Filed with the Securities and Exchange Commission on October 20, 1995
File No. 2-36238
File No. 811-2021
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 36
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 20
Scudder Securities Trust
(Exact Name of Registrant as Specified in Charter)
Two International Place, Boston, MA 02110-4103
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (617) 295-2567
Thomas F. McDonough
Scudder, Stevens & Clark, Inc.
Two International Place, Boston MA 02110
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
immediately upon filing pursuant to paragraph (b)
--------
X on November 1, 1995 pursuant to paragraph (b)
--------
60 days after filing pursuant to paragraph (a)(i)
--------
on _______________ pursuant to paragraph (a)(i)
--------
75 days after filing pursuant to paragraph (a)(ii)
--------
on _______________ pursuant to paragraph (a)(ii) of Rule 485.
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The Registrant has filed a declaration registering an indefinite amount of
securities pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended. The Registrant filed the notice required by Rule 24f-2 for its most
recent fiscal year on August 24, 1995.
<PAGE>
SCUDDER SECURITIES TRUST
Calculation of Registration Fee under the Securities Act of 1933
Proposed Proposed
Maximum Maximum
Title of Securities Amount Offering Aggregate Amount of
Being Being Price Per Offering Registration
Registered Registered Share (1) Price (1,2) Fee (2)
---------- ---------- ---------- ---------- ----------
Shares of Beneficial 1,691,425 $38.52 $290,000 $100.00
Interest, $.01 Par Value
Scudder Development Fund
This Post-Effective Amendment No. 36 seeks to register 1,691,425 additional
shares of beneficial interest under the Securities Act of 1933.
(1) Computed under Rule 457(d) on the basis of the net asset value per
share of registrant's shares of beneficial interest at the close
of business on October 12, 1995. The above calculation shall not
be deemed a representation as to the actual offering price.
(2) Calculated pursuant to Rule 24e-2 under the Investment Company Act
of 1940.
(a) Total number of shares redeemed during
previous fiscal year 10,208,073
(b) Total number of shares included in (a)
previously used under Rule 24e-2 this fiscal
year -0-
(c) Total number of shares included in (a)
previously used under Rule 24f-2(c) this
fiscal year 8,524,177
(d) Total number of shares included in (a) being
used to reduce maximum aggregate offering
price in this Post-Effective Amendment 1,683,896
<PAGE>
SCUDDER DEVELOPMENT FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
PART A
<TABLE>
<CAPTION>
Item No. Item Caption Prospectus Caption
<S> <C> <C>
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information
4. General Description of INVESTMENT OBJECTIVES AND POLICIES
Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
FUND ORGANIZATION
5. Management of the Fund FINANCIAL HIGHLIGHTS
A MESSAGE FROM SCUDDER'S CHAIRMAN FUND
ORGANIZATION--Investment adviser, Transfer agent
SHAREHOLDER BENEFITS--A team approach to investing
TRUSTEES AND OFFICERS
5A. Management's Discussion of NOT APPLICABLE
Fund Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION--Dividends and capital gains
Securities distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax information
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder Automated Information Line, Dividend
reinvestment plan, T.D.D. service for the hearing impaired
HOW TO CONTACT SCUDDER
7. Purchase of Securities FUND ORGANIZATION--Underwriter
Being Offered PURCHASES
TRANSACTION INFORMATION--Purchasing
shares, Share price, Processing time,
Minimum balances, Third party
transactions
SHAREHOLDER BENEFITS--Dividend reinvestment plan
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
INVESTMENT PRODUCTS AND SERVICES
8. Redemption or Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax identification number,
Minimum balances
9. Pending Legal Proceedings NOT APPLICABLE
Cross Reference - Page 1
<PAGE>
PART B
Caption in Statement of
Item No. Item Caption Additional Information
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and FUND ORGANIZATION
History
13. Investment Objectives and THE FUND'S INVESTMENT OBJECTIVE AND POLICIES PORTFOLIO
Policies TRANSACTIONS--Brokerage Commissions,
Portfolio turnover
14. Management of the Fund INVESTMENT ADVISER
TRUSTEES AND OFFICERS
REMUNERATION
15. Control Persons and TRUSTEES AND OFFICERS
Principal Holders of
Securities
16. Investment Advisory and INVESTMENT ADVISER
Other Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts, Other Information
17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage Commissions, Portfolio Turnover
and Other Practices
18. Capital Stock and FUND ORGANIZATION
Other Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
19. Purchase, Redemption and PURCHASES
Pricing of Securities EXCHANGES AND REDEMPTIONS
Being Offered FEATURES AND SERVICES OFFERED BY THE FUND--Dividend and Capital Gain
Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of Performance PERFORMANCE INFORMATION
Data
23. Financial Statements FINANCIAL STATEMENTS
Cross Reference - Page 2
<PAGE>
SCUDDER SMALL COMPANY VALUE FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
PART A
Item No. Item Caption Prospectus Caption
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial NOT APPLICABLE
Information
4. General Description of INVESTMENT OBJECTIVES AND POLICIES
Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
FUND ORGANIZATION
5. Management of the Fund FINANCIAL HIGHLIGHTS
A MESSAGE FROM SCUDDER'S CHAIRMAN
FUND ORGANIZATION--Investment adviser,
Transfer agent
SHAREHOLDER BENEFITS--A team approach to investing
TRUSTEES AND OFFICERS
5A. Management's Discussion of NOT APPLICABLE
Fund Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION--Dividends and capital gains
Securities distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax information
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder Automated Information Line, Dividend
reinvestment plan, T.D.D. service for the hearing impaired
HOW TO CONTACT SCUDDER
7. Purchase of Securities FUND ORGANIZATION--Underwriter
Being Offered PURCHASES
TRANSACTION INFORMATION--Purchasing
shares, Share price, Processing time,
Minimum balances, Third party
transactions
SHAREHOLDER BENEFITS--Dividend reinvestment plan
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
INVESTMENT PRODUCTS AND SERVICES
8. Redemption or Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax identification number,
Minimum balances
9. Pending Legal Proceedings NOT APPLICABLE
Cross Reference - Page 3
<PAGE>
PART B
Caption in Statement of
Item No. Item Caption Additional Information
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and FUND ORGANIZATION
History
13. Investment Objectives and THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
Policies PORTFOLIO TRANSACTIONS--Brokerage Commissions, Portfolio turnover
14. Management of the Fund INVESTMENT ADVISER
TRUSTEES AND OFFICERS
REMUNERATION
15. Control Persons and TRUSTEES AND OFFICERS
Principal Holders of
Securities
16. Investment Advisory and INVESTMENT ADVISER
Other Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts, Other Information
17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage Commissions, Portfolio Turnover
and Other Practices
18. Capital Stock and FUND ORGANIZATION
Other Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
19. Purchase, Redemption and PURCHASES
Pricing of Securities EXCHANGES AND REDEMPTIONS
Being Offered FEATURES AND SERVICES OFFERED BY THE FUND--Dividend and Capital Gain
Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of Performance PERFORMANCE INFORMATION
Data
23. Financial Statements FINANCIAL STATEMENTS
</TABLE>
Cross Reference - Page 4
<PAGE>
This prospectus sets forth concisely the information about Scudder Development
Fund, a series of Scudder Securities Trust, an open-end management investment
company, that a prospective investor should know before investing. Please retain
it for future reference.
If you require more detailed information, a Statement of Additional Information
dated November 1, 1995, as amended from time to time, may be obtained without
charge by writing Scudder Investor Services, Inc., Two International Place,
Boston, MA 02110-4103 or calling 1-800-225-2470. The Statement, which is
incorporated by reference into this prospectus, has been filed with the
Securities and Exchange Commission.
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.
Contents--see page 4.
Scudder
Development
Fund
Prospectus
November 1, 1995
A pure no-load(TM) (no sales charges) mutual fund which seeks long-term growth
of capital by investing primarily in securities of emerging growth companies
<PAGE>
Expense information
How to compare a Scudder pure no-load(TM) fund
This information is designed to help you understand the various costs and
expenses of investing in Scudder Development Fund (the "Fund"). By reviewing
this table and those in other mutual funds' prospectuses, you can compare the
Fund's fees and expenses with those of other funds. With Scudder's pure
no-load(TM) funds, you pay no commissions to purchase or redeem shares, or to
exchange from one fund to another. As a result, all of your investment goes to
work for you.
1) Shareholder transaction expenses: Expenses charged directly to your
individual account in the Fund for various transactions.
Sales commissions to purchase shares (sales load) NONE
Commissions to reinvest dividends NONE
Redemption fees NONE*
Fees to exchange shares NONE
2) Annual Fund operating expenses: Expenses paid by the Fund before it
distributes its net investment income, expressed as a percentage of the
Fund's average daily net assets, for the fiscal year ended June 30, 1995.
Investment management fee 0.99%
12b-1 fees NONE
Other expenses 0.33%
-----
Total Fund operating expenses 1.32%
=====
Example
Based on the level of total Fund operating expenses listed above, the total
expenses relating to a $1,000 investment, assuming a 5% annual return and
redemption at the end of each period, are listed below. Investors do not pay
these expenses directly; they are paid by the Fund before it distributes its
net investment income to shareholders. (As noted above, the Fund has no
redemption fees of any kind.)
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$13 $42 $72 $159
See "Fund organization--Investment adviser" for further information about the
investment management fee. This example assumes reinvestment of all dividends
and distributions and that the percentage amounts listed under "Annual Fund
operating expenses" remain the same each year. This example should not be
considered a representation of past or future expenses or return. Actual Fund
expenses and return vary from year to year and may be higher or lower than
those shown.
* You may redeem by writing or calling the Fund. If you wish to receive your
redemption proceeds via wire, there is a $5 wire service fee. For
additional information, please refer to "Transaction information--Redeeming
shares."
2
<PAGE>
Financial highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the audited
financial statements.
If you would like more detailed information concerning the Fund's performance,
a complete portfolio listing and audited financial statements are available in
the Fund's Annual Report dated June 30, 1995 and may be obtained without
charge by writing or calling Scudder Investor Services, Inc.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30, (a)
-------------------------------------------------------------------------------------------------------
1995(b) 1994(b) 1993(b) 1992(b) 1991(b) 1990(b) 1989(b) 1988 1987 1986(b)
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period................ $27.58 $ 34.58 $29.92 $27.33 $26.25 $22.54 $22.00 $25.39 $25.12 $20.41
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment loss... (.31) (.30) (.27) (.23) (.10) (.08) (.10) (.08) (.07) (.01)
Net realized
and unrealized
gain (loss) on
investment
transactions........ 12.20 (3.63) 6.63 3.78 2.41 6.07 1.06 (1.41) 1.67 5.81
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Total from
investment
operations............ 11.89 (3.93) 6.36 3.55 2.31 5.99 .96 (1.49) 1.60 5.80
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
From net investment
income.............. -- -- -- -- -- -- -- -- -- (.17)
From net realized
gains on investment
transactions........ (2.12) (3.07) (1.70) (.96) (1.23) (2.28) (.42) (1.90) (1.33) (.92)
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (2.12) (3.07) (1.70) (.96) (1.23) (2.28) (.42) (1.90) (1.33) (1.09)
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period......... $37.35 $ 27.58 $34.58 $29.92 $27.33 $26.25 $22.54 $22.00 $25.39 $25.12
====== ======= ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%)........ 45.41 (12.91) 22.28 12.83 10.32 28.50 4.66 (5.35) 7.51 29.92
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end
of period
($ millions).......... 727 546 821 700 476 361 275 356 387 359
Ratio of operating
expenses to
average
net assets (%)........ 1.32 1.27 1.30 1.30 1.29 1.34 1.32 1.30 1.27 1.25
Ratio of net
investment
loss to average
net assets (%)........ (1.01) (.91) (.83) (.70) (.40) (.35) (.47) (.44) (.33) (.03)
Portfolio turnover
rate (%).............. 41.6 48.3 49.2 53.5 70.8 40.1 32.0 39.2 23.5 29.4
<FN>
(a) All per share and share outstanding amounts through 1986 have been restated to reflect the November 17, 1986, 200% stock
dividend.
(b) Per share amounts have been calculated using the weighted average shares outstanding during the period method.
</FN>
</TABLE>
3
<PAGE>
A message from Scudder's chairman
Scudder, Stevens & Clark, Inc., investment adviser to the Scudder Family of
Funds, was founded in 1919. We offered America's first no-load mutual fund in
1928. Today, we manage in excess of $90 billion for many private accounts and
over 50 mutual fund portfolios. We manage the mutual funds in a special program
for the American Association of Retired Persons, as well as the fund options
available through Scudder Horizon Plan, a tax-advantaged variable annuity. We
also advise The Japan Fund and nine closed-end funds that invest in countries
around the world.
The Scudder Family of Funds is designed to make investing easy and less costly.
It includes money market, tax free, income and growth funds as well as IRAs,
401(k)s, Keoghs and other retirement plans.
Services available to all shareholders include toll-free access to the
professional service representatives of Scudder Investor Relations, easy
exchange among funds, shareholder reports, informative newsletters and the
walk-in convenience of Scudder Funds Centers.
All Scudder mutual funds are pure no-load(TM). This means you pay no commissions
to purchase or redeem your shares or to exchange from one fund to another. There
are no "12b-1" fees either, which many other funds now charge to support their
marketing efforts. All of your investment goes to work for you. We look forward
to welcoming you as a shareholder.
/s/ Daniel Pierce
Scudder Development Fund
Investment objective
* long-term growth of capital
Investment characteristics
* a professionally managed portfolio consisting primarily of securities of
emerging growth companies
* potential for above-average long-term growth of capital in return for
above-average risk
* daily liquidity at current net asset value
Contents
Investment objective and policies 5
Why invest in the Fund? 5
Additional information about policies and investments 6
Distribution and performance information 8
Fund organization 9
Purchases 10
Exchanges and redemptions 11
Transaction information 12
Shareholder benefits 15
Trustees and Officers 18
Investment products and services 19
How to contact Scudder Back cover
4
<PAGE>
Investment objective and policies
Above-average long-term capital growth
Scudder Development Fund (the "Fund"), a diversified series of Scudder
Securities Trust, seeks long-term growth of capital by investing primarily in
securities of emerging growth companies. The Fund is designed for investors in
search of substantial long-term growth who can accept above-average stock market
risk and little or no current income.
Except as otherwise indicated, the Fund's investment objective and policies are
not fundamental and may be changed without a vote of shareholders. Shareholders
will receive written notice of any changes in the Fund's objective. If there is
a change in investment objective, shareholders should consider whether the Fund
remains an appropriate investment in light of their then current financial
position and needs. There can be no assurance that the Fund's objective will be
met.
Investments
The Fund generally invests in equity securities, including common stocks and
convertible securities, of relatively small or little-known companies, commonly
referred to as emerging growth companies, that the Fund's investment adviser,
Scudder, Stevens & Clark, Inc. (the "Adviser") believes have above-average
earnings growth potential and/or may receive greater market recognition. Both
factors are believed to offer significant opportunity for capital appreciation
and the Adviser will attempt to identify these opportunities before their
potential is recognized by investors in general.
To help reduce risk, the Fund allocates its investments among many companies and
different industries. In selecting industries and companies for investment, the
Adviser will consider overall growth prospects, financial condition, competitive
position, technology, research and development, productivity, labor costs, raw
material costs and sources, profit margins, return on investment, structural
changes in local economies, capital resources, the degree of governmental
regulation or deregulation, management and other factors.
For temporary defensive purposes the Fund may vary from its investment policy
during periods in which conditions in securities markets or other economic or
political conditions warrant. In such cases, the Fund may hold cash, high
quality debt securities without equity features, U.S. Government securities and
invest in money market instruments which are rated in the two highest categories
by Moody's Investors Service, Inc. or Standard & Poor's, or, if unrated, are
deemed by the Adviser to be of equivalent quality.
In addition, the Fund may invest in preferred stocks when management anticipates
that the capital appreciation is likely to equal or exceed that of common stocks
over a selected time.
The Fund may enter into repurchase agreements with member banks of the Federal
Reserve System and broker/dealers which are recognized as reporting government
securities dealers. In addition, the Fund may engage in strategic transactions.
See "Additional information about policies and investments" for more information
about these investment techniques.
Why invest in the Fund?
Scudder Development Fund offers participation in the potential growth of small
companies with favorable long-term prospects. It also offers the benefits of
professional management of investments in many rapidly changing sectors of the
economy. Examples include new retailing concepts, the U.S. transition to a more
service based economy and advances in health care, communications and
technology. In return for accepting above-average risk, investors gain access to
a large, diversified portfolio designed for above-average capital appreciation
5
<PAGE>
compared to that available from larger companies such as those in the Standard &
Poor's 500 Stock Index.
In addition, the Fund offers all the benefits of the Scudder Family of Funds.
Scudder, Stevens & Clark, Inc. manages a diverse family of pure no-load(TM)
funds and provides a wide range of services to help investors meet their
investment needs. Please refer to "Investment products and services" for
additional information.
Additional information about policies and investments
Investment restrictions
The Fund has adopted certain fundamental policies which may not be changed
without a vote of shareholders and which are designed to reduce the Fund's
investment risk.
The Fund may not borrow money except as a temporary measure for extraordinary or
emergency purposes and may not make loans except through the lending of
portfolio securities, the purchase of debt securities or through repurchase
agreements.
In addition, as a matter of nonfundamental policy, the Fund may not invest more
than 10% of its total assets, in the aggregate, in securities which are not
readily marketable, repurchase agreements maturing in more than seven days and
restricted securities. The Fund may not invest more than 5% of its net assets in
warrants. A complete description of these and other policies and restrictions is
contained under "Investment Restrictions" in the Fund's Statement of Additional
Information.
Strategic Transactions and derivatives
The Fund may, but is not required to, utilize various other investment
strategies as described below to hedge various market risks (such as interest
rates, currency exchange rates, and broad or specific equity or fixed-income
market movements), to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio or to enhance potential gain. These
strategies may be executed through the use of derivative contracts. Such
strategies are generally accepted as a part of modern portfolio management and
are regularly utilized by many mutual funds and other institutional investors.
Techniques and instruments may change over time as new instruments and
strategies are developed or regulatory changes occur.
In the course of pursuing these investment strategies, the Fund may purchase and
sell exchange-listed and over-the-counter put and call options on securities,
equity and fixed-income indices and other financial instruments, purchase and
sell financial futures contracts and options thereon, enter into various
interest rate transactions such as swaps, caps, floors or collars, and enter
into various currency transactions such as currency forward contracts, currency
futures contracts, currency swaps or options on currencies or currency futures
(collectively, all the above are called "Strategic Transactions").
Strategic Transactions may be used without limit to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for the Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio, or to establish a position in the
derivatives markets as a temporary substitute for purchasing or selling
particular securities. Some Strategic Transactions may also be used to enhance
potential gain although no more than 5% of the Fund's assets will be committed
to Strategic Transactions entered into for non-hedging purposes. Any or all of
these investment techniques may be used at any time and in any combination, and
there is no particular strategy that dictates the use of one technique rather
6
<PAGE>
than another, as use of any Strategic Transaction is a function of numerous
variables including market conditions. The ability of the Fund to utilize these
Strategic Transactions successfully will depend on the Adviser's ability to
predict pertinent market movements, which cannot be assured. The Fund will
comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. Strategic Transactions involving
financial futures and options thereon will be purchased, sold or entered into
only for bona fide hedging, risk management or portfolio management purposes and
not for speculative purposes. Please refer to "Risk factors--Strategic
Transactions and derivatives" for more information.
Foreign securities
While the Fund generally emphasizes investments in companies domiciled in the
U.S., it may invest in listed and unlisted foreign securities that meet the same
criteria as the Fund's domestic holdings. The Fund may invest in foreign
securities when the anticipated performance of the foreign securities is
believed by the Adviser to offer more potential than domestic alternatives in
keeping with the investment objective of the Fund. However, the Fund has no
current intention of investing more than 20% of its net assets in foreign
securities.
Risk factors
The Fund's risks are determined by the nature of the securities held and the
portfolio management strategies used by the Adviser. The following are
descriptions of certain risks related to investments and techniques that the
Fund may use from time to time.
Investing in emerging growth companies. The investment risk associated with
emerging growth companies is higher than that normally associated with larger,
older companies due to the greater business risks of small size, the relative
age of the company, limited product lines, distribution channels and financial
and managerial resources. Further, there is typically less publicly available
information concerning smaller companies than for larger, more established ones.
The securities of small companies are often traded over-the-counter and may not
be traded in the volumes typical on a national securities exchange.
Consequently, in order to sell this type of holding, the Fund may need to
discount the securities from recent prices or dispose of the securities over a
long period of time. The prices of this type of security may be more volatile
than those of larger companies which are often traded on a national securities
exchange.
Foreign securities. Investments in foreign securities involve special
considerations, due to limited information, higher brokerage costs, different
accounting standards and thinner trading markets as compared to domestic markets
and the likely impact of foreign taxes on the income from securities. They may
also entail other risks, such as the possibility of one or more of the
following: imposition of dividend or interest withholding or confiscatory taxes;
currency blockages or transfer restrictions; expropriation, nationalization or
other adverse political or economic developments; less government supervision
and regulation of securities exchanges, brokers and listed companies; and the
difficulty of enforcing obligations in other countries. Purchases of foreign
securities are usually made in foreign currencies and, as a result, the Fund may
incur currency conversion costs and may be affected favorably or unfavorably by
changes in the value of foreign currencies against the U.S. dollar.
Further, it may be more difficult for the Fund's agents to keep currently
informed about corporate actions which may affect the prices of portfolio
securities. Communications between the U.S. and foreign countries may be less
reliable than within the U.S., increasing the risk of delayed settlements of
portfolio transactions or loss of certificates for portfolio securities. The
7
<PAGE>
Fund's ability and decisions to purchase and sell portfolio securities may be
affected by laws or regulations relating to the convertibility and repatriation
of assets.
Strategic Transactions and derivatives. Strategic Transactions, including
derivative contracts, have risks associated with them including possible default
by the other party to the transaction, illiquidity and, to the extent the
Adviser's view as to certain market movements is incorrect, the risk that the
use of such Strategic Transactions could result in losses greater than if they
had not been used. Use of put and call options may result in losses to the Fund,
force the sale or purchase of portfolio securities at inopportune times or for
prices higher than (in the case of put options) or lower than (in the case of
call options) current market values, limit the amount of appreciation the Fund
can realize on its investments or cause the Fund to hold a security it might
otherwise sell. The use of currency transactions can result in the Fund
incurring losses as a result of a number of factors including the imposition of
exchange controls, suspension of settlements or the inability to deliver or
receive a specified currency. The use of options and futures transactions
entails certain other risks. In particular, the variable degree of correlation
between price movements of futures contracts and price movements in the related
portfolio position of the Fund creates the possibility that losses on the
hedging instrument may be greater than gains in the value of the Fund's
position. In addition, futures and options markets may not be liquid in all
circumstances and certain over-the-counter options may have no markets. As a
result, in certain markets, the Fund might not be able to close out a
transaction without incurring substantial losses, if at all. Although the use of
futures contracts and options transactions for hedging should tend to minimize
the risk of loss due to a decline in the value of the hedged position, at the
same time they tend to limit any potential gain which might result from an
increase in value of such position. Finally, the daily variation margin
requirements for futures contracts would create a greater ongoing potential
financial risk than would purchases of options, where the exposure is limited to
the cost of the initial premium. Losses resulting from the use of Strategic
Transactions would reduce net asset value, and possibly income, and such losses
can be greater than if the Strategic Transactions had not been utilized. The
Strategic Transactions that the Fund may use and some of their risks are
described more fully in the Fund's Statement of Additional Information.
Distribution and performance information
Dividends and capital gains distributions
The Fund intends to distribute any dividends from its net investment income and
any net realized capital gains after utilization of capital loss carryforwards,
if any, in December to prevent application of a federal excise tax, although an
additional distribution may be made within three months of the Fund's fiscal
year end, if necessary. Any dividends or capital gains distributions declared in
October, November or December with a record date in such a month and paid the
following January will be treated by shareholders for federal income tax
purposes as if received on December 31 of the calendar year declared. According
to preference, shareholders may receive distributions in cash or have them
reinvested in additional shares of the Fund. If an investment is in the form of
a retirement plan, all dividends and capital gains distributions must be
reinvested into the shareholder's account.
Generally, dividends from net investment income are taxable to shareholders as
ordinary income. Long-term capital gains distributions, if any, are taxable as
8
<PAGE>
long-term capital gains regardless of the length of time shareholders have owned
their shares. Short-term capital gains and any other taxable income
distributions are taxable as ordinary income. A portion of such dividends from
net investment income may qualify for the dividends-received deduction for
corporations.
The Fund sends detailed tax information to shareholders about the amount and
type of its distributions by January 31 of the following year.
Performance information
From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature or shareholder reports. All performance figures
are historical, show the performance of a hypothetical investment and are not
intended to indicate future performance. "Total return" is the change in value
of an investment in the Fund for a specified period. The "average annual total
return" of the Fund is the average annual compound rate of return of an
investment in the Fund assuming the investment has been held for one year, five
years and ten years as of a stated ending date. "Cumulative total return"
represents the cumulative change in value of an investment in the Fund for
various periods. All types of total return calculations assume that all
dividends and capital gains distributions during the period were reinvested in
shares of the Fund. "Capital change" measures return from capital, including
reinvestment of any capital gains distributions but does not include the
reinvestment of dividends. Performance will vary based upon, among other things,
changes in market conditions and the level of the Fund's expenses.
Fund organization
Scudder Development Fund is a diversified series of Scudder Securities Trust
(the "Trust"), formerly Scudder Development Fund, an open-end management
investment company registered under the Investment Company Act of 1940 (the
"1940 Act"). The Trust was organized as a Massachusetts business trust in
October 1985 and on December 31, 1985 assumed the business of its predecessor.
Its predecessor was organized as a Delaware corporation in February 1970.
The Fund's activities are supervised by the Trust's Board of Trustees.
Shareholders have one vote for each share held on matters on which they are
entitled to vote. The Trust is not required to and has no current intention of
holding annual shareholder meetings, although special meetings may be called for
purposes such as electing or removing Trustees, changing fundamental investment
policies or approving an investment advisory contract. Shareholders will be
assisted in communicating with other shareholders in connection with removing a
Trustee as if Section 16(c) of the 1940 Act were applicable.
Investment adviser
The Fund retains the investment management firm of Scudder, Stevens & Clark,
Inc., a Delaware corporation, to manage its daily investment and business
affairs subject to the policies established by its Trustees. The Trustees have
overall responsibility for the management of the Fund under Massachusetts law.
For the fiscal year ended June 30, 1995, the Adviser received an investment
management fee of 0.99% of the Fund's average daily net assets.
The fee is graduated so that increases in the Fund's net assets may result in a
lower fee rate and decreases in the Fund's net assets may result in a higher
fee.
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. Because of the higher cost of
research, this fee is higher than that charged by most funds.
9
<PAGE>
(Continued on page 12)
Purchases
-------------------------------------------------------------------------------
Opening Minimum initial investment: $1,000; IRAs $500
an account Group retirement plans (401(k), 403(b), etc.) have similar
or lower minimums. See appropriate plan literature.
Make checks o By Mail Send your completed and signed application
payable to "The and check
Scudder Funds."
by regular mail to: or by express,
registered, or
certified mail to:
The Scudder Funds Scudder Shareholder
P.O. Box 2291 Services Center
Boston, MA 42 Longwater Drive
02107-2291 Norwell, MA
02061-1612
o By Wire
Please see Transaction
information--Purchasing shares--By
wire following these tables for
details, including the ABA wire
transfer number. Then call
1-800-225-5163 for instructions.
o In Person Visit one of our Funds Centers to complete
your application with the help of a Scudder
representative. Funds Center locations are
listed under Shareholder benefits.
-------------------------------------------------------------------------------
Purchasing Minimum additional investment: $100; IRAs $50
additional Group retirement plans (401(k), 403(b), etc.) have similar
shares or lower minimums. See appropriate plan literature.
Make checks o By Mail Send a check with a Scudder investment slip,
payable to "The or with a letter of instruction including
Scudder Funds." your account number and the complete Fund
name, to the appropriate address listed above.
o By Wire Please see Transaction information--Purchasing
shares--By wire following these tables for
details, including the ABA wire
transfer number.
o In Person Visit one of our Funds Centers to make an
additional investment in your Scudder fund
account. Funds Center locations are listed
under Shareholder benefits.
o By Telephone You may purchase additional shares in an
amount of $10,000 or more. Please call
1-800-225-5163 for more details.
o By Automatic You may arrange to make investments on a
Investment regular basis through automatic deductions
Plan from your bank checking account. Please call
($50 minimum) 1-800-225-5163 for more information and an
enrollment form.
-------------------------------------------------------------------------------
10
<PAGE>
Exchanges and redemptions
- --------------------------------------------------------------------------------
Exchanging Minimum investments: $1,000 to establish a new account;
shares $100 to exchange among existing accounts
o By Telephone To speak with a service representative, call
1-800-225-5163 from 8 a.m. to 8 p.m. eastern
time or to access SAIL(TM), Scudder's
Automated Information Line, call
1-800-343-2890 (24 hours a day).
o By Mail Print or type your instructions and include:
or Fax - the name of the Fund and the account
number you are exchanging from;
- your name(s) and address as they appear
on your account;
- the dollar amount or number of shares
you wish to exchange;
- the name of the Fund you are exchanging
into; and
- your signature(s)as it appears on your
account and a daytime telephone number.
Send your instructions
by regular mail to: or by express, or by fax to:
registered or
certified
mail to:
The Scudder Funds Scudder Shareholder 1-800-821-6234
P.O. Box 2291 Services Center
Boston, MA 02107-2291 42 Longwater Drive
Norwell, MA
02060, 1612
-------------------------------------------------------------------------------
Redeeming o By Telephone To speak with a service representative, call
shares 1-800-225-5163 from 8 a.m. to 8 p.m.
eastern time or to access SAIL(TM),
Scudder's Automated Information Line,
call 1-800-343-2890 (24 hours a day). You
may have redemption proceeds sent to your
predesignated bank account, or redemption
proceeds of up to $50,000 sent to your
address of record.
o By Mail Send your instructions for redemption to the
or Fax appropriate address or fax number above and
include:
- the name of the Fund and account
number you are redeeming from;
- your name(s)and address as they appear on
your account;
- the dollar amount or number of shares you
wish to redeem; and
- your signature(s) as it appears on your
account and a daytime telephone number.
A signature guarantee is required for
redemptions over $50,000. See Transaction
information--Redeeming shares following
these tables.
o By Automatic You may arrange to receive automatic cash
Withdrawal payments periodically. Call 1-800-225-5163
Plan for more information and an enrollment form.
-------------------------------------------------------------------------------
11
<PAGE>
Fund organization (cont'd)
(Continued from page 9)
All of the Fund's expenses are paid out of gross investment income. Shareholders
pay no direct charges or fees for investment or administrative services.
Scudder, Stevens & Clark, Inc. is located at Two International Place, Boston,
Massachusetts.
Transfer agent
Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts 02107-2291, a
wholly-owned subsidiary of the Adviser, is the transfer, shareholder servicing
and dividend-paying agent for the Fund.
Underwriter
Scudder Investor Services, Inc., a wholly-owned subsidiary of the Adviser, is
the Fund's principal underwriter. Scudder Investor Services, Inc. confirms, as
agent, all purchases of shares of the Fund. Scudder Investor Relations is a
telephone information service provided by Scudder Investor Services, Inc.
Custodian
State Street Bank and Trust Company is the Fund's custodian.
Fund accounting agent
Scudder Fund Accounting Corporation, a wholly-owned subsidiary of the Adviser,
is responsible for determining the daily net asset value per share and
maintaining the general accounting records of the Fund.
Transaction information
Purchasing shares
Purchases are executed at the next calculated net asset value per share after
the Fund's transfer agent in Boston receives the purchase request in good order.
Purchases are made in full and fractional shares. (See "Share price.")
By check. If you purchase shares with a check that does not clear, your purchase
will be canceled and you will be subject to any losses or fees incurred in the
transaction. Checks must be drawn on or payable through a U.S. bank. If you
purchase shares by check and redeem them within seven business days of purchase,
the Fund may hold redemption proceeds until the purchase check has cleared. If
you purchase shares by federal funds wire, you may avoid this delay. Redemption
or exchange requests by telephone prior to the expiration of the seven-day
period will not be accepted.
By wire. To open a new account by wire, first call Scudder at 1-800-225-5163 to
obtain an account number. A representative will instruct you to send a
completed, signed application to the transfer agent in Boston. Accounts cannot
be opened without a completed, signed application and a Scudder fund account
number. Contact your bank to arrange a wire transfer to:
The Scudder Funds
State Street Bank and Trust Company
Boston, MA 02101
ABA Number 011000028
DDA Account 9903-5552
Your wire instructions must also include:
- -- the name of the fund in which the money is to be invested,
- -- the account number of the fund, and
- -- the name(s) of the account holder(s).
The account will be established once the application and money order are
received in good order.
You may also make additional investments of $100 or more to your existing
account by wire.
By exchange. Your new account will have the same registration and address as
your existing account.
The exchange requirements for corporations, other organizations, trusts,
fiduciaries, agents, institutional investors and retirement plans may be
different from those for regular accounts.
12
<PAGE>
Please call 1-800-225-5163 for more information, including information about the
transfer of special account features.
You can also make exchanges among your Scudder fund accounts on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.
By telephone order. Existing shareholders may purchase shares at a certain day's
price by calling 1-800-225-5163 before the close of regular trading on the New
York Stock Exchange (the "Exchange"), normally 4 p.m. eastern time, on that day.
Orders must be for $10,000 or more and cannot be for an amount greater than four
times the value of your account at the time the order is placed. A confirmation
with complete purchase information is sent shortly after your order is received.
You must include with your payment the order number given at the time the order
is placed. If payment by check or wire is not received within three business
days, the order is subject to cancellation and the shareholder will be
responsible for any loss to the Fund resulting from this cancellation. Telephone
orders are not available for shares held in Scudder IRA accounts and most other
Scudder retirement plan accounts.
Redeeming shares
The Fund allows you to redeem shares (i.e., sell them back to the Fund) without
redemption fees.
By telephone. This is the quickest and easiest way to sell Fund shares. If you
elected telephone redemption to your bank on your application, you can call to
request that federal funds be sent to your authorized bank account. If you did
not elect telephone redemption to your bank on your application, call
1-800-225-5163 for more information.
Redemption proceeds will be wired to your bank unless otherwise requested. If
your bank cannot receive federal reserve wires, redemption proceeds will be
mailed to your bank. There will be a $5 charge for all wire redemptions.
You can also make redemptions from your Scudder fund account on SAIL by calling
1-800-343-2890.
If you open an account by wire, you cannot redeem shares by telephone until the
Fund's transfer agent has received your completed and signed application.
Telephone redemption is not available for shares held in Scudder IRA accounts
and most other Scudder retirement plan accounts.
In the event that you are unable to reach the Fund by telephone, you should
write to the Fund; see "How to contact Scudder" for the address.
Signature guarantees. For your protection and to prevent fraudulent redemptions,
on written redemption requests in excess of $50,000 we require an original
signature and an original signature guarantee for each person in whose name the
account is registered. (The Fund reserves the right, however, to require a
signature guarantee for all redemptions.) You can obtain a signature guarantee
from most banks, credit unions or savings associations, or from broker/dealers,
municipal securities 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 notaries public are not acceptable. Redemption requirements for
corporations, other organizations, trusts, fiduciaries, agents, institutional
investors and retirement plans may be different from those for regular accounts.
For more information, please call 1-800-225-5163.
Telephone transactions
Shareholders automatically receive the ability to exchange by telephone and the
right to redeem by telephone up to $50,000 to their address of record.
Shareholders also may, by telephone, request that redemption proceeds be sent to
a predesignated bank account. Each Fund uses procedures designed to give
reasonable assurance that telephone instructions are genuine, including
13
<PAGE>
recording telephone calls, testing a caller's identity and sending written
confirmation of telephone transactions. If a 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.
Share price
Purchases and redemptions, including exchanges, are made at net asset value.
Scudder Fund Accounting Corporation determines net asset value per share as of
the close of regular trading on the Exchange, normally 4 p.m. eastern time, on
each day the Exchange is open for trading. Net asset value per share is
calculated by dividing the value of total Fund assets, less all liabilities, by
the total number of shares outstanding.
Processing time
All purchase and redemption requests received in good order by the Fund's
transfer agent in Boston by the close of regular trading on the Exchange are
executed at the net asset value per share calculated at the close of regular
trading that day.
Purchase and redemption requests received after the close of regular trading on
the Exchange will be executed the following business day.
If you wish to make a purchase of $500,000 or more, you should notify Scudder
Investor Relations by calling 1-800-225-5163.
The Fund will normally send your redemption proceeds within one business day
following the redemption request, but may take up to seven business days (or
longer in the case of shares recently purchased by check).
Short-term trading
Purchases and sales should be made for long-term investment purposes only. The
Fund and Scudder Investor Services, Inc. each reserves the right to restrict
purchases of Fund shares (including exchanges) when a pattern of frequent
purchases and sales made in response to short-term fluctuations in the Fund's
share price appears evident.
Tax information
A redemption of shares, including an exchange into another Scudder fund, is a
sale of shares and may result in a gain or loss for income tax purposes.
Tax identification number
Be sure to complete the Tax Identification Number section of the Fund's
application when you open an account. Federal tax law requires the Fund to
withhold 31% of taxable dividends, capital gains distributions and redemption
and exchange proceeds from accounts (other than those of certain exempt payees)
without a certified Social Security or tax identification number and certain
other certified information or upon notification from the IRS or a broker that
withholding is required. The Fund reserves the right to reject new account
applications without a certified Social Security or tax identification number.
The Fund also reserves the right, following 30 days' notice, to redeem all
shares in accounts without a 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.
Minimum balances
Shareholders should maintain a share balance worth at least $1,000, which amount
may be changed by the Board of Trustees. Scudder retirement plans have similar
or lower minimum share balance requirements. The Fund reserves the right,
following 60 days' written notice to shareholders, to redeem all shares in
sub-minimum accounts, including accounts of new investors, where a reduction in
14
<PAGE>
value has occurred due to a redemption or exchange out of the account.
Reductions in value that result solely from market activity will not trigger an
involuntary redemption. The Fund will mail the proceeds of the redeemed account
to the shareholder. The shareholder may restore the share balance to $1,000 or
more during the 60-day notice period and must maintain it at no lower than that
minimum to avoid involuntary redemption.
Third party transactions
If purchases and redemptions 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.
