AARP Investment Program From Scudder
AARP Growth and Income Fund
a diversified, open-end mutual fund which seeks to provide long-term capital
growth and regular income
IRA PROSPECTUS
February 1, 1995
This Prospectus provides information about the AARP Growth and Income Fund, a
series of AARP Growth Trust, that a prospective IRA investor should know before
investing. Please keep it for future reference.
You may get more detailed information in the Statement of Additional Information
(SAI) dated February 1, 1995, as amended from time to time. The SAI is
considered part of this Prospectus by reference to it. The SAI is on file with
the Securities and Exchange Commission (SEC).
You may get a copy of the SAI without charge. Call 1-800-253-2277, or write to
Scudder Investor Services, Inc., P.O. Box 2540, Boston, MA 02208-2540.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
FUND EXPENSES
The AARP Growth and Income Fund does not charge sales fees or commissions. 100%
of your investment goes to work for you.
* No fees to open your account
* No fees to make contributions
* No fees to exchange (move investments from one fund to another within the
AARP Family of Funds)
* No fees to receive distributions
* No marketing fees or 12b-1 fees
* No fees to reinvest dividends
There are Annual Fund Operating Expenses for the AARP Growth and Income Fund.
However, you do not pay these expenses directly. The Fund pays these expenses
before distributing net investment income to you. These expenses include the
management fee paid to the Fund Manager as well as other expenses for services
such as maintaining shareholder records and furnishing shareholder statements
and fund reports. The expenses are reflected in the Fund's share price or
dividends and are not directly charged to shareholder accounts.
The following table presents information on the projected costs and expenses of
investing in the AARP Growth and Income Fund. You may use this table to compare
the fees and expenses of the Fund with other mutual funds.
Annual Fund Operating Expenses are expressed as a percentage of the Fund's
average daily net assets.
The chart shows the expenses for the Fund for the fiscal year ended September
30, 1994 had the current management agreement been in effect for the full fiscal
year.**
Effective Management Fee Total Fund Operating
Rate** Other Expenses Expenses
------------------ --------- -------------------
.49% .27% .76%
Examples of What Fund Expenses Would Be on a $1,000 Investment in the AARP
Growth and Income Fund
Based on the level of assets as of September 30, 1994, we have calculated the
total expenses of a $1,000 investment in the Fund for 1 year, 3 years, 5 years
and 10 years. These examples assume 5% annual return. There are 3 other
assumptions: (1) redemption at the end of each period, (2) reinvestment of all
dividends and distributions, and (3) total fund operating expenses noted above
remain the same each year.
1 Year 3 Years 5 Years 10 Years
------ ------- ------- -------
$8 $24 $42 $94
You should not consider this example as a representation of past or future
expenses or returns. Actual fund expenses may be higher or lower in the future.
** The AARP Growth and Income Fund's fee structure is designed to recognize
the degree to which the pooled resources of the Program provide economies in the
management of the AARP Funds. The fee consists of two elements: a "Base Fee" and
an "Individual Fund Fee." The combined Base Fee and Individual Fund Fee is
called the Effective Management Fee Rate. See page 12 for information on how the
Effective Management Fee Rate is calculated.
FINANCIAL HIGHLIGHTS
Below you will find a variety of information about the income and the expenses
of the AARP Growth and Income Fund for the stated periods. You will also find
the following: (1) the net gain or loss on the investments, (2) the
distributions, if any, of income and gain, and, (3) the change in net asset
value per share from the beginning to the end of the stated periods.
<TABLE>
<CAPTION>
For the Years Ended September 30
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985(a)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value at $32.91 $28.67 $26.97 $22.30 $26.11 $20.94 $25.54 $20.88 $16.84 $15.00
Beginning of Period
Net Investment .94 .83 .97 1.11 1.11 1.01 1.04 .67 .73 .39
Income (d)
Net Realized & 1.62 4.58 2.11 4.78 (3.69) 5.20 (3.93) 5.51 4.10 1.64
Unrealized
Investment Gain
(Loss)
Total from 2.56 5.41 3.08 5.89 (2.58) 6.21 (2.89) 6.18 4.83 2.03
Investment
Operations
Dividends from Net (1.13) (.87) (.90) (1.17) (1.15) (1.04) (.94) (.64) (.70) (.19)
Investment Income
Distributions from (.21) (.30) (.48) (.05) (.08) -- (.77) (.88) (.09) --
Net Realized Gains
Distributions in -- -- -- -- -- -- -- -- -- --
Excess of Net
Realized Gains
Total Distributions (1.34) (1.17) (1.38) (1.22) (1.23) (1.04) (1.71) (1.52) (.79) (.19)
Net Asset Value at 34.13 32.91 28.67 26.97 22.30 26.11 20.94 25.54 20.88 16.84
End of Period
Total Return % 7.99 19.38 11.59 27.19 (10.19) 30.58 (10.75) 30.92 29.00 13.53(b)
Net Assets End of 2,312 1,560 748 392 248 236 228 358 99 27
Period ($ millions)
Ratio of Operating .76 .84 .91 .96 1.03 1.04 1.06 1.08 1.21 1.50(c)
Expenses to Average
Net Assets % (d)
Ratio of Net 3.00 3.08 3.84 4.61 4.76 4.19 4.52 3.81 4.55 5.62(c)
Investment Income
to Average Net
Assets %
Portfolio Turnover 31.82 17.44 36.40 53.68 58.47 55.21 61.34 43.25 37.44 12.75(c)
Rate %
Per Share -- -- -- -- -- -- -- .007 -- .020
Reimbursement of
Expenses (d):
(a) Operations for the period of November 30, 1984 (commencement of operations) to September 30, 1985.
