche Asset Management.

Kevin M. Gay (44), Assistant Treasurer of each Fund since 5/12/04. Mr. Gay is
also a Vice President of Deutsche Investment Management Americas (2002-present)
and formerly, a Vice President and Director of PFPC, Inc. or its predecessor
organization (1994-2002).

Kathleen Sullivan D'Eramo (46), Assistant Treasurer of each Fund since 5/14/03.
Ms. D'Eramo is also a Director of Deutsche Asset Management.

John Millette (41), Secretary of each Fund since 9/26/01. Mr. Millette is also a
Director of Deutsche Asset Management.

Daniel O. Hirsch (49), Assistant Secretary of each Fund since 4/5/02. Mr. Hirsch
is also a Managing Director of Deutsche Asset Management (2002-present); a
Director of Deutsche Global Funds Ltd. (2002-present); and formerly, a Principal
of BT Alex. Brown Incorporated (now Deutsche Bank Securities Inc.) (1998-1999).

Caroline Pearson (41), Assistant Secretary of each Fund since 1/21/98. Ms.
Pearson is a Managing Director of Deutsche Asset Management.

Lisa Hertz (33), Assistant Secretary of each Fund since 9/26/03. Ms. Hertz is
also an Assistant Vice President of Deutsche Asset Management.

The officers of each Fund are elected by the Board of each Fund on an annual
basis to serve until their successors are elected and qualified.

SHARE OWNERSHIP. As of December 31, 2003, each executive officer, nominee and
Trustee of each Fund individually, and the officers and Trustees as a group,
owned beneficially less than 1% of the outstanding shares of each Fund. Appendix
3 hereto lists the dollar range and amount of shares of each Fund owned directly
or beneficially owned by each Trustee and nominee of the Funds individually and
as a group with the executive officers of each Fund. As of December 31, 2003,
the Trustees and executive officers did not own any Preferred Shares of KTF or
KSM.

As of December 31, 2003, no person is known to any Fund to have owned
beneficially more than 5% of any class of shares of any Fund, except as noted
below:

880 shares in the aggregate, or 31.43% of the outstanding Preferred Shares of
KSM, were held by Pinnacle West Capital Corp., P.O. Box 53999, Phoenix, Arizona
85072-3999.

200 shares in the aggregate, or 7.14% of the outstanding Preferred Shares of
KSM, were held by Devon Energy Corp., 20 N. Broadway, Oklahoma City, Oklahoma
73102-8202.

200 shares in the aggregate, or 7.14% of the outstanding Preferred Shares of
KSM, were held by a person whose name and address is not known to the Fund.

280 shares in the aggregate, or 10.00% of the outstanding Preferred Shares of
KSM, were held by a person whose name and address is not known to the Fund.

SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. 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 Advisor, affiliated persons of the Advisor 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, 2003 (December 31, 2003 for KGT), all
filings were timely, except that Phil Condon filed a Form 4 late for KTF; Sean
McCaffrey filed a Form 3 late for KMM; Edwin Guiterrez, Karl Sternberg, James
Knell, Simon Kempton, Annette Fraser, David Haysey, Stephen Illot, Matthew
Linsey, Alexander Tedder and Brett Diment (current and former officers and
directors of the subadviser) each filed a Form 3 late for KGT; and Brenda Lyons
filed a Form 3 late for all Funds.

INVESTMENT MANAGER. Deutsche Investment Management Americas Inc. ("DeIM" or the
"Advisor"), 345 Park Avenue, New York, NY 10154, serves as each Fund's
investment adviser and manager pursuant to an investment management agreement.
Deutsche Asset Management Investment Services Ltd., One Appold Street, London,
England, serves as the subadviser for Scudder Multi-Market Income Trust, Scudder
Strategic

Income Trust and Scudder Intermediate Government & Agency Trust pursuant to
subadvisory agreements with the Advisor.

Deutsche Asset Management ("DeAM") is the marketing name in the US for the asset
management activities of Deutsche Bank AG, DeIM, Deutsche Asset Management Inc.,
Deutsche Asset Management Investment Services Ltd., Deutsche Bank Trust Company
Americas and Scudder Trust Company. DeAM is a global asset management
organization that offers a wide range of investing expertise and resources,
including hundreds of portfolio managers and analysts and an office network that
reaches the world's major investment centers. This well-resourced global
investment platform brings together a wide variety of experience and investment
insight, across industries, regions, asset classes and investing styles. DeIM is
an indirect, wholly-owned subsidiary of Deutsche Bank AG. Deutsche Bank AG is a
major global banking institution that is engaged in a wide range of financial
services, including investment management, mutual fund, retail, private and
commercial banking, investment banking and insurance.

ITEM 2. SELECTION OF INDEPENDENT AUDITORS

THE BOARD OF EACH FUND RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF THE
SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR EACH FUND.

Each Board, including the Independent Trustees, has selected Ernst & Young LLP
("E&Y") to act as independent auditors to audit the books and records of each
Fund for the current 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. The selection of E&Y as independent auditors of each Fund
is being submitted to the shareholders for ratification. A representative of E&Y
is expected to be present at the Meeting and will be available to respond to any
appropriate questions raised at the Meeting and may make a statement.

The following table shows fees paid to E&Y by each Fund during that Fund's two
most recent fiscal years: (i) for audit and non-audit services provided to the
Fund, and (ii) for engagements for non-audit services pre-approved by the Audit
Committees for the Advisor and certain entities controlling, controlled by, or
under common control with the Advisor that provide ongoing services to the Fund
(collectively, the "Advisor Entities"), which engagements relate directly to the
operations and financial reporting of the Fund. The Audit Committee of each
Board will review, at least annually, whether E&Y's receipt of non-audit fees

from the Fund, DeIM and all Advisor Entities is compatible with maintaining
E&Y's independence.

AUDIT RELATED ALL OTHER
AUDIT FEES(1) FEES(2) TAX FEES(3) FEES(4)
------------- ------------- ----------- ---------
ADVISOR ADVISOR ADVISOR
NAME OF FUND FUND FUND ENTITIES FUND ENTITIES FUND ENTITIES
------------ ---- ---- -------- ---- -------- ---- --------

Scudder High Income Trust
2002....................... $38,008 $0 $212,800 $ 6,707 $0 $ 0 $0
2003....................... $40,881 $0 $112,900 $ 8,266 $0 $364 $0
Scudder Intermediate
Government & Agency Trust
2002....................... $35,951 $0 $212,800 $ 6,344 $0 $ 0 $0
2003....................... $32,364 $0 $112,900 $ 7,231 $0 $364 $0
Scudder Multi-Market Income
Trust
2002....................... $35,483 $0 $212,800 $ 6,262 $0 $ 0 $0
2003....................... $40,882 $0 $112,900 $ 8,267 $0 $364 $0
Scudder Municipal Income
Trust
2002....................... $56,801 $0 $212,800 $10,024 $0 $ 0 $0
2003....................... $40,845 $0 $112,900 $ 6,687 $0 $364 $0
Scudder Strategic Municipal
Income Trust
2002....................... $55,679 $0 $212,800 $ 9,826 $0 $ 0 $0
2003....................... $39,494 $0 $112,900 $ 6,687 $0 $364 $0
Scudder Strategic Income
Trust
2002....................... $38,849 $0 $212,800 $ 6,856 $0 $ 0 $0
2003....................... $39,099 $0 $112,900 $ 6,617 $0 $364 $0

---------------

(1) "Audit Fees" are the aggregate fees billed for professional services for the
audit of each Fund's annual financial statements and services provided in
connection with statutory and regulatory filings or engagements.

(2) "Audit Related Fees" are the aggregate fees billed for assurance and related
services reasonably related to the performance of the audit or review of
financial statements and are not reported under "Audit Fees."

(3) "Tax Fees" are the aggregate fees billed for professional services for tax
advice, tax compliance and tax planning.

(4) "All Other Fees" are the aggregate fees billed for products and services
other than "Audit Fees," "Audit Related Fees" and "Tax Fees."

AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES. Generally, the Audit
Committee must pre-approve (i) all services to be performed for the Fund by the
Fund's independent auditors and (ii) all non-audit services to be performed by
the Fund's independent auditors for the Advisor Entities with respect to
operations and financial reporting of the Fund. There are several de minimis
exceptions. The Chairman of the Audit Committee may grant the pre-approval for
non-audit services described in items (i) and (ii) above for non-prohibited
services for engagements of less than $100,000. All such delegated pre-approvals
shall

be presented to the Audit Committee no later than the next Audit Committee
meeting. Pre-approval of non-audit services described in item (i) is not
required if the aggregate amount of all non-audit services provided to the Fund
is less than 5% of the total fees paid by the Fund to the independent auditors
during the fiscal year in which the non-audit services are provided.
Pre-approval of non-audit services described in item (ii) is not required if the
aggregate amount of all non-audit services provided is less than 5% of the total
fees paid by the Fund, the Advisor or any Advisor Entities providing ongoing
services to the Fund, to the independent auditors during the fiscal year in
which the non-audit services are provided.

ALL NON-AUDIT FEES. The table below shows the aggregate non-audit fees billed by
Ernst & Young LLP for services rendered to the Funds and to the Advisor Entities
for the two most recent fiscal years for each Fund.

KHI KGT KMM KTF KSM KST
---------- ---------- ---------- ---------- ---------- ----------

2002................. $ 970,199 $ 969,836 $ 969,754 $ 973,516 $ 973,318 $ 970,348
2003................. $3,750,630 $3,749,595 $3,750,631 $3,749,051 $3,749,051 $3,748,981

In assessing E&Y's independence, the Audit Committee considers the opinions of
Fund management.

ITEM 3. APPROVAL OF THE MODIFICATION OR ELIMINATION OF CERTAIN INVESTMENT
POLICIES AND THE ELIMINATION OF THE SHAREHOLDER APPROVAL REQUIREMENT AS TO
CERTAIN OTHER MATTERS.

THE BOARD OF EACH FUND RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE PROPOSAL
DISCUSSED BELOW FOR EACH APPLICABLE FUND.

The 1940 Act requires an investment company to adopt policies governing certain
specified activities, which can be changed only by a shareholder vote. Policies
that cannot be changed or eliminated without a shareholder vote are referred to
in this Proxy Statement as "fundamental" policies. The purposes of this proposal
are to eliminate the requirement of shareholder approval to change policies
except where required by the 1940 Act and to provide the maximum permitted
flexibility in those policies that do require shareholder approval. Management
has advised the Boards that some of the Funds' fundamental policies that are not
required to be such under the 1940 Act were adopted in the past to reflect
industry conditions at the time and no longer serve any useful purpose.
Management believes that other fundamental policies, as well as the
classification of each Fund's investment objective(s) as fundamental, are
unnecessary because the provisions of the 1940 Act or federal tax law, together
with the disclosure requirements of the federal securities laws, provide
adequate safeguards for a Fund and its shareholders. The proposal is described
in more detail below.

