The prospectus and SAI for Scudder Managed Municipal Bond filed on September 29,
2000 are incorporated by reference in their entirety and will be distributed
with these supplements.
<PAGE>
SCUDDER
INVESTMENTS(SM)
[LOGO]
Scudder Managed Municipal Bonds
Supplement to Prospectus Dated October 1, 1999
On or about July 31, 2000, Scudder Managed Municipal Bonds will offer two
classes of shares to provide investors with different purchase options. The two
classes are Class S and Class AARP. Each class has its own important features
and policies. In addition, as of July 31, 2000, all existing shares of the fund
will be redesignated as Class S shares of the fund. Shares of Class AARP will be
especially designed for members of AARP.
For your convenience, this supplement has been divided into two parts. Part I
provides information relating to important changes to the fund generally. Part
II provides information relating specifically to Class AARP. As always, you
should refer to the prospectus for general information about the fund, including
its investment approach, risks, and portfolio managers, and for additional
information relating to Class S, such as its purchase, redemption and exchange
procedures.
PART I -- General Information about the Fund
Effective on or about July 31, 2000, Scudder Managed Municipal Bonds seeks
income exempt from regular federal income tax while actively seeking to reduce
downside risk as compared with other tax-free income funds. The managers use
analytical tools to actively monitor the risk profile of the portfolio as
compared to comparable funds and appropriate benchmarks and peer groups. The
managers use several strategies in seeking to reduce downside risk, including
(i) typically maintaining a high level of portfolio quality, (ii) keeping the
fund's duration generally shorter than comparable mutual funds, and (iii)
primarily focusing on premium coupon bonds, which have lower volatility in down
markets than bonds selling at a discount. In addition, Scudder Managed Municipal
Bonds will not invest in securities issued by tobacco-producing companies.
On July 13, 2000, shareholders of the fund elected the following people to the
fund's Board: Henry P. Becton, Jr., Linda C. Coughlin, Dawn-Marie Driscoll,
Edgar R. Fiedler, Keith R. Fox, Joan E. Spero, Jean Gleason Stromberg, Jean C.
Tempel and Steven Zaleznick.
<PAGE>
The Fund's Track Record
While a fund's past performance isn't necessarily a sign of how it will do in
the future, it can be valuable for an investor to know. The bar chart and table
look at fund performance two different ways: year by year and over time.
The bar chart shows how the returns of the fund's Class S shares have varied
from year to year, which may give some idea of risk. The table shows average
annual total returns of the fund's Class S shares and a broad-based market index
(which, unlike the fund, does not have any fees or expenses). The performance of
both the fund and the index varies over time. All figures on this page assume
reinvestment of dividends and distributions.
--------------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
'90 6.77
'91 12.23
'92 8.98
'93 13.32
'94 -6.04
'95 17.12
'96 4.15
'97 9.29
'98 6.23
'99 -1.96
2000 Total Return as of June 30: 3.80%
Best Quarter: 6.69%, Q1 1995 Worst Quarter: -6.17%, Q1 1994
--------------------------------------------------------------------------------
Average Annual Total Returns (%) as of 12/31/1999
--------------------------------------------------------------------------------
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------
Fund -- Class S* -1.96 6.78 6.80
--------------------------------------------------------------------------------
Index -2.06 6.91 6.89
--------------------------------------------------------------------------------
Index: Lehman Brothers Municipal Bond Index, a market value-weighted measure
of municipal bonds issued across the United States.
* Performance for Class AARP shares is not provided because this class does
not have a full calendar year of performance.
2
<PAGE>
How Much Investors Pay
This fund has no sales charge or other shareholder fees. The fund does have
annual operating expenses, and as a shareholder of either Class AARP or Class S
shares you pay them indirectly.
--------------------------------------------------------------------------------
Fee Table
--------------------------------------------------------------------------------
Shareholder Fees (paid directly from your investment) None
--------------------------------------------------------------------------------
Annual Operating Expenses (deducted from fund assets)
--------------------------------------------------------------------------------
Management Fee 0.49%
--------------------------------------------------------------------------------
Distribution (12b-1) Fee None
--------------------------------------------------------------------------------
Other Expenses* 0.15%
-----------
--------------------------------------------------------------------------------
Total Annual Operating Expenses 0.64%
--------------------------------------------------------------------------------
* Includes a fixed rate administrative fee of 0.15%.
The fees and expenses for Class S of the fund are being restated to reflect the
implementation of a new administrative fee and a new investment management fee.
These new fees will become effective on or about July 31, 2000.
--------------------------------------------------------------------------------
Expense Example
--------------------------------------------------------------------------------
Based on the costs above, this example is designed to help you compare this
fund's expenses to those of other mutual funds. The example assumes the expenses
above remain the same and that you invested $10,000, earned 5% annual returns,
reinvested all dividends and distributions and sold your shares at the end of
each period. This is only an example; your actual expenses will be different.
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$65 $205 $357 $798
--------------------------------------------------------------------------------
Management Fee
On or about July 31, 2000, Scudder Managed Municipal Bonds will implement a new
investment management agreement which has the following fee rates set forth
below.