(b) Not Annualized.
(c) Annualized.
(d) Reflects a per share reimbursement of expenses during the period by the Fund Manager. See last row.
</TABLE>
Price Waterhouse LLP, the Fund's independent accountants, have examined the
information in the Financial Highlights on the previous page. The Annual Report
to Shareholders includes their report.
For a copy of the Annual Report to Shareholders, please contact an AARP Mutual
Fund Representative at 1-800-253-2277.
AN OVERVIEW OF THE AARP INVESTMENT PROGRAM
AARP is a nonprofit organization dedicated to addressing the needs and interests
of persons aged 50 and older. It seeks through education, advocacy, and service
to enhance the quality of life for all by promoting independence, dignity, and
purpose. In the early 1980s, research conducted by AARP indicated that many
members were not taking steps to invest adequately for their future. To
encourage members to plan for their retirement and beyond, AARP decided to make
available a family of mutual funds. The family of funds would provide members
with a limited number of distinct investment choices that were managed by an
experienced investment adviser. To provide the family of funds, AARP sought an
investment management firm to develop and manage the funds. After interviewing a
number of investment managers, AARP selected Scudder, Stevens & Clark, Inc., who
will be referred to in this prospectus as Scudder or the Fund Manager.
Information about each Fund in the family of funds is available in a combined
Program prospectus, which you can obtain by calling an AARP Mutual Fund
Representative at 1-800-253-2277.
Who is Scudder, Stevens & Clark? Scudder, Stevens & Clark is America's oldest
independent investment counsel firm. Its founder, Theodore T. Scudder,
established the profession of long-term, fee-based investment counsel in 1919 at
a time when investment firms were focused on short-term, commission-based
trading. In the more than 75 years that have passed since then, Scudder has
grown to be one of America's largest independent investment managers. Today,
Scudder manages more than $90 billion in assets for clients around the world.
Scudder manages corporate funds, pension plans, and endowments for institutions,
and provides an array of investment products and services. These include the
Scudder Funds, a family of no-load mutual funds; a no-load variable annuity;
401(k) Plans; and several closed-end funds.
Scudder brings decades of experience and innovation to mutual fund investing. In
1928, Scudder offered America's first no-load mutual fund. Scudder was the first
company to offer an international mutual fund to U.S. investors. In 1984,
Scudder was selected by AARP to develop and manage the AARP Mutual Funds.
What are the roles of AARP and Scudder? The AARP Investment Program from Scudder
was established in accordance with criteria set by AARP. Specifically, these
criteria include providing members with competitive investment performance,
allowing easy access to investments, offering easy-to-understand information
concerning investing and consistently delivering superior service. Fulfilling
this mandate is the mission of AARP and Scudder. Both organizations work closely
to ensure these criteria are met. AARP provides insight into the diversity and
changing character of AARP members. Association staff closely monitor Program
services and review all Program materials developed for members to ensure
conformity to AARP's high standards. Members of AARP leadership also serve as
Trustees for the AARP Funds. Scudder provides investment management and
administrative services for the AARP Funds and brings to the Program more than
75 years of investment counseling and management experience.
WHAT DOES THE AARP INVESTMENT PROGRAM OFFER ME?
The Program was created to address the investment concerns of AARP members and
to help them make informed investment decisions. It features several benefits
that may make investing advantageous and give you greater confidence that you've
made decisions appropriate for your needs:
* No Fees to Open and Maintain an AARP IRA or other Retirement Plan Account:
You'll pay no separate fees to open or maintain your retirement plan
account. All your money goes to work for your retirement.
* Low Initial Investment: Open an account for $250 or more for each AARP IRA
account. So it's easy to get started. See page 14 of this Prospectus for
more information on minimum investments.
* A Unique Family of Funds: The AARP Growth and Income Fund is part of a
program which offers a range of mutual funds which recognize the needs of
AARP members. Each of the AARP Funds is conservatively managed, seeking to
moderate share price volatility, while seeking competitive returns. This
makes the AARP Funds distinct from other mutual funds, which may seek
higher returns but do not focus on reducing share price volatility.
* No Sales Fees or Commissions: Unlike most other mutual funds, the AARP
Funds are pure no-load(tm) so you don't pay any sales fees or commissions
for contributions or distributions for your retirement plan account. In
addition, the Funds do not charge 12b-1 fees, which are a form of a sales
charge that covers marketing and distribution expenses.
* Professional Investment Management by Scudder, Stevens & Clark: Scudder
brings over 75 years of investment management experience to the AARP Funds.
* Responsive Service from AARP Mutual Fund Representatives: Our knowledgeable
representatives are ready to answer your questions or initiate
transactions--call them toll-free. They are available Monday through
Friday, from 8 a.m. to 8 p.m. Eastern time.
You'll also benefit from:
* Informative communications, such as newsletters and free educational
guides;
* Quarterly AARP IRA Statements;
* Prompt transaction confirmations;
* Special services designed to make investing simple and convenient;
* AARP's commitment to represent your interests; and
* Dedication to delivery of quality investor service.
AARP GROWTH AND INCOME FUND
The AARP Growth and Income Fund is a conservatively managed fund which seeks to
offer you competitive returns. In addition, you can feel confident when you
invest in the AARP Growth and Income Fund because, recognizing the needs of AARP
members, the Fund seeks to moderate share price volatility. Consequently, your
investment will be managed conservatively and knowledgeably, and with the needs
of AARP investors always in mind. Conservative investment management entails our
focus on moderating share price volatility of the Fund. Other growth and income
mutual funds with higher share price volatility may also have higher returns.