This proposal is sub-divided into the following three sections:

(1) ELIMINATION OF SHAREHOLDER APPROVAL REQUIREMENT TO AMEND INVESTMENT
OBJECTIVES AND INVESTMENT POLICIES. All of the Funds listed below currently
require shareholder approval to amend investment objectives and certain
investment policies. The first section of this proposal seeks shareholder
approval of the elimination of the shareholder approval requirement for amending
(a) "investment objectives" and (b) "investment policies" which are not
otherwise specifically identified as fundamental. Eliminating the shareholder
approval requirement for amending the investment objective (or objectives) of a
Fund is intended to enhance the Fund's investment flexibility in the event of
changing circumstances. Additionally, management believes that currently it is
difficult to determine precisely which policies are fundamental on the basis of
the language in the Funds' Prospectuses and, if applicable, Statements of
Additional Information, thus creating uncertainty and restricting the Funds'
investment flexibility and their ability to respond to changing regulatory and
industry conditions.

(2) REVISION OF FUNDAMENTAL POLICIES MANDATED BY THE 1940 ACT. Each of the
fundamental policies proposed for revision relates to an activity that the 1940
Act requires be governed by a fundamental policy. Each proposed revision is, in
general, intended to provide the Funds' Boards with the maximum flexibility
permitted under the 1940 Act, and to promote simplicity among the Funds'
policies.

(3) ELIMINATION OF SHAREHOLDER APPROVAL REQUIREMENT TO CHANGE OTHER FUNDAMENTAL
POLICIES. This proposal seeks to eliminate certain policies that are
specifically designated as fundamental but which are not required to be
fundamental under the 1940 Act. The Boards of the Funds anticipate adopting
certain of these policies as non-fundamental. Any policy that is not designated
as fundamental can be modified or eliminated by the Board, and, as indicated
below, management intends to recommend to the Boards the elimination of several
of them as being inappropriate or unnecessary under current conditions.

Each proposed policy is identified in bold-type below, together with a list of
Funds whose shareholders' vote is required.

Each Fund's current fundamental policies are set forth in Appendix 4. Changes in
fundamental policies that are approved by shareholders, as well as changes in
non-fundamental policies that are adopted by a Board, will be reflected in each
Fund's next annual shareholder report and other disclosure documents. Any change
in the method of operation of a Fund will require prior Board approval. Except
as specifically indicated below, the Board of each Fund does not presently
intend to change the investment objective(s) or make any significant changes to
its basic investment

policies. Shareholders would receive notice prior to the implementation of any
such change.

Approval of each item of this proposal with respect to any Fund requires the
affirmative vote of a majority of the outstanding voting securities of that
Fund. Under the 1940 Act, the vote of a majority of the outstanding voting
securities means the lesser of (A) 67% or more of the voting securities present
at a shareholder meeting, if the holders of more than 50% of the outstanding
voting securities of a Fund are present or represented by proxy, or (B) more
than 50% of the outstanding voting securities of a Fund. If the shareholders of
any Fund fail to approve the proposed modification or elimination of policies or
the elimination of the shareholder approval requirement as to a matter, the
current policy or approval requirement will remain in effect.

ELIMINATION OF SHAREHOLDER APPROVAL REQUIREMENT TO AMEND INVESTMENT OBJECTIVES
AND INVESTMENT POLICIES

INVESTMENT OBJECTIVES

PROPOSAL 3.0: IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND, THE
INVESTMENT OBJECTIVE(S) OF THAT FUND WILL NOT BE CLASSIFIED AS FUNDAMENTAL.

This proposal applies to all Funds.

Management believes that leaving the power to modify investment objectives up to
the discretion of the Board would strengthen each Fund's ability to respond to
changing circumstances. The Board of each Fund does not presently intend to
modify any investment objective, and would disclose any changes to applicable
shareholders in the next annual report to shareholders following the change.

INVESTMENT POLICIES

PROPOSAL 3.1: IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND, THE
"INVESTMENT POLICIES" OF THAT FUND WILL NOT BE CLASSIFIED AS FUNDAMENTAL EXCEPT
AS OTHERWISE PROVIDED IN THIS PROXY STATEMENT.

This proposal applies to:

KHI KGT KMM
KTF KST

This proposal is intended to provide the Funds with clarity of disclosure and
the investment flexibility necessary to respond to changing circumstances by
eliminating the shareholder approval requirement for amending "investment
policies" which are not specifically identified as fundamental. The Funds'
Prospectuses currently contain a statement that characterizes some or all of the
"investment policies" of a Fund as fundamental.

Management believes that these current statements are overbroad and, therefore,
create difficulty for portfolio managers in operating a Fund and for current or
potential shareholders of a Fund in determining which policies of the Fund are
fundamental. The current statements also unnecessarily restrict a Fund's
flexibility and may make it more difficult to respond to changing conditions.
For KTF, its policy of investing at least 80% of net assets, plus the amount of
any borrowings for investment purposes, in municipal securities, will remain
fundamental. Management believes that removing the fundamental characterization
of all policies not otherwise specifically identified as fundamental is
consistent with industry standards and would allow the Board of a Fund to modify
its investment policies in light of changes in the investment management
industry, market conditions and the regulatory environment, but only consistent
with applicable law, the Fund's investment objective and its clearly-identified
fundamental policies.

REVISION OF FUNDAMENTAL POLICIES MANDATED BY THE 1940 ACT

DIVERSIFICATION

PROPOSAL 3.2(A): IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND,
THAT FUND WILL REMAIN A "DIVERSIFIED" FUND UNDER THE 1940 ACT, BUT WILL NOT BE
SUBJECT TO ADDITIONAL REQUIREMENTS THAT ARE MORE RESTRICTIVE THAN THE 1940 ACT.

This proposal applies to:

KHI KGT KMM
KTF KST

Each Fund identified above is currently classified as a diversified, closed-end
investment company. Under the 1940 Act, a "diversified" Fund may not, with
respect to 75% of the value of its total assets, invest more than 5% of the
value of its total assets in securities issued by any one issuer or purchase
more than 10% of the outstanding voting securities of any one issuer, except in
each case in U.S. Government securities or securities issued by other investment
companies. Currently, each Fund also has adopted additional diversification
policies. Each Fund, with respect to 75% of the value of its total assets, may
not invest more than 5% of the value of its total assets in the securities of
any one issuer, and with respect to 100% of the value of its total assets, may
not purchase more than 10% of the securities of any one issuer. Each of the
Funds' policies includes an exception for U.S. Government securities.

Accordingly, the elimination of the additional diversification policies for a
Fund means that the Fund must comply with only the 1940 Act diversification
requirements. As a result, the elimination of the additional diversification
policies that apply to 75% of the value of a Fund's total assets will

not represent a substantive change to that Fund's diversification requirements.
However, the elimination of the additional diversification policies that apply
to 100% of the value of a Fund's total assets will cause that Fund to have less
restrictive diversification requirements.

PROPOSAL 3.2(B): IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF KSM, IT
WILL REMAIN A "NON-DIVERSIFIED" FUND UNDER THE 1940 ACT BUT WILL ELIMINATE AS
FUNDAMENTAL THE CURRENT DIVERSIFICATION POLICIES.

This proposal applies to: KSM.

KSM has elected to be classified as a non-diversified, closed-end investment
company. Consequently, the Fund has no diversification requirements under the
1940 Act. However, the Fund currently has diversification policies that restrict
the Fund, with respect to 50% of the value of its total assets, from investing
more than 5% of the value of its total assets in the securities of any one
issuer, and with respect to the other 50% of its total assets, from investing
more than 25% of the value of its total assets in the securities of any one
issuer. These diversification policies reflect the requirements of the Internal
Revenue Code of 1986, as amended, for a fund to qualify for the favorable tax
status as a "regulated investment company." Whether or not this proposal is
approved by shareholders, the Fund intends to continue to meet these
requirements.

BORROWING

PROPOSAL 3.3: IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND, THAT
FUND MAY NOT BORROW MONEY, EXCEPT AS PERMITTED UNDER THE INVESTMENT COMPANY ACT
OF 1940, AS AMENDED, AND AS INTERPRETED OR MODIFIED BY REGULATORY AUTHORITY
HAVING JURISDICTION, FROM TIME TO TIME.

This proposal applies to all Funds.

The current policy of KTF and KSM prohibits borrowing money, except as a
temporary measure for extraordinary or emergency purposes, in which case each
may borrow up to one-third of the value of its total assets. The current policy
of KGT prohibits borrowing except to repurchase shares, and the current policy
of KGT and KST prohibits borrowing unless immediately after each such borrowing
there is asset coverage of at least 300% (including the proceeds of such
borrowing). The current policy of KHI and KMM prohibits borrowing except to the
extent permitted by applicable law. Although these Funds' current policies are
essentially the same as the proposed policies, the Funds are participating in
this proposal so as to standardize the Funds' policies.

The proposed policy would permit each Fund to engage in borrowing in a manner
and to the full extent permitted by applicable law. The 1940 Act requires
borrowings to have 300% asset coverage, which means, in effect, that a Fund
would be permitted to borrow up to an amount equal to

33 1/3% of its total assets under the proposed borrowing policy. Additionally,
under the proposed policy, each Fund would not be limited to borrowing for
temporary or emergency purposes, could borrow for leverage, and could purchase
securities for investment while borrowings are outstanding. To the extent a Fund
borrows for leverage, such borrowings increase the Fund's volatility and the
risk of loss in a declining market. The Advisor intends to recommend to the
Board of KGT that, if this proposal is approved, KGT be authorized to borrow for
leverage purposes.

SENIOR SECURITIES

PROPOSAL 3.4: IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND, THAT
FUND MAY NOT ISSUE SENIOR SECURITIES, EXCEPT AS PERMITTED UNDER THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED, AND AS INTERPRETED OR MODIFIED BY REGULATORY
AUTHORITY HAVING JURISDICTION, FROM TIME TO TIME.

This proposal applies to all Funds.

The current policy of KHI and KGT prohibits the issuance of senior securities,
except for borrowing, and excludes collateral arrangements with respect to
options, futures contracts and options on futures contracts and collateral
arrangements meeting applicable SEC requirements with respect to initial and
variation margin, from the definition of senior securities. The current policy
of KMM prohibits the issuance of senior securities, as defined in the 1940 Act,
other than (i) preferred shares, (ii) short or intermediate term notes, (iii)
borrowing or (iv) transactions involving futures contracts or the writing of
options. The current policy of KTF and KSM prohibits the issuance of senior
securities, as defined in the 1940 Act, other than (i) preferred shares, (ii)
borrowings or (iii) transactions involving futures contracts or the writing of
options. The current policy of KST prohibits the issuance of senior securities,
as defined in the 1940 Act, other than (i) borrowings, including reverse
repurchase agreements and (ii) transactions involving futures contracts or the
writing of options.

