SCUDDER SECURITIES TRUST, 485BPOS, 1997-12-30

SCUDDER SECURITIES TRUST
485BPOS, 1997-12-30

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Filed electronically with the Securities and Exchange Commission
on December 30, 1997

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. 54

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 38

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 January 1, 1998 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.
--------

<PAGE>

SCUDDER DEVELOPMENT FUND
CROSS-REFERENCE SHEET

Items Required By Form N-1A

PART A
- ------
Item No. Item Caption Prospectus Caption
- -------- ------------ ------------------
<TABLE>
<S> <C> <C>
<CAPTION>

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>

SCUDDER DEVELOPMENT FUND
(continued)

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 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

5A. Management's Discussion of NOT APPLICABLE
Fund Performance

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>

SCUDDER SMALL COMPANY VALUE FUND
(continued)

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

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 4
<PAGE>

SCUDDER MICRO CAP 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 OBJECTIVE AND POLICIES
Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
FUND ORGANIZATION

5. Management of the Fund 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

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 5
<PAGE>

SCUDDER MICRO CAP FUND
(continued)

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

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 6
<PAGE>

SCUDDER 21ST CENTURY GROWTH 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 OBJECTIVE AND POLICIES
Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
FUND ORGANIZATION

5. Management of the Fund 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

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 7
<PAGE>

SCUDDER 21ST CENTURY GROWTH FUND
(continued)

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

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 8

<PAGE>

SCUDDER FINANCIAL SERVICES 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 OBJECTIVE AND POLICIES
Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
FUND ORGANIZATION

5. Management of the Fund 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

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 9
<PAGE>

SCUDDER FINANCIAL SERVICES FUND
(continued)

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

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 10

<PAGE>

SCUDDER HEALTH CARE 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 OBJECTIVE AND POLICIES
Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
FUND ORGANIZATION

5. Management of the Fund 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

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 11
<PAGE>

SCUDDER HEALTH CARE FUND
(continued)

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

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 12

<PAGE>

SCUDDER TECHNOLOGY 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 OBJECTIVE AND POLICIES
Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
FUND ORGANIZATION

5. Management of the Fund 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

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 13
<PAGE>

SCUDDER TECHNOLOGY FUND
(continued)

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

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 14
<PAGE>

[Image] Scudder Small Company Value Fund Profile [Image]
- ---------------------------------------------------------------------------

The fund profile, a supplement to the full prospectus, is designed as
an easy-to-read summary of fund risks, fees, and objectives. You can
click on any question to link to the Fund's prospectus and get more
information on that topic. Or, if you wish, you can proceed directly
to the Fund's prospectus. Once you have read the prospectus and
considered your investment goals, you can proceed to a Scudder Funds
application.
----------------------------------------------------------------------

Fund Profile
October 1, 1997

----------------------------------------------------------------------

1. What Is The Fund's Objective?

Scudder Small Company Value Fund seeks to provide long-term growth of
capital by seeking out undervalued stocks of small U.S. companies.

2. What Does The Fund Invest In?

The Fund normally invests primarily (at least 90% of its assets) in
the common stock of small U.S. companies. The Fund seeks to identify
small, domestic companies that, in the opinion of the Fund's
investment adviser, Scudder, Stevens & Clark, Inc., are selling at
prices that do not reflect adequately their long-term business
potential. The Fund will invest in securities of companies that are
similar in size to those in the Russell 2000 Index of small stocks and
maintain a median market capitalization (i.e., current stock price
times shares outstanding) below $500 million.

The Fund is actively managed using a disciplined, value-oriented
investment management approach. The adviser uses a proprietary,
computerized model to identify for investment small public U.S.
companies selling at prices that, in the opinion of the adviser, do
not reflect adequately their long-term business potential. Companies
purchased for the Fund typically have attractive valuations relative
to the Russell 2000 Index -- a widely used benchmark of small stock
performance -- based on measures such as price to earnings, price to
book value and price to cash flow ratios; and favorable trends in
earnings growth rates and stock price momentum. It will not be unusual
for the Fund to participate in more than one hundred small companies,
representing a variety of U.S. industries.

3. What Are The Risks Of Investing In The Fund?

An investment in the Fund involves above-average stock market risk.
Investment in undervalued stocks carries the risk that their prices
may not rise to a level reflective of Scudder's valuation. Small
companies may have limited product lines, markets or financial
resources; may lack management depth or experience; and may be more
vulnerable to adverse general market or economic developments than
large companies. The prices of small company securities are often more
volatile than prices associated with large company issues, and can
display abrupt or erratic movements at times, due to limited trading
volumes and less publicly available information. The securities of
small companies are often traded over-the-counter and may not be
traded in 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.

Other risk factors are that the value of your investment may decline
as a result of declines in the overall stock market or in the types of
securities held in the Fund, and that in rising markets the types of
stocks emphasized in the Fund may underperform other sectors of the
stock market. You incur principal risk when you invest because your
shares, when sold, may be worth more or less than what you paid for
them.

4. For Whom Is This Fund Appropriate?

You may wish to consider this Fund if you are seeking capital growth
and:

o plan to hold your investment for the long-term,
o can tolerate fluctuations in share price,
o have or plan to have other investments for the benefit of
diversification, and
o understand the risks of stock market investing.

5. What Are The Fund's Expenses And Fees?

There are two kinds of expenses that a shareholder may incur, directly
or indirectly, by investing in a mutual fund. These types of expenses,
as they relate to Scudder Small Company Value Fund are:

Shareholder transaction expenses --
Expenses charged directly to your account for various transactions.
Please note that there is a $5 service fee if you request redemption
proceeds via wire.

Sales Commissions to Purchase Shares (Sales None
Load)

Commissions to Reinvest Dividends None

Deferred Sales Charge None

Redemption Fees Payable to the Fund 1.00% *

Exchange Fees Payable to the Fund 1.00% *

* Imposed only on redemption or exchange of shares held less than
one year.

Annual Fund operating expenses (after expense maintenance) --
Expenses paid by the Fund before it distributes its net investment
income, expressed as a percentage of the Fund's average daily net
assets. Figures below are for the fiscal year ended August 31, 1996,
during which Scudder maintained the total annualized expenses of the
Fund at not more than 1.50% of average daily net assets. Had Scudder
not done so, total operating expenses would have been: 2.61%,
including 0.75% for management fees. Scudder will continue this
expense maintenance until December 31, 1997.

Investment management fee (after waiver) 0%

12b-1 fees None

Other expenses 1.50%
------

Total Fund operating expenses 1.50%
====

Example:
Assuming a 5% annual return and redemption at the end of each
period, the total expenses relating to a $1,000 investment would be:

1 Year 3 Years 5 Years 10 Years

$15 $47 $82 $179

This example assumes reinvestment of all dividends and distributions
and that the total Fund operating expenses listed above 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.

6. How Has The Fund Performed Historically?

This table shows how the Fund has performed since it commenced
operations on October 6, 1995, assuming reinvestment of all
distributions. Performance is historical and is no guarantee of future
results. Total return and principal value will fluctuate.

THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE.

BAR CHART TITLE: Total return for year ended December 31:

BAR CHART DATA: 1996 23.84%

The Fund's Average Annual Total Return
for the period ended September 30, 1997

One Year 52.08%
Life of Fund 33.69%

If the adviser had not maintained the Fund's expenses, average annual
total return would have been lower.

7. Who Manages The Fund?

The Fund's investment adviser is Scudder, Stevens & Clark, Inc., a
leading provider of U.S. and international investment management for
clients throughout the world. The Fund is managed by a team of Scudder
investment professionals, who each play an important role in the
Fund's management process.

Philip S. Fortuna, Lead Portfolio Manager, joined Scudder in 1986 as
manager of institutional equity accounts. He became director of
quantitative research in 1987 and served as director of investment
operations from 1993 to 1994. James M. Eysenbach, Portfolio Manager,
joined Scudder in 1991 as a senior quantitative analyst and is
currently director of quantitative research for Scudder. Mr. Eysenbach
has more than ten years investment research and management experience.

8. How Can I Invest?

To make it easy for you to open an account, you may invest by mail,
phone, fax, or in person. The minimum initial investment is $2,500,
except that shareholders may open an account with at least $1,000 if
an automatic investment plan of $100/month is established. Scudder
retirement plans and certain other accounts have similar or lower
minimum share balance requirements. A shareholder who maintains a
nonfiduciary account balance of less than $2,500 without establishing
an automatic investment plan, will be assessed an annual fee of
$10.00, payable to the Fund. Retirement accounts and certain other
accounts will not be assessed the $10.00 charge. You may also exchange
Fund shares within the Scudder Family of Funds.

9. How Can I Redeem Shares?

You may redeem shares at the current share price on any business day
by telephone, fax, or mail. There may be a 1% fee retained by the Fund
which is imposed only on redemptions or exchanges of shares held less
than one year.

10. When Are Distributions Made?

The Fund typically makes dividends and capital gains distributions, if
any, in November or December. You may elect to receive distributions
in cash or have them reinvested in additional shares of the Fund.

Generally, dividends from net investment income are taxable to
shareholders as ordinary income. Long-term capital gains
distributions, if any, are taxable as 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.

What Services Does Scudder Provide?

As a shareholder, you'll enjoy:

o professional service from representatives who can answer your
questions and execute your transactions
o automated toll-free touchtone access to account information,
share prices and yields, and to perform transactions
o Scudder's quarterly shareholder newsletter, Scudder Perspectives
o regular, informative reports about the performance of your Fund

[Image]

----------------------------------------------------------------------
[Image]Scudder wants you to make informed investment decisions. This
Fund Profile contains key information about the Fund. If you would
like more information before you invest, please consult the Fund's
accompanying prospectus. For details about the Fund's holdings or
recent investment strategies, please review the Fund's most recent
annual or semiannual report. The reports are free and may be ordered
by calling 1-800-225-2470.

----------------------------------------------------------------------
Contact Scudder

<PAGE>
[Image] Scudder Small Company Value Fund Profile [Image]
- ---------------------------------------------------------------------------

Fund Profile
July 1, 1997

----------------------------------------------------------------------

1. What Is The Fund's Objective?

Scudder Small Company Value Fund seeks to provide long-term growth of
capital by seeking out undervalued stocks of small U.S. companies.

2. What Does The Fund Invest In?

The Fund normally invests primarily (at least 90% of its assets) in the
common stock of small U.S. companies. The Fund seeks to identify small,
domestic companies that, in the opinion of the Fund's investment adviser,
Scudder, Stevens & Clark, Inc., are selling at prices that do not reflect
adequately their long-term business potential. The Fund will invest in
securities of companies that are similar in size to those in the Russell
2000 Index of small stocks and maintain a median market capitalization
(i.e., current stock price times shares outstanding) below $500 million.

The Fund is actively managed using a disciplined, value-oriented investment
management approach. The adviser uses a proprietary, computerized model to
identify for investment small public U.S. companies selling at prices that,
in the opinion of the adviser, do not reflect adequately their long-term
business potential. Companies purchased for the Fund typically have
attractive valuations relative to the Russell 2000 Index -- a widely used
benchmark of small stock performance -- based on measures such as price to
earnings, price to book value and price to cash flow ratios; and favorable
trends in earnings growth rates and stock price momentum. It will not be
unusual for the Fund to participate in more than one hundred small
companies, representing a variety of U.S. industries.

3. What Are The Risks Of Investing In The Fund?

An investment in the Fund involves above-average stock market risk.
Investment in undervalued stocks carries the risk that their prices may not
rise to a level reflective of Scudder's valuation. Small companies may have
limited product lines, markets or financial resources; may lack management
depth or experience; and may be more vulnerable to adverse general market
or economic developments than large companies. The prices of small company
securities are often more volatile than prices associated with large
company issues, and can display abrupt or erratic movements at times, due
to limited trading volumes and less publicly available information. The
securities of small companies are often traded over-the-counter and may not
be traded in 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.

Other risk factors are that the value of your investment may decline as a
result of declines in the overall stock market or in the types of
securities held in the Fund, and that in rising markets the types of stocks
emphasized in the Fund may underperform other sectors of the stock market.
You incur principal risk when you invest because your shares, when sold,
may be worth more or less than what you paid for them.

4. For Whom Is This Fund Appropriate?

You may wish to consider this Fund if you are seeking capital growth and:

5. What Are The Fund's Expenses And Fees?

There are two kinds of expenses that a shareholder may incur, directly or
indirectly, by investing in a mutual fund. These types of expenses, as they
relate to Scudder Small Company Value Fund are:

Shareholder transaction expenses --
Expenses charged directly to your account for various transactions.

Sales Commissions to Purchase Shares (Sales Load) None

Commissions to Reinvest Dividends None

Deferred Sales Charge None

Redemption Fees Payable to the Fund 1.00%*

Exchange Fees Payable to the Fund 1.00%*

* Imposed only on redemption or exchange of shares held less than one
year.

Annual Fund operating expenses (after expense maintenance) -- Expenses
paid by the Fund before it distributes its net investment income,
expressed as a percentage of the Fund's average daily net assets. Figures
below are for the fiscal year ended August 31, 1996, during which Scudder
maintained the total annualized expenses of the Fund at not more than
1.50% of average daily net assets. Had Scudder not done so, total
operating expenses would have been: 2.61%, including 0.75% for management
fees. Scudder will continue this expense maintenance until December 31,
1997.

Investment management fee (after waiver) 0%

12b-1 fees None

Other expenses 1.50%
-----

Total Fund operating expenses 1.50%
=====

Example:

Assuming a 5% annual return and redemption at the end of each period, the
total expenses relating to a $1,000 investment would be:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------

$15 $47 $ 82 $179

This example assumes reinvestment of all dividends and distributions and
that the total Fund operating expenses listed above 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. Please note that there
is a $5 service fee if you request redemption proceeds via wire.

6. How Has The Fund Performed Historically?

This table shows how the Fund has performed since it commenced operations
on October 6, 1995, assuming reinvestment of all distributions. Performance
is historical and may not be indicative of future results. Total return and
principal value will fluctuate.

THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE.

BAR CHART TITLE: Total return for year ended December 31:

BAR CHART DATA: 1996 23.84%

The Fund's Average Annual Total Return
for the period ended June 30, 1997

One Year 33.66%
Life of Fund 27.67%

If the adviser had not maintained the Fund's expenses, average annual total
return would have been lower.

7. Who Manages The Fund?

The Fund's investment adviser is Scudder, Stevens & Clark, Inc., a leading
provider of U.S. and international investment management for clients
throughout the world. The Fund is managed by a team of Scudder investment
professionals, who each play an important role in the Fund's management
process.

Philip S. Fortuna, Lead Portfolio Manager, joined Scudder in 1986 as
manager of institutional equity accounts. He became director of
quantitative research in 1987 and served as director of investment
operations from 1993 to 1994. James M. Eysenbach, Portfolio Manager, joined
Scudder in 1991 as a senior quantitative analyst and is currently director
of quantitative research for Scudder. Mr. Eysenbach has more than ten years
investment research and management experience.

8. How Can I Invest?

To make it easy for you to open an account, you may invest by mail, phone,
fax, or in person. The minimum initial investment is $2,500, except that
shareholders may open an account with at least $1,000 if an automatic
investment plan of $100/month is established. Scudder retirement plans and
certain other accounts have similar or lower minimum share balance
requirements. A shareholder who maintains an account balance of less than
$2,500 without establishing an automatic investment plan, will be assessed
an annual fee of $10.00, payable to the Fund. Retirement accounts and
certain other accounts will not be assessed the $10.00 charge. You may also
exchange Fund shares within the Scudder Family of Funds.

9. How Can I Redeem Shares?

You may redeem shares at the current share price on any business day by
telephone, fax, or mail. There may be a 1% fee retained by the Fund which
is imposed only on redemptions or exchanges of shares held less than one
year.

10. When Are Distributions Made?

The Fund typically makes dividends and capital gains distributions, if any,
in November or December. You may elect to receive distributions in cash or
have them reinvested in additional shares of the Fund.

Generally, dividends from net investment income are taxable to shareholders
as ordinary income. Long-term capital gains distributions, if any, are
taxable as 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.

11. What Services Does Scudder Provide?

As a shareholder, you'll enjoy:

[Image]

----------------------------------------------------------------------
[Image]Scudder wants you to make informed investment decisions. This Fund
Profile contains key information about the Fund. If you would like more
information before you invest, please consult the Fund's accompanying
prospectus. For details about the Fund's holdings or recent investment
strategies, please review the Fund's most recent annual or semiannual
report. The reports are free and may be ordered by calling 1-800-225-2470.

----------------------------------------------------------------------
Contact Scudder
<PAGE>
[Image] Scudder Small Company Value Fund Profile
- ---------------------------------------------------------------------------

Fund Profile
April 1, 1997

----------------------------------------------------------------------

1. What Is The Fund's Objective?

Scudder Small Company Value Fund seeks to provide long-term growth of
capital by seeking out undervalued stocks of small U.S. companies.