Average daily net assets Fee rate
--------------------------------------------------------------------------------
first $2 billion 0.490%
--------------------------------------------------------------------------------
next $1 billion 0.465%
--------------------------------------------------------------------------------
over $3 billion 0.440%
--------------------------------------------------------------------------------
3
<PAGE>
Financial Highlights -- Class S
--------------------------------------------------------------------------------
1999(a) 1999(b) 1998(c) 1997(c) 1996(c) 1995(c) 1994(c)
--------------------------------------------------------------------------------
Net asset value,
beginning of period $ 8.98 $ 9.18 $ 9.13 $ 8.84 $ 8.94 $ 8.07 $ 9.09
---------------------------------------------------------
--------------------------------------------------------------------------------
Income from investment
operations:
--------------------------------------------------------------------------------
Net investment
income .23 .19 .45 .46 .45 .48 .46
--------------------------------------------------------------------------------
Net realized and
unrealized gain
(loss) on investment
transactions (.33) (.20) .10 .34 (.10) .87 (1.00)
---------------------------------------------------------
--------------------------------------------------------------------------------
Total from
investment operations (.10) (.01) .55 .80 .35 1.35 (.54)
--------------------------------------------------------------------------------
Less distributions from:
--------------------------------------------------------------------------------
Net investment income (.23) (.19) (.45) (.46) (.45) (.48) (.46)
--------------------------------------------------------------------------------
Net realized gains
on investment
transactions (.04) -- (.05) (.05) -- -- (.02)
---------------------------------------------------------
--------------------------------------------------------------------------------
Total distributions (.27) (.19) (.50) (.51) (.45) (.48) (.48)
--------------------------------------------------------------------------------
Net asset value, end
of period $ 8.61 $ 8.98 $ 9.18 $ 9.13 $ 8.84 $ 8.94 $ 8.07
---------------------------------------------------------
--------------------------------------------------------------------------------
Total Return (%) (1.20)** (.17)** 6.23 9.29 4.15 17.12 (6.04)
--------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
--------------------------------------------------------------------------------
Net assets, end of
period ($ millions) 707 713 737 728 737 775 709
--------------------------------------------------------------------------------
Ratio of expenses
before expense
reductions (%) .63* .64* .62 .64 .63 .63 .63
--------------------------------------------------------------------------------
Ratio of expenses
after expense
reductions (%) .63* .64* 62 .64 .63 .63 .63
--------------------------------------------------------------------------------
Ratio of net
investment income (%) 5.15* 4.92* 4.96 5.12 5.20 5.59 5.41
--------------------------------------------------------------------------------
Portfolio turnover
rate (%) 55.2* 13.8* 8.6 9.8 12.2 17.8 33.7
--------------------------------------------------------------------------------
(a) For the six months ended November 30, 1999 (Unaudited).
(b) For the five months ended May 31, 1999. On August 10, 1998 the Board of
Trustees of the Trust changed the fiscal year end from December 31 to May
31.
(c) Years ended December 31.
* Annualized
** Not annualized
4
<PAGE>
How The Fund Calculates Share Price
For each share class of the fund, the share price is the net asset value per
share, or NAV. To calculate NAV, each share class of the fund uses the following
equation:
TOTAL ASSETS - TOTAL LIABILITIES
---------------------------------- = NAV
TOTAL NUMBER OF SHARES OUTSTANDING
Other Rights We Reserve
You should be aware that we may, for Class AARP and Class S shareholders, close
your account and send you the proceeds if your balance falls below $1,000; for
Class S shareholders, charge you $10 a year if your account balance falls below
$2,500; in either case, we will give you 60 days' notice so you can either
increase your balance or close your account (these policies don't apply to
retirement accounts, to investors with $100,000 or more in Scudder fund shares
or in any case where a fall in share price created the low balance).
5
<PAGE>
PART II -- Specific Information about Class AARP
The remainder of this supplement provides specific information regarding the
important features and policies of Class AARP of the fund. Please remember to
review the fund's prospectus for additional information about the fund.
Class AARP
Class AARP of Scudder Managed Municipal Bonds will be offered beginning on or
about July 31, 2000. In addition, Class AARP of each other fund in the Scudder
Family of Funds is expected to be available no later than October 2, 2000.
Scudder Kemper has agreed to pay a fee to AARP and/or its affiliates in return
for advice and other services relating to investments by AARP members in AARP
Class shares of a fund. This fee is calculated on a daily basis as a percentage
of the combined net assets of the AARP Classes of all funds managed by Scudder
Kemper. The fee rates, which decrease as the aggregate net assets of the AARP
Classes become larger, are as follows: 0.07% for the first $6 billion in net
assets, 0.06% for the next $10 billion and 0.05% thereafter.
Past Performance
As Class AARP does not have a full calendar year of performance, no past
performance information is provided. However, the bar chart and table in the
fund's prospectus show how the total returns for the fund's Class S have varied
from year to year, and over time. Shares of the fund's Class AARP would have
substantially similar returns to Class S because the shares represent an
interest in the same portfolio of securities and the annual returns would differ
only to the extent that the classes have different expenses.
6
<PAGE>
How to Buy, Sell or Exchange Class AARP Shares
Buying Shares Use these instructions to invest directly. Make out your check to
"The AARP Investment Program."
--------------------------------------------------------------------------------
Class AARP First investment Additional investments
--------------------------------------------------------------------------------
$1,000 or more for regular $50 or more if you use an
accounts Automatic Investment Plan
$500 or more for IRAs
--------------------------------------------------------------------------------
By mail o For enrollment forms, call Send a personalized
1-800-253-2277 investment slip or short
o Fill out and sign an note that includes:
enrollment form o fund name
o Send it to us at the o account number
appropriate address, along o check payable to "The AARP
with an investment check Investment Program"
--------------------------------------------------------------------------------
By wire o Call 1-800-253-2277 for o Call 1-800-253-2277 for
instructions instructions
--------------------------------------------------------------------------------
By phone -- o Call 1-800-253-2277 for
instructions
--------------------------------------------------------------------------------
With an automatic o Fill in the information o To set up regular
investment plan required on your enrollment investments from a bank
form and include a voided checking account, call
check 1-800-253-2277
--------------------------------------------------------------------------------
Payroll o Select either of these o Once you specify a dollar
Deduction options on your enrollment amount (minimum $50),
or Direct form and submit it. You will investments are automatic.
Deposit receive further instructions
by mail.
--------------------------------------------------------------------------------
Using QuickBuy -- o Call 1-800-253-2277
--------------------------------------------------------------------------------
On the Internet o Go to "Services and Forms-- o Call 1-800-253-2277 to
How to Open an Account" at ensure you have electronic
aarp.scudder.com services
o Print out a prospectus and o Register at
an enrollment form aarp.scudder.com
o Complete and return the o Follow the instructions
enrollment form with your for buying shares with
check money from your bank
account
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[ICON] Regular mail:
The AARP Investment Program, PO Box 2540, Boston, MA
02208-2540
Express, registered or certified mail:
The AARP Investment Program, 66 Brooks Drive, Braintree, MA
02184-3839
Fax number: 1-800-821-6234 (for exchanging and selling only)
--------------------------------------------------------------------------------
7
<PAGE>
Exchanging or Selling Shares Use these instructions to exchange or sell shares
in an account opened directly with Scudder.