While the Fund is conservatively managed, it is important that you realize that
your principal is never insured or guaranteed, and the value of your investment
and your return will move up and down as market conditions change.
The share price of a mutual fund, other than a money market fund, typically
moves up and down on a day-to-day basis. Share price volatility reflects the
level of fluctuation of the value of a Fund's shares over relatively short time
periods. A mutual fund that experiences large changes in its share price on a
daily basis would be considered to have high share price volatility. The AARP
Growth and Income Fund will be managed to seek to reduce share price volatility
as compared to other growth and income mutual funds. This does not mean the
Fund's share price will not be affected by market forces. Market forces may
include downward and upward movements of the stock market or interest rates with
resulting upward or downward movement in the Fund's share price. For a more
detailed discussion of the Fund, please read the "Investment Objective and
Policies" section.
Information included in this Prospectus focuses on the Fund's potential return
and risk. Before investing, you should determine your investment objectives and
personal investment time horizons. This will help you decide if the Fund fits
your investment needs.
When you invest in the AARP Growth and Income Fund, remember that any investment
in stocks involves risk and the value of your shares will fluctuate daily. The
share price of the Fund will tend to rise when the stock market rises and
decline when the stock market declines. Investing in the Fund offers the
opportunity for gain through potential appreciation in the value of your
investment as well as from the income that the investment earns. While the Fund
is managed to attempt to moderate share price volatility, the value of your
investment can decrease due to price changes. That's why you should consider
your investment as one that you can afford to let work for you over
time--generally for a period of 3 years or more.
How is my investment managed? The AARP Growth and Income Fund is managed to seek
both competitive returns and to moderate share price volatility. The Fund is
managed by a team of investment professionals at Scudder. Professional portfolio
managers develop investment strategies and select securities for the Fund's
portfolio. They are supported by Scudder's dedicated staff of economists,
research analysts, traders, and other investment specialists who work in Scudder
offices across the United States and abroad. At Scudder, there has always been a
strong partnership between research analysts and portfolio managers. Scudder's
large staff of independent research analysts helps the portfolio managers assess
economic and industry trends as they make their investment decisions. Because of
this emphasis on "fundamentals," the portfolio managers do not take a short-term
approach to investing. Instead, they seek to add value over the long term,
carefully selecting investments they believe have superior potential for
achieving the Fund's objective.
INVESTMENT OBJECTIVE AND POLICIES
The following information details the investment objective and policies of the
AARP Growth and Income Fund. Included is the Fund's objective, whom it is
designed for, what it offers investors, what it can invest in, the risks
involved, and who at Scudder manages the Fund. As with any investment, there is
no guarantee that the AARP Growth and Income Fund will successfully meet its
investment objective. Be sure to read the section titled "Other Investment
Policies and Risk Factors" beginning on page 8.
The Trustees of the Fund can modify the Fund's objective without the approval of
a majority of the Fund's shareholders. Shareholders will be informed in writing
of any changes in the objective. In that event, they should consider whether the
Fund is still an appropriate investment given their then current financial
position and needs.
Fund Objective: From investments primarily in common stocks and securities
convertible into common stocks, the Fund seeks to provide long-term capital
growth and income, and to keep the value of its shares more stable than other
growth and income mutual funds.
Whom is the Fund designed for? The Fund is suitable for investors who are
seeking long-term growth of their assets to keep ahead of inflation. Investors
should invest for the longer-term (at least 3 years or more) and be comfortable
with fluctuation to their principal that is associated with investing in stocks.
What does the Fund offer to investors? The Fund offers the opportunity for
long-term growth of principal with some income. This growth will come from
possible appreciation in the value of shares, as well as quarterly dividend
distributions when reinvested in additional shares of the Fund. Through a
broadly diversified portfolio consisting primarily of stocks with above average
dividend yields, the Fund seeks to offer less share price volatility than many
growth and income funds.
What does the Fund invest in? The Fund invests primarily in common stocks and
securities convertible into common stocks. The Fund may also invest in preferred
stock. The Fund emphasizes securities of companies that offer the opportunity
for capital growth and growth of earnings while providing dividends.
A research-oriented approach to investing is used by the Fund, taking advantage
of Scudder's large research department.
The Fund will invest in a variety of industries and companies. Generally, the
Fund will invest in companies domiciled in the United States. It may invest,
however, in foreign securities without limit. Also, the Fund may write (sell)
covered call options to enhance investment return, and may purchase and sell
options on stock indices for hedging purposes. See "Other Investment Policies
and Risk Factors."
The Fund may enter into repurchase agreements only with Federal Reserve member
banks or broker-dealers recognized as reporting government securities dealers.
The Fund's policy is to remain substantially invested in stocks and securities
convertible into stocks. However, for liquidity, temporary defensive purposes,
or when market conditions warrant, the Fund may invest without limit in high
quality money market securities. These include U.S. Treasury Bills, commercial
paper, certificates of deposit, bankers' acceptances, and repurchase agreements.
What are the risks? The risk to principal is consistent with an investment in
stocks. The stock market doesn't go up every year, and can rise and
fall--sometimes quite dramatically over a short period of time. Investors should
focus on the longer term (at least 3 years or more) and be comfortable with
fluctuation in the value of their principal. See "Other Investment Policies and
Risk Factors."
The level of income from your investment will be affected by dividends paid on
the securities held by the Fund.
Who at Scudder manages my investment? Lead Portfolio Manager Robert T. Hoffman
has had responsibility for setting the Fund's stock investment strategy and has
overseen the Fund's day-to-day management since 1991. Mr. Hoffman, who joined
Scudder in 1990, has over 9 years of experience in the investment industry.