Redemption-in-kind
The Fund reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase order by making
payment in whole or in part in readily marketable securities chosen by the Fund
and valued as they are for purposes of computing the Fund's net asset value (a
redemption-in-kind). If payment is made in securities, a shareholder may incur
transaction expenses in converting these securities to cash. The Fund has
elected, however, to be governed by Rule 18f-1 under the 1940 Act as a result of
which the Fund is obligated to redeem shares, with respect to any one
shareholder during any 90-day period, solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Fund at the beginning of the
period.
Shareholder benefits
Experienced professional management
Scudder, Stevens & Clark, Inc., one of the nation's most experienced investment
management firms, actively manages your Scudder fund investment. Professional
management is an important advantage for investors who do not have the time or
expertise to invest directly in individual securities.
A team approach to investing
Scudder Development Fund is managed by a team of Scudder investment
professionals, who each play an important role in the Fund's management process.
Team members work together to develop investment strategies and select
securities for the Fund's portfolio. They are supported by Scudder's large staff
of economists, research analysts, traders and other investment specialists who
work in Scudder's offices across the United States and abroad. Scudder believes
its team approach benefits Fund investors by bringing together many disciplines
and leveraging Scudder's extensive resources.
Lead Portfolio Manager Roy C. McKay assumed responsibility for the Fund's
day-to-day management when he joined Scudder in 1988. Mr. McKay has 29 years of
investment experience, with 20 years specializing in small company growth
stocks. Peter Chin, who has been with Scudder since 1973, joined Scudder's small
company group in 1986 and became a Portfolio Manager of the Development Fund in
1993. Mr. Chin contributes expertise in manufacturing, service and energy
companies.
SAIL(TM)--Scudder Automated Information Line
For personalized account information including fund prices, yields and account
balances, to perform transactions in existing Scudder fund accounts, or to
obtain information on any Scudder fund, shareholders can call Scudder's
Automated Information Line (SAIL) at 1-800-343-2890, 24 hours a day. During
periods of extreme economic or market changes, or other conditions, it may be
difficult for you to effect telephone transactions in your account. In such an
event you should write to the Fund; please see "How to contact Scudder" for the
address.
15
<PAGE>
Investment flexibility
Scudder offers toll-free telephone exchange between funds at current net asset
value. You can move your investments among money market, income, growth,
tax-free and growth and income funds with a simple toll-free call or, if you
prefer, by sending your instructions through the mail or by fax. Telephone and
fax redemptions and exchanges are subject to termination and their terms are
subject to change at any time by the Fund or the transfer agent. In some cases,
the transfer agent or Scudder Investor Services, Inc. may impose additional
conditions on telephone transactions.
Dividend reinvestment plan
You may have dividends and distributions automatically reinvested in additional
Fund shares. Please call 1-800-225-5163 to request this feature.
Shareholder statements
You receive a detailed account statement every time you purchase or redeem
shares. All of your statements should be retained to help you keep track of
account activity and the cost of shares for tax purposes.
Shareholder reports
In addition to account statements, you receive periodic shareholder reports
highlighting relevant information, including investment results and a review of
portfolio changes.
To reduce the volume of mail you receive, only one copy of most Fund reports,
such as the Fund's Annual Report, may be mailed to your household (same surname,
same address). Please call 1-800-225-5163 if you wish to receive additional
shareholder reports.
Newsletters
Four times a year, Scudder sends you At the Helm, an informative newsletter
covering economic and investment developments, service enhancements and other
topics of interest to Scudder fund investors.
Scudder Funds Centers
As a convenience to shareholders who like to conduct business in person, Scudder
Investor Services, Inc. maintains Funds Centers in Boca Raton, Boston, Chicago,
Cincinnati, Los Angeles, New York, Portland (OR), San Diego, San Francisco and
Scottsdale.
T.D.D. service for the hearing impaired
Scudder's full range of investor information and shareholder services is
available to hearing impaired investors through a toll-free T.D.D. (Telephone
Device for the Deaf) service. If you have access to a T.D.D., call
1-800-543-7916 for investment information or specific account questions and
transactions.
16
<PAGE>
Scudder tax-advantaged retirement plans
Scudder offers a variety of tax-advantaged retirement plans for individuals,
businesses and non-profit organizations. These flexible plans are designed for
use with the Scudder Family of Funds (except Scudder tax-free funds, which are
inappropriate for such plans). Scudder Funds offer a broad range of investment
objectives and can be used to seek almost any investment goal. Using Scudder's
retirement plans can help shareholders save on current taxes while building
their retirement savings.
* Scudder No-Fee IRAs. These retirement plans allow a maximum annual
contribution of $2,000 per person for anyone with earned income. Many
people can deduct all or part of their contributions from their taxable
income, and all investment earnings accrue on a tax deferred basis. The
Scudder No-Fee IRA charges no annual custodial fee.
* 401(k) Plans. 401(k) plans allow employers and employees to make
tax-deductible retirement contributions. Scudder offers a full service
program that includes recordkeeping, prototype plan, employee
communications and trustee services, as well as investment options.
* Profit Sharing and Money Purchase Pension Plans. These plans allow
corporations, partnerships and people who are self-employed to make
annual, tax-deductible contributions of up to $30,000 for each person
covered by the plans. Plans may be adopted individually or paired to
maximize contributions. These are sometimes known as Keogh plans.
* 403(b) Plans. Retirement plans for tax-exempt organizations and school
systems to which employers and employees may both contribute.
* SEP-IRAs. Easily administered retirement plans for small businesses and
self-employed individuals. The maximum annual contribution to SEP-IRA
accounts is adjusted each year for inflation.
* Scudder Horizon Plan. A no-load variable annuity that lets you build
assets by deferring taxes on your investment earnings. You can start with
$2,500 or more.
Scudder Trust Company (an affiliate of the Adviser) is Trustee or Custodian for
some of these plans and is paid an annual fee for some of the above retirement
plans. For information about establishing a Scudder No-Fee IRA, SEP-IRA, Profit
Sharing Plan, Money Purchase Pension Plan or a Scudder Horizon Plan, please call
1-800-225-2470. For information about 401(k)s or 403(b)s please call
1-800-323-6105. To effect transactions in existing IRA, SEP-IRA, Profit Sharing
or Pension Plan accounts, call 1-800-225-5163.
The variable annuity contract is provided by Charter National Life Insurance
Company (in New York State, Intramerica Life Insurance Company [S 1802]). The
contract is offered by Scudder Insurance Agency, Inc. (in New York State, Nevada
and Montana, Scudder Insurance Agency of New York, Inc.). CNL, Inc. is the
Principal Underwriter. Scudder Horizon Plan is not available in all states.
17
<PAGE>
Trustees and Officers
Daniel Pierce*
President and Trustee
Paul Bancroft III
Trustee; Venture Capitalist and Consultant
Thomas J. Devine
Trustee; Consultant
Douglas M. Loudon*
Vice President and Trustee
Wilson Nolen
Trustee; Consultant
Juris Padegs*
Trustee
Gordon Shillinglaw
Trustee; Professor Emeritus of Accounting, Columbia University
Graduate School of Business
Robert G. Stone, Jr.
Trustee; Chairman of the Board and Director, Kirby Corporation
Edmond D. Villani*
Trustee
Robert W. Lear
Honorary Trustee; Executive-in-Residence, Visiting Professor, Columbia
University Graduate School of Business
Edmund R. Swanberg*
Honorary Trustee
Peter Chin*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
David S. Lee*
Vice President
Roy C. McKay*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Kathryn L. Quirk*
Vice President and Assistant Secretary
Richard W. Desmond*
Assistant Secretary
Coleen Downs Dinneen*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
18
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Investment products and services
<C> <C>
The Scudder Family of Funds Income
Money market Scudder Emerging Markets Income Fund
Scudder Cash Investment Trust Scudder GNMA Fund
Scudder U.S. Treasury Money Fund Scudder Income Fund
Tax free money market+ Scudder International Bond Fund
Scudder Tax Free Money Fund Scudder Short Term Bond Fund
Scudder California Tax Free Money Fund* Scudder Short Term Global Income Fund
Scudder New York Tax Free Money Fund* Scudder Zero Coupon 2000 Fund
Tax free+ Growth
Scudder California Tax Free Fund* Scudder Capital Growth Fund
Scudder High Yield Tax Free Fund Scudder Development Fund
Scudder Limited Term Tax Free Fund Scudder Global Fund
Scudder Managed Municipal Bonds Scudder Global Small Company Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Gold Fund
Scudder Massachusetts Tax Free Fund* Scudder Greater Europe Growth Fund
Scudder Medium Term Tax Free Fund Scudder International Fund
Scudder New York Tax Free Fund* Scudder Latin America Fund
Scudder Ohio Tax Free Fund* Scudder Pacific Opportunities Fund
Scudder Pennsylvania Tax Free Fund* Scudder Quality Growth Fund
Growth and Income Scudder Small Company Value Fund
Scudder Balanced Fund Scudder Value Fund
Scudder Growth and Income Fund The Japan Fund
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
Retirement Plans and Tax-Advantaged Investments
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan*+++ (a variable annuity) Profit Sharing and
401(k) Plans Money Purchase Pension Plans
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
Closed-end Funds#
The Argentina Fund, Inc. Scudder New Europe Fund, Inc.
The Brazil Fund, Inc. Scudder World Income Opportunities Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc. Institutional Cash Management
The Latin America Dollar Income Fund, Inc. Scudder Institutional Fund, Inc.
Montgomery Street Income Securities, Inc. Scudder Fund, Inc.
Scudder New Asia Fund, Inc. Scudder Treasurers Trust(TM)++
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +A portion of the income from the tax-free funds may
be subject to federal, state and local taxes. *Not available in all states. +++A
no-load variable annuity contract provided by Charter National Life Insurance
Company and its affiliate, offered by Scudder's insurance agencies,
1-800-225-2470. #These funds, advised by Scudder, Stevens & Clark, Inc., are
traded on various stock exchanges. ++For information on Scudder Treasurers
Trust(TM), an institutional cash management service that utilizes certain
portfolios of Scudder Fund, Inc. ($100,000 minimum), call: 1-800-541-7703.
19
<PAGE>
<TABLE>
<CAPTION>
How to contact Scudder
<C> <C> <C>
Account Service and Information: Please address all correspondence to:
For existing account Scudder Investor The Scudder Funds
service and Relations P.O. Box 2291
transactions 1-800-225-5163 Boston, Massachusetts
02107-2291
For personalized Scudder Automated
information about your Information Line (SAIL)
Scudder accounts; 1-800-343-2890
exchanges and
redemptions; or
information on any
Scudder fund
Investment Information: Or Stop by a Scudder Funds Center:
To receive information about Scudder Investor Many shareholders enjoy the personal, one-on-one
the Scudder funds, for Relations service of the Scudder Funds Centers. Check for a
additional applications and 1-800-225-2470 Funds Center near you--they can be found in the
prospectuses, or for following cities:
investment questions
For establishing, 401(k) Scudder Defined Boca Raton New York
and 403(b) plans Contribution Boston Portland, OR
Services Chicago San Diego
1-800-323-6105 Cincinnati San Francisco
Los Angeles Scottsdale
For information on Scudder Treasurers Trust(TM), an For information on Scudder Institutional Funds*,
institutional cash management service for funds designed to meet the broad investment management and
corporations, non-profit organizations and trusts which service needs of banks and other institutions, call:
utilizes certain portfolios of Scudder Fund, Inc.* 1-800-854-8525.
($100,000 minimum), call: 1-800-541-7703.
</TABLE>
Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a
prospectus with more complete information, including management fees and
expenses. Please read it carefully before you invest or send money.
<PAGE>
SCUDDER DEVELOPMENT FUND
A Pure No-Load (TM) (No Sales Charges) Mutual Fund
Which Seeks Long-Term Growth of Capital
by Investing Primarily in Securities
of Emerging Growth Companies
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1995
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Prospectus of Scudder Development Fund
dated November 1, 1995, as amended from time to time, a copy of which
may be obtained without charge by writing to Scudder Investor Services,
Inc., Two International Place, Boston, Massachusetts 02110-4103.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
THE FUND'S INVESTMENT OBJECTIVE AND POLICIES..........................................................................1
General Investment Objective and Policies....................................................................1
Investments Involving Above-Average Risk.....................................................................1
Investments and Investment Techniques........................................................................2
Investment Restrictions.....................................................................................10
Other Investment Policies...................................................................................11
PURCHASES............................................................................................................13
Additional Information About Opening An Account.............................................................13
Additional Information About Making Subsequent Investments..................................................13
Checks......................................................................................................13
Wire Transfer of Federal Funds..............................................................................14
Share Price.................................................................................................14
Share Certificates..........................................................................................14
Other Information...........................................................................................14
EXCHANGES AND REDEMPTIONS............................................................................................14
Exchanges...................................................................................................14
Redemption by Telephone.....................................................................................15
Redemption by Mail or Fax...................................................................................16
Redemption-In-Kind..........................................................................................16
Other Information...........................................................................................17
FEATURES AND SERVICES OFFERED BY THE FUND............................................................................17
The Pure No-Load(TM) Concept...................................................................................17
Dividend and Capital Gain Distribution Options..............................................................18
Diversification.............................................................................................19
Scudder Funds Centers.......................................................................................19
Reports to Shareholders.....................................................................................19
Transaction Summaries.......................................................................................19
THE SCUDDER FAMILY OF FUNDS..........................................................................................19
SPECIAL PLAN ACCOUNTS................................................................................................22
Scudder Retirement Plans: Profit-Sharing and Money Purchase Pension Plans for
Corporations and Self-Employed Individuals.............................................................23
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for Corporations and
Self-Employed Individuals..............................................................................23
Scudder IRA: Individual Retirement Account.................................................................23
Scudder 403(b) Plan.........................................................................................24
Automatic Withdrawal Plan...................................................................................24
Group or Salary Deduction Plan..............................................................................25
Automatic Investment Plan...................................................................................25
Uniform Transfers/Gifts to Minors Act.......................................................................25
Scudder Trust Company.......................................................................................25
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS............................................................................25
PERFORMANCE INFORMATION..............................................................................................26
Average Annual Total Return.................................................................................26
Cumulative Total Return.....................................................................................26
Total Return................................................................................................27
Capital Change..............................................................................................27
Comparison of Fund Performance..............................................................................27
FUND ORGANIZATION....................................................................................................30
i
<PAGE>
INVESTMENT ADVISER...................................................................................................31
Personal Investments by Employees of the Adviser............................................................33
TRUSTEES AND OFFICERS................................................................................................34
REMUNERATION.........................................................................................................36
DISTRIBUTOR..........................................................................................................37
TAXES................................................................................................................38
PORTFOLIO TRANSACTIONS...............................................................................................41
Brokerage Commissions.......................................................................................41
Portfolio Turnover..........................................................................................42
NET ASSET VALUE......................................................................................................42
ADDITIONAL INFORMATION...............................................................................................43
Experts.....................................................................................................43
Shareholder Indemnification.................................................................................43
Other Information...........................................................................................43
FINANCIAL STATEMENTS.................................................................................................44
ii
</TABLE>
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
(See "Investment objective and policies" and "Additional
information about policies and investments" in the Fund's
prospectus.)
Scudder Development Fund (the "Fund") is a pure no-load(TM),
diversified, series of Scudder Securities Trust (the "Trust"), an open-end
management investment company which continuously offers and redeems its shares
at net asset value. It is a company of the type commonly known as a mutual fund.
General Investment Objective and Policies
Scudder Development Fund seeks long-term growth of capital by investing
primarily in securities of emerging growth companies. The Fund is designed for
investors in search of substantial long-term growth who can accept above-average
stock market risk and little or no current income.
The Fund generally invests in equity securities, including common
stocks and convertible securities, of relatively small or little-known
companies, commonly referred to as emerging growth companies, that the Fund's
investment adviser, Scudder, Stevens & Clark, Inc. (the "Adviser") believes have
above-average earnings growth potential and/or may receive greater market
recognition. Both factors are believed to offer significant opportunity for
capital appreciation and the Adviser will attempt to identify these
opportunities before their potential is recognized by investors in general.
To help reduce risk, the Fund allocates its investments among many
companies and different industries. In selecting industries and companies for
investment, the Adviser will consider overall growth prospects, financial
condition, competitive position, technology, research and development,
productivity, labor costs, raw material costs and sources, profit margins,
return on investment, structural changes in local economies, capital resources,
the degree of governmental regulation or deregulation, management and other
factors.
For temporary defensive purposes the Fund may vary from its investment
policy during periods in which conditions in securities markets or other
economic or political conditions warrant. In such cases, the Fund may hold cash,
high quality debt securities without equity features, U.S. Government securities
and invest in money market instruments which are rated in the two highest
categories by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's
("S&P"), or, if unrated, are deemed by the Adviser to be of equivalent quality.
In addition, the Fund may invest in preferred stocks when management
anticipates that the capital appreciation is likely to equal or exceed that of
common stocks over a selected time.
The Fund may enter into repurchase agreements with member banks of the
Federal Reserve System and any broker/dealer which is recognized as a reporting
government securities dealer. The Fund may also invest in foreign securities and
in restricted securities which may involve greater risks of loss to the Fund
than domestic readily marketable securities. The Fund may utilize various
strategic transactions.
Except as otherwise indicated, the Fund's investment objective and
policies are not fundamental and may be changed without a vote of shareholders.
Shareholders will receive written notice of any changes in the Fund's objective.
If there is a change in investment objective, shareholders should consider
whether the Fund remains an appropriate investment in light of their then
current financial position and needs. The Fund is intended to be an investment
vehicle for that portion of an investor's assets which can appropriately accept
above-average risk and is not intended to provide a balanced investment program
to meet all requirements of every investor.
There is no assurance that the Fund will achieve its objective.
Investments Involving Above-Average Risk
As opportunities for greater gain frequently involve a correspondingly
large risk of loss, the Fund may purchase securities carrying above-average
risk. The Fund's shares are believed by the Adviser to be suitable only for
those investors who can make such investments without concern for current income
and who are in a financial position to assume above-average stock market risks
in search of substantial long-term rewards.
<PAGE>
As stated above, the Fund may purchase securities involving
above-average risk. For example, the Fund has invested from time to time in
relatively new companies but is limited, however, by its non-fundamental policy
that it may not invest more than 5% of its total assets in companies that, with
their predecessors, have been in continuous operation for less than three years.
The Fund's portfolio may also include the securities of small or little-known
companies, commonly referred to as emerging growth companies, that the Adviser
believes have above-average earnings growth potential and/or may receive greater
market recognition. Both factors are believed to offer significant opportunity
for capital appreciation. Investment risk is higher than that normally
associated with larger, older companies due to the higher business risks
associated with small size, frequently narrow product lines and relative
immaturity. To help reduce risk, the Fund allocates its investments among many
companies and different industries.
The securities of such companies are often traded only over-the-counter
and may not be traded in the volume typical of trading on a national securities
exchange. As a result, the disposition by the Fund of holdings of such
securities may require the Fund to offer a discount from recent prices or to
make many small sales over a lengthy period of time. Such securities may be
subject to more abrupt or erratic market movements than those typically
encountered on national securities exchanges.
The Fund may occasionally purchase securities other than in the open
market. While such purchases may often offer attractive opportunities for
investment not otherwise available on the open market, the securities so
purchased are often "restricted securities", i.e., securities which cannot be
sold to the public without registration under the Securities Act of 1933 or the
availability of an exemption from registration (such as Rules 144 or 144A), or
which are "not readily marketable" because they are subject to other legal or
contractual delays in or restrictions on resale.
Generally speaking, restricted securities may be sold only to qualified
institutional buyers, or in a privately negotiated transaction to a limited
number of purchasers, or in limited quantities after they have been held for a
specified period of time and other conditions are met pursuant to an exemption
from registration, or in a public offering for which a registration statement is
in effect under the Securities Act of 1933. The Fund may be deemed to be an
"underwriter" for purposes of the Securities Act of 1933 when selling restricted
securities to the public, and in such event the Fund may be liable to purchasers
of such securities if the registration statement prepared by the issuer, or the
prospectus forming a part of it, is materially inaccurate or misleading.
The Fund will not invest more than 10% of its total assets in
securities which are not readily marketable, the disposition of which is
restricted under Federal securities laws or in repurchase agreements not
terminable within seven days.
Investments and Investment Techniques
Repurchase Agreements. The Fund may enter into repurchase agreements with any
member bank of the Federal Reserve System and any broker/dealer which is
recognized as a reporting government securities dealer if the creditworthiness
of the bank or broker/dealer has been determined by the Adviser to be at least
as high as that of other obligations the Fund may purchase or to be at least
equal to that of issuers of commercial paper rated within the two highest grades
assigned by Moody's or S&P.
A repurchase agreement provides a means for the Fund to earn income on
funds for periods as short as overnight. It is an arrangement under which the
purchaser (i.e., the Fund) acquires a security ("Obligation") and the seller
agrees, at the time of sale, to repurchase the Obligation at a specified time
and price. Securities subject to a repurchase agreement are held in a segregated
account and the value of such securities kept at least equal to the repurchase
price on a daily basis. The repurchase price may be higher than the purchase
price, the difference being income to the Fund, or the purchase and repurchase
prices may be the same, with interest at a stated rate due to the Fund together
with the repurchase price upon repurchase. In either case, the income to the
Fund is unrelated to the interest rate on the Obligation itself. Obligations
will be physically held by the Custodian or in the Federal Reserve Book Entry
System.
For purposes of the Investment Company Act of 1940 ("1940 Act"), a
repurchase agreement is deemed to be a loan from the Fund to the seller of the
Obligation subject to the repurchase agreement and is therefore subject to the
Fund's investment restriction applicable to loans. It is not clear whether a
court would consider the Obligation purchased by the Fund subject to a
2
<PAGE>
repurchase agreement as being owned by the Fund or as being collateral for a
loan by the Fund to the seller. In the event of the commencement of bankruptcy
or insolvency proceedings with respect to the seller of the Obligation before
repurchase of the Obligation under a repurchase agreement, the Fund may
encounter delay and incur costs before being able to sell the security. Delays
may involve loss of interest or decline in price of the Obligation. If the court
characterizes the transaction as a loan and the Fund has not perfected a
security interest in the Obligation, the Fund may be required to return the
Obligation to the seller's estate and be treated as an unsecured creditor of the
seller. As an unsecured creditor, the Fund would be at risk of losing some or
all of the principal and income involved in the transaction. As with any
unsecured debt obligation purchased for the Fund, the Adviser seeks to minimize
the risk of loss through repurchase agreements by analyzing the creditworthiness
of the obligor, in this case the seller of the Obligation. Apart from the risk
of bankruptcy or insolvency proceedings, there is also the risk that the seller
may fail to repurchase the security. However, if the market value of the
Obligation subject to the repurchase agreement becomes less than the repurchase
price (including interest), the Fund will direct the seller of the Obligation to
deliver additional securities so that the market value of all securities subject
to the repurchase agreement will equal or exceed the repurchase price.
Strategic Transactions and Derivatives. The Fund may, but is not required to,
utilize various other investment strategies as described below to hedge various
market risks (such as interest rates, currency exchange rates, and broad or
specific equity or fixed-income market movements), to manage the effective
maturity or duration of fixed-income securities in the Fund's portfolio, or to
enhance potential gain. These strategies may be executed through the use of
derivative contracts. Such strategies are generally accepted as a part of modern
portfolio management and are regularly utilized by many mutual funds and other
institutional investors. Techniques and instruments may change over time as new
instruments and strategies are developed or regulatory changes occur.
In the course of pursuing these investment strategies, the Fund may
purchase and sell exchange-listed and over-the-counter put and call options on
securities, equity and fixed-income indices and other financial instruments,
purchase and sell financial futures contracts and options thereon, enter into
various interest rate transactions such as swaps, caps, floors or collars, and
enter into various currency transactions such as currency forward contracts,
currency futures contracts, currency swaps or options on currencies or currency
futures (collectively, all the above are called "Strategic Transactions").
Strategic Transactions may be used without limit to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for the Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio, or to establish a position in the
derivatives markets as a temporary substitute for purchasing or selling
particular securities. Some Strategic Transactions may also be used to enhance
potential gain although no more than 5% of the Fund's assets will be committed
to Strategic Transactions entered into for non-hedging purposes. Any or all of
these investment techniques may be used at any time and in any combination, and
there is no particular strategy that dictates the use of one technique rather
than another, as use of any Strategic Transaction is a function of numerous
variables including market conditions. The ability of the Fund to utilize these
Strategic Transactions successfully will depend on the Adviser's ability to
predict pertinent market movements, which cannot be assured. The Fund will
comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. Strategic Transactions involving
financial futures and options thereon will be purchased, sold or entered into
only for bona fide hedging, risk management or portfolio management purposes and
not for speculative purposes.
Strategic Transactions, including derivative contracts, have risks
associated with them including possible default by the other party to the
transaction, illiquidity and, to the extent the Adviser's view as to certain
market movements is incorrect, the risk that the use of such Strategic
Transactions could result in losses greater than if they had not been used. Use
of put and call options may result in losses to the Fund, force the sale or
purchase of portfolio securities at inopportune times or for prices higher than
(in the case of put options) or lower than (in the case of call options) current
market values, limit the amount of appreciation the Fund can realize on its
investments or cause the Fund to hold a security it might otherwise sell. The
use of currency transactions can result in the Fund incurring losses as a result
of a number of factors including the imposition of exchange controls, suspension
of settlements, or the inability to deliver or receive a specified currency. The
use of options and futures transactions entails certain other risks. In
particular, the variable degree of correlation between price movements of
futures contracts and price movements in the related portfolio position of the
Fund creates the possibility that losses on the hedging instrument may be
greater than gains in the value of the Fund's position. In addition, futures and
options markets may not be liquid in all circumstances and certain
3
<PAGE>
over-the-counter options may have no markets. As a result, in certain markets,
the Fund might not be able to close out a transaction without incurring
substantial losses, if at all. Although the use of futures and options
transactions for hedging should tend to minimize the risk of loss due to a
decline in the value of the hedged position, at the same time they tend to limit
any potential gain which might result from an increase in value of such
position. Finally, the daily variation margin requirements for futures contracts
would create a greater ongoing potential financial risk than would purchases of
options, where the exposure is limited to the cost of the initial premium.
Losses resulting from the use of Strategic Transactions would reduce net asset
value, and possibly income, and such losses can be greater than if the Strategic
Transactions had not been utilized.
General Characteristics of Options. Put options and call options typically have
similar structural characteristics and operational mechanics regardless of the
underlying instrument on which they are purchased or sold. Thus, the following
general discussion relates to each of the particular types of options discussed
in greater detail below. In addition, many Strategic Transactions involving
options require segregation of Fund assets in special accounts, as described
below under "Use of Segregated and Other Special Accounts."
A put option gives the purchaser of the option, upon payment of a
premium, the right to sell, and the writer the obligation to buy, the underlying
security, commodity, index, currency or other instrument at the exercise price.
For instance, the Fund's purchase of a put option on a security might be
designed to protect its holdings in the underlying instrument (or, in some
cases, a similar instrument) against a substantial decline in the market value
by giving the Fund the right to sell such instrument at the option exercise
price. A call option, upon payment of a premium, gives the purchaser of the
option the right to buy, and the seller the obligation to sell, the underlying
instrument at the exercise price. The Fund's purchase of a call option on a
security, financial future, index, currency or other instrument might be
intended to protect the Fund against an increase in the price of the underlying
instrument that it intends to purchase in the future by fixing the price at
which it may purchase such instrument. An American style put or call option may
be exercised at any time during the option period while a European style put or
call option may be exercised only upon expiration or during a fixed period prior
thereto. The Fund is authorized to purchase and sell exchange listed options and
over-the-counter options ("OTC options"). Exchange listed options are issued by
a regulated intermediary such as the Options Clearing Corporation ("OCC"), which
guarantees the performance of the obligations of the parties to such options.
The discussion below uses the OCC as an example, but is also applicable to other
financial intermediaries.
With certain exceptions, OCC issued and exchange listed options
generally settle by physical delivery of the underlying security or currency,
although in the future cash settlement may become available. Index options and
Eurodollar instruments are cash settled for the net amount, if any, by which the
option is "in-the-money" (i.e., where the value of the underlying instrument
exceeds, in the case of a call option, or is less than, in the case of a put
option, the exercise price of the option) at the time the option is exercised.
Frequently, rather than taking or making delivery of the underlying instrument
through the process of exercising the option, listed options are closed by
entering into offsetting purchase or sale transactions that do not result in
ownership of the new option.
The Fund's ability to close out its position as a purchaser or seller
of an OCC or exchange listed put or call option is dependent, in part, upon the
liquidity of the option market. Among the possible reasons for the absence of a
liquid option market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange; (iii)
trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities including
reaching daily price limits; (iv) interruption of the normal operations of the
OCC or an exchange; (v) inadequacy of the facilities of an exchange or OCC to
handle current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
4
<PAGE>
OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. The
Fund will only sell OTC options (other than OTC currency options) that are
subject to a buy-back provision permitting the Fund to require the Counterparty
to sell the option back to the Fund at a formula price within seven days. The
Fund expects generally to enter into OTC options that have cash settlement
provisions, although it is not required to do so.
Unless the parties provide for it, there is no central clearing or
guaranty function in an OTC option. As a result, if the Counterparty fails to
make or take delivery of the security, currency or other instrument underlying
an OTC option it has entered into with the Fund or fails to make a cash
settlement payment due in accordance with the terms of that option, the Fund
will lose any premium it paid for the option as well as any anticipated benefit
of the transaction. Accordingly, the Adviser must assess the creditworthiness of
each such Counterparty or any guarantor or credit enhancement of the
Counterparty's credit to determine the likelihood that the terms of the OTC
option will be satisfied. The Fund will engage in OTC option transactions only
with U.S. government securities dealers recognized by the Federal Reserve Bank
of New York as "primary dealers" or broker/dealers, domestic or foreign banks or
other financial institutions which have received (or the guarantors of the
obligation of which have received) a short-term credit rating of A-1 from S&P or
P-1 from Moody's or an equivalent rating from any nationally recognized
statistical rating organization ("NRSRO") or, in the case of OTC currency
transactions, are determined to be of equivalent credit quality by the Adviser.
The staff of the SEC currently takes the position that OTC options purchased by
the Fund, and portfolio securities "covering" the amount of the Fund's
obligation pursuant to an OTC option sold by it (the cost of the sell-back plus
the in-the-money amount, if any) are illiquid, and are subject to the Fund's
limitation on investing no more than 10% of its assets in illiquid securities.
If the Fund sells a call option, the premium that it receives may serve
as a partial hedge, to the extent of the option premium, against a decrease in
the value of the underlying securities or instruments in its portfolio or will
increase the Fund's income. The sale of put options can also provide income.
The Fund may purchase and sell call options on securities including
U.S. Treasury and agency securities, mortgage-backed securities, corporate debt
securities, equity securities (including convertible securities) and Eurodollar
instruments that are traded on U.S. and foreign securities exchanges and in the
over-the-counter markets, and on securities indices, currencies and futures
contracts. All calls sold by the Fund must be "covered" (i.e., the Fund must own
the securities or futures contract subject to the call) or must meet the asset
segregation requirements described below as long as the call is outstanding.
Even though the Fund will receive the option premium to help protect it against
loss, a call sold by the Fund exposes the Fund during the term of the option to
possible loss of opportunity to realize appreciation in the market price of the
underlying security or instrument and may require the Fund to hold a security or
instrument which it might otherwise have sold.
The Fund may purchase and sell put options on securities including U.S.
Treasury and agency securities, mortgage-backed securities, corporate debt
securities, equity securities (including convertible securities) and Eurodollar
instruments (whether or not it holds the above securities in its portfolio), and
on securities, indices, currencies and futures contracts other than futures on
individual corporate debt and individual equity securities. The Fund will not
sell put options if, as a result, more than 50% of the Fund's assets would be
required to be segregated to cover its potential obligations under such put
options other than those with respect to futures and options thereon. In selling
put options, there is a risk that the Fund may be required to buy the underlying
security at a disadvantageous price above the market price.
General Characteristics of Futures. The Fund may enter into financial futures
contracts or purchase or sell put and call options on such futures as a hedge
against anticipated interest rate, currency or equity market changes, for
duration management and for risk management purposes. Futures are generally
bought and sold on the commodities exchanges where they are listed with payment
of initial and variation margin as described below. The sale of a futures
contract creates a firm obligation by the Fund, as seller, to deliver to the
buyer the specific type of financial instrument called for in the contract at a
specific future time for a specified price (or, with respect to index futures
and Eurodollar instruments, the net cash amount). Options on futures contracts
5
<PAGE>
are similar to options on securities except that an option on a futures contract
gives the purchaser the right in return for the premium paid to assume a
position in a futures contract and obligates the seller to deliver such
position.
The Fund's use of financial futures and options thereon will in all
cases be consistent with applicable regulatory requirements and in particular
the rules and regulations of the Commodity Futures Trading Commission and will
be entered into only for bona fide hedging, risk management (including duration
management) or other portfolio management purposes. Typically, maintaining a
futures contract or selling an option thereon requires the Fund to deposit with
a financial intermediary as security for its obligations an amount of cash or
other specified assets (initial margin) which initially is typically 1% to 10%
of the face amount of the contract (but may be higher in some circumstances).
Additional cash or assets (variation margin) may be required to be deposited
thereafter on a daily basis as the mark to market value of the contract
fluctuates. The purchase of an option on financial futures involves payment of a
premium for the option without any further obligation on the part of the Fund.
If the Fund exercises an option on a futures contract it will be obligated to
post initial margin (and potential subsequent variation margin) for the
resulting futures position just as it would for any position. Futures contracts
and options thereon are generally settled by entering into an offsetting
transaction but there can be no assurance that the position can be offset prior
to settlement at an advantageous price, nor that delivery will occur.
The Fund will not enter into a futures contract or related option
(except for closing transactions) if, immediately thereafter, the sum of the
amount of its initial margin and premiums on open futures contracts and options
thereon would exceed 5% of the Fund's total assets (taken at current value);
however, in the case of an option that is in-the-money at the time of the
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation. The segregation requirements with respect to futures contracts and
options thereon are described below.
Options on Securities Indices and Other Financial Indices. The Fund also may
purchase and sell call and put options on securities indices and other financial
indices and in so doing can achieve many of the same objectives it would achieve
through the sale or purchase of options on individual securities or other
instruments. Options on securities indices and other financial indices are
similar to options on a security or other instrument except that, rather than
settling by physical delivery of the underlying instrument, they settle by cash
settlement, i.e., an option on an index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the index
upon which the option is based exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option (except if, in the case
of an OTC option, physical delivery is specified). This amount of cash is equal
to the excess of the closing price of the index over the exercise price of the
option, which also may be multiplied by a formula value. The seller of the
option is obligated, in return for the premium received, to make delivery of
this amount. The gain or loss on an option on an index depends on price
movements in the instruments making up the market, market segment, industry or
other composite on which the underlying index is based, rather than price
movements in individual securities, as is the case with respect to options on
securities.
Currency Transactions. The Fund may engage in currency transactions with
Counterparties in order to hedge the value of portfolio holdings denominated in
particular currencies against fluctuations in relative value. Currency
transactions include forward currency contracts, exchange listed currency
futures, exchange listed and OTC options on currencies, and currency swaps. A
forward currency contract involves a privately negotiated obligation to purchase
or sell (with delivery generally required) a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. A currency swap is
an agreement to exchange cash flows based on the notional difference among two
or more currencies and operates similarly to an interest rate swap, which is
described below. The Fund may enter into currency transactions with
Counterparties which have received (or the guarantors of the obligations which
have received) a credit rating of A-1 or P-1 by S&P or Moody's, respectively, or
that have an equivalent rating from a NRSRO or are determined to be of
equivalent credit quality by the Adviser.
The Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is entering into a currency transaction with
respect to specific assets or liabilities of the Fund, which will generally
arise in connection with the purchase or sale of its portfolio securities or the
receipt of income therefrom. Position hedging is entering into a currency
transaction with respect to portfolio security positions denominated or
generally quoted in that currency.
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The Fund will not enter into a transaction to hedge currency exposure
to an extent greater, after netting all transactions intended wholly or
partially to offset other transactions, than the aggregate market value (at the
time of entering into the transaction) of the securities held in its portfolio
that are denominated or generally quoted in or currently convertible into such
currency, other than with respect to proxy hedging or cross hedging as described
below.
The Fund may also cross-hedge currencies by entering into transactions
to purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Fund has or in which the Fund expects
to have portfolio exposure.
To reduce the effect of currency fluctuations on the value of existing
or anticipated holdings of portfolio securities, the Fund may also engage in
proxy hedging. Proxy hedging is often used when the currency to which the Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar. Proxy
hedging entails entering into a commitment or option to sell a currency whose
changes in value are generally considered to be correlated to a currency or
currencies in which some or all of the Fund's portfolio securities are or are
expected to be denominated, in exchange for U.S. dollars. The amount of the
commitment or option would not exceed the value of the Fund's securities
denominated in correlated currencies. For example, if the Adviser considers that
the Austrian schilling is correlated to the German deutschemark (the "D-mark"),
the Fund holds securities denominated in schillings and the Adviser believes
that the value of schillings will decline against the U.S. dollar, the Adviser
may enter into a commitment or option to sell D-marks and buy dollars. Currency
hedging involves some of the same risks and considerations as other transactions
with similar instruments. Currency transactions can result in losses to the Fund
if the currency being hedged fluctuates in value to a degree or in a direction
that is not anticipated. Further, there is the risk that the perceived
correlation between various currencies may not be present or may not be present
during the particular time that the Fund is engaging in proxy hedging. If the
Fund enters into a currency hedging transaction, the Fund will comply with the
asset segregation requirements described below.
Risks of Currency Transactions. Currency transactions are subject to risks
different from those of other portfolio transactions. Because currency control
is of great importance to the issuing governments and influences economic
planning and policy, purchases and sales of currency and related instruments can
be negatively affected by government exchange controls, blockages, and
manipulations or exchange restrictions imposed by governments. These can result
in losses to the Fund if it is unable to deliver or receive currency or funds in
settlement of obligations and could also cause hedges it has entered into to be
rendered useless, resulting in full currency exposure as well as incurring
transaction costs. Buyers and sellers of currency futures are subject to the
same risks that apply to the use of futures generally. Further, settlement of a
currency futures contract for the purchase of most currencies must occur at a
bank based in the issuing nation. Trading options on currency futures is
relatively new, and the ability to establish and close out positions on such
options is subject to the maintenance of a liquid market which may not always be
available. Currency exchange rates may fluctuate based on factors extrinsic to
that country's economy.