--------------------------------------------------------------------------------
Class AARP Exchanging into another fund Selling shares
--------------------------------------------------------------------------------
$1,000 or more to open a new Some transactions, including
account ($500 for IRAs) most for over $100,000, can
only be ordered in writing;
if you're in doubt, see page
31 of the prospectus
--------------------------------------------------------------------------------
By phone o Call 1-800-253-2277 for o Call 1-800-253-2277 for
instructions instructions
--------------------------------------------------------------------------------
Using Easy-Access o Call 1-800- 631-4636 and o Call 1-800-631-4636 and
Line follow the instructions follow the instructions
--------------------------------------------------------------------------------
By mail or fax Your instructions should Your instructions should
(see previous include: include:
page) o your account number o your account number
o names of the funds, class o name of the fund, class
and number of shares or and number of shares or
dollar amount you want to dollar amount you want to
exchange redeem
--------------------------------------------------------------------------------
With an automatic -- o To set up regular cash
withdrawal plan payments from an account,
call 1-800-253-2277
--------------------------------------------------------------------------------
Using QuickSell -- o Call 1-800-253-2277
--------------------------------------------------------------------------------
On the Internet o Register at aarp.scudder.com --
o Follow the instructions for
making on-line exchanges
--------------------------------------------------------------------------------
Services For AARP Class Investors
--------------------------------------------------------------------------------
To reach us: o Web site aarp.scudder.com
o Program representatives 1-800-253-2277, M-F, 8 a.m. - 8
p.m. EST
o Confidential fax line 1-800-821-6234, always open
o TDD line 1-800-634-9454, M-F, 9 a.m. - 5 p.m. EST
Services for o AARP Lump Sum Service For planning and setting up a lump
participants: sum distribution.
o AARP Legacy Service For organizing financial documents and
planning the orderly transfer of assets to heirs.
o AARP Goal Setting and Asset Allocation Service For
allocating assets and measuring investment progress.
o For more information, please call 1-800-253-2277.
--------------------------------------------------------------------------------
July 14, 2000
<PAGE>
SCUDDER MANAGED MUNICIPAL BONDS
SUPPLEMENT TO THE COMBINED STATEMENT OF
ADDITIONAL INFORMATION DATED OCTOBER 1, 1999
--------------------------
On or about July 31, 2000, Scudder Managed Municipal Bonds will offer
two classes of shares to provide investors with different purchase options. The
two classes are Class S and Class AARP. Each class has its own important
features and policies. In addition, as of the date noted above, all existing
shares of the fund will be redesignated as Class S shares of the fund. Shares of
Class AARP will be especially designed for members of AARP.
Effective July 31, 2000, the following disclosure replaces the paragraph under
General Investment Objectives and Policies of Scudder Managed Municipal Bonds on
page 3 of the Statement of Additional Information:
Scudder Managed Municipal Bonds, a diversified series of Scudder
Municipal Trust, will modify its investment objective to seek income exempt from
regular federal income tax while actively seeking to reduce downside risk as
compared with other tax-free income funds. Scudder Managed Municipal Bonds will
not invest in securities issued by tobacco-producing companies.
The following information supplements the cover page:
The unaudited Semiannual Report to Shareholders of Scudder Managed
Municipal Bonds dated June 30, 2000 is incorporated by reference and hereby
deemed to be part of this Statement of Additional Information.
The following disclosure supplements the disclosure regarding "Additional
Information About Opening an Account" on page 19:
The following supplements "General Investment Objectives and Policies of Scudder
Managed Municipal Bonds" on page 3:
Effective on or about July 31, 2000, Scudder Managed Municipal Bonds seeks
income exempt from regular federal income tax while actively seeking to reduce
downside risk as compared with other tax-free income funds. The managers use
analytical tools to actively monitor the risk profile of the portfolio as
compared to comparable funds and appropriate benchmarks and peer groups. The
managers use several strategies in seeking to reduce downside risk, including
(i) typically maintaining a high level of portfolio quality, (ii) keeping the
fund's duration generally shorter than comparable mutual funds, and (iii)
primarily focusing on premium coupon bonds, which have lower volatility in down
markets than bonds selling at a discount. In addition, Scudder Managed Municipal
Bonds will not invest in securities issued by tobacco-producing companies.
Additional Information About Opening an Account - for
Scudder Managed Municipal Bonds
Clients having a regular investment counsel account with the Adviser or
its affiliates and members of their immediate families, officers and employees
of the Adviser or of any affiliated organization and members of their immediate
families, members of the National Association of Securities Dealers, Inc.
("NASD") and banks may, if they prefer, subscribe initially for at least $2,500
for Class S and $1,000 for Class AARP through Scudder Investor Services, Inc. by
letter, fax, or telephone.
Shareholders of other Scudder funds who have submitted an account
application and have certified a tax identification number, clients having a
regular investment counsel account with the Adviser or its affiliates and
members of their immediate families, officers and employees of the Adviser or of
any
<PAGE>
affiliated organization and members of their immediate families, members of the
NASD, and banks may open an account by wire. Investors interested in investing
in Class S must call 1-800-225-5163 to get an account number. During the call
the investor will be asked to indicate the Fund name, class name, amount to be
wired ($2,500 minimum for Class S and $1,000 for Class AARP), name of bank or
trust company from which the wire will be sent, the exact registration of the
new account, the tax identification number or Social Security number, address
and telephone number. The investor must then call the bank to arrange a wire
transfer to The Scudder Funds, Boston, MA 02101, ABA Number 011000028, DDA
Account 9903-5552. The investor must give the Scudder fund name, class name,
account name and the new account number. Finally, the investor must send a
completed and signed application to the Fund promptly. Investors interested in
investing in the Class AARP should call 1-800-253-2277 for further instructions.
The minimum initial purchase amount is less than $2,500 for Class S
under certain plan accounts and is $1,000 for Class AARP.
The following disclosure supplements the disclosure regarding "Minimum balances"
on page 19:
Minimum balances - for Scudder Managed Municipal Bonds
Shareholders should maintain a share balance worth at least $2,500 for
Class S and $1,000 for Class AARP. For fiduciary accounts such as IRAs, and
custodial accounts such as Uniform Gift to Minor Act and Uniform Trust to Minor
Act accounts, the minimum balance is $1000 for Class S and $500 for Class AARP.
These amounts may be changed by the Fund's Board of Trustees. A shareholder may
open an account with at least $1,000 ($500 for fiduciary/custodial accounts), if
an automatic investment plan (AIP) of $100/month ($50/month for Class AARP and
fiduciary/custodial accounts) is established. Scudder group retirement plans and
certain other accounts have similar or lower minimum share balance requirements.