Kathleen T. Millard, Portfolio Manager, focuses on stock investing strategy and
stock selection. Ms. Millard has worked in the investment industry since 1983
and at Scudder since 1991. Benjamin W. Thorndike, Portfolio Manager, is the
Fund's chief analyst and strategist for convertible securities. Mr. Thorndike,
who has more than 15 years of investment experience, joined Scudder and the Fund
in 1986.
OTHER INVESTMENT POLICIES AND RISK FACTORS
Below are some detailed descriptions of several types of securities and
investment techniques referred to in this prospectus.
Repurchase Agreements--This is an agreement under which the Fund may buy one or
more U.S. Government obligations which the seller simultaneously agrees to
repurchase at a specified time and price. The Fund can earn income for periods
as short as overnight. Such an agreement may enhance liquidity since it is
normally a short-term commitment. If the seller under a repurchase agreement
becomes insolvent, the Fund's right to sell the securities may be restricted.
Also, the value of such securities may decline before the Fund can sell them.
The Fund might also incur transaction costs by selling the securities.
Foreign Securities--The Fund may invest without limit in foreign securities.
Investments in foreign securities may benefit the Fund by providing access to
different markets and opportunities. It may also help to reduce risk by
increasing diversification. However, foreign securities involve special
considerations. Brokerage costs are higher. Information about foreign securities
is more limited. Foreign companies or securities often have different and less
stringent government regulations, different accounting standards, slower
settlement of transactions, and more limited and volatile trading markets.
Investments in foreign securities may also involve other risks. These include
possible imposition of withholding, confiscatory and other taxes; possible
currency blockages or transfer restrictions; expropriation, nationalization or
other adverse political or economic developments; and the difficulty of
enforcing obligations in other countries. The Fund may incur currency conversion
costs of purchases made in foreign currencies. There may also be favorable or
unfavorable consequences from the changes in the value of foreign currencies
against the U.S. dollar.
Derivatives--The following descriptions of Forward Foreign Currency Exchange
Contracts and Options Transactions discuss the types of derivatives in which the
Fund may invest.
Forward Foreign Currency Exchange Contracts--The Fund may enter into forward
foreign currency exchange contracts. These contracts, which involve costs,
permit the Fund to purchase or sell a specific amount of a particular currency
at a specified price on a specified future date. They may be used by the Fund
only to hedge against possible variations in exchange rates of currencies in
countries in which it may invest.
The Fund will realize a benefit only to the extent that the relevant currencies
move as anticipated. If the currencies do not move as anticipated, the use of
these contracts may result in losses greater than if they had not been used.
Options Transactions--In an attempt to enhance investment returns, the Fund may
write covered call options. These are agreements to sell a particular security
in the Fund's portfolio at a specified price on or before the expiration date of
the option. Covered call options may be written on portfolio securities worth up
to 25% of the Fund's net assets.
There are risks associated with writing covered options. These include the
possible inability to make closing transactions at favorable prices or because
an exercise notice has been received. The Fund also risks giving up appreciation
on the underlying security in excess of the exercise price.
The Fund may also purchase and sell exchange-traded options on stock indices. In
addition, the Fund may engage in over-the-counter options transactions with
broker-dealers who make markets in these options. Over-the-counter options may
be more difficult to terminate than exchange-traded options. They are frequently
illiquid, and involve counterparty credit risk. The Fund Manager will engage in
such transactions to hedge against unfavorable price movements which can
adversely affect the value of the Fund's securities or securities the Fund
intends to buy. These transactions involve risk, including the risk that market
prices may move in unanticipated directions or will not correlate well with the
Fund's portfolio, causing the Fund to lose the value of the option premium and
to fail to realize any benefit from the transaction. Further, a closing
transaction may not be available when the Fund wishes to close out a
transaction.
Segregated Accounts--The Fund may be required to segregate assets (such as cash,
U.S. Government securities and other high grade debt obligations) or otherwise
provide coverage consistent with applicable regulatory policies. This would be
in respect to the Fund's permissible obligations under the call and put options
it writes and the forward foreign currency exchange contracts it enters into.
Convertible Securities--Convertible securities include convertible bonds, notes
and debentures, convertible preferred stocks, and other securities that give the
holder the right to exchange the security for a specific number of shares of
common stock. Convertible securities entail less credit risk than the issuer's
common stock because they are considered to be "senior" to common stock.
Convertible securities generally offer lower interest or dividend yields than
non-convertible debt securities of similar quality. They may also reflect
changes in value of the underlying common stock.
Demand Obligations--Demand obligations permit the holder to demand payment of a
specified amount prior to maturity. The holder's right to payment depends upon
the issuer's ability to pay principal and interest on demand. The Fund will
purchase demand notes only to enhance liquidity. The Fund Manager will
continuously monitor the creditworthiness of issuers of such obligations.
Portfolio Turnover--The Fund may buy and sell securities to take advantage of
investment opportunities. The Fund Manager will do so to improve overall
investment return consistent with the Fund's objectives. These transactions
involve transaction costs in the form of spreads or brokerage commissions.
INVESTMENT RESTRICTIONS
To help reduce investment risk, the Fund has adopted certain investment
policies. Only the shareholders can approve changes to the following policies:
* The Fund may not make loans. (A purchase of a debt security is not a loan
for this purpose.) However, the Fund may lend its portfolio securities and
enter into repurchase agreements.
* The Fund may borrow money only for temporary or emergency purposes.
The following policies may be changed without shareholder approval if applicable
legal requirements change:
* The Fund may not invest more than 10% of its net assets in restricted or
not readily marketable securities. These "illiquid securities" include
repurchase agreements maturing in more than 7 days. Additionally, the Fund
may not invest more than 5% of its net assets in restricted securities.