2. What Does The Fund Invest In?

The Fund is actively managed using a disciplined, value-oriented
investment management approach. The adviser uses a proprietary,
computerized model to identify for investment small public U.S.
companies selling at prices that, in the opinion of the adviser, do
not reflect adequately their long-term business potential. Companies
purchased for the Fund typically have attractive valuations relative
to the Russell 2000 Index-a widely used benchmark of small stock
performance-based on measures such as price to earnings, price to book
value and price to cash flow ratios; and favorable trends in earnings
growth rates and stock price momentum. It will not be unusual for the
Fund to participate in more than one hundred small companies,
representing a variety of U.S. industries.

3. What Are The Risks Of Investing In The Fund?

4. For Whom Is This Fund Appropriate?

You may wish to consider this Fund if you are seeking capital growth
and:

5. What Are The Fund's Expenses And Fees?

There are two kinds of expenses that a shareholder may incur, directly
or indirectly, by investing in a mutual fund. These types of expenses,
as they relate to Scudder Small Company Value Fund are:

Shareholder transaction expenses -
Expenses charged directly to your account for various transactions.

Sales Commissions to Purchase None
Shares (Sales Load)

Commissions to Reinvest None
Dividends

Deferred Sales Charge None

Redemption Fees Payable to 1.00% *
the Fund

Exchange Fees Payable to the 1.00% *
Fund

* Imposed only on redemption or exchange of shares held less than one
year.

Annual Fund operating expenses (after expense maintenance) -
Expenses paid by the Fund before it distributes its net investment
income, expressed as a percentage of the Fund's average daily net
assets. Figures below are for the fiscal year ended August 31, 1996,
during which Scudder maintained the total annualized expenses of the
Fund at not more than 1.50% of average daily net assets. Had Scudder
not done so, total operating expenses would have been: 2.61%,
including 0.75% for management fees. Scudder will continue this
expense maintenance until December 31, 1997.

Investment management fee (after waiver) 0%

12b-1 fees None

Other expenses 1.50%
-----

Total Fund operating expenses 1.50%
=====

Example:
Assuming a 5% annual return and redemption at the end of each
period, the total expenses relating to a $1,000 investment would be:

1 Year 3 Years 5 Years 10 Years

$15 $47 $82 $179

6. How Has The Fund Performed Historically?

This table shows how the Fund has performed since it commenced
operations on October 6, 1995, assuming reinvestment of all
distributions. Performance is historical and may not be indicative of
future results. Total return and principal value will fluctuate.

THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE.

BAR CHART TITLE: Total returns for year ended December 31:

BAR CHART DATA: 1996 23.84%

The Fund's Average Annual Total Return
for the period ended March 31, 1997

One Year 18.92%
Life of Fund 19.30%

If the adviser had not maintained the Fund's expenses, average annual
total return would have been lower.

7. Who Manages The Fund?

8. How Can I Invest?

To make it easy for you to open an account, you may invest by mail,
phone, fax, or in person. The minimum initial investment is $2,500
($1,000 for IRAs), except that shareholders may open a regular account
with a minimum of $1,000 if an automatic investment plan of $100/month
is established. A shareholder with a non-fiduciary account who
maintains an account balance of less than $2,500 without establishing
an automatic investment plan, may be assessed an annual fee of $10.00,
payable to the Fund. You may also exchange Fund shares within the
Scudder Family of Funds.

9. How Can I Redeem Shares?

10. When Are Distributions Made?

11. What Services Does Scudder Provide?

As a shareholder, you'll enjoy:

----------------------------------------------------------------------
Contact Scudder
<PAGE>

[Image] Scudder Small Company Value Fund Profile
- ---------------------------------------------------------------------------

Fund Profile
January 1, 1997

----------------------------------------------------------------------

1. What Is The Fund's Objective?

Scudder Small Company Value Fund seeks to provide long-term growth of
capital by seeking out undervalued stocks of small U.S. companies.

2. What Does The Fund Invest In?

3. What Are The Risks Of Investing In The Fund?

4. For Whom Is This Fund Appropriate?

You may wish to consider this Fund if you are seeking capital growth
and:

5. What Are The Fund's Expenses And Fees?

There are two kinds of expenses that a shareholder may incur, directly
or indirectly, by investing in a mutual fund. These types of expenses,
as they relate to Scudder Small Company Value Fund are:

Shareholder transaction expenses --
Expenses charged directly to your account for various transactions.

Sales Commissions to Purchase None
Shares (Sales Load)

Commissions to Reinvest None
Dividends

Deferred Sales Charge None

Redemption Fees Payable to 1.00% *
the Fund

Exchange Fees Payable to the 1.00% *
Fund

* Imposed only on redemption or exchange of shares held less than one
year.

Investment management fee (after waiver) 0%

12b-1 fees None

Other expenses 1.50%
-----

Total Fund operating expenses 1.50%
=====

Example:
Assuming a 5% annual return and redemption at the end of each
period, the total expenses relating to a $1,000 investment would be:

1 Year 3 Years 5 Years 10 Years

$15 $47 $ 82 $179

6. How Has The Fund Performed Historically?

This table shows how the Fund has performed since it commenced
operations on October 6, 1995, assuming reinvestment of all
distributions. Performance is historical and may not be indicative of
future results. Total return and principal value will fluctuate.

THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE.

BAR CHART TITLE: Total returns for year ended December 31:

BAR CHART DATA: 1996 23.84%

The Fund's Average Annual Total Return
for the period ended December 31, 1996

One Year 23.84%
Life of Fund 23.24%

If the adviser had not maintained the Fund's expenses, average annual
total return would have been lower.

7. Who Manages The Fund?

8. How Can I Invest?

9. How Can I Redeem Shares?

10. When Are Distributions Made?

11. What Services Does Scudder Provide?

As a shareholder, you'll enjoy:

----------------------------------------------------------------------
Contact Scudder
<PAGE>

[Image] Scudder Micro Cap Fund Profile [Image]
- ---------------------------------------------------------------------------

Fund Profile
November 1, 1997

----------------------------------------------------------------------

1. What Is The Fund's Objective?

Scudder Micro Cap Fund seeks long-term growth of capital by investing
primarily in a diversified portfolio of U.S. micro-capitalization
common stocks.

2. What Does The Fund Invest In?

The Fund will normally invest at least 80% of its assets in common
stocks issued by U.S. micro-cap companies. The Fund will typically
invest in companies that, at the time of purchase, are smaller than
the smallest stocks in the Russell 2000 Index at its annual
reconstitution. The median market capitalization (i.e., current stock
price times shares outstanding) of the portfolio is not expected to
exceed $125 million. The Fund's investment adviser, Scudder, Stevens &
Clark, Inc. believes these domestic emerging growth companies offer
the potential for substantial long-term appreciation.

The adviser selects investments from among more than 4,000 publicly
traded U.S. micro-cap stocks based on a proprietary, quantitative
investment strategy. The adviser looks for companies selling at a
discount to estimated fair value. The adviser expects to invest in
hundreds of such companies, representing a broad cross-section of U.S.
industries.

The Fund may purchase other types of exchange listed or
over-the-counter securities, including preferred stocks, convertible
or non-convertible securities, rights and warrants.

Due to investment considerations, it is presently intended that the
Fund will close to new individual investors when it reaches $100
million in total assets. If the Fund does so close, the Trustees may
determine to reopen it at some future point.

3. What Are The Risks Of Investing In The Fund?

Due to the inherent business characteristics and risks of small
companies, along with the relative limited trading market for
micro-cap stocks, the Fund's share price can experience periods of
significant volatility. Also, because micro-cap companies normally
have fewer shares outstanding and these shares trade less frequently
than those of large companies, it may be more difficult for the Fund
to buy and sell significant amounts of such shares without an
unfavorable impact on prevailing prices. Micro-cap companies entail
higher risk due to their smaller size; relative age; limited product
lines; distribution channels; financial resources; possible lack of
managerial depth and experience; and dependence on key personnel.
Further, there is typically less publicly available information for
smaller companies, their securities are often traded over-the-counter
and thus the prices of these securities are often more volatile than
those of larger companies. Microcap companies are also more vulnerable
to adverse market or economic conditions than larger companies.

Movements of the stock market will affect the Fund's share price,
which is likely to vary from day-to-day. The value of your investment
may decline as a result of declines in the overall stock market or in
the types of securities held in the Fund's portfolio. You incur
principal risk because your shares, when sold, may be worth more or
less than what you paid for them.

4. For Whom Is This Fund Appropriate?

You may wish to consider this Fund if you are seeking long-term growth
of capital and:

o plan to hold your investment for the longer term (at least 5
years or more),
o can tolerate share price volatility with little or no current
income,
o have or plan to have other investments for the benefit of
diversification, and
o understand the risks of investing in micro-cap companies.

5. What Are The Fund's Expenses And Fees?

There are two kinds of expenses that a shareholder may incur, directly
or indirectly, by investing in a mutual fund. These types of expenses,
as they relate to Scudder Micro Cap Fund are:

Shareholder transaction expenses --
Expenses charged directly to your account for various transactions.
Please note that there is a $5 service fee if you request redemption
proceeds via wire.

Sales Commission None

Commissions to Reinvest Dividends None

Redemption Fee Payable to the Fund 1.00%*

Exchange Fee Payable to the Fund 1.00%*

_________________________

*Imposed on redemptions or exchanges of shares held less than one
year.

Annual Fund operating expenses (after expense maintenance) --
Estimated expenses paid by the Fund before it distributes its net
investment income, expressed as a percentage of the Fund's average
daily net assets. Figures below have been estimated for the initial
fiscal year during which Scudder has agreed to maintain the total
annualized expenses of the Fund at not more than 1.75% of average
daily net assets. Had Scudder not done so, it is estimated that
total operating expenses would have amounted to 1.86%, including
0.75% for management fees. Scudder will continue this expense
maintenance until December 31, 1997.

Investment management fee (after waiver) 0.64%

12b-1 fees None

Other expenses 1.11%
------

Total Fund operating expenses (after waiver) 1.75%
====

Example:
Assuming a 5% annual return and redemption at the end of each
period, the total expenses relating to a $1,000 investment would be:

1 Year 3 Years

$18 $55

6. How Has The Fund Performed Historically?

The Fund commenced operations on August 12, 1996. Performance is
historical and is no guarantee of future results. Total return and
principal value will fluctuate.

One Year Life of Fund

The Fund's Total Return for the 46.86% 44.45%
period ended September 30, 1997

If the adviser had not maintained the Fund's expenses, total return
would have been lower.

7. Who Manages The Fund?

James M. Eysenbach, Lead Portfolio Manager, joined Scudder in 1991 as
a senior quantitative analyst and is currently director of
quantitative research for Scudder. Mr. Eysenbach has more than nine
years investment research and management experience. Philip S.
Fortuna, Portfolio Manager, joined Scudder in 1986 as manager of
institutional equity accounts. He became director of quantitative
research in 1987 and served as director of investment operations from
1993 to 1994.

8. How Can I Invest?

9. How Can I Redeem Shares?

10. When Are Distributions Made?

The Fund typically makes distributions in November or December. You
may elect to receive distributions in cash or have them reinvested in
additional shares of the Fund.

11. What Services Does Scudder Provide?

As a shareholder, you'll enjoy:

[Image]

----------------------------------------------------------------------
Contact Scudder
<PAGE>

[Image] Scudder Micro Cap Fund Profile [Image]
- ---------------------------------------------------------------------------

Fund Profile
April 1, 1997

----------------------------------------------------------------------

1. What Is The Fund's Objective?

Scudder Micro Cap Fund seeks long-term growth of capital by investing
primarily in a diversified portfolio of U.S. micro-capitalization
common stocks.

2. What Does The Fund Invest In?

The Fund may purchase other types of exchange listed or
over-the-counter securities, including preferred stocks, convertible
or non-convertible securities, rights and warrants.

3. What Are The Risks Of Investing In The Fund?

4. For Whom Is This Fund Appropriate?

You may wish to consider this Fund if you are seeking long-term growth
of capital and:

5. What Are The Fund's Expenses And Fees?

There are two kinds of expenses that a shareholder may incur, directly
or indirectly, by investing in a mutual fund. These types of expenses,
as they relate to Scudder Micro Cap Fund are:

Shareholder transaction expenses --
Expenses charged directly to your account for
various transactions.

Sales Commission None

Commissions to Reinvest Dividends None

Redemption Fee Payable to the Fund 1.00%*

Exchange Fee Payable to the Fund 1.00%*

_________________________

*Imposed on redemptions or exchanges of shares held less than one
year.

Investment management fee (after waiver) 0.64%

12b-1 fees None

Other expenses 1.11%
-----

Total Fund operating expenses (after waiver) 1.75%
=====

Example:
Assuming a 5% annual return and redemption at the end of each
period, the total expenses relating to a $1,000 investment would be:

1 Year 3 Years

$18 $55

6. How Has The Fund Performed Historically?

The Fund commenced operations on August 12, 1996. Performance is
historical and may not be indicative of future results. Total return
and principal value will fluctuate.

Life of Fund

The Fund's Total Return for the period 12.38%*
ended March 31, 1997

* Not Annualized

If the adviser had not maintained the Fund's expenses, total return
would have been lower.

7. Who Manages The Fund?

8. How Can I Invest?

To make it easy for you to open an account, you may invest by mail,
phone, fax, or in person. The minimum initial investment is $2,500
($1,000 for IRAs). A shareholder may open an account with at least
$1,000, if an automatic investment plan (AIP) of $100/month is
established. Shareholders who maintain a non-fiduciary account balance
of less than $2,500 in the Fund, without establishing an AIP, will be
assessed an annual $10.00 charge, payable to the Fund. You may also
exchange Fund shares within the Scudder Family of Funds.

9. How Can I Redeem Shares?

10. When Are Distributions Made?

The Fund typically makes distributions in November or December. You
may elect to receive distributions in cash or have them reinvested in
additional shares of the Fund.

11. What Services Does Scudder Provide?

As a shareholder, you'll enjoy:

[Image]

----------------------------------------------------------------------
Contact Scudder
<PAGE>

[Image] Scudder Micro Cap Fund Profile
- ---------------------------------------------------------------------------

Fund Profile
January 1, 1997

----------------------------------------------------------------------

1. What Is The Fund's Objective?

Scudder Micro Cap Fund seeks long-term growth of capital by investing
primarily in a diversified portfolio of U.S. micro-capitalization
common stocks.

2. What Does The Fund Invest In?

The Fund may purchase other types of exchange listed or
over-the-counter securities, including preferred stocks, convertible
or non-convertible securities, rights and warrants.

3. What Are The Risks Of Investing In The Fund?

Due to the inherent business characteristics and risks of small
companies, along with the relative limited trading market for
micro-cap stocks, the Fund's share price can experience periods of
significant volatility. Also, because micro-cap companies normally
have fewer shares outstanding and these shares trade less frequently
than those of large companies, it may be more difficult for the Fund
to buy and sell significant amounts of such shares without an
unfavorable impact on prevailing prices. Micro-cap companies entail
higher risk due to their smaller size; relative age; limited product
lines; distribution channels; financial resources; possible lack of
managerial depth and experience; and dependence on key personnel.
Further, there is typically less publicly available information for
smaller companies, their securities are often traded over-the-counter
and thus the prices of these securities are often more volatile than
those of larger companies. Micro-cap companies are also more
vulnerable to adverse market or economic conditions than larger
companies.

4. For Whom Is This Fund Appropriate?

You may wish to consider this Fund if you are seeking long-term growth
of capital and:

5. What Are The Fund's Expenses And Fees?

There are two kinds of expenses that a shareholder may incur, directly
or indirectly, by investing in a mutual fund. These types of expenses,
as they relate to Scudder Micro Cap Fund are:

Shareholder transaction expenses --
Expenses charged directly to your account for various transactions.

Sales Commission None

Commissions to Reinvest None
Dividends

Redemption Fee Payable to 1.00%*
the Fund

Exchange Fee Payable to 1.00%*
the Fund

_________________________

*Imposed on redemptions or exchanges of shares held less than one
year.

Investment management fee (after waiver) 0.64%

12b-1 fees None

Other expenses 1.11%
------

Total Fund operating expenses (after waiver) 1.75%
====

Example:
Assuming a 5% annual return and redemption at the end of each
period, the total expenses relating to a $1,000 investment would be:

1 Year 3 Years

$18 $ 55

6. How Has The Fund Performed Historically?

The Fund commenced operations on August 12, 1996. Performance is
historical and may not be indicative of future results. Total return
and principal value will fluctuate.

Life of Fund

The Fund's Total Return for the period ended December 8.38%*
31, 1996

* Not Annualized

If the adviser had not maintained the Fund's expenses, total return
would have been lower.

7. Who Manages The Fund?

8. How Can I Invest?

9. How Can I Redeem Shares?

10. When Are Distributions Made?

The Fund typically makes distributions in November or December. You
may elect to receive distributions in cash or have them reinvested in
additional shares of the Fund.

11. What Services Does Scudder Provide?

As a shareholder, you'll enjoy:

----------------------------------------------------------------------
Contact Scudder
<PAGE>

[Image] Scudder 21st Century Growth Fund Profile [Image]
- ---------------------------------------------------------------------------

Fund Profile
November 1, 1997

----------------------------------------------------------------------

1. What Is The Fund's Objective?

Scudder 21st Century Growth Fund seeks long-term growth of capital by
investing primarily in the securities of emerging growth companies
poised to be leaders in the 21st century.