CONCENTRATION

PROPOSAL 3.5: IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND, THAT
FUND MAY NOT CONCENTRATE ITS INVESTMENTS IN A PARTICULAR INDUSTRY, AS THAT TERM
IS USED IN THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED, AND AS INTERPRETED OR
MODIFIED BY REGULATORY AUTHORITY HAVING JURISDICTION, FROM TIME TO TIME.

This proposal applies to all Funds.

While the 1940 Act does not define what constitutes "concentration" in an
industry, the staff of the SEC takes the position that investment of

more than 25% of a fund's assets in an industry constitutes concentration. If a
fund concentrates in an industry, it must at all times have more than 25% of its
assets invested in that industry, and if its policy is not to concentrate, as is
the case with each of the Funds, it may not invest more than 25% of its assets
in the applicable industry, unless, in either case, the fund discloses the
specific conditions under which it will change from concentrating to not
concentrating or vice versa.

Each Fund's current policy in effect prohibits the purchase of securities if it
would result in more than 25% of the Fund's total assets being invested in the
same industry. For each of the Funds, there are exceptions for U.S. Government
securities and/or state securities. In some cases, what constitutes an industry
for the purposes of this restriction is included in the policy itself. A fund is
permitted to adopt reasonable definitions of what constitutes an industry, or it
may use standard classifications recognized by the SEC, or some combination
thereof. Because a fund may create its own reasonable industry classifications,
management believes that it is not necessary to include such matters in the
fundamental policy of a Fund.

UNDERWRITING OF SECURITIES

PROPOSAL 3.6: IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND, THAT
FUND MAY NOT ENGAGE IN THE BUSINESS OF UNDERWRITING SECURITIES ISSUED BY OTHERS,
EXCEPT TO THE EXTENT THAT A FUND MAY BE DEEMED TO BE AN UNDERWRITER IN
CONNECTION WITH THE DISPOSITION OF PORTFOLIO SECURITIES.

This proposal applies to all Funds.

The proposed underwriting policy has been re-worded without making any material
changes.

INVESTMENT IN REAL ESTATE

PROPOSAL 3.7: IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND, THAT
FUND MAY NOT PURCHASE OR SELL REAL ESTATE, WHICH TERM DOES NOT INCLUDE
SECURITIES OF COMPANIES WHICH DEAL IN REAL ESTATE OR MORTGAGES, OR INVESTMENTS
SECURED BY REAL ESTATE OR INTERESTS THEREIN, EXCEPT THAT THE FUND RESERVES
FREEDOM OF ACTION TO HOLD AND TO SELL REAL ESTATE ACQUIRED AS A RESULT OF THE
FUND'S OWNERSHIP OF SECURITIES.

This proposal applies to all Funds.

The proposed real estate policy re-words the current policies without making any
material changes. The policies of KHI and KGT currently also prohibit investment
in interests in oil, gas or mineral leases, commodities or commodity contracts
in the ordinary course of the business of the Funds.

PURCHASE OF COMMODITIES

PROPOSAL 3.8: IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND, THAT
FUND MAY NOT PURCHASE PHYSICAL COMMODITIES OR CONTRACTS RELATING TO PHYSICAL
COMMODITIES.

This proposal applies to all Funds.

The Funds' current policies prohibit the purchase or sale of commodities or
commodity contracts. These policies may contain exceptions for financial futures
contracts and options on such contracts, and foreign currency transactions.
Under the proposed policy, each Fund would be prohibited from purchasing only
physical commodities or contracts relating to physical commodities and would be
permitted, subject to Board approval, to engage in transactions in financial
futures and related options and foreign currency transactions for hedging and
non-hedging purposes.

LENDING

PROPOSAL 3.9: IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND, THAT
FUND MAY NOT MAKE LOANS EXCEPT AS PERMITTED UNDER THE INVESTMENT COMPANY ACT OF
1940, AS AMENDED, AND AS INTERPRETED OR MODIFIED BY REGULATORY AUTHORITY HAVING
JURISDICTION, FROM TIME TO TIME.

This proposal applies to all Funds.

Each Fund's current lending policy prohibits making loans to others. There may
be exceptions for loans of portfolio securities and to the extent the entry into
repurchase agreements, the purchase of debt securities or interests in
indebtedness in accordance with a Fund's investment objective(s) and policies
are deemed to be loans. The proposed policy, unlike the current policies, does
not specify the particular types of lending in which each Fund is permitted to
engage; instead, the proposed policy permits each Fund to lend in a manner and
to an extent permitted by applicable law. The proposed change would, therefore,
permit each Fund, subject to the receipt of any necessary regulatory approval
and Board authorization, to enter into lending arrangements, including lending
agreements under which the Funds advised by DeIM could for temporary purposes
lend money directly to and borrow money directly from each other through a
credit facility. Each of the Funds believes that the flexibility provided by
this policy change could possibly reduce the Fund's borrowing costs and enhance
its ability to earn higher rates of interest on short-term lendings in the event
that the Board determines that such arrangements are warranted in light of the
Fund's particular circumstances.

ELIMINATION OF SHAREHOLDER APPROVAL REQUIREMENT TO CHANGE OTHER FUNDAMENTAL
POLICIES

The policies listed below (Margin Purchases and Short Sales, Restricted and
Illiquid Securities, Investment in Other Investment Companies and Investment
other than in Municipal Securities and Temporary Investments) reflected industry
conditions at the time. Management believes that each of these policies should
be eliminated as a fundamental policy in the interest of simplicity and
flexibility. Except as otherwise stated, if shareholders approve the elimination
of these policies as fundamental, management will recommend to the Boards that
they eliminate these policies entirely as being unnecessary.

MARGIN PURCHASES AND SHORT SALES

PROPOSAL 3.10: IF THIS PROPOSAL IS ADOPTED BY THE SHAREHOLDERS OF A FUND, THAT
FUND WILL NOT HAVE A FUNDAMENTAL RESTRICTION ON MARGIN PURCHASES AND SHORT
SALES.

This proposal applies to all Funds.

Each Fund is currently either prohibited from (1) making purchases on margin
and/or making short sales, except for options transactions, unless the Fund has
the right to obtain securities equivalent in kind and amount to those sold and
unless not more than 10% of the Fund's total assets is held as collateral for
such sales at any one time, (2) making margin purchases and short sales, except
to obtain short-term credits necessary for clearance of transactions, and in the
case of margin deposits, in connection with financial futures, currency,
interest rate and other hedging transactions, and options transactions, or (3)
writing or purchasing put or call options, except to the extent that the
purchase of a stand-by commitment may be considered the purchase of a put. If
elimination of this restriction is approved by shareholders, each Fund's
potential use of margin transactions beyond transactions in futures and options
and for the clearance of purchases and sales of securities, including the use of
margin in ordinary securities transactions, would be generally limited by the
current position taken by the staff of the SEC that margin transactions with
respect to securities are prohibited under Section 18 of the 1940 Act because
they create senior securities. "Margin transactions" involve the purchase of
securities with money borrowed from a broker, with cash or eligible securities
being used as collateral against the loan. Each Fund's ability to engage in
margin transactions is also limited by its borrowing policies, which permit a
Fund to borrow money only as permitted by applicable law.

RESTRICTED AND ILLIQUID SECURITIES

PROPOSAL 3.11: IF THIS PROPOSAL IS ADOPTED BY THE SHAREHOLDERS OF A FUND, THAT
FUND WILL NOT HAVE A FUNDAMENTAL RESTRICTION ON THE PURCHASE OF RESTRICTED AND
ILLIQUID SECURITIES.

This proposal applies to:

KGT KTF KSM

Each Fund is currently prohibited from entering into repurchase agreements or
purchasing securities if, as a result: (1) more than 20% of the Fund's total
assets would be invested in illiquid securities or restricted securities; or (2)
more than 10% of total assets would be invested in repurchase agreements
maturing in more than seven days.

INVESTMENT IN OTHER INVESTMENT COMPANIES

PROPOSAL 3.12: IF THIS PROPOSAL IS ADOPTED BY THE SHAREHOLDERS OF A FUND, THAT
FUND WILL NOT HAVE A FUNDAMENTAL RESTRICTION ON INVESTMENT IN OTHER INVESTMENT
COMPANIES.

This proposal applies to:

KHI KGT KMM KST

The Funds are currently prohibited from purchasing securities of other
investment companies, if more than 3% of the outstanding voting stock of such
investment company would be held by a Fund; if more than 5% of total assets of a
Fund would be invested in any such investment company; or if a Fund would own,
in the aggregate, securities of other investment companies representing more
than 10% of its assets. The 1940 Act limits a fund's ability to invest in other
investment companies.

INVESTMENT OTHER THAN IN MUNICIPAL SECURITIES AND TEMPORARY INVESTMENTS

PROPOSAL 3.13: IF THIS PROPOSAL IS ADOPTED BY THE SHAREHOLDERS OF A FUND, THAT
FUND WILL NOT HAVE A FUNDAMENTAL RESTRICTION ON INVESTMENT OTHER THAN IN
MUNICIPAL SECURITIES AND TEMPORARY INVESTMENTS.

This proposal applies to:

KSM KTF

The Funds are currently prohibited from purchasing securities or from the making
of investments other than in municipal securities and temporary investments.
Management believes that this policy is not meaningful.

MISCELLANEOUS

GENERAL. The cost of preparing, printing and mailing the enclosed proxy,
accompanying notice and proxy statement and all other costs in connection with
solicitation of proxies will be paid by the Funds, including any additional
solicitation made by letter, telephone, facsimile or made electronically. In
addition to solicitation by mail, certain officers and representatives of the
Funds, officers and employees of the Advisor and certain financial services
firms and their representatives, who will receive no extra compensation for
their services, may solicit proxies electronically, by telephone, by telegram or
personally. The Funds have engaged Georgeson Shareholder Communications Inc.
("GSC") to assist in the solicitation of proxies at a total estimated cost of
$9,500 per Fund plus expenses. Failure of a quorum to be present at the Meeting
for a Fund will necessitate adjournment for that Fund and will subject the Fund
to additional expenses. As the Meeting date approaches, certain shareholders of
each Fund may receive a telephone call from a representative of GSC if their
votes have not yet been received. Authorization to permit GSC to execute proxies
may be obtained by telephonic or electronically transmitted instructions from
shareholders of each Fund. Proxies that are obtained telephonically or
electronically will be recorded in accordance with the procedures believed by
the Funds to be 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 GSC toll free at (866) 800-0586. Any proxy given
by a shareholder is revocable until voted at the Meeting.