A complete description of these and other policies and restrictions is contained
in the Statement of Additional Information.
INFORMATION ABOUT DISTRIBUTIONS AND TAXES
Dividends and Capital Gains--Dividends from the Fund's net ordinary income are
distributed quarterly in March, June, September and December. Any capital gains
typically will be distributed annually after September 30. All distributions are
automatically reinvested in your IRA account.
Tax Information--Shareholders are eligible to make a regular IRA contribution
forany tax year in which they have "earned income." However, shareholders cannot
make a regular contribution for the calendar year in which they reach age 70 1/2
or for any later year.
Regular contributions for any tax year must be made during that tax year or by
April 15 of the next year. Rollover contributions or transfers to an IRA may be
made at any time even if a shareholder has reached the age of 70 1/2, but the
minimum required distribution for the year must be taken before a transfer or
rollover.
Shareholders are allowed to transfer or roll over all or a part of an IRA
investment to another IRA without any tax liability. Shareholders may transfer
assets directly from one IRA trustee or custodian to another at any time.
Shareholders may also take proceeds from an IRA and roll them over, within 60
days, into another IRA; however, only one rollover may be made from a particular
IRA during any 12-month period.
If shareholders take a distribution from an IRA and do not roll over all of the
money received within the 60-day rollover period, they will be subject to
federal income tax, and state and local taxes, if applicable, on any portion
they keep. In most cases, if shareholders are younger than 59 1/2, they will
also be subject to a 10% federal penalty on the amount not rolled over. In
addition, if they are to receive a distribution of all or any part of their
interest in an employer-maintained retirement plan, then they may roll over all
or a portion of the distribution into an IRA either directly from the
employer-maintained plan or within 60 days of the day received, unless the
distribution is a required minimum distribution or part of a series of
substantially equal payments made over a period of 10 years or more, or the
shareholders' life expectancy or the joint life expectancy of the shareholders
and their beneficiaries.
Please note that distributions paid directly from an employer plan will be
subject to a 20% withholding requirement unless they are required minimum
distributions or payments made over a period longer than 10 years of the life
expectancy or the joint life expectancy of the shareholders and their
beneficiaries. Distributions directly rolled over to an IRA are not subject to
20% withholding. An exchange from one AARP Fund to another in the same IRA does
not result in immediate taxable income to the IRA owner.
Social Security Number--Be sure to complete the Social Security Number section
of the IRA Enrollment Form when you open an account. The Fund reserves the right
to reject new account applications without a Social Security number. The Fund
also reserves the right, following 30 days' notice, to distribute all shares in
accounts without a Social Security number. A shareholder may avoid involuntary
distribution by providing the Fund with a Social Security number during the
30-day notice period.
FUND ORGANIZATION
General Management--The AARP Growth and Income Fund is a series of AARP Growth
Trust, a diversified, open-end management investment company registered under
the Investment Company Act of 1940. The Trust was organized in June 1984.
The Trustees have overall responsibility for the management of the Trust under
Massachusetts law. Under their direction, the Fund Manager--Scudder, Stevens &
Clark, Inc.--provides general investment management of the AARP Funds. The
Trustees supervise the Trust's activities. The shareholders elect the Trustees
and may remove them. Shareholders have one vote per share held on matters on
which they are entitled to vote.
The Trust is not required to hold annual shareholder meetings and has no current
intention to do so. There may be special meetings for purposes such as electing
or removing Trustees, changing fundamental policies or approving an investment
advisory contract. The Fund Manager will help shareholders to communicate with
other shareholders in connection with removing a Trustee as if Section 16(c) of
the Investment Company Act of 1940 applied.
The right of the Trust and AARP Growth and Income Fund to use the AARP name will
end upon termination of the member services agreement with the Fund Manager
unless AARP otherwise agrees to let the AARP Funds continue to use the AARP
name.
Management Fees--There are eight mutual funds offered by the AARP Investment
Program which are organized as four Massachusetts business trusts--AARP Cash
Investment Funds, AARP Income Trust, AARP Tax Free Income Trust and AARP Growth
Trust.
Each AARP Fund pays the Fund Manager a fee for management and administrative
services. Commencing February 1, 1994, the following fee arrangement was
instituted. The management fee consists of two elements: a Base Fee and an
Individual Fund Fee. The Base Fee is calculated as a percentage of the combined
net assets of all of the AARP Funds. Each AARP Fund pays, as its portion of the
Base Fee, an amount equal to the ratio of its daily net assets to the daily net
assets of all of the AARP Funds. The table below shows the annual Base Fee Rate
at specified levels of Program assets:
Annual Base Fee Rate Program Assets
.350% First $2 billion
.330% Next $2 billion
.300% Next $2 billion
.280% Next $2 billion
.260% Next $3 billion
.250% Next $3 billion
.240% Thereafter
In addition to the Base Fee Rate, each AARP Fund pays a flat Individual Fund Fee
based on the net assets of that Fund. This fee rate is not linked to the total
assets of the Program. The Individual Fee Rate recognizes the different
characteristics of each AARP Fund, the varying levels of complexity of
investment research and securities trading required to manage each Fund, as well
as the relative value that can be, and has been, added by the Fund Manager. The
Individual Fund Fee Rate for the AARP Growth and Income Fund is .19%.