2. What Does The Fund Invest In?

The Fund generally invests in equity securities, including common
stocks (which normally comprise at least 80% of assets) and
convertible securities, of relatively small or little-known companies,
commonly referred to as emerging growth companies, with market
capitalization typically below $750 million. The Fund's investment
manager, Scudder, Stevens & Clark, Inc. believes these companies are
well-positioned for above-average earnings growth and/or greater
market recognition and offer significant opportunity for capital
appreciation. Emerging growth companies are those with the ability, in
the Adviser's opinion, to expand earnings per share by at least 15%
per annum over the next three to five years at a minimum. The adviser
allocates the Fund's investments among many companies and different
industries in the U.S. and abroad.

3. What Are The Risks Of Investing In The Fund?

Emerging growth companies entail higher risk due to their smaller
size; relative age; limited product lines; distribution channels;
financial resources; possible lack of managerial depth and experience;
and dependence on key personnel. Further, there is typically less
publicly available information for smaller companies. Also, because
small companies normally have fewer shares outstanding and these
shares trade less frequently than those of large companies, it may be
more difficult for the Fund to buy and sell significant amounts of
such shares without an unfavorable impact on prevailing market prices.
Their securities are often traded over-the-counter and thus the prices
of these securities are often more volatile than those of larger
companies. Small companies may also be more vulnerable to adverse
general market or economic developments than large companies.

In addition, the Fund is managed as an aggressive stock fund.
Movements of the stock market will affect the Fund's share price,
which is likely to vary from day to day. The value of your investment
may decline as a result of declines in the overall stock market or in
the types of securities held in the Fund's portfolio. You incur
principal risk because your shares, when sold, may be worth more or
less than what you paid for them.

4. For Whom Is This Fund Appropriate?

You may wish to consider this Fund if you are seeking long-term growth
of capital and:

5. What Are The Fund's Expenses And Fees?

There are two kinds of expenses that a shareholder may incur, directly
or indirectly, by investing in a mutual fund. These types of expenses,
as they relate to Scudder 21st Century Growth Fund are:

Shareholder transaction expenses --
Expenses charged directly to your account for various transactions.
Please note that there is a $5 service fee if you request redemption
proceeds via wire.

Sales Commission None

Commissions to Reinvest Dividends None

Redemption Fee Payable to the Fund 1.00% *

Exchange Fee Payable to the Fund 1.00% *

Annual Fund operating expenses (after expense maintenance) --
Estimated expenses paid by the Fund before it distributes its net
investment income, expressed as a percentage of the Fund's average
daily net assets. Figures below have been estimated for the initial
fiscal year during which Scudder has agreed to maintain the total
annualized expenses of the Fund at not more than 1.75% of average
daily net assets. Had Scudder not done so, it is estimated that
total operating expenses would have amounted to 2.72%, including
1.00% for management fees. Scudder will continue this expense
maintenance until December 31, 1997.

Investment management fee (after waiver) 0.03%

12b-1 fees None

Other expenses 1.72%

Total Fund operating expenses (after waiver) 1.75%

* Imposed only on redemptions or exchanges of shares held less than
one year.

Example:
Assuming a 5% annual return and redemption at the end of each
period, the total expenses relating to a $1,000 investment would be:

1 Year 3 Years

$18 $55

6. How Has The Fund Performed Historically?

The Fund commenced operations on September 9, 1996. Performance is
historical and is no guarantee of future results. Total return and
principal value will fluctuate.

One Year Life of Fund

The Fund's Total Return for the 11.27% 15.85%
period ended September 30, 1997

* Not Annualized
If the adviser had not maintained the Fund's expenses, total return
would have been lower.

7. Who Manages The Fund?

Lead Portfolio Manager Peter Chin has responsibility for the Fund's
day-to-day management and investment strategies. Mr. Chin has 23 years
of research and portfolio management experience, primarily in small
company growth stocks. Roy C. McKay, Portfolio Manager, has 29 years
of investment experience, with 20 years specializing in small company
growth stocks.

8. How Can I Invest?

To make it easy for you to open an account, you may invest by mail,
phone, fax, or in person. The minimum initial investment is $2,500,
except that shareholders my open an account with at least $1,000 if an
automatic investment plan of $100/month is established. Scudder
retirement plans and certain other accounts have similar or lower
minimum share balance requirements. A shareholder who maintains a
nonfiduciary account balance of less than $2,500 without establishing
an automatic investment plan, will be assessed an annual fee of
$10.00, payable to the Fund. Retirement accounts and certain other
accounts will not be assessed the $10.00 charge. You may also exchange
Fund shares within the Scudder Family of Funds.

9. How Can I Redeem Shares?

You may redeem shares at the current share price on any business day
by telephone, fax, or mail. There may be a 1% fee retained by the
Fund, which is imposed only on redemptions or exchanges of shares held
less than one year.

10. When Are Distributions Made?

The Fund typically makes distributions in November or December. You
may elect to receive distributions in cash or have them reinvested in
additional shares of the Fund.

11. What Services Does Scudder Provide?

As a shareholder, you'll enjoy:

[Image]

----------------------------------------------------------------------
Contact Scudder
<PAGE>

[Image] Scudder 21st Century Growth Fund Profile [Image]
- ---------------------------------------------------------------------------

Fund Profile
July 1, 1997

----------------------------------------------------------------------

1. What Is The Fund's Objective?

Scudder 21st Century Growth Fund seeks long-term growth of capital by
investing primarily in the securities of emerging growth companies
poised to be leaders in the 21st century.

2. What Does The Fund Invest In?

3. What Are The Risks Of Investing In The Fund?

4. For Whom Is This Fund Appropriate?

You may wish to consider this Fund if you are seeking long-term growth
of capital and:

5. What Are The Fund's Expenses And Fees?

There are two kinds of expenses that a shareholder may incur, directly
or indirectly, by investing in a mutual fund. These types of expenses,
as they relate to Scudder 21st Century Growth Fund are:

Shareholder transaction expenses --
Expenses charged directly to your account for various transactions.

Sales Commission None

Commissions to Reinvest Dividends None

Redemption Fee Payable to the Fund 1.00%*

Exchange Fee 1.00%*

Annual Fund operating expenses (after expense maintenance) --
Estimated expenses paid by the Fund before it distributes its net
investment income, expressed as a percentage of the Fund's average
daily net assets. Figures below have been estimated for the initial
fiscal year during which Scudder has agreed to maintain the total
annualized expenses of the Fund at not more than 1.75% of average
daily net assets. Had Scudder not done so, it is estimated that
total operating expenses would have amounted to 2.72%, including
1.00% for management fees. Scudder will continue this expense
maintenance until August 31, 1997.

Investment management fee (after waiver) 0.03%

12b-1 fees None

Other expenses 1.72%
------

Total Fund operating expenses (after 1.75%
waiver) ====

Example:
Assuming a 5% annual return and redemption at the end of each
period, the total expenses relating to a $1,000 investment would be:

1 Year 3 Years

$18 $55

* Imposed only on redemptions or exchanges of shares held less than
one year.

6. How Has The Fund Performed Historically?

The Fund commenced operations on September 9, 1996. Performance is
historical and may not be indicative of future results. Total return
and principal value will fluctuate.

Life of Fund

The Fund's Total Return for the period 3.25%*
ended June 30, 1997

* Not Annualized

If the adviser had not maintained the Fund's expenses, total return
would have been lower.

7. Who Manages The Fund?

8. How Can I Invest?

To make it easy for you to open an account, you may invest by mail,
phone, fax, or in person. The minimum initial investment is $2,500,
except that shareholders my open an account with at least $1,000 if an
automatic investment plan of $100/month is established. Scudder
retirement plans and certain other accounts have similar or lower
minimum share balance requirements. A shareholder who maintains an
account balance of less than $2,500 without establishing an automatic
investment plan, will be assessed an annual fee of $10.00, payable to
the Fund. Retirement accounts and certain other accounts will not be
assessed the $10.00 charge. You may also exchange Fund shares within
the Scudder Family of Funds.

9. How Can I Redeem Shares?

10. When Are Distributions Made?

The Fund typically makes distributions in November or December. You
may elect to receive distributions in cash or have them reinvested in
additional shares of the Fund.

11. What Services Does Scudder Provide?

As a shareholder, you'll enjoy:

[Image]

----------------------------------------------------------------------
Contact Scudder
<PAGE>

[Image] Scudder 21st Century Growth Fund Profile
- ---------------------------------------------------------------------------

Fund Profile
April 1, 1997

----------------------------------------------------------------------

1. What Is The Fund's Objective?

Scudder 21st Century Growth Fund seeks long-term growth of capital by
investing primarily in the securities of emerging growth companies
poised to be leaders in the 21st century.

2. What Does The Fund Invest In?

3. What Are The Risks Of Investing In The Fund?

4. For Whom Is This Fund Appropriate?

You may wish to consider this Fund if you are seeking long-term growth
of capital and:

5. What Are The Fund's Expenses And Fees?

There are two kinds of expenses that a shareholder may incur, directly
or indirectly, by investing in a mutual fund. These types of expenses,
as they relate to Scudder 21st Century Growth Fund are:

Shareholder transaction expenses --
Expenses charged directly to your account for various transactions.

Sales Commission None

Commissions to Reinvest None
Dividends

Redemption Fee Payable to 1.00%*
the Fund

Exchange Fee Payable to 1.00%*
the Fund

Annual Fund operating expenses (after expense maintenance) -
Estimated expenses paid by the Fund before it distributes its net
investment income, expressed as a percentage of the Fund's average
daily net assets. Figures below have been estimated for the initial
fiscal year during which Scudder has agreed to maintain the total
annualized expenses of the Fund at not more than 1.75% of average
daily net assets. Had Scudder not done so, it is estimated that
total operating expenses would have amounted to 2.72%, including
1.00% for management fees. Scudder will continue this expense
maintenance until August 31, 1997.

Investment management fee 0.03%
(after waiver)

12b-1 fees None

Other expenses 1.72%
------

Total Fund operating 1.75%
expenses (after waiver) ====

* Imposed only on redemptions or exchanges of shares held less than
one year.

Example:
Assuming a 5% annual return and redemption at the end of each
period, the total expenses relating to a $1,000 investment would be:

1 Year 3 Years

$18
$55

6. How Has The Fund Performed Historically?

The Fund commenced operations on September 9, 1996. Performance is
historical and may not be indicative of future results. Total return
and principal value will fluctuate.

Life of Fund

The Fund's Total Return for the period ended March -14.75%*
31, 1997

* Not Annualized

If the adviser had not maintained the Fund's expenses, total return
would have been lower.

7. Who Manages The Fund?

8. How Can I Invest?

To make it easy for you to open an account, you may invest by mail,
phone, fax, or in person. The minimum initial investment is $2,500
($1,000 for IRAs), except that shareholders may open a regular account
with a minimum of $1,000 if an investment program of $100/month is
established. A shareholder with a non-fiduciary account who maintains
an account balance of less than $2,500 without establishing an
investment program, may be assessed an annual fee of $10.00, payable
to the Fund. You may also exchange Fund shares within the Scudder
Family of Funds.

9. How Can I Redeem Shares?

10. When Are Distributions Made?

The Fund typically makes distributions in November or December. You
may elect to receive distributions in cash or have them reinvested in
additional shares of the Fund.

11. What Services Does Scudder Provide?

As a shareholder, you'll enjoy:

----------------------------------------------------------------------
<PAGE>

[Image] Scudder 21st Century Growth Fund Profile
- ---------------------------------------------------------------------------

Fund Profile
January 1, 1997

----------------------------------------------------------------------

1. What Is The Fund's Objective?

Scudder 21st Century Growth Fund seeks long-term growth of capital by
investing primarily in the securities of emerging growth companies
poised to be leaders in the 21st century.

2. What Does The Fund Invest In?

3. What Are The Risks Of Investing In The Fund?

4. For Whom Is This Fund Appropriate?

You may wish to consider this Fund if you are seeking long-term growth
of capital and:

5. What Are The Fund's Expenses And Fees?

There are two kinds of expenses that a shareholder may incur, directly
or indirectly, by investing in a mutual fund. These types of expenses,
as they relate to Scudder 21st Century Growth Fund are:

Shareholder transaction expenses --
Expenses charged directly to your account for various transactions.

Sales Commission None

Commissions to Reinvest None
Dividends

Redemption Fee Payable to 1.00% *
the Fund

Exchange Fee Payable to 1.00% *
the Fund

Annual Fund operating expenses (after expense maintenance) --
Estimated expenses paid by the Fund before it distributes its net
investment income, expressed as a percentage of the Fund's average
daily net assets. Figures below have been estimated for the initial
fiscal year during which Scudder has agreed to maintain the total
annualized expenses of the Fund at not more than 1.75% of average
daily net assets. Had Scudder not done so, it is estimated that
total operating expenses would have amounted to 2.72%, including
1.00% for management fees. Scudder will continue this expense
maintenance until August 31, 1997.

Investment management fee 0.03%
(after waiver)

12b-1 fees None

Other expenses 1.72%
------

Total Fund operating 1.75%
expenses (after waiver) ====

* Imposed only on redemptions or exchanges of shares held less than
one year.

Example:
Assuming a 5% annual return and redemption at the end of each
period, the total expenses relating to a $1,000 investment would be:

1 Year 3 Years

$18 $55

6. How Has The Fund Performed Historically?

The Fund commenced operations on September 9, 1996. Performance is
historical and may not be indicative of future results. Total return
and principal value will fluctuate.

Life of Fund

The Fund's Total Return for the period ended December -1.58%*
31, 1996

* Not Annualized

If the adviser had not maintained the Fund's expenses, total return
would have been lower.

7. Who Manages The Fund?

8. How Can I Invest?

To make it easy for you to open an account, you may invest by mail,
phone, fax, or in person. The minimum initial investment is $2,500
($1,000 for IRAs), except that shareholders may open a regular account
with a minimum of $1,000 if an investment program of $100/month is
established. A shareholder with a non-fiduciary account who maintains
an account balance of less than $2,500 without establishing an
investment program, may be assessed an annual fee of $10.00, payable
to the Fund. You may also exchange Fund shares within the Scudder
Family of Funds.

9. How Can I Redeem Shares?

10. When Are Distributions Made?

The Fund typically makes distributions in November or December. You
may elect to receive distributions in cash or have them reinvested in
additional shares of the Fund.

11. What Services Does Scudder Provide?

As a shareholder, you'll enjoy:

----------------------------------------------------------------------
Contact Scudder

<PAGE>

SCUDDER [SCUDDER LOGO]

Scudder
Small Company
Value Fund

Prospectus
January 1, 1998

A pure no-load(TM) (no sales charges) mutual fund which invests for long-term
growth of capital by seeking out undervalued stocks of small U.S. companies.

This prospectus sets forth concisely the information about Scudder Small Company
Value Fund, a diversified 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 January 1, 1998, 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 and is available along with other related
materials on the SEC's Internet Web site (http://www.sec.gov).

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.

- -----------------------------
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
- -----------------------------

312-2-18
MIS78P
PR780198

[PRINTED WITH SOY INK LOGO] [RECYCLE LOGO] Printed on recycled paper
<PAGE>

- ---------------------------------------
Expense information
- ---------------------------------------

- --------------------------------------------------------------------------------
How to compare a Scudder Family of Funds pure no-load(TM) fund

This information is designed to help you understand the various costs and
expenses of investing in Scudder Small Company Value 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
Deferred sales charge NONE
Redemption fees payable to the Fund 1.00%*
Exchange fees payable to the Fund 1.00%*

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 August 31, 1997.

Investment management fee 0.75%**
12b-1 fees NONE
Other expenses 0.88%
----
Total Fund operating expenses 1.63%**
====

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.

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------

$17 $51 $89 $193

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.

* There is a 1% fee retained by the Fund which is imposed only on redemptions
or exchanges of shares held less than one year. 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--Exchanging and redeeming shares."

** Until December 31, 1997, the Adviser waived a portion of its investment
management fee to the extent necessary so that the total annualized expenses
of the Fund did not exceed 1.50% of average daily net assets. Expenses shown
above are restated to reflect what the Fund would have paid during the
fiscal year ended August 31, 1997 absent such waiver.

- --------------------------------------------------------------------------------

- --
2
<PAGE>

- ---------------------------------------
Financial highlights
- ---------------------------------------

- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
the period (a) 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 August 31, 1997 and may be obtained without charge by
writing or calling Scudder Investor Services, Inc.

