AARP Investment Program
from Scudder
December 31, 1997
Dear AARP Investment Program Shareholder,
On July 18, 1997, I wrote to tell you that Scudder, Stevens & Clark, Inc.
had reached an agreement to form a strategic alliance with the Zurich Group.
I am now pleased to inform you that as of December 31, 1997, Scudder's
business combined with that of Zurich Kemper Investments, Inc., an investment
management company owned by the Zurich Group, to form Scudder Kemper
Investments, Inc.
A major advantage of this new relationship is that we can now draw on the
strengths and resources of both Scudder and Zurich Kemper Investments, Inc. to
bring you even more in-depth investment management capabilities.
To capitalize on all the expertise of this new organization, we have
made changes to several portfolio management teams. These changes are detailed
on the reverse side of this letter and are designed to further bolster our
commitment to helping you meet your financial goals.
Of course, our approach to managing your investments will remain the same.
Every AARP Mutual Fund will continue to seek competitive returns with less risk
due to less share price fluctuations than comparable funds.
If you have any questions about this information, please feel free to call
one of our knowledgeable AARP Mutual Fund Representatives toll-free at
1-800-253-2277. They are available to help you, Monday through Friday, from 8:00
a.m. to 8:00 p.m., ET.
Sincerely,
/s/Linda C. Coughlin
Linda C. Coughlin
Chairperson
This letter is for explanatory purposes and is not part of the prospectus
supplement on the following pages.
<PAGE>
AARP Investment Program
from Scudder
Supplement to Prospectus dated February 1, 1997
Trusts AARP Mutual Funds
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AARP Cash Investment Funds AARP High Quality Money Fund
AARP Income Trust AARP GNMA and U.S. Treasury Fund
AARP High Quality Bond Fund
AARP Bond Fund for Income
AARP Tax Free Income Trust AARP High Quality Tax Free Money Fund AARP
Insured Tax Free General Bond Fund
AARP Growth Trust AARP Balanced Stock and Bond Fund
AARP Growth and Income Fund
AARP U.S. Stock Index Fund
AARP Global Growth Fund
AARP Capital Growth Fund
AARP International Stock Fund
AARP Small Company Stock Fund
AARP Managed Investment AARP Diversified Income Portfolio
Portfolios Trust AARP Diversified Growth Portfolio
The Funds' investment adviser, Scudder, Stevens & Clark, Inc. ("Scudder"), and
Zurich Insurance Company ("Zurich"), an international insurance and financial
services organization, have formed a new global investment organization by
combining Scudder's business with that of Zurich's subsidiary, Zurich Kemper
Investments, Inc. ("Zurich Kemper"), and Scudder has changed its name to Scudder
Kemper Investments, Inc. ("Scudder Kemper" or the "Adviser"). As a result of the
transaction, Zurich owns approximately 70% of Scudder Kemper, with the balance
owned by Scudder Kemper's officers and employees. Scudder Kemper now manages in
excess of $200 billion in assets.
Following the transaction, the AARP Mutual Funds and Scudder Family of Funds
will continue to be pure no load. The Scudder Family of Funds consists of those
Funds or classes of Funds advised by Scudder Kemper which are offered without
commissions to purchase or redeem shares or to exchange from one Fund to
another.
The transaction between Scudder and Zurich resulted in the termination of each
Fund's investment management agreement with Scudder. However, new investment
management agreements between each Fund and Scudder Kemper were approved by each
respective Fund's Board of Trustees. A special meeting of shareholders (the
"Special Meeting") of each Fund was held in October, 1997, at which time the
shareholders also approved the new investment management agreements. The new
investment management agreements (each an "Investment Management Agreement" and,
collectively, the "Investment Management Agreements") are all effective as of
December 31, 1997 and each will be in effect for an initial term ending on the
same date as would the corresponding previous investment management agreement.
Each Fund's Investment Management Agreement is the same in all material respects
as the corresponding previous investment management agreement, except that
Scudder Kemper is the new investment adviser to each Fund.