PROPOSALS OF SHAREHOLDERS. It is currently anticipated that the 2005 annual
meeting of shareholders will be held in May. A shareholder wishing to submit a
proposal for inclusion in a Fund's proxy statement for the 2005 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 December 17, 2004 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 of 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 February 18, 2005 as timely. The
timely

submission of a proposal, however, does not guarantee its inclusion under either
rule.

OTHER MATTERS TO COME BEFORE THE MEETING. The Boards are not aware of any
matters that will be presented for action at the Meeting other than those set
forth herein. Should any other matters requiring a vote of shareholders arise,
the proxy in the accompanying form will confer upon the person or persons
entitled to vote the shares represented by such proxy the discretionary
authority to vote the shares with respect to any such other matters in
accordance with their best judgment in the interest of the Fund(s).

VOTING, QUORUM. Each valid proxy will be voted in accordance with the
instructions on the proxy and as the persons named in the proxy determine on
such other business as may come before the Meeting. If no instructions are
given, the proxy will be voted in favor of each Item referred to in this Proxy
Statement. Shareholders who execute proxies may revoke them at any time before
they are voted, either by writing to the Fund or in person at the time of the
Meeting.

Item 1, election of Trustees for a Fund, requires a plurality vote of the shares
of such Fund voting at the Meeting. As noted previously, the holders of the
Preferred Shares of KTF and KSM, voting as a separate class for each respective
Fund, 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 seven remaining Trustees. Item 2, ratification
of the selection of independent auditors for a Fund, requires the affirmative
vote of a majority of the shares of the Fund voting at the Meeting. Item 3,
approval of modification or elimination of certain investment policies and the
elimination of the shareholder approval requirement as to other matters,
requires the affirmative vote of a majority of the outstanding voting
securities, as defined on page 20, of the particular Fund. On Item 1,
abstentions and broker non-votes will have no effect; the persons receiving the
largest number of votes will be elected. On Item 2, abstentions and broker
non-votes will not be counted as votes cast and will have no effect on the
result of the vote. On Item 3, abstentions and broker non-votes will not be
counted as votes cast and will have the effect of a "no" vote.

At least 50% of the shares of a Fund must be present, in person or by proxy, in
order to constitute a quorum for that Fund. Thus, the meeting for a particular
Fund could not take place on its scheduled date if less than 50% of the shares
of that Fund were represented. In the event that the necessary quorum to
transact business or the vote required to approve any Item 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 Item. 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 Item and will vote against any such
adjournment those proxies to be voted against that Item. 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 neither has 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.

HOUSEHOLDING INFORMATION. Each Fund provides periodic reports to its
shareholders that highlight relevant information, including investment results
and a review of portfolio changes. In order to reduce the amount of mail you
receive and to help reduce expenses of the Funds, we generally send a single
copy of annual reports and proxy statements to each household. If you do not
want the mailing of these documents to be combined with those for other members
of your household, or if you are receiving multiple copies of these documents
and you want to request delivery of a single copy, please contact the Advisor at
(800) 621-1048, or write to the Advisor at 222 South Riverside Plaza, Chicago,
Illinois 60606.

A COPY OF A FUND'S ANNUAL REPORT IS AVAILABLE WITHOUT CHARGE UPON REQUEST BY
WRITING TO SUCH FUND, 222 SOUTH RIVERSIDE PLAZA, CHICAGO, ILLINOIS 60606 OR BY
CALLING (800) 621-1048.

THE BOARD OF EACH FUND RECOMMENDS AN AFFIRMATIVE VOTE ON ITEMS 1, 2 AND 3.

PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) (OR TAKE ADVANTAGE
OF AVAILABLE ELECTRONIC OR TELEPHONIC VOTING PROCEDURES) PROMPTLY. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.

By order of the Boards,

/s/ John Millette
John Millette
Secretary

APPENDIX 1

SCUDDER FUNDS

(CHICAGO BOARD)

AUDIT COMMITTEE CHARTER

ADOPTED JULY 18, 2001

AMENDED MAY 14, 2003

AMENDED MARCH 17, 2004

I. PURPOSE

The Audit Committee is a committee of the Board of the Fund. Its primary
function is to assist the Board(1) in fulfilling certain of its
responsibilities. This Charter sets forth the duties and responsibilities of the
Audit Committee.

The Audit Committee serves as an independent and objective party to monitor the
Fund's accounting policies, financial reporting and internal control system, as
well as the work of the independent auditors. The Audit Committee assists Board
oversight of (1) the integrity of the Fund's financial statements; (2) the
Fund's compliance with legal and regulatory requirements;(2) (3) the independent
auditors' qualifications and independence; and (4) the performance of the Fund's
independent auditors. The Audit Committee also serves to provide an open avenue
of communication among the independent auditors, the Adviser's internal audit
department, Fund management, and the Board.(3)

- Fund management has the primary responsibility to establish and maintain
systems for accounting, reporting and internal control.

- The independent auditors have the primary responsibility to plan and implement
a proper audit, including consideration of the Fund's accounting, reporting
and internal control practices.

---------------

(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."

(2) The Board has delegated to other committees oversight of various legal and
regulatory requirements. The Audit Committee's function is limited to the
activities set out in Section IV.

(3) If the Fund is listed on the New York Stock Exchange, the Corporate
Governance Standards require the Audit Committee's charter to address, as
one of the Committee's purposes, that it assist Board oversight of "the
performance of the company's internal audit function." Since the Fund has no
internal audit function, this has not been included as one of the purposes
of the Committee, although the Committee does serve to provide an open
avenue of communication with the Adviser's internal audit department, and
reviews the scope, resources and findings and recommendations of the
Adviser's internal audit department as set forth in Section IV.B.2.

A-1

The Audit Committee may have additional functions and responsibilities as deemed
appropriate by the Board and the Audit Committee.(4)

Although the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Fund's financial statements are complete and
accurate and have been prepared in accordance with generally accepted accounting
principles.

II. COMPOSITION

The Audit Committee shall be comprised of three or more board members 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

- he or she does not accept, directly or indirectly, any consulting, advisory,
or other compensatory fee from the Fund (except in the capacity as a Board or
committee member).

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). The Audit Committee will review the
qualifications of its members and determine whether any of its members qualify
as an "audit committee financial expert"(5) as defined in

---------------

(4) If the Fund is a listed closed-end investment company, the Audit Committee
also has as a purpose the preparation of an audit committee report to be
included in the annual proxy statement. This report is described in footnote
11.

(5) An "audit committee financial expert" of a company is defined as a person
who has all of the following attributes: (1) an understanding of generally
accepted accounting principles ("GAAP") and financial statements; (2) the
ability to assess the general application of GAAP in connection with the
accounting for estimates, accruals and reserves; (3) experience preparing,
auditing, analyzing or evaluating financial statements that present a
breadth and level of complexity of accounting issues that are generally
comparable to the breadth and complexity of issues that can reasonably be
expected to be raised by the company's financial statements, or experience
actively supervising one or more persons engaged in such activities; (4) an
understanding of internal controls and procedures for financial reporting;
and (5) an understanding of audit committee functions. An audit committee
financial expert must have acquired such attributes through any one or more
of the following: (1) education and experience as a principal financial
officer, principal accounting officer, controller, public accountant or
auditor or experience in one or more positions that involve the performance
of similar functions (or active supervision of such persons); or (2)
experience overseeing or assessing the performance of companies or public
accountants with respect to the preparation, auditing or evaluation of
financial statements; or (3) other relevant experience.

A-2

Form N-CSR.(6) The Audit Committee will submit such determination to the Board
for its final determination.

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.

No member of the Audit Committee shall serve on the audit committee of three or
more public companies (or three or more investment company complexes) in
addition to his or her service on the Audit Committee of the Fund (excluding
service on the audit committees of other funds in the fund complex), unless the
Board determines that such simultaneous service would not impair the ability of
the Audit Committee member to serve effectively on the Audit Committee.

III. MEETINGS

The Audit Committee shall meet five times annually, or more frequently as
circumstances dictate. Special meetings (including telephone meetings) may be
called by the Chairman 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 shall meet
annually with senior Fund management responsible for accounting and financial
reporting, the independent auditors, and representatives of the Adviser's
internal audit department 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. Charter

Review this Charter, annually, and recommend changes, if any, to the Board.

B. Internal Controls

1. Review, annually, with Fund management and the independent auditors:

(a) the organizational structure, reporting relationship, adequacy of
resources and qualifications of the senior Fund management

---------------

(6) If the Fund is listed on the New York Stock Exchange, 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.

A-3

personnel responsible for accounting and financial reporting; and

(b) their separate evaluation of the adequacy and effectiveness of the
Fund's system of internal controls, including those of the Fund's
service providers.

2. Review, with Fund management, the independent auditors and the Adviser's
internal audit department:

(a) the Adviser's internal audit department's internal audit scope and
plan related to the Fund's systems for accounting, reporting and
internal controls;

(b) the responsibilities, resources and staffing of the Adviser's
internal audit department with respect to the activities in
IV.B.2.(a) above; and

(c) any significant internal audit findings or recommendations related to
the Fund's systems for accounting, reporting and internal controls
and Fund management's response.

3. Establish procedures for the receipt, retention and treatment of
complaints received by the Fund and/or the Audit Committee regarding
accounting, internal accounting controls or auditing matters and the
confidential, anonymous submission by officers and directors of the Fund
or employees of the Adviser, principal underwriter and any provider of
accounting-related services to the Fund of concerns regarding questionable
accounting or auditing matters.

4. Review, annually, with Fund management and the independent auditors,
policies for valuation of Fund portfolio securities, and the frequency and
magnitude of pricing errors.

C. Independent Auditors

1. Approve, and recommend to the Board, the appointment, retention or
termination of the independent auditors, and approve the fees and other
compensation to be paid to the independent auditors. Such selection shall
be pursuant to a written engagement letter approved by the Audit
Committee, which shall provide that:

(a) the Audit Committee shall be directly responsible for the
appointment, compensation, retention and oversight (such oversight
shall include resolving disagreements between Fund management and the
independent auditors regarding financial reporting) of the
independent auditors; and

(b) the independent auditors shall report directly to the Audit
Committee.

A-4

2. Pre-approve any engagement of the independent auditors to provide any
services to the Fund, including the fees and other compensation to be paid
to the independent auditors. Notwithstanding the above, the independent
auditors shall not perform any of the following non-audit services for the
Fund ("prohibited non-audit services"):

(a) bookkeeping or other services related to the accounting records or
financial statements of the Fund;

(b) financial information systems design and implementation;

(d) actuarial services;

(e) internal audit outsourcing services;

(f) management functions or human resources;

(g) broker or dealer, investment adviser, or investment banking services;

(h) legal services and expert services unrelated to the audit; and

(i) any other services that the Public Company Accounting Oversight Board
determines are impermissible.