<TABLE>
<CAPTION>
For the Period
October 6, 1995
(commencement of
Year Ended operations) to
August 31, August 31,
1997 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
-------------------------------
Net asset value, beginning of period ................................... $13.57 $12.00
-------------------------------
Income from investment operations:
Net investment income .................................................. .01 .07
Net realized and unrealized gain on investment transactions ............ 6.03 1.53
-------------------------------
Total from investment operations ....................................... 6.04 1.60
-------------------------------
Less distributions:
From net investment income ............................................. (.03) (.05)
From net realized gains on investment transactions ..................... (.01) --
-------------------------------
Total distributions .................................................... (.04) (.05)
-------------------------------
Redemption fees ........................................................ .01 .02
-------------------------------
Net asset value, end of period ......................................... $19.58 $13.57
- -----------------------------------------------------------------------------------------------------------
Total Return (%) (b) ................................................... 44.67 13.54(c)**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ................................. 123 41
Ratio of operating expenses, net to average daily net assets (%) ....... 1.50 1.50*
Ratio of operating expenses before expense reductions,
to average daily net assets (%) ...................................... 1.63 2.61*
Ratio of net investment income to average daily net assets (96) ........ .07 .67*
Portfolio turnover rate (%) ............................................ 43.64 33.97*
Average commission rate paid ........................................... $.0332 $.0364
</TABLE>

(a) Based on monthly average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been reduced.
(c) Total return does not reflect the effect to the shareholder of the 1%
redemption fee on shares held less than one year.
* Annualized
** Not annualized

- --------------------------------------------------------------------------------

--
3
<PAGE>

- ---------------------------------------
A message from the President
- ---------------------------------------

[PHOTO]

Edmond D. Villani, President
and CEO, Scudder Kemper
Investments, Inc.

Scudder Kemper Investments, Inc., investment adviser to the Scudder Family of
Funds, is one of the largest and most experienced investment management
organizations worldwide, managing more than $200 billion in assets globally for
mutual fund investors, retirement and pension plans, institutional and corporate
clients, and private family and individual accounts. It is one of the ten
largest mutual fund companies in the U.S.

We offered America's first no-load mutual fund in 1928, and today the Scudder
Family of Funds includes over 45 no-load mutual fund portfolios. We also 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 numerous
other open and closed-end funds that invest in this country and other 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 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 Investor Centers.

The Scudder Family of Funds includes those Funds, or classes of Funds, advised
by Scudder Kemper Investments, Inc., that are offered without commissions to
purchase or redeem 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/ Edmond D. Villani

- ---------------------------------------
Scudder Small Company
Value Fund
- ---------------------------------------

Investment objective

o long-term growth of capital

Investment characteristics

o a diversified, actively managed portfolio of domestic small capitalization
stocks

o a systematic, proprietary investment approach to uncovering potentially
undervalued small U.S. companies

o potential for above-average long-term growth with above-average stock
market risk

- ---------------------------------------
Contents
- ---------------------------------------

Investment objective and policies ......................... 5
Why invest in the Fund? ................................... 6
U.S. investment experience ................................ 6
What are the Fund's special risks? ........................ 7
Additional information about policies
and investments ........................................ 7
Distribution and performance information .................. 10
Fund organization ......................................... 10
Transaction information ................................... 11
Shareholder benefits ...................................... 16
Purchases ................................................. 18
Exchanges and redemptions ................................. 19
Trustees and Officers ..................................... 21
Investment products and services .......................... 22
How to contact Scudder .................................... 23

- --
4
<PAGE>

- ---------------------------------------
Investment objective and policies
- ---------------------------------------

Scudder Small Company Value Fund (the "Fund"), a diversified series of Scudder
Securities Trust, invests for long-term growth of capital by seeking out
undervalued stocks of small U.S. companies. The Fund's investment adviser,
Scudder Kemper Investments, Inc. (the "Adviser"), uses a systematic, proprietary
investment approach to identify small, domestic companies that, in the opinion
of the Adviser, are selling at prices that do not reflect adequately their
long-term business potential. These companies are often out of favor or not
closely followed by investors and, as a result, may offer substantial
appreciation potential over time.

The Fund is expected to provide little, if any, current income and is designed
for the aggressive portion of an investor's portfolio. Although the Fund
typically holds a large number of securities identified through a quantitative,
value-driven investment strategy, it does entail above-average investment risk
in comparison to larger stocks. Shares of the Fund should be purchased with a
long-term horizon in mind. To encourage long-term investment, a 1% redemption
and exchange fee, described more fully below, is payable to the Fund for the
benefit of remaining shareholders on shares held less than one year.

Investments

In pursuit of long-term growth of capital, the Fund invests, under normal
circumstances, at least 90% of its assets in the common stock of small U.S.
companies. The Fund will invest in securities of companies that are similar in
size to those in the Russell 2000(R) Index of small stocks. The Fund will sell
securities of companies that have grown in market capitalization above the
maximum of the Russell 2000 Index, as necessary to keep the Fund focused on
smaller companies.

The Fund takes a diversified approach to investing in small capitalization
issues. It will not be unusual for the Fund to participate in more than one
hundred small companies, representing a variety of U.S. industries.

While the Fund invests predominantly in common stocks, it can purchase other
types of equity securities including preferred stocks (convertible securities),
rights, warrants, and restricted and illiquid securities. Securities may be
listed on national exchanges or, more commonly, traded over-the-counter. The
Fund also may invest up to 20% of its assets in U.S. Treasury, agency and
instrumentality obligations on a temporary basis, may enter into repurchase
agreements and reverse repurchase agreements and may engage in strategic
transactions, using such derivatives contracts as index options and futures, to
increase stock market participation, enhance liquidity and manage transaction
costs. The Fund currently intends to borrow only for temporary or emergency
purposes, such as providing for redemptions or distributions, and not for
investment leverage purposes.

For temporary defensive purposes, the Fund may invest without limit in cash and
cash equivalents when the Adviser deems such a position advisable in light of
economic or market conditions. It is impossible to predict accurately how long
such alternate strategies may be utilized. More information about these
investment techniques is provided under "Additional information about policies
and investments."

Value investment approach

The Fund is actively managed using a disciplined, value-oriented investment
management approach. The Adviser uses a proprietary,

--
5
<PAGE>

computerized model to identify for investment small public U.S. companies
selling at prices that, in the opinion of the Adviser, do not reflect adequately
their long-term business potential. Companies purchased for the Fund typically
have the following characteristics:

o Attractive valuations relative to the Russell 2000 Index--a widely used
benchmark of small stock performance--based on measures such as price to
earnings, price to book value and price to cash flow ratios.

o Favorable trends in earnings growth rates and stock price momentum.

The Fund's holdings are often out of favor or simply overlooked by investors.
Accordingly, their prices can rise either as a result of improved business
fundamentals, particularly when earnings grow faster than general expectations,
or as more investors come to recognize the full extent of a company's underlying
potential.

While the Fund involves above-average equity risk, the Fund's value-oriented,
systematic approach to investing is designed to mitigate volatility of the
Fund's share price relative to the small capitalization sector of the U.S. stock
market. This risk is further managed by purchasing a large number of stocks, and
employing specialized portfolio management techniques, such as portfolio
optimization.

- ---------------------------------------
Why invest in the Fund?
- ---------------------------------------

Scudder Small Company Value Fund combines the long-term growth potential of
small company stocks with the defensive nature of value investing. The Fund
focuses on U.S. small capitalization issues that may be out of favor or not
closely followed by investors, yet which, in the opinion of the Adviser, will
reward investors with substantial returns over time. U.S. small capitalization
stocks have outperformed large capitalization stocks over time, albeit with
greater volatility in returns. Since the Fund involves both above-average
performance opportunity and risk, it may be suitable for those individuals who
are investing for a long-term goal, such as accumulating assets for retirement,
funding a child's college education or building wealth for future generations.

While the Fund may invest in a broad range of industries, it is not, by itself,
a complete investment program. Nonetheless, it can help improve the
diversification of an investment portfolio already holding other types of stock
and fixed-income securities. Historically, the prices of value stocks, and in
particular small company value stocks, have not always moved in tandem with the
prices of either large company stocks or higher-risk small company "growth"
issues. Thus, Fund shares can add balance to a personal investment portfolio.

The Fund offers low-cost, convenient access to a sector of the U.S. stock market
in which investors might otherwise find it difficult to participate. On their
own, individual investors might find it a challenge to analyze data on hundreds
of small companies, receive complete, up-to-date financial information, and buy
and sell securities at favorable prices. The Fund's portfolio management team
assumes the burden of these varied responsibilities for investors.

- ---------------------------------------
U.S. investment experience
- ---------------------------------------

The Adviser is one of America's largest investment managers and has been
involved in U.S. stock investing for over 75 years. The Adviser manages in
excess of $200 billion in assets globally. Among other funds, the Adviser
manages Scudder Development Fund, one of America's first small company mutual
funds, Scudder Micro Cap Fund and Scudder 21st Century Growth Fund.

- --
6
<PAGE>

- ---------------------------------------
What are the Fund's special risks?
- ---------------------------------------

While, historically, small company stocks have outperformed the stocks of large
companies, the former have customarily involved more risk, as well. Small
companies may have limited product lines, markets or financial resources; may
lack management depth or experience; and may be more vulnerable to adverse
general market or economic developments than large companies. The prices of
small company securities are often more volatile than prices associated with
large company issues, and can display abrupt or erratic movements at times, due
to limited trading volumes and less publicly available information.

Some of the companies in which the Fund may invest may distribute, sell or
produce products which have recently been brought to market and may be dependent
on key personnel.

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.

- ---------------------------------------
Additional information about
policies and investments
- ---------------------------------------

Investment restrictions

The Fund has certain investment restrictions which are designed to reduce the
Fund's investment risk. Fundamental investment restrictions may not be changed
without a vote of shareholders; non-fundamental investment restrictions may be
changed by a vote of the Fund's Board of Trustees. A complete listing of
investment restrictions is contained under "Investment Restrictions" in the
Fund's Statement of Additional Information.

As a matter of fundamental policy, the Fund may not borrow money, except as
permitted under Federal law. Further, as a matter of non-fundamental policy, the
Fund may not borrow money in an amount greater than 5% of total assets, except
for temporary or emergency purposes, although the Fund may engage up to 5% of
total assets in reverse repurchase agreements or dollar rolls.

As a matter of fundamental policy, the Fund may not make loans except through
the lending of portfolio securities, the purchase of debt securities or through
repurchase agreements. The Fund has adopted a non-fundamental policy restricting
the lending of portfolio securities to no more than 5% of total assets.

A complete description of these and other policies and restrictions is contained
under "Investment Restrictions" in the Fund's Statement of Additional
Information.

Common stocks

Under normal circumstances, the Fund invests primarily in common stocks. Common
stock is issued by companies to raise cash for business purposes and represents
a proportionate interest in the issuing companies. Therefore, the Fund
participates in the success or failure of any company in which it holds stock.
The market values of common stocks can fluctuate significantly, reflecting the
business performance of the issuing company, investor perception and general
economic or financial market movements. Smaller companies are especially
sensitive to these factors and may even become valueless. Despite the risk of
price volatility, however, common stocks also offer the greatest potential for
gain on investment, compared to

--
7
<PAGE>

other classes of financial assets such as bonds or cash equivalents.

Convertible securities

Prior to their conversion, convertible securities may have characteristics
similar to nonconvertible securities of the same type.

Repurchase agreements

As a means of earning income for periods as short as overnight, the Fund may
enter into repurchase agreements with selected banks and broker/dealers. Under a
repurchase agreement, the Fund acquires securities, subject to the seller's
agreement to repurchase at a specified time and price.

The Fund may enter into repurchase commitments with any party deemed
creditworthy by the Adviser if the transaction is entered into for investment
purposes and the counterparty's creditworthiness is at least equal to that of
issuers of securities which the Fund may purchase.

Illiquid securities

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 or to seek 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.

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 market 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, 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

- --
8
<PAGE>

speculative purposes. Please refer to "Risk factors--Strategic Transactions and
derivatives" for more information.

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 the investments and techniques that the
Fund may use from time to time.

Convertible securities. While convertible securities generally offer lower
yields than nonconvertible debt securities of similar quality, their prices may
reflect changes in the value of the underlying common stock. Convertible
securities entail less credit risk than the issuer's common stock.

Repurchase agreements. If the seller under a repurchase agreement becomes
insolvent, the Fund's right to dispose of the securities may be restricted, or
the value of the securities may decline before the Fund is able to dispose of
them. In the event of the commencement of bankruptcy or insolvency proceedings
with respect to the seller of the securities before repurchase of the securities
under a repurchase agreement, the Fund may encounter delay and incur costs,
including a decline in the value of the securities, before being able to sell
the securities. Some repurchase commitment transactions may not provide the Fund
with collateral marked-to-market during the term of the commitment.

Illiquid securities. The absence of a trading market can make it difficult to
ascertain a market value for these investments. Disposing of illiquid
investments may involve time-consuming negotiation and legal expenses, and it
may be difficult or impossible for the Fund to sell them promptly at an
acceptable price.

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 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.

--
9
<PAGE>

- ---------------------------------------
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 November or December, although an additional distribution may be made
if necessary. Any dividends or capital gains distributions declared in October,
November or December with a record date in such 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
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 and
the life of the Fund 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. Performance will vary based upon, among other things,
changes in market conditions and the level of the Fund's expenses.

- ---------------------------------------
Fund organization
- ---------------------------------------

Scudder Small Company Value 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 management agreement. 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 Kemper Investments,
Inc., a

- --
10
<PAGE>

Delaware corporation formerly known as Scudder, Stevens & Clark, Inc., to manage
its daily investment and business affairs subject to the policies established by
the Board of Trustees. The Trustees have overall responsibility for the
management of the Fund under Massachusetts law.

Scudder, Stevens & Clark, Inc. and Zurich Insurance Company ("Zurich"), an
international insurance and financial services organization, have formed a new
global investment organization by combining Scudder's business with that of
Zurich's subsidiary, Zurich Kemper Investments, Inc. and Scudder has changed its
name to Scudder Kemper Investments, Inc. As a result of the transaction, Zurich
owns approximately 70% of the Adviser, with the balance owned by the Adviser's
officers and employees.

The Fund pays the Adviser an annual investment management fee of 0.75% of the
Fund's average daily net assets. The fee is payable monthly, provided that the
Fund will make such interim payments as may be requested by the Adviser not to
exceed 75% of the amount of the fee then accrued on the books of the Fund and
unpaid. The fee is higher than the average management fee, but not necessarily
higher than that charged by funds with a similar investment objective.

The Adviser agreed to maintain the annualized expenses of the Fund at no more
than 1.50% of the average daily net assets of the Fund until December 31, 1997.
As a result of this waiver the Adviser received an investment management fee of
0.62% of the Fund's average daily net assets for the fiscal period ended August
31, 1997.

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 Kemper Investments, Inc., is located at 345 Park Avenue, New York, New
York.

Transfer agent

Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts 02107-2291, a
subsidiary of the Adviser, is the transfer, shareholder servicing and
dividend-paying agent for the Fund.

Underwriter

Scudder Investor Services, Inc., a 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.

Fund accounting agent

Scudder Fund Accounting Corporation, a subsidiary of the Adviser, is responsible
for determining the daily net asset value per share and maintaining the general
accounting records of the Fund.

Custodian

State Street Bank and Trust Company is the Fund's custodian.

- ---------------------------------------
Transaction information
- ---------------------------------------

Purchasing shares

Purchases are executed at the next calculated net asset value per share after
the Fund's transfer agent 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
requests by telephone prior to the

--
11
<PAGE>

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. 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 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.

By "QuickBuy." If you elected "QuickBuy" for your account, you can call
toll-free to purchase shares. The money will be automatically transferred from
your predesignated bank checking account. Your bank must be a member of the
Automated Clearing House for you to use this service. If you did not elect
"QuickBuy," call 1-800-225-5163 for more information.

To purchase additional shares, call 1-800-225-5163. Purchases may not be for
more than $250,000. Proceeds in the amount of your purchase will be transferred
from your bank checking account in two or three business days following your
call. For requests received by the close of regular trading on the Exchange,
shares will be purchased at the net asset value per share calculated at the
close of trading on the day of your call. "QuickBuy" requests received after the
close of regular trading on the Exchange will begin their processing and be
purchased at the net asset value calculated the following business day.

If you purchase shares by "QuickBuy" and redeem them within seven days of the
purchase, the Fund may hold the redemption proceeds for a period of up to seven
business days. If you purchase shares and there are insufficient funds in your
bank account, the purchase will be canceled and you will be subject to any
losses or fees incurred in the transaction. "QuickBuy" transactions are not
available for most retirement plan accounts. However, "QuickBuy" transactions
are available for Scudder IRA accounts.

Exchanging and redeeming shares

- --
12
<PAGE>

Sharing and Money Purchase Pension Plans. However, if such shares are purchased
through a broker, financial institution or recordkeeper maintaining an omnibus
account for the shares, such waiver may not apply. (Before purchasing shares,
please check with your account representative concerning the availability of the
fee waiver.) In addition, this waiver does not apply to any IRA or SEP-IRA
accounts. This fee is intended to encourage long-term investment in the Fund, to
avoid transaction and other expenses caused by early redemptions, and to
facilitate portfolio management. The fee is not a deferred sales charge, is not
a commission paid to the Adviser or its subsidiaries, and does not benefit the
Adviser in any way. The Fund reserves the right to modify the terms of or
terminate this fee at any time.

The fee applies to redemptions from the Fund and exchanges to other Scudder
funds, but not to dividend or capital gains distributions which have been
automatically reinvested in the Fund.