Combined Transactions. The Fund may enter into multiple transactions, including
multiple options transactions, multiple futures transactions, multiple currency
transactions (including forward currency contracts) and multiple interest rate
transactions and any combination of futures, options, currency and interest rate
transactions ("component" transactions), instead of a single Strategic
Transaction, as part of a single or combined strategy when, in the opinion of
the Adviser, it is in the best interests of the Fund to do so. A combined
transaction will usually contain elements of risk that are present in each of
its component transactions. Although combined transactions are normally entered
into based on the Adviser's judgment that the combined strategies will reduce
risk or otherwise more effectively achieve the desired portfolio management
goal, it is possible that the combination will instead increase such risks or
hinder achievement of the portfolio management objective.
Swaps, Caps, Floors and Collars. Among the Strategic Transactions into which the
Fund may enter are interest rate, currency and index swaps and the purchase or
sale of related caps, floors and collars. The Fund expects to enter into these
transactions primarily to preserve a return or spread on a particular investment
or portion of its portfolio, to protect against currency fluctuations, as a
duration management technique or to protect against any increase in the price of
securities the Fund anticipates purchasing at a later date. The Fund intends to
use these transactions as hedges and not as speculative investments and will not
sell interest rate caps or floors where it does not own securities or other
instruments providing the income stream the Fund may be obligated to pay.
Interest rate swaps involve the exchange by the Fund with another party of their
respective commitments to pay or receive interest, e.g., an exchange of floating
rate payments for fixed rate payments with respect to a notional amount of
principal. A currency swap is an agreement to exchange cash flows on a notional
amount of two or more currencies based on the relative value differential among
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them and an index swap is an agreement to swap cash flows on a notional amount
based on changes in the values of the reference indices. The purchase of a cap
entitles the purchaser to receive payments on a notional principal amount from
the party selling such cap to the extent that a specified index exceeds a
predetermined interest rate or amount. The purchase of a floor entitles the
purchaser to receive payments on a notional principal amount from the party
selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or values.
The Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as these swaps, caps,
floors and collars are entered into for good faith hedging purposes, the Adviser
and the Fund believe such obligations do not constitute senior securities under
the 1940 Act and, accordingly, will not treat them as being subject to its
borrowing restrictions. The Fund will not enter into any swap, cap, floor or
collar transaction unless, at the time of entering into such transaction, the
unsecured long-term debt of the Counterparty, combined with any credit
enhancements, is rated at least A by S&P or Moody's or has an equivalent rating
from a NRSRO or is determined to be of equivalent credit quality by the Adviser.
If there is a default by the Counterparty, the Fund may have contractual
remedies pursuant to the agreements related to the transaction. The swap market
has grown substantially in recent years with a large number of banks and
investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.
Eurodollar Instruments. The Fund may make investments in Eurodollar instruments.
Eurodollar instruments are U.S. dollar-denominated futures contracts or options
thereon which are linked to the London Interbank Offered Rate ("LIBOR"),
although foreign currency-denominated instruments are available from time to
time. Eurodollar futures contracts enable purchasers to obtain a fixed rate for
the lending of funds and sellers to obtain a fixed rate for borrowings. The Fund
might use Eurodollar futures contracts and options thereon to hedge against
changes in LIBOR, to which many interest rate swaps and fixed income instruments
are linked.
Risks of Strategic Transactions Outside the U.S. When conducted outside the
U.S., Strategic Transactions may not be regulated as rigorously as in the U.S.,
may not involve a clearing mechanism and related guarantees, and are subject to
the risk of governmental actions affecting trading in, or the prices of, foreign
securities, currencies and other instruments. The value of such positions also
could be adversely affected by: (i) other complex foreign political, legal and
economic factors, (ii) lesser availability than in the U.S. of data on which to
make trading decisions, (iii) delays in the Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the U.S., (iv)
the imposition of different exercise and settlement terms and procedures and
margin requirements than in the U.S., and (v) lower trading volume and
liquidity.
Use of Segregated and Other Special Accounts. Many Strategic Transactions, in
addition to other requirements, require that the Fund segregate liquid high
grade assets with its custodian to the extent Fund obligations are not otherwise
"covered" through ownership of the underlying security, financial instrument or
currency. In general, either the full amount of any obligation by the Fund to
pay or deliver securities or assets must be covered at all times by the
securities, instruments or currency required to be delivered, or, subject to any
regulatory restrictions, an amount of cash or liquid high grade securities at
least equal to the current amount of the obligation must be segregated with the
custodian. The segregated assets cannot be sold or transferred unless equivalent
assets are substituted in their place or it is no longer necessary to segregate
them. For example, a call option written by the Fund will require the Fund to
hold the securities subject to the call (or securities convertible into the
needed securities without additional consideration) or to segregate liquid
high-grade securities sufficient to purchase and deliver the securities if the
call is exercised. A call option sold by the Fund on an index will require the
Fund to own portfolio securities which correlate with the index or to segregate
liquid high grade assets equal to the excess of the index value over the
exercise price on a current basis. A put option written by the Fund requires the
Fund to segregate liquid, high grade assets equal to the exercise price.
Except when the Fund enters into a forward contract for the purchase or
sale of a security denominated in a particular currency, which requires no
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segregation, a currency contract which obligates the Fund to buy or sell
currency will generally require the Fund to hold an amount of that currency or
liquid securities denominated in that currency equal to the Fund's obligations
or to segregate liquid high grade assets equal to the amount of the Fund's
obligation.
OTC options entered into by the Fund, including those on securities,
currency, financial instruments or indices and OCC issued and exchange listed
index options, will generally provide for cash settlement. As a result, when the
Fund sells these instruments it will only segregate an amount of assets equal to
its accrued net obligations, as there is no requirement for payment or delivery
of amounts in excess of the net amount. These amounts will equal 100% of the
exercise price in the case of a non cash-settled put, the same as an OCC
guaranteed listed option sold by the Fund, or the in-the-money amount plus any
sell-back formula amount in the case of a cash-settled put or call. In addition,
when the Fund sells a call option on an index at a time when the in-the-money
amount exceeds the exercise price, the Fund will segregate, until the option
expires or is closed out, cash or cash equivalents equal in value to such
excess. OCC issued and exchange listed options sold by the Fund other than those
above generally settle with physical delivery, or with an election of either
physical delivery or cash settlement and the Fund will segregate an amount of
assets equal to the full value of the option. OTC options settling with physical
delivery, or with an election of either physical delivery or cash settlement
will be treated the same as other options settling with physical delivery.
In the case of a futures contract or an option thereon, the Fund must
deposit initial margin and possible daily variation margin in addition to
segregating assets sufficient to meet its obligation to purchase or provide
securities or currencies, or to pay the amount owed at the expiration of an
index-based futures contract. Such assets may consist of cash, cash equivalents,
liquid debt or equity securities or other acceptable assets.
With respect to swaps, the Fund will accrue the net amount of the
excess, if any, of its obligations over its entitlements with respect to each
swap on a daily basis and will segregate an amount of cash or liquid high grade
securities having a value equal to the accrued excess. Caps, floors and collars
require segregation of assets with a value equal to the Fund's net obligation,
if any.
Strategic Transactions may be covered by other means when consistent
with applicable regulatory policies. The Fund may also enter into offsetting
transactions so that its combined position, coupled with any segregated assets,
equals its net outstanding obligation in related options and Strategic
Transactions. For example, the Fund could purchase a put option if the strike
price of that option is the same or higher than the strike price of a put option
sold by the Fund. Moreover, instead of segregating assets if the Fund held a
futures or forward contract, it could purchase a put option on the same futures
or forward contract with a strike price as high or higher than the price of the
contract held. Other Strategic Transactions may also be offset in combinations.
If the offsetting transaction terminates at the time of or after the primary
transaction no segregation is required, but if it terminates prior to such time,
assets equal to any remaining obligation would need to be segregated.
The Fund's activities involving Strategic Transactions may be limited
by the requirements of Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), for qualification as a regulated investment company. (See
"TAXES.")
Foreign Securities. While the Fund generally emphasizes investments in companies
domiciled in the United States, it may invest in listed and unlisted foreign
securities of the same types as the domestic securities in which the Fund may
invest when the anticipated performance of foreign securities is believed by the
Adviser to offer more potential than domestic alternatives in keeping with the
investment objective of the Fund. However, the Fund has no current intention of
investing more than 20% of its net assets in foreign securities.
Investors should recognize that investing in foreign securities
involves certain special considerations, including those set forth below, which
are not typically associated with investing in United States securities and
which may favorably or unfavorably affect the Fund's performance. As foreign
companies are not generally subject to uniform accounting and auditing and
financial reporting standards, practices and requirements comparable to those
applicable to domestic companies, there may be less publicly available
information about a foreign company than about a domestic company. Many foreign
stock markets, while growing in volume of trading activity, have substantially
less volume than the New York Stock Exchange (the "Exchange"), and securities of
some foreign companies are less liquid and more volatile than securities of
domestic companies. Further, foreign markets have different clearance and
settlement procedures and in certain markets there have been times when
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settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when assets of the Fund are
uninvested and no return is earned thereon. The inability of the Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems either could result in losses to the Fund
due to subsequent declines in value of the portfolio security or, if the Fund
has entered into a contract to sell the security, could result in possible
liability to the purchaser. Fixed commissions on some foreign stock exchanges
are generally higher than negotiated commissions on U.S. exchanges, although the
Fund will endeavor to achieve the most favorable net results on its portfolio
transactions. Further, the Fund may encounter difficulties or be unable to
pursue legal remedies and obtain judgments in foreign courts. There is generally
less government supervision and regulation of business and industry practices,
stock exchanges, brokers and listed companies than in the United States. It may
be more difficult for the Fund's agents to keep currently informed about
corporate actions such as stock dividends or other matters which may affect the
prices of portfolio securities. Communications between the United States and
foreign countries may be less reliable than within the United States, thus
increasing the risk of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities. Payment for securities without delivery
may be required in certain foreign markets. In addition, with respect to certain
foreign countries, there is the possibility of expropriation or confiscatory
taxation, political or social instability, or diplomatic developments which
could affect United States investments in those countries. Investments in
foreign securities may also entail certain risks, such as possible currency
blockages or transfer restrictions, and the difficulty of enforcing rights in
other countries. Moreover, individual foreign economies may differ favorably or
unfavorably from the United States economy in such respects as growth of gross
national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position.
These considerations generally are more of a concern in developing
countries. For example, the possibility of revolution and the dependence on
foreign economic assistance may be greater in these countries than in developed
countries. The management of the Fund seeks to mitigate the risks associated
with these considerations through diversification and active professional
management. Investments in companies domiciled in developing countries may be
subject to potentially greater risks than investments in developed countries.
Investments in foreign securities usually will involve currencies of
foreign countries. Moreover, the Fund temporarily may hold funds in bank
deposits in foreign currencies during the completion of investment programs.
Accordingly, the value of the assets for the Fund as measured in U.S. dollars
may be affected favorably or unfavorably by changes in foreign currency exchange
rates and exchange control regulations, and the Fund may incur costs in
connection with conversions between various currencies. Although the Fund values
its assets daily in terms of U.S. dollars, it does not intend to convert its
holdings of foreign currencies, if any, into U.S. dollars on a daily basis. It
may do so from time to time, and investors should be aware of the costs of
currency conversion. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference (the "spread")
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Fund at one rate,
while offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer. The Fund will conduct its foreign currency exchange
transactions, if any, either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market or through strategic
transactions involving currencies.
To the extent that the Fund invests in foreign securities, the Fund's
share price could reflect the movements of the stock markets in which it is
invested and the currencies in which the investments are denominated; the
strength or weakness of the U.S. dollar against foreign currencies could account
for part of the Fund's investment performance.
Investment Restrictions
Unless specified to the contrary, the following restrictions may not be
changed without the approval of a majority of the outstanding voting securities
of the Fund involved which, under the 1940 Act and the rules thereunder and as
used in this Statement of Additional Information, means the lesser of (1) 67% or
more of the voting securities present at such meeting, if the holders of more
than 50% of the outstanding voting securities of the Fund are present or
represented by proxy, or (2) more than 50% of the outstanding voting securities
of the Fund.
Any investment restrictions herein which involve a maximum percentage
of securities or assets shall not be considered to be violated unless an excess
over the percentage occurs immediately after and is caused by an acquisition or
encumbrance of securities or assets of, or borrowings by, the Fund.
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As a matter of fundamental policy, the Fund may not:
(1) with respect to 75% of its total assets, taken at market
value, purchase more than 10% of the voting securities of any
one issuer or invest more than 5% of the value of its total
assets in the securities of any one issuer, except obligations
issued or guaranteed by the U.S. Government, its agencies, or
instrumentalities and except securities of other investment
companies;
(2) borrow money except as a temporary measure for extraordinary
or emergency purposes or except in connection with reverse
repurchase agreements, provided that the Fund maintains asset
coverage of 300% for all borrowings;
(3) purchase or sell real estate; (except that the Fund may invest
in (i) securities of companies which deal in real estate or
mortgages, and (ii) securities secured by real estate or
interests therein, and 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); or purchase or sell
physical commodities or contracts relating to physical
commodities;
(4) act as underwriter of securities issued by others, except to
the extent that it may be deemed an underwriter in connection
with the disposition of portfolio securities of the Fund;
(5) make loans to other persons, except (a) loans of portfolio
securities, and (b) to the extent the entry into repurchase
agreements and the purchase of debt securities in accordance
with its investment objectives and investment policies may be
deemed to be loans; or
(6) purchase any securities which would cause more than 25% of the
market value of its total assets at the time of such purchase
to be invested in the securities of one or more issuers having
their principal business activities in the same industry,
provided that there is no limitation with respect to
investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities (for the
purposes of this restriction, telephone companies are
considered to be in a separate industry from gas and electric
public utilities, and wholly-owned finance companies are
considered to be in the industry of their parents if their
activities are primarily related to financing the activities
of their parents).
Other Investment Policies
As a matter of nonfundamental policy, the Fund will not:
(a) purchase or retain securities of any open-end investment
company, or securities of closed-end investment companies
except by purchase in the open market where no commission or
profit to a sponsor or dealer results from such purchases, or
except when such purchase, though not made in the open market,
is part of a plan of merger, consolidation, reorganization or
acquisition of assets; in any event the Fund may not purchase
more than 3% of the outstanding voting securities of another
investment company, may not invest more than 5% of its assets
in another investment company, and may not invest more than
10% of its assets in other investment companies;
(b) pledge, mortgage or hypothecate its assets in excess, together
with permitted borrowings, of 1/3 of its total assets;
(c) purchase or retain securities of an issuer any of whose
officers, directors, trustees or security holders is an
officer, director or trustee of the Fund or a member, officer,
director or trustee of the investment adviser of the Fund if
one or more of such individuals owns beneficially more than
one-half of one percent (1/2%) of the outstanding shares or
securities or both (taken at market value) of such issuer and
such individuals owning more than one-half of one percent
(1/2%) of such shares or securities together own beneficially
more than 5% of such shares or securities or both;
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(d) purchase securities on margin or make short sales unless, by
virtue of its ownership of other securities, it has the right
to obtain securities equivalent in kind and amount to the
securities sold and, if the right is conditional, the sale is
made upon the same conditions, except in connection with
arbitrage transactions, and except that the Fund may obtain
such short-term credits as may be necessary for the clearance
of purchases and sales of securities;
(e) invest more than 10% of its total assets in securities which
are not readily marketable, the disposition of which is
restricted under Federal securities laws or in repurchase
agreements not terminable within 7 days, and the Fund will not
invest more than 10% of its total assets in restricted
securities;
(f) purchase securities of any issuer with a record of less than
three years continuous operations, including predecessors,
except U.S. Government securities, and obligations issued or
guaranteed by any foreign government or its agencies or
instrumentalities, if such purchase would cause the
investments of the Fund in all such issuers to exceed 5% of
the total assets of the Fund taken at market value;
(g) buy options on securities or financial instruments unless the
aggregate premiums paid on all such options held by the Fund
at any time do not exceed 20% of the Fund's net assets; or
sell put options on securities if, as a result, the aggregate
value of the obligations underlying such put options would
exceed 50% of the Fund's net assets;
(h) enter into futures contracts or purchase options thereon
unless immediately after the purchase, the value of the
aggregate initial margin with respect to all futures contracts
entered into on behalf of the Fund and the premiums paid for
options on futures contracts does not exceed 5% of the fair
market value of the Fund's total assets; provided, that in the
case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in computing
the 5% limit;
(i) invest in oil, gas or other mineral leases, or exploration or
development programs (although it may invest in issuers which
own or invest in such interests);
(j) borrow money, including reverse repurchase agreements, in
excess of 5% of its total assets (taken at market value),
except for temporary or emergency purposes, or borrow other
than from banks;
(k) purchase warrants if as a result warrants taken at the lower
of cost or market value would represent more than 5% of the
value of the Fund's net assets or more than 2% of its net
assets in warrants that are not listed on the New York or
American Stock Exchanges or on an exchange with comparable
listing requirements (for this purpose, warrants attached to
securities will be deemed to have no value);
(l) invest more than 20% of its net assets in the securities of
foreign issuers;
(m) purchase from or sell to any of the Fund's officers and
trustees, its investment adviser, its principal underwriter or
the officers and directors of its investment adviser or
principal underwriter, portfolio securities of the Fund;
(n) purchase or sell real estate limited partnership interests; or
(o) make securities loans if the value of such securities loaned
exceeds 30% of the value of the Fund's total assets at the
time any loan is made; all loans of portfolio securities will
be fully collateralized and marked to market daily. The Fund
has no current intention of making loans of portfolio
securities that would amount to greater than 5% of the Fund's
total assets.
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PURCHASES
(See "Purchases" and "Transaction information" in the Fund's
prospectus.)
Additional Information About Opening An Account
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 their immediate families,
members of the National Association of Securities Dealers, Inc. ("NASD") and
banks may, if they prefer, subscribe initially for at least $1,000 of Fund
shares through Scudder Investor Services, Inc. (the "Distributor") by letter,
fax, TWX, or telephone.
Shareholders of other Scudder funds who have submitted an account
application and have a certified taxpayer 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 affiliated organization and their immediate families, members of the NASD,
and banks may open an account by wire. These investors must call 1-800-225-5163
to get an account number. During the call, the investor will be asked to
indicate the Fund name, amount to be wired ($1,000 minimum), name of bank or
trust company from which the wire will be sent, the exact registration of the
new account, the taxpayer identification or Social Security number, address and
telephone number. The investor must then call the bank to arrange a wire
transfer to The Scudder Funds, State Street Bank and Trust Company, Boston, MA
02110, ABA Number 011000028, DDA Account Number: 9903-5552. The investor must
give the Scudder fund name, account name and the new account number. Finally,
the investor must send the completed and signed application to the Fund
promptly.
The minimum initial purchase amount is less than $1,000 under certain
special plan accounts.
Additional Information About Making Subsequent Investments
Subsequent purchase orders for $10,000 or more and for an amount not
greater than four times the value of the shareholder's account may be placed by
telephone, fax, etc. by established shareholders (except by Scudder Individual
Retirement Account (IRA), Scudder Horizon Plan, Scudder Profit Sharing and Money
Purchase Pension Plans, Scudder 401(k) and Scudder 403(b) Plan holders), members
of the NASD, and banks. Orders placed in this manner may be directed to any
office of the Distributor listed in the Fund's prospectus. A confirmation of the
purchase will be mailed out promptly following receipt of a request to buy.
Federal regulations require that payment be received within three business days.
If payment is not received within that time, the order is subject to
cancelation. In the event of such cancelation or cancelation at the purchaser's
request, the purchaser will be responsible for any loss incurred by the Fund or
the principal underwriter by reason of such cancelation. If the purchaser is a
shareholder, the Trust shall have the authority, as agent of the shareholder, to
redeem shares in the account in order to reimburse the Fund or the principal
underwriter for the loss incurred. Net losses on such transactions which are not
recovered from the purchaser will be absorbed by the principal underwriter. Any
net profit on the liquidation of unpaid shares will accrue to the Fund.
Checks
A certified check is not necessary, but checks are only accepted
subject to collection at full face value in U.S. funds and must be drawn on, or
payable through, a U.S. bank.
If shares of the Fund are purchased by a check which proves to be
uncollectible, the Trust reserves the right to cancel the purchase immediately
and the purchaser will be responsible for any loss incurred by the Trust or the
principal underwriter by reason of such cancelation. If the purchaser is a
shareholder, the Trust will have the authority, as agent of the shareholder, to
redeem shares in the account in order to reimburse the Fund or the principal
underwriter for the loss incurred. Investors whose orders have been canceled may
be prohibited from, or restricted in, placing future orders in any of the
Scudder funds.
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Wire Transfer of Federal Funds
To obtain the net asset value determined as of the close of regular
trading on the Exchange on a selected day, your bank must forward federal funds
by wire transfer and provide the required account information so as to be
available to the Fund prior to the close of regular trading on the Exchange
(normally 4 p.m. eastern time).
The bank sending an investor's federal funds by bank wire may charge
for the service. Presently, the Distributor pays a fee for receipt by State
Street Bank and Trust Company (the "Custodian") of "wired funds," but the right
to charge investors for this service is reserved.
Boston banks are closed on certain holidays although the Exchange may
be open. These holidays include Martin Luther King, Jr. Day (the 3rd Monday in
January), Columbus Day (the 2nd Monday in October) and Veterans Day (November
11). Investors are not able to purchase shares by wiring federal funds on such
holidays because the Custodian is not open to receive such federal funds on
behalf of the Fund.
Share Price
Purchases will be filled without sales charge at the net asset value
next computed after receipt of the application in good order. Net asset value
normally will be computed 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 receive 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 the Fund's transfer agent in Boston by
the close of regular trading on the Exchange.
Share Certificates
Due to the desire of the Trust'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 Scudder
Service Corporation (the "Transfer Agent") for cancelation 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.
Other Information
If purchases or redemptions of Fund shares are arranged and settlement
is made at the investor's election through a member of the NASD other than the
Distributor, 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, and each may
suspend or terminate the offering of shares of the Fund at any time.
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, certification of exempt status) will be
returned to the investor.
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.
EXCHANGES AND REDEMPTIONS
(See "Exchanges and redemptions" and "Transaction information" in the Fund's
prospectus.)
Exchanges
Exchanges are comprised of a redemption from one Scudder fund and a
purchase into another Scudder fund. The purchase side of the exchange may be
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<PAGE>
either 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 $1,000. When an
exchange represents an additional investment into an existing account, the
account receiving the exchange proceeds must have identical registration, tax
identification number, address, and account options/features as the account of
origin. Exchanges into an existing account must be for $100 or more. 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 as described under "Transaction Information--Redeeming
shares--Signature guarantees" in the Fund's prospectus.
Exchange orders received before the close of regular trading on the
Exchange on any business day ordinarily will be executed at the 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.
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 Automatic 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 Automatic 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 Trust 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 Trust does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Trust will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine. The Trust, 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 the Distributor a prospectus of the Scudder fund
into which the exchange is being contemplated.
Scudder retirement plans may have different exchange requirements.
Please refer to appropriate plan literature.
Redemption by Telephone
Shareholders currently receive the right, automatically without having
to elect it, to redeem by telephone up to $50,000 and have the proceeds mailed
to their address of record. Shareholders may also request 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 telephone redemption to a
predesignated bank account 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 payments
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<PAGE>
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 original
signature guarantee are required for each person in whose name
the account is registered.
Telephone redemption is not available with respect to shares
represented by share certificates or shares held in certain retirement accounts.
If a request for 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 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.
Redemption by Mail or Fax
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/executrix, certificates of corporate authority and waivers of tax
(required in some states when settling estates).
It is suggested that shareholders holding share certificates or 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 five business days
after receipt by the Transfer Agent of a request for redemption that complies
with the above requirements. Delays in payment of more than seven days 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 please call 1-800-225-5163.
Redemption-In-Kind
The Trust reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption or repurchase order by
making payment in whole or in part in readily marketable securities chosen by
the Trust and valued as they are for purposes of computing the Fund's net asset
value (a redemption-in-kind). If payment is made in securities, a shareholder
may incur transaction expenses in converting these securities into cash. The
Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act as a
result of which the Trust is obligated to redeem shares, with respect to any one
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<PAGE>
shareholder during any 90 day period, solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Fund at the beginning of the
period.
Other Information
If a shareholder redeems all shares in the account after the record
date of a dividend, the shareholder will receive, in addition to the net asset
value thereof, all declared but unpaid dividends thereon. The value of shares
redeemed or repurchased may be more or less than the shareholder's cost
depending on the net asset value at the time of redemption or repurchase. The
Fund does not impose a redemption or repurchase charge, although a wire charge
may be applicable for redemption proceeds wired to an investor's bank account.
Redemptions of shares, including an exchange into another Scudder fund, may
result in tax consequences (gain or loss) to the shareholder and the proceeds of
such redemptions may be subject to backup withholding. (see "TAXES.")
Shareholders who wish to redeem shares from Special Plan Accounts
should contact the employer, trustee or custodian of the Plan for the
requirements.
The determination of net asset value may be suspended at times and a
shareholder's right to redeem shares and to receive payment may be suspended at
times during which (a) the Exchange is closed, other than customary weekend and
holiday closings, (b) trading on the Exchange is restricted for any reason, (c)
an emergency exists as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable or it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, or (d) a
governmental body having jurisdiction over the Fund may by order of the SEC
permit such a suspension for the protection of the Trust's shareholders;
provided that applicable rules and regulations of the SEC (or any succeeding
governmental authority) shall govern as to whether the conditions prescribed in
(b), (c) or (d) exist.
If transactions at any time reduce a shareholder's account balance in
the Fund to below $1,000 in value, the Fund may notify the shareholder that,
unless the account balance is brought up to at least $1,000, the Fund will
redeem all shares and close the account by making payment to the shareholder.
The shareholder has sixty days to bring the account balance up to $1,000 before
any action will be taken by the Fund. (This policy applies to accounts of new
shareholders, but does not apply to certain Special Plan Accounts.) The Trustees
have the authority to change the minimum account size.
FEATURES AND SERVICES OFFERED BY THE FUND
(See "Shareholder benefits" in the Fund's prospectus.)
The Pure No-Load(TM) Concept
Investors are encouraged to be aware of the full ramifications of
mutual fund fee structures, and of how Scudder distinguishes its funds from the
vast majority of mutual funds available today. The primary distinction is
between load and no-load funds.
Load funds generally are defined as mutual funds that charge a fee for
the sale and distribution of fund shares. There are three types of loads:
front-end loads, back-end loads, and asset-based 12b-1 fees. 12b-1 fees are
distribution-related fees charged against fund assets and are distinct from
service fees, which are charged for personal services and/or maintenance of
shareholder accounts. Asset-based sales charges and service fees are typically
paid pursuant to distribution plans adopted under 12b-1 under the 1940 Act.
A front-end load is a sales charge, which can be as high as 8.50% of
the amount invested. A back-end load is a contingent deferred sales charge,
which can be as high as 8.50% of either the amount invested or redeemed. The
maximum front-end or back-end load varies, and depends upon whether or not a
fund also charges a 12b-1 fee and/or a service fee or offers investors various
sales-related services such as dividend reinvestment. The maximum charge for a
12b-1 fee is 0.75% of a fund's average annual net assets, and the maximum charge
for a service fee is 0.25% of a fund's average annual net assets.
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<PAGE>
A no-load fund does not charge a front-end or back-end load, but can
charge a small 12b-1 fee and/or service fee against fund assets. Under the
National Association of Securities Dealers Rules of Fair Practice, a mutual fund
can call itself a "no-load" fund only if the 12b-1 fee and/or service fee does
not exceed 0.25% of a fund's average annual net assets.
Because Scudder funds do not pay any asset-based sales charges or
service fees, Scudder developed and trademarked the phrase pure no-load(TM) to
distinguish Scudder funds from other no-load mutual funds. Scudder pioneered the
no-load concept when it created the nation's first no-load fund in 1928, and
later developed the nation's first family of no-load mutual funds.
The following chart shows the potential long-term advantage of
investing $10,000 in a Scudder pure no-load fund over investing the same amount
in a load fund that collects an 8.50% front-end load, a load fund that collects
only a 0.75% 12b-1 and/or service fee, and a no-load fund charging only a 0.25%
12b-1 and/or service fee. The hypothetical figures in the chart show the value
of an account assuming a constant 10% rate of return over the time periods
indicated and reinvestment of dividends and distributions.
<TABLE>
<CAPTION>
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
Scudder No-Load Fund with
Pure No-Load(TM) Load Fund with 0.75% 0.25% 12b-1
YEARS Fund 8.50% Load Fund 12b-1 Fee Fee
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
10 $ 25,937 $ 23,733 $ 24,222 $ 25,354
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
15 41,772 38,222 37,698 40,371
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
20 67,275 61,557 58,672 64,282
- ------------------------ ---------------------- ---------------------- ---------------------- ----------------------
</TABLE>
Investors are encouraged to review the fee tables on page 2 of the
Fund's prospectus for more specific information about the rates at which
management fees and other expenses are assessed.
Dividend and Capital Gain Distribution Options
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 must be received by the Transfer Agent at least five days prior to a
dividend record date. Shareholders may change their dividend option either by
calling 1-800-225-5163 or by sending written instructions to the Transfer Agent.
Please include your account number with your written request. See "How to
contact Scudder" in the Prospectus for the address.
Reinvestment is usually made at the closing net asset value 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 shares of the Fund.
Investors may also have dividends and distributions automatically
deposited in their predesignated bank account through Scudder's
DistributionsDirect Program. Shareholders who elect to participate in the
DistributionsDirect Program, and whose predesignated checking account of record
is with a member bank of the 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 DistributionsDirect request form can be obtained by calling
1-800-225-5163. Confirmation statements will be mailed to shareholders as
notification that distributions have been deposited.
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<PAGE>
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.
Diversification
Your investment represents an interest in a large, diversified
portfolio of carefully selected securities. Diversification may protect you
against the possible risks of concentrating in fewer securities or in a specific
market sector.
Scudder Funds Centers
Investors may visit any of the Funds Centers maintained by the
Distributor. The Centers are designed to provide individuals with services
during any business day. Investors may pick up literature or obtain assistance
with opening an account, adding monies or special options to existing accounts,
making exchanges within the Scudder Family of Funds, redeeming shares or opening
retirement plans. Checks should not be mailed to the Centers but to "The Scudder
Funds" at the address listed under "How to contact Scudder" in the Prospectus.
Reports to Shareholders
The Fund issues shareholders unaudited semiannual financial statements
and annual financial statements audited by independent accountants, including a
list of investments held and statements of assets and liabilities, operations,
changes in net assets and financial highlights. The Fund presently intends to
distribute to shareholders informal quarterly reports during the intervening
quarters, containing certain performance and investment highlights of the Fund.
Each distribution will be accompanied by a brief explanation of the source of
the distribution.
Transaction Summaries
Annual summaries of all transactions in each Fund account are available
to shareholders. The summaries may be obtained by calling 1-800-225-5163.
THE SCUDDER FAMILY OF FUNDS
(See "Investment products and services" in the Fund's
prospectus.)
The Scudder Family of Funds is America's first family of mutual funds
and the nation's oldest family of no-load mutual funds. To assist investors in
choosing a Scudder fund, descriptions of the Scudder funds' objectives follow.
Initial purchases in each Scudder fund must be at least $1,000 or $500 in the
case of IRAs. Subsequent purchases must be for $100 or more. Minimum investments
for special plan accounts may be lower.
MONEY MARKET
Scudder Cash Investment Trust ("SCIT") seeks to maintain the stability
of capital, and consistent therewith, to maintain the liquidity of
capital and to provide current income through investment in a
supervised portfolio of short-term debt securities. SCIT intends to
seek to maintain a constant net asset value of $1.00 per share,
although in certain circumstances this may not be possible.
Scudder U.S. Treasury Money Fund seeks to provide safety, liquidity and
stability of capital and consistent therewith to provide current income
through investment in a supervised portfolio of U.S. Government and
U.S. Government guaranteed obligations with maturities of not more than
762 calendar days. The Fund intends to seek to maintain a constant net
asset value of $1.00 per share, although in certain circumstances this
may not be possible.
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<PAGE>
INCOME
Scudder Emerging Markets Income Fund seeks to provide high current
income and, secondarily, long-term capital appreciation through
investments primarily in high-yielding debt securities issued in
emerging markets.
Scudder GNMA Fund seeks to provide investors with high current income
from a portfolio of high-quality GNMA securities.
Scudder Income Fund seeks to earn a high level of income consistent
with the prudent investment of capital through a flexible investment
program emphasizing high-grade bonds.
Scudder International Bond Fund seeks to provide income from a
portfolio of high-grade bonds denominated in foreign currencies. As a
secondary objective, the Fund seeks protection and possible enhancement
of principal value by actively managing currency, bond market and
maturity exposure and by security selection.
Scudder Short Term Bond Fund seeks to provide a higher and more stable
level of income than is normally provided by money market investments,
and more price stability than investments in intermediate- and
long-term bonds.
Scudder Short Term Global Income Fund seeks to provide high current
income from a portfolio of high-grade money market instruments and
short-term bonds denominated in foreign currencies and the U.S. dollar.
Scudder Zero Coupon 2000 Fund seeks to provide as high an investment
return over a selected period as is consistent with the minimization of
reinvestment risks through investments primarily in zero coupon
securities.
TAX FREE MONEY MARKET
Scudder Tax Free Money Fund ("STFMF") is designed to provide investors
with income exempt from regular federal income tax while seeking
stability of principal. STFMF seeks to maintain a constant net asset
value of $1.00 per share, although in certain circumstances this may
not be possible.
Scudder California Tax Free Money Fund* is designed to provide
California taxpayers income exempt from California state and regular
federal income taxes, and seeks stability of capital and the
maintenance of a constant net asset value of $1.00 per share, although
in certain circumstances this may not be possible.
Scudder New York Tax Free Money Fund* is designed to provide New York
taxpayers income exempt from New York state, New York City and regular
federal income taxes, and seeks stability of capital and the
maintenance of a constant net asset value of $1.00 per share, although
in certain circumstances this may not be possible.
TAX FREE
Scudder High Yield Tax Free Fund seeks to provide high income which is
exempt from regular federal income tax by investing in investment-grade
municipal securities.
Scudder Limited Term Tax Free Fund seeks to provide as high a level of
income exempt from regular federal income tax as is consistent with a
high degree of principal stability.
Scudder Managed Municipal Bonds seeks to provide income which is exempt
from regular federal income tax primarily through investments in
long-term municipal securities with an emphasis on high quality.
* These funds are not available for sale in all states. For
information, contact Scudder Investor Services, Inc.
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<PAGE>
Scudder Medium Term Tax Free Fund seeks to provide a high level of
income free from regular federal income taxes and to limit principal
fluctuation by investing in high-grade municipal securities of
intermediate maturities.
Scudder California Tax Free Fund* seeks to provide income exempt from
both California and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
California state, municipal and local government obligations.
Scudder Massachusetts Limited Term Tax Free Fund* seeks to provide as
high a level of income exempt from Massachusetts personal and regular
federal income tax as is consistent with a high degree of principal
stability.
Scudder Massachusetts Tax Free Fund* seeks to provide income exempt
from both Massachusetts and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
Massachusetts state, municipal and local government obligations.
Scudder New York Tax Free Fund* seeks to provide income exempt from New
York state, New York City and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
investments in New York state, municipal and local government
obligations.
Scudder Ohio Tax Free Fund* seeks to provide income exempt from both
Ohio and regular federal income taxes through the professional and
efficient management of a portfolio consisting of Ohio state, municipal
and local government obligations.
Scudder Pennsylvania Tax Free Fund* seeks to provide income exempt from
both Pennsylvania and regular federal income taxes through a portfolio
consisting of Pennsylvania state, municipal and local government
obligations.
GROWTH AND INCOME
Scudder Balanced Fund seeks to provide a balance of growth and income,
as well as long-term preservation of capital, from a diversified
portfolio of equity and fixed income securities.
Scudder Growth and Income Fund seeks to provide long-term growth of
capital, current income, and growth of income through a portfolio
invested primarily in common stocks and convertible securities by
companies which offer the prospect of growth of earnings while paying
current dividends.
GROWTH
Scudder Capital Growth Fund seeks to maximize long-term growth of
capital through a broad and flexible investment program emphasizing
common stocks.
Scudder Development Fund seeks to achieve long-term growth of capital
primarily through investments in marketable securities, principally
common stocks, of relatively small or little-known companies which in
the opinion of management have promise of expanding their size and
profitability or of gaining increased market recognition for their
securities, or both.
Scudder Global Fund seeks long-term growth of capital primarily through
a diversified portfolio of marketable equity securities selected on a
worldwide basis. It may also invest in debt securities of U.S. and
foreign issuers. Income is an incidental consideration.
Scudder Global Small Company Fund seeks above-average capital
appreciation over the long term by investing primarily in the equity
securities of small companies located throughout the world.
* These funds are not available for sale in all states. For
information, contact Scudder Investor Services, Inc.
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<PAGE>
Scudder Gold Fund seeks maximum return (principal change and income)
consistent with investing in a portfolio of gold-related equity
securities and gold.
Scudder Greater Europe Growth Fund seeks long-term growth of capital
through investments primarily in the equity securities of European
companies.
Scudder International Fund seeks long-term growth of capital through
investment principally in a diversified portfolio of marketable equity
securities selected primarily to permit participation in non-U.S.
companies and economies with prospects for growth. It also invests in
fixed-income securities of foreign governments and companies, with a
view toward total investment return.
Scudder Latin America Fund seeks to provide long-term capital
appreciation through investment primarily in the securities of Latin
American issuers.
Scudder Pacific Opportunities Fund seeks long-term growth of capital
through investment primarily in the equity securities of Pacific Basin
companies, excluding Japan.
Scudder Quality Growth Fund seeks to provide long-term growth of
capital through investment primarily in the equity securities of
seasoned, financially strong U.S.
growth companies.
Scudder Small Company Value Fund invests for long-term growth of
capital by seeking out undervalued stocks of small U.S. companies.
Scudder Value Fund seeks long-term growth of capital through investment
in undervalued equity securities.
The Japan Fund, Inc. seeks capital appreciation through investment in
Japanese securities, primarily in common stocks of Japanese companies.
The net asset values of most Scudder Funds can be found daily in the
"Mutual Funds" section of The Wall Street Journal under "Scudder Funds," and in
other leading newspapers throughout the country. Investors will notice the net
asset value and offering price are the same, reflecting the fact that no sales
commission or "load" is charged on the sale of shares of the Scudder Funds. The
latest seven-day yields for the money-market funds can be found every Monday and
Thursday in the "Money-Market Funds" section of The Wall Street Journal. This
information also may be obtained by calling the Scudder Automated Information
Line (SAIL) at 1-800-343-2890.
The Scudder Family of Funds offers many conveniences and services,
including: active professional investment management; broad and diversified
investment portfolios; pure no-load funds with no commissions to purchase or
redeem shares or Rule 12b-1 distribution fees; individual attention from a
service representative of Scudder Investor Relations; easy telephone exchanges
into other Scudder funds; shares redeemable at net asset value at any time.