Under this fee structure, the combined Base Fee and the Individual Fund Fee,
called the "Effective Management Fee Rate," would be reduced if total Program
assets increase to certain levels, regardless of whether the AARP Growth and
Income Fund's assets increase or decrease. The converse is also true--if assets
decrease to certain levels, the Effective Management Fee Rate increases,
regardless of any increase or decrease in assets of the AARP Growth and Income
Fund. For the fiscal year ended September 30, 1994 (under the former fee
arrangement from October 1, 1993 to January 31, 1994, and the new agreement from
February 1, 1994 to September 30, 1994), fees paid to the Fund Manager totaled
.49 of 1% for the AARP Growth and Income Fund.
The Fund Manager pays a portion of the management fee to AARP Financial Services
Corporation (AFSC). AFSC provides the Fund Manager with advice and other
services relating to AARP Fund investment by AARP members.
The fee paid to AFSC is calculated on a daily basis and depends on the level of
total assets of the AARP Investment Program. The fee rate decreases as the level
of total assets increases. The fee rate for each level of assets is .07 of 1%
for the first $6 billion, .06 of 1% for the next $10 billion and .05 of 1%
thereafter.
Understanding Fund Performance
Performance of the Fund may be included in advertisements, sales literature or
shareholder reports. Important components of performance are total return and
cumulative total return. These components vary based on changes in market
conditions and the level of the Fund's expenses. Total return, and cumulative
total return are based on historical earnings and are not intended to indicate
future performance.
What is total return? The total return of a mutual fund refers to the average
annual percentage change in value of an investment in the fund assuming that the
investment has been held for the stated period. Total return quotations are
expressed in terms of average annual compound rates of return for all periods
quoted and assume that all dividends and capital gain distributions during the
period were reinvested in shares of the fund.
What is cumulative total return? Cumulative total return of a mutual fund
represents the cumulative change in value of an investment in a fund for various
periods. It assumes that all dividends and capital gain distributions during the
period were reinvested in shares of the fund.
UNDERSTANDING SHARE PRICE
How is a Fund's share price determined? Share price is based on the Fund's net
assets. It is calculated by dividing the current market value of total fund
assets, less all liabilities, by the total number of shares outstanding. The
Fund's custodian, State Street Bank and Trust Company, determines net asset
value per share of the Fund as of the close of regular trading on the New York
Stock Exchange, normally 4:00 p.m. Eastern time on each day the Exchange is open
for trading. The Fund reserves the right to suspend the sale of Fund shares
after appropriate notice to shareholders if the Trustees of the Trust determine
that it is in the best interest of shareholders.
Opening an Account
How do I get started? Fill out, sign and return your IRA Enrollment Form (and
IRA Transfer Form if you are transferring your IRA) with your check in the
postage paid envelope provided. Once your IRA Enrollment Form is received, an
account number will be assigned to you. Your check should only be drawn on a
U.S. bank and be payable to State Street Bank and Trust Co. c/o AARP Investment
Program.
Please note you cannot open AARP IRA accounts by wire.
What is the minimum investment? You can open an AARP IRA with as little as $250.
What happens if my investment falls below its minimum balance? The Fund reserves
the right to redeem accounts below the minimum balance including accounts of new
investors, where a reduction in value has occurred due to a distribution or
exchange out of the account. This distribution may be subject to tax and
penalties. The Fund will return the proceeds to you if you do not increase an
account above the minimum within 60 days after notice. However, if your account
falls below the minimum solely as a result of market activity, your account will
not be closed.
What is the normal processing time of checks when making a contribution? If
checks are drawn on a Federal Reserve System member bank, the Program will
normally execute checks received in good order on the same business day that
they are received.
Third Party Transactions--If contributions and distributions of Fund shares are
arranged and settlement is made at an investor's election through a member of
the National Association of Securities Dealers, Inc., other than Scudder
Investor Services, Inc., that member may, at its discretion, charge a fee for
that service.
Telephone Transactions--When you open an account you automatically become
eligible to exchange shares among the Program's Family of Funds by telephone.
When exchange requests are made over the telephone, procedures are in place to
give reasonable assurance that telephone instructions are genuine, including
recording telephone calls, testing a caller's identity and sending written
confirmation of such transactions. If the Fund does not follow such procedures,
it may be liable for losses due to unauthorized or fraudulent telephone
instructions.
Opening an IRA
Minimum initial investment: $250
A $2,000 contribution gives you the maximum advantage.
* By Mail
Send your completed and signed IRA Enrollment Form, indicating "New IRA"
and send a check in the enclosed business reply envelope by regular mail
to:
AARP Investment Program
P.O. Box 2540
Boston, MA 02208-2540
by express, registered, or certified mail to:
AARP Investment Program
1099 Hingham Street
Rockland, MA 02370
Make checks payable to "State Street Bank and Trust Co. c/o AARP Investment
Program."
IRA Transfers
If you've reached age 70 1/2, you must take your required minimum
distribution for the year before you complete the transfer.
Send your completed and signed IRA Enrollment Form and Transfer Form to one
of the addresses above. We'll take care of everything for you.
IRA Rollovers
If you've reached age 70 1/2, you must take your required minimum
distribution for the year before you complete the rollover.
Send your completed and signed IRA Enrollment Form, indicating "IRA-to-IRA
Rollover" and send a check in the enclosed business reply envelope for your
rollover amount to one of the addresses above.
Make checks payable to "State Street Bank and Trust Co. c/o AARP Investment
Program."
Direct IRA Rollovers
If you've reached age 70 1/2, you must take your required minimum
distribution for the year before you complete the rollover.
Send your completed and signed IRA Enrollment Form, indicating "Rollover
from Employer Sponsored Plan" and send a check in the enclosed business
reply envelope for your rollover amount to one of the addresses above.
If a check is not received with your enrollment form, an IRA account will
be established in your name, and you will be sent confirmation and
instructions for sending the proceeds from your plan.