The fee is applied to the shares being redeemed or exchanged in the order in
which they were purchased. See "Exchanges and Redemptions" in the Fund's
Statement of Additional Information for a more detailed description of the
redemption fee.

Exchanges. The Fund may be exchanged for shares of other funds in the Scudder
Family of Funds unless otherwise determined by the Board of Trustees. 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. 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.

Redemption by telephone. This is the quickest and easiest way to sell Fund
shares. If you provided your banking information on your application, you can
call to request that federal funds be sent to your authorized bank account. If
you did not include your banking information 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.

By "QuickSell." If you elected "QuickSell" for your account, you can call
toll-free to redeem shares. The money will be automatically transferred to your
predesignated bank checking account. Your bank must be a member of the Automated
Clearing House for you to use this service. If you did not elect "QuickSell,"
call 1-800-225-5163 for more information.

--
13
<PAGE>

net asset value per share calculated at the close of trading on the day of your
call. "QuickSell" requests received after the close of regular trading on the
Exchange will begin their processing and be redeemed at the net asset value
calculated the following business day.

"QuickSell" transactions are not available for Scudder IRA accounts and most
other retirement plan accounts.

Signature guarantees. For your protection and to prevent fraudulent redemptions,
on written redemption requests in excess of $100,000 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 $100,000 to their address of record.
Shareholders also may, by telephone, request that redemption proceeds be sent to
a predesignated bank account. The Fund uses procedures designed to give
reasonable assurance that telephone instructions are genuine, including
recording telephone calls, testing a caller's identity and sending written
confirmation of telephone transactions. If 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.

Share price

Purchases and redemptions, including exchanges, are made at net asset value.
There is a 1% fee payable to the Fund for exchanges or redemptions of shares
held less than one year. 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 must be received in good order by the
Fund's transfer agent. Those requests received 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).

Purchase restrictions

Purchases and sales should be made for long-term investment purposes only. The
Fund and Scudder Investor Services, Inc. each reserves the right to reject
purchases of Fund shares (including exchanges) for any reason, including when a
pattern of frequent purchases and sales made in

- --
14
<PAGE>

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 correct 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 correct 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 correct certified Social
Security or tax identification number. A shareholder may avoid involuntary
redemption by providing the Fund with a tax identification number during the
30-day notice period. Redemptions for failure to provide a tax identification
number are not subject to the 1% redemption fee.

Minimum balances

Shareholders should maintain a share balance worth at least $2,500, which amount
may be changed by the Board of Trustees. Scudder retirement plans and certain
other accounts have similar or lower minimum share balance requirements. A
shareholder may open an account with at least $1,000, if an automatic investment
plan of $100/month is established.

Shareholders who maintain a non-fiduciary account balance of less than $2,500 in
the Fund, without establishing an automatic investment plan, will be assessed an
annual $10.00 per fund charge with the fee to be paid to the Fund. The $10.00
charge will not apply to shareholders with a combined household account balance
in any of the Scudder Funds of $25,000 or more. The Fund reserves the right,
following 60 days' written notice to shareholders, to redeem all shares in
accounts below $250, including accounts of new investors, where a reduction in
value has occurred due to a redemption or exchange out of the account. The Fund
will mail the proceeds of the redeemed account to the shareholder. Reductions in
value that result solely from market activity will not trigger an involuntary
redemption. Retirement accounts and certain other accounts will not be assessed
the $10.00 charge or be subject to automatic liquidation. Please refer to
"Exchanges and Redemptions--Other information" in the Fund's Statement of
Additional Information for more information.

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 Trust 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

--
15
<PAGE>

net asset value of the Fund at the beginning of the period.

- ---------------------------------------
Shareholder benefits
- ---------------------------------------

Experienced professional management

Scudder Kemper Investments, 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 Small Company Value Fund is managed by a team of Scudder Kemper
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. Scudder Kemper believes its team
approach benefits Fund investors by bringing together many disciplines and
leveraging the Adviser's extensive resources.

Co-lead Portfolio Managers Philip S. Fortuna and James M. Eysenbach have
responsibility for the Fund's day-to-day management and investment strategies.
Mr. Fortuna joined the Adviser in 1986 as a manager of institutional equity
accounts, served as director of quantitative services from 1987 to 1993 and
director of investment operations from 1993 to 1995. From 1995 to 1997 he was
involved in global planning and new product development in addition to his
portfolio management responsibilities. Mr. Fortuna is currently director of the
Adviser's quantitative group.

Mr. Eysenbach joined the Adviser in 1991 as a senior quantitative analyst,
served as director of quantitative services from 1993 to 1997 and has been
co-manager of quantitative equity products at the Adviser since 1995. He is
currently managing portfolios full-time. Mr. Eysenbach has more than 10 years
investment management experience, specializing in quantitative research,
analysis and portfolio management.

Calvin S. Young serves as Portfolio Manager for the Fund. Mr. Young joined the
Adviser in 1990 as a quantitative analyst. Since 1995 he has been providing
analytical support for the Adviser's quantitative equity products. Mr. Young has
more than nine years of investment industry experience with a special focus on
small 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.

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. (The exchange
privilege may not be available for certain Scudder funds. For more information,
please call 1-800-225-5163.) 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.

Personal Counsel(SM) -- A Managed Fund Portfolio Program

If you would like to receive direct guidance and management of your overall
mutual fund

- --
16
<PAGE>

portfolio to help you pursue your investment goals, you may be interested in
Personal Counsel from Scudder. Personal Counsel, a program of Scudder Investor
Services, Inc., a registered investment adviser and a subsidiary of Scudder
Kemper Investments, Inc., combines the benefits of a customized portfolio of
pure no-load Scudder Funds with ongoing portfolio monitoring and individualized
service, for an annual fee of generally 1% or less of assets (with a $1,000
minimum). In addition, it draws upon the Adviser's more than 75-year heritage of
providing investment counsel to large corporate and private clients. If you have
$100,000 or more to invest initially and would like more information about
Personal Counsel, please call 1-800-700-0183.

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 Perspectives, an informative newsletter
covering economic and investment developments, service enhancements and other
topics of interest to Scudder fund investors.

Scudder Investor Centers

As a convenience to shareholders who like to conduct business in person, Scudder
Investor Services, Inc. maintains Investor Centers in Boca Raton, Boston,
Chicago, New York and San Francisco.

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.

--
17
<PAGE>

- ---------------------------------------
Purchases
- ---------------------------------------

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Opening Minimum initial investment: $2,500; IRAs $1,000
an account Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums.
See appropriate plan literature.

<S> <C> <C>
Make checks o By Mail Send your completed and signed application and check
payable to "The
Scudder Funds." by regular mail to: or by express, registered,
or certified mail to:

The Scudder Funds Scudder Shareholder
P.O. Box 2291 Service Center
Boston, MA 42 Longwater Drive
02107-2291 Norwell, MA
02061-1612

o By Wire Please see Transaction information--Purchasing shares--
By wire for details, including the ABA wire transfer number.
Then call 1-800-225-5163 for instructions.

o In Person Visit one of our Investor Centers to complete your application with the
help of a Scudder representative. Investor Center locations are listed
under Shareholder benefits.

<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Purchasing Minimum additional investment: $100; IRAs $50
additional Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums.
shares See appropriate plan literature.

<S> <C> <C>
Make checks o By Mail Send a check with a Scudder investment slip, or with a
payable to "The instruction including your account number and the
Scudder Funds." complete Fund name, to the appropriate address listed above.

o By Wire Please see Transaction information--Purchasing shares--
By wire for details, including the ABA wire transfer number.

o In Person Visit one of our Investor Centers to make an additional
investment in your Scudder fund account. Investor Center
locations are listed under Shareholder benefits.

o By Telephone Please see Transaction information--Purchasing shares--
By QuickBuy or By telephone order for more details.

o By Automatic You may arrange to make investments on aregular basis regular basis
Investment Plan through automatic deductions from your bank checking
($50 minimum) account. Please call 1-800-225-5163 for more information and an
enrollment form.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

- --
18
<PAGE>

- ---------------------------------------
Exchanges and redemptions
- ---------------------------------------

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Exchanging Minimum investments: $2,500 to establish a new account;
shares $100 to exchange among existing accounts

<S> <C> <C>
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).

There may be a o By Mail Print or type your instructions and include:
1% fee payable or Fax - the name of the Fund and the account number you are exchanging from;
to the Fund for - your name(s) and address as they appear on your account;
exchanges of - the dollar amount or number of shares you wish to exchange;
shares held less - the name of the Fund you are exchanging into;
than one year. - your signature(s) as it appears on your account; and
- a daytime telephone number.

Send your instructions
by regular mail to: or by express, registered, or by fax to:
or certified mail to:

Redeeming shares 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). You may
have redemption proceeds sent to your predesignated bank account, or
redemption proceeds of up to $100,000 sent to your address of record.

There may be a o By Mail Send your instructions for redemption to the appropriate address or fax number
1% fee payable or Fax above and include:
to the Fund for - the name of the Fund and account
redemption of number you are redeeming from;
shares held less - your name(s) and address as they appear on
than one year. your account;
- the dollar amount or number of shares you wish to redeem;
- your signature(s) as it appears on your account; and
- a daytime telephone number.

A signature guarantee is required for redemptions over $100,000.
See Transaction information--Redeeming shares.

o By Automatic You may arrange to receive automatic cash payments periodically.
Withdrawal Call 1-800-225-5163 for more information and an enrollment form.
Plan
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

--
19
<PAGE>

- ---------------------------------------
Scudder Kemper tax-advantaged
retirement plans
- ---------------------------------------

Scudder Kemper 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.

o Scudder No-Fee IRAs. These retirement plans allow a maximum annual
contribution of up to $2,000 per person for anyone with earned income (up
to $2,000 per individual for married couples if only one spouse has 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 you no annual custodial fee.

o Scudder Roth No-Fee IRAs. Similar to the traditional IRA in many respects,
these retirement plans provide a unique opportunity for qualifying
individuals to accumulate investment earnings tax free. Unlike a
traditional IRA, with a Roth IRA, if you meet the distribution
requirements, you can withdraw your money without paying any taxes on the
earnings. The Scudder Roth IRA charges you no annual custodial fee.

o 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.

o 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. The
Scudder Keogh charges you no annual custodial fee.

o 403(b) Plans. Retirement plans for tax-exempt organizations and school
systems to which employers and employees may both contribute.

o 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. The Scudder SEP-IRA charges
you no annual custodial fee.

o 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.

Scudder Investor Relations is a service provided through Scudder Investor
Services, Inc., Distributor.

- --
20
<PAGE>

- --------------------------------------------------------------------------------
Trustees and Officers
- --------------------------------------------------------------------------------

Daniel Pierce*
President and Trustee

Paul Bancroft III
Trustee; Venture Capitalist and Consultant

Sheryle J. Bolton
Trustee; Chief Executive Officer, Scientific Learning Corporation

William T. Burgin
Trustee; General Partner, Bessemer Venture Partners

Thomas J. Devine
Trustee; Consultant

Keith R. Fox
Trustee; President, Exeter Capital Management Corporation

William H. Luers
Trustee; President, The Metropolitan Museum of Art

Dr. Wilson Nolen
Trustee; Consultant

Kathryn L. Quirk*
Trustee, Vice President and Assistant Secretary

Robert W. Lear
Honorary Trustee; Executive-in-Residence, Visiting Professor, Columbia
University Graduate School of Business

Robert G. Stone, Jr.
Honorary Trustee; Chairman of the Board and Director, Kirby Corporation

Edmund R. Swanberg*
Honorary Trustee

Peter Chin*
Vice President

James M. Eysenbach*
Vice President

Philip S. Fortuna*
Vice President

Jerard K. Hartman*
Vice President

Thomas W. Joseph*
Vice President

Roy C. McKay*
Vice President

Thomas F. McDonough*
Vice President and Secretary

Edward J. O'Connell*
Vice President and Assistant Treasurer

Richard W. Desmond*
Assistant Secretary

Caroline Pearson*
Assistant Secretary

*Scudder Kemper Investments, Inc.

--
21
<PAGE>

- --------------------------------------------------------------------------------
Investment products and services
- --------------------------------------------------------------------------------

The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series--
Premium Shares*
Managed Shares*
Scudder Government Money Market Series--Managed Shares*

Tax Free Money Market+
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**

Tax Free+
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited
Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**

U.S. Income
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund

Global Income
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund

Asset Allocation
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio

U.S. Growth and Income
Scudder Balanced Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund

U.S. Growth

Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund

Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund

Global Growth

Worldwide
Scudder Global Fund
Scudder International Growth and Income Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund

Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.

Retirement Programs
Traditional IRA
Roth IRA
SEP-IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan **+++ +++
(a variable annuity)

Education Accounts
Education IRA
UGMA/UTMA

Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal Fund, Inc.

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. +++Funds within categories are listed in order from
expected least risk to most risk. Certain Scudder funds may not be available for
purchase or exchange. +A portion of the income from the tax-free funds may be
subject to federal, state, and local taxes. *A class of shares of the Fund.
**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 Kemper Investments, Inc., are traded on the New York Stock Exchange and,
in some cases, on various foreign stock exchanges.

- --
22
<PAGE>

- --------------------------------------------------------------------------------
How to contact Scudder
- --------------------------------------------------------------------------------

Account Service and Information:

For existing account service and transactions

Scudder Investor Relations -- 1-800-225-5163

For 24 hour account information, fund information, exchanges, and an
overview of all the services available to you

Scudder Electronic Account Services -- http://funds.scudder.com

For personalized information about your Scudder accounts, exchanges and
redemptions

Scudder Automated Information Line (SAIL) -- 1-800-343-2890

Investment Information:

For information about the Scudder funds, including additional applications
and prospectuses, or for answers to investment questions

Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com

For establishing 401(k) and 403(b) plans

Scudder Defined Contribution Services -- 1-800-323-6105

Scudder Brokerage Services:

To receive information about this discount brokerage service and to obtain
an application

Scudder Brokerage Services* -- 1-800-700-0820

Personal Counsel(SM) -- A Managed Fund Portfolio Program:

To receive information about this mutual fund portfolio guidance and
management program

Personal Counsel from Scudder -- 1-800-700-0183

Please address all correspondence to:

The Scudder Funds
P.O. Box 2291
Boston, Massachusetts
02107-2291

Or Stop by a Scudder Investor Center:

Many shareholders enjoy the personal, one-on-one service of the Scudder
Investor Centers. Check for an Investor Center near you--they can be found
in the following cities:

Boca Raton Chicago San Francisco
Boston New York

Scudder Investor Relations and Scudder Investor Centers are services provided
through Scudder Investor Services, Inc., Distributor.

* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061 --
Member NASD/SIPC.

--
23
<PAGE>

SCUDDER SMALL COMPANY VALUE FUND

A Pure No-Load (TM) (No Sales Charges) Diversified Mutual Fund
Which Invests for Long-Term Growth
of Capital by Seeking out Undervalued
Stocks of Small U.S. Companies

- --------------------------------------------------------------------------------

STATEMENT OF ADDITIONAL INFORMATION

January 1, 1998

- --------------------------------------------------------------------------------

This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus of Scudder Small Company Value Fund
dated January 1, 1998, 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 OF CONTENTS

<TABLE>
<CAPTION>
Page

<S> <C>
THE FUND'S INVESTMENT OBJECTIVE AND POLICIES......................................1
General Investment Objective and Policies...................................1
A Master/Feeder Fund Structure..............................................2
Investments and Investment Techniques.......................................2
Investment Restrictions....................................................12

PURCHASES........................................................................14
Additional Information About Opening An Account............................14
Additional Information About Making Subsequent Investments.................14
Additional Information About Making Subsequent Investments by QuickBuy.....15
Checks.....................................................................15
Wire Transfer of Federal Funds.............................................16
Share Price................................................................16
Share Certificates.........................................................16
Other Information..........................................................16

EXCHANGES AND REDEMPTIONS........................................................16
Exchanges..................................................................16
Special Redemption and Exchange Information................................17
Redemption by Telephone....................................................18
Redemption by QuickSell....................................................19
Redemption by Mail or Fax..................................................19
Redemption-In-Kind.........................................................19
Other Information..........................................................20

FEATURES AND SERVICES OFFERED BY THE FUND........................................20
The Pure No-Load(TM) Concept...............................................20
Internet access............................................................21
Dividends and Capital Gain Distribution Options............................22
Diversification............................................................22
Scudder Investor Centers...................................................22
Reports to Shareholders....................................................23
Transaction Summaries......................................................23

THE SCUDDER FAMILY OF FUNDS......................................................23

SPECIAL PLAN ACCOUNTS............................................................27
Scudder Retirement Plans: Profit-Sharing and Money Purchase Pension
Plans for Corporations and Self-Employed Individuals.....................28
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for Corporations
and Self-Employed Individuals............................................28
Scudder IRA: Individual Retirement Account................................28
Scudder Roth IRA: Individual Retirement Account............................29
Scudder 403(b) Plan........................................................29
Automatic Withdrawal Plan..................................................30
Group or Salary Deduction Plan.............................................30
Automatic Investment Plan..................................................30
Uniform Transfers/Gifts to Minors Act......................................31
Scudder Savings Incentive Match Plans for Employees: SIMPLE IRA'S..........31

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS........................................31

PERFORMANCE INFORMATION..........................................................32
Average Annual Total Return................................................32
Cumulative Total Return....................................................32
Total Return...............................................................33
</TABLE>

i
<PAGE>

TABLE OF CONTENTS (continued)

<TABLE>
<CAPTION>
Page

<S> <C>
Comparison of Fund Performance.............................................33

FUND ORGANIZATION................................................................36

INVESTMENT ADVISER...............................................................37
Personal Investments by Employees of the Adviser...........................40

TRUSTEES AND OFFICERS............................................................40

REMUNERATION.....................................................................42
Responsibilities of the Board--Board and Committee Meetings................42
Compensation of Officers and Trustees......................................43

DISTRIBUTOR......................................................................44

TAXES............................................................................45

PORTFOLIO TRANSACTIONS...........................................................47
Brokerage Commissions......................................................47
Portfolio Turnover.........................................................48

NET ASSET VALUE..................................................................49

ADDITIONAL INFORMATION...........................................................50
Experts....................................................................50
Shareholder Indemnification................................................50
Other Information..........................................................50

FINANCIAL STATEMENTS.............................................................51
</TABLE>

ii
<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 Small Company Value 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 Small Company Value Fund invests for long-term growth of capital
by seeking out undervalued stocks of small U.S. companies. The Fund's investment
adviser, Scudder Kemper Investments, Inc. (the "Adviser"), uses a systematic,
proprietary investment approach to identify small, U.S. companies that, in the
opinion of the Adviser, are selling at prices that do not reflect adequately
their long-term business potential. The Fund evaluates over 1000 companies
similar in size to those comprising the Russell 2000(R) Index (created by Frank
Russell Company ("Russell"), a leading asset strategy and investment management
consultant, which provides independent evaluation of investment managers. These
companies are often out of favor or not closely followed by investors and, as a
result, can offer substantial appreciation potential over time.

