AARP Investment Program
from SCUDDER
SUPPLEMENT TO PROSPECTUS DATED
FEBRUARY 1, 1998
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Trusts AARP Mutual Funds
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AARP Cash Investment Funds AARP High Quality Money Fund
AARP Income Trust AARP High Quality Short Term Bond Fund
AARP GNMA and U.S. Treasury 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 Growth and Income Fund
AARP Small Company Stock Fund
AARP Managed Investment AARP Diversified Income with Growth Portfolio
Portfolios Trust AARP Diversified Growth Portfolio
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On December 22, 1997, Zurich Insurance Company ("Zurich") entered into an
agreement with B.A.T Industries p.l.c. ("B.A.T") pursuant to which the financial
services businesses of B.A.T will be combined with Zurich's businesses
(including Zurich's 70% interest in Scudder Kemper Investments, Inc., the Funds'
investment adviser ("Scudder Kemper")), to form a new global insurance and
financial services company known as Zurich Financial Services. After the
transaction is completed, by way of a dual holding company structure, current
Zurich Insurance Company shareholders will own approximately 57% of the new
organization, with the balance owned by B.A.T's current shareholders.
The transaction is expected to close in the third quarter of 1998. Upon
consummation of the transaction, each AARP Investment Program Fund's investment
management agreement with Scudder Kemper will be deemed to have been assigned
and, therefore, will terminate. The board of each Fund has approved new
investment management agreements with Scudder Kemper, which are substantially
identical to the current investment management agreements, except for the dates
of execution and termination. Each new investment management agreement is to
become effective upon the termination of the current investment management
agreements. The board of each Fund will seek shareholder approval of the new
investment management agreements through a proxy solicitation that is currently
scheduled to conclude in mid-December.
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Overstated Expense Ratio
On page 13 of the Prospectus regarding AARP High Quality Short Term Bond Fund,
the figure in the 1997 column of the "Ratio of Operating Expenses Before Expense
Reductions to Average Net Assets" should be 0.93% instead of 5.84%, as reported.
Additional Portfolio Manager
For the AARP Small Company Stock Fund on page 59 of the Prospectus in the
section entitled "Who at Scudder manages my investment?" the following Portfolio
Manager should be added:
Calvin S. Young, Portfolio Manager, joined the Fund Manager in 1990 as a
quantitative analyst, and has nine years of investment management
experience. Mr. Young is responsible for small company and security
research as well as portfolio management.
Planning for the Year 2000
Like other mutual funds and financial and business organizations worldwide, the
Funds could be adversely affected if computer systems on which the Funds rely,
which primarily include those used by the Fund Manager, its affiliates or other
service providers, are unable to correctly process date-related information on
and after January 1, 2000. This risk is commonly called the Year 2000 Issue.
Failure to successfully address the Year 2000 Issue could result in
interruptions to and other material adverse effects on the Funds' business and
operations. The Fund Manager has commenced a review of the Year 2000 Issue as it
may affect the Funds and is taking steps it believes are reasonably designed to
address the Year 2000 Issue, although there can be no assurances that these
steps will be sufficient. In addition, there can be no assurances that the Year
2000 Issue will not have an adverse effect on the companies whose securities are
held by the Funds or on global markets or economies generally.
Management Fee Waiver
From July 31, 1998 until January 31, 1999, the Fund Manager has agreed to waive
a portion of its management fee to the extent necessary so that the total
annualized expenses for each of the following Funds do not exceed the indicated
percentage of average daily net assets:
Expense
Fund Limitation
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AARP Bond Fund for Income 0.25%
AARP International Growth and Income Fund 1.75%
AARP Small Company Stock Fund 1.75%
AARP U.S. Stock Index Fund 0.50%
September 1, 1998