SPECIAL PLAN ACCOUNTS
(See "Scudder tax-advantaged retirement plans," "Purchases--By
Automatic Investment Plan" and "Exchanges and redemptions--By
Automatic Withdrawal Plan" in the Fund's prospectus.)
Detailed information on any Scudder investment plan, including the
applicable charges, minimum investment requirements and disclosures made
pursuant to Internal Revenue Service (the "IRS") requirements, may be obtained
by contacting Scudder Investor Services, Inc., Two International Place, Boston,
Massachusetts 02110-4103 or by calling toll free, 1-800-225-2470. It is
advisable for an investor considering the funding of the investment plans
described below to consult with an attorney or other investment or tax adviser
with respect to the suitability requirements and tax aspects thereof.
22
<PAGE>
Shares of the Fund may also be a permitted investment under profit
sharing and pension plans and IRA's other than those offered by the Fund's
distributor depending on the provisions of the relevant plan or IRA.
None of the plans assures a profit or guarantees protection against
depreciation, especially in declining markets.
Scudder Retirement Plans: Profit-Sharing and
Money Purchase Pension Plans for Corporations
and Self-Employed Individuals
Shares of the Fund may be purchased as the investment medium under a
plan in the form of a Scudder Profit-Sharing Plan (including a version of the
Plan which includes a cash-or-deferred feature) or a Scudder Money Purchase
Pension Plan (jointly referred to as the Scudder Retirement Plans) adopted by a
corporation, a self-employed individual or a group of self-employed individuals
(including sole proprietorships and partnerships), or other qualifying
organization. Each of these forms was approved by the IRS as a prototype. The
IRS's approval of an employer's plan under Section 401(a) of the Code will be
greatly facilitated if it is in such approved form. Under certain circumstances,
the IRS will assume that a plan, adopted in this form, after special notice to
any employees, meets the requirements of Section 401(a) of the Code.
Scudder 401(k): Cash or Deferred
Profit-Sharing Plan for
Corporations and Self-Employed
Individuals
Shares of the Fund may be purchased as the investment medium under a
plan in the form of a Scudder 401(k) Plan adopted by a corporation, a
self-employed individual or a group of self-employed individuals (including sole
proprietors and partnerships), or other qualifying organization. This plan has
been approved as a prototype by the IRS.
Scudder IRA: Individual Retirement Account
Shares of the Fund may be purchased as the underlying investment for an
Individual Retirement Account which meets the requirements of Section 408(a) of
the Code.
A single individual who is not an active participant in an
employer-maintained retirement plan, a simplified employee pension plan, or a
tax-deferred annuity program (a "qualified plan"), and a married individual who
is not an active participant in a qualified plan and whose spouse is also not an
active participant in a qualified plan, are eligible to make tax deductible
contributions of up to $2,000 to an IRA prior to the year such individual
attains age 70 1/2. In addition, certain individuals who are active participants
in qualified plans (or who have spouses who are active participants) are also
eligible to make tax-deductible contributions to an IRA; the annual amount, if
any, of the contribution which such an individual will be eligible to deduct
will be determined by the amount of his, her, or their adjusted gross income for
the year. Whenever the adjusted gross income limitation prohibits an individual
from contributing what would otherwise be the maximum tax-deductible
contribution he or she could make, the individual will be eligible to contribute
the difference to an IRA in the form of nondeductible contributions.
An eligible individual may contribute as much as $2,000 of qualified
income (earned income or, under certain circumstances, alimony) to an IRA each
year (up to $2,250 for married couples if one spouse has earned income of no
more than $250). All income and capital gains derived from IRA investments are
reinvested and compound tax-deferred until distributed. Such tax-deferred
compounding can lead to substantial retirement savings.
The table below shows how much individuals would accumulate in a fully
tax-deductible IRA by age 65 (before any distributions) if they contribute
$2,000 at the beginning of each year, assuming average annual returns of 5, 10,
and 15%. (At withdrawal, accumulations in this table will be taxable.)
23
<PAGE>
<TABLE>
<CAPTION>
Value of IRA at Age 65
Assuming $2,000 Deductible Annual Contribution
- ---------------------------- ------------------------- -------------------------- -------------------------
Starting
Age of Annual Rate of Return
------------------------------------------------------------------------------
Contributions 5% 10% 15%
- ---------------------------- ------------------------- -------------------------- -------------------------
<S> <C> <C> <C>
25 $253,680 $973,704 $4,091,908
35 139,522 361,887 999,914
45 69,439 126,005 235,620
55 26,414 35,062 46,699
</TABLE>
This next table shows how much individuals would accumulate in non-IRA
accounts by age 65 if they start with $2,000 in pretax earned income at the
beginning of each year (which is $1,380 after taxes are paid), assuming average
annual returns of 5, 10 and 15%. (At withdrawal, a portion of the accumulation
in this table will be taxable.)
<TABLE>
<CAPTION>
Value of a Non-IRA Account at
Age 65 Assuming $1,380 Annual Contributions
(post tax, $2,000 pretax) and a 31% Tax Bracket
- ---------------------------- ------------------------- -------------------------- -------------------------
Starting
Age of Annual Rate of Return
------------------------------------------------------------------------------
Contributions 5% 10% 15%
- ---------------------------- ------------------------- -------------------------- -------------------------
<S> <C> <C> <C>
25 $119,318 $287,021 $741,431
35 73,094 136,868 267,697
45 40,166 59,821 90,764
55 16,709 20,286 24,681
</TABLE>
Scudder 403(b) Plan
Shares of the Fund may also be purchased as the underlying investment
for tax sheltered annuity plans under the provisions of Section 403(b)(7) of the
Code. In general, employees of tax-exempt organizations described in Section
501(c)(3) of the Code (such as hospitals, churches, religious, scientific, or
literary organizations and educational institutions) or a public school system
are eligible to participate in a 403(b) plan.
Automatic Withdrawal Plan
Non-retirement plan shareholders who currently own shares of the Fund
may establish an Automatic Withdrawal Plan. The investor can then receive
monthly, quarterly or periodic redemptions from his or her account for any
designated amount of $50 or more. Payments are mailed at the end of each month.
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. Requests
for increases in withdrawal amounts or to change payee must be submitted in
writing, signed exactly as the account is registered and contain signature
guarantee(s) as described under "Transaction information--Redeeming
shares--Signature guarantees" in the Fund's prospectus. Any such requests must
be received by the Fund's transfer agent by the 15th of the month in which such
change is to take effect. 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.
24
<PAGE>
Group or Salary Deduction Plan
An investor may join a Group or Salary Deduction Plan where
satisfactory arrangements have been made with Scudder Investor Services, Inc.
for forwarding regular investments through a single source. The minimum annual
investment is $240 per investor which may be made in monthly, quarterly,
semiannual or annual payments. The minimum monthly deposit per investor is $20.
Except for trustees or custodian fees for certain retirement plans, at present
there is no separate charge for maintaining group or salary deduction plans;
however, the Trust and its agents reserve the right to establish a maintenance
charge in the future depending on the services required by the investor.
The Trust reserves the right, after notice has been given to the
shareholder, to redeem and close a shareholder's account in the event that the
shareholder ceases participating in the group plan prior to investment of $1,000
per individual or in the event of a redemption which occurs prior to the
accumulation of that amount or which reduces the account value to less than
$1,000 and the account value is not increased to $1,000 within a reasonable time
after notification. An investor in a plan who has not purchased shares for six
months shall be presumed to have stopped making payments under the plan.
Automatic Investment Plan
Shareholders may arrange to make periodic investments 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.
[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.]
Uniform Transfers/Gifts to Minors Act
Grandparents, parents or other donors may set up custodian accounts for
minors. The minimum initial investment is $1,000 unless the donor agrees to
continue to make regular share purchases for the account through Scudder's
Automatic Investment Plan (AIP). In this case, the minimum initial investment is
$500.
The Trust reserves the right, after notice has been given to the
shareholder and custodian, to redeem and close a shareholder's account in the
event that regular investments to the account cease before the $1,000 minimum is
reached.
Scudder Trust Company
Annual service fees are paid by the Fund to Scudder Trust Company, an
affiliate of the Adviser, for certain retirement plan accounts and are included
in the fees paid to the Transfer Agent.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
(See "Distribution and performance information--Dividends
and capital gains distributions" in the Fund's
prospectus.)
The Fund intends to follow the practice of distributing substantially
all of its investment company taxable income, which includes any excess of net
realized short-term capital gains over net realized long-term capital losses. In
the past, the Fund has followed the practice of distributing the entire excess
of net realized long-term capital gains over net realized short-term capital
losses. However, the Fund may retain all or part of such gain for reinvestment,
after paying the related federal income taxes for which the shareholders may
25
<PAGE>
claim a credit against their federal income tax liability. If the Fund does not
distribute the amount of capital gains and/or ordinary income required to be
distributed by an excise tax provision of the Code, the Fund may be subject to
that excise tax. In certain circumstances the Fund may determine that it is in
the interest of shareholders to distribute less than the required amount. (See
"TAXES.")
The Fund intends to distribute substantially all of its net investment
income and any net realized capital gains resulting from Fund investment
activity in September as well as in December. Both types of distributions will
be made in shares of the Fund and confirmations will be mailed to each
shareholder unless a shareholder has elected to receive cash, in which case a
check will be sent. Distributions of investment company taxable income and net
realized capital gains are taxable (see "TAXES"), whether made in shares or
cash.
PERFORMANCE INFORMATION
(See "Distribution and performance
information--Performance information" in the Fund's
prospectus.)
From time to time, quotations of the Fund's performance may be included
in advertisements, sales literature or reports to shareholders or prospective
investors. These performance figures are calculated in the following manner:
Average Annual Total Return
Average Annual Total Return is the average annual compound rate of
return for the periods of one year, five years and ten years, all ended on the
last day of a recent calendar quarter. Average annual total return quotations
reflect changes in the price of the Fund's shares and assume that all dividends
and capital gains distributions during the respective periods were reinvested in
Fund shares. Average annual total return is calculated by finding the average
annual compound rates of return of a hypothetical investment over such periods,
according to the following formula (average annual total return is then
expressed as a percentage):
T = (ERV/P)^1/n - 1
Where:
P = a hypothetical initial investment of $1,000
T = Average Annual Total Return
n = number of years
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
Average Annual Total Return for the periods ended June 30, 1995
One year Five years Ten years
45.41% 14.03% 13.11%
Cumulative Total Return
Cumulative Total Return is the cumulative rate of return on a
hypothetical initial investment of $1,000 for a specified period. Cumulative
Total Return quotations reflect changes in the price of the Fund's shares and
assume that all dividends and capital gains distributions during the period were
reinvested in Fund shares. Cumulative Total Return is calculated by finding the
cumulative rates of return of a hypothetical investment over such periods,
according to the following formula (Cumulative Total Return is then expressed as
a percentage):
C = (ERV/P) -1
Where:
C = Cumulative Total Return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
26
<PAGE>
Cumulative Total Return for the periods ended June 30, 1995
One year Five years Ten years
45.41% 92.76% 242.71%
Total Return
Total Return is the rate of return on an investment for a specified
period of time calculated in the same manner as Cumulative Total Return.
Capital Change
Capital Change measures the return from invested capital including
reinvested capital gains distributions. Capital change does not include the
reinvestment of income dividends.
Quotations of the Fund's performance are historical and are not
intended to indicate future performance. An investor's shares when redeemed may
be worth more or less than their original cost. Performance of the Fund will
vary based on changes in market conditions and the level of the Fund's expenses.
Comparison of Fund Performance
A comparison of the quoted non-standard performance offered for various
investments is valid only if performance is calculated in the same manner. Since
there are different methods of calculating performance, investors should
consider the effects of the methods used to calculate performance when comparing
performance of the Fund with performance quoted with respect to other investment
companies or types of investments.
In connection with communicating its performance to current or
prospective shareholders, the Fund also may compare these figures to the
performance of unmanaged indices which may assume reinvestment of dividends or
interest but generally do not reflect deductions for administrative and
management costs. Examples include, but are not limited to the Dow Jones
Industrial Average, the Consumer Price Index, Standard & Poor's 500 Composite
Stock Price Index (S&P 500), the NASDAQ OTC Composite Index, the NASDAQ
Industrials Index, the Russell 2000 Index, and statistics published by the Small
Business Administration.
From time to time, in advertising and marketing literature, this Fund's
performance may be compared to the performance of broad groups of mutual funds
with similar investment goals, as tracked by independent organizations such as,
Investment Company Data, Inc. ("ICD"), Lipper Analytical Services, Inc.
("Lipper"), CDA Investment Technologies, Inc. ("CDA"), Morningstar, Inc., Value
Line Mutual Fund Survey and other independent organizations. When these
organizations' tracking results are used, the Fund will be compared to the
appropriate fund category, that is, by fund objective and portfolio holdings, or
to the appropriate volatility grouping, where volatility is a measure of a
fund's risk. For instance, a Scudder growth fund will be compared to funds in
the growth fund category; a Scudder income fund will be compared to funds in the
income fund category; and so on. Scudder funds (except for money market funds)
may also be compared to funds with similar volatility, as measured statistically
by independent organizations.
From time to time, in marketing and other Fund literature, Trustees and
officers of the Fund, the Fund's portfolio manager, or members of the portfolio
management team may be depicted and quoted to give prospective and current
shareholders a better sense of the outlook and approach of those who manage the
Fund. In addition, the amount of assets that the Adviser has under management in
various geographical areas may be quoted in advertising and marketing materials.
The Fund may be advertised as an investment choice in Scudder's college
planning program. The description may contain illustrations of projected future
college costs based on assumed rates of inflation and examples of hypothetical
fund performance, calculated as described above.
27
<PAGE>
Statistical and other information, as provided by the Social Security
Administration, may be used in marketing materials pertaining to retirement
planning in order to estimate future payouts of social security benefits.
Estimates may be used on demographic and economic data.
Marketing and other Fund literature may include a description of the
potential risks and rewards associated with an investment in the Fund. The
description may include a "risk/return spectrum" which compares the Fund to
other Scudder funds or broad categories of funds, such as money market, bond or
equity funds, in terms of potential risks and returns. Money market funds are
designed to maintain a constant $1.00 share price and have a fluctuating yield.
Share price, yield and total return of a bond fund will fluctuate. The share
price and return of an equity fund also will fluctuate. The description may also
compare the Fund to bank products, such as certificates of deposit. Unlike
mutual funds, certificates of deposit are insured up to $100,000 by the U.S.
government and offer a fixed rate of return.
Because bank products guarantee the principal value of an investment
and money market funds seek stability of principal, these investments are
considered to be less risky than investments in either bond or equity funds,
which may involve the loss of principal. However, all long-term investments,
including investments in bank products, may be subject to inflation risk, which
is the risk of erosion of the value of an investment as prices increase over a
long time period. The risks/returns associated with an investment in bond or
equity funds depend upon many factors. For bond funds these factors include, but
are not limited to, a fund's overall investment objective, the average portfolio
maturity, credit quality of the securities held, and interest rate movements.
For equity funds, factors include a fund's overall investment objective, the
types of equity securities held and the financial position of the issuers of the
securities. The risks/returns associated with an investment in international
bond or equity funds also will depend upon currency exchange rate fluctuation.
A risk/return spectrum generally will position the various investment
categories in the following order: bank products, money market funds, bond funds
and equity funds. Shorter-term bond funds generally are considered less risky
and offer the potential for less return than longer-term bond funds. The same is
true of domestic bond funds relative to international bond funds, and bond funds
that purchase higher quality securities relative to bond funds that purchase
lower quality securities. Growth and income equity funds are generally
considered to be less risky and offer the potential for less return than growth
funds. In addition, international equity funds usually are considered more risky
than domestic equity funds but generally offer the potential for greater return.
Risk/return spectrums also may depict funds that invest in both
domestic and foreign securities or a combination of bond and equity securities.
Evaluation of Fund performance or other relevant statistical
information made by independent sources may also be used in advertisements
concerning the Fund, including reprints of, or selections from, editorials or
articles about this Fund. Sources of Fund performance information and articles
about the Fund include the following:
American Association of Individual Investors' Journal, a monthly publication of
the AAII that includes articles on investment analysis techniques.
Asian Wall Street Journal, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.
Banxquote, an on-line source of national averages for leading money market and
bank CD interest rates, published on a weekly basis by Masterfund, Inc. of
Wilmington, Delaware.
Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.
Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing abroad.
CDA Investment Technologies, Inc., an organization which provides performance
and ranking information through examining the dollar results of hypothetical
mutual fund investments and comparing these results against appropriate market
indices.
28
<PAGE>
Consumer Digest, a monthly business/financial magazine that includes a "Money
Watch" section featuring financial news.
Financial Times, Europe's business newspaper, which features from time to time
articles on international or country-specific funds.
Financial World, a general business/financial magazine that includes a "Market
Watch" department reporting on activities in the mutual fund industry.
Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.
The Frank Russell Company, a West-Coast investment management firm that
periodically evaluates international stock markets and compares foreign equity
market performance to U.S. stock market performance.
Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds investing internationally.
IBC/Donoghue's Money Fund Report, a weekly publication of the Donoghue
Organization, Inc., of Holliston, Massachusetts, reporting on the performance of
the nation's money market funds, summarizing money market fund activity and
including certain averages as performance benchmarks, specifically "Donoghue's
Money Fund Average," and "Donoghue's Government Money Fund Average."
Ibbotson Associates, Inc., a company specializing in investment research and
data.
Investment Company Data, Inc., an independent organization which provides
performance ranking information for broad classes of mutual funds.
Investor's Daily, a daily newspaper that features financial, economic, and
business news.
Kiplinger's Personal Finance Magazine, a monthly investment advisory publication
that periodically features the performance of a variety of securities.
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a weekly
publication of industry-wide mutual fund averages by type of fund.
Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.
Morgan Stanley International, an integrated investment banking firm that
compiles statistical information.
Mutual Fund Values, a biweekly Morningstar, Inc. publication that provides
ratings of mutual funds based on fund performance, risk and portfolio
characteristics.
The New York Times, a nationally distributed newspaper which regularly covers
financial news.
The No-Load Fund Investor, a monthly newsletter, published by Sheldon Jacobs,
that includes mutual fund performance data and recommendations for the mutual
fund investor.
No-Load Fund*X, a monthly newsletter, published by DAL Investment Company, Inc.,
that reports on mutual fund performance, rates funds and discusses investment
strategies for the mutual fund investor.
Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.
29
<PAGE>
Personal Investor, a monthly investment advisory publication that includes a
"Mutual Funds Outlook" section reporting on mutual fund performance measures,
yields, indices and portfolio holdings.
Smart Money, a national personal finance magazine published monthly by Dow Jones
and Company, Inc. and The Hearst Corporation. Focus is placed on ideas for
investing, spending and saving.
Success, a monthly magazine targeted to the world of entrepreneurs and growing
business, often featuring mutual fund performance data.
United Mutual Fund Selector, a semi-monthly investment newsletter, published by
Babson United Investment Advisors, that includes mutual fund performance data
and reviews of mutual fund portfolios and investment strategies.
USA Today, a leading national daily newspaper.
U.S. News and World Report, a national business weekly that periodically reports
mutual fund performance data.
Value Line Mutual Fund Survey, an independent organization that provides
biweekly performance and other information on mutual funds.
Wall Street Journal, a Dow Jones and Company, Inc. newspaper which regularly
covers financial news.
Wiesenberger Investment Companies Services, an annual compendium of information
about mutual funds and other investment companies, including comparative data on
funds' backgrounds, management policies, salient features, management results,
income and dividend records and price ranges.
Working Woman, a monthly publication that features a "Financial Workshop"
section reporting on the mutual fund/financial industry.
Worth, a national publication put out 10 times per year by Capital Publishing
Company, a subsidiary of Fidelity Investments. Focus is placed on personal
financial journalism.
FUND ORGANIZATION
(See "Fund organization" in the Fund's prospectus.)
The Fund is a series of Scudder Securities Trust, formerly Scudder
Development Fund, a Massachusetts business trust established under a Declaration
of Trust dated October 16, 1985. The Trust's predecessor was organized as a
Delaware corporation in 1970. The Trust's authorized capital consists of an
unlimited number of shares of beneficial interest of $0.01 par value, all of
which are of one class and have equal rights as to voting, dividends and
liquidation. The Trust's shares are currently divided into two series, Scudder
Development Fund and Scudder Small Company Value Fund. The Trustees have the
authority to issue additional series of shares and to designate the relative
rights and preferences as between the different series. Each share of each Fund
has equal rights with each other share of that Fund as to voting, dividends and
liquidations. All shares issued and outstanding will be fully paid and
nonassessable by the Trust, and redeemable as described in this Statement of
Additional Information and in each Fund's prospectus.
The assets of the Trust received for the issue or sale of the shares of
each series and all income, earnings, profits and proceeds thereof, subject only
to the rights of creditors, are specifically allocated to such series and
constitute the underlying assets of such series. The underlying assets of each
series are segregated on the books of account, and are to be charged with the
liabilities in respect to such series and with a proportionate share of the
general liabilities of the Trust. If a series were unable to meet its
obligations, the assets of all other series may in some circumstances be
available to creditors for that purpose, in which case the assets of such other
series could be used to meet liabilities which are not otherwise properly
chargeable to them. Expenses with respect to any two or more series are to be
allocated in proportion to the asset value of the respective series except where
allocations of direct expenses can otherwise be fairly made. The officers of the
Trust, subject to the general supervision of the Trustees, have the power to
determine which liabilities are allocable to a given series, or which are
30
<PAGE>
general or allocable to two or more series. In the event of the dissolution or
liquidation of the Trust or any series, the holders of the shares of any series
are entitled to receive as a class the underlying assets of such shares
available for distribution to shareholders.
Shares of the Trust entitle their holders to one vote per share;
however, separate votes are taken by each series on matters affecting that
individual series. For example, a change in investment policy for a series would
be voted upon only by shareholders of the series involved. Additionally,
approval of the investment advisory agreement is a matter to be determined
separately by each series.
The Trustees, in their discretion, may authorize the division of shares
of the Fund (or shares of a series) into different classes, permitting shares of
different classes to be distributed by different methods. Although shareholders
of different classes of a series would have an interest in the same portfolio of
assets, shareholders of different classes may bear different expenses in
connection with different methods of distribution. The Trustees have no present
intention of taking the action necessary to effect the division of shares into
separate classes, nor of changing the method of distribution of shares of the
Fund.
The Declaration of Trust provides that obligations of the Fund are not
binding upon the Trustees individually but only upon the property of the Fund,
that the Trustees and officers will not be liable for errors of judgment or
mistakes of fact or law, and that the Fund will indemnify its Trustees and
officers against liabilities and expenses incurred in connection with litigation
in which they may be involved because of their offices with the Fund, except if
it is determined in the manner provided in the Declaration of Trust that they
have not acted in good faith in the reasonable belief that their actions were in
the best interests of the Fund. However, nothing in the Declaration of Trust
protects or indemnifies a Trustee or officer against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
INVESTMENT ADVISER
(See "Fund organization--Investment adviser" in the Fund's
prospectus.)
Scudder, Stevens & Clark, Inc. (the "Adviser"), an investment counsel
firm, acts as investment adviser to the Fund. This organization is one of the
most experienced investment counsel firms in the U.S. It was established as a
partnership in 1919 and pioneered the practice of providing investment counsel
to individual clients on a fee basis. In 1928 it introduced the first no-load
mutual fund to the public. In 1953 the Adviser introduced Scudder International
Fund, Inc., the first mutual fund available in the U.S. investing
internationally in securities of issuers in several foreign countries. The firm
reorganized from a partnership to a corporation on June 28, 1985.
The principal source of the Adviser's income is professional fees
received from providing continuous investment advice, and the firm derives no
income from brokerage or underwriting of securities. Today, it provides
investment counsel for many individuals and institutions, including insurance
companies, colleges, industrial corporations, and financial and banking
organizations. In addition, it manages Montgomery Street Income Securities,
Inc., Scudder California Tax Free Trust, Scudder Cash Investment Trust, Scudder
Equity Trust, Scudder Fund, Inc., Scudder Funds Trust, Scudder Global Fund,
Inc., Scudder GNMA Fund, Scudder Portfolio Trust, Scudder Institutional Fund,
Inc., Scudder International Fund, Inc., Scudder Investment Trust, Scudder
Municipal Trust, Scudder Mutual Funds, Inc., Scudder New Asia Fund, Inc.,
Scudder New Europe Fund, Inc., Scudder Securities Trust, Scudder State Tax Free
Trust, Scudder Tax Free Money Fund, Scudder Tax Free Trust, Scudder U.S.
Treasury Money Fund, Scudder Variable Life Investment Fund, Scudder World Income
Opportunities Fund, Inc., The Argentina Fund, Inc., The Brazil Fund, Inc., The
First Iberian Fund, Inc., The Korea Fund, Inc., The Japan Fund, Inc. and The
Latin America Dollar Income Fund, Inc. Some of the foregoing companies or trusts
have two or more series.
The Adviser also provides investment advisory services to the mutual
funds which comprise the AARP Investment Program from Scudder. The AARP
Investment Program from Scudder has assets over $11 billion and includes the
AARP Growth Trust, AARP Income Trust, AARP Tax Free Income Trust and AARP Cash
Investment Funds.
The Adviser maintains a large research department, which conducts
continuous studies of the factors that affect the position of various
industries, companies and individual securities. In this work, the Adviser
utilizes certain reports and statistics from a variety of sources, including
31
<PAGE>
brokers and dealers who may execute portfolio transactions for the Fund and for
clients of the Adviser, but conclusions are based primarily on investigations
and critical analyses by its own research specialists.
Certain investments may be appropriate for the Fund and also for other
clients advised by the Adviser. Investment decisions for the Fund and other
clients are made with a view toward achieving their respective investment
objectives and after consideration of such factors as their current holdings,
availability of cash for investment and the size of their investments generally.
Frequently, a particular security may be bought or sold for only one client or
in different amounts and at different times for more than one but less than all
clients. Likewise, a particular security may be bought for one or more clients
when one or more other clients are selling the security. In addition, purchases
or sales of the same security may be made for two or more clients on the same
day. In such event, such transactions will be allocated among the clients in a
manner believed by the Adviser to be equitable to each. In some cases, this
procedure could have an adverse effect on the price or amount of the securities
purchased or sold by the Fund. Purchase and sale orders for the Fund may be
combined with those of other clients of the Adviser in the interest of achieving
the most favorable net results to the Fund.
The Investment Management Agreement (the "Agreement") was last approved
by the Trustees of the Fund on September 6, 1995. The Agreement is dated June 9,
1992 and will continue in effect until September 30, 1996 and from year to year
thereafter only if its continuance is approved annually by the vote of a
majority of those Trustees who are not parties to such Agreement or interested
persons of the Adviser or the Fund, cast in person at a meeting called for the
purpose of voting on such approval, and either by a vote of the Fund's Trustees
or of a majority of the outstanding voting securities of the Fund. The Agreement
may be terminated at any time without payment of penalty by either party on
sixty days' written notice, and automatically terminates in the event of its
assignment.
Under the Agreement, the Adviser provides the Fund with continuing
investment management for the Fund's portfolio consistent with the Fund's
investment objective, policies and restrictions and determines what securities
shall be purchased, held or sold and what portion of the Fund's assets shall be
held uninvested, subject always to the provisions of the Fund's Declaration of
Trust and By-Laws, the 1940 Act and the Internal Revenue Code of 1986 and to the
Fund's investment objective, policies and restrictions, and subject, further, to
such policies and instructions as the Board of Trustees of the Fund may from
time to time establish. The Adviser also advises and assists the officers of the
Fund in taking such steps as are necessary or appropriate to carry out the
decisions of its Trustees and the appropriate committees of the Trustees
regarding the conduct of the business of the Fund.
Under the Agreement, the Adviser renders significant administrative
services (not otherwise provided by third parties) necessary for the Fund's
operations as an open-end investment company including, but not limited to,
preparing reports and notices to the Trustees and shareholders; supervising,
negotiating contractual arrangements with, and monitoring various third-party
service providers to the Fund (such as the Fund's transfer agent, pricing
agents, custodian, accountants and others); preparing and making filings with
the SEC and other regulatory agencies; assisting in the preparation and filing
of the Fund's federal, state and local tax returns; preparing and filing the
Fund's federal excise tax returns; assisting with investor and public relations
matters; monitoring the valuation of securities and the calculation of net asset
value; monitoring the registration of shares of the Fund under applicable
federal and state securities laws; maintaining the Fund's books and records to
the extent not otherwise maintained by a third party; assisting in establishing
accounting policies of the Fund; assisting in the resolution of accounting and
legal issues; establishing and monitoring the Fund's operating budget;
processing the payment of the Fund's bills; assisting the Fund in, and otherwise
arranging for, the payment of distributions and dividends and otherwise
assisting the Fund in the conduct of its business, subject to the direction and
control of the Trustees.
The Adviser pays the compensation and expenses (except those for
attending Board and committee meetings outside New York, New York and Boston,
Massachusetts) of all Trustees, officers and executive employees of the Fund
affiliated with the Adviser and makes available, without expense to the Fund,
the services of such directors, officers and employees of the Adviser as may
duly be elected officers of the Fund, subject to their individual consent to
serve and to any limitations imposed by law, and provides the Fund's office
space and facilities.
For these services the Fund pays the Adviser a fee equal to an annual
rate of 1% of the Fund's first $500 million of average daily net assets, 0.95 of
1% of the next $500 million of such net assets, and 0.90 of 1% on such net
assets in excess of $1 billion. The fee is payable monthly, provided the Fund
will make such interim payments as may be requested by the Adviser not to exceed
32
<PAGE>
75% of the amount of the fee then accrued on the books of the Fund and unpaid.
Because of the higher cost of research, this fee is higher than that paid by
most other investment companies. The investment advisory fees for the fiscal
years ended June 30, 1993, 1994 and 1995 were $7,770,198, $7,239,230 and
$6,050,470, respectively. Net assets as of June 30, 1995 were $727,312,123.
Under the Agreement, the Fund is responsible for all of its other
expenses including: fees and expenses incurred in connection with membership in
investment company organizations; broker's commissions; legal, auditing and
accounting expenses; the calculation of net asset value; taxes and governmental
fees; the fees and expenses of the Transfer Agent; the cost of preparing share
certificates or any other expenses including expenses of issuance, redemption or
repurchase of shares; the expenses of and the fees for registering or qualifying
securities for sale; the fees and expenses of Trustees, officers and employees
of the Fund who are not affiliated with the Adviser; the cost of printing and
distributing reports and notices to shareholders; and the fees and disbursements
of custodians. The Fund may arrange to have third parties assume all or part of
the expenses of sale, underwriting and distribution of shares of the Fund. The
Fund is also responsible for expenses of shareholders' meetings, the cost of
responding to shareholders' inquiries, and expenses incurred in connection with
litigation, proceedings and claims and the legal obligation it may have to
indemnify its officers and Trustees with respect thereto.
The Agreement requires the Adviser to reimburse the Fund for all or a
portion of advances of its management fee to the extent annual expenses of the
Fund (including the management fee stated above) exceed the limitations
prescribed by any state in which the Fund's shares are offered for sale.
Management has been advised that, while most states have eliminated expense
limitations, the lowest such limitation is presently 2 1/2% of average daily net
assets up to $30 million, 2% of the next $70 million of average daily net assets
and 1 1/2% of average daily net assets in excess of that amount. Certain
expenses such as brokerage commissions, taxes, extraordinary expenses and
interest are excluded from such limitation. For the fiscal years ended June 30,
1993, 1994 and 1995, expenses of the Fund equaled 1.30%, 1.27% and 1.32%,
respectively, of the average net assets of the Fund. Any such fee advance
required to be returned to the Fund will be returned as promptly as practicable
after the end of the Fund's fiscal year. However, no fee payment will be made to
the Adviser during any fiscal year which will cause year to date expenses to
exceed the cumulative pro rata expense limitation at the time of such payment.
The Agreement also provides that the Fund may use any name derived from
the name "Scudder, Stevens & Clark" only as long as the Agreement or any
extension, renewal or amendment thereof remains in effect.
In reviewing the terms of the Agreement and in discussions with the
Adviser concerning such Agreement, the Trustees of the Fund who are not
"interested persons" of the Adviser are represented by independent counsel at
the Fund's expense.
The Agreement provides that the Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with matters to which the Agreement relates, except a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of the
Adviser in the performance of its duties or from reckless disregard by the
Adviser of its obligations and duties under the Agreement.
Officers and employees of the Adviser from time to time may have
transactions with various banks, including the Fund's custodian bank. It is the
Adviser's opinion that the terms and conditions of those transactions which have
occurred were not influenced by existing or potential custodial or other Fund
relationships.
None of the Trustees or officers of the Fund may have dealings with the
Fund as principals in the purchase or sale of securities, except as individual
subscribers or holders of shares of the Fund.
Personal Investments by Employees of the Adviser
Employees of the Adviser are permitted to make personal securities
transactions, subject to requirements and restrictions set forth in the
Adviser's Code of Ethics. The Code of Ethics contains provisions and
requirements designed to identify and address certain conflicts of interest
33
<PAGE>
between personal investment activities and the interests of investment advisory
clients such as the Funds. Among other things, the Code of Ethics, which
generally complies with standards recommended by the Investment Company
Institute's Advisory Group on Personal Investing, 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 monthly 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 Code of Ethics may be granted in
particular circumstances after review by appropriate personnel.
<TABLE>
<CAPTION>
TRUSTEES AND OFFICERS
Position with
Underwriter,
Name Position Scudder Investor
and Address with Fund Principal Occupation** Services, Inc.
- ----------- --------- -------------------- --------------
<S> <C> <C> <C>
Daniel Pierce+* President and Trustee Chairman of the Board and Vice President, Director and
Managing Director of Scudder, Assistant Treasurer
Stevens & Clark, Inc.
Paul Bancroft III Trustee Venture Capitalist and --
1120 Cheston Lane Consultant; Retired, President
Queenstown, MD 21658 Chief Executive Officer and
Director of Bessemer Securities
Corporation
Thomas J. Devine Trustee Consultant --
641 Lexington Avenue,
28th Floor
New York, NY 10022
Douglas M. Loudon++* Vice President and Managing Director of Scudder, Senior Vice President
Trustee Stevens & Clark, Inc.
Wilson Nolen Trustee Consultant (1989 until present); --
1120 Fifth Avenue Corporate Vice President of
New York, NY 10128 Becton, Dickinson & Company,
manufacturer of medical and
scientific products (until June
1989)
Juris Padegs++#* Trustee Managing Director of Scudder, Vice President and Director
Stevens & Clark, Inc.
Dr. Gordon Shillinglaw Trustee Professor Emeritus of --
Columbia University Accounting, Columbia University
196 Villard Avenue Graduate School of Business
Hastings-on-Hudson
New York, NY 10706
Robert G. Stone, Jr. Trustee Chairman of the Board and --
405 Lexington Avenue, Director, Kirby Corporation
39th Floor (inland and offshore marine
New York, NY 10174 transportation and diesel
repairs)
34
<PAGE>
Position with
Underwriter,
Name Position Scudder Investor
and Address with Fund Principal Occupation** Services, Inc.
- ----------- --------- -------------------- --------------
Edmond D. Villani++#* Trustee President and Managing Director --
of Scudder, Stevens & Clark, Inc.
Robert W. Lear Honorary Trustee Executive-in-Residence, Visiting --
429 Silvermine Road Professor, Columbia University
New Canaan, CT 06840 Graduate School of Business
Edmund R. Swanberg++ Honorary Trustee Advisory Managing Director of --
Scudder, Stevens & Clark, Inc.
Peter Chin Vice President Principal of Scudder, Stevens & --
Clark, Inc.
Jerard K. Hartman++ Vice President Managing Director of Scudder, --
Stevens & Clark, Inc.
Thomas W. Joseph+ Vice President Principal of Scudder, Stevens & Vice President, Director,
Clark, Inc. Treasurer and Assistant Clerk
David S. Lee+ Vice President Managing Director of Scudder, President, Director and
Stevens & Clark, Inc. Assistant Treasurer
Thomas F. McDonough+ Vice President and Principal of Scudder, Stevens & Clerk
Secretary Clark, Inc.
Pamela A. McGrath+ Vice President and Principal of Scudder, Stevens & --
Treasurer Clark, Inc.
Roy C. McKay++ Vice President Managing Director of Scudder, --
Stevens & Clark, Inc.
Edward J. O'Connell++ Vice President and Principal of Scudder, Stevens & Assistant Treasurer
Assistant Treasurer Clark, Inc.
Kathryn L. Quirk++ Vice President and Managing Director of Scudder, Vice President
Assistant Secretary Stevens & Clark, Inc.
Richard W. Desmond++ Assistant Secretary Vice President of Scudder, Vice President
Stevens & Clark, Inc.
Coleen Downs Dinneen+ Assistant Secretary Vice President of Scudder, Assistant Clerk
Stevens & Clark, Inc.
<FN>
* Messrs. Loudon, Padegs, Pierce and Villani are considered by the Fund
and counsel to be persons who are "interested persons" of the Adviser
or of the Fund, within the meaning of the Investment Company Act of
1940, as amended.
** Unless otherwise stated, all the Trustees and officers have been
associated with their respective companies for more than five years,
but not necessarily in the same capacity.
# Messrs. Padegs and Villani are members of the Executive
Committee, which may exercise all of the powers of the
Trustees when they are not in session.
+ Address: Two International Place, Boston, Massachusetts
++ Address: 345 Park Avenue, New York, New York
</FN>
</TABLE>
35
<PAGE>
The Trustees and officers of the Fund also serve in similar capacities
with other Scudder Funds.
As of September 30, 1995, all Trustees and officers of the Fund as a
group owned beneficially (as that term is defined under Section 13(d) of the
Securities Exchange Act of 1934) ________ shares, or ____% of the shares of the
Fund outstanding on such date.
Certain accounts for which the Adviser acts as investment adviser owned
________ shares in the aggregate, or ____% of the outstanding shares on
September 30, 1995. The Adviser may be deemed to be the beneficial owner of such
shares but disclaims any beneficial ownership in such shares.
To the best of the Fund's knowledge, as of September 30, 1995, no
person owned beneficially more than 5% of the Fund's outstanding shares except
as stated above.