The Fund reserves the right, following 60 days' written notice to
applicable shareholders, to:
o for Class S, assess an annual $10 per Fund charge (with the
Fee to be paid to the Fund) for any
non-fiduciary/non-custodial account without an automatic
investment plan (AIP) in place and a balance of less than
$2,500; and
o redeem all shares in Fund accounts below $1,000 where a
reduction in value has occurred due to a redemption, exchange
or transfer out of the account. The Fund will mail the
proceeds of the redeemed account to the shareholder.
Reductions in value that result solely from market activity will not
trigger an involuntary redemption. Shareholders with a combined household
account balance in any of the Scudder Funds of $100,000 or more, as well as
group retirement and certain other accounts will not be subject to a fee or
automatic redemption.
Fiduciary (e.g., IRA or Roth IRA) and custodial accounts (e.g., UGMA or
UTMA) with balances below $100 are subject to automatic redemption following 60
days' written notice to applicable shareholders.
The following disclosure supplements the disclosure regarding "Additional
Information About Making Subsequent Investments by QuickBuy" on page 20:
Additional Information About Making Subsequent Investments
by QuickBuy - for Scudder Managed Municipal Bonds
Shareholders whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and who have elected to participate
in the QuickBuy program may purchase shares
2
<PAGE>
of the Fund by telephone. Through this service shareholders may purchase up to
$250,000. To purchase shares by QuickBuy, shareholders should call before the
close of regular trading on the New York Stock Exchange (the "Exchange"),
normally 4 p.m. eastern time. Proceeds in the amount of your purchase will be
transferred from your bank checking account two or three business days following
your call. For requests received by the close of regular trading on the
Exchange, shares will be purchased at the net asset value per share calculated
at the close of trading on the day of your call. QuickBuy requests received
after the close of regular trading on the Exchange will begin their processing
and be purchased at the net asset value calculated the following business day.
If you purchase shares by QuickBuy and redeem them within seven days of the
purchase, the Fund may hold the redemption proceeds for a period of up to seven
business days. If you purchase shares and there are insufficient funds in your
bank account the purchase will be canceled and you will be subject to any losses
or fees incurred in the transaction. QuickBuy transactions are not available for
most retirement plan accounts. However, QuickBuy transactions are available for
Scudder IRA accounts.
In order to request purchases by QuickBuy, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account from which the purchase payment will be debited.
New investors wishing to establish QuickBuy may so indicate on the application.
Existing shareholders who wish to add QuickBuy to their account may do so by
completing a QuickBuy Enrollment Form. After sending in an enrollment form
shareholders should allow 15 days for this service to be available.
The Fund employs procedures, including recording telephone calls,
testing a caller's identity, and sending written confirmation of telephone
transactions, designed to give reasonable assurance that instructions
communicated by telephone are genuine and to discourage fraud. To the extent
that the Fund does not follow such procedures, they may be liable for losses due
to unauthorized or fraudulent telephone instructions. The Fund will not be
liable for acting upon instructions communicated by telephone that it reasonably
believes to be genuine.
Investors interested in making subsequent investments in Class AARP of
the Fund should call 1-800-253-2277 for further instruction.
The following information supplements the disclosure on page 21 of the SAI
relating to "Share Price," "Share Certificates" and "Other Information":
Share Price - for Scudder Managed Municipal Bonds
Purchases will be filled without sales charge at the net asset value
per share next computed after receipt of the application in good order. Net
asset value normally will be computed for each class as of the close of regular
trading on each day during which the Exchange is open for trading. Orders
received after the close of regular trading on the Exchange will be executed at
the next business day's net asset value. If the order has been placed by a
member of the NASD, other than the Distributor, it is the responsibility of that
member broker, rather than the Fund, to forward the purchase order to Scudder
Service Corporation (the "Transfer Agent") in Boston by the close of regular
trading on the Exchange.
There is no sales charge in connection with the purchase of shares of
any class of the Fund.
Share Certificates - for Scudder Managed Municipal Bonds
Due to the desire of the Fund's management to afford ease of
redemption, certificates will not be issued to indicate ownership in the Fund.
Share certificates now in a shareholder's possession may be sent to the Fund's
Transfer Agent for cancellation and credit to such shareholder's account.
Shareholders who prefer may hold the certificates in their possession until they
wish to exchange or redeem such shares.
3
<PAGE>
All issued and outstanding shares of what were formerly AARP Funds that
were subsequently reorganized into existing Scudder Funds were simultaneously
cancelled on the books of the AARP Funds. Share certificates representing
interests in shares of the relevant AARP Fund will represent a number of shares
of Class AARP of the relevant Scudder Fund into which the AARP Fund was
reorganized. Class AARP shares of each fund will not issue certificates
representing shares in connection with the reorganization.
Other Information - for Scudder Managed Municipal Bonds
The Fund has authorized certain members of the NASD other than the
Distributor to accept purchase and redemption orders for its shares. Those
brokers may also designate other parties to accept purchase and redemption
orders on the Fund's behalf. Orders for purchase or redemption will be deemed to
have been received by the Fund when such brokers or their authorized designees
accept the orders. Subject to the terms of the contract between the Fund and the
broker, ordinarily orders will be priced at a class's net asset value next
computed after acceptance by such brokers or their authorized designees.
Further, if purchases or redemptions of the Fund's shares are arranged and
settlement is made at an investor's election through any other authorized NASD
member, that member may, at its discretion, charge a fee for that service. The
Board of Trustees and the Distributor each has the right to limit the amount of
purchases by, and to refuse to sell to, any person. The Board of Trustees and
the Distributor may suspend or terminate the offering of shares of the Fund at
any time for any reason.
The "Tax Identification Number" section of the Application must be
completed when opening an account. Applications and purchase orders without a
certified tax identification number and certain other certified information
(e.g., from exempt organizations a certification of exempt status), will be
returned to the investor. The Fund reserves the right, following 30 days'
notice, to redeem all shares in accounts without a correct certified Social
Security or tax identification number. A shareholder may avoid involuntary
redemption by providing the Fund with a tax identification number during the
30-day notice period.
The Trust may issue shares at net asset value in connection with any
merger or consolidation with, or acquisition of the assets of, any investment
company or personal holding company, subject to the requirements of the 1940
Act.