3. Pre-approve any engagement of the independent auditors, including the fees
and other compensation to be paid to the independent auditors, to provide
any non-audit services to the Adviser (or any "control affiliate"(7) of
the Adviser providing ongoing services to the Fund), if the engagement
relates directly to the operations and financial reporting of the Fund.

- The Chairman of the Audit Committee (or, in his absence, any member
of the Audit Committee) may grant the pre-approval referenced in
Sections IV.C. 2 and 3 above for non-prohibited services for
engagements of less than $100,000. All such delegated pre-approvals
shall be presented to the Audit Committee no later than the next
Audit Committee meeting.

- Pre-approval of non-audit services for the Fund pursuant to Section
IV.C. 2 above is not required, if:

(a) the aggregate amount of all non-audit services provided to the Fund
is less than 5% of the total fees paid by the Fund to the

---------------

(7) "Control affiliate" means any entity controlling, controlled by, or under
common control with the Adviser.

A-5

independent auditors during the fiscal year in which the non-audit services
are provided; and

(b) the services were not recognized by Fund management at the time of
the engagement as non-audit services; and

(c) such services are promptly brought to the attention of the Audit
Committee by Fund management and the Audit Committee approves them
(which may be by delegation) prior to the completion of the audit.

- Pre-approval of non-audit services for the Adviser (or any affiliate
of the Adviser providing ongoing services to the Fund) pursuant to
Section IV.C.3 above is not required, if:

(i) the aggregate amount of all non-audit services provided is
less than 5% of the total fees paid by the Fund, the Adviser
and any "control affiliate" of the Adviser providing ongoing
services to the Fund to the independent auditors during the
fiscal year in which the non-audit services are provided;

(ii) the services were not recognized by Fund management at the
time of the engagement as non-audit services; and

(iii) such services are promptly brought to the attention of the
Audit Committee by Fund management and the Audit Committee
approves them (which may be by delegation) prior to the
completion of the audit.

4. On an annual basis, request, receive in writing and review a report by the
independent auditors describing:

(a) the independent auditors' internal quality-control procedures;

(b) any material issues raised by the most recent internal quality-
control review, or peer review, of the independent auditors, or by
any inquiry or investigations by governmental or professional
authorities, within the preceding five years, respecting one or more
independent audits carried out by the independent auditors, and any
steps taken to deal with any such issues; and

(c) all relationships between the independent auditors and the Fund, so
as to assess the auditors' independence, including identification of
all relationships the independent auditors have with the Fund and all
significant relationships the independent auditors have with the
Adviser (and any "control affiliate" of the Adviser) and any material
service provider to the Fund (including, but not limited to,
disclosures regarding

A-6

the independent auditors' independence required by Independence
Standards Board Standard No. 1 and compliance with the applicable
independence provisions of Rule 2-01 of Regulation S-X).

In assessing the auditors' independence, the Audit Committee shall take
into account the opinions of Fund management and the Adviser's internal
audit department. The Committee will present its conclusions with respect
to the independent auditors to the Board, and recommend that the Board
take appropriate action, if any, in response to the independent auditors'
report to satisfy itself of the independent auditors' independence.

5. On an annual basis, review and evaluate the lead audit partner (such
review to include consideration of whether, in addition to the regular
rotation of the lead audit partner as required by law, in order to assure
continuing auditor independence, there should be regular consideration of
rotation of the firm serving as independent auditors).

6. On an annual basis, meet with the independent auditors and Fund management
to review the arrangements for and scope of the proposed audit for the
current year and the audit procedures to be utilized.

7. Review the management letter prepared by the independent auditors and Fund
management's response.

D. Financial Reporting Processes

1. If the Fund is a listed closed-end investment company,

(a) review with Fund management and the independent auditors, the Fund's
audited financial statements, including management's discussion of
Fund performance, 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; and

(b) review the Fund's policy and procedures with respect to declaring
dividends and issuing dividend announcements and related press
releases, as well as financial information and dividend guidance
provided to analysts and rating agencies.

A-7

2. Review with Fund management and the independent auditors the matters that
auditing professional standards require to be communicated to the Audit
Committee, including, but not limited to, the matters required to be discussed
by Statements on Auditing Standards No. 61, including:

- the independent auditors' judgments about the quality, and not just the
acceptability, of the Fund's accounting principles as applied in its
financial reporting;

- the process used by Fund management in formulating estimates and the
independent auditors' conclusions regarding the reasonableness of those
estimates;

- all significant adjustments arising from the audit, whether or not
recorded by the Fund;

- when the independent auditors are aware that Fund management has
consulted with other accountants about significant accounting and
auditing matters, the independent auditors' views about the subject of
the consultation;

- any disagreements with Fund management regarding accounting or
reporting matters;

- any difficulties encountered in the course of the audit, including any
restrictions on the scope of the independent auditors' activities or on
access to requested information; and

- significant deficiencies in the design or operation of internal
controls.

3. The independent auditors shall report, within 90 days prior to the filing
of the Fund's annual financial statements with the SEC, to the Audit
Committee:

(a) all critical accounting policies and practices to be used;

(b) all alternative treatments of financial information within GAAP for
policies and practices related to material items that have been
discussed with Fund management, the ramifications of the use of such
alternative disclosures and treatments, and the treatment preferred
by the independent auditor;

(c) other material written communications between the independent
auditors and Fund management including, but not limited to, any
management letter or schedule of unadjusted differences; and

A-8

(d) all non-audit services provided to an entity in the "investment
company complex"(8) as defined in paragraph (f)(14) of Rule 2-01 of
Regulation S-X that were not pre-approved by the Audit Committee.

4. Review, annually, with Fund management and the independent auditors, the
Fund's "disclosure controls and procedures"(9) as defined in Rule 30a-3(c)
under the Investment Company Act of 1940.

5. Review with Fund management and the independent auditors a report by Fund
management covering any Form N-CSR filed, and any required certification
of such filing, along with the results of Fund management's most recent
evaluation of the Fund's "disclosure controls and procedures."

E. Process Improvements

Review with the independent auditors and Fund management significant changes
or improvements in accounting and auditing processes that have been
implemented.

F. Legal and Compliance

1. Review any legal or regulatory matters that arise that could have a
material impact on the Fund's financial statements.

2. Review policies and procedures with respect to financial statement risk
assessment and risk management, including the steps Fund

---------------

(8) "Investment company complex" includes: (1) an investment company and its
investment adviser or sponsor; (2) any entity controlled by or controlling
an investment adviser or sponsor in (1) above, or any entity under common
control with any investment adviser or sponsor in (1) above if the entity:
(A) is an investment adviser or sponsor or (B) is engaged in the business of
providing administrative, custodian, underwriter, or transfer agent services
to any investment company, investment adviser, or sponsor; and (3) an
investment company or entity that would be an investment company but for the
exclusions provided by Section 3(c) of the 1940 Act that has an investment
adviser or sponsor included in (1) and (2) above. Investment adviser does
not include a subadviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser. Sponsor is an
entity that establishes a unit investment trust.

(9) "Disclosure controls and procedures" means controls and other procedures of
a registered management investment company that are designed to ensure that
information required to be disclosed by the investment company on Form N-CSR
is recorded, processed, summarized and reported, within the time periods
specified in the SEC's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by an investment company in the reports
that it files or submits on Form N-CSR is accumulated and communicated to
the investment company's management, including its principal executive
officer or officers and principal financial officer or officers, or person
performing similar functions, as appropriate to allow timely decisions
regarding required disclosure.

A-9

management has taken to monitor and control such risk exposures.(10)

3. Establish clear hiring policies for the Fund with respect to employees or
former employees of the independent auditors.

G. Other Responsibilities

1. Review, annually, the performance of the Audit Committee.

2. If the Fund is a listed closed-end investment company, prepare a report of
the Audit Committee as required to be included in the annual proxy
statement.(11)

3. Investigate any other matter brought to its attention within the scope of
its duties, and have the authority in its discretion to retain legal,
accounting or other experts or consultants to advise the Audit Committee,
at the expense of the Fund, if, in the Committee's judgment, that is
appropriate.

4. 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.

5. 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.

V. FUNDING

The Audit Committee shall receive appropriate funding, as determined by the
Audit Committee, for payment of (i) compensation to the independent auditors for
approved audit or non-audit services for the Fund; (ii) compensation to any
legal, accounting or other experts or consultants retained by the Audit
Committee pursuant to Section IV.G.3 above and (iii) ordinary administrative
expenses of the Audit Committee that are necessary or appropriate in carrying
out its duties.

---------------

(10) The Board has delegated to other committees oversight related to investment
risks.

(11) Item 306 of Regulation S-K requires each proxy statement relating to a
shareholder meeting at which directors are to be elected to include a
report, followed by the name of each Audit Committee member, stating
whether: (1) the Committee has reviewed and discussed the audited financial
statements with management, (2) the Committee has discussed with the
independent auditors the matters required to be discussed by SAS 61, (3)
the Committee has received the written disclosures and the letter from the
independent auditors required by Independence Standards Board Standard No.
1, and has discussed with the independent auditors their independence, and
(4) based on the review and discussions referred to in paragraphs (1)
through (3), the Audit Committee recommended to the Board 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.

A-10

APPENDIX 2

SCUDDER FUNDS

(CHICAGO BOARD)

NOMINATING AND GOVERNANCE COMMITTEE CHARTER

ADOPTED JULY 18, 2001

AMENDED JANUARY 15, 2003

AMENDED MARCH 17, 2004

I. PURPOSE

The Nominating and Governance Committee is a committee of the Board of the Fund.
Its primary function is to identify and recommend individuals for membership on
the Board and oversee the administration of the Board Governance and Procedures
Guidelines.

II. COMPOSITION

The Nominating and Governance Committee shall be comprised of three or more
board members(1) 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 Nominating and Governance Committee. For purposes of the
Nominating and Governance 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.

The members and Chairman of the Nominating and Governance Committee shall be
elected by the Board annually and serve until their successors shall be duly
elected and qualified.

III. MEETINGS

The Nominating and Governance Committee shall meet three times annually, or more
frequently as circumstances dictate. Special meetings (including telephone
meetings) may be called by the Chairman or a majority of the members of the
Nominating and Governance Committee upon reasonable notice to the other members
of the Nominating and Governance Committee.

---------------

(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."

A-11

IV. RESPONSIBILITIES AND DUTIES

To fulfill its responsibilities and duties the Nominating and Governance
Committee shall:

A. Board Nominations and Functions

1. Identify and recommend individuals for membership on the Board. The
principal criterion for selection of candidates is their ability to carry
out the responsibilities of the Board. In addition, the following factors
are taken into consideration:

(a) The Board collectively should represent a broad cross section of
backgrounds, functional disciplines and experience.

(b) Candidates should exhibit stature commensurate with the
responsibility of representing shareholders.