REMUNERATION
Several of the officers and Trustees of the Trust may be officers or
employees of the Adviser, or of the Distributor, the Transfer Agent, Scudder
Trust Company or Scudder Fund Accounting Corporation, from whom they receive
compensation, as a result of which they may be deemed to participate in the fees
paid by the Trust. The Trust pays no direct remuneration to any officer of the
Trust. However, each of the Trust's Trustees who is not affiliated with the
Adviser will be compensated for all expenses relating to Trust business
(specifically including travel expenses relating to Trust business.) Each of
these unaffiliated Trustees receives an annual Trustee's fee of $4,000 plus $400
for each attended Trustees' meeting, audit committee meeting or meeting held for
the purpose of considering arrangements between the Fund and the Adviser or any
of its affiliates. Each unaffiliated Trustee also receives $150 per committee
meeting attended other than those set forth above. For the fiscal year ended
June 30, 1995, the Fund paid such Trustees $43,660.
The following Compensation Table provides, in tabular form, the following data:
Column (1) All Trustees who receive compensation from the Trust.
Column (2) Aggregate compensation received by a Trustee from all series of the
Trust.
Columns (3) and (4) Pension or retirement benefits accrued or proposed to be
paid by the Fund Complex. Scudder Securities Trust does not pay its Trustees
such benefits.
Column (5) Total compensation received by a Trustee from the Trust plus
compensation received from all funds managed by the Adviser for which
a Trustee serves. The total number of funds from which a Trustee receives such
compensation is also provided in column (5). Generally, compensation received by
a Trustee for serving on the board of a closed-end fund is greater than the
compensation received by a Trustee for serving on the board of an open-end fund.
36
<PAGE>
<TABLE>
<CAPTION>
Compensation Table
for the year ended December 31, 1994*
- ---------------------------- -------------------------------- ------------------ ----------------- -----------------
(1) (2) (3) (4) (5)
Pension or Total
Retirement Compensation
Aggregate Benefits Accrued Estimated From the Trust
Compensation As Part of Fund Annual Benefits and Fund Complex
Name of Person, from Complex Upon Paid to
Position Scudder Securities Trust** Expenses Retirement Trustee
- ---------------------------- -------------------------------- ------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Paul Bancroft III, $8,200 N/A N/A $ 120,238
Trustee (14 funds)
Thomas J. Devine, Trustee $8,200 N/A N/A $ 115,656
(16 funds)
Wilson Nolen, Trustee $8,200 N/A N/A $ 132,023
(15 funds)
Dr. Gordon Shillinglaw, $9,000 N/A N/A $ 89,570
Trustee (14 funds)
Robert G. Stone, Jr., $8,200 $6,289 $6,000 $ 140,438
Trustee (15 funds)
<FN>
* Scudder Small Company Value Fund commenced operations on October 6, 1995.
** The Trust consists of two funds: Scudder Development Fund and Scudder
Small Company Value Fund.
</FN>
</TABLE>
DISTRIBUTOR
The Trust has an underwriting agreement with Scudder Investor Services,
Inc. (the "Distributor"), a Massachusetts corporation, which is a wholly-owned
subsidiary of the Adviser, a Delaware corporation. The Trust's underwriting
agreement dated September 30, 1995 will remain in effect until September 30,
1997 and from year to year thereafter only if its continuance is approved
annually by a majority of the Trustees who are not parties to such agreement or
interested persons of any such party and either by a vote of a majority of the
Trustees or a majority of the outstanding voting securities of the Fund. The
underwriting agreement was last approved by the Trustees on September 6, 1995.
Under the underwriting agreement, the Fund is responsible for: the
payment of all fees and expenses in connection with the preparation and filing
with the SEC of its registration statement and prospectus and any amendments and
supplements thereto; the registration and qualification of shares for sale in
the various states, including registering the Fund as a broker or dealer in the
various states as required; the fees and expenses of preparing, printing and
mailing prospectuses annually to existing shareholders (see below for expenses
relating to prospectuses paid by the Distributor), notices, proxy statements,
reports or other communications to shareholders of the Fund; the cost of
printing and mailing confirmations of purchases of shares and any prospectuses
accompanying such confirmations; any issuance taxes and/or any initial transfer
taxes; a portion of shareholder toll-free telephone charges and expenses of
shareholder service representatives; the cost of wiring funds for share
purchases and redemptions (unless paid by the shareholder who initiates the
transaction); the cost of printing and postage of business reply envelopes; and
a portion of the cost of computer terminals used by both the Fund and the
Distributor.
The Distributor will pay for printing and distributing prospectuses or
reports prepared for its use in connection with the offering of the Fund's
shares to the public and preparing, printing and mailing any other literature or
advertising in connection with the offering of the shares of the Fund to the
public. The Distributor will pay all fees and expenses in connection with its
qualification and registration as a broker or dealer under federal and state
laws, a portion of the cost of toll-free telephone service and expenses of
37
<PAGE>
shareholder service representatives, a portion of the cost of computer
terminals, and expenses of any activity which is primarily intended to result in
the sale of shares issued by the Fund, unless a 12b-1 Plan is in effect which
provides that the Fund shall bear some or all of such expenses.
NOTE: Although the Fund does not currently have a 12b-1 Plan, and the
Trustees have no current intention of adopting one, the Fund would also
pay those fees and expenses permitted to be paid or assumed by the Fund
pursuant to a 12b-1 Plan, if any, were adopted by the Fund,
notwithstanding any other provision to the contrary in the underwriting
agreement.
As agent, the Distributor currently offers the Fund's shares on a
continuous basis to investors in all states in which shares of the Fund may from
time to time be registered or where permitted by applicable law. The
underwriting agreement provides that the Distributor accepts orders for shares
at net asset value as no sales commission or load is charged to the investor.
The Distributor has made no firm commitment to acquire shares of the Fund.
TAXES
(See "Distribution and performance information--Dividends and
capital gain distributions" and "Transaction information--
Tax information, Tax identification number" in the Fund's
prospectus.)
The Fund has elected to be treated as a regulated investment company
under Subchapter M of the Code or a predecessor statute, and has qualified as
such since its inception. It intends to continue to qualify for such treatment.
Such qualification does not involve governmental supervision or management of
investment practices or policy.
A regulated investment company qualifying under Subchapter M of the
Code is required to distribute to its shareholders at least 90% of its
investment company taxable income (including net short-term capital gain) and
generally is not subject to federal income tax to the extent that it distributes
annually its investment company taxable income and net realized capital gains in
the manner required under the Code.
The Fund is subject to a 4% nondeductible excise tax on amounts
required to be but not distributed under a prescribed formula. The formula
requires payment to shareholders during a calendar year of distributions
representing at least 98% of the Fund's ordinary income for the calendar year,
at least 98% of the excess of its capital gains over capital losses (adjusted
for certain ordinary losses) realized during the one-year period ending October
31 during such year, and all ordinary income and capital gains for prior years
that were not previously distributed.
Investment company taxable income includes dividends, interest and net
short-term capital gains in excess of net long-term capital losses, less
expenses. Net realized capital gains for a fiscal year are computed by taking
into account any capital loss carryforward of the Fund. Presently, the Fund has
no capital loss carryforwards.
If any net realized long-term capital gains in excess of net realized
short-term capital losses are retained by the Fund for reinvestment, requiring
federal income taxes to be paid thereon by the Fund, the Fund intends to elect
to treat such capital gains as having been distributed to shareholders. As a
result, each shareholder will report such capital gains as long-term capital
gains, will be able to claim a relative share of federal income taxes paid by
the Fund on such gains as a credit against personal federal income tax
liability, and will be entitled to increase the adjusted tax basis on Fund
shares by the difference between a pro rata share of such gains owned and the
individual tax credit.
Distributions of investment company taxable income are taxable to
shareholders as ordinary income.
Dividends from domestic corporations are expected to comprise a
substantial part of the Fund's gross income. To the extent that such dividends
constitute a portion of the Fund's gross income, a portion of the income
distributions of the Fund may be eligible for the deduction for dividends
received by corporations. Shareholders will be informed of the portion of
dividends which so qualify. The dividends-received deduction is reduced to the
extent the shares of the Fund with respect to which the dividends are received
are treated as debt-financed under federal income tax law, and is eliminated if
either those shares or the shares of the Fund are deemed to have been held by
the Fund or the shareholder, as the case may be, for less than 46 days.
38
<PAGE>
Distributions of the excess of net long-term capital gain over net
short-term capital loss are taxable to shareholders as long-term capital gain,
regardless of the length of time the shares of the Fund have been held by such
shareholders. Such distributions are not eligible for the dividends-received
deduction. Any loss realized upon the redemption of shares held at the time of
redemption for six months or less will be treated as a long-term capital loss to
the extent of any amounts treated as distributions of long-term capital gain
during such six-month period.
Distributions of investment company taxable income and net realized
capital gains will be taxable as described above, whether received in shares or
in cash. Shareholders electing to receive distributions in the form of
additional shares will have a cost basis for federal income tax purposes in each
share so received equal to the net asset value of a share on the reinvestment
date.
All distributions of investment company taxable income and net realized
capital gain, whether received in shares or in cash, must be reported by each
shareholder on his or her federal income tax return. Dividends and capital gains
distributions declared in October, November or December and payable to
shareholders of record in such a month will be deemed to have been received by
shareholders on December 31 if paid during January of the following year.
Redemptions of shares, including exchanges for shares of another Scudder fund,
may result in tax consequences (gain or loss) to the shareholder and are also
subject to these reporting requirements.
A qualifying individual may make a deductible IRA contribution for any
taxable year only if (i) neither the individual nor his or her spouse (unless
filing separate returns) is an active participant in an employer's retirement
plan, or (ii) the individual (and his or her spouse, if applicable) has an
adjusted gross income below a certain level ($40,050 for married individuals
filing a joint return, with a phase-out of the deduction for adjusted gross
income between $40,050 and $50,000; $25,050 for a single individual, with a
phase-out for adjusted gross income between $25,050 and $35,000). However, an
individual not permitted to make a deductible contribution to an IRA for any
such taxable year may nonetheless make nondeductible contributions up to $2,000
to an IRA (up to $2,250 to IRAs for an individual and his or her nonearning
spouse) for that year. There are special rules for determining how withdrawals
are to be taxed if an IRA contains both deductible and nondeductible amounts. In
general, a proportionate amount of each withdrawal will be deemed to be made
from nondeductible contributions; amounts treated as a return of nondeductible
contributions will not be taxable. Also, annual contributions may be made to a
spousal IRA even if the spouse has earnings in a given year if the spouse elects
to be treated as having no earnings (for IRA contribution purposes) for the
year.
Distributions by the Fund result in a reduction in the net asset value
of the Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should consider the tax implications of buying shares just
prior to a distribution. The price of shares purchased at that time includes the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will then receive a partial return of capital upon the
distribution, which will nevertheless be taxable to them.
The Fund may invest in shares of certain foreign corporations which may
be classified under the Code as passive foreign investment companies ("PFICs").
If the Fund receives a so-called "excess distribution" with respect to PFIC
stock, the Fund itself may be subject to a tax on a portion of the excess
distribution. Certain distributions from a PFIC as well as gains from the sale
of the PFIC shares are treated as "excess distributions." In general, under the
PFIC rules, an excess distribution is treated as having been realized ratably
over the period during which the Fund held the PFIC shares. The Fund will be
subject to tax on the portion, if any, of an excess distribution that is
allocated to prior Fund taxable years and an interest factor will be added to
the tax, as if the tax had been payable in such prior taxable years. Excess
distributions allocated to the current taxable year are characterized as
ordinary income even though, absent application of the PFIC rules, certain
excess distributions might have been classified as capital gain.
Proposed regulations have been issued which may allow the Fund to make
an election to mark to market its shares of these foreign investment companies
in lieu of being subject to U.S. federal income taxation. At the end of each
taxable year to which the election applies, the Fund would report as ordinary
income the amount by which the fair market value of the foreign company's stock
exceeds the Fund's adjusted basis in these shares. No mark to market losses may
be recognized. The effect of the election would be to treat excess distributions
and gain on dispositions as ordinary income which is not subject to a fund level
tax when distributed to shareholders as a dividend. Alternatively, the Fund may
39
<PAGE>
elect to include as income and gain its share of the ordinary earnings and net
capital gain of certain foreign investment companies in lieu of being taxed in
the manner described above.
Equity options (including covered call options on portfolio stock) and
over-the-counter options on debt securities written or purchased by the Fund
will be subject to tax under Section 1234 of the Code. In general, no loss is
recognized by a Fund upon payment of a premium in connection with the purchase
of a put or call option. The character of any gain or loss recognized (i.e.,
long-term or short-term) will generally depend, in the case of a lapse or sale
of the option, on the Fund's holding period for the option, and in the case of
an exercise of a put option, on the Fund's holding period for the underlying
stock. The purchase of a put option may constitute a short sale for federal
income tax purposes, causing an adjustment in the holding period of the
underlying stock or substantially identical stock in the Fund's portfolio. If
the Fund writes a put or call option, no gain is recognized upon its receipt of
a premium. If the option lapses or is closed out, any gain or loss is treated as
a short-term capital gain or loss. If a call option is exercised, any resulting
gain or loss is a short-term or long-term capital gain or loss depending on the
holding period of the underlying stock. The exercise of a put option written by
the Fund is not a taxable transaction for the Fund.
Many futures contracts and certain foreign currency forward contracts
entered into by the Fund and all listed non-equity options written or purchased
by the Fund (including options on futures contracts and options on broad-based
stock indices) will be governed by Section 1256 of the Code. Absent a tax
election to the contrary, gain or loss attributable to the lapse, exercise or
closing out of any such position generally will be treated as 60% long-term and
40% short-term capital gain or loss, and on the last trading day of the Fund's
fiscal year, all outstanding Section 1256 positions will be marked to market
(i.e. treated as if such positions were closed out at their closing price on
such day), with any resulting gain or loss recognized as 60% long-term and 40%
short-term. Under Section 988 of the Code, discussed below, foreign currency
gain or loss from foreign currency-related forward contracts and similar
financial instruments entered into or acquired by the Fund will be treated as
ordinary income. Under certain circumstances, entry into a futures contract to
sell a security may constitute a short sale for federal income tax purposes,
causing an adjustment in the holding period of the underlying security or a
substantially identical security in the Fund's portfolio.
Positions of the Fund which consist of at least one stock and at least
one other position with respect to a related security which substantially
diminishes the Fund's risk of loss with respect to such stock could be treated
as a "straddle" which is governed by Section 1092 of the Code, the operation of
which may cause deferral of losses, adjustments in the holding periods of stock
or securities and conversion of short-term capital losses into long-term capital
losses. An exception to these straddle rules exists for certain "qualified
covered call options" on stock written by the Fund.
Positions of the Fund which consist of at least one position not
governed by Section 1256 and at least one futures or forward contract or
non-equity option governed by Section 1256 which substantially diminishes the
Fund's risk of loss with respect to such other position will be treated as a
"mixed straddle." Although mixed straddles are subject to the straddle rules of
Section 1092 of the Code, certain tax elections exist for them which reduce or
eliminate the operation of these rules. The Fund intends to monitor its
transactions in options and futures and may make certain tax elections in
connection with these investments.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund accrues receivables or
liabilities denominated in a foreign currency and the time the Fund actually
collects such receivables, or pays such liabilities, generally are treated as
ordinary income or ordinary loss. Similarly, on disposition of debt securities
denominated in a foreign currency, and on disposition of certain options,
futures contracts and forward contracts, gains or losses attributable to
fluctuations in the value of foreign currency between the date of acquisition of
the security or contract and the date of disposition are also treated as
ordinary gain or loss. These gains or losses, referred to under the Code as
"Section 988" gains or losses, may increase or decrease the amount of the Fund's
investment company taxable income to be distributed to its shareholders as
ordinary income.
The Fund will be required to report to the Internal Revenue Service all
distributions of taxable income and capital gains as well as gross proceeds from
the redemption or exchange of Fund shares, except in the case of certain exempt
shareholders. Under the backup withholding provisions of Section 3406 of the
Code, distributions of taxable income and capital gains and proceeds from the
redemption or exchange of the shares of a regulated investment company may be
subject to withholding of federal income tax at the rate of 31% in the case of
non-exempt shareholders who fail to furnish the investment company with their
40
<PAGE>
taxpayer identification numbers and with required certifications regarding their
status under the federal income tax law. Withholding may also be required if the
Fund is notified by the IRS or a broker that the taxpayer identification number
furnished by the shareholder is incorrect or that the shareholder has previously
failed to report interest or dividend income. If the withholding provisions are
applicable, any such distributions and proceeds, whether taken in cash or
reinvested in additional shares, will be reduced by the amounts required to be
withheld.
Shareholders of the Fund may be subject to state and local taxes on
distributions received from the Fund and on redemptions of the Fund's shares.
Each distribution is accompanied by a brief explanation of the form and
character of the distribution. In January of each year the Fund issues to each
shareholder a statement of the federal income tax status of all distributions.
The Fund is organized as a series of a Massachusetts business trust and
is not liable for any income or franchise tax in the Commonwealth of
Massachusetts, provided that it qualifies as a regulated investment company for
federal income tax purposes.
The foregoing discussion of U.S. federal income tax law relates solely
to the application of that law to U.S. persons, i.e., U.S. citizens and
residents and U.S. corporations, partnerships, trusts and estates. Each
shareholder who is not a U.S. person should consider the U.S. and foreign tax
consequences of ownership of shares of the Fund, including the possibility that
such a shareholder may be subject to a U.S. withholding tax at a rate of 30% (or
at a lower rate under an applicable income tax treaty) on amounts constituting
ordinary income received by him or her, where such amounts are treated as income
from U.S. sources under the Code.
Dividend and interest income received by the Fund from sources outside
the U.S. may be subject to withholding and other taxes imposed by such foreign
jurisdictions. Tax conventions between certain countries and the U.S. may reduce
or eliminate these foreign taxes, however, and foreign countries generally do
not impose taxes on capital gains respecting investments by foreign investors.
Shareholders should consult their tax advisers about the application of
the provisions of tax law described in this Statement of Additional Information
in light of their particular tax situations.
PORTFOLIO TRANSACTIONS
Brokerage Commissions
To the maximum extent feasible the Adviser places orders for portfolio
transactions for the Fund through the Distributor, which in turn places orders
on behalf of the Fund with issuers, underwriters or other brokers and dealers.
The Distributor receives no commissions, fees or other remuneration from the
Fund for this service. Allocation of brokerage is supervised by the Adviser.
The primary objective of the Adviser in placing orders for the purchase
and sale of securities for the Fund's portfolio is to obtain the most favorable
net results, taking into account such factors as price, commission where
applicable (negotiable in the case of U.S. national securities exchange
transactions), size of order, difficulty of execution and skill required of the
executing broker/dealer. The Adviser seeks to evaluate the overall
reasonableness of brokerage commissions paid (to the extent applicable) through
the familiarity of the Distributor with commissions charged on comparable
transactions, as well as by comparing commissions paid by the Fund to reported
commissions paid by others. The Adviser reviews on a routine basis commission
rates, execution and settlement services performed, making internal and external
comparisons.
When it can be done consistently with the policy of obtaining the most
favorable net results, it is the Adviser's practice to place such orders with
brokers and dealers who supply market quotations to the custodian of the Fund
for appraisal purposes; or who supply research, market and statistical
information to the Fund or the Adviser. The term "research, market and
statistical information" includes advice as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities, and analyses
and reports concerning issuers, industries, securities, economic factors and
trends, portfolio strategy and the performance of accounts. The Adviser is not
authorized when placing portfolio transactions for the Fund to pay a brokerage
41
<PAGE>
commission (to the extent applicable) in excess of that which another broker
might have charged for executing the same transaction solely on account of the
receipt of research, market or statistical information. The Adviser does not
place orders with brokers or dealers on the basis that the broker or dealer has
or has not sold shares of the Fund. In effecting transactions in
over-the-counter securities, orders are placed with the principal market makers
for the security being traded unless, after exercising care, it appears that
more favorable results are available otherwise.
Although certain research, market and statistical information from
brokers and dealers can be useful to the Fund and to the Adviser, it is the
opinion of the Adviser that such information will only supplement the Adviser's
own research effort since the information must still be analyzed, weighed, and
reviewed by the Adviser's staff. Such information may be useful to the Adviser
in providing services to clients other than the Fund, and not all such
information is used by the Adviser in connection with the Fund. Conversely, such
information provided to the Adviser by brokers and dealers through whom other
clients of the Adviser effect securities transactions may be useful to the
Adviser in providing services to the Fund.
Subject also to obtaining the most favorable net results, the Adviser
may place brokerage transactions through the Fund's custodian and a credit
against the custodian fee due to the custodian equal to one-half of the
commission on any such transaction will be given. Except for implementing the
policy stated above, there is no intention to place portfolio transactions with
particular brokers or dealers or groups thereof.
In the fiscal years ended June 30, 1993, 1994 and 1995, the Fund paid
brokerage commissions of $1,041,196.41, $644,093 and $_______, respectively. For
the fiscal year ended June 30, 1995, $______ (__% of the total brokerage
commissions paid) resulted from orders placed, consistent with the policy of
obtaining the most favorable net results, with brokers and dealers who provided
supplementary research information to the Fund or the Adviser. The amount of
such transactions aggregated $_______ (__% of all transactions).
The Trustees intend to review from time to time whether the recapture
for the benefit of the Fund of some portion of the brokerage commissions or
similar fees paid by the Fund on portfolio transactions is legally permissible
and advisable. Within the past three years no such recapture has been effected.
Portfolio Turnover
The portfolio turnover rates (defined by the SEC as the ratio of the
lesser of sales or purchases to the monthly average value of such securities
owned during the year, excluding all securities whose remaining maturities at
the time of acquisition were one year or less) for the fiscal years ended June
30, 1994 and 1995 were 48.3% and 41.6%, respectively.
NET ASSET VALUE
The net asset value of shares of the Fund is computed as of the close
of regular trading on the New York Stock Exchange (the "Exchange") on each day
the Exchange is open for trading. The Exchange is scheduled to be closed on the
following holidays: New Year's Day, Presidents Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas. Net asset value per
share is determined by dividing the value of the total assets of the Fund, less
all liabilities, by the total number of shares outstanding.
An exchange-traded equity security is valued at its most recent sale
price. Lacking any sales, the security is valued at the calculated mean between
the most recent bid quotation and the most recent asked quotation (the
"Calculated Mean"). Lacking a Calculated Mean, the security is valued at the
most recent bid quotation. An equity security which is traded on the National
Association of Securities Dealers Automated Quotation ("NASDAQ") system is
valued at its most recent sale price. Lacking any sales, the security is valued
at the high or "inside" bid quotation. The value of an equity security not
quoted on the NASDAQ System, but traded in another over-the-counter market, is
its most recent sale price. Lacking any sales, the security is valued at the
Calculated Mean. Lacking a Calculated Mean, the security is valued at the most
recent bid quotation.
Debt securities, other than short-term securities, are valued at prices
supplied by the Fund's pricing agent(s) which reflect broker/dealer supplied
valuations and electronic data processing techniques. Short-term securities with
remaining maturities of sixty days or less are valued by the amortized cost
method, which the Board believes approximates market value. If it is not
possible to value a particular debt security pursuant to these valuation
42
<PAGE>
methods, the value of such security is the most recent bid quotation supplied by
a bona fide marketmaker. If it is not possible to value a particular debt
security pursuant to the above methods, the Adviser may calculate the price of
that debt security, subject to limitations established by the Board.
An exchange traded options contract on securities, currencies, futures
and other financial instruments is valued at its most recent sale price on such
exchange. Lacking any sales, the options contract is valued at the Calculated
Mean. Lacking any Calculated Mean, the options contract is valued at the most
recent bid quotation in the case of a purchased options contract, or the most
recent asked quotation in the case of a written options contract. An options
contract on securities, currencies and other financial instruments traded
over-the-counter is valued at the most recent bid quotation in the case of a
purchased options contract and at the most recent asked quotation in the case of
a written options contract. Futures contracts are valued at the most recent
settlement price. Foreign currency exchange forward contracts are valued at the
value of the underlying currency at the prevailing exchange rate.
If a security is traded on more than one exchange, or upon one or more
exchanges and in the over-the-counter market, quotations are taken from the
market in which the security is traded most extensively.
If, in the opinion of the Fund's Valuation Committee, the value of a
portfolio asset as determined in accordance with these procedures does not
represent the fair market value of the portfolio asset, the value of the
portfolio asset is taken to be an amount which, in the opinion of the Valuation
Committee, represents fair market value on the basis of all available
information. The value of other portfolio holdings owned by the Fund is
determined in a manner which, in the discretion of the Valuation Committee most
fairly reflects fair market value of the property on the valuation date.
Following the valuations of securities or other portfolio assets in
terms of the currency in which the market quotation used is expressed ("Local
Currency"), the value of these portfolio assets in terms of U.S. dollars is
calculated by converting the Local Currency into U.S. dollars at the prevailing
currency exchange rate on the valuation date.
ADDITIONAL INFORMATION
Experts
The Financial Highlights of the Fund included in the prospectus and the
Financial Statements incorporated by reference in this Statement of Additional
Information have been so included or incorporated by reference in reliance on
the report of Coopers & Lybrand L.L.P., One Post Office Square, Boston,
Massachusetts 02109, independent accountants, and given on the authority of that
firm as experts in accounting and auditing.
Shareholder Indemnification
The Trust is an organization of the type commonly known as a
Massachusetts business trust. Under Massachusetts law, shareholders of such a
trust may, under certain circumstances, be held personally liable as partners
for the obligations of the Trust. The Declaration of Trust contains an express
disclaimer of shareholder liability in connection with the Fund's property or
the acts, obligations or affairs of the Trust. The Declaration of Trust also
provides for indemnification out of the Fund's property of any shareholder held
personally liable for the claims and liabilities which a shareholder may become
subject by reason of being or having been a shareholder. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations.
Other Information
Many of the investment changes in the Fund will be made at prices
different from those prevailing at the time they may be reflected in a regular
report to shareholders of the Fund. These transactions will reflect investment
decisions made by the Adviser in light of the objective and policies of the
Fund, and other factors such as its other portfolio holdings and tax
considerations, and should not be construed as recommendations for similar
action by other investors.
43
<PAGE>
The name "Scudder Securities Trust" is the designation of the Trustees
for the time being under a Declaration of Trust dated October 16, 1985, as
amended from time to time, and all persons dealing with the Fund must look
solely to the property of the Fund for the enforcement of any claims against the
Fund as neither the Trustees, officers, agents or shareholders assume any
personal liability for obligations entered into on behalf of the Fund. No series
of the Trust shall be liable for the obligations of any other series. Upon the
initial purchase of shares, the shareholder agrees to be bound by the Trust's
Declaration of Trust, as amended from time to time. The Declaration of Trust is
on file at the Massachusetts Secretary of State's Office in Boston,
Massachusetts.
The CUSIP number of the Fund is 811196-10-4.
The Fund employs State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110 as custodian.
The firm of Dechert Price & Rhoads of Boston is counsel to the Trust.
Scudder Fund Accounting Corporation, Two International Place, Boston,
Massachusetts, 02110-4103, a wholly-owned subsidiary of the Adviser, computes
net asset value for the Fund. The Fund pays Scudder Fund Accounting Corporation
an annual fee equal to 0.025% of the first $150 million of average daily net
assets, 0.0075% of such assets in excess of $150 million, 0.0045% of such assets
in excess of $1 billion, plus holding and transaction charges for this service.
Scudder Service Corporation ("Service Corporation"), P.O. Box 2291,
Boston, Massachusetts 02107-2291, a wholly-owned subsidiary of the Adviser, is
the transfer and dividend paying agent for the Fund. The Fund pays Service
Corporation an annual fee for each account maintained for a participant. The fee
incurred by the Fund for the year ended June 30, 1995 amounted to $1,131,627, of
which $95,011 is unpaid at June 30, 1995.
The Fund's prospectus and this Statement of Additional Information omit
certain information contained in the Registration Statement and its amendments
which the Fund has filed with the SEC under the Securities Act of 1933 and
reference is hereby made to the Registration Statement for further information
with respect to the Fund and the securities offered hereby. This Registration
Statement and its amendments are available for inspection by the public at the
SEC in Washington, D.C.
FINANCIAL STATEMENTS
The financial statements, including the investment portfolio, of
Scudder Development Fund, which are included on pages 19 through 26, inclusive,
in the Annual Report to the Shareholders of the Fund dated June 30, 1995,
together with the Report of Independent Accountants, and Financial Highlights,
are incorporated by reference and attached hereto, and are deemed to be a part
of this Statement of Additional Information.
44
<PAGE>
Scudder
Development
Fund
Annual Report
June 30, 1995
o Offers opportunities for long-term growth of capital by investing primarily
in securities of emerging growth companies.
o A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
<PAGE>
CONTENTS
2 In Brief
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
10 Investment Portfolio
19 Financial Statements
22 Financial Highlights
23 Notes to Financial Statements
27 Report of Independent Accountants
28 Tax Information
29 Officers and Trustees
30 Investment Products and Services
31 How to Contact Scudder
IN BRIEF
- - Scudder Development Fund provided shareholders with a 45.41% total return
for the 12 months ended June 30, 1995, outperforming by a wide margin the
unmanaged Russell 2000 Growth Index, which returned 25.82%.
<TABLE>
<CAPTION>
Comparative Returns Through June 30, 1995
Scudder Russell 2000
Development Fund Growth Index
<S> <C> <C>
One year 45.41% 25.82%
6 months 26.44% 15.95%
3 months 17.71% 9.92%
</TABLE>
- - The Fund's technology and healthcare holdings contributed greatly to
performance, thanks to steady demand for computer-related software and
equipment, and rapid earnings improvements throughout the period.
- - The Fund further diversified its holdings during the period with new
positions in manufacturing, energy, and regional bank stocks, made possible
in part by the sale of several consumer-oriented holdings.
2
<PAGE>
LETTER FROM THE FUND'S PRESIDENT
Dear Shareholders,
The past 12 months have witnessed an extraordinarily strong rise in the net
asset value of the Scudder Development Fund. The Fund's total return for the
fiscal year ended June 30, 1995, was 45.41% -- almost double that of the
unmanaged Russell 2000 Growth Index. This reflects not only the general strength
in stock prices but the tremendous gains of stocks in the technology and
healthcare industries, which are heavily represented in the portfolio.
In some ways the past year's performance is a catch-up, given the relative
underperformance the technology and healthcare sectors have experienced in the
prior year or two. This type of sector rotation is not unusual in the stock
market. It is vindication, however, for the patient investor who believes that
rapid, above-average earnings growth will eventually be recognized in the
marketplace. And while prices have risen dramatically, so have earnings, as
evidenced by the table on page 7.
Longer term, we believe investment prospects around the world are
fundamentally positive. In our view, the driver of capital market returns over
the next five years will be disinflationary growth, dominated by such forces as
technological innovation, deregulation, and monetary restraint. Those industries
and companies that contribute to, or are beneficiaries of, this disinflationary
environment should offer above-average returns. Fortunately, Scudder Development
Fund has a long history of investing in these types of innovative,
growth-oriented companies. With an approach to investment management grounded in
independent research, your portfolio managers will continue to assess the
changing economic landscape to try to identify those investment opportunities
that provide financial reward for shareholders with an appropriate level of
risk.
If you have questions about your Fund or your investments, please contact a
Scudder Investor Relations representative at 1-800-225-2470. Page 31 provides
more information on how to contact Scudder. Thank you for choosing Scudder
Development Fund to help meet your investment needs.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Development Fund
3
<PAGE>
Scudder Development Fund
Performance Update as of June 30, 1995
- -----------------------------------------------------------------
Growth of a $10,000 Investment
- -----------------------------------------------------------------
Scudder Development Fund
- ----------------------------------------
Total Return
Period Growth -------------
Ended of Average
6/30/95 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $ 14,541 45.41% 45.41%
5 Year $ 19,276 92.76% 14.03%
10 Year $ 34,271 242.71% 13.11%
20 Year $172,649 1,726.49% 15.63%
Russell 2000 Growth Index
- --------------------------------------
Total Return
Period Growth -------------
Ended of Average
6/30/95 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $ 12,582 25.82% 25.82%
5 Year $ 16,676 66.76% 10.76%
10 Year $ 25,513 155.13% 9.81%
20 Year* $ -- --% --%
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Yearly periods ended June 30
Scudder Development Fund
Year Amount
- ----------------------
85 10000
86 12992
87 13968
88 13220
89 13835
90 17779
91 19613
92 22129
93 27061
94 23568
95 34271
Russell 2000 Growth Index
Year Amount
- ----------------------
85 10000
86 13483
87 14319
88 12762
89 14071
90 15300
91 15388
92 16688
93 20100
94 20278
95 25513
The Russell 2000 Growth Index is an unmanaged capitalization-
weighted measure of 2,000 of the smallest capitalized U.S.
companies with a greater-than-average growth orientation and
whose common stocks trade on the NYSE, AMEX, and NASDAQ. Index
returns assume reinvestment of dividends and, unlike Fund returns,
do not reflect any fees or expenses.
- -------------------------------------------------------------------
Returns and Per Share Information
- -------------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
Yearly periods ended June 30
- ----------------------------------
<TABLE>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
---------------------------------------------------------------------------------
Net Asset Value... $25.12 $25.39 $22.00 $22.54 $26.25 $27.33 $29.92 $34.58 $27.58 $37.35
Income Dividends.. $ .17 $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
Capital Gains
Dividends......... $ .92 $ 1.33 $ 1.90 $ .42 $ 2.28 $ 1.23 $ .96 $ 1.70 $ 3.07 $ 2.12
Fund Total
Return (%)........ 29.92 7.51 -5.35 4.66 28.50 10.32 12.83 22.28 -12.91 45.41
Index Total
Return (%)........ 34.83 6.20 -10.88 10.26 8.72 .58 8.45 20.45 .88 25.82
</TABLE>
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results.
Investment return and principal value will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than when purchased.
*Index returns not available for this period.
4
<PAGE>
Portfolio Summary as of June 30, 1995
- ---------------------------------------------------------------------------
Diversification
- ---------------------------------------------------------------------------
Equity Securities 99%
Cash Equivalents 1%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Sectors (Excludes 1% Cash Equivalents)
- --------------------------------------------------------------------------
Technology 29%
Health 14% The technology and healthcare sectors
Service Industries 13% contributed most to the Fund's recent
Consumer Discretionary 11% strong performance, as investors reacted
Manufacturing 11% to generally stronger-than-expected
Durables 6% earnings gains.
Energy 6%
Media 5%
Communications 2%
Other 3%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Ten Largest Equity Holdings
- --------------------------------------------------------------------------
1. Informix Corp.
Database management software
2. American Power Conversion Corp.
Manufacturer of backup power supply products
3. Parametric Technology Corp.
Mechanical design software producer
4. Atmel Corp.
Developer and manufacturer of integrated circuits
5. Cintas Corp.
Uniform rentals
6. Fiserv Inc.
Data processing services
7. STERIS Corp.
Manufacturer of sterile processing systems
8. G&K Services Inc.
Uniform rentals
9. Triton Energy Corp.
Oil and gas exploration
10. SAP AG
Computer software manufacturer
Several of the Fund's largest holdings returned more than 100%
during the year.
For more complete details about the Fund's investment portfolio,
see page 10.
A monthly Investment Portfolio Summary is available upon request.
5
<PAGE>
SCUDDER DEVELOPMENT FUND
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
Scudder Development Fund produced a total return of 45.41% over the
past year ended June 30, far surpassing the 25.82% return of the Russell 2000
Growth Index, its unmanaged benchmark. The Fund also performed well relative to
its peers, outpacing the 25.28% average return of the 86 mid-capitalization
funds tracked by Lipper Analytical Services, Inc. The tables on page 4 put this
recent performance into historical perspective. Over the past three, five, ten
and twenty years, the Development Fund has produced strong average annual
compounded total returns of 15.70%, 14.03%, 13.11%, and 15.63%, respectively.
The primary driver of these returns has been a consistent, long-term
philosophy to concentrate investments in small- to mid-sized companies that are
well-managed and capable of at least 15% earnings growth per annum. Where
possible, we try to purchase stocks that have experienced price declines in
spite of their fundamental strength. Conversely, we sell holdings that we feel
have become overvalued, either due to significant price appreciation or to
deteriorating business conditions. Key to the successful implementation of this
philosophy has been Scudder's fundamental research into each of the Fund's
investments.
Healthcare, Technology Stocks Shine
In the last few months of the period, the economic and investment
environment was most conducive and rewarding to technology and healthcare
companies -- traditionally, areas where your Fund has had its highest investment
concentration. During the first half of 1994, the prices of technology stocks
were held back by concerns about inflationary economic growth and a series of
interest rate increases that many feared were a threat to continued
profitability. Meanwhile, as demand for personal computers soared and the uses
for semiconductors multiplied seemingly without limit, technology companies
posted record earnings gains. Once interest rates peaked and started down,
investors turned their attention to corporate earnings and were encouraged by
what they found.
The resulting price gains over the past several months reflect these
underlying earnings increases, with some stocks up over 150% for the 12-month
period. Historically, rapid price appreciation of this magnitude has been
followed by some amount of profit taking and correction. The enthusiasm
accompanying strong market rallies inevitably invites sharp short-term
corrections and valuation concerns. However, it is important to note that while
6
<PAGE>
this year's advances in stock prices have been extremely rewarding, coming from
depressed valuations one year ago, the earnings growth of these companies also
has been impressive. The following table provides an example of this phenomenon.
The 12-month returns of the Fund's five largest technology holdings are shown
beside each company's earnings growth over the same time period.
<TABLE>
<CAPTION>
Strong Returns Backed By Expanding Earnings
(price and earnings increases through June 30, 1995)
<S> <C> <C>
Price Change Earnings Change
------------ ---------------
Informix Corp. 64% 39%
Parametric Technology Corp. 120 36
Synopsys Inc. 67 86
Atmel Corp. 133 60
KLA Instruments Corp. 106 109
</TABLE>
A number of medical device companies also demonstrated excellent
earnings growth and stock market performance during the period. Prompted in part
by the threat of government regulation, the healthcare industry has
revolutionized itself in recent years by slashing costs and achieving
unprecedented efficiencies. A host of new companies have sprung up to meet the
deflationary challenge, and many are successfully establishing niche markets,
thereby paving the way toward strong profit growth for some time to come.
Companies participating in this trend include PLC Systems (up 150% for the
year), the inventor of laser systems used to revascularize human heart muscle;
Research Industries (up 188%), a leading producer of disposable plastic
components used in open heart surgery; and STERIS Corporation (up 150%), the
manufacturer of a patented system for sterilizing surgical equipment without
damaging heat.
Recent Additions Boost Portfolio Diversification
Despite the Fund's emphasis on the technology and healthcare
industries, now representing 43% of assets, our research is generally conducted
at the individual company level rather than by sector. Over the years, we have
identified what we believe to be strong growth companies in a number of areas
outside technology and healthcare. The overall effect of our approach to stock
selection has been a relatively broad diversification of assets, which should
help dampen price volatility.