The following disclosure supplements the disclosure regarding "Exchanges" on
page 21:
Exchanges - for Scudder Managed Municipal Bonds
Exchanges are comprised of a redemption from one Scudder Fund and a
purchase into another Scudder Fund. The purchase side of the exchange either may
be an additional investment into an existing account or may involve opening a
new account in the other Fund. When an exchange involves a new account, the new
account will be established with the same registration, tax identification
number, address, telephone redemption option, "Scudder Automated Information
Line" (SAIL) transaction authorization and dividend option as the existing
account. Other features will not carry over automatically to the new account.
Exchanges to a new Fund account must be for a minimum of $2,500 for Class S and
$1,000 for Class AARP. When an exchange represents an additional investment into
an existing account, the account receiving the exchange proceeds must have
identical registration, address, and account options/features as the account of
origin. Exchanges into an existing account must be for $100 or more for Class S.
If the account receiving the exchange proceeds is to be different in any
respect, the exchange request must be in writing and must contain an original
signature guarantee.
Exchange orders received before the close of regular trading on the
Exchange on any business day ordinarily will be executed at respective net asset
values determined on that day. Exchange orders received after the close of
regular trading on the Exchange will be executed on the following business day.
4
<PAGE>
Investors may also request, at no extra charge, to have exchanges
automatically executed on a predetermined schedule from one Scudder Fund to an
existing account in another Scudder Fund, at current net asset value, through
Scudder's Systematic Exchange Program. Exchanges must be for a minimum of $50.
Shareholders may add this free feature over the telephone or in writing.
Automatic Exchanges will continue until the shareholder requests by telephone or
in writing to have the feature removed, or until the originating account is
depleted. The Trust and the Transfer Agent each reserves the right to suspend or
terminate the privilege of the Systematic Exchange Program at any time.
There is no charge to the shareholder for any exchange described above.
An exchange into another Scudder Fund is a redemption of shares and therefore
may result in tax consequences (gain or loss) to the shareholder, and the
proceeds of such an exchange may be subject to backup withholding. (See
"TAXES.")
Investors currently receive the exchange privilege, including exchange
by telephone, automatically without having to elect it. The Fund employs
procedures, including recording telephone calls, testing a caller's identity,
and sending written confirmation of telephone transactions, designed to give
reasonable assurance that instructions communicated by telephone are genuine,
and to discourage fraud. To the extent that the Fund does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Fund will not be liable for acting upon instructions
communicated by telephone that it reasonably believes to be genuine. The Fund
and the Transfer Agent each reserves the right to suspend or terminate the
privilege of exchanging by telephone or fax at any time.
The Scudder Funds into which investors may make an exchange are listed
under "THE SCUDDER FAMILY OF FUNDS" herein. Before making an exchange,
shareholders should obtain from Scudder Investor Services, Inc. a prospectus of
the Scudder Fund into which the exchange is being contemplated. The exchange
privilege may not be available for certain Scudder Funds or classes of Scudder
Funds. For more information, please call 1-800-225-5163 (Class S) or
1-800-253-2277 (Class AARP).
Scudder retirement plans may have different exchange requirements.
Please refer to appropriate plan literature.
The following disclosure supplements the disclosure regarding "Redemptions" on
page 22:
Redemption By Telephone - for Scudder Managed Municipal Bonds
Shareholders currently receive the right automatically, without having
to elect it, to redeem by telephone up to $100,000 and have the proceeds mailed
to their address of record. Shareholders may also request by telephone to have
the proceeds mailed or wired to their predesignated bank account. In order to
request wire redemptions by telephone, shareholders must have completed and
returned to the Transfer Agent the application, including the designation of a
bank account to which the redemption proceeds are to be sent.
(a) NEW INVESTORS wishing to establish the telephone redemption
privilege must complete the appropriate section on the
application.
(b) EXISTING SHAREHOLDERS (except those who are Scudder IRA,
Scudder pension and profit-sharing, Scudder 401(k) and Scudder
403(b) Planholders) who wish to establish telephone redemption
to a predesignated bank account or who want to change the bank
account previously designated to receive redemption proceeds
should either return a Telephone Redemption Option Form
(available upon request), or send a letter identifying the
account and specifying the exact information to be changed.
The letter must be signed exactly as the shareholder's name(s)
appears on the account. An original signature and an
5
<PAGE>
original signature guarantee are required for each person in
whose name the account is registered.
If a request for a redemption to a shareholder's bank account is made
by telephone or fax, payment will be by Federal Reserve bank wire to the bank
account designated on the application, unless a request is made that the
redemption check be mailed to the designated bank account. There will be a $5
charge for all wire redemptions.
Note: Investors designating a savings bank to receive their telephone
redemption proceeds are advised that if the savings bank is not a
participant in the Federal Reserve System, redemption proceeds must be
wired through a commercial bank which is a correspondent of the savings
bank. As this may delay receipt by the shareholder's account, it is
suggested that investors wishing to use a savings bank discuss wire
procedures with their bank and submit any special wire transfer
information with the telephone redemption authorization. If appropriate
wire information is not supplied, redemption proceeds will be mailed to
the designated bank.
The Fund employs procedure, including recording telephone calls,
testing a caller's identity, and sending written confirmation of telephone
transactions, designed to give reasonable assurance that instructions
communicated by telephone are genuine, and to discourage fraud. To the extent
that the Fund does not follow such procedures, it may be liable for losses due
to unauthorized or fraudulent telephone instructions. The Fund will not be
liable for acting upon instructions communicated by telephone that it reasonably
believes to be genuine.
Redemption requests by telephone (technically a repurchase agreement
between the Fund and the shareholder) of shares purchased by check will not be
accepted until the purchase check has cleared which may take up to seven
business days.
Redemption by QuickSell - for Scudder Managed Municipal Bonds
Shareholders whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and have elected to participate in
the QuickSell program may sell shares of the Fund by telephone. Redemptions must
be for at least $250. Proceeds in the amount of your redemption will be
transferred to your bank checking account in two or three business days
following your call. For requests received by the close of regular trading on
the Exchange, normally 4 p.m. eastern time, Shares will be redeemed at the net
asset value per share calculated at the close of trading on the day of your
call. QuickSell requests received after the close of regular trading on the
Exchange will begin their processing the following business day. QuickSell
transactions are not available for IRA accounts and most other retirement plan
accounts.