Adding to Your Investment
After your account is opened, you can add to your AARP Growth and Income
Fund investment in any amount in the following ways. (Remember, there are
limitations on the amount you can contribute annually to an IRA):
* Mail your request
Send your check with a personalized investment slip or with a letter
naming your account number.
* Exchange from another AARP Fund
See Exchanging below.
Exchanging Shares
You make an exchange when you sell shares in one AARP Fund to purchase
shares in another. This is technically two transactions, a sale and
purchase of shares. If the value of the shares sold in the exchange was
higher or lower than your original purchase price, you may have a capital
gain or loss. You may exchange shares from an existing AARP Fund account to
open or add to an existing AARP Growth and Income Fund account. If you wish
to exchange shares from your AARP Growth and Income Fund account into other
AARP Funds, call 1-800-253-2277 for a full prospectus containing
information about the entire Program.
* Mail or fax your request
Tell us the AARP Fund from which to take the money you wish to
exchange into AARP Growth and Income Fund. Include your account
number, registered name(s) and address, and either the dollar amount
or number of shares you want to exchange. Be sure to sign your name(s)
exactly as it appears on the account statement.
* Call Toll-Free
Call us before 4:00 p.m. Eastern time to exchange by close of business
the same day. If you purchased shares by check, you may not use this
option until 7 business days after the purchase date to allow the
check to clear. During this period, you must send your exchange
request by mail or fax.
* Call the Easy-Access Line
You can exchange shares through this automated toll-free line. It is
available 24 hours a day, 7 days a week. Simply call toll-free and
follow the recorded voice instructions.
ADDITIONAL INFORMATION ABOUT DISTRIBUTIONS
How do I take a distribution? Shareholders who have reached the age of 70 1/2
are required to begin to receive distributions by April 1, following the year in
which they reached age 70 1/2. Written requests for distributions should be made
in advance of the required distribution date to ensure that the distribution
will be made before that time. Shareholders should specify whether they would
like the distribution in a lump sum or in installment payments. The Fund will
make the distribution as soon as possible after receiving the written request.
Call 1-800-253-2277 to request an IRA Distribution form. Distributions may be
requested at any time and must be made in writing. Just tell us the number of
shares or dollar amount you wish to distribute. Make sure to give us your
account number, registered name and where you want the distribution proceeds
sent. If you want the proceeds to go to an address other than your registered
address, to your bank, or to someone else, please provide complete details. This
will require a special type of authorization called a Signature Guarantee. (See
next page.) Sign the letter exactly as it appears on your account statement. If
your request requires a Signature Guarantee, you must mail the request instead
of faxing it.
When are distributions processed? Any distribution request received in good
order prior to 4:00 p.m. Eastern time during normal business operations will be
processed on that day. The request will be processed at that night's closing
share price. Normally, requests received in good order after 4:00 p.m. Eastern
time will be processed on the next business day.
Normally, proceeds of your distribution will be sent on the business day
following a distribution request in good order. In any event, the Fund may take
no more than 7 calendar days to send your distribution proceeds.
When can I expect to receive my money? We will mail your distribution proceeds
promptly. If you purchase shares by check and then request a distribution of
them by letter within 7 business days of the purchase, the distribution proceeds
may be held until the purchase check has cleared the banking system. When the
check has cleared, we will mail your distribution proceeds promptly.
Short-Term Trading--Contributions should be made for long-term investment
purposes only. The AARP Funds do not permit a pattern of frequent purchases and
sales in response to short-term changes in share price.
When such a pattern occurs, the AARP Funds and Scudder Investor Services, Inc.
reserve the right to restrict purchases or exchanges. This right extends to
individual purchasers or groups of related purchasers.
SIGNATURE GUARANTEES
What is a "Signature Guarantee"? A "Signature Guarantee" is a certification of
your signature. We require this for your protection and to prevent fraudulent
distributions. In effect, the appropriate institution (see below) guarantees
that you are authorized to make certain requests.
When do I need one? A "Signature Guarantee" from the person on the account
registration is needed for the following distribution requests:
1) Distributions of more than $50,000;
2) When distribution proceeds are payable to someone other than the registered
shareholder(s);
3) When distribution proceeds are to be sent to an address other than the
registered address; or
4) If the account's registered address has changed during the last 30 days.
Transactions requiring signature guarantees cannot be faxed.
Where can I get one? You can get your signature guaranteed through most banks,
credit unions or savings associations, or from broker-dealers, government
securities broker-dealers, national securities exchanges, registered securities
associations, or clearing agencies deemed eligible by the Securities and
Exchange Commission. Signature Guarantees by notary publics are not acceptable.
INVESTOR SERVICES
To make investing simpler and more convenient there are many free investor
services available to you.
Easy-Access Line
* Exchange between AARP Funds
* Exchange to open a new AARP Fund CALL TOLL-FREE
1-800-631-4636
* Get current performance information 24 HOURS A DAY
7 DAYS A WEEK
* Get current account balance information
* Confirm your last transaction
With the Easy-Access Line you can get performance, and account information.
If you have a touch-tone phone, you can also exchange. Simply call toll-free
1-800-631-4636 using a touch-tone phone and follow the easy pre-recorded voice
instructions.
Distributions Direct
You may choose to have fixed IRA distributions automatically deposited into your
bank checking or NOW account. To enroll in this service, your bank must be a
member of the Automated Clearing House (ACH) network. Once you enroll, your IRA
distributions will be automatically deposited into your personal bank account
within 3 business days of the distribution date. You'll receive a statement
confirming the amount. There is no charge to shareholders for the service.