7
<PAGE>
What's more, many of the Fund's investments outside of technology and
healthcare performed exceptionally well during the period. Consider, for
example, the Fund's two largest investments in the oil industry. Benton Oil and
Gas and Triton Energy returned 91.4% and 40.0%, respectively, based upon rapidly
expanding oil production from recent discoveries. The regional bank stocks
purchased last summer represent another area providing portfolio diversification
and superior returns. With interest rates declining and much of the savings from
cost cutting behind them, banks have begun acquiring one another in an attempt
to boost profits (generally with positive effects on the stocks of those being
acquired). One holding, West One Bankcorp, was acquired at a 20% premium to the
then-current price in May. Three other regional banks also posted gains of at
least 45% during the year: First Security Corp., Magna Group Inc., and First
American Corp. We are continually looking for opportunities to expand
investments in well-managed regional banks on a selective basis.
Investments were also recently made in the paper industry at attractive
valuations to take advantage of the potential earnings gains that should result
from the global shortage of coated paper and pulp. In recent years, the supply
of wood pulp for manufacturing paper has diminished as environmental protection
has become more widespread and enforceable. The shortage of paper producers is
compounded because businesses have been unwilling to invest the huge sums
required for this type of manufacturing. Meanwhile, the demand for paper
products around the world continues to grow -- particularly in the developing
economies of Asia and Latin America -- and prices have risen sharply. Seeking to
profit from these trends, we purchased Asia Pacific Resources, an Indonesian
producer of pulp, at less than seven times next year's estimated earnings; and
Repap Enterprises, a Canadian producer of fine paper, at less than four times
next year's estimated earnings.
Recent Sales Reflect Gains and Disappointments
As stock prices rose throughout the period, we took the opportunity to
trim our positions in several important holdings. While we remain optimistic in
each case, paring back our exposure to these companies enabled us to "lock in"
returns and reduce the impact of near-term corrections. Holdings reduced in
recent months include STERIS, American Power Conversion, SAP AG, and Parametric
Technology. Other holdings were sold during the period where revenues and
earnings did not meet our expectations or where general economic and business
conditions were likely to impact future earnings negatively, in our opinion.
8
<PAGE>
Among the portfolio's disappointments were Crompton & Knowles, where lackluster
earnings were the result of equally lackluster demand for women's apparel (a
significant end market for Crompton's dyes); Cygne Designs, where competition
among women's apparel suppliers and retailers has squeezed profit margins; and
Crestar Financial, located in the Washington, D.C., area, where federal
government downsizing could negatively impact the local economy.
Outlook
Last year's market correction and this year's substantial recovery
serve as reminders that stock prices in the short term can be influenced by
external variables like interest rates, whereas longer-term results are
determined by earnings growth. Likewise, the recent pull-back in technology
stock prices underscores the importance of our investment approach: to maintain
a consistent long-term investment horizon, have the courage and persistency to
stay invested in well-managed companies in spite of short-term price declines,
and have the flexibility to sell companies whose underlying fundamentals are
deteriorating. Now that investor concern has shifted to the ability of
individual companies to produce the earnings expected by analysts and owners,
Scudder's research team is working to identify early those companies that may be
impacted by economic weakness while at the same time continuing to search for
new opportunities.
Sincerely,
Your Portfolio Management Team
/s/Roy C. McKay /s/Peter Chin
Roy C. McKay Peter Chin
Scudder Development Fund:
A Team Approach to Investing
Scudder Development Fund is managed by a team of Scudder investment
professionals who each play an important role in the Fund's management process.
Team members work together to develop investment strategies and select
securities for the Fund's portfolio. They are supported by Scudder's large staff
of economists, research analysts, traders and other investment specialists who
work in Scudder's offices across the United States and abroad. We believe our
team approach benefits Fund investors by bringing together many disciplines and
leveraging Scudder's extensive resources.
Lead Portfolio Manager Roy C. McKay assumed responsibility for the Fund's
day-to-day management when he joined Scudder in 1988. Roy has 29 years of
investment experience, with 20 years specializing in small company growth
stocks. Peter Chin, who became a Portfolio Manager in 1993, has been with
Scudder since 1973, and joined Scudder's small company group in 1986. Peter
contributes expertise in manufacturing, service and energy companies.
9
<PAGE>
<PAGE>
<TABLE>
SCUDDER DEVELOPMENT FUND
INVESTMENT PORTFOLIO as of June 30, 1995
- -------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1.1% REPURCHASE AGREEMENTS
--------------------------------------------------------------------------
7,991,000 Repurchase Agreement with Donaldson,
Lufkin & Jenrette dated 6/30/95 at 6.07%,
to be repurchased at $7,995,042 on 7/3/95,
collateralized by a $7,740,000 U.S. Treasury
Note, 8%, 10/15/96 (Cost $7,991,000)........... 7,991,000
---------
0.0% CONVERTIBLE BONDS
--------------------------------------------------------------------------
MEDIA
Broadcasting &
Entertainment 250,000 InTouch Group, Inc. Promissory Note,
8%, 2/1/96 (Cost $250,000)(b)(c)............... 250,000
---------
0.7% CONVERTIBLE PREFERRED STOCKS
--------------------------------------------------------------------------
Shares
--------------------------------------------------------------------------
MEDIA 0.1%
Broadcasting &
Entertainment 363,637 InTouch Group Inc. "D" * (Interactive
place-based media applications and
information services)(b)(c).................... 909,093
---------
HEALTH 0.6%
Biotechnology 0.3% 2,857,143 Norian Corp. "D" * (Developer and manufacturer
of a proprietary biomaterial for skeletal
repair)(b)(c).................................. 2,000,000
---------
Medical Supply &
Specialty 0.3% 125,000 Cardiometrics, Inc. "C" (Manufacturer
and marketer of intravascular Doppler
ultrasound devices for diagnostic and
therapeutic uses)(b)(c)........................ 500,000
120,000 InterVentional Technologies, Inc. "G"
(Manufacturer of minimally invasive
disposable microsurgical devices and
systems for treatment of cardiovascular
disease)(b).................................... 1,200,000
---------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $7,700,007).............................. 4,609,093
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2.9% PREFERRED STOCKS
--------------------------------------------------------------------------
CONSUMER DISCRETIONARY 1.1%
Specialty Retail 6,000 Hornbach Holding AG (Do-it-yourself home
improvement retailer).......................... 8,070,289
----------
TECHNOLOGY 1.8%
Computer Software 10,350 SAP AG (Computer software manufacturer).......... 13,041,816
----------
TOTAL PREFERRED STOCKS (Cost $5,291,558)......... 21,112,105
----------
95.3% COMMON STOCKS
--------------------------------------------------------------------------
CONSUMER DISCRETIONARY 9.6%
Department &
Chain Stores 0.8% 208,250 Men's Wearhouse Inc.* (Discount retailer)........ 5,726,875
----------
Hotels & Casinos 0.5% 107,900 Grand Casinos Inc. (Casino manager).............. 3,816,962
----------
Recreational Products 1.3% 373,400 Sierra On-Line Inc.* (Developer of
entertainment software)........................ 9,335,000
----------
Restaurants 3.5% 536,200 Cracker Barrel Old Country Stores
(Restaurants and gift stores).................. 11,059,125
261,600 Outback Steakhouse Inc.* (Operator of
full-service restaurants)...................... 7,553,700
143,500 Starbucks Corp.* (High-quality coffee provider).. 5,112,187
308,700 Taco Cabana Inc.* (Mexican style restaurant
chain)......................................... 1,697,850
----------
25,422,862
----------
Specialty Retail 3.5% 2,250 Hornbach Baumarkt AG (German do-it-yourself
home improvement retailer)..................... 1,505,043
213,600 PETsMART Inc.* (Pet food and supply
superstores)................................... 6,141,000
511,900 Sports & Recreation Inc.* (Sports equipment
superstores)................................... 6,718,688
299,400 Viking Office Products Inc.* (Direct marketer
of office supplies) ........................... 10,965,525
----------
25,330,256
----------
HEALTH 13.8%
Health Industry Services 1.8% 16,700 American Oncology Resources, Inc. * (Provider
of comprehensive management services to
medical and radiation oncology and
hematology practices)......................... 463,425
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
SCUDDER DEVELOPMENT FUND
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
298,900 CliniCom, Inc. (Developer and installer of
computer-based clinical information systems
for hospitals).................................... 4,931,850
218,000 Mid Atlantic Medical Services, Inc.* (Health
care management services)......................... 4,033,000
142,900 Vivra, Inc. * (Provider of dialysis services)....... 3,876,163
----------
13,304,438
----------
Hospital Management 0.4% 229,600 Advocat, Inc.* (Operator of nursing homes and
retirement centers)............................... 2,554,300
37,500 OccuSystems Inc. * (Provider of primary care
physician and case management services) .......... 642,187
----------
3,196,487
----------
Medical Supply &
Specialty 8.7% 526,400 Endosonics Corp.* (Manufacturer of imaging
catheters)........................................ 5,856,200
525,000 Heart Technology Inc.* (Developer,
manufacturer and marketer of devices for
treatment of arteriosclerosis).................... 10,171,875
336,500 ICU Medical Inc.* (Designer, manufacturer
and marketer of proprietary disposable
medical products)................................. 4,753,062
300,000 Immunomedics* (Cancer imaging
therapy)(c)....................................... 712,500
180,000 PLC Systems Inc.* (Developer, manufacturer
and marketer of medical laser systems)............ 1,766,250
287,700 Research Industries* (Manufacturer of single-
patient use cardiology medical products).......... 6,617,100
337,600 STERIS Corp.* (Manufacturer of sterile
processing systems)............................... 16,373,600
100,500 Target Therapeutics, Inc.* (Manufacturer of
disposable medical devices for treatment of
vascular diseases) ............................... 4,422,000
493,500 Thermedics Inc.* (Manufacturer of drug
detection instruments, explosives detectors,
and heart assist devices)......................... 9,623,250
274,333 UroMed Corp.* (Manufacturer of urological/
gynecological medical products)(b)(c)............. 1,783,165
89,700 UroMed Corp.* ...................................... 728,812
----------
62,807,814
----------
Pharmaceuticals 2.9% 568,000 BioChem Pharma, Inc. * (Research and
development of therapeutic products).............. 12,425,000
357,143 CIMA Laboratories, Inc. * (Developer of oral
dosage drug products)(b)(c)....................... 1,214,286
665,400 Noven Pharmaceuticals, Inc.* (Transdermal
drug delivery systems) ........................... 5,156,850
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
60,000 R.P. Scherer Corp.* (Manufacturer of drug
delivery system).............................. 2,535,000
----------
21,331,136
----------
COMMUNICATIONS 1.7%
Cellular Telephone 0.6% 166,100 CommNet Cellular, Inc.* (Management,
maintenance and financing of cellular
telephone systems throughout the
United States)................................ 4,650,800
----------
Telephone/
Communications 1.1% 5,407,268 Champion Technology * (Paging services
in China)..................................... 489,168
125,000 Mobile Telecommunications Technology Corp.*
(Telecommunication and paging services)....... 3,421,875
40,000 Mobilemedia Corp.* (Provider of paging services
and other wireless messaging services)........ 820,000
82,000 Paging Network, Inc.* (Paging services)......... 2,808,500
----------
7,539,543
----------
FINANCIAL 1.6%
Banks 137,300 Dauphin Deposit Corp. (Commercial banking
in Pennsylvania).............................. 3,329,525
85,000 First American Corp. (Tennessee) (Regional
commercial banking) .......................... 3,049,375
91,700 First Security Corp. (Commercial banking in
western states)............................... 2,567,600
137,200 Magna Group, Inc. (Commercial banking and
financial services)........................... 3,018,400
----------
11,964,900
----------
MEDIA 4.6%
Broadcasting &
Entertainment 2.9% 124,600 Broderbund Software Inc.* (Developer of
entertainment and educational software)....... 7,943,250
7,500 Davidson & Associates Inc.* (Developer of
educational software)......................... 298,125
299,000 DMX, Inc.* (Provider of cable
audio services)............................... 756,844
100,000 DMX, Inc. "G" * (b)(c).......................... 202,500
170,300 Minnesota Educational Computing Corp.*
(Developer and publisher of educational
software for use by children)................. 6,088,225
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
SCUDDER DEVELOPMENT FUND
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
300,000 Sanctuary Woods Multimedia Inc.* (Leading
developer of family-oriented entertainment
and educational CD-ROM titles).................... 1,537,500
800,000 Sanctuary Woods Multimedia Inc.*(c)................. 4,100,000
----------
20,926,444
----------
Cable Television 0.8% 599,420 Century Communications Corp. "A"* (Owner
and operator of cable TV systems)................. 5,619,562
----------
Print Media 0.9% 121,200 Scholastic Corp.* (Leading publisher and
distributor of educational books, videos and
computer software)................................ 6,575,100
----------
SERVICE INDUSTRIES 12.9%
EDP Services 5.3% 600,000 Fiserv Inc.* (Data processing services)............. 16,875,000
497,500 Pyxis Corp.* (Manufacturer of point-of-use
distribution systems) ............................ 11,255,938
501,200 Systems & Computer Technology Corp.*
(Computer software for educational institutions).. 10,024,000
----------
38,154,938
----------
Investment 1.5% 414,500 Pioneer Group Inc. (Fund management
company owning major gold producer in
Ghana)............................................ 11,139,687
----------
Miscellaneous
Commercial Services 6.1% 342,000 BI Inc.* (Manufacturer of and service provicer
for house arrest electronic monitoring systems)... 2,265,750
98,000 Career Horizons Inc.* (Temporary help service
for business and healthcare)...................... 1,862,000
600,000 Cintas Corp. (Uniform rentals)...................... 21,300,000
67,100 Copart, Inc.* (Auctioner of damaged vehicles
for insurance companies).......................... 1,526,525
9,722 Education Alternatives Inc.* (Provider of school
management consulting services and
developer of various educational
products)(b)(c) .................................. 95,276
796,650 G&K Services Inc. "A" (Uniform rentals)............. 15,534,675
69,300 RTW, Inc.* (Provider of comprehensive managed
care products and services for workers'
compensation programs)............................ 1,264,725
120,000 Strategic Distribution, Inc.* (In-plant distributor
of parts and supplies)............................ 510,000
----------
44,358,951
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DURABLES 6.1%
Telecommunications
Equipment 134,600 Ascend Communications, Inc.* (Developer and
producer of a variety of high-speed wide
area network access products)...................... 6,797,300
65,600 Cascade Communications Corp.* (Designer
and developer of multi-service wide area
network switches).................................. 2,837,200
107,000 Digital Link Corp.* (Manufacturer of digital
access products) .................................. 3,022,750
89,300 Shiva Corp.* (Developer and manufacturer of
hardware and software products that enable
remote connectivity to enterprise networks)........ 3,862,225
160,400 Stratacom, Inc.* (Manufacturer of switching
systems for wide area networks).................... 7,819,500
249,800 Summa Four Inc.* (Manufacturer and
distributor of telecommunication switching
systems)........................................... 7,056,850
40,000 Tellabs, Inc.* (Manufacturer of voice data
communication equipment)........................... 1,925,000
96,027 U.S. Robotics Corp.* (Designer and
manufacturer of high performance data
communication products and systems)................ 10,466,943
----------
43,787,768
----------
MANUFACTURING 10.9%
Containers & Paper 2.1% 80,100 Aptargroup, Inc. (Manufacturer of
packaging equipment components).................... 2,573,213
617,900 Asia Pacific Resources International
Holdings Ltd.* (Manufacturer of rayon
fiber for Asian textile markets, owner of world's
leading paper pulp mill)........................... 5,638,338
628,700 Repap Enterprises, Inc.* (Worldwide
manufacturer of various types of paper)............ 4,872,425
50,000 Sealed Air Corp.* (Protective packaging
material).......................................... 2,200,000
----------
15,283,976
----------
Diversified Manufacturing 0.5% 144,100 Duracraft Corp.* (Manufacturer of household
products).......................................... 3,854,675
----------
Electrical Products 3.4% 1,090,200 American Power Conversion Corp.*
(Manufacturer of backup power supply
products).......................................... 24,938,325
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
<TABLE>
SCUDDER DEVELOPMENT FUND
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Industrial Specialty 2.1% 140,400 Itron, Inc.* (Manufacturer of meter reading
instruments for utilities)....................... 4,387,500
485,100 Lydall, Inc.* (Engineered fiber materials)......... 10,672,200
----------
15,059,700
----------
Machinery/Components/
Controls 0.8% 352,700 Medar Inc.* (Manufacturer of quality control
equipment)....................................... 3,218,388
40,000 Nordson Corp. (Industrial application equipment)... 2,180,000
----------
5,398,388
----------
Office Equipment/
Supplies 2.0% 429,600 Danka Business Systems PLC (ADR)
(Distributor of office equipment)................ 10,390,950
162,800 Encad, Inc.* (Manufacturer of large format
color inkjet printers)........................... 4,395,600
----------
14,786,550
----------
TECHNOLOGY 26.8%
Computer Software 13.2% 200,000 Autodesk, Inc. (Computer-aided design and
drafting)........................................ 8,600,000
662,250 Cheyenne Software Inc.* (Computer software
and equipment)................................... 12,251,625
995,400 Informix Corp.* (Database management
software)........................................ 25,258,275
216,000 Kurzweil Applied Intelligence* (Developer of
speech recognition software and systems)......... 783,000
80,300 MapInfo Corporation* (Developer and supporter
of desktop mapping software and applications,
and geographic and demographic information
products)........................................ 2,850,650
470,000 Parametric Technology Corp.* (Mechanical
design software producer)........................ 23,382,500
141,500 Security Dynamics Technologies, Inc.*
(Designer, developer and supporter of a family
of security products used to manage access
to computer-based information resources)......... 6,367,500
123,900 Softdesk, Inc.* (Designer and supporter of
computer-aided design software for
architecture, engineering and construction
industries)...................................... 2,539,950
203,700 Synopsys Inc.* (Developer of high level
electronic design software)...................... 12,756,713
31,000 UUNET Technologies, Inc.* (Provider of a range
of Internet access options, applications and
consulting services)............................. 852,500
----------
95,642,713
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Electronic Components/
Distributors 2.1% 150,400 ITI Technologies, Inc.* (Designer and
manufacturer of wireless security system)......... 3,572,000
329,000 Three-Five Systems Inc.* (Manufacturer of
opto-electronic components)....................... 11,309,375
----------
14,881,375
----------
Office/Plant Automation 2.0% 150,500 Cabletron Systems Inc.* (Computer
networking products and services)................. 8,014,125
166,100 Cognex Corp.* (Manufacturer of machine
vision systems)................................... 6,685,525
----------
14,699,650
----------
Precision Instruments 4.0% 162,300 KLA Instruments Corp.* (Developer,
manufacturer and marketer of automated
image processing systems)......................... 12,537,675
87,500 Lam Research Corp.* (Manufacturer of
plasma etching equipment)......................... 5,600,000
294,300 Silicon Valley Group Inc.* (Manufacturer
of equipment for semiconductor industry).......... 10,668,375
----------
28,806,050
----------
Semiconductors 5.5% 386,700 Atmel Corp.* (Developer and manufacturer
of integrated circuits) .......................... 21,413,513
62,600 Paradigm Technology Inc.* (Designer,
manufacturer and marketer of high speed,
high density SRAM semiconductor devices).......... 1,404,588
99,600 Tower Semiconductor Ltd. (Manufacturer of
semiconductor integrated circuits on silicon
wafers)........................................... 2,888,400
36,000 Transwitch Corp.* (Developer, marketer and
supporter of integrated digital and
mixed-signal semiconductors for
telecommunication markets)........................ 328,500
62,500 Xilinx Inc.* (Supplier of semiconductors)........... 5,875,000
161,150 Zilog Inc.* (Manufacturer and marketer of
integrated circuits).............................. 8,037,356
----------
39,947,357
----------
ENERGY 5.7%
Oil & Gas Production 4.5% 270,100 Barrett Resources Corp.* (Oil and gas
exploration and production)....................... 6,279,825
933,100 Benton Oil & Gas Co.* (Oil and gas exploration,
development and production)....................... 12,946,762
294,100 Triton Energy Corp. (Oil and gas exploration)....... 13,638,888
----------
32,865,475
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
<TABLE>
SCUDDER DEVELOPMENT FUND
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Oilfield Services/
Equipment 1.2% 126,100 Global Industries Ltd.* (Pipeline construction,
derrick and diving services for offshore oil
and gas industry)............................ 2,805,725
461,600 Weatherford International Inc.* (Oilfield
equipment and services)...................... 5,885,400
-----------
8,691,125
-----------
TRANSPORTATION 0.5%
Trucking 227,600 Celadon Group Inc.* (Long-haul trucking
services).................................... 3,470,900
-----------
OTHER 1.1% Miscellaneous Securities....................... 8,265,911
-----------
TOTAL COMMON STOCKS (Cost $429,551,204)........ 691,581,693
-----------
- -----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $450,783,769)(a)....................... 725,543,891
===========
</TABLE>
* Non-income producing security.
(a) The cost for federal income tax purposes was $452,311,805. At June 30,
1995, net unrealized appreciation for all securities based on tax cost was
$273,232,086. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $298,828,756 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$25,596,670.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Trustees. The cost of these securities at June 30, 1995, aggregated
$12,375,768. See Note A of the Notes to Financial Statements.
(c) Restricted Securities - securities which have not been registered with the
Securities and Exchange Commission under the Securities Act of 1933.
Information concerning such restricted securities at June 30, 1995 is as
follows:
Security Acquisition Date Cost ($)
-------- ---------------- --------
Cardiometrics, Inc. "C" 4/26/93 500,000
CIMA Laboratories Inc. 1/7/94 2,500,000
DMX, Inc. 8/23/93 435,625
Education Alternatives Inc. 7/1/93 240,133
Immunomedics 3/4/91 675,068
InTouch Group Inc. 2/14/95 250,000
InTouch Group Inc. "D" 1/20/94 4,000,007
Norian Corp. "D" 4/12/95 2,000,000
Sanctuary Woods Multimedia Inc. 1/28/94 4,000,000
UroMed Corp. 9/15/93 1,250,003
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- ----------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ----------------------------------------------------------------------------------
JUNE 30, 1995
- ----------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $450,783,769)
(Note A)............................................. $725,543,891
Receivables:
Investments sold..................................... 8,435,686
Fund shares sold..................................... 4,173,075
Dividends and interest............................... 67,880
------------
Total assets...................................... 738,220,532
LIABILITIES
Payables:
Investments purchased................................ $9,691,576
Fund shares redeemed................................. 442,978
Accrued management fee (Note C)...................... 566,604
Other accrued expenses (Note C)...................... 207,251
----------
Total liabilities................................. 10,908,409
------------
Net assets, at market value............................ $727,312,123
============
NET ASSETS
Net assets consist of:
Unrealized appreciation on:
Investments....................................... $274,760,122
Foreign currency related transactions............. 8,987
Accumulated net realized gain........................ 46,245,128
Shares of beneficial interest........................ 194,748
Additional paid-in capital........................... 406,103,138
------------
Net assets, at market value............................ $727,312,123
============
NET ASSET VALUE, offering and redemption price per
share ($727,312,123 / 19,474,819 outstanding
shares of beneficial interest, $.01 par value,
unlimited number of shares authorized)............... $37.35
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
<TABLE>
SCUDDER DEVELOPMENT FUND
- ------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1995
- ------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of $11,058).... $ 1,525,525
Interest................................................ 363,559
------------
1,889,084
Expenses:
Management fee (Note C)................................. $ 6,050,470
Services to shareholders (Note C)....................... 1,320,362
Custodian and accounting fees (Note C).................. 195,600
Trustees' fees (Note C)................................. 43,660
Reports to shareholders................................. 251,944
Auditing................................................ 52,115
State registration...................................... 35,705
Legal................................................... 24,709
Other................................................... 71,683 8,046,248
--------------------------
Net investment loss..................................... (6,157,164)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain (loss) from:
Investments......................................... 58,077,037
Foreign currency related transactions............... (9,571) 58,067,466
------------
Net unrealized appreciation during the period on:
Investments......................................... 180,154,581
Foreign currency related transactions............... 8,987 180,163,568
--------------------------
Net gain on investment transactions..................... 238,231,034
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.... $232,073,870
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------
<CAPTION>
YEARS ENDED JUNE 30,
-----------------------------
INCREASE (DECREASE) IN NET ASSETS 1995 1994
- -------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment loss................................. $ (6,157,164) $ (6,685,599)
Net realized gain from investment transactions...... 58,067,466 74,717,985
Net unrealized appreciation (depreciation) on
investment transactions during the period....... 180,163,568 (148,042,293)
------------- -------------
Net increase (decrease) in net assets resulting
from operations................................. 232,073,870 (80,009,907)
------------- -------------
Distributions to shareholders from net realized
gains from investments ($2.12 and
$3.07 per share, respectively).................. (41,498,116) (67,981,079)
------------- -------------
Fund share transactions:
Proceeds from shares sold........................... 260,652,295 321,444,546
Net asset value of shares issued to
shareholders in reinvestment of
distributions................................... 39,673,233 64,939,143
Cost of shares redeemed............................. (309,316,368) (513,441,752)
------------- -------------
Net decrease in net assets from
Fund share transactions. ...................... (8,990,840) (127,058,063)
------------- -------------
INCREASE (DECREASE) IN NET ASSETS................... 181,584,914 (275,049,049)
Net assets at beginning of period................... 545,727,209 820,776,258
------------- -------------
NET ASSETS AT END OF PERIOD......................... $ 727,312,123 $ 545,727,209
============= =============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period........... 19,787,452 23,737,608
------------- -------------
Shares sold......................................... 8,524,177 9,715,584
Shares issued to shareholders in reinvestment
of distributions................................ 1,371,263 1,904,190
Shares redeemed..................................... (10,208,073) (15,569,930)
------------- -------------
Net decrease in Fund shares......................... (312,633) (3,950,156)
------------- -------------
Shares outstanding at end of period................. 19,474,819 19,787,452
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
<TABLE>
SCUDDER DEVELOPMENT FUND
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout each period and other
performance information derived from the financial statements.
<CAPTION>
YEARS ENDED JUNE 30, (a)
-------------------------------------------------------------------------------------------------------
1995(b) 1994(b) 1993(b) 1992(b) 1991(b) 1990(b) 1989(b) 1988 1987 1986(b)
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period................ $27.58 $ 34.58 $29.92 $27.33 $26.25 $22.54 $22.00 $25.39 $25.12 $20.41
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment loss... (.31) (.30) (.27) (.23) (.10) (.08) (.10) (.08) (.07) (.01)
Net realized
and unrealized
gain (loss) on
investment
transactions........ 12.20 (3.63) 6.63 3.78 2.41 6.07 1.06 (1.41) 1.67 5.81
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Total from
investment
operations............ 11.89 (3.93) 6.36 3.55 2.31 5.99 .96 (1.49) 1.60 5.80
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
From net investment
income.............. -- -- -- -- -- -- -- -- -- (.17)
From net realized
gains on investment
transactions........ (2.12) (3.07) (1.70) (.96) (1.23) (2.28) (.42) (1.90) (1.33) (.92)
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (2.12) (3.07) (1.70) (.96) (1.23) (2.28) (.42) (1.90) (1.33) (1.09)
------ ------- ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period......... $37.35 $ 27.58 $34.58 $29.92 $27.33 $26.25 $22.54 $22.00 $25.39 $25.12
====== ======= ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%)........ 45.41 (12.91) 22.28 12.83 10.32 28.50 4.66 (5.35) 7.51 29.92
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end
of period
($ millions).......... 727 546 821 700 476 361 275 356 387 359
Ratio of operating
expenses to
average
net assets (%)........ 1.32 1.27 1.30 1.30 1.29 1.34 1.32 1.30 1.27 1.25
Ratio of net
investment
loss to average
net assets (%)........ (1.01) (.91) (.83) (.70) (.40) (.35) (.47) (.44) (.33) (.03)
Portfolio turnover
rate (%).............. 41.6 48.3 49.2 53.5 70.8 40.1 32.0 39.2 23.5 29.4
<FN>
(a) All per share and share outstanding amounts through 1986 have been restated to reflect the November 17, 1986, 200% stock
dividend.
(b) Per share amounts have been calculated using the weighted average shares outstanding during the period method.
</FN>
</TABLE>
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Scudder Development Fund (the "Fund") is organized as a Massachusetts business
trust and is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. The policies
described below are followed consistently by the Fund in the preparation of its
financial statements in conformity with generally accepted accounting
principles.
SECURITY VALUATION. Portfolio securities which are traded on U.S. or foreign
stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the National Association of
Securities Dealers Automatic Quotation ("NASDAQ") System, for which there have
been sales, are valued at the most recent sale price reported on such system.
If there are no such sales, the value is the high or "inside" bid quotation.
Securities which are not quoted on the NASDAQ System but are traded in another
over-the-counter market are valued at the most recent sale price on such
market. If no sale occurred, the security is then valued at the calculated
mean between the most recent bid and asked quotations. If there are no such bid
and asked quotations the most recent bid quotation shall be used. Short-term
investments having a maturity of sixty days or less are valued at amortized
cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Trustees. Securities valued in good faith
by the Valuation Committee of the Trustees at fair value amounted to $8,154,320
(1.1% of net assets) and have been noted in the investment portfolio as of
June 30, 1995.
RESTRICTED SECURITIES. The Fund may not purchase restricted securities (for
these purposes, restricted security means a security which cannot be sold to
the public without registration under the Securities Act of 1933 or the
availability of an exemption from registration, or which is subject to other
legal or contractual delays in or restrictions on resale), if, as a result
thereof, more than 5% of the value of the Fund's total assets would be invested
in restricted securities. The aggregate fair
23
<PAGE>
SCUDDER DEVELOPMENT FUND
- --------------------------------------------------------------------------------
value of restricted securities at June 30, 1995 amounted to $11,766,820 which
represents 1.6% of net assets.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and
liabilities at the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and
interest income and certain expenses at the rates of exchange
prevailing on the respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes
in market prices of the investments. Such fluctuations are included with the
net realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement, is equal to at least 100.5% of the resale price.
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, the Fund paid no federal income taxes and no federal income tax
provision was required.
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DISTRIBUTION OF INCOME AND GAINS. Distributions of net investment income are
made annually. During any particular year net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders annually. An additional distribution may be made to the extent
necessary to avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations which may differ from generally accepted accounting principles.
These differences primarily relate to tax equalization and investments in
certain securities sold at a loss. As a result, net investment income (loss)
and net realized gain (loss) on investment transactions for a reporting period
may differ significantly from distributions during such period. Accordingly,
the Fund may periodically make reclassifications among certain of its capital
accounts without impacting the net asset value of the Fund.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
OTHER. Investment security transactions are accounted for on a trade-date
basis. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis.
B. PURCHASES AND SALES OF SECURITIES
- --------------------------------------------------------------------------------
During the year ended June 30, 1995, purchases and sales of investment
securities (excluding short-term investments) aggregated $251,720,843 and
$312,932,440, respectively.
C. RELATED PARTIES
- --------------------------------------------------------------------------------
Under the Fund's Investment Management Agreement (the "Agreement") with
Scudder, Stevens & Clark, Inc. (the "Adviser"), the Fund agrees to pay to the
Adviser a fee equal to an annual rate of 1% of the Fund's first $500 million of
average daily net assets, .95% of the next $500 million of such net assets, and
.90% on such net assets in excess of $1 billion, computed and accrued daily and
payable monthly. As manager of the assets of the Fund, the Adviser directs the
investments of the Fund in accordance with its investment objective, policies,
and restrictions. The Adviser determines the securities,
25
<PAGE>
SCUDDER DEVELOPMENT FUND
- --------------------------------------------------------------------------------
instruments and other contracts relating to investments to be purchased, sold
or entered into by the Fund. In addition to portfolio management services,
the Adviser provides certain administrative services in accordance with the
Agreement. The Agreement also provides that if the Fund's expenses, exclusive
of taxes, interest, and extraordinary expenses, exceed specified limits, such
excess, up to the amount of the management fee, will be paid by the Adviser.
For the year ended June 30, 1995, the fee pursuant to the Agreement amounted
to $6,050,470.
Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the Adviser,
is the transfer, dividend paying and shareholder service agent for the Fund.
For the year ended June 30, 1995, the amount charged by SSC aggregated
$1,131,627, of which $95,011 is unpaid at June 30, 1995.
Effective March 21, 1995, Scudder Fund Accounting Corporation ("SFAC"), a
wholly-owned subsidiary of the Adviser, assumed responsibility for determining
the daily net asset value per share and maintaining the portfolio and general
accounting records of the Fund. For the year ended June 30, 1995, the amount
charged to the Fund by SFAC aggregated $29,935 of which $9,310 is unpaid at
June 30, 1995.
The Fund pays each of its Trustees not affiliated with the Adviser $4,000
annually plus specified amounts for attended board and committee meetings. For
the year ended June 30, 1995, Trustees' fees aggregated $43,660.
26
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE TRUSTEES AND SHAREHOLDERS OF SCUDDER DEVELOPMENT FUND:
We have audited the accompanying statement of assets and liabilities of Scudder
Development Fund, including the investment portfolio, as of June 30, 1995, and
the related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended,
and the financial highlights for each of the ten years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of June 30, 1995 by correspondence with the custodian and brokers. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder Development Fund as of June 30, 1995, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the ten years
in the period then ended, in conformity with generally accepted accounting
principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
August 10, 1995
27
<PAGE>
SCUDDER DEVELOPMENT FUND
TAX INFORMATION
- --------------------------------------------------------------------------------
The Fund paid distributions of $2.12 per share from long-term capital gains
during its year ended June 30, 1995. Pursuant to section 852 of the Internal
Revenue Code, the Fund designates $58,664,154 as capital gain dividends for
its fiscal year ended June 30, 1995.
Please consult a tax adviser if you have any questions about federal or state
income tax laws, or on how to prepare your tax returns. If you have specific
questions about your Scudder Fund account, please call a Scudder Investor
Relations Representative at 1-800-225-5163.
28
<PAGE>
OFFICERS AND TRUSTEES
Daniel Pierce*
President and Trustee
Paul Bancroft III
Trustee; Venture Capitalist and Consultant
Thomas J. Devine
Trustee; Consultant
Douglas M. Loudon*
Vice President and Trustee
Wilson Nolen
Trustee; Consultant
Juris Padegs*
Trustee
Gordon Shillinglaw
Trustee; Professor Emeritus of Accounting, Columbia University Graduate
School of Business
Robert G. Stone, Jr.
Trustee; Chairman of the Board and Director, Kirby Corporation
Edmond D. Villani*
Trustee
Robert W. Lear
Honorary Trustee; Executive-in-Residence, Columbia University Graduate
School of Business
Edmund R. Swanberg
Honorary Trustee
Peter Chin*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
David S. Lee*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Roy C. McKay*
Vice President
Edward J. O'Connell*
Vice President and Assistant Treasurer
Kathryn L. Quirk*
Vice President and Assistant Secretary
Richard W. Desmond*
Assistant Secretary
Coleen Downs Dinneen*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
29
<PAGE>
INVESTMENT PRODUCTS AND SERVICES
<TABLE>
<CAPTION>
The Scudder Family of Funds
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Money Market Income
Scudder Cash Investment Trust Scudder Emerging Markets Income Fund
Scudder U.S. Treasury Money Fund Scudder GNMA Fund
Tax Free Money Market+ Scudder Income Fund
Scudder Tax Free Money Fund Scudder International Bond Fund
Scudder California Tax Free Money Fund* Scudder Short Term Bond Fund
Scudder New York Tax Free Money Fund* Scudder Short Term Global Income Fund
Tax Free+ Scudder Zero Coupon 2000 Fund
Scudder California Tax Free Fund* Growth
Scudder High Yield Tax Free Fund Scudder Capital Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Managed Municipal Bonds Scudder Global Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Global Small Company Fund
Scudder Massachusetts Tax Free Fund* Scudder Gold Fund
Scudder Medium Term Tax Free Fund Scudder Greater Europe Growth Fund
Scudder New York Tax Free Fund* Scudder International Fund
Scudder Ohio Tax Free Fund* Scudder Latin America Fund
Scudder Pennsylvania Tax Free Fund* Scudder Pacific Opportunities Fund
Growth and Income Scudder Quality Growth Fund
Scudder Balanced Fund Scudder Value Fund
Scudder Growth and Income Fund The Japan Fund
Retirement Plans and Tax-Advantaged Investments
-----------------------------------------------------------------------------------------------------------------
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan+++* (a variable annuity) Profit Sharing and Money Purchase
401(k) Plans Pension Plans
Closed-End Funds#
-----------------------------------------------------------------------------------------------------------------
The Argentina Fund, Inc. The Latin America Dollar Income Fund, Inc.
The Brazil Fund, Inc. Montgomery Street Income Securities, Inc.
The First Iberian Fund, Inc. Scudder New Asia Fund, Inc.
The Korea Fund, Inc. Scudder New Europe Fund, Inc.
Scudder World Income
Opportunities Fund, Inc.
Institutional Cash Management
-----------------------------------------------------------------------------------------------------------------
Scudder Institutional Fund, Inc.
Scudder Fund, Inc.
Scudder Treasurers Trust(TM)++
-----------------------------------------------------------------------------------------------------------------
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +A portion of the income from the
tax-free funds may be subject to federal, state, and local taxes. *Not
available in all states. +++A no-load variable annuity contract provided by
Charter National Life Insurance Company and its affiliate, offered by
Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by
Scudder, Stevens & Clark, Inc. are traded on various stock exchanges. ++For
information on Scudder Treasurers Trust,(TM) an institutional cash
management service that utilizes certain portfolios of Scudder Fund, Inc.
($100,000 minimum), call 1-800-541-7703.
30
<PAGE>
HOW TO CONTACT SCUDDER
Account Service and Information
-------------------------------------------------------------------------------------------------------------
For existing account service and transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163
For account updates, prices, yields,
exchanges, and redemptions
SCUDDER AUTOMATED INFORMATION LINE (SAIL)
1-800-343-2890
Investment Information
-------------------------------------------------------------------------------------------------------------
To receive information about the Scudder
funds, for additional applications and
prospectuses, or for investment questions
SCUDDER INVESTOR RELATIONS
1-800-225-2470
For establishing 401(k) and 403(b) plans
SCUDDER DEFINED CONTRIBUTION SERVICES
1-800-323-6105
Please address all correspondence to
-------------------------------------------------------------------------------------------------------------
THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
-------------------------------------------------------------------------------------------------------------
Many shareholders enjoy the personal,
one-on-one service of the Scudder Funds
Centers. Check for a Funds Center near
you--they can be found in the following
cities:
Boca Raton New York
Boston Portland, OR
Chicago San Diego
Cincinnati San Francisco
Los Angeles Scottsdale
-------------------------------------------------------------------------------------------------------------
For information on Scudder For information on Scudder
Treasurers Trust,(TM) an institutional Institutional Funds,* funds
cash management service for designed to meet the broad
corporations, non-profit investment management and
organizations and trusts that uses service needs of banks and
certain portfolios of Scudder Fund, other institutions, call
Inc.* ($100,000 minimum), call 1-800-854-8525.