(c) Candidates should commit to strive for high attendance levels at
regular and special meetings, and participate in committee activities
as needed.

(d) Candidates should represent the best choices available based upon
thorough identification, investigation and recruitment of candidates.

2. Evaluate candidates recommended for membership on the Board.
Recommendations for candidates may come from shareholders, from other
directors or from the Fund's investment manager. Shareholders may
recommend candidates for Board positions by forwarding their
correspondence by U.S. mail or courier service to the Fund's Secretary for
the attention of the Chairman of the Nominating and Governance Committee.
Suggestions for candidates must include a resume of the candidate.

3. Review the Board Governance Procedures and Guidelines, annually, and
recommend changes, if any, to the Board.

4. Periodically review the composition of the Board to determine whether it
may be appropriate to add individuals with different backgrounds or skill
sets from those already on the Board.

5. Review annually Independent Director compensation, including compensation
deferral programs and Fund ownership criteria, and recommend any
appropriate changes to the Independent Directors as a group.

6. Coordinate with legal counsel to the Independent Directors an annual
evaluation of the performance of the Board.

A-12

7. Oversee the development and implementation by the Fund's investment
manager and legal counsel for the Independent Directors of a program for
the orientation of new Independent Directors and ongoing education for
Independent Directors.

B. Committee Nominations and Functions

1. Identify and recommend individuals for membership on all committees and
review committee assignments at least annually.

2. Review as necessary the responsibilities of any committees of the Board,
whether there is a continuing need for each committee, whether there is a
need for additional committees of the Board, and whether committees should
be combined or reorganized.

C. Insurance

1. At least annually, review the Fund's fidelity bond for appropriateness of
the type and amount of coverage as well as the premium. Review the terms
of any joint allocation agreement.

2. At least annually, review the Fund's directors and officers and errors and
omissions insurance coverage for appropriateness of the type and amount of
coverage as well as the premium. Review the terms of any joint allocation
agreement.

3. At least annually, review other insurance policies and assess needs for
other types of coverage.

D. Proxy Voting

At least annually, review the proxy voting policies and procedures.

E. Other Powers and Responsibilities

1. Review this Charter, annually, and recommend changes, if any, to the
Board.

2. Review compliance with the relevant codes of ethics and consider any
proposed changes to the codes of ethics.

3. Review Fund governance structure for compliance with legal requirements.

4. Monitor the performance of legal counsel employed by the Fund and the
Independent Directors, and be responsible for the supervision of counsel
to the Independent Directors.

5. 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.

A-13

6. Retain any search firm to identify Board member candidates, at the expense
of the Fund, if, in the Committee's judgment, this is appropriate.

7. Perform any other activities consistent with this Charter, the Fund's
Charter, By-Laws and governing law, as the Nominating and Governance
Committee or the Board deems necessary or appropriate.

8. Maintain minutes of Committee meetings, report its significant activities
to the Board, and make such recommendations to the Board as the Nominating
and Governance Committee deems necessary or appropriate.

F. Litigation.

As needed, review Fund litigation matters.

A-14

APPENDIX 3

TRUSTEE/NOMINEE SHAREHOLDINGS

Many of the Trustees/Nominees own shares of funds in the Scudder Fund Complex,
allocating their investments among such funds based on their individual needs.
The following table sets forth, for each Trustee/Nominee, as of December 31,
2003, the number of shares beneficially owned in each Fund, the dollar range of
securities owned in each Fund, and the aggregate dollar range of all
shareholdings in all funds advised by DeIM for which such person is a board
member or nominee. As of December 31, 2003, each Trustee/Nominee individually,
and the executive officers and Trustees as a group, owned beneficially less than
1% of the outstanding shares of each Fund.

NON-INTERESTED PERSONS

AGGREGATE DOLLAR RANGE
OF SECURITIES OWNED IN
NUMBER OF DOLLAR RANGE OF ALL FUNDS IN THE SCUDDER
NAME OF SHARES OWNED SECURITIES OWNED FUND COMPLEX OVERSEEN
TRUSTEE/NOMINEE IN EACH FUND IN EACH FUND BY TRUSTEE
--------------- ------------- ---------------- ------------------------

John W. Ballantine, KHI--0 None Over $100,000
Trustee KGT--0 None
KMM--0 None
KSM--0 None
KST--0 None
KTF--0 None
Lewis A. Burnham, KHI--0 None Over $100,000
Trustee KGT--0 None
KMM--0 None
KSM--0 None
KST--0 None
KTF--0 None
Donald L. Dunaway, KHI--0 None Over $100,000
Trustee KGT--0 None
KMM--0 None
KSM--0 None
KST--0 None
KTF--0 None
James R. Edgar, KHI--0 None Over $100,000*
Trustee KGT--0 None
KMM--0 None
KSM--0 None
KST--0 None
KTF --0 None

A-15

Paul K. Freeman, KHI--0 None Over $100,000
Trustee KGT--0 None
KMM--0 None
KSM--0 None
KST--0 None
KTF--0 None
Robert B. Hoffman, KHI--0 None Over $100,000
Trustee KGT--0 None
KMM--0 None
KSM--0 None
KST--0 None
KTF--0 None
Shirley D. Peterson, KHI--0 None Over $100,000
Trustee KGT--0 None
KMM--0 None
KSM--0 None
KST--0 None
KTF--0 None
John G. Weithers, KHI--2,700 $10,001--$50,000 Over $100,000
Trustee KGT--1,400 $1--$10,000
KMM--1,200 $10,001--$50,000
KSM-- $1--$10,000
Preferred--0
Common--400
KST--1,300 $10,001--$50,000
KTF-- $1--$10,000
Preferred--0
Common--500

---------------

* Reflects shadow shares held by Governor Edgar pursuant to the Deferred
Compensation Plan.

INTERESTED PERSON

AGGREGATE DOLLAR RANGE
OF SECURITIES OWNED IN
NUMBER OF DOLLAR RANGE OF ALL FUNDS IN THE FUND
NAME OF SHARES OWNED SECURITIES OWNED COMPLEX TO BE OVERSEEN
TRUSTEE/NOMINEE IN EACH FUND IN EACH FUND BY TRUSTEE
--------------- ------------ ---------------- ------------------------

William N. Shiebler, KHI--0 None Over $100,000
Nominee KGT--0 None
KMM--0 None
KSM--0 None
KST--0 None
KTF--0 None

A-16

As of December 31, 2003, the Trustees/Nominees and executive officers of the
Funds as a group owned beneficially the following shares of each Fund:

SHARES
BENEFICIALLY
FUND OWNED(1)
---- ------------

KHI........................................................ 2,900
KGT........................................................ 1,600
KMM........................................................ 1,400
KTF(2)..................................................... 500
KSM(2)..................................................... 400
KST........................................................ 1,400

---------------

(1) Includes shares held by Mr. Fred Renwick, an Independent Trustee, who will
retire from the Funds' Board, effective June 29, 2004.

(2) Common Shares

A-17

APPENDIX 4

CURRENT FUNDAMENTAL INVESTMENT OBJECTIVES
AND POLICIES

SCUDDER HIGH INCOME TRUST ("KHI")

INVESTMENT OBJECTIVES

KHI has the following fundamental objectives:

1. The Fund seeks, through a professionally managed, diversified portfolio
of income-producing securities, the highest current income obtainable
consistent with reasonable risk as determined by the Fund's investment
advisor.

2. As a secondary objective, the Fund seeks capital gains where consistent
with its primary objective.

INVESTMENT POLICIES

All of KHI's other investment policies (as well as its objective and its
restrictions) have been designated as "fundamental." Specifically, as a matter
of fundamental policy, at least 65% of the Fund's assets will, in normal
circumstances, be invested in securities which provide the potential to result
in high income to the Fund, but which have speculative characteristics such as
lower credit quality, currency exchange risk, liquidity constraints and/or risk
associated with related options and hedging activities.

KHI may not, as a fundamental policy:

1. borrow money except to the extent permitted by applicable law;

2. purchase any security or evidence of interest therein on margin except
that the Fund may obtain such short-term credit as may be necessary for
the clearance of purchases and sales of securities and except that the
Fund may make deposits on margin in connection with currency, interest
rate and other hedging transactions and options [described in its
prospectus dated April 21, 1988];

3. underwrite securities issued by other persons except insofar as the Fund
may technically be deemed an underwriter under the Securities Act of
1993 in selling a portfolio security;

4. purchase or sell real estate (except that the Fund may invest in
securities secured by real estate or interests therein and securities of
issuers which invest or deal in real estate), interests in oil, gas or
mineral leases, commodities or commodity contracts (except for hedging
transactions and except for investments in the securities of issuers
which invest in or sponsor such programs) in the ordinary course of the
business of the Fund (the Fund reserves the freedom

A-18

of action to hold and to sell real estate acquired as a result of the
ownership of securities);

5. invest 25% or more of its total assets in securities of issuers
conducting their principal business activities in the same industry;
provided that this limitation shall not apply with respect to
investments in U.S. Government securities;

6. invest more than 5% of its total assets in securities of any one issuer,
except that this limitation shall not apply to securities of the U.S.
Government, its agencies and instrumentalities or to the investment of
25% of its total assets;

7. except for the borrowing provided in Paragraph (1), issue any "senior
security" as that term is defined in the 1940 Act (for the purpose of
this restriction, collateral arrangements with respect to options,
futures contracts and options on futures contracts and collateral
arrangements meeting applicable SEC requirements with respect to initial
and variation margin are not deemed to be the issuance of a senior
security);

8. make loans to other persons except through the lending of its portfolio
securities not in excess of 30% of its total assets (taken at market
value) and except through the use of repurchase agreements, the purchase
of commercial paper or the purchase of all or a portion of an issue of
debt securities in accordance with its investment objectives, policies
and restrictions;

9. except for options transactions, make short sales of securities or
maintain a short position, unless at all times when a short position is
open it owns an equal amount of such securities or securities
convertible into or exchangeable, without payment of any further
consideration, for securities of the same issue as, and equal in amount
to, the securities sold short ("short sales against the box"), and
unless not more than 10% of the Fund's net assets (taken at market
value) is held as collateral for such sales at any one time (it is the
Fund's present intention to make such sales only for the purpose of
deferring realization of gain or loss for federal income tax purposes;
such sales would not be made of securities subject to outstanding
options); and

10. invest in the securities of any other investment company, if more than
3% of the outstanding voting stock of such investment company would be
held by the Fund; if more than 5% of the total assets of the Fund would
be invested in any such investment company; or if the Fund would own, in
the aggregate, securities of other investment companies representing
more than 10% of its assets.