In order to request redemptions by QuickSell, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account. New investors wishing to establish QuickSell may
so indicate on the application. Existing shareholders who wish to add QuickSell
to their account may do so by completing a QuickSell Enrollment Form. After
sending in an enrollment form, shareholders should allow for 15 days for this
service to be available.
The Fund employ procedures, including recording telephone calls,
testing a caller's identity, and sending written confirmation of telephone
transactions, designed to give reasonable assurance that instructions
communicated by telephone are genuine, and to discourage fraud. To the extent
that the Fund does not follow such procedures, it may be liable for losses due
to unauthorized or fraudulent telephone instructions. The Fund will not be
liable for acting upon instructions communicated by telephone that it reasonably
believes to be genuine.
6
<PAGE>
Redemption by Mail or Fax - for Scudder Managed Municipal Bonds
Any existing share certificates representing shares being redeemed must
accompany a request for redemption and be duly endorsed or accompanied by a
proper stock assignment form with signature(s) guaranteed.
In order to ensure proper authorization before redeeming shares, the
Transfer Agent may request additional documents such as, but not restricted to,
stock powers, trust instruments, certificates of death, appointments as
executor, certificates of corporate authority and waivers of tax (required in
some states when settling estates).
It is suggested that shareholders holding shares registered in other
than individual names contact the Transfer Agent prior to any redemptions to
ensure that all necessary documents accompany the request. When shares are held
in the name of a corporation, trust, fiduciary agent, attorney or partnership,
the Transfer Agent requires, in addition to the stock power, certified evidence
of authority to sign. These procedures are for the protection of shareholders
and should be followed to ensure prompt payment. Redemption requests must not be
conditional as to date or price of the redemption. Proceeds of a redemption will
be sent within seven (7) business days after receipt by the Transfer Agent of a
request for redemption that complies with the above requirements. Delays of more
than seven (7) days of payment for shares tendered for repurchase or redemption
may result, but only until the purchase check has cleared.
The requirements for IRA redemptions are different from those for
regular accounts. For more information call 1-800-225-5163.
The following disclosure supplements the disclosure regarding "Internet access"
on page 25 and applies to each class of Scudder Managed Municipal Bonds except
as noted:
Internet access
World Wide Web Site -- The address of the Scudder Funds site is www.scudder.com.
The address for the AARP class of shares is aarp.scudder.com. These sites offer
guidance on global investing and developing strategies to help meet financial
goals and provides access to the Scudder investor relations department via
e-mail. The sites also enable users to access or view Fund prospectuses and
profiles with links between summary information in Fund Summaries and details in
the Prospectus. Users can fill out new account forms on-line, order free
software, and request literature on Funds.
Account Access -- The Adviser is among the first mutual fund families to allow
shareholders to manage their fund accounts through the World Wide Web. Scudder
Fund shareholders can view a snapshot of current holdings, review account
activity and move assets between Scudder Fund accounts.
The Adviser's personal portfolio capabilities -- known as SEAS (Scudder
Electronic Account Services) -- are accessible only by current Scudder Fund
shareholders who have set up a Personal Page on Scudder's Web sites. Using a
secure Web browser, shareholders sign on to their account with their Social
Security number and their SAIL password. As an additional security measure,
users can change their current password or disable access to their portfolio
through the World Wide Web.
An Account Activity option reveals a financial history of transactions
for an account, with trade dates, type and amount of transaction, share price
and number of shares traded. For users who wish to trade shares between Scudder
Funds, the Fund Exchange option provides a step-by-step procedure to exchange
shares among existing fund accounts or to new Scudder Fund accounts.
7
<PAGE>
The following information supplements the disclosure on page 26 regarding
"Dividends and Capital Gains Distribution Options":
Dividends and Capital Gains Distribution Options - for Scudder Managed Municipal
Bonds
Investors have freedom to choose whether to receive cash or to reinvest
any dividends from net investment income or distributions from realized capital
gains in additional shares of the Fund. A change of instructions for the method
of payment may be given to the Transfer Agent in writing at least five days
prior to a dividend record date. Shareholders may change their dividend option
by calling 1-800-225-5163 for Class S and 1-800-253-2277 for Class AARP or by
sending written instructions to the Transfer Agent. Please include your account
number with your written request.
Reinvestment is usually made at the closing net asset value of the
class determined on the business day following the record date. Investors may
leave standing instructions with the Transfer Agent designating their option for
either reinvestment or cash distribution of any income dividends or capital
gains distributions. If no election is made, dividends and distributions will be
invested in additional class shares of the Fund.
Investors may also have dividends and distributions automatically
deposited to their predesignated bank account through Scudder's Direct
Distributions Program. Shareholders who elect to participate in the Direct
Distributions Program, and whose predesignated checking account of record is
with a member bank of Automated Clearing House Network (ACH) can have income and
capital gain distributions automatically deposited to their personal bank
account usually within three business days after the Fund pays its distribution.
A Direct Distributions request form can be obtained by calling 1-800-225-5163
for Class S and 1-800-253-2277 for Class AARP. Confirmation Statements will be
mailed to shareholders as notification that distributions have been deposited.
Investors choosing to participate in Scudder's Automatic Withdrawal
Plan must reinvest any dividends or capital gains. For most retirement plan
accounts, the reinvestment of dividends and capital gains is also required.
The following information supplements the information regarding "Automatic
Withdrawal Plan" for Scudder Managed Municipal Bonds on page 30:
Non-retirement plan shareholders may establish an Automatic Withdrawal
Plan to receive monthly, quarterly or periodic redemptions from his or her
account for any designated amount of $50 or more. Shareholders may designate
which day they want the automatic withdrawal to be processed. The check amounts
may be based on the redemption of a fixed dollar amount, fixed share amount,
percent of account value or declining balance. The Plan provides for income
dividends and capital gains distributions, if any, to be reinvested in
additional Shares. Shares are then liquidated as necessary to provide for
withdrawal payments. Since the withdrawals are in amounts selected by the
investor and have no relationship to yield or income, payments received cannot
be considered as yield or income on the investment and the resulting
liquidations may deplete or possibly extinguish the initial investment and any
reinvested dividends and capital gains distributions. Requests for increases in
withdrawal amounts or to change the payee must be submitted in writing, signed
exactly as the account is registered, and contain signature guarantee(s). Any
such requests must be received by the Fund's transfer agent ten days prior to
the date of the first automatic withdrawal. An Automatic Withdrawal Plan may be
terminated at any time by the shareholder, the Trust or its agent on written
notice, and will be terminated when all Shares of the Fund under the Plan have
been liquidated or upon receipt by the Trust of notice of death of the
shareholder.