1-800-541-7703.
- -------------------------------------------------------------------------------------------------------------
Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a
prospectus with more complete information, including management fees and
expenses. Please read it carefully before you invest or send money.
</TABLE>
31
<PAGE>
Celebrating Over 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven
Clark, Scudder, Stevens & Clark was the first independent investment counsel
firm in the United States. Since its birth, Scudder's pioneering spirit and
commitment to professional long-term investment management have helped shape the
investment industry. In 1928, we introduced the nation's first no-load mutual
fund. Today we offer 36 pure no load(TM) funds, including the first
international mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication to
research and fundamental investment disciplines have helped us become one of the
largest and most respected investment managers in the world. Though times have
changed since our beginnings, we remain committed to our long-standing
principles: managing money with integrity and distinction; keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.
<PAGE>
PART C. OTHER INFORMATION
<TABLE>
<CAPTION>
Item 24. Financial Statements and Exhibits
<S> <C> <C>
a. Financial Statements
Included in Part A of this Registration Statement:
For Scudder Development Fund:
Financial highlights for the ten fiscal years ended June 30, 1995.
For Scudder Small Company Value Fund:
Financial highlights (to be filed by amendment).
Included in Part B of this Registration Statement:
For Scudder Development Fund:
Investment Portfolio as of June 30, 1995
Statement of Assets and Liabilities as of June 30, 1995
Statement of Operations for the fiscal year ended June 30, 1995
Statements of Changes in Net Assets for the two fiscal years ended June 30, 1995
Financial Highlights for the ten fiscal years ended June 30, 1995
Notes to Financial Statements
Report of Independent Accountants
For Scudder Small Company Value Fund:
Statement of Assets and Liabilities as of October 3, 1995.
(Incorporated by reference to Post-Effective Amendment No. 35 to the Registration
Statement.)
Statements, schedules and historical information other than those listed above
have been omitted since they are either not applicable or are not required.
b. Exhibits:
1. (a)(1) Amended and Restated Declaration of Trust dated December 21, 1987.
(Incorporated by reference to Exhibit 1 to Post-Effective Amendment
No. 27 to the Registration Statement.)
(a)(2) Amendment to Amended and Restated Declaration of Trust dated
December 13, 1990.
(Incorporated by reference to Exhibit 1(a)(2) to Post-Effective
Amendment No. 30 to the Registration Statement.)
(a)(3) Amendment to Amended and Restated Declaration of Trust to change the
name of the Trust dated July 21, 1995 is filed herein.
(Incorporated by reference to Exhibit 1 (a)(3) to Post-Effective
Amendment No. 34 to the Registration Statement.)
Part C - Page 1
<PAGE>
(a)(4) Amendment to Amended and Restated Declaration of Trust to add new
series dated July 21, 1995.
(Incorporated by reference to Exhibit 1(a)(4) to Post-Effective
Amendment No. 34 to the Registration Statement.)
2. (a) Amendment to the By-Laws Article IV: Notice of Meetings dated
December 12, 1991.
(Incorporated by reference to Exhibit 2(a) to Post-Effective
Amendment No. 31 to the Registration Statement.)
(b) By-Laws as of October 16, 1985.
(Incorporated by reference to Exhibit 2(a) to Post-Effective
Amendment No. 24 to the Registration Statement.)
(c) Amendment to the By-Laws of Registrant as amended through December
9, 1985.
(Incorporated by reference to Exhibit 2(b) to Post-Effective
Amendment No. 24 to the Registration Statement.)
3. Inapplicable.
4. Specimen certificate representing shares of beneficial interest
($.01 par value) for Scudder Development Fund.
(Incorporated by reference to Exhibit 4 to Post-Effective Amendment
No. 28 to the Registration Statement.)
5. (a) Investment Management Agreement between the Registrant, on behalf of
Scudder Development Fund, and Scudder, Stevens & Clark, Inc. dated
June 9, 1992.
(Incorporated by reference to Exhibit 5 to Post-Effective Amendment
No. 31 to the Registration Statement.)
(b) Investment Management Agreement between the Registrant, on behalf of
Scudder Development Fund, and Scudder, Stevens & Clark, Inc. dated
December 14, 1990.
(Incorporated by reference to Exhibit 5 to Post-Effective Amendment
No. 30 to the Registration Statement.)
(c) Investment Management Agreement between the Registrant, on behalf of
Scudder Small Company Value Fund, and Scudder, Stevens & Clark, Inc.
dated October 6, 1995 is filed herein.
6. (a) Underwriting Agreement between the Registrant, on behalf of Scudder
Development Fund, and Scudder Investor Services, Inc., formerly
Scudder Fund Distributors, Inc., dated December 31, 1985.
(Incorporated by reference to Exhibit 6 to Post-Effective Amendment
No. 25 to the Registration Statement.)
(b) Underwriting Agreement between the Registrant and Scudder Investor
Services, Inc., dated September 30, 1995.
(Incorporated by reference to Exhibit 6(b) to Post-Effective
Amendment No. 35 to the Registration Statement.)
7. Inapplicable.
Part C - Page 2
<PAGE>
8. (a)(1) Custodian Contract between the Registrant, on behalf of Scudder
Development Fund, and Brown Brothers Harriman & Co. dated April 1,
1980.
(Incorporated by reference to Exhibit 8(a)(1) to Post-Effective
Amendment No. 18 to the Registration Statement.)
(a)(2) Fee schedule for Exhibit 8(a)(1).
(Incorporated by reference to Exhibit 8(a)(4) to Post-Effective
Amendment No. 17 to the Registration Statement.)
(a)(3) Custodian Contract between the Registrant and State Street Bank and
Trust Company dated September 6, 1995.
(Incorporated by reference to Exhibit 8(a)(3) to Post-Effective
Amendment No. 35 to the Registration Statement.)
(a)(4) Fee schedule for Exhibit 8(a)(3).
(Incorporated by reference to Exhibit 8(a)(4) to Post-Effective
Amendment No. 35 to the Registration Statement.)
(b)(1) Subcustodian Agreement between Brown Brothers Harriman & Co. and The
Bank of New York, London office, dated January 30, 1979.
(Incorporated by reference to Exhibit 8(b)(l) to Post-Effective
Amendment No. 17 to the Registration Statement.)
(b)(2) Fee schedule for Exhibit 8(b)(1).
(Incorporated by reference to Exhibit 8(b)(2) to Post-Effective
Amendment No. 17 to the Registration Statement.)
9. (a)(1) Transfer Agency and Service Agreement between the Registrant and
Scudder Service Corporation dated October 2, 1989.
(Incorporated by reference to Exhibit 9(a)(1) to Post-Effective
Amendment No. 29 to the Registration Statement.)
(a)(2) Fee schedule for Exhibit 9(a)(1).
(Incorporated by reference to Exhibit 9(a)(2) to Post-Effective
Amendment No. 29 to the Registration Statement.)
(a)(3) Service Agreement between Copeland Associates, Inc., on behalf of
Scudder Development Fund, and Scudder Service Corporation dated June
8, 1995.
(Incorporated by reference to Exhibit 9(a)(3) to Post-Effective
Amendment No. 35 to the Registration Statement.)
(a)(4) A Form of revised fee schedule for Exhibit 9(a)(1) is filed herein.
(b)(1) COMPASS Service Agreement between the Registrant and Scudder Trust
Company dated January 1, 1990.
(Incorporated by reference to Exhibit 9(b)(1) to Post-Effective
Amendment No. 29 to the Registration Statement.)
(b)(2) Fee schedule for Exhibit 9(b)(1).
(Incorporated by reference to Exhibit 9(b)(2) to Post-Effective
Amendment No. 29 to the Registration Statement.)
(b)(3) A Form of COMPASS Service Agreement between the Registrant
and Scudder Trust Company is filed herein.
Part C - Page 3
<PAGE>
(c) Application to be filed by amendment.
(d) Shareholder Services Agreement between the Registrant and Charles
Schwab & Co., Inc. dated June 1, 1990.
(Incorporated by reference to Exhibit 9(d) to Post-Effective
Amendment No. 29 to the Registration Statement.)
(e) Fund Accounting Services Agreement between the Registrant, on behalf
of Scudder Development Fund and Scudder Fund Accounting Corporation
dated March 21, 1995.
(Incorporated by reference to Exhibit 9(c) to Post-Effective
Amendment No. 35 to the Registration Statement.)
(f) Fund Accounting Services Agreement between the Registrant, on behalf
of Scudder Small Company Value Fund and Scudder Fund Accounting
Corporation dated October 6, 1995 to be filed by amendment.
10. Opinion of Counsel is filed herein.
11. Consent of Independent Accountants, on behalf of Scudder Development
Fund, is filed herein.
12. Inapplicable.
13. Inapplicable.
14. (a) Scudder Flexi-Plan for Corporations and Self-Employed Individuals.
(Incorporated by reference to Exhibit 14(c) to Scudder Income Fund,
Post-Effective Amendment No. 46 to its Registration Statement on
Form N-1A (File Nos. 2-13627 and 811-42).)
(b) Scudder Individual Retirement Plan.
(Incorporated by reference to Exhibit 14(b) to Scudder Income Fund,
Post-Effective Amendment No. 46 to its Registration Statement on
Form N-1A (File Nos. 2-13627 and 811-42)).
(c) Scudder Funds 403(b) Plan.
(Incorporated by reference to Exhibit 14(c) to Scudder Income Fund,
Post-Effective Amendment No. 46 to its Registration Statement on
Form N-1A (File Nos. 2-13627 and 811-42)).
(d) Scudder Employer-Select 403(b) Plan.
(Incorporated by reference to Exhibit 14(e)(2) to Scudder Income
Fund, Post-Effective Amendment No. 43 to its Registration Statement
on Form N-1A (File Nos. 2-13627 and 811-42)).
(e) Scudder Cash or Deferred Profit Sharing Plan under Section 401(k).
(Incorporated by reference to Exhibit 14(f) to Scudder Income Fund,
Post-Effective Amendment No. 43 to its Registration Statement on
Form N-1A (File Nos. 2-13627 and 811-42)).
15. Inapplicable.
Part C - Page 4
<PAGE>
16. Schedule for Computation of Performance Data.
(Incorporated by reference to Exhibit 16 to Post-Effective Amendment
No. 28 to the Registration Statement.)
17. Financial Data Schedule is filed herein.
18. Inapplicable.
Power of Attorney is incorporated by reference to the Signature Page of Post-Effective Amendment No. 30.
</TABLE>
Item 25. Persons Controlled by or under Common Control with Registrant
None
Item 26. Number of Holders of Securities (as of June 30, 1995).
(1) (2)
Title of Class Number of Record Shareholders
Shares of beneficial interest
($.01 par value)
Scudder Development Fund 41,327
Item 27. Indemnification
A policy of insurance covering Scudder, Stevens & Clark, Inc.,
its subsidiaries including Scudder Investor Services, Inc.,
and all of the registered investment companies advised by
Scudder, Stevens & Clark, Inc. insures the Registrant's
trustees and officers and others against liability arising by
reason of an alleged breach of duty caused by any negligent
act, error or accidental omission in the scope of their
duties.
Article IV, Sections 4.1 - 4.3 of the Registrant's Declaration
of Trust provide as follows:
Section 4.1. No Personal Liability of Shareholders, Trustees,
Etc. No Shareholder shall be subject to any personal liability
whatsoever to any Person in connection with Trust Property or
the acts, obligations or affairs of the Trust. No Trustee,
officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever to any Person, other than to
the Trust or its Shareholders, in connection with Trust
Property or the affairs of the Trust, save only that arising
from bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties with respect to such Person;
and all such Persons shall look solely to the Trust Property
for satisfaction of claims of any nature arising in connection
with the affairs of the Trust. If any Shareholder, Trustee,
officer, employee, or agent, as such, of the Trust, is made a
party to any suit or proceeding to enforce any such liability
of the Trust, he shall not, on account thereof, be held to any
personal liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims and
liabilities, to which such Shareholder may become subject by
reason of his being or having been a Shareholder, and shall
reimburse such Shareholder for all legal and other expenses
reasonably incurred by him in connection with any such claim
or liability. The indemnification and reimbursement required
by the preceding sentence shall be made only out of the assets
of the one or more Series of which the Shareholder who is
entitled to indemnification or reimbursement was a Shareholder
at the time the act or event occurred which gave rise to the
claim against or liability of said Shareholder. The rights
accruing to a Shareholder under this Section 4.1 shall not
impair any other right to which such Shareholder may be
lawfully entitled, nor shall anything herein contained
restrict the right of the Trust to indemnify or reimburse a
Shareholder in any appropriate situation even though not
specifically provided herein.
Part C - Page 5
<PAGE>
Section 4.2. Non-Liability of Trustees, Etc. No Trustee,
officer, employee or agent of the Trust shall be liable to the
Trust, its Shareholders, or to any Shareholder, Trustee,
officer, employee, or agent thereof for any action or failure
to act (including without limitation the failure to compel in
any way any former or acting Trustee to redress any breach of
trust) except for his own bad faith, willful misfeasance,
gross negligence or reckless disregard of the duties involved
in the conduct of his office.
Section 4.3. Mandatory Indemnification. (a) Subject to the
exceptions and limitations contained in paragraph (b) below:
(i) every person who is, or has been, a Trustee or
officer of the Trust shall be indemnified by the Trust to the
fullest extent permitted by law against all liability and
against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which
he becomes involved as a party or otherwise by virtue of his
being or having been a Trustee or officer and against amounts
paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits or
proceedings (civil, criminal, administrative or other,
including appeals), actual or threatened; and the words
"liability" and "expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement,
fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to
a Trustee or officer:
(i) against any liability to the Trust, a Series
thereof, or the Shareholders by reason of a final adjudication
by a court or other body before which a proceeding was brought
that he engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his office;
(ii) with respect to any matter as to which he shall
have been finally adjudicated not to have acted in good faith
in the reasonable belief that his action was in the best
interest of the Trust;
(iii) in the event of a settlement or other
disposition not involving a final adjudication as provided in
paragraph (b)(i) or (b)(ii) resulting in a payment by a
Trustee or officer, unless there has been a determination that
such Trustee or officer did not engage in willful misfeasance,
bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office:
(A) by the court or other body approving the
settlement or other disposition; or
(B) based upon a review of readily available
facts (as opposed to a full trial-type inquiry) by
(x) vote of a majority of the Disinterested Trustees
acting on the matter (provided that a majority of the
Disinterested Trustees then in office act on the
matter) or (y) written opinion of independent legal
counsel.
(c) The rights of indemnification herein provided may
be insured against by policies maintained by the Trust, shall
be severable, shall not affect any other rights to which any
Trustee or officer may now or hereafter be entitled, shall
continue as to a person who has ceased to be such Trustee or
officer and shall insure to the benefit of the heirs,
executors, administrators and assigns of such a person.
Nothing contained herein shall affect any rights to
indemnification to which personnel of the Trust other than
Trustees and officers may be entitled by contract or otherwise
under law.
(d) Expenses of preparation and presentation of a
defense to any claim, action, suit or proceeding of the
character described in paragraph (a) of this Section 4.3 may
be advanced by the Trust prior to final disposition thereof
upon receipt of an undertaking by or on behalf of the
recipient to repay such amount if it is ultimately determined
that he is not entitled to indemnification under this Section
4.3, provided that either:
Part C - Page 6
<PAGE>
(i) such undertaking is secured by a surety bond or
some other appropriate security provided by the recipient, or
the Trust shall be insured against losses arising out of any
such advances; or
(ii) a majority of the Disinterested Trustees acting
on the matter (provided that a majority of the Disinterested
Trustees act on the matter) or an independent legal counsel in
a written opinion shall determine, based upon a review of
readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 4.3, a "Disinterested
Trustee" is one who is not (i) an "Interested Person" of the
Trust (including anyone who has been exempted from being an
"Interested Person" by any rule, regulation or order of the
Commission), or (ii) involved in the claim, action, suit or
proceeding.
Item 28. Business or Other Connections of Investment Adviser
The Adviser has stockholders and employees who are denominated
officers but do not as such have corporation-wide
responsibilities. Such persons are not considered officers for
the purpose of this Item 28.
<TABLE>
<CAPTION>
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
----- ---------------------------------------
<S> <C>
Stephen R. Beckwith Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Lynn S. Birdsong Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Supervisory Director, The Latin America Income and Appreciation Fund N.V. (investment
company) +
Supervisory Director, The Venezuela High Income Fund N.V. (investment company) xx
Supervisory Director, Scudder Mortgage Fund (investment company) +
Supervisory Director, Scudder Floating Rate Funds for Fannie Mae Mortgage Securities I
& II (investment company) +
Director, Scudder, Stevens & Clark (Luxembourg) S.A. (investment manager) #
Trustee, Scudder Funds Trust (investment company)*
President & Director, The Latin America Dollar Income Fund, Inc. (investment company)**
President & Director, Scudder World Income Opportunities Fund, Inc. (investment
company)**
Director, Inverlatin Dollar Income Fund, Inc. (investment company) Georgetown, Grand
Cayman, Cayman Islands
Director, ProMexico Fixed Income Dollar Fund, Inc. (investment company) Georgetown,
Grand Cayman, Cayman Islands
Director, Canadian High Income Fund (investment company)#
Director, Hot Growth Companies Fund (investment company)#
Partner, George Birdsong Co., Rye, NY
Nicholas Bratt Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
President & Director, Scudder New Europe Fund, Inc. (investment company)**
President & Director, The Brazil Fund, Inc. (investment company)**
President & Director, The First Iberian Fund, Inc. (investment company)**
President & Director, Scudder International Fund, Inc. (investment company)**
President & Director, Scudder Global Fund, Inc. (Director only on Scudder Global Fund,
a series of Scudder Global Fund, Inc.) (investment company)**
President & Director, The Korea Fund, Inc. (investment company)**
President & Director, Scudder New Asia Fund, Inc. (investment company)**
President, The Argentina Fund, Inc. (investment company)**
Vice President, Scudder, Stevens & Clark Corporation (Delaware) (investment adviser)**
Part C - Page 7
<PAGE>
Vice President, Scudder, Stevens & Clark Japan, Inc. (investment adviser)###
Vice President, Scudder, Stevens & Clark of Canada Ltd. (Canadian investment adviser)
Toronto, Ontario, Canada
Vice President, Scudder, Stevens & Clark Overseas Corporationoo
Linda C. Coughlin Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Director, Scudder Investor Services, Inc. (broker/dealer)**
President & Trustee, AARP Cash Investment Funds (investment company)**
President & Trustee, AARP Growth Trust (investment company)**
President & Trustee, AARP Income Trust (investment company)**
President & Trustee, AARP Tax Free Income Trust (investment company)**
Director, SFA, Inc. (advertising agency)*
Margaret D. Hadzima Director, Scudder, Stevens & Clark, Inc. (investment adviser)*
Assistant Treasurer, Scudder Investor Services, Inc. (broker/dealer)*
Jerard K. Hartman Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President, Scudder California Tax Free Trust (investment company)*
Vice President, Scudder Equity Trust (investment company)*
Vice President, Scudder Cash Investment Trust (investment company)*
Vice President, Scudder Global Fund, Inc. (investment company)**
Vice President, Scudder GNMA Fund (investment company)*
Vice President, Scudder Portfolio Trust (investment company)*
Vice President, Scudder International Fund, Inc. (investment company)**
Vice President, Scudder Investment Trust (investment company)*
Vice President, Scudder Municipal Trust (investment company)*
Vice President, Scudder Mutual Funds, Inc. (investment company)**
Vice President, Scudder New Asia Fund, Inc. (investment company)**
Vice President, Scudder New Europe Fund, Inc. (investment company)**
Vice President, Scudder Securities Trust (investment company)*
Vice President, Scudder State Tax Free Trust (investment company)*
Vice President, Scudder Funds Trust (investment company)*
Vice President, Scudder Tax Free Money Fund (investment company)*
Vice President, Scudder Tax Free Trust (investment company)*
Vice President, Scudder U.S. Treasury Money Fund (investment company)*
Vice President, Scudder Variable Life Investment Fund (investment company)*
Vice President, The Brazil Fund, Inc. (investment company)**
Vice President, The Korea Fund, Inc. (investment company)**
Vice President, The Argentina Fund, Inc. (investment company)**
Vice President & Director, Scudder, Stevens & Clark of Canada, Ltd. (Canadian
investment adviser) Toronto, Ontario, Canada
Vice President, The First Iberian Fund, Inc. (investment company)**
Vice President, The Latin America Dollar Income Fund, Inc. (investment company)**
Vice President, Scudder World Income Opportunities Fund, Inc. (investment company)**
Richard A. Holt Director, Scudder, Stevens & Clark, Inc. (investment adviser)++
Vice President, Scudder Variable Life Investment Fund (investment company)*
Dudley H. Ladd Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Senior Vice President & Director, Scudder Investor Services, Inc. (broker/dealer)*
President & Director, SFA, Inc. (advertising agency)*
Vice President & Trustee, Scudder Cash Investment Trust (investment company)*
Trustee, Scudder Investment Trust (investment company)*
Trustee, Scudder Portfolio Trust (investment company)*
Trustee, Scudder Municipal Trust (investment company)*
Part C - Page 8
<PAGE>
Trustee, Scudder State Tax Free Trust (investment company)*
Vice President, Scudder U.S. Treasury Money Fund (investment company)*
Douglas M. Loudon Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President & Trustee, Scudder Equity Trust (investment company)*
Vice President, Scudder Global Fund, Inc. (investment company)**
Vice President, Scudder Investment Trust (investment company)*
Vice President & Director, Scudder Mutual Funds, Inc. (investment company)**
Vice President & Trustee, Scudder Securities Trust (investment company)*
Vice President, AARP Cash Investment Funds (investment company)**
Vice President, AARP Growth Trust (investment company)**
Vice President, AARP Income Trust (investment company)**
Vice President, AARP Tax Free Income Trust (investment company)**
Vice President, Scudder, Stevens & Clark Corporation (Delaware) (investment adviser)**
Senior Vice President, Scudder Investor Services, Inc. (broker/dealer)*
Vice President, Scudder, Stevens & Clark of Canada Ltd. (Canadian investment adviser)
Toronto, Ontario, Canada
Chairman, World Capital Fund (investment company) Luxembourg ##
Managing Director, Kankaku - Scudder Capital Asset Management Corporation (investment
adviser)**
Chairman & Director, Scudder, Stevens & Clark Japan, Inc. (investment adviser)###
President, The Japan Fund, Inc. (investment company)**
Trustee, Scudder, Stevens & Clark Supplemental Retirement Income Plan
Trustee, Scudder, Stevens & Clark Profit Sharing Plan **
Chairman & Director, The World Capital Fund (investment company) Luxembourg
Chairman & Director, Scudder, Stevens & Clark (Luxembourg), S.A.,
Luxembourg#
Chairman, Canadian High Income Fund (investment company) #
Chairman, Hot Growth Companies Fund (investment company) #
Vice President & Director, Scudder Precious Metals, Inc. xxx
Director, Berkshire Farm & Services for Youth
Board of Governors & President, Investment Counsel Association of America
John T. Packard Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
President, Montgomery Street Income Securities, Inc. (investment company) o
Director, Scudder Realty Advisors, Inc. (realty investment adviser) x
Juris Padegs Secretary & Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Chairman & Director, The Brazil Fund, Inc. (investment company)**
Vice President & Trustee, Scudder Equity Trust (investment company)*
Chairman & Director, The First Iberian Fund, Inc. (investment company)**
Trustee, Scudder Funds Trust (investment company)*
Vice President & Assistant Secretary, Scudder Global Fund, Inc. (investment company)**
Trustee, Scudder Investment Trust (investment company)*
Vice President, Assistant Secretary & Director, Scudder International Fund, Inc.
(investment company)**
Vice President, The Latin America Dollar Income Fund, Inc. (investment company)**
Trustee, Scudder Municipal Trust (investment company)*
Vice President & Assistant Secretary, Scudder Mutual Funds, Inc. (investment company)**
Vice President & Director, Scudder New Europe Fund, Inc. (investment company)**
Trustee, Scudder State Tax Free Trust (investment company)*
Vice President, Assistant Secretary & Director, Scudder New Asia Fund, Inc. (investment
company)**
Trustee, Scudder Securities Trust (investment company)*
Part C - Page 9
<PAGE>
Vice President & Trustee, Scudder Tax Free Money Fund (investment company)*
Trustee, Scudder Tax Free Trust (investment company)*
Chairman & Director, The Korea Fund, Inc. (investment company)**
Vice President & Director, The Argentina Fund, Inc. (investment company)**
Secretary, Scudder, Stevens & Clark of Canada Ltd. (Canadian investment adviser),
Toronto, Ontario, Canada
Vice President & Director, Scudder Realty Advisors, Inc. (realty investment adviser) x
Assistant Secretary, SFA, Inc. (advertising agency)*
Vice President & Director, Scudder Investor Services, Inc. (broker/dealer)**
Assistant Treasurer & Director, Kankaku - Scudder Capital Asset Management (investment
adviser)**
Chairman & Director, Scudder, Stevens & Clark Japan, Inc. (investment adviser)###
Chairman & Director, Scudder, Stevens & Clark Corporation (Delaware) (investment
adviser)**
Chairman & Supervisory Director, Sovereign High Yield Investment Company N.V.
(investment company) +
Director, President Investment Trust Corporation (Joint Venture)***
Vice President, Scudder World Income Opportunities Fund, Inc. (investment company)**
Director, Vice President & Assistant Secretary, Scudder Precious Metals, Inc. xxx
Vice President & Director, Scudder Service Corporation (in-house transfer agent)*
Chairman, Scudder, Stevens & Clark Overseas Corporationoo
Director, Scudder Trust (Cayman) Ltd. (trust services company)xxx
Director, ICI Mutual Insurance Company, Inc., Washington, D.C.
Director, Baltic International USA
Director, Baltic International Airlines (a limited liability company) Riga, Latvia
Daniel Pierce Chairman & Director, Scudder New Europe Fund, Inc. (investment company)**
Trustee, California Tax Free Trust (investment company)*
President & Trustee, Scudder Equity Trust (investment company)**
Director, The First Iberian Fund, Inc. (investment company)**
President & Trustee, Scudder GNMA Fund (investment company)*
President & Trustee, Scudder Portfolio Trust (investment company)*
President & Trustee, Scudder Funds Trust (investment company)*
President & Director, Scudder Institutional Fund, Inc. (investment company)**
President & Director, Scudder Fund, Inc. (investment company)**
Director, Scudder International Fund, Inc. (investment company)**
President & Trustee, Scudder Investment Trust (investment company)*
Vice President & Trustee, Scudder Municipal Trust (investment company)*
President & Director, Scudder Mutual Funds, Inc. (investment company)**
Director, Scudder New Asia Fund, Inc. (investment company)**
President & Trustee, Scudder Securities Trust (investment company)**
Trustee, Scudder State Tax Free Trust (investment company)*
Vice President & Trustee, Scudder Variable Life Investment Fund (investment company)*
Director, The Brazil Fund, Inc. (until 7/94) (investment company)**
Vice President & Assistant Treasurer, Montgomery Street Income Securities, Inc.
(investment company)o
Vice President & Director, Scudder Global Fund, Inc. (investment company)**
Vice President, Director & Assistant Treasurer, Scudder Investor Services, Inc.
(broker/dealer)*
President & Director, Scudder Service Corporation (in-house transfer agent)*
Chairman & President, Scudder, Stevens & Clark of Canada, Ltd. (Canadian investment
adviser), Toronto, Ontario, Canada
Chairman, Assistant Treasurer & Director, Scudder, Stevens & Clark, Inc. (investment
adviser)**
Part C - Page 10
<PAGE>
President & Director, Scudder Precious Metals, Inc. xxx
Chairman & Director, Scudder Global Opportunities Funds (investment company) Luxembourg
Chairman, Scudder, Stevens & Clark, Ltd. (investment adviser) London, England
Director, Scudder Fund Accounting Corporation (in-house fund accounting agent)*
Director, Scudder Realty Holdings Corporation (a real estate holding company)*
Director, Scudder Latin America Investment Trust PLC (investment company)@
Incorporator, Scudder Trust Company (a trust company)+++
Director, Fiduciary Trust Company (banking & trust company) Boston, MA
Director, Fiduciary Company Incorporated (banking & trust company) Boston, MA
Trustee, New England Aquarium, Boston, MA
Cornelia M. Small Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President, Scudder Global Fund, Inc. (investment company)**
Vice President, AARP Cash Investment Funds (investment company)*
Vice President, AARP Growth Trust (investment company)*
Vice President, AARP Income Trust (investment company)*
Vice President, AARP Tax Free Income Trust (investment company)*
Edmond D. Villani President & Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Chairman & Director, Scudder Global Fund, Inc. (investment company)**
Chairman & Director, Scudder International Fund, Inc. (investment company)**
Chairman & Director, Scudder New Asia Fund, Inc. (investment company)**
Trustee, Scudder Securities Trust (investment company)*
Chairman & Director, The Argentina Fund, Inc. (investment company)**
Director, Scudder Realty Advisors, Inc. (realty investment adviser) x
Supervisory Director, Scudder Mortgage Fund (investment company) +
Chairman & Director, The Latin America Dollar Income Fund, Inc. (investment company)**
Director, Scudder, Stevens & Clark Japan, Inc. (investment adviser)###
Chairman & Director, Scudder World Income Opportunities Fund, Inc. (investment
company)**
Supervisory Director, Scudder Floating Rate Funds for Fannie Mae Mortgage Securities I
& II (investment company)+
Director, The Brazil Fund, Inc. (investment company)**
Director, Indosuez High Yield Bond Fund (investment company) Luxembourg
President & Director, Scudder, Stevens & Clark Overseas Corporationoo
President & Director, Scudder, Stevens & Clark Corporation (Delaware) (investment
adviser)**
Director, IBJ Global Investment Manager S.A., (Luxembourg investment management
company) Luxembourg, Grand-Duchy of Luxembourg
* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
++ Two Prudential Plaza, 180 N. Stetson Avenue, Chicago, IL
+++ 5 Industrial Way, Salem, NH
o 101 California Street, San Francisco, CA
# 11, rue Aldringen, L-1118 Luxembourg, Grand-Duchy of Luxembourg
+ John B. Gorsiraweg 6, Willemstad Curacao, Netherlands Antilles
xx De Ruyterkade 62, P.O. Box 812, Willemstad Curacao, Netherlands Antilles
## 2 Boulevard Royal, Luxembourg
*** B1 2F3F 248 Section 3, Nan King East Road, Taipei, Taiwan
xxx Grand Cayman, Cayman Islands, British West Indies
oo 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
@ c/o Sinclair Hendersen Limited, 23 Cathedral Yard, Exeter, Devon
</TABLE>
Part C - Page 11
<PAGE>
Item 29. Principal Underwriters.
(a) Scudder California Tax Free Trust
Scudder Cash Investment Trust
Scudder Equity Trust
Scudder Fund, Inc.
Scudder Funds Trust
Scudder Global Fund, Inc.
Scudder GNMA Fund
Scudder Institutional Fund, Inc.
Scudder International Fund, Inc.
Scudder Investment Trust
Scudder Municipal Trust
Scudder Mutual Funds, Inc.
Scudder Portfolio Trust
Scudder Securities Trust
Scudder State Tax Free Trust
Scudder Tax Free Money Fund
Scudder Tax Free Trust
Scudder U.S. Treasury Money Fund
Scudder Variable Life Investment Fund
AARP Cash Investment Funds
AARP Growth Trust
AARP Income Trust
AARP Tax Free Income Trust
The Japan Fund, Inc.
(b)
<TABLE>
<CAPTION>
(1) (2) (3)
<S> <C> <C>
Name and Principal Position and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
------------------ ------------------------------- -----------------------
E. Michael Brown Assistant Treasurer None
Two International Place
Boston, MA 02110
Mark S. Casady Vice President and Director None
Two International Place
Boston, MA 02110
Linda Coughlin Director None
345 Park Avenue
New York, NY 10154
Richard W. Desmond Vice President None
345 Park Avenue
New York, NY 10154
Coleen Downs Dinneen Assistant Clerk Assistant Secretary
Two International Place
Boston, MA 02110
Part C - Page 12
<PAGE>
Name and Principal Position and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
------------------ ------------------------------- -----------------------
Paul J. Elmlinger Vice President None
345 Park Avenue
New York, NY 10154
Cuyler W. Findlay Senior Vice President None
345 Park Avenue
New York, NY 10154
Margaret D. Hadzima Assistant Treasurer None
Two International Place
Boston, MA 02110
Thomas W. Joseph Vice President, Director, Vice President
Two International Place Treasurer and Assistant Clerk
Boston, MA 02110
Dudley H. Ladd Senior Vice President and None
Two International Place Director
Boston, MA 02110
David S. Lee President, Assistant Vice President
Two International Place Treasurer and Director
Boston, MA 02110
Douglas M. Loudon Senior Vice President Vice President and Trustee
345 Park Avenue
New York, NY 10154
Thomas F. McDonough Clerk Vice President and
Two International Place Secretary
Boston, MA 02110
Thomas H. O'Brien Assistant Treasurer None
345 Park Avenue
New York, NY 10154
Edward J. O'Connell Assistant Treasurer Vice President and
345 Park Avenue Assistant Treasurer
New York, NY 10154
Juris Padegs Vice President and Director Trustee
345 Park Avenue
New York, NY 10154
Daniel Pierce Vice President, Director President and Trustee
Two International Place and Assistant Treasurer
Boston, MA 02110
Kathryn L. Quirk Vice President Vice President and
345 Park Avenue Assistant Secretary
New York, NY 10154
Part C - Page 13
<PAGE>
Name and Principal Position and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
------------------ ------------------------------- -----------------------
Edmund J. Thimme Vice President and Director None
345 Park Avenue
New York, NY 10154
David B. Watts Assistant Treasurer None
Two International Place
Boston, MA 02110
Linda J. Wondrack Vice President None
Two International Place
Boston, MA 02110
</TABLE>
The Underwriter has employees who are denominated officers of an
operational area. Such persons do not have corporation-wide
responsibilities and are not considered officers for the purpose of
this Item 29.
(c)
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Net Underwriting Compensation on
Name of Principal Discounts and Redemptions Brokerage
Underwriter Commissions and Repurchases Commissions Other Compensation
----------- ----------- --------------- ----------- ------------------
<S> <C> <C> <C> <C>
Scudder Investor None None None None
Services, Inc.
</TABLE>
Item 30. Location of Accounts and Records.
Certain accounts, books and other documents required to be
maintained by Section 31(a) of the 1940 Act and the Rules
promulgated thereunder are maintained by Scudder, Stevens &
Clark, Inc., Two International Place, Boston, MA 02110-4103.
Records relating to the duties of the Registrant's custodian
are maintained by State Street Bank and Trust Company,
Heritage Drive, North Quincy, Massachusetts. Records relating
to the duties of the Registrant's transfer agent are
maintained by Scudder Service Corporation, Two International
Place, Boston, Massachusetts.
Item 31. Management Services.
Inapplicable.
Item 32. Undertakings.
The Registrant hereby undertakes to file a post-effective
amendment, using reasonably current financial statements of
Scudder Small Company Value Fund, within four to six months
from the effective date of the Registrant's Registration
Statement under the 1933 Act.
The Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of such Fund's
latest annual report to shareholders upon request and without
change.
The Registrant hereby undertakes to call a meeting of
shareholders for the purpose of voting on the question of
removal of a Trustee or Trustees when requested to do so by
the holders of at least 10% of the Registrant's outstanding
shares and in connection with such meeting to comply with the
provisions of Section 16(c) of the Investment Company Act of
1940 relating to shareholder communications.
Part C - Page 14
<PAGE>
The Registrant hereby undertakes, insofar as indemnification
for liability arising under the Securities Act of 1933 may be
permitted to trustees, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a
trustee, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in
connection with the securities being registered, the
registrant will unless in the opinion of its counsel the
matter has been settled by controlling precedent, submits to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Part C - Page 15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Boston and the Commonwealth of Massachusetts on
the 17th day of October, 1995.
SCUDDER SECURITIES TRUST
By /s/Thomas F. McDonough
Thomas F. McDonough, Vice President
and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
amendment to its Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/Daniel Pierce
Daniel Pierce* President (Principal Executive October 17, 1995
Officer) and Trustee
/s/Paul Bancroft III
Paul Bancroft III* Trustee October 17, 1995
/s/Thomas J. Devine
Thomas J. Devine* Trustee October 17, 1995
/s/Douglas M. Loudon
Douglas M. Loudon* Vice President and Trustee October 17, 1995
/s/Wilson Nolen
Wilson Nolen* Trustee October 17, 1995
/s/Juris Padegs
Juris Padegs* Trustee October 17, 1995
/s/Gordon Shillinglaw
Gordon Shillinglaw* Trustee October 17, 1995
/s/Robert G. Stone, Jr.
Robert G. Stone, Jr.* Trustee October 17, 1995
<PAGE>
SIGNATURE TITLE DATE
- --------- ----- ----
/s/Edmond D. Villani
Edmond D. Villani* Trustee October 17, 1995
/s/Pamela A. McGrath
Pamela A. McGrath Vice President and Treasurer October 17, 1995
(Principal Financial and Accounting
Officer)
</TABLE>
*By: /s/Thomas F. McDonough
Thomas F. McDonough
Attorney-in-fact pursuant to a power of attorney contained in the
signature page of Post-Effective Amendment No. 30 filed August 26, 1991.
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File No. 2-36238
File No. 811-2021
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 36
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 20
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
SCUDDER SECURITIES TRUST
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SCUDDER SECURITIES TRUST
EXHIBIT INDEX
Exhibit 5 (c)
Exhibit 9 (a)(4)
Exhibit 9 (b)(3)
Exhibit 10
Exhibit 11
Exhibit 17
Exhibit 5(c)
Scudder Securities Trust
Two International Place
Boston, Massachusetts 02110
October 6, 1995
Scudder, Stevens & Clark, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Scudder Small Company Value Fund
Ladies and Gentlemen:
Scudder Securities Trust (formerly known as Scudder Development Fund)(the
"Trust"), has been established as a Massachusetts business Trust to engage in
the business of an investment company. Pursuant to the Trust's Declaration of
Trust, as amended from time-to-time (the "Declaration"), the Board of Trustees
has divided the Trust's shares of beneficial interest, par value $0.01 per
share, (the "Shares") into separate series, or funds, including Scudder Small
Company Value Fund (the "Fund"). Series may be abolished and dissolved, and
additional series established, from time to time by action of the Trustees.