STATEMENTS AND REPORTS
What kinds of statements do I receive? You will receive a prompt confirmation
statement for your transactions.
In addition, you will receive a quarterly Consolidated Statement detailing the
market value of all the AARP Funds in your account. It also includes a listing
of recent transactions. You should keep these statements for your records.
What other reports do I get? Each year, you will receive a current prospectus,
mid year report and annual report. To reduce the volume of mail, we will only
send one copy of most reports to a household (same surname, same address).
Please contact us if you wish to receive additional reports.
SERVICE PROVIDERS OF THE AARP GROWTH AND INCOME FUND
Legal Counsel
Dechert Price & Rhoads,
Washington, DC
Independent Accountants
Price Waterhouse LLP, Boston, MA
Underwriter
Scudder Investor Services, Inc., Two International Place, Boston, MA (a
wholly-owned subsidiary of Scudder) is principal underwriter of the AARP Funds.
Scudder Investor Services, Inc. offers for sale and confirms as agent all
purchases of shares of the AARP Funds.
Custodian
State Street Bank and Trust Company, Boston, MA
Transfer and Dividend-Disbursing Agent
Scudder Service Corporation, P.O. Box
2540, Boston, MA 02208-2540 (a wholly-owned subsidiary of Scudder)
Investment Adviser
Scudder, Stevens & Clark, Inc., 345 Park Avenue, New York, NY is investment
adviser for the AARP Funds.
TRUSTEES AND OFFICERS
ADELAIDE ATTARD, Trustee, Consultant, Gerontology; Commissioner, County of
Nassau, New York, Department of Senior Citizen Affairs (1971-1991); Chairperson,
Federal Council on Aging (1983-1992).
CYRIL F. BRICKFIELD, Trustee, Honorary Trustee; Honorary President and Special
Counsel, American Association of Retired Persons.
ROBERT N. BUTLER, M.D., Trustee, Brookdale Professor of Geriatrics and Adult
Development, Mount Sinai School of Medicine; formerly Director, National
Institute on Aging, National Institute of Health.
LINDA C. COUGHLIN, President and Trustee, Managing Director, Scudder, Stevens &
Clark, Inc., Director, Scudder Investor Services, Inc.*
HORACE B. DEETS, Vice Chairman and Trustee, Executive Director, American
Association of Retired Persons; Member, Board of Councilors, Andrus Gerontology
Center; Member of the Board, HelpAge International.
MARY JOHNSTON EVANS, Trustee, Corporate Director; Senior Member, The Conference
Board, Inc.
CUYLER W. FINDLAY, Chairman and Trustee, Managing Director, Scudder, Stevens &
Clark, Inc., Senior Vice President and Director, Scudder Investor Services,
Inc.*
WAYNE F. HAEFER, Trustee, Director, Membership Division of AARP; Secretary,
Employee's Pension and Welfare Trusts of AARP and Retired Persons Services,
Inc.; Formerly Director, Administration and Data Management Division of AARP.
WILLIAM B. MACOMBER, Trustee, formerly Teacher, History and Government,
Nantucket H.S., Nantucket, MA; formerly President, The Metropolitan Museum of
Art and U.S. Ambassador to Turkey and Jordan.
ROBERT J. MYERS, Trustee, Actuarial Consultant; formerly Executive Director,
National Commission on Social Security Reform; formerly Chairman, Commission on
Railroad Retirement Reform.
JOSEPH S. PERKINS, Trustee, Director, American Association of Retired Persons;
Corporate Retirement Manager, Polaroid Corporation.
JAMES H. SCHULZ, Trustee, Professor of Economics and Kirstein Professor of Aging
Policy, Policy Center on Aging, Florence Heller School, Brandeis University.
GORDON SHILLINGLAW, Trustee, Professor Emeritus of Accounting, Columbia
University Graduate School of Business.
EDWARD V. CREED*, Vice President
THOMAS W. JOSEPH*, Vice President
DAVID S. LEE*, Vice President and Assistant Treasurer
DOUGLAS M. LOUDON*, Vice President
THOMAS F. McDONOUGH*, Vice President and Assistant Secretary
PAMELA A. McGRATH*, Vice President and Treasurer
EDWARD J. O'CONNELL*, Vice President and Assistant Treasurer
KATHRYN L. QUIRK*, Vice President and Secretary
HOWARD SCHNEIDER*, Vice President
CORNELIA M. SMALL*, Vice President
*Scudder, Stevens & Clark, Inc.
INFORMATION CONTAINED IN THE PROSPECTUS AND WHERE TO FIND IT
FUND EXPENSES 2
FINANCIAL HIGHLIGHTS 3
AN OVERVIEW OF THE AARP INVESTMENT PROGRAM 4
WHAT DOES THE AARP INVESTMENT PROGRAM OFFER ME? 5
AARP GROWTH AND INCOME FUND 6
INVESTMENT OBJECTIVE AND POLICIES 7
OTHER INVESTMENT POLICIES AND RISK FACTORS 8
INVESTMENT RESTRICTIONS 10
INFORMATION ABOUT DISTRIBUTIONS AND TAXES 11
FUND ORGANIZATION 12
UNDERSTANDING FUND PERFORMANCE 13
UNDERSTANDING SHARE PRICE 14
OPENING AN ACCOUNT 14
ADDITIONAL INFORMATION ABOUT DISTRIBUTIONS 17
SIGNATURE GUARANTEES 18
INVESTOR SERVICES 18
STATEMENTS AND REPORTS 19
SERVICE PROVIDERS OF THE AARP GROWTH AND INCOME 19
FUND
TRUSTEES AND OFFICERS 20