An Automatic Withdrawal Plan request form can be obtained by calling
1-800-225-5163 for Class S and 1-800-253-2277 for Class AARP.
8
<PAGE>
The following information supplements the information regarding "Automatic
Investment Plan" on page 30:
Shareholders may arrange to make periodic investments in Class S shares
through automatic deductions from checking accounts by completing the
appropriate form and providing the necessary documentation to establish this
service. The minimum investment is $50 for Class S shares.
Shareholders may arrange to make periodic investments in Class AARP of
the Fund through automatic deductions from checking accounts. The minimum
pre-authorized investment amount is $50. New shareholders who open a Gift to
Minors Account pursuant to the Uniform Gift to Minors Act (UGMA) and the Uniform
Transfer to Minors Act (UTMA) and who sign up for the Automatic Investment Plan
will be able to open the Fund account for less than $500 if they agree to
increase their investment to $500 within a 10 month period. Investors may also
invest in any Class AARP for $500 if they establish a plan with a minimum
automatic investment of at least $100 per month. This feature is only available
to Gifts to Minors Account investors. The Automatic Investment Plan may be
discontinued at any time without prior notice to a shareholder if any debit from
their bank is not paid, or by written notice to the shareholder at least thirty
days prior to the next scheduled payment to the Automatic Investment Plan.
The Automatic Investment Plan involves an investment strategy called
dollar cost averaging. Dollar cost averaging is a method of investing whereby a
specific dollar amount is invested at regular intervals. By investing the same
dollar amount each period, when shares are priced low the investor will purchase
more shares than when the share price is higher. Over a period of time this
investment approach may allow the investor to reduce the average price of the
shares purchased. However, this investment approach does not assure a profit or
protect against loss. This type of regular investment program may be suitable
for various investment goals such as, but not limited to, college planning or
saving for a home.
The following information replaces the information under "Performance
Information" on page 32:
Average Annual Total Return for periods ended November 30, 1999
One Five Ten
Year Years Years
---- ----- -----
Scudder Managed Municipal Bonds - Class S -0.96% 7.49% 6.95%
* Scudder Managed Municipal Bonds has changed its fiscal year end from
December 31 to May 31. For the abbreviated fiscal period beginning January
1, 1999 through May 31, 1999, the Fund posted a total return of -0.17%.
Over the twelve months ended May 31, the Fund's total return was 4.04%.
Cumulative Total Return for periods ended November 30, 1999
One Five Ten
Year Years Years
---- ----- -----
Scudder Managed Municipal Bonds - Class S -.096% 43.51% 95.73%
The following information supplements the first paragraph of "Organization of
the Fund" on page 36:
Scudder Managed Municipal Bonds is further divided into two classes of
shares, Class AARP and Class S shares.
The following information replaces the information in the fifth and sixth
complete paragraphs on page 38:
9
<PAGE>
Upon consummation of the transaction between Zurich and B.A.T, the
Funds' existing investment management agreements with Scudder Kemper were deemed
to have been assigned and, therefore, terminated. The Board approved new
investment management agreements (the "Agreements") with Scudder Kemper, which
are substantially identical to the prior investment management agreements,
except for the date of execution and termination. The agreements became
effective September 7, 1998, upon the termination of the then current investment
management agreements and were approved at a shareholder meeting held on
December 15, 1998. A new agreement for Scudder Managed Municipal Bonds was
approved by the Board on February 7, 2000 which becomes effective on or about
July 31, 2000.
The Agreements dated September 7, 1998 for all funds except Scudder
Managed Municipal Bonds were approved by the Trustees on August 6, 1998. The
Agreements continued in effect until September 30, 1999 (September 30, 2001 for
Scudder Managed Municipal Bonds) at which time they were re-approved by the
Trustees. The Agreements will continue from year to year thereafter only if
their continuance is approved annually by the vote of a majority of those
Trustees who are not parties to such Agreements or interested persons of the
Adviser or the Trust, cast in person at a meeting called for the purpose of
voting on such approval, and either by a vote of the Trust's Trustees or of a
majority of the outstanding voting securities of the Funds. The Agreements may
be terminated at any time without payment of penalty by either party on sixty
days' notice and automatically terminates in the event of its assignment.
The following information replaces the information in the seventh complete
paragraphs on page 38:
For Scudder Kemper's services, the Scudder Managed Municipal Bonds pays
Scudder Kemper a fee equal to 0.490% of average daily net assets on such assets
up to $2 billion, 0.465% of average daily net assets on such assets exceeding $2
billion, and 0.440% of average daily net assets on such assets exceeding $3
billion. The fee is payable monthly, provided the Fund will make such interim
payments as may be requested by the Adviser not to exceed 75% of the amount of
the fee then accrued on the books of the Fund and unpaid.
The following information replaces the information regarding "Personal
Investments by Employees of the Adviser" on page 41:
Code of Ethics
The Funds, the Adviser and principal underwriter have each adopted
codes of ethics under rule 17j-1 of the Investment Company Act. Board members,
officers of the Funds and employees of the Adviser and principal underwriter are
permitted to make personal securities transactions, including transactions in
securities that may be purchased or held by the Funds, subject to requirements
and restrictions set forth in the applicable Code of Ethics. The Adviser's Code
of Ethics contains provisions and requirements designed to identify and address
certain conflicts of interest between personal investment activities and the
interests of the Funds. Among other things, the Adviser's Code of Ethics
prohibits certain types of transactions absent prior approval, imposes time
periods during which personal transactions may not be made in certain
securities, and requires the submission of duplicate broker confirmations and
quarterly reporting of securities transactions. Additional restrictions apply to
portfolio managers, traders, research analysts and others involved in the
investment advisory process. Exceptions to these and other provisions of the
Adviser's Code of Ethics may be granted in particular circumstances after review
by appropriate personnel.
The following information replaces the information regarding "Trustees
and Officers" on page 41:
10
<PAGE>
<TABLE>
<CAPTION>
TRUSTEES AND OFFICERS OF SCUDDER MUNICIPAL TRUST
Position with
Underwriter,
Scudder Investor
Name, Age, and Address Position with Fund Principal Occupation** Services, Inc.