The Trust, on behalf of the Fund, has selected you to act as the sole
investment manager of the Fund and to provide certain other services, as more
fully set forth below, and you have indicated that you are willing to act as
such investment manager and to perform such services under the terms and
conditions hereinafter set forth. Accordingly, the Trust on behalf of the Fund
agrees with you as follows:
1. Delivery of Documents. The Trust engages in the business of investing
and reinvesting the assets of the Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to the Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement") filed
by the Trust under the Investment Company Act of 1940, as amended, (the "1940
Act") and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you by the Trust.
The Trust has also furnished you with copies properly certified or authenticated
of each of the following additional documents related to the Trust and the Fund:
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(a) The Declaration dated December 21, 1987, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the "By-Laws").
(c) Resolutions of the Trustees of the Trust selecting you as investment
manager and approving the form of this Agreement.
(d) Establishment and Designation of Series of Shares of Beneficial Interest
dated July 21, 1995 relating to the Fund.
The Trust will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements, if any, to the
foregoing, including the Prospectus, the SAI and the Registration Statement.
2. Name of Trust and Fund. The Trust and the Fund may use any name derived
from the name "Scudder, Stevens & Clark", if the Trust elects to do so, only for
so long as this Agreement, any other investment management agreement between you
and the Trust with respect to the Fund or any extension, renewal or amendment
hereof or thereof remains in effect, including any similar agreement with any
organization which shall have succeeded to your business as investment manager.
At such time as such an agreement shall no longer be in effect, the Trust and
the Fund shall each (to the extent the Trust has the legal power to cause it to
be done) cease to use such a name or any other name indicating that it is
managed by or otherwise connected with you or any organization which shall have
so succeeded to your business.
3. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Trust's Board of
Trustees. In connection therewith, you shall use reasonable efforts to manage
the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 3, you shall
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be entitled to receive and act upon advice of counsel to the Trust or counsel to
you. You shall also make available to the Trust promptly upon request all of the
Fund's investment records and ledgers as are necessary to assist the Trust to
comply with the requirements of the 1940 Act and other applicable laws. To the
extent required by law, you shall furnish to regulatory authorities having the
requisite authority any information or reports in connection with the services
provided pursuant to this Agreement which may be requested in order to ascertain
whether the operations of the Trust are being conducted in a manner consistent
with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
4. Administrative Services. In addition to the portfolio management
services specified above in section 3, you shall furnish at your expense for the
use of the Fund such office space and facilities in the United States as the
Fund may require for its reasonable needs, and you (or one or more of your
affiliates designated by you) shall render to the Trust administrative services
on behalf of the Fund necessary for operating as an open-end investment company
and not provided by persons not parties to this Agreement including, but not
limited to, preparing reports to and meeting materials for the Trust's Board of
Trustees and reports and notices to Fund shareholders; supervising, negotiating
contractual arrangements with, to the extent appropriate, and monitoring the
performance of, accounting agents, custodians, depositories, transfer and
pricing agents, accountants, attorneys, printers, underwriters, brokers and
dealers, insurers and other persons in any capacity deemed to be necessary or
desirable to Fund operations; preparing and making filings with the Securities
and Exchange Commission (the "SEC") and other regulatory and self-regulatory
organizations, including, but not limited to, preliminary and definitive proxy
materials, post-effective amendments to the Registration Statement, semi-annual
reports on Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act;
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overseeing the tabulation of proxies by the Fund's transfer agent; assisting in
the preparation and filing of the Fund's federal, state and local tax returns;
preparing and filing the Fund's federal excise tax return pursuant to Section
4982 of the Code; providing assistance with investor and public relations
matters; monitoring the valuation of portfolio securities, the calculation of
net asset value and the calculation and payment of distributions to Fund
shareholders; monitoring the registration of Shares of the Fund under applicable
federal and state securities laws; maintaining or causing to be maintained for
the Fund all books, records and reports and any other information required under
the 1940 Act, to the extent that such books, records and reports and other
information are not maintained by the Fund's custodian or other agents of the
Fund; assisting in establishing the accounting policies of the Fund; assisting
in the resolution of accounting issues that may arise with respect to the Fund's
operations and consulting with the Fund's independent accountants, legal counsel
and the Fund's other agents as necessary in connection therewith; establishing
and monitoring the Fund's operating expense budgets; reviewing the Fund's bills;
processing the payment of bills that have been approved by an authorized person;
assisting the Fund in determining the amount of dividends and distributions
available to be paid by the Fund to its shareholders, preparing and arranging
for the printing of dividend notices to shareholders, and providing the transfer
and dividend paying agent and the custodian with such information as is required
for such parties to effect the payment of dividends and distributions; and
otherwise assisting the Trust as it may reasonably request in the conduct of the
Fund's business, subject to the direction and control of the Trust's Board of
Trustees. Nothing in this Agreement shall be deemed to shift to you or to
diminish the obligations of any agent of the Fund or any other person not a
party to this Agreement which is obligated to provide services to the Fund.
5. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this section 5, you shall pay the compensation and expenses of all
Trustees, officers and executive employees of the Trust (including the Fund's
share of payroll taxes) who are affiliated persons of you, and you shall make
available, without expense to the Fund, the services of such of your directors,
officers and employees as may duly be elected officers of the Trust, subject to
their individual consent to serve and to any limitations imposed by law. You
shall provide at your expense the portfolio management services described in
section 3 hereof and the administrative services described in section 4 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 5. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
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to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out-of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent, custodians,
subcustodians, transfer agents, dividend disbursing agents and registrars;
payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; expenses of preparing share
certificates and, except as provided below in this section 5, other expenses in
connection with the issuance, offering, distribution, sale, redemption or
repurchase of securities issued by the Fund; expenses relating to investor and
public relations; expenses and fees of registering or qualifying Shares of the
Fund for sale; interest charges, bond premiums and other insurance expense;
freight, insurance and other charges in connection with the shipment of the
Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Trust business) of Trustees, officers and
employees of the Trust who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; costs of
shareholders' and other meetings; and travel expenses (or an appropriate portion
thereof) of Trustees and officers of the Trust who are directors, officers or
employees of you to the extent that such expenses relate to attendance at
meetings of the Board of Trustees of the Trust or any committees thereof or
advisors thereto held outside of Boston, Massachusetts or New York, New York.
You shall not be required to pay expenses of any activity which is
primarily intended to result in sales of Shares of the Fund if and to the extent
that (i) such expenses are required to be borne by a principal underwriter which
acts as the distributor of the Fund's Shares pursuant to an underwriting
agreement which provides that the underwriter shall assume some or all of such
expenses, or (ii) the Trust on behalf of the Fund shall have adopted a plan in
conformity with Rule 12b-1 under the 1940 Act providing that the Fund (or some
other party) shall assume some or all of such expenses. You shall be required to
pay such of the foregoing sales expenses as are not required to be paid by the
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principal underwriter pursuant to the underwriting agreement or are not
permitted to be paid by the Fund (or some other party) pursuant to such a plan.
6. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 3, 4 and 5 hereof, the Trust
on behalf of the Fund shall pay you on the last day of each month the unpaid
balance of a fee equal to the excess of (a) 1/12 of 0.75 of 1 percent of the
average daily net assets as defined below of the Fund for such month; over (b)
the greater of (i) the amount by which the Fund's expenses exceed the lowest
applicable expense limitation (as more fully described below) or (ii) any
compensation waived by you from time to time (as more fully described below).
You shall be entitled to receive during any month such interim payments of your
fee hereunder as you shall request, provided that no such payment shall exceed
75 percent of the amount of your fee then accrued on the books of the Fund and
unpaid.
The "average daily net assets" of the Fund shall mean the average of the
values placed on the Fund's net assets as of 4:00 p.m. (New York time) on each
day on which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 6, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 6.
You agree that your gross compensation for any fiscal year shall not be
greater than an amount which, when added to the other expenses of the Fund,
shall cause the aggregate expenses of the Fund to equal the maximum expenses
under the lowest applicable expense limitation established pursuant to the
statutes or regulations of any jurisdiction in which the Shares of the Fund may
be qualified for offer and sale. Except to the extent that such amount has been
reflected in reduced payments to you, you shall refund to the Fund the amount of
any payment received in excess of the limitation pursuant to this section 6 as
promptly as practicable after the end of such fiscal year, provided that you
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shall not be required to pay the Fund an amount greater than the fee paid to you
in respect of such year pursuant to this Agreement. As used in this section 6,
"expenses" shall mean those expenses included in the applicable expense
limitation having the broadest specifications thereof, and "expense limitation"
means a limit on the maximum annual expenses which may be incurred by an
investment company determined (i) by multiplying a fixed percentage by the
average, or by multiplying more than one such percentage by different specified
amounts of the average, of the values of an investment company's net assets for
a fiscal year or (ii) by multiplying a fixed percentage by an investment
company's net investment income for a fiscal year. The words "lowest applicable
expense limitation" shall be construed to result in the largest reduction of
your compensation for any fiscal year of the Fund; provided, however, that
nothing in this Agreement shall limit your fees if not required by an applicable
statute or regulation referred to above in this section 6.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
7. Avoidance of Inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other investments
for the account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed
to be exclusive and it is understood that you may render investment advice,
management and services to others. In acting under this Agreement, you shall be
an independent contractor and not an agent of the Trust.
8. Limitation of Liability of Manager. As an inducement to your undertaking
to render services pursuant to this Agreement, the Trust agrees that you shall
not be liable under this Agreement for any error of judgment or mistake of law
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or for any loss suffered by the Fund in connection with the matters to which
this Agreement relates, provided that nothing in this Agreement shall be deemed
to protect or purport to protect you against any liability to the Trust, the
Fund or its shareholders to which you would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of your
duties, or by reason of your reckless disregard of your obligations and duties
hereunder. Any person, even though also employed by you, who may be or become an
employee of and paid by the Fund shall be deemed, when acting within the scope
of his or her employment by the Fund, to be acting in such employment solely for
the Fund and not as your employee or agent.
9. Duration and Termination of This Agreement. This Agreement shall remain
in force until September 30, 1997, and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Trustees who are not parties
to this Agreement or interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Trustees of the Trust, or by the vote of a majority of the outstanding
voting securities of the Fund. The aforesaid requirement that continuance of
this Agreement be "specifically approved at least annually" shall be construed
in a manner consistent with the 1940 Act and the rules and regulations
thereunder.
This Agreement may be terminated with respect to the Fund at any time,
without the payment of any penalty, by the vote of a majority of the outstanding
voting securities of the Fund or by the Trust's Board of Trustees on 60 days'
written notice to you, or by you on 60 days' written notice to the Trust. This
Agreement shall terminate automatically in the event of its assignment.
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved by the vote of a majority of the outstanding voting
securities of the Fund and by the Trust's Board of Trustees, including a
majority of the Trustees who are not parties to this Agreement or interested
persons of any party to this Agreement, cast in person at a meeting called for
the purpose of voting on such approval.
11. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "Scudder Securities
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Trust" refers to the Trustees under the Declaration collectively as Trustees and
not as individuals or personally, and that no shareholder of the Fund, or
Trustee, officer, employee or agent of the Trust, shall be subject to claims
against or obligations of the Trust or of the Fund to any extent whatsoever, but
that the Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as
set forth in the Declaration and you agree that the obligations assumed by the
Trust on behalf of the Fund pursuant to this Agreement shall be limited in all
cases to the Fund and its assets, and you shall not seek satisfaction of any
such obligation from the shareholders or any shareholder of the Fund or any
other series of the Trust, or from any Trustee, officer, employee or agent of
the Trust. You understand that the rights and obligations of each Fund, or
series, under the Declaration are separate and distinct from those of any and
all other series.
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
In interpreting the provisions of this Agreement, the definitions contained
in Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code.
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If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
SCUDDER SECURITIES TRUST,
on behalf of Scudder Small Company Value
Fund
By: /s/Daniel Pierce
Daniel Pierce, President
The foregoing Agreement is hereby accepted as of the date thereof.
SCUDDER, STEVENS & CLARK, INC.
By: /s/David S. Lee
David S. Lee, Managing Director
10
Exhibit 9(a)(4)
SCUDDER SERVICE CORPORATION
FEE INFORMATION FOR SERVICES PROVIDED UNDER
TRANSFER AGENCY AND SERVICE AGREEMENT
Scudder Family of Funds
Annual maintenance fee for each account
- ---------------------------------------
1/12th of the annual maintenance fee shall be charged and payable each month. It
will be charged for any account which at any time during the month had a share
balance in the fund.
The minimum monthly charge to any portfolio is $1,000.
Money Market Funds $28.90
Monthly Income Funds 25.00
Quarterly Distribution Funds 20.40
Annual Distribution Funds 17.55
Other fees
New Account Set Up $ 5.00 each
Disaster Recovery 0.25 per year
Closed Accounts 1.20 per year
TIN Certificates 0.15 each
TIN Maintenance 0.25 each
Check Writing:
Set Up 5.00 per account
Retail Check Clearance 0.96 per check
Corporate Check Clearance 0.46 per check
Out of pocket expenses shall be reimbursed by the fund to Scudder Service
Corporation or paid directly by the fund. Such expenses include but are not
limited to the following:
Telephone (portion allocable to servicing accounts)
Postage, overnight service or similar services
Stationery and envelopes
Shareholder Statements - printing and postage
Checks - stock supply, printing and postage
Data circuits
Lease and maintenance of S.A.I.L. and Easy Access
Forms
Microfilm and microfiche
Expenses incurred at the specific direction of the fund
Payment
- -------
The above will be billed within the first five (5) business days of each month
and will be paid by wire within five (5) business days of receipt.
On behalf of the Funds listed on
Attachment A: Scudder Service Company
By:_________________________ By:_____________________
David S. Lee Daniel Pierce
Vice President President
Date: October 1, 1995 Date: October 1, 1995
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ATTACHMENT A
TRANSFER AGENCY AND SERVICE AGREEMENT
Money Market Accounts
Scudder California Tax Free Money Fund
Scudder Cash Investment Trust
Scudder New York Tax Free Money Fund
Scudder Tax Free Money Fund
Scudder U.S. Treasury Money Fund
Monthly Income Funds
Scudder California Tax Free Fund
Scudder GNMA Fund
Scudder High Yield Tax Free Fund
Scudder International Bond Fund
Scudder Limited Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder Massachusetts Limited Term Tax Free Fund
Scudder Massachusetts Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder New York Tax Free Fund
Scudder Ohio Tax Free Fund
Scudder Pennsylvania Tax Free Fund
Scudder Short Term Bond Fund
Scudder Short Term Global Income Fund
Quarterly Distribution Funds
Scudder Balanced Fund
Scudder Growth and Income Fund
Scudder Emerging Markets Income Fund
Scudder Income Fund
Annual Distribution Funds
Scudder Capital Growth Fund Scudder Latin America Fund
Scudder Development Fund Scudder Pacific Opportunities Fund
Scudder Global Fund Scudder Quality Growth Fund
Scudder Global Small Company Fund Scudder Small Company Value Fund
Scudder Gold Fund Scudder Value Fund
Scudder Greater Europe Growth Fund Scudder Zero Coupon 2000 Fund
Scudder International Fund
dated as of October 6, 1995
EXHIBIT 9(b)(3)
COMPASS AND TRAK 2000 SERVICE AGREEMENT
THIS AGREEMENT is made as of this 1st day of October, 1995, by and
between SCUDDER TRUST COMPANY, a New Hampshire banking corporation ("Trust
Company") and SCUDDER SECURITIES TRUST, a Massachusetts business trust (the
"Fund").
WITNESSETH:
WHEREAS, Trust Company is engaged in the business of providing certain
recordkeeping and other services; and
WHEREAS, Trust Company and the Fund entered into a "Compass Service
Agreement," dated January 1, 1990 (the "Former Agreement") under which Trust
Company has been providing certain recordkeeping and other services, and Trust
Company also has been performing certain recordkeeping and other services for
the Fund in connection with the TRAK 2000 system; and
WHEREAS, the Fund is engaged in business as an open-end investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, Trust Company is willing to continue to provide to the Fund
such recordkeeping and other services in connection with the COMPASS and TRAK
2000 systems and in addition is willing to provide certain order processing
services as agent for the Fund; and
WHEREAS, Trust Company and the Fund wish to amend, restate and replace
the Former Agreement with this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. Terms of Appointment; Performance of Duties.
1.1. Appointment. Subject to the terms and conditions set
forth in this Agreement, the Fund hereby employs and appoints Trust Company (i)
to act as, and Trust Company agrees to act as, recordkeeping agent with respect
to the authorized and issued shares of beneficial interest of the Fund
("Shares") or units representing such Shares ("Units"), and (ii) to act as an
agent of the Fund for the purpose of receiving requests for the purchase and
redemption of Shares or Units (collectively, "Shares") and communicating such
requests to the Fund's transfer agent ("Transfer Agent"), in connection with
certain retirement and employee benefit plans established under the Internal
Revenue Code of 1986 including but not limited to defined contribution plans,
Section 403(b) plans, individual retirement accounts and deferred compensation
plans (each a "Plan" or collectively the "Plans"), utilizing the Comprehensive
Participant Accounting Services ("COMPASS") or TRAK 2000 system, and established
by plan administrators, employers, trustees, custodians and other persons (each
individually an "Administrator" or collectively the "Administrators") on behalf
of employers (each individually an "Employer" or collectively the "Employers")
and individuals for certain participants in such Plans (each individually a
"Participant" or collectively the "Participants").
1.2. Recordkeeping. Trust Company agrees that it will perform
the following recordkeeping services in connection with the COMPASS and TRAK
2000 systems in accordance with procedures established from time to time by
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agreement between the Fund and Trust Company. Subject to instructions from the
Administrators, Trust Company shall:
(i) receive from Administrators instructions for the purchase of
Shares of the Fund, confirm compliance with such instructions and, as agent of
the respective Administrators, deliver within a reasonable time such
instructions and any appropriate documentation therefor to the Transfer Agent of
the Fund duly appointed by the Trustees of the Fund (the "Transfer Agent");
(ii) record the purchase by Plans of the appropriate number of Shares
or Units and within a reasonable time allocate such Shares or Units among the
Participants' accounts;
(iii) record dividends and capital gains distributions on behalf of
Participants;
(iv) receive from Administrators instructions for redemption and
repurchase requests and directions, confirm compliance with such instructions
and as agent of the respective Administrators deliver within a reasonable time
such instructions and any appropriate documentation therefor to the Transfer
Agent;
(v) record the redemption or repurchase by Plans of the appropriate
number of Shares or Units and within a reasonable time make the appropriate
adjustments among the Participants' accounts;
(vi) certify to the Fund no less frequently than annually the number
of Participants accounts for which records are maintained hereunder;
(vii) maintain records of account for and advise the Fund and
Administrators and Participants, when appropriate, as to the foregoing;
(viii) maintain all Plan and Participant accounts other than accounts
maintained by the Transfer Agent; and
(ix) maintain and mail administrative reports and Participant
statements.
Procedures applicable to certain of these services may be established
from time to time by agreement between the Fund and Trust Company.
1.3. Order Processing.
(a) In addition to the recordkeeping to be performed in accordance
with Section 1.02 above, the Fund hereby appoints Trust Company, and Trust
Company agrees to act, as the Fund's agent for the purpose of receiving requests
for the purchase and redemption of Shares or Units and communicating such
requests to the Fund's Transfer Agent, subject to and in accordance with the
terms of this Agreement, and as follows:
(i) Trust Company shall receive from the Plans, Plan
participants, Plan sponsors, authorized Plan committees or Plan trustees,
according to Trust Company's agreement with each Plan, by the close of regular
trading on the New York Stock Exchange (the "Close of Trading") each business
day that the New York Stock Exchange is open for business ("Business Day")
instructions for the purchase and redemption of Shares (together,
"Instructions"). Instructions received by Trust Company after the Close of
Trading on any Business Day shall be treated as received on the next Business
Day.
2
<PAGE>
(ii) In connection with the COMPASS system, Trust Company shall
compute net purchase requests or net redemption requests for Shares of the Fund
for each Plan based on Instructions received each Business Day.
(iii) Trust Company shall communicate purchase and redemption
requests for Shares of the Fund, netted in accordance with (ii) above in the
case of COMPASS ("Orders"), to the Transfer Agent, for acceptance by the Fund or
its agents, in the manner specified herein, and promptly deliver, or instruct
the Plans (or the Plans' trustees as the case may be) to deliver, appropriate
documentation and, in the case of purchase requests, payment therefor to the
Transfer Agent. Orders shall be based solely on Instructions received by Trust
Company from the Plans, Plan participants, Plan sponsors, authorized Plan
committees or Plan trustees.
(b) Trust Company shall maintain adequate records related to, and
advise the Transfer Agent as to, the foregoing, as instructed by the Fund, or by
the Transfer Agent or other person designated to act on the Fund's behalf. To
the extent required under the 1940 Act and rules thereunder, Trust Company
agrees that such records maintained by it hereunder will be preserved,
maintained and made available in accordance with the provisions of the 1940 Act
and rules thereunder, and copies or, if required, originals will be surrendered
promptly to the Fund, Transfer Agent or other person designated to act on the
Fund's behalf, on and in accordance with its request. Records surrendered
hereunder shall be in machine readable form, except to the extent that Trust
Company has maintained such records only in paper form. This provision shall
survive the termination of this Agreement.
(c) Trust Company shall perform its duties hereunder subject to the
terms and conditions of the Fund's current prospectus; the Fund and the Trust
Company may establish such additional procedures for order processing not
inconsistent with the terms of this Agreement as they reasonably determine to be
necessary or advisable from time to time.
(d) Trust Company acknowledges that it is not authorized by the Fund
to register the transfer of the Fund's Shares or to transfer record ownership of
the Fund's Shares, and that only the Transfer Agent is authorized to perform
such activities.
1.4. Agents of Trust Company. Trust Company may engage one or more
individuals, corporations, partnerships, trusts or other entities (including
affiliates of Trust Company) to act as its subcontractor(s) or agent(s)
("Agents") in providing the services contemplated hereunder. Any such Agent
shall be required to comply with the terms of this Agreement applicable to the
performance of such services it is performing as though it were the Trust
Company. Further, the Trust Company shall be solely responsible for, and assumes
all liability for, the actions and inactions of such Agents in connection with
their performance of such services.
2. Fees and Expenses.
2.1. Fees. For performance by Trust Company of services pursuant to
this Agreement, the Fund agrees to pay Trust Company an annual maintenance fee
for each Participant account as set out in the fee schedule, as amended from
time to time. Such fee schedule and out-of-pocket expenses and advances
identified under Section 2.2 below may be changed from time to time by mutual
agreement between the Fund and Trust Company. The parties hereto acknowledge
that the fees payable hereunder are for administrative and recordkeeping
services only and do not constitute payment in any manner for investment
advisory or distribution services.
3
<PAGE>
2.2. Expenses. In addition to the fee paid under Section 2.1 above,
the Fund agrees to reimburse Trust Company for out-of-pocket expenses or
advances incurred by Trust Company for the items set out in the fee schedule. In
addition, any other expenses incurred by Trust Company, at the request or with
the consent of the Fund, will be reimbursed by the Fund. The Fund agrees to pay
all fees and reimbursable expenses promptly. Postage and the cost of materials
for mailing of administrative reports, Participant statements and other mailings
to all Employer accounts or Participants shall be advanced to Trust Company by
the Fund at least two (2) days prior to the mailing date of such materials or
paid within two (2) days of the receipt by the Fund of a bill therefor.
3. Representations and Warranties of Trust Company.
Trust Company represents and warrants to the Fund that:
(i) It is a banking corporation duly organized and existing and in
good standing under the laws of The State of New Hampshire.
(ii) It has the legal power and authority to carry on its business in
any jurisdiction where it does business.
(iii) It is empowered under applicable laws and by its charter and
By-Laws to enter into and perform this Agreement.
(iv) All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement.
(v) It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
4. Representations and Warranties of the Fund.
The Fund represents and warrants to Trust Company that:
(i) It is a business trust duly organized and existing and in good
standing under the laws of The Commonwealth of Massachusetts.
(ii) It is empowered under applicable laws and by its Declaration of
Trust and By-Laws to enter into and perform this Agreement.
(iii) All proceedings required by said Declaration of Trust and
By-Laws have been taken to authorize it to enter into and perform this
Agreement.
(iv) It is an investment company registered under the 1940 Act.
(v) It makes available its Shares in connection with certain Plans.
(vi) A majority of the Trustees of the Fund who are not interested
persons have made findings to the effect that:
4
<PAGE>
(a) the Agreement is in the best interest of the Fund and its
shareholders;
(b) the services to be performed pursuant to the Agreement are
services required for the operation of the Fund;
(c) Trust Company can provide services the nature and quality of which
are at least equal to those provided by others offering the same or similar
services; and
(d) the fees charged by Trust Company for such services are fair and
reasonable in the light of the usual and customary charges made by others for
services of the same nature and quality.
(vii) A registration statement under the Securities Act of 1933, as amended
(the "33 Act"), has been filed and has become effective, and appropriate state
securities law filings have been made with respect to all Shares of the Fund
being offered for sale. The Fund shall notify Trust Company (i) if such
registration statement or any state securities registration or qualification has
been terminated or a stop order has been entered with respect to the Shares or
(ii) if such registration statement shall have been amended to cover Shares of
any additional Series (as hereinafter defined in Section 8.1).
5. Indemnification.
5.1. By Fund. Trust Company shall not be responsible for, and the Fund
shall indemnify and hold Trust Company harmless from and against, any and all
losses, damages, costs, charges, counsel fees, payments, expenses and
liabilities arising out of or attributable to:
(a) All actions of Trust Company or its agents required to be taken
pursuant to this Agreement, provided that such actions are taken in good faith
and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack of good faith, negligence or
willful misconduct or which arise out of the breach of any representation or
warranty of the Fund hereunder.
(c) The reliance on or use by Trust Company or its agents of
information, records and documents which (i) are received by Trust Company or
its agents and furnished to it by or on behalf of the Fund, and (ii) have been
prepared and/or maintained by the Fund or any other person or firm (except Trust
Company) on behalf of the Fund.
(d) The reliance on or the carrying out by Trust Company or its agents
of any written instructions or requests of the Fund or any person acting on
behalf of the Fund.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations, or the securities laws or
regulations of any state that such Shares be registered in such state, or in
violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such Shares in such
state.
5.2. By Trust Company. Trust Company shall indemnify and hold the Fund
harmless from and against any and all losses, damages, costs, charges, counsel
fees, payments, expenses and liabilities arising out of or attributable to Trust
Company's refusal or failure to comply with the terms of this Agreement, or
which arise out of Trust Company's lack of good faith, negligence or willful
misconduct or which arise out of the breach of any representation or warranty of
Trust Company hereunder.
5
<PAGE>
5.3. Reliance. At any time Trust Company may apply to any officer of the
Fund for instructions, and may consult with legal counsel (which may also be
legal counsel for the Fund) with respect to any matter arising in connection
with the services to be performed by Trust Company under this Agreement, and
Trust Company shall not be liable and shall be indemnified by the Fund for any
action taken or omitted by it in reliance upon such instructions or upon the
opinion of such counsel. Trust Company and its agents shall be protected and
indemnified in acting upon any paper or document furnished by or on behalf of
the Fund, reasonably believed to be genuine and to have been signed by the
proper person or persons, or upon any instruction, information, data, records or
documents provided Trust Company or its agents by telephone, in person,
machine-readable input, telex, CRT data entry or other similar means authorized
by the Fund, and shall not be held to have notice of any change of authority of
any person, until receipt of written notice thereof from the Fund.
5.4. Acts of God. In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God, strikes,
equipment or transmission failure or damage reasonably beyond its control, or
other causes reasonably beyond its control, such party shall not be liable to
the other for any damages resulting from such failure to perform or otherwise
from such causes.
5.5. Procedures. In order that the indemnification provisions contained in
this Article 5 shall apply, upon the assertion of a claim for which either party
may be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
6. Covenants of the Fund and Trust Company.
6.1. Adequate Facilities. Trust Company hereby agrees to establish and
maintain facilities, personnel, and computer and other facilities and procedures
reasonably acceptable to the Fund for safekeeping of records, for the
preparation or use, and for keeping account of, such records, and for order
processing.
6.2. Insurance. Trust Company shall at all times maintain insurance
coverage which is reasonable and customary in light of its duties hereunder and
its other obligations and activities, and shall notify the Fund of any changes
in its insurance coverage unless the Fund is covered by the same policy and such
change is also applicable to the Fund.
6.3. Records. Trust Company shall keep records relating to the services to
be performed hereunder, in the form and manner as it may deem advisable.
6.4. Confidentiality. Trust Company and the Fund agree that all books,
records, information and data pertaining to the business of the other party
which are exchanged or received pursuant to the negotiation or the carrying out
of this Agreement shall remain confidential, and shall not be voluntarily
disclosed to any other person, except as may be required by law.
6.5. Inspection. In case of any requests or demands for the inspection of
the records relating to Plan accounts and Participant accounts with the Fund,
Trust Company will endeavor to notify the Fund and to secure instructions from
6
<PAGE>
an authorized officer of the Fund as to such inspection. Trust Company reserves
the right, however, to exhibit such records to any person whenever it is
reasonably advised by counsel to the Fund that it may be held liable for the
failure to exhibit such records to such person.
6.6. Laws Applicable to Fund. Trust Company acknowledges that the Fund, as
a registered investment company under the 1940 Act, is subject to the provisions
of the 1940 Act and the rules and regulations thereunder, and that the offer and
sale of the Fund's Shares are subject to the provisions of federal and state
laws and regulations applicable to the offer and sale of securities. The Fund
acknowledges that Trust Company is not responsible for the Fund's compliance
with such laws, rules and regulations. If the Fund advises Trust Company that a
procedure of Trust Company related to the discharge of its obligations hereunder
has or may have the effect of causing the Fund to violate any of such laws or
regulations, Trust Company shall use its best efforts to develop an alternative
procedure which does not have such effect.
6.7. Relationship to Plans. Trust Company acknowledges to the Fund that, as
the offeror of COMPASS and TRAK 2000, Trust Company does not act as a plan
administrator or as a fiduciary under the Employee Retirement Income Security
Act of 1974, as amended from time to time, with respect to any Plan. Trust
Company shall not be responsible for determining whether the terms of a
particular Plan or the Shares of the Fund are appropriate for the Plan or
Participant and does not guarantee the performance of the Fund.
7. Termination of Agreement.
This Agreement may be terminated by either party on the last day of the
month next commencing after thirty (30) days written notice to the other party.
Upon termination of this Agreement, the Fund shall pay to Trust Company such
fees and expenses as may be due as of the date of such termination. Should the
Fund exercise its right to terminate this Agreement, Trust Company reserves the
right to charge for any other reasonable expenses associated with such
termination.
8. Additional Series of the Fund.
8.1. Establishment of Series. Shares of the Fund are of a single class;
however, Shares may be divided into additional series ("Series") that may be
established from time to time by action of the Trustees of the Fund. If the
context requires and unless otherwise specifically provided herein, the term
"Fund" as used in this Agreement shall mean in addition each separate Series
currently existing or subsequently created, and the term "Shares" shall mean all
shares of beneficial interest of the Fund, whether of a single class or divided
into separate Series of the Fund currently existing or hereinafter created.
8.2. Notice to Trust Company. In the event that the Fund establishes one or
more or additional Series of Shares in addition to the original Series with
respect to which it desires to have Trust Company render services as
recordkeeping agent under the terms hereof, it shall so notify Trust Company in
writing, and upon the effectiveness of a registration statement under the 33 Act
relating to such Series of Shares and unless Trust Company objects in writing to
providing such services, such Series shall be subject to this Agreement.
8.3. Suspension. In the event that the Fund suspends the offering of Shares
of any one or more Series, it shall so notify Trust Company in writing to such
effect.
7
<PAGE>
9. Assignment.
Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the written consent of the other party. This
Agreement shall inure to the benefit of and be binding upon the parties and
their respective permitted successors and assigns.
10. Amendment.
This Agreement may be amended or modified by a written agreement
executed by both parties.
11. Massachusetts Law to Apply.
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
12. Entire Agreement.
This Agreement constitutes the entire agreement between the parties
hereto.
13. Correspondence.
Trust Company will answer correspondence from Administrators relating
to Plan and Plan participant accounts and such other correspondence as may from
time to time be mutually agreed upon and notify the Fund of any correspondence
which may require an answer from the Fund.
14. Further Actions.
Each party agrees to perform such further acts and execute such further
documents as are necessary to effectuate the purposes hereof.
15. Interpretive Provisions.
In connection with the operation of this Agreement, Trust Company and
the Fund may agree from time to time on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement. Any such interpretive or
additional provisions are to be signed by the parties and annexed hereto, but no
such provisions shall contravene any applicable federal or state law or
regulation and no such interpretive or additional provision shall be deemed to
be an amendment of this Agreement.
16. Miscellaneous.
The name Scudder Securities Trust is the designation of the Trustees
for the time being under a Declaration of Trust dated December 21, 1987, as
amended, and all persons dealing with the Fund must look solely to the Fund
property for the enforcement of any claims against the Fund as neither the
Trustees, officers, agents nor shareholders assume any personal liability for
obligations entered into on behalf of the Fund. No Series of the Fund shall be
liable for any claims against any other Series of the Fund.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first above
written.
SCUDDER TRUST COMPANY
By: ____________________________________
Dennis M. Cronin, Jr.
Title: Vice President & Treasurer
SCUDDER SECURITIES TRUST
By: ____________________________________
David S. Lee
Title: Vice President
9
Exhibit 10
Law offices of
DECHERT PRICE & RHOADS
TEN POST OFFICE SQUARE - SOUTH
BOSTON, MA 02109 - 4603
TELEPHONE: (617) 728-7100
FAX: (617) 426-6567
October 18, 1995
Scudder Securities Trust, on behalf
of Scudder Development Fund
Two International Place
Boston, MA 02110
Re: Post-Effective Amendment No. 36 to Registration
Statement on Form N1-A (File No. 2-36238) (the
"Registration Statement")
Gentlemen:
Scudder Securities Trust (the "Fund"), formerly Scudder Development
Fund, is a trust created under a written Declaration of Trust dated October 16,
1985, and executed and delivered in Boston, Massachusetts. The Declaration of
Trust was amended by an Amended and Restated Declaration of Trust dated December
21, 1987 (as further amended, the "Declaration of Trust"). The beneficial
interest thereunder is represented by transferable shares, $.01 per share par
value (the "Shares"). The Trustees have the powers set forth in the Declaration
of Trust, subject to the terms, provisions and conditions therein provided.
We are of the opinion that the legal requirements have been complied
with in the creation of the Fund and that said Declaration of Trust is legal and
valid.
Under Article V, Section 5.4 of the Declaration of Trust, the Trustees
are empowered, in their discretion, from time to time, to issue Shares for such
amount and type of consideration, at such time or times and on such terms as the
Trustees may deem best. Under Article V, Section 5.1, it is provided that the
number of Shares of beneficial interest authorized to be issued under the
<PAGE>
Scudder Development Fund
October 18, 1995
Page 2
Declaration of Trust is unlimited. To date, two series of shares have been
created: Scudder Development Fund and Scudder Small Company Value Fund.
By votes adopted on December 6 and 7, 1993 and December 5 and 6, 1994,
the Trustees of the Fund authorized the President, any Vice President, the
Secretary, and the Treasurer, from time to time, to determine the appropriate
number of Shares to be registered, to register with the Securities and Exchange
Commission, and to issue and sell to the public, such Shares.
We understand that you are about to register, under the Securities Act
of 1933, 1,691,425 Shares of Scudder Development Fund by Post-Effective
Amendment No. 36 to the Registration Statement.
We are of the opinion that all necessary Fund action precedent to the
issue of said 1,691,425 Shares comprising the Shares covered by Post-Effective
Amendment No. 36 to the Registration Statement has been duly taken, and that all
such Shares may be legally and validly issued for cash, and when sold will be
fully paid and non-assessable by the Fund upon receipt by the Fund or its agent
of consideration for such Shares in accordance with the terms in the
Registration Statement, subject to compliance with the Securities Act of 1933,
as amended, the Investment Company Act of 1940, as amended, and applicable state
laws regulating the sale of securities.
We consent to your filing this opinion with the Securities and Exchange
Commission as an Exhibit to Post-Effective Amendment No. 36 to the Registration
Statement.
Very truly yours,
/s/Dechert Price & Rhoads
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Scudder Securities Trust:
We consent to the incorporation by reference in Post-Effective
Amendment No. 36 to the Registration Statement of Scudder Development Fund, Inc.
on Form N-1A, of our report dated August 10, 1995 on our audit of the financial
statements and financial highlights of Scudder Development Fund, which report is
included in the Annual Report to Shareholders for the year ended June 30, 1995,
which is incorporated by reference in the Registration Statement.
We consent to the reference to our Firm under the caption, "Experts."
/s/COOPERS & LYBRAND L.L.P.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
October 16, 1995
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Scudder
Development Fund Annual Report for the fiscal year ended June 30, 1995 and is
qualified in its entirety by reference to such
financial statements.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> SCUDDER DEVELOPMENT FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 450,783,769
<INVESTMENTS-AT-VALUE> 725,543,891
<RECEIVABLES> 12,676,641
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 738,220,532
<PAYABLE-FOR-SECURITIES> 9,691,576
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,216,833
<TOTAL-LIABILITIES> 10,908,409
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 406,297,886
<SHARES-COMMON-STOCK> 19,474,819
<SHARES-COMMON-PRIOR> 19,787,452
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 46,245,128
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 274,769,109
<NET-ASSETS> 727,312,123
<DIVIDEND-INCOME> 1,525,525
<INTEREST-INCOME> 363,559
<OTHER-INCOME> 0
<EXPENSES-NET> 8,046,248
<NET-INVESTMENT-INCOME> (6,157,164)
<REALIZED-GAINS-CURRENT> 58,067,466
<APPREC-INCREASE-CURRENT> 180,163,568
<NET-CHANGE-FROM-OPS> 232,073,870
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (41,498,116)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,524,177
<NUMBER-OF-SHARES-REDEEMED> (10,208,073)
<SHARES-REINVESTED> 1,371,263
<NET-CHANGE-IN-ASSETS> (312,633)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 47,509,254
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,050,470
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,046,248
<AVERAGE-NET-ASSETS> 610,271,307
<PER-SHARE-NAV-BEGIN> 27.58
<PER-SHARE-NII> (.31)
<PER-SHARE-GAIN-APPREC> 12.20
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (2.12)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 37.35
<EXPENSE-RATIO> 1.32
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