The Fund is expected to provide little, if any, current income and is
designed for the aggressive portion of an investor's portfolio. Although the
Fund typically holds a large number of securities identified through a
quantitative, value-driven investment strategy, it does entail above average
investment risk in comparison to larger U.S. stocks. Shares of the Fund should
be purchased with a long-term horizon in mind (five years or more).

In pursuit of long-term growth of capital, the Fund invests, under normal
circumstances, at least 90% of its assets in the common stock of small U.S.
companies. The Fund will invest in securities of companies that are similar in
size to those in the Russell 2000 Index of small stocks and maintain a median
market capitalization (i.e., current stock price times shares outstanding) below
$500 million. On a temporary basis, the Fund may continue to hold securities of
companies that have grown in market capitalization above the maximum of the
Russell 2000 Index, but will not add to these holdings.

industries.

While the Fund invests primarily in common stocks, it can purchase other
types of equity securities including preferred stocks (either convertible or
nonconvertible), rights, warrants and restricted securities. Securities may be
listed on national exchanges or, more commonly, traded over-the-counter. The
Fund may also invest up to 20% of its assets in U.S. Treasury, agency and
instrumentality obligations on a temporary basis, may enter into repurchase
agreements and may engage in strategic transactions, using such derivatives
contracts as index options and futures, to increase stock market participation,
enhance liquidity and manage transaction costs. The Fund may borrow money for
temporary, emergency or other purposes, including investment leverage purposes,
as determined by the Trustees. The Fund may also borrow under reverse repurchase
agreements. The Investment Company Act of 1940 as amended (the "1940 Act"),
requires borrowings to have 300% asset coverage.

Except as otherwise indicated, the Fund's investment objective and policies are
not fundamental and may be changed without a vote of shareholders. 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's objective
will be met.

<PAGE>

A Master/Feeder Fund Structure

At a special meeting, the shareholders approved a proposal which gives the
Trust's Board of Trustees the discretion to retain the current distribution
arrangement for the Fund while investing in a master fund in a master/feeder
fund structure as described below.

A master/feeder fund structure is one in which a fund (a "feeder fund"),
instead of investing directly in a portfolio of securities, invests most or all
of its investment assets in a separate registered investment company (the
"master fund") with substantially the same investment objective and policies as
the feeder fund. Such a structure permits the pooling of assets of two or more
feeder funds, preserving separate identities or distribution channels at the
feeder fund level. Based on the premise that certain of the expenses of
operating an investment portfolio are relatively fixed, a larger investment
portfolio may eventually achieve a lower ratio of operating expenses to average
net assets. An existing investment company is able to convert to a feeder fund
by selling all of its investments, which involves brokerage and other
transaction costs and realization of a taxable gain or loss, or by contributing
its assets to the master fund and avoiding transaction costs and, if proper
procedures are followed, the realization of taxable gain or loss.

Investments and Investment Techniques

Value Investment Approach. The Fund is actively managed using a disciplined,
value-oriented investment management approach. The Adviser uses a proprietary,
computerized model to identify for investment small public U.S. companies
selling at prices that, in the opinion of the Adviser, do not reflect adequately
their long-term business potential. Companies purchased for the Fund typically
have the following characteristics:

o attractive valuations relative to the Russell 2000 Index--a widely
used benchmark of small stock performance--based on measures such
as price to earnings, price to book value and price to cash flow
ratios.

o favorable trends in earnings growth rates and stock price momentum.

The Fund's holdings are often out of favor or simply overlooked by
investors. Accordingly, their prices can rise either as a result of improved
business fundamentals, particularly when earnings grow faster than general
expectations, or as more investors come to recognize the full extent of a
company's underlying potential.

While the Fund involves above-average equity risk, the Fund's
value-oriented, systematic approach to investing is designed to mitigate
volatility of the Fund's share price relative to the small capitalization sector
of the U.S. stock market. This risk is further managed by purchasing a large
number of stocks, and employing specialized portfolio management techniques,
such as portfolio optimization.

The Fund focuses specifically on finding undervalued stocks of small U.S.
companies. Historically, small companies have been attractive because they have
been sources of new technologies and services, have competed with large
companies on the basis of lower labor costs and have grown faster than larger
firms. Their small size has also allowed them to respond rapidly to changing
business conditions. In addition, small companies have not been closely followed
by as many securities analysts as larger companies, so they have rewarded
investors with the patience and knowledge to have sought them out.

NEEDS TO BE UPDATED

According to Ibbotson Associates, which has compiled market data back to
1926, the growth of $1 invested in small company stocks over that 70 year period
would have grown to $2,707.90, compared to $1,370.95 if invested in large
company stocks. Over this period, the compound annual growth rate of that $1
investment would have been 11.8% for the small company investment versus 10.7%
for the large company investment. With the better performance, however, comes
greater volatility in returns -- from a one-year high of 123.27% to a one-year
low of -49.68% during the period for small stocks, vs. 54.0% and -43.3% for
large stocks.

2
<PAGE>

Needs to be updated [GRAPHIC OMITTED]

Source: Ibbotson Associates(1)

The value approach entails searching for "bargains" in the market. These
are often companies that are selling at prices below their estimated long-term
business potential, and not followed or not purchased due to recent company
downturns. Historically, these stocks, as measured by the Russell 2000 Value
Index, typically have been less volatile than small growth stocks which
generally have higher price/earnings ratios. As one would expect, value stocks
have tended to rise as business fundamentals improved or as investors began to
recognize their potential. "Growth" stocks have provided even more substantial
increases in up markets, but they are also subject to substantial decreases in
down markets, especially relative to value stocks. These greater ups and downs
for growth stocks have meant greater overall volatility or risk. However,
according to data compiled by Russell, historical performance indicates that the
value orientation tends to produce less extreme swings, and manages to provide
superior overall returns due to the limited downside risk inherent in the
discipline.

The Russell 2000 Index is a dynamic index comprised of 2000 small U.S.
company stocks. (Scudder Small Company Value Fund invests in stocks of similar
size -- see General Investment Objective and Policies.) For measurement and
analysis, Russell has split the Index into growth and value subsets.

Needs to be updated

Russell 2000 Index of Small Stocks Performance in Up and Down Markets
Compound Average Monthly Total Return: 1979* to September 1996

# Months Russell 2000(R) Russell 2000(R) Russell
Growth Value 2000(R)
Down Months 83 -5.1% -3.0% -4.1%
Up Months 142 4.9% 4.1% 4.5%
All Months 225 1.1% 1.4% 1.3%
(annualized) -- 14.2% 18.3% 16.3%

* Earliest performance for the Russell Indices.
- ----------

(1) Small stocks from 1926-1995 are described by the NYSE AMEX, NASDAQ National
Market 6th-8th decile returns.

Large stocks are described by the Standard & Poor's Composite Index, currently
comprised of 500 generally large stocks in the U.S. Prior to 1957, the Index was
comprised of 90 of the largest stocks. Source: Stocks, Bonds Bills and Inflation
1995 Yearbook, Ibbotson Associates.

3
<PAGE>

From 1979 to September 1996, a period that includes one of the most
significant "up market" periods in history, the Russell 2000 Value Index has
outperformed the overall Russell 2000 index by 1.6 percentage points on an
annualized basis. Furthermore, small company value stocks tend to outperform
small company stocks over various rolling periods.(2)

Needs to be updated

o Value has outperformed Russell 2000 in 59% of rolling 12 month periods.
o Value has outperformed Russell 2000 in 97% of rolling 60 month periods.

Small Cap Value Outperforms Small Stocks Over Long Term

o By 1.6% Points Annualized (1979-9/1996)
o In 120 of 202 (59%) Rolling 12 Month Periods
o In 149 of 154 (97%) Rolling 60 Month Periods

- --------------------------------------------------------------------------------

[GRAPHIC OMITTED]

Note: Small Cap Style Indices, currently defined by Frank Russell using
price-to-book ratios and the IBES Long Term Growth Forecast, are subsets of the
Russell 2000 Small Stock Index. Returns through 9/96. Source: Frank Russell
Co., Scudder, Stevens & Clark.

The performance advantage of value stocks has been fairly consistent over
rolling five year periods and has not been caused by exceptional performance in
any one year. Instead, this phenomenon appears to be driven by the fact that the
downside volatility of small cap value stocks is limited relative to that of
growth stocks, as indicated in the previous table. Upside performance also tends
to be limited, but is sufficiently high that, over time, small cap value stocks
have outperformed small cap growth stocks.

Investments Involving Above-Average Risk. As opportunities for greater gain
frequently involve a correspondingly larger risk of loss, the Fund may purchase
securities carrying above-average risk. The Fund's shares are 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 long-term rewards.

As stated above, the Fund may purchase securities involving above-average
risk. Small companies may have limited product lines, markets or financial
resources; may lack management depth or experience; and may be more vulnerable
to adverse general market or economic developments than large companies. The
prices of small company securities are often more volatile than prices
associated with large company issues, and can display abrupt or erratic

- ----------
(2) Rolling periods capture returns over overlapping uniform holding periods. In
examining 60-month rolling periods, the first rolling period would be
1/79-12/83, the second rolling period would be 2/79-1/84, the third rolling
period would be 3/79-2/84, etc.

4
<PAGE>

movements at times, due to limited trading volumes and less publicly available
information. To help reduce risk, the Fund allocates its investments among many
companies and different industries.

The securities of small 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
dispose of the securities over a lengthy 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.

Convertible Securities. The Fund may invest in convertible securities; that is,
bonds, notes, debentures, preferred stocks, and other securities which are
convertible into common stocks.

The convertible securities in which the Fund may invest may be converted
or exchanged at a stated or determinable exchange ratio into underlying shares
of common stock. The exchange ratio for any particular convertible security may
be adjusted from time to time due to stock splits, dividends, spin-offs, other
corporate distributions, or scheduled changes in the exchange ratio. Convertible
debt securities and convertible preferred stocks, until converted, have general
characteristics similar to both debt and equity securities. Although to a lesser
extent than with debt securities generally, the market value of convertible
securities tends to decline as interest rates increase and, conversely, tends to
increase as interest rates decline. In addition, because of the conversion or
exchange feature, the market value of convertible securities typically changes
as the market value of the underlying common stocks changes, and, therefore,
also tends to follow movements in the general market for equity securities. A
unique feature of convertible securities is that as the market price of the
underlying common stock declines, convertible securities tend to trade
increasingly on a yield basis and so may not experience market value declines to
the same extent as the underlying common stock. When the market price of the
underlying common stock increases, the prices of the convertible securities tend
to rise as a reflection of the value of the underlying common stock, although
typically not as much as the underlying common stock. While no securities
investments are without risk, investments in convertible securities generally
entail less risk than investments in common stock of the same issuer.

As debt securities, convertible securities are investments which provide
for a stream of income (or in the case of zero coupon securities, accretion of
income) with generally higher yields than common stocks. Of course, like all
debt securities, there can be no assurance of income or principal payments
because the issuers of the convertible securities may default on their
obligations. Convertible securities generally offer lower yields than
nonconvertible securities of similar quality because of their conversion or
exchange features.

Convertible securities generally are subordinated to other similar but
non-convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock, of the
same issuer. However, because of the subordination feature, convertible bonds
and convertible preferred stock typically have lower ratings than similar
non-convertible securities.

Convertible securities may be issued as fixed income obligations that pay
current income or as zero coupon notes and bonds, including Liquid Yield Option
Notes (LYONS). Zero coupon securities pay no cash income and are sold at
substantial discounts from their value at maturity. When held to maturity, their
entire income, which consists of accretion of discount, comes from the
difference between the issue price and their value at maturity. Zero coupon
convertible securities offer the opportunity for capital appreciation as
increases (or decreases) in market value of such securities closely follow the
movements in the market value of the underlying common stock. Zero coupon
convertible securities generally are expected to be less volatile than the
underlying common stocks as they usually are issued with shorter maturities (15
years or less) and are issued with options and/or redemption features
exercisable by the holder of the obligation entitling the holder to redeem the
obligation and receive a defined cash payment.

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 Investors Service ("Moody's") or Standard & Poor's ("S&P").

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<PAGE>

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, as amended, ("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
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.

Reverse Repurchase Agreements. In a reverse repurchase agreement, the Fund sells
a portfolio instrument to another party, such as a bank or broker-dealer, in
return for cash and agrees to repurchase the instrument at a particular price
and time. While a reverse repurchase agreement is outstanding, the Fund will
maintain liquid assets in a segregated custodial account to cover its obligation
under the agreement. The Fund will enter into reverse repurchase agreements only
with parties whose creditworthiness has been found satisfactory by the Adviser.
Such transactions may increase fluctuations in the market value of the fund's
assets and may be viewed as a form of leverage.

Borrowing. As a matter of fundamental policy, the Fund will not borrow money,
except as permitted under the 1940 Act, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time. While
the Trustees do not currently intend to borrow for investment leverage purposes,
if such a strategy were implemented in the future it would increase the Fund's
volatility and the risk of loss in a declining market. Borrowing by the Fund
will involve special risk considerations. Although the principal of the Fund's
borrowings will be fixed, the Fund's assets may change in value during the time
a borrowing is outstanding, thus increasing exposure to capital risk.

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 or to seek 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 other financial instruments, purchase and sell financial
futures contracts and options thereon, and enter into various interest rate
transactions such as swaps, caps, floors or collars (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

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<PAGE>

Fund's portfolio resulting from securities market 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 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 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.

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<PAGE>

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.

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 15% 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, equity securities
(including convertible securities) and Eurodollar instruments that are

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<PAGE>

traded on U.S. and foreign securities exchanges and in the over-the-counter
markets, and on securities indices, 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, equity securities
(including convertible securities) and Eurodollar instruments (whether or not it
holds the above securities in its portfolio), and on securities indices, 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, 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 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

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<PAGE>

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.

Combined Transactions. The Fund may enter into multiple transactions, including
multiple options transactions, multiple futures transactions, 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 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. 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.

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<PAGE>

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 cash or liquid
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 cash or
liquid 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 cash
or liquid 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 cash or liquid assets equal to the exercise price.

OTC options entered into by the Fund, including those on securities,
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 for qualification
as a regulated investment company. (See "TAXES.")

11
<PAGE>

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.

As a matter of fundamental policy, the Fund may not:

(1) borrow money, except as permitted under the Investment Company Act
of 1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time;

(2) issue senior securities, except as permitted under the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time;

(3) concentrate its investments in a particular industry, as that term
is used in the 1940 Act, as amended, and as interpreted or modified
by regulatory authority having jurisdiction, from time to time;

(4) engage in the business of underwriting securities issued by others,
except to the extent that the Fund may be deemed to be an
underwriter in connection with the disposition of portfolio
securities;

(5) purchase or sell real estate, which term does not include securities
of companies which deal in real estate or mortgages or investments
secured by real estate or interests therein, except that the Fund
reserves freedom of action to hold and to sell real estate acquired
as a result of the Fund's ownership of securities;

(6) purchase physical commodities or contracts related to
physical commodities; or

(7) make loans to other persons, except (i) loans of portfolio
securities, and (ii) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's investment objective and
policies may be deemed to be loans.