---------------------- ------------------ ---------------------- --------------
<S> <C> <C> <C>
Henry P. Becton, Jr. (56) Trustee President and General Manager, WGBH --
WGBH Educational Foundation
125 Western Avenue
Allston, MA 02134
Linda C. Coughlin (48)+* Trustee Managing Director of Scudder Kemper Senior Vice President
Investments, Inc.
Dawn-Marie Driscoll (53) Trustee Executive Fellow, Center for Business --
4909 SW 9th Place Ethics, Bentley College; President,
Cape Coral, FL 33914 Driscoll Associates (consulting firm)
Edgar R. Fiedler (70) Trustee Senior Fellow and Economic Counselor, --
50023 Brogden The Conference Board, Inc.
Chapel Hill, NC
Keith R. Fox (45) Trustee Private Equity Investor, President, --
10 East 53rd Street Exeter Capital Management Corporation
New York, NY 10022
Joan E. Spero (55) Trustee President, Doris Duke Charitable --
Doris Duke Charitable Foundation Foundation; Department of State -
650 Fifth Avenue Undersecretary of State for Economic,
New York, NY 10128 Business and Agricultural Affairs
(March 1993 to January 1997)
Jean Gleason Stromberg (56) Trustee Consultant; Director, Financial --
3816 Military Road, NW Institutions Issues, U.S. General
Washington, D.C. Accounting Office (1996-1997);
Partner, Fulbright & Jaworski Law
Firm (1978-1996)
Jean C. Tempel (56) Trustee Managing Director, First Light Capital --
One Boston Place
23rd Floor
Boston, MA 02108
Steven Zaleznick (45)* Trustee President and CEO, AARP Services, Inc. --
(address)
Ann M. McCreary (43) # Vice President Managing Director of Scudder Kemper --
Investments, Inc.
11
<PAGE>
Position with
Underwriter,
Scudder Investor
Name, Age, and Address Position with Fund Principal Occupation** Services, Inc.
---------------------- ------------------ ---------------------- --------------
John R. Hebble (42)+ Treasurer Senior Vice President of Scudder Assistant Treasurer
Kemper Investments, Inc.
Caroline Pearson (38)+ Assistant Secretary Senior Vice President of Scudder Clerk
Kemper Investments, Inc.; Associate,
Dechert Price & Rhoads (law firm)
1989 - 1997
John Millette (37)+ Vice President and Vice President of Scudder Kemper --
Secretary Investments, Inc.
</TABLE>
* Ms. Coughlin and Mr. Zaleznick are considered by the Fund and its
counsel to be "interested persons" of the Adviser or of the Trust as
defined in the 1940 Act.
** Unless otherwise stated, all officers and directors have been
associated with their respective companies for more than five years,
but not necessarily in the same capacity.
+ Address: Two International Place, Boston, Massachusetts 02110
# Address: 345 Park Avenue, New York, New York 10154
## Address: 101 California Street, Suite 4100, San Francisco, CA 94111
The Trustees and officers of the Trust also serve in similar capacities
with respect to other Scudder Funds. The newly-constituted Board may determine
to change its compensation structure.
As of June 15, 2000, all Trustees and Officers of the fund, as a group,
owned beneficially (as that term is defined in Section 13 (d) of The Securities
and Exchange Act of 1934) less than 1% of the outstanding shares.
Certain accounts for which Scudder Kemper acts as investment adviser
owned 8,988,416 shares in the aggregate, or 11.37% of the outstanding shares of
as of the fund. Scudder Kemper may be deemed to be the beneficial owner of such
shares, but disclaims any beneficial ownership in such shares.
To the knowledge of the Fund, as of June 15, 2000, no person owned
beneficially more than 5% of the outstanding shares of the fund.
The following information regarding the "Administrative Fee" is added on page
46:
Administrative Fee
The Fund has entered into an administrative services agreement with
Scudder Kemper (the "Administration Agreements"), pursuant to which Scudder
Kemper will provide or pay others to provide substantially all of the
administrative services required by the Fund (other than those provided by
Scudder Kemper under its investment management agreement with the Fund, as
described above) in exchange for the payment by the Fund of an administrative
services fee (the "Administrative Fee") of 0.15% of its average daily net
assets. One effect of these arrangements is to make the Fund's future expense
ratio more predictable. The Administrative Fee will become effective on or about
July 31, 2000.
Various third-party service providers (the "Service Providers"), some
of which are affiliated with Scudder Kemper, provide certain services to the
Fund pursuant to separate agreements with the Fund. Scudder Fund Accounting
Corporation, a subsidiary of Scudder
12
<PAGE>
Kemper, computes net asset value for the Fund and maintains their accounting
records. Scudder Service Corporation, also a subsidiary of Scudder Kemper, is
the transfer, shareholder servicing and dividend-paying agent for the shares of
the Fund. Scudder Trust Company, an affiliate of Scudder Kemper, provides
subaccounting and recordkeeping services for shareholders in certain retirement
and employee benefit plans. As custodian, State Street Bank and Trust Company
holds the portfolio securities of the Fund, pursuant to a custodian agreement.
PricewaterhouseCoopers LLP audits the financial statements of the Fund and
provides other audit, tax, and related services. Willkie Farr and Gallagher acts
as general counsel for the Fund. In addition to the fees they pay under the
investment management agreements with Scudder Kemper, the Fund pays the fees and
expenses associated with these service arrangements, as well as the Fund's
insurance, registration, printing, postage and other costs.
Scudder Kemper will pay the Service Providers for the provision of
their services to the Fund and will pay other Fund expenses, including
insurance, registration, printing and postage fees. In return, the Fund will pay
Scudder Kemper an Administrative Fee.
The Administration Agreement has an initial term of three years,
subject to earlier termination by the Fund's Board. The fee payable by the Fund
to Scudder Kemper pursuant to the Administration Agreements is reduced by the
amount of any credit received from the Fund's custodian for cash balances.
Certain expenses of the Fund will not be borne by Scudder Kemper under
the Administration Agreements, such as taxes, brokerage, interest and
extraordinary expenses; and the fees and expenses of the Independent Trustees
(including the fees and expenses of their independent counsel). In addition, the
Fund will continue to pay the fees required by its investment management
agreement with Scudder Kemper.
July 14, 2000
13