A-19

CURRENT FUNDAMENTAL INVESTMENT OBJECTIVE
AND POLICIES

SCUDDER INTERMEDIATE GOVERNMENT &

AGENCY TRUST ("KGT")

INVESTMENT OBJECTIVE

The Fund has the following fundamental objective:

The Fund's investment objective is to provide high current income consistent
with preservation of capital by investing in obligations issued or guaranteed by
the U.S. Government, its agencies, authorities or instrumentalities and in
obligations issued or guaranteed by a foreign government or any of its political
subdivisions, authorities, agencies or instrumentalities.

INVESTMENT POLICIES

As a non-fundamental policy, at least 80% of net assets, plus the amount of any
borrowings for investment purposes, will be invested in U.S. Government
Securities.

All of KGT's other investment policies (as well as its objective and its
restrictions) are fundamental including, in particular, that:

At least 65% of the Fund's assets will, in normal circumstances, be invested in
U.S. Government Securities. U.S. Government Securities shall include the
following: U.S. Treasury Securities, Obligations Issued or Guaranteed by U.S.
Government Agencies and Instrumentalities, Mortgage-Backed Securities Issued or
Guaranteed by U.S. Government Instrumentalities, and Zero Coupon U.S. Government
Securities. Options, futures and options on futures will not be counted for
purposes of satisfying the 65% policy;

The Fund will maintain a dollar weighted average portfolio maturity of between
three and ten years; and

The Fund will seek to enhance income by writing options on U.S. Government
Securities and foreign government securities and on indices based on U.S.
Government Securities and foreign government securities and may engage in
interest rate, foreign currency and other hedging transactions.

A-20

KGT may not, as a matter of fundamental policy:

1. borrow money, except the Fund may borrow to repurchase shares of the
Fund if, after each such borrowing, the ratio which the value of the
total assets of the Fund less all liabilities and indebtedness not
represented by senior securities bears to the aggregate amount of senior
securities representing indebtedness of the Fund is at least 300%. To
the extent the Fund engages in any such borrowings, it will be in a
leveraged position;

2. purchase any security or evidence of interest therein on margin except
that the Fund may obtain such short term credit as may be necessary for
the clearance of purchases and sales of securities and except that the
Fund may make deposits on margin in connection with currency, interest
rate and other hedging transactions and options [described in its
prospectus dated July 21, 1988].

3. underwrite securities issued by other persons except insofar as the Fund
may technically be deemed an underwriter under the Securities Act of
1933 in selling a portfolio security;

4. invest in illiquid investments, including securities which are subject
to legal or contractual restrictions on resale or for which there is no
readily available market (e.g., trading in the securities is suspended
or, in the case of unlisted securities, market makers do not exist or
will not entertain bids or offers), if more than 20% of the Fund's
assets (taken at market value) would be invested in such securities. For
purposes of this restriction, repurchase agreements not terminable
within seven days will be deemed illiquid;

5. purchase or sell real estate (except that the Fund may invest in
securities secured by real estate or interests therein and securities of
issuers which invest or deal in real estate), interests in oil, gas or
mineral leases, commodities or commodity contracts (except for hedging
transactions and except for investments in the securities of issuers
which invest in or sponsor such programs) in the ordinary course of the
business of the Fund (the Fund reserves the freedom of action to hold
and to sell real estate acquired as a result of the ownership of
securities);

6. invest more than 5% of its total assets in securities of any one issuer,
except that this limitation shall not apply to U.S. Government
Securities or to the investment of 25% of its total assets;

A-21

respect to initial and variation margin are not deemed to be the
issuance of a senior security);

8. make loans to other persons except through the lending of its portfolio
securities and except through the use of repurchase agreements, the
purchase of commercial paper or the purchase of all or a portion of an
issue of debt securities in accordance with its investment objective,
policies and restrictions;

11. invest more than 25% of its total assets in any one industry. For this
purpose "industry" does not include the U.S. Government and agencies,
authorities and instrumentalities of the U.S. Government.

A-22

CURRENT FUNDAMENTAL INVESTMENT OBJECTIVE AND POLICIES

SCUDDER MULTI-MARKET INCOME TRUST ("KMM")

INVESTMENT OBJECTIVE

KMM has the following fundamental objective:

The Fund's investment objective is to provide high current income consistent
with prudent total return asset management.

INVESTMENT POLICIES

All of KMM's investment policies (as well as its objective and its restrictions)
are fundamental.

KMM may not, as a fundamental policy:

1. issue senior securities, as defined in the 1940 Act, other than (i)
preferred shares which immediately after issuance will have asset
coverage of at least 200%, (ii) short or intermediate term notes which
immediately after issuance will have asset coverage of at least 300%,
(iii) the borrowings described under subparagraph 10 below or (iv)
transactions involving futures contracts or the writing of options
within the limits described herein;

2. make short sales of securities or purchase any securities on margin
(except for such short term credits as are necessary for the clearance
of transactions), or write or purchase put or call options, except to
the extent that the purchase of a stand-by commitment may be considered
the purchase of a put, and except for transactions involving options
[within the limits described in its prospectus dated January 23, 1989];

3. underwrite any issue of securities, except to the extent that the
purchase of securities in accordance with its investment objective,
policies and limitations may be deemed to be an underwriting;

4. invest 25% or more of its total assets in securities of issuers in any
one industry; provided, however, that such limitation shall not be
applicable to securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities;

5. purchase or sell real estate, but this shall not prevent the Fund from
investing in securities secured by real estate or interests therein;

6. purchase or sell commodities or commodities contracts, except for
transactions involving futures contracts or options on such

A-23

contracts [within the limits described in its prospectus dated January
23, 1989];

7. make loans, other than by lending portfolio securities and by entering
into repurchase agreements and through the purchase of securities or
temporary investments in accordance with its investment objective,
policies and limitations;

8. invest more than 5% of its total assets in securities of any one issuer,
except that this limitation shall not apply to securities of the United
States government, its agencies and instrumentalities or to the
investment of 25% of its total assets;

9. invest in the securities of any other investment company (including a
private issuer of collateralized mortgage obligations operating under an
SEC order exempting it from registration as an investment company under
the 1940 Act), if more than 3% of the outstanding voting stock of such
investment company would be held by the Fund; if more than 5% of the
total assets of the Fund would be invested in any such investment
company; or if the Fund would own, in the aggregate, securities of other
investment companies representing more than 10% of its assets; or

10. borrow money except to the extent permitted by applicable law.

CURRENT FUNDAMENTAL INVESTMENT OBJECTIVE AND POLICIES

SCUDDER MUNICIPAL INCOME TRUST ("KTF")

INVESTMENT OBJECTIVE

KTF has the following fundamental objective:

The Fund's investment objective is to provide a high level of current income
exempt from federal income tax.

INVESTMENT POLICIES

As a fundamental policy, under normal circumstances, the Fund will seek to
achieve its objective by investing at least 80% of net assets, plus the amount
of any borrowings for investment purposes, in municipal securities.

As a matter of fundamental policy:

The Fund will invest substantially all of its net assets in tax-exempt municipal
securities valued at the time of purchase within the four highest grades (Baa or
BBB or better) by Moody's Investors Service, Inc.

A-24

("Moody's") or Standard & Poor's Corporation ("S&P"), or unrated municipal
securities which in the opinion of the Advisor have credit characteristics
equivalent to, and will be of comparable quality to, municipal securities rated
within the four highest grades by Moody's or S&P. The Fund may not invest more
than 20% of its net assets in such unrated municipal securities.

The Fund intends to emphasize investments in municipal securities with long term
maturities, but the degree of such emphasis will depend upon market conditions
existing at the time of investment. The Advisor expects that the Fund's
portfolio will be primarily invested in securities with maturities ranging from
10 to 30 years with an average weighted maturity of 20-25 years.

During temporary defensive periods, the Fund may invest any percentage of its
net assets in taxable temporary investments. The Fund will invest only in
temporary investments which are U.S. Government securities or securities rated
within the two highest grades by Moody's or S&P, and which mature within one
year from the date of purchase.

KTF may not, as a fundamental policy:

1. issue senior securities, as defined in the 1940 Act, other than (i)
Preferred Shares which immediately after issuance will have asset
coverage of at least 200%, (ii) the borrowings described under
subparagraph (3) below or (iii) transactions involving futures contracts
or the writing of options [within the limits described in its prospectus
dated October 20, 1988];

3. borrow money, except for temporary or emergency purposes or for
repurchase of its shares, and then only in an amount not exceeding
one-third of the value of the Fund's total assets including the amount
borrowed; however, the Fund will not purchase any securities for its
portfolio at any time when borrowings exceed 5% of its total assets
(taken at value);

4. underwrite any issue of securities, except to the extent that the
purchase of municipal securities in accordance with its investment
objective, policies and limitations may be deemed to be an underwriting;

A-25

5. invest more than 25% of its total assets in securities of issuers in any
one industry; provided, however, that such limitations shall not be
applicable to municipal securities other than those municipal securities
backed only by the assets and revenues of non-governmental users, nor
shall it apply to municipal securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities;

6. purchase or sell real estate, but this shall not prevent the Fund from
investing in municipal securities secured by real estate or interests
therein;

7. purchase or sell commodities or commodities contracts, except for
transactions involving futures contracts or options on such contracts
[within the limits described in its prospectus dated October 20, 1988];

8. make loans, other than by entering into repurchase agreements and
through the purchase of municipal securities or temporary investments in
accordance with its investment objective, policies and limitations;

9. invest in securities other than municipal securities and temporary
investments [as those terms are defined in its prospectus dated October
20, 1988];

10. invest more than 5% of its total assets in securities of any one issuer,
except that this limitation shall not apply to securities of the United
States government, its agencies and instrumentalities or to the
investment of 25% of its total assets; or

11. invest more than 10% of its total assets in repurchase agreement
maturing in more than seven days.

CURRENT FUNDAMENTAL INVESTMENT OBJECTIVE AND POLICIES

SCUDDER STRATEGIC MUNICIPAL INCOME TRUST ("KSM")

INVESTMENT OBJECTIVE

KSM has the following fundamental objective:

The Fund's investment objective is to provide a high level of current income
exempt from federal income tax.

A-26

INVESTMENT POLICIES

As a fundamental policy, under normal circumstances, at least 80% of the Fund's
net assets, plus the amount of any borrowings for investment purposes, will be
invested in municipal securities.

KSM may not, as a fundamental policy:

1. issue senior securities, as defined in the 1940 Act, other than (i)
preferred shares which immediately after issuance will have asset
coverage of at least 200%, (ii) the borrowings described under
subparagraph 3 below or (iii) transactions involving futures contracts
or the writing of options [within the limits described in its prospectus
dated March 22, 1989];

6. purchase or sell real estate, but this shall not prevent the Fund from
investing in municipal securities secured by real estate or interests
therein;

7. purchase or sell commodities or commodities contracts, except for
transactions involving futures contracts or options on such

A-27

contracts [within the limits described in its prospectus dated March 22,
1989];

9. invest in securities other than municipal securities and temporary
investments [as those terms are defined in its prospectus dated March
22, 1989];

10. invest more than 5% of its total assets in securities of any one issuer,
except that this limitation shall not apply to securities of the United
States government, its agencies and instrumentalities and except that
with respect to 50% of the Fund's total assets the Fund may invest up to
25% of its total assets in securities of any one issuer; or

11. invest more than 10% of its total assets in repurchase agreements
maturing in more than seven days.