As a matter of nonfundamental policy, the Fund currently does not intend
to:

(a) borrow money in an amount greater than 5% of its total assets,
except (i) for temporary or emergency purposes and (ii) by engaging
in reverse repurchase agreements, dollar rolls, or other investments
or transactions described in the Fund's registration statement which
may be deemed to be borrowings;

(b) enter into either of reverse repurchase agreements or dollar rolls
in an amount greater than 5% of its total assets;

(c) purchase securities on margin or make short sales, except (i) short
sales against the box, (ii) in connection with arbitrage
transactions, (iii) for margin deposits in connection with futures
contracts, options or other permitted investments, (iv) that
transactions in futures contracts and options shall not be deemed to
constitute selling securities short, and (v) that the Fund may
obtain such short-term credits as may be necessary for the clearance
of securities transactions;

12
<PAGE>

(d) purchase options, unless the aggregate premiums paid on all such
options held by the Fund at any time do not exceed 20% of its total
assets; or sell put options, if as a result, the aggregate value of
the obligations underlying such put options would exceed 50% of its
total assets;

(e) enter into futures contracts or purchase options thereon unless
immediately after the purchase, the value of the aggregate initial
margin with respect to such futures contracts entered into on behalf
of the Fund and the premiums paid for such 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;

(f) purchase warrants if as a result, such securities, taken at the
lower of cost or market value, would represent more than 5% of the
value of the Fund's total assets (for this purpose, warrants
acquired in units or attached to securities will be deemed to have
no value); and

(g) lend portfolio securities in an amount greater than 5% of its total
assets.

13
<PAGE>

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 $2,500 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 ($2,500 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 $2,500 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 members of the NASD, by banks, and by established

14
<PAGE>

shareholders (except by Scudder Individual Retirement Account (IRA), Scudder
Horizon Plan, Scudder Profit Sharing and Money Purchase Pension Plans, and
Scudder 401(k) and Scudder 403(b) Plan holders). 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 cancellation. In the event of such cancellation or
cancellation at the purchaser's request, the purchaser will be responsible for
any loss incurred by a Fund or the principal underwriter by reason of such
cancellation. 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.

Additional Information About Making Subsequent Investments by QuickBuy

Shareholders, whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and who have elected to participate
in the QuickBuy program, may purchase shares of the Fund by telephone. Through
this service shareholders may purchase up to $250,000 but not less than $250. To
purchase shares by QuickBuy, shareholders should call before 4 p.m. eastern
time. Proceeds in the amount of your purchase will be transferred from your bank
checking account two or three business days following your call. For requests
received by the close of regular trading on the Exchange, shares will be
purchased at the net asset value per share calculated at the close of trading on
the day of your call. QuickBuy requests received after the close of regular
trading on the Exchange will begin their processing and be purchased at the net
asset value calculated the following business day. If you purchase shares by
QuickBuy and redeem them within seven days of the purchase, the Fund may hold
the redemption proceeds for a period of up to seven business days. If you
purchase shares and there are insufficient funds in your bank account the
purchase will be canceled and you will be subject to any losses or fees incurred
in the transaction. QuickBuy transactions are not available for Scudder IRA
accounts and most other retirement plan accounts.

In order to request purchases by QuickBuy, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account from which the purchase payment will be debited.
New investors wishing to establish QuickBuy may so indicate on the application.
Existing shareholders who wish to add QuickBuy to their account may do so by
completing an QuickBuy Enrollment Form. After sending in an enrollment form
shareholders should allow for 15 days for this service to be available.

The Fund employs procedures, including recording telephone calls, testing
a caller's identity, and sending written confirmation of telephone transactions,
designed to give reasonable assurance that instructions communicated by
telephone are genuine and to discourage fraud. To the extent that the Fund does
not follow such procedures, 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.

Checks

A certified check is not necessary, but checks are only accepted subject
to collection at full face value 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 cancellation. 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.

15
<PAGE>

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 Scudder Service Corporation (the
"Transfer Agent") 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.

Other Information

If purchases or redemptions of Fund shares are arranged and settlement is
made at an 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, also the Fund's principal
underwriter, each has the right to limit the amount of purchases by, and to
refuse to sell to, any person. The Trustees and the Distributor each may suspend
or terminate the offering of shares of the Fund at any time for any reason.

The Tax Identification Number section of the application must be completed
when opening an account. Applications and purchase orders without a correct
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
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

16
<PAGE>

Automated Information Line" (SAIL) transaction authorization and dividend option
as the existing account. Other features will not carry over automatically to the
new account. Exchanges to a new fund account must be for a minimum of $2,500.
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--Exchanging and 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.
However, shares that are exchanged may be subject to the Fund's 1% redemption
fee. (See "Special Redemption and Exchange Information." 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. The exchange privilege may not be
available for certain Scudder funds. For more information, please call
1-800-225-5163.

Scudder retirement plans may have different exchange requirements. Please
refer to appropriate plan literature.

Special Redemption and Exchange Information

In general, shares of the Fund may be exchanged or redeemed at net asset
value. However, shares of the Fund held for less than one year are redeemable at
a price equal to 99% of the then current net asset value per share. This 1%
discount, referred to in the prospectus and this statement of additional
information as a redemption fee, directly affects the amount a shareholder who
is subject to the discount receives upon exchange or redemption. It is intended
to encourage long-term investment in the Fund, to avoid transaction and other
expenses caused by early redemptions and to facilitate portfolio management. The
fee is not a deferred sales charge, is not a commission paid to the Adviser or
its subsidiaries, and does not benefit the Adviser in any way. The Fund reserves
the right to modify the terms of or terminate this fee at any time.

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<PAGE>

The redemption discount will not be applied to (a) a redemption of shares
of the Fund outstanding for one year or more, (b) shares purchased through
certain Scudder retirement plans, including 401(k) plans, 403(b) plans, 457
plans, Keogh accounts, and Profit Sharing and Money Purchase Pension Plans
provided, however, if such shares are purchased through a broker, financial
institution or recordkeeper maintaining an omnibus account for the shares, such
waiver may not apply. (Before purchasing shares, please check with your account
representative concerning the availability of the fee waiver. In addition, this
waiver does not apply to IRA and SEP-IRA accounts.) (c) a redemption of
reinvestment shares (i.e., shares purchased through the reinvestment of
dividends or capital gains distributions paid by the Fund), (d) a redemption of
shares by the Fund upon exercise of its right to liquidate accounts (i) falling
below the minimum account size by reason of shareholder redemptions or (ii) when
the shareholder has failed to provide tax identification information, or (e) a
redemption of shares due to the death of the registered shareholder of a Fund
account, or, due to the death of all registered shareholders of a Fund account
with more than one registered shareholder, (i.e., joint tenant account), upon
receipt by Scudder Service Corporation of appropriate written instructions and
documentation satisfactory to Scudder Service Corporation. For this purpose and
without regard to the shares actually redeemed, shares will be treated as
redeemed as follows: first, reinvestment shares; second, purchased shares held
one year or more; and third, purchased shares held for less than one year.
Finally, if a redeeming shareholder acquires Fund shares through a transfer from
another shareholder, applicability of the discount, if any, will be determined
by reference to the date the shares were originally purchased, and not from the
date of transfer between shareholders.

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 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.

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.

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<PAGE>

Redemption by QuickSell

Shareholders, whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and who have elected to participate
in the QuickSell program may sell shares of the Fund by telephone. To sell
shares by QuickSell, shareholders should call before 4 p.m. eastern time.
Redemptions must be for at least $250. Proceeds in the amount of your redemption
will be transferred to your bank checking account two or three business days
following your call. For requests received by the close of regular trading on
the Exchange, shares will be redeemed at the net asset value per share
calculated at the close of trading on the day of your call. QuickSell requests
received after the close of regular trading on the Exchange will begin their
processing and be redeemed at the net asset value calculated the following
business day. QuickSell transactions are not available for Scudder IRA accounts
and most other retirement plan accounts.

In order to request redemptions by QuickSell, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account from which the purchase payment will be debited.
New investors wishing to establish QuickSell may so indicate on the application.
Existing shareholders who wish to add QuickSell to their account may do so by
completing an QuickSell Enrollment Form. After sending in an enrollment form,
shareholders should allow for 15 days for this service to be available.

The Fund employs procedures, including recording telephone calls, testing
a caller's identity, and sending written confirmation of telephone transactions,
designed to give reasonable assurance that instructions communicated by
telephone are genuine, and to discourage fraud. To the extent that the Fund does
not follow such procedures, 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

In order to ensure proper authorization before redeeming shares, the
Transfer Agent may request additional documents such as, but not restricted to,
stock powers, trust instruments, certificates of death, appointments as
executor, certificates of corporate authority and waivers of tax (required in
some states when settling estates).

It is suggested that shareholders holding shares registered in other than
individual names contact the Transfer Agent prior to any redemptions to ensure
that all necessary documents accompany the request. When shares are held in the
name of a corporation, trust, fiduciary, agent, attorney or partnership, the
Transfer Agent requires, in addition to the stock power, certified evidence of
authority to sign. These procedures are for the protection of shareholders and
should be followed to ensure prompt payment. Redemption requests must not be
conditional as to date or price of the redemption. Proceeds of a redemption will
be sent within 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
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.

19
<PAGE>

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. 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 and a shareholder's right to redeem
shares and to receive payment 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 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.

Shareholders should maintain a share balance worth at least $2,500, which
amount may be changed by the Board of Trustees. Scudder retirement plans have
similar or lower minimum share balance requirements. A shareholder may open an
account with at least $1,000, if an automatic investment plan of $100/month is
established. Shareholders who maintain a non-fiduciary account balance of less
than $2,500 in the Fund, without establishing an automatic investment plan, will
be assessed an annual $10.00 per fund charge with the fee to be paid to the
Fund. The $10.00 charge will not apply to shareholders with a combined household
account balance in any of the Scudder Funds of $25,000 or more. The Fund
reserves the right, following 60 days' written notice to shareholders, to redeem
all shares in accounts below $250, including accounts of new investors, where a
reduction in value has occurred due to a redemption or exchange out of the
account. The Fund will mail the proceeds of the redeemed account to the
shareholder. Reductions in value that result solely from market activity will
not trigger an involuntary redemption. Retirement accounts and certain other
accounts will not be assessed the $10.00 charge or be subject to automatic
liquidation.

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

20
<PAGE>

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.

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 Conduct Rules, 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.

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
================================================================================

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.

Internet access

World Wide Web Site -- The address of the Scudder Funds site is
http://funds.scudder.com. The site offers guidance on global investing and
developing strategies to help meet financial goals and provides access to the
Scudder investor relations department via e-mail. The site also enables users to
access or view fund prospectuses and profiles with links between summary
information in Profiles and details in the Prospectus. Users can fill out new
account forms on-line, order free software, and request literature on funds.

The site is designed for interactivity, simplicity and maneuverability. A
section entitled "Planning Resources" provides information on asset allocation,
tuition, and retirement planning to users who fill out interactive "worksheets."
Investors can easily establish a "Personal Page," that presents price
information, updated daily, on funds they're interested in following. The
"Personal Page" also offers easy navigation to other parts of the site. Fund
performance data from both Scudder and Lipper Analytical Services, Inc. are
available on the site. Also offered on the site is a news feature, which
provides timely and topical material on the Scudder Funds.

Scudder has communicated with shareholders and other interested parties on
Prodigy since 1988 and has participated since 1994 in GALT's Networth "financial
marketplace" site on the Internet. The firm made Scudder Funds information
available on America Online in early 1996.

21
<PAGE>

Account Access -- Scudder is among the first mutual fund families to allow
shareholders to manage their fund accounts through the World Wide Web. Scudder
Fund shareholders can view a snapshot of current holdings, review account
activity and move assets between Scudder Fund accounts.

Scudder's personal portfolio capabilities -- known as SEAS (Scudder
Electronic Account Services) -- are accessible only by current Scudder Fund
shareholders who have set up a Personal Page on Scudder's Web site. Using a
secure Web browser, shareholders sign on to their account with their Social
Security number and their SAIL password. As an additional security measure,
users can change their current password or disable access to their portfolio
through the World Wide Web.

An Account Activity option reveals a financial history of transactions for
an account, with trade dates, type and amount of transaction, share price and
number of shares traded. For users who wish to trade shares between Scudder
Funds, the Fund Exchange option provides a step-by-step procedure to exchange
shares among existing fund accounts or to new Scudder Fund accounts.

A Call Me(TM) feature enables users to speak with a Scudder Investor
Relations telephone representative while viewing their account on the Web site.
In order to use the Call Me(TM) feature, an individual must have two phone lines
and enter on the screen the phone number that is not being used to connect to
the Internet. They are connected to the next available Scudder Investor
Relations representative from 8 a.m. to 8 p.m. eastern time.

Dividends 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.

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 securities. Diversification may protect you against the possible risks of
concentrating in fewer securities or in a specific market sector.

Scudder Investor Centers

Investors may visit any of the Investor 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

22
<PAGE>

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.

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 Funds' prospectuses.)

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.

MONEY MARKET

Scudder U.S. Treasury Money Fund seeks to provide safety, liquidity and
stability of capital and, consistent therewith, to provide current income.
The Fund seeks to maintain a constant net asset value of $1.00 per share,
although in certain circumstances this may not be possible, and declares
dividends daily.

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. SCIT seeks to maintain a constant net asset
value of $1.00 per share, although in certain circumstances this may not
be possible, and declares dividends daily.

Scudder Money Market Series seeks to provide investors with as high a
level of current income as is consistent with its investment polices and
with preservation of capital and liquidity. The Fund seeks to maintain a
constant net asset value of $1.00 per share, but there is no assurance
that it will be able to do so. The institutional class of shares of this
Fund is not within the Scudder Family of Funds.

Scudder Government Money Market Series seeks to provide investors with as
high a level of current income as is consistent with its investment
polices and with preservation of capital and liquidity. The Fund seeks to
maintain a constant net asset value of $1.00 per share, but there is no
assurance that it will be able to do so. The institutional class of shares
of this Fund is not within the Scudder Family of Funds.

TAX FREE MONEY MARKET

Scudder Tax Free Money Fund ("STFMF") seeks to provide income exempt from
regular federal income tax and stability of principal through investments
primarily in municipal securities. STFMF seeks to maintain a constant net
asset value of $1.00 per share, although in extreme circumstances this may
not be possible.

Scudder Tax Free Money Market Series seeks to provide investors with as
high a level of current income that cannot be subjected to federal income
tax by reason of federal law as is consistent with its investment policies
and with preservation of capital and liquidity. The Fund seeks to maintain
a constant net asset value of $1.00 per share, but there is no assurance
that it will be able to do so. The institutional class of shares of this
Fund is not within the Scudder Family of Funds.

23
<PAGE>

Scudder California Tax Free Money Fund* seeks stability of capital and the
maintenance of a constant net asset value of $1.00 per share while
providing California taxpayers income exempt from both California State
personal and regular federal income taxes. The Fund is a professionally
managed portfolio of high quality, short-term California municipal
securities. There can be no assurance that the stable net asset value will
be maintained.

Scudder New York Tax Free Money Fund* seeks stability of capital and the
maintenance of a constant net asset value of $1.00 per share, while
providing New York taxpayers income exempt from New York State and New
York City personal income taxes and regular federal income tax. There can
be no assurance that the stable net asset value will be maintained.

TAX FREE

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 Medium Term Tax Free Fund seeks to provide a high level of income
free from regular federal income taxes and to limit principal fluctuation.
The Fund will invest primarily in high-grade, intermediate-term bonds.

Scudder Managed Municipal Bonds seeks to provide income exempt from
regular federal income tax primarily through investments in high-grade,
long-term municipal securities.

Scudder High Yield Tax Free Fund seeks to provide a high level of interest
income, exempt from regular federal income tax, from an actively managed
portfolio consisting primarily of investment-grade municipal securities.

Scudder California Tax Free Fund* seeks to provide California taxpayers
with income exempt from both California State personal income and regular
federal income tax. The Fund is a professionally managed portfolio
consisting primarily of California municipal securities.

Scudder Massachusetts Limited Term Tax Free Fund* seeks to provide
Massachusetts taxpayers with as high a level of income exempt from
Massachusetts personal income tax and regular federal income tax, as is
consistent with a high degree of price stability, through a professionally
managed portfolio consisting primarily of investment-grade municipal
securities.

Scudder Massachusetts Tax Free Fund* seeks to provide Massachusetts
taxpayers with income exempt from both Massachusetts personal income tax
and regular federal income tax. The Fund is a professionally managed
portfolio consisting primarily of investment-grade municipal securities.

Scudder New York Tax Free Fund* seeks to provide New York taxpayers with
income exempt from New York State and New York City personal income taxes
and regular federal income tax. The Fund is a professionally managed
portfolio consisting primarily of New York municipal securities.

Scudder Ohio Tax Free Fund* seeks to provide Ohio taxpayers with income
exempt from both Ohio personal income tax and regular federal income tax.
The Fund is a professionally managed portfolio consisting primarily of
investment-grade municipal securities.

Scudder Pennsylvania Tax Free Fund* seeks to provide Pennsylvania
taxpayers with income exempt from both Pennsylvania personal income tax
and regular federal income tax. The Fund is a professionally managed
portfolio consisting primarily of investment-grade municipal securities.

- ----------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.