<PAGE>
Each Fund's fundamental policies have been amended by a vote of shareholders at
each Fund's respective Special Meeting. Following is a list of each Fund's
amended and restated fundamental policies. As a matter of fundamental policy,
each Fund will not:
o borrow money, except as permitted under the Investment Company Act of 1940,
as amended, and as interpreted or modified by regulatory authority having
jurisdiction, from time to time;
o issue senior securities, except as permitted under the Investment Company
Act of 1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time;
o concentrate its investments in a particular industry, as that term is used
in the Investment Company Act of 1940, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time
(except that each of AARP High Quality Money Fund and AARP High Quality Tax
Free Money Fund reserves the freedom of action to concentrate its
investments in instruments issued by domestic banks and except that AARP
Diversified Income Portfolio and AARP Diversified Growth Portfolio may
concentrate in an underlying fund. However, each underlying fund in which
each Portfolio of the AARP Managed Investment Portfolios Trust will invest
may concentrate its investments in a particular industry);
o engage in the business of underwriting securities issued by others, except
to the extent that the Fund may be deemed to be an underwriter in
connection with the disposition of portfolio securities;
o purchase or sell real estate, which term does not include securities of
companies which deal in real estate or mortgages or investments secured by
real estate or interests therein, except that the Fund reserves freedom of
action to hold and to sell real estate acquired as a result of the Fund's
ownership of securities;
o purchase physical commodities or contracts relating to physical
commodities;
o make loans to other persons, except (i) loans of portfolio securities, and
(ii) to the extent that entry into repurchase agreements and the purchase
of debt instruments or interests in indebtedness in accordance with the
Fund's investment objective and policies may be deemed to be loans.
In addition, with respect to each of AARP High Quality Tax Free Money Fund and
AARP Insured Tax Free General Bond Fund, the Fund will, as a matter of
fundamental policy:
o have at least 80% of its net assets invested in securities that are exempt
from Federal income tax during periods of normal market conditions.
Each Fund's non-fundamental borrowing and lending policies have been amended by
the respective Fund's Board of Trustees as follows:
o For AARP High Quality Money Fund, AARP High Quality Tax Free Money Fund and
AARP Insured Tax Free General Bond Fund: the Fund does not currently intend
to borrow money in an amount greater than 5% of its total assets, except
for temporary or emergency purposes.
o For all other Funds,: the Fund does not currently intend to borrow money in
an amount greater than 5% of its total assets, except (i) for temporary or
emergency purposes and (ii) by engaging in reverse repurchase agreements,
dollar rolls, or other investments or transactions described in the Fund's
registration statement which may be deemed to be borrowings.
o For all Funds, (except AARP Diversified Income Portfolio and AARP
Diversified Growth Portfolio): the Fund currently does not intend to lend
portfolio securities in an amount greater than 5% of its total assets.
On January 1, 1998, the following lead portfolio managers will assume
responsibility for each listed fund's day-to-day operations and overall
investment strategy. This list reflects only new lead portfolio management
responsibilities; these individuals may also serve as lead portfolio managers on
additional funds.
<PAGE>
Frank J. Rachwalski, Jr.'s fund management responsibilities include AARP High
Quality Money Fund and AARP High Quality Tax Free Money Fund. Mr. Rachwalski
joined Zurich Kemper in 1973. Mr. Rachwalski has more than 20 years of
experience managing money market portfolios.
Philip G. Condon's fund management responsibilities include AARP Insured Tax
Free General Bond Fund. Mr. Condon joined the Adviser in 1983 and has more than
17 years of experience in municipal investing and portfolio management. Mr.
Condon has served as a portfolio manager on this team since 1989.
Stephen A. Wohler's fund management responsibilities include AARP High Quality
Bond Fund and AARP Bond Fund for Income. Mr. Wohler has over 17 years of
experience managing fixed-income investments and has been with the Adviser since
1979. Mr. Wohler has been a portfolio manager for AARP High Quality Bond Fund
since 1994.
Richard L. Vandenberg's fund management responsibilities include AARP GNMA and
U.S. Treasury Fund. Mr. Vandenberg has been a portfolio manager for Zurich
Kemper since 1996 when he joined the firm. Prior to 1996, Mr. Vandenberg had
been a portfolio manager for several investment management firms for over 22
years. In addition to being a portfolio manager, Mr. Vandenberg was the head of
the taxable fixed-income department at Voyageur Asset Management.
Philip S. Fortuna joins James M. Eysenbach as Co-Lead Portfolio Manager of AARP
Small Company Stock Fund. Mr. Fortuna joined the Adviser in 1986 as manager of
institutional equity accounts. He became director of quantitative research in
1987 and served as director of investment operations from 1993 to 1994. Mr.
Fortuna has been on the portfolio management team of the Fund since its
inception in February 1997.
James M. Eysenbach joins Philip S. Fortuna as Co-Lead Portfolio Manager of AARP
U.S. Stock Index Fund. Mr. Eysenbach joined the Adviser in 1991 as a senior
quantitative analyst and is currently director of quantitative research for the
Adviser. Mr. Eysenbach has more than ten years of investment research and
management experience.
December 31, 1997