CURRENT FUNDAMENTAL INVESTMENT OBJECTIVE AND POLICIES

SCUDDER STRATEGIC INCOME FUND ("KST")

INVESTMENT OBJECTIVE

KST has the following fundamental objective:

The Fund's investment objective is to provide high current income.

INVESTMENT POLICIES

All of KST's investment policies (as well as its objective and restrictions) are
fundamental. Specifically, as a matter of fundamental policy:

The Fund will seek to achieve its objective by investing its assets in a
combination of (1) lower rated corporate fixed income securities, (2) fixed
income securities of emerging market and other foreign issuers and (3) fixed
income securities of the U.S. Government and its agencies and instrumentalities
and private mortgage-backed issuers. Up to 70% of the Fund's total assets may be
invested in any one of such categories.

KST may not, as a fundamental policy:

1. issue senior securities, as defined in the 1940 Act, other than (i)
borrowings, including reverse repurchase agreements, if immediately
after each such borrowing there is asset coverage of at least

A-28

300% (including the proceeds of such borrowing) and (ii) transactions
involving futures contracts or the writing of options [within the limits
described in its Statement of Additional Information and in its
prospectus dated April 29, 1994];

3. underwrite securities issued by others, except to the extent that the
Fund may be deemed to be an underwriter, under the federal securities
laws, in connection with the disposition of portfolio securities;

5. purchase or sell real estate, but this shall not prevent the Fund from
investing in securities secured by real estate or interests therein;

6. purchase or sell commodities or commodities contracts, except for
transactions involving futures contracts or options on such contracts
[within the limits described in its Statement of Additional Information
dated April 29, 1994];

8. invest in the securities of any other investment company if more than 3%
of the outstanding voting stock of such investment company would be held
by the Fund; if more than 5% of the total assets of the Fund would be
invested in any such investment company; or if the Fund would own, in
the aggregate, securities of other investment companies representing
more than 10% of its assets; or

9. invest more than 5% of its total assets in securities of any one issuer,
except that this limitation shall not apply to securities of the United
States government, its agencies and instrumentalities or to the
investment of 25% of its total assets.

A-29

PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING.
--------------------------------------------------------------------------------
P R O X Y

SCUDDER MUNICIPAL INCOME TRUST - COMMON SHARES

FOR THE JOINT ANNUAL MEETING OF SHAREHOLDERS JUNE 29, 2004

The signers of this proxy hereby appoint Daniel O. Hirsch, Philip J. Collora,
John Millette and Caroline Pearson, and each of them, attorneys and proxies,
with power of substitution in each, to vote all shares for the signers at the
Joint Annual Meeting of Shareholders to be held at the offices of Deutsche
Investment Management Americas Inc., Two International Place, Boston, MA 02110
on June 29, 2004, at 4:00 p.m. Eastern time and at any adjournments or
postponements thereof, as specified herein, and in accordance with their best
judgment, on any other business that may properly come before this meeting. I
hereby revoke any and all proxies with respect to such shares previously given
by me. I acknowledge receipt of the Proxy Statement relating to the Joint Annual
Meeting.

This instruction may be revoked at any time prior to its exercise at the Joint
Annual Meeting by execution of a subsequent proxy card, by written notice to the
Fund's secretary or by voting in person at the Joint Annual Meeting.

YOUR VOTE IS NEEDED! IF NOT VOTING ELECTRONICALLY OR BY TELEPHONE, PLEASE SIGN,
DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE REQUIRED.

If you have any questions regarding the execution of the proxy, please call
Georgeson Shareholder Communications Inc. at 866-800-0586.

PLEASE BE SURE TO SIGN AND DATE THIS PROXY ON THE REVERSE SIDE.

(CONTINUED, AND TO BE SIGNED, ON THE REVERSE SIDE.)

INSTRUCTIONS FOR VOTING YOUR PROXY

Scudder Municipal Income Trust offers shareholders of record three alternative
ways of voting their proxies:
- By Telephone
- Through the Internet (using a browser)
- By Mail (traditional method)

Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you had mailed your proxy card. We encourage you to use
these cost effective and convenient ways of voting.

TELEPHONE VOTING:
Available only until 4:00 p.m. Eastern time June 28, 2004.
- Call Toll-Free: 1-877-260-0394 on any touch-tone telephone to authorize
voting of your shares. You may call 24 hours a day, 7 days a week. You
will be prompted to follow simple instructions.
- Your vote will be confirmed and cast as you directed.

INTERNET VOTING:
Available only until 4:00 p.m. Eastern time on June 28, 2004.
- Visit the Internet voting Website at http://proxy.georgeson.com.
- Enter the COMPANY NUMBER AND CONTROL NUMBER shown below and follow the
instructions on your screen.
- You will incur only your usual Internet charges.

VOTING BY MAIL:
- Simply sign and date your proxy card and return it in the postage-paid
envelope.
-------------- --------------
COMPANY NUMBER CONTROL NUMBER
-------------- --------------

PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING.
--------------------------------------------------------------------------------
_
|
/X/ TO VOTE, MARK BLOCKS
BELOW IN BLUE OR BLACK
INK AS INDICATED AT LEFT

THIS PROXY IS SOLICITED BY THE BOARD OF THE FUND WHICH RECOMMENDS A VOTE
"FOR" ALL ITEMS.

FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
1. To elect nine Trustees to [ ] [ ] [ ]
the Board of the Fund:

01) John W. Ballantine, 02) Lewis A.Burnham,
03) Donald L. Dunaway, 04) James R. Edgar,
05) Paul K. Freeman, 06) Robert B. Hoffman,
07) Shirley D. Peterson

TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE "FOR ALL
EXCEPT" BOX AND WRITE THE NOMINEE'S NUMBER ON THE LINE PROVIDED BELOW.

---------------------------------------------------------------------------

2. To ratify the selection of FOR AGAINST ABSTAIN
Ernst & Young LLP as the [ ] [ ] [ ]
Fund's independent
auditors for the current
fiscal year.

3. To approve the modification or elimination of certain investment policies
and the elimination of the shareholder approval requirement as to certain
other matters.

FOR AGAINST ABSTAIN
3.0 Investment
Objectives [ ] [ ] [ ]

3.2(a) Diversification [ ] [ ] [ ]

3.3 Borrowing [ ] [ ] [ ]

3.4 Senior
Securities [ ] [ ] [ ]

3.5 Concentration [ ] [ ] [ ]

3.6 Underwriting of
Securities [ ] [ ] [ ]

3.7 Investment in
Real Estate [ ] [ ] [ ]

3.8 Purchase of
Commodities [ ] [ ] [ ]

3.9 Lending [ ] [ ] [ ]

3.10 Margin Purchases
and Short Sales [ ] [ ] [ ]

3.11 Restricted and
Illiquid Securities [ ] [ ] [ ]

3.13 Investment other than
in Municipal Securities
and Temporary Investments [ ] [ ] [ ]

IF NO SPECIFICATION IS MADE HEREIN, ALL SHARES WILL BE VOTED AS RECOMMENDED BY
THE BOARD.

TO VOTE BY TOUCH-TONE PHONE OR INTERNET, SEE INSTRUCTIONS ABOVE.

Signature ______________________________________________

Date ___________________________________________________

Signature (Joint) ______________________________________

Date____________________________________________________

Note: All registered owners of accounts shown above must sign. Please sign
exactly as your name appears on this Proxy. If signing for a corporation, estate
or trust, please indicate your capacity or title.

PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING.
--------------------------------------------------------------------------------
P R O X Y

SCUDDER MUNICIPAL INCOME TRUST - PREFERRED SHARES

FOR THE JOINT ANNUAL MEETING OF SHAREHOLDERS JUNE 29, 2004

YOUR VOTE IS NEEDED! PLEASE SIGN,DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. NO POSTAGE REQUIRED.

If you have any questions regarding the execution of the proxy, please call
Georgeson Shareholder Communications Inc. at 866-800-0586.

PLEASE BE SURE TO SIGN AND DATE THIS PROXY ON THE REVERSE SIDE.

(CONTINUED, AND TO BE SIGNED, ON THE REVERSE SIDE.)

-------------- --------------
COMPANY NUMBER CONTROL NUMBER
-------------- --------------

THIS PROXY IS SOLICITED BY THE BOARD OF THE FUND WHICH RECOMMENDS A VOTE
"FOR" ALL ITEMS.

FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
1. To elect nine Trustees to [ ] [ ] [ ]
the Board of the Fund:

01) John W. Ballantine, 02) Lewis A. Burnham,
03) Donald L. Dunaway, 04) James R. Edgar,
05) Paul K. Freeman, 06) Robert B. Hoffman,
07) Shirley D. Peterson, 08) William N. Shiebler,
09) John G. Weithers

TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE "FOR ALL
EXCEPT" BOX AND WRITE THE NOMINEE'S NUMBER ON THE LINE PROVIDED BELOW.

---------------------------------------------------------------------------

2. To ratify the selection of FOR AGAINST ABSTAIN
Ernst & Young LLP as the [ ] [ ] [ ]
Fund's independent
auditors for the current
fiscal year.

3. To approve the modification or elimination of certain investment policies
and the elimination of the shareholder approval requirement as to certain
other matters.

FOR AGAINST ABSTAIN
3.0 Investment
Objectives [ ] [ ] [ ]

3.1 Investment
Policies [ ] [ ] [ ]

3.2(a) Diversification [ ] [ ] [ ]

3.3 Borrowing [ ] [ ] [ ]

3.4 Senior
Securities [ ] [ ] [ ]

3.5 Concentration [ ] [ ] [ ]

3.6 Underwriting of
Securities [ ] [ ] [ ]

3.7 Investment in
Real Estate [ ] [ ] [ ]

3.8 Purchase of
Commodities [ ] [ ] [ ]

3.9 Lending [ ] [ ] [ ]

3.10 Margin Purchases
and Short Sales [ ] [ ] [ ]

3.11 Restricted and
Illiquid Securities [ ] [ ] [ ]

3.13 Investment other
than in Municipal
Securities and
Temporary Investments [ ] [ ] [ ]

IF NO SPECIFICATION IS MADE HEREIN, ALL SHARES WILL BE VOTED AS RECOMMENDED BY
THE BOARD.

Signature ______________________________________________

Date ___________________________________________________

Signature (Joint) ______________________________________

Date____________________________________________________