24
<PAGE>

U.S. INCOME

Scudder Short Term Bond Fund seeks to provide a high level of income
consistent with a high degree of principal stability by investing
primarily in high quality short-term bonds.

Scudder Zero Coupon 2000 Fund seeks to provide as high an investment
return over a selected period as is consistent with investment in U.S.
Government securities and the minimization of reinvestment risk.

Scudder GNMA Fund seeks to provide high current income primarily from U.S.
Government guaranteed mortgage-backed (Ginnie Mae) securities.

Scudder Income Fund seeks a high level of income, consistent with the
prudent investment of capital, through a flexible investment program
emphasizing high-grade bonds.

Scudder High Yield Bond Fund seeks a high level of current income and,
secondarily, capital appreciation through investment primarily in below
investment-grade domestic debt securities.

GLOBAL INCOME

Scudder Global Bond Fund seeks to provide total return with an emphasis on
current income by investing primarily in high-grade bonds denominated in
foreign currencies and the U.S. dollar. As a secondary objective, the Fund
will seek capital appreciation.

Scudder International Bond Fund seeks to provide income primarily by
investing in a managed portfolio of high-grade international bonds. 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 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 by governments and
corporations in emerging markets.

ASSET ALLOCATION

Scudder Pathway Series: Conservative Portfolio seeks primarily current
income and secondarily long-term growth of capital. In pursuing these
objectives, the Portfolio, under normal market conditions, will invest
substantially in a select mix of Scudder bond mutual funds, but will have
some exposure to Scudder equity mutual funds.

Scudder Pathway Series: Balanced Portfolio seeks to provide investors with
a balance of growth and income by investing in a select mix of Scudder
money market, bond and equity mutual funds.

Scudder Pathway Series: Growth Portfolio seeks to provide investors with
long-term growth of capital. In pursuing this objective, the Portfolio
will, under normal market conditions, invest predominantly in a select mix
of Scudder equity mutual funds designed to provide long-term growth.

Scudder Pathway Series: International Portfolio seeks maximum total return
for investors. Total return consists of any capital appreciation plus
dividend income and interest. To achieve this objective, the Portfolio
invests in a select mix of established international and global Scudder
funds.

U.S. GROWTH AND INCOME

Scudder Balanced Fund seeks a balance of growth and income from a
diversified portfolio of equity and fixed-income securities. The Fund also
seeks long-term preservation of capital through a quality-oriented
approach that is designed to reduce risk.

25
<PAGE>

Scudder Growth and Income Fund seeks long-term growth of capital, current
income, and growth of income.

Scudder S&P 500 Index Fund seeks to provide investment results that,
before expenses, correspond to the total return of common stocks publicly
traded in the United States, as represented by the Standard & Poor's 500
Composite Stock Price Index.

U.S. GROWTH

Value

Scudder Large Company Value Fund seeks to maximize long-term capital
appreciation through a value-driven investment program.

Scudder Value Fund seeks long-term growth of capital through investment in
undervalued equity securities.

Scudder Small Company Value Fund invests for long-term growth of capital
by seeking out undervalued stocks of small U.S. companies.

Scudder Micro Cap Fund seeks long-term growth of capital by investing
primarily in a diversified portfolio of U.S. micro-capitalization
("micro-cap") common stocks.

Growth

Scudder Classic Growth Fund seeks to provide long-term growth of capital
and to keep the value of its shares more stable than other growth mutual
funds.

Scudder Large Company 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 Development Fund seeks long-term growth of capital by investing
primarily in securities of small and medium-size growth companies.

Scudder 21st Century Growth Fund seeks long-term growth of capital by
investing primarily in the securities of emerging growth companies poised
to be leaders in the 21st century.

GLOBAL GROWTH

Worldwide

Scudder Global Fund seeks long-term growth of capital through a
diversified portfolio of marketable securities, primarily equity
securities, including common stocks, preferred stocks and debt securities
convertible into common stocks.

Scudder International Growth and Income Fund seeks long-term growth of
capital and current income primarily from foreign equity securities.

Scudder International Fund seeks long-term growth of capital primarily
through a diversified portfolio of marketable foreign equity securities.

Scudder Global Discovery Fund seeks above-average capital appreciation
over the long term by investing primarily in the equity securities of
small companies located throughout the world.

26
<PAGE>

Scudder Emerging Markets Growth Fund seeks long-term growth of capital
primarily through equity investment in emerging markets around the globe.

Scudder Gold Fund seeks maximum return (principal change and income)
consistent with investing in a portfolio of gold-related equity securities
and gold.

Regional

Scudder Greater Europe Growth Fund seeks long-term growth of capital
through investments primarily in the equity securities of European
companies.

Scudder Pacific Opportunities Fund seeks long-term growth of capital
through investment primarily in the equity securities of Pacific Basin
companies, excluding Japan.

Scudder Latin America Fund seeks to provide long-term capital appreciation
through investment primarily in the securities of Latin American issuers.

The Japan Fund, Inc. seeks long-term capital appreciation by investing
primarily in equity securities (including American Depository Receipts)
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; and easy telephone
exchanges into other Scudder funds. Certain Scudder funds may not be available
for purchase or exchange. For more information, please call 1-800-225-5163.

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.

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.

27
<PAGE>

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 Internal
Revenue 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 Internal Revenue 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 Internal Revenue 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 $2,000 per individual for married couples if only one spouse has
earned income). 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.)

Value of IRA at Age 65
Assuming $2,000 Deductible Annual Contribution

-------------------------------------------------------------------------
Starting Annual Rate of Return
Age of ------------------------------------------------------
Contributions 5% 10% 15%
-------------------------------------------------------------------------
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

28
<PAGE>

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.)

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 Annual Rate of Return
Age of ------------------------------------------------------
Contributions 5% 10% 15%
-------------------------------------------------------------------------
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

Scudder Roth IRA: Individual Retirement Account

Shares of the Fund(s) may be purchased as the underlying investment for an
individual Retirement Account which meets the requirements of Section 408A of
the Internal Revenue Code.

A single individual earning below $95,000 can contribute up to $2,000 per
year to a Roth IRA. The maximum contribution amount diminishes and gradually
falls to zero for single filers with adjusted gross incomes ranging from $95,000
to $110,000. Married couples earning less than $150,000 combined, and filing
jointly, can contribute a full $4,000 per year ($2,000 per IRA). The maximum
contribution amount for married couples filing jointly phases out from $150,000
to $160,000.

An eligible individual can contribute money to a traditional IRA and a
Roth IRA as long as the total contribution to all IRAs does not exceed $2,000.
No tax deduction is allowed under Section 219 of the Internal Revenue Code for
contributions to a Roth IRA. Contributions to a Roth IRA may be made even after
the individual for whom the account is maintained has attained age 70 1/2.

All income and capital gains derived from Roth IRA investments are
reinvested and compounded tax-free. Such tax-free compounding can lead to
substantial retirement savings. No distributions are required to be taken prior
to the death of the original account holder. If a Roth IRA has been established
for a minimum of five years, distributions can be taken tax-free after reaching
age 59 1/2, for a first time home purchase ($10,000 maximum, one-time use), or
upon death or disability. All other distributions from a Roth IRA are taxable
and subject to a 10% tax penalty unless an exception applies. Exceptions to the
10% penalty include distributions that are (i) properly rolled over, (ii) one of
a series of substantially equal payments over a period that does not exceed life
expectancy (iii) exempt withdrawals of excess distributions, (iv) for deductible
medical expenses, (v) for certain health insurance premiums in the event of
unemployment, and (vi) for qualified higher education expenses.

An individual with less than $100,000 (who is not married filing
separately) can roll his or her existing IRA into a Roth IRA. However, the
individual must pay taxes on the taxable amount in his or her traditional IRA.
Individuals who complete the rollover in 1998 will be allowed to spread the tax
payments over a four year period. After 1998, all taxes on such a rollover will
have to be paid in the tax year in which the rollover is made.

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
Internal Revenue Code. In general, employees of tax-exempt organizations
described in Section 501(c)(3) of the Internal Revenue 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.

29
<PAGE>

Automatic Withdrawal Plan

Non-retirement plan shareholders may establish an Automatic Withdrawal
Plan to receive monthly, quarterly or periodic redemptions from his or her
account for any designated amount of $50 or more. Shareholders may designate
which day they want the automatic withdrawal to be processed. The check amounts
may be based on the redemption of a fixed dollar amount, fixed share amount,
percent of account value or declining balance. The Plan provides for income
dividends and capital gains distributions, if any, to be reinvested in
additional shares. Shares are then liquidated as necessary to provide for
withdrawal payments. Since the withdrawals are in amounts selected by the
investor and have no relationship to yield or income, payments received cannot
be considered as yield or income on the investment and the resulting
liquidations may deplete or possibly extinguish the initial investment and any
reinvested dividends and capital gains distributions. Requests for increases in
withdrawal amounts or to change the payee must be submitted in writing, signed
exactly as the account is registered, and contain signature guarantee(s) 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 ten days prior to the date of the first automatic
withdrawal. An Automatic Withdrawal Plan may be terminated at any time by the
shareholder, the Trust or its agent on written notice, and will be terminated
when all shares of the Fund under the Plan have been liquidated or upon receipt
by the Trust of notice of death of the shareholder.

An Automatic Withdrawal Plan request form can be obtained by calling
1-800-225-5163.

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.

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<PAGE>

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 Savings Incentive Match Plans for Employees: SIMPLE IRA'S

Shares of the Fund may be purchased as the underlying investment for a
"SIMPLE IRA." A SIMPLE IRA is an IRA into which both an individual and the
individual's employer may make contributions. The individual may elect to make
pre-tax contributions, calculated as a percentage of compensation, to a SIMPLE
IRA, up to $6,000 a year. Subject to certain limits, the employer may either
match a portion of your contributions, or may make a contribution equal to 2% of
the employee's compensation without regard to the amount the employee
contributes under the SIMPLE IRA. Individuals will be immediately 100% vested in
all contributions made to a SIMPLE IRA.

If amounts are distributed from a SIMPLE IRA account during the two year
period beginning on the date the employee first participates in the SIMPLE
salary reduction arrangement, a 25% penalty tax will be imposed on such
distribution. Also during that two year period, the SIMPLE IRA account can be
rolled over tax-free only to another SIMPLE IRA account. After that two year
period has passed, distributions from a SIMPLE IRA instead will be subject
generally to the rules applicable to other IRAs; for example, they may be rolled
over tax-free into any individual retirement plan, they will be subject to the
10% penalty tax on early distributions that are made before the individual
reaches age 59-1/2, and they will be fully taxed when withdrawn.

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.
The Fund may allow 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 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 investment company taxable income and any
net realized capital gains resulting from Fund investment activity in November
or December each year. 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.

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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 will be 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 and the life of the Fund, 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.

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.

Cumulative Total Return for the periods ended August 31, 1997*

One Year Life of Fund

__________ ________

(1) For the period October 6, 1995 (commencement of operations) to
August 31, 1997
* If the Adviser had not absorbed a portion of Fund expenses and had
imposed a full management fee, cumulative total return would have
been approximately _________.

NEEDS TO BE UPDATED

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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.

Quotations of the Fund's Performance are historical and are not intended
to indicate future performance. An investor's share 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 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)(Directors) 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.

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.

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<PAGE>

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 for 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.

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.

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<PAGE>

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 Money Fund Report, a weekly publication of IBC Financial Data, Inc.,
reporting on the performance of the nation's money market funds, summarizing
money market fund activity and including certain averages as performance
benchmarks, specifically "IBC's Money Fund Average," and "IBC'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 Business 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.

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.

SmartMoney, 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.

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<PAGE>

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 news 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.

The 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 issued 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, as amended. 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 five
series, Scudder Development Fund, Scudder Micro Cap Fund, Scudder 21st Century
Growth Fund, Scudder Small Company Value Fund and Scudder Financial Services
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 liquidation. 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
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.

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<PAGE>

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. Nothing in the Declaration of Trust, however,
protects or indemnifies a Trustee or officer against any liability to which that
person would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct of
that person's office.

INVESTMENT ADVISER

(See "Fund organization--Investment adviser" in the Fund's prospectus.)

Scudder Kemper Investments, Inc. (the "Adviser"), an investment counsel
firm, acts as investment adviser to the Fund. Scudder, Stevens & Clark, Inc.
("Scudder"), the predecessor organization to the Adviser, 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.

On June 26, 1997, Scudder entered into an agreement with Zurich Insurance
Company ("Zurich") pursuant to which Scudder and Zurich agreed to form an
alliance. On November __, 1997, Zurich acquired a majority interest in Scudder,
and Zurich Kemper Investments, Inc., a Zurich subsidiary, became part of
Scudder. Scudder's name has been changed to Scudder Kemper Investments, Inc.

Founded in 1872, Zurich is a multinational, public corporation organized
under the laws of Switzerland. Its home office is located at Mythenquai 2, 8002
Zurich, Switzerland. Historically, Zurich's earnings have resulted from its
operations as an insurer as well as from its ownership of its subsidiaries and
affiliated companies (the "Zurich Insurance Group"). Zurich and the Zurich
Insurance Group provide an extensive range of insurance products and services
and have branch offices and subsidiaries in more than 40 countries throughout
the world. Zurich Insurance Group is particularly strong in the insurance of
international companies and organizations. Over the past few years, Zurich's
global presence, particularly in the United States, has been strengthened by
means of selective acquisitions.

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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 Korea Fund, Inc., The Japan Fund, Inc.,
The Latin America Dollar Income Fund, Inc. and Scudder Spain and Portugal 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 $13 billion and includes the AARP Growth
Trust, AARP Income Trust, AARP Tax Free Income Trust, AARP Managed Investment
Portfolios Trust and AARP Cash Investment Funds.

Pursuant to an Agreement between Scudder, Stevens & Clark, Inc. and AMA
Solutions, Inc., a subsidiary of the American Medical Association (the "AMA"),
dated May 9, 1997, Scudder has agreed, subject to applicable state regulations,
to pay AMA Solutions, Inc. royalties in an amount equal to 5% of the management
fee received by Scudder with respect to assets invested by AMA members in
Scudder funds in connection with the AMA InvestmentLink(SM) Program. Scudder
will also pay AMA Solutions, Inc. a general monthly fee, currently in the amount
of $833. The AMA and AMA Solutions, Inc. are not engaged in the business of
providing investment advice and neither is registered as an investment adviser
or broker/dealer under federal securities laws. Any person who participates in
the AMA InvestmentLink(SM) Program will be a customer of Scudder (or of a
subsidiary thereof) and not the AMA or AMA Solutions, Inc. AMA
InvestmentLink(SM) is a service mark of AMA Solutions, Inc.

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 wide variety of sources,
including brokers and dealers who may execute portfolio transactions for the
Fund and other clients of the Adviser, but conclusions are based primarily on
investigations and critical analyses by the Adviser's 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.

An investment management agreement (the "Agreement") dated October 6, 1995
was approved by the Trustees of the Fund on September 6, 1995 and by the initial
shareholder of the Fund on October 4, 1995. Because the transaction between
Scudder and Zurich resulted in the assignment of the Fund's investment
management agreement with Scudder, that agreement was deemed to be automatically
terminated at the consummation of the transaction. In anticipation of the
transaction, however, a new investment management agreement between the Fund and
the Adviser was approved by the Fund's Trustees. At the special meeting of the
Fund's stockholders held on October 27, 1997, the stockholders also approved a
proposed new investment management agreement. The new investment management
agreement (the "Agreement") will become effective as of the consummation of
Scudder's change in control, but in no event later than February 28, 1998, and
will be in effect for an initial term ending on September 30, 1998. The
Agreement is in all material respects on the same terms as the previous
investment management agreement which it supersedes. The Agreement incorporates
conforming changes which promote consistency among all of the funds advised by
the Adviser and which permit ease of administration. The Agreement will continue
in effect 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

38
<PAGE>

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, the Code 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 0.75% of the Fund's average daily net assets payable monthly, provided the
Fund will make such interim payments as may be requested by the Adviser not to
exceed 75% of the amount of the fee then accrued on the books of the Fund and
unpaid. The Adviser has agreed until December 31, 1997 to maintain the total
annualized expenses of the Fund at no more than 1.50% of the average daily net
assets of the Fund. For the period October 6, 1995 (commencement of operations)
to August 31, 1997, the Adviser did not impose any portion of its management fee
amounting to $______. [TO BE UPDATED]

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 identifies the Adviser as the exclusive licensee of the
rights to use and sublicense the names "Scudder," "Scudder Kemper Investments,
Inc." and "Scudder Stevens and Clark, Inc." (together, the "Scudder Marks").
Under this license, the Trust, with respect to the Fund, has the non-exclusive
right to use and sublicense the

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Scudder name and marks as part of its name, and to use the Scudder Marks in the
Trust's investment products and services.

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
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.

TRUSTEES AND OFFICERS

Position with
Underwriter,
Name Position Scudder Investor
and Address with Fund Principal Occupation** Services, Inc.
- ----------- --------- ---------------------- --------------

Daniel Pierce+* (63) President Chairman of the Board Vice President,
and Trustee and Managing Director Director and
of Scudder, Stevens & Assistant Treasurer
Clark, Inc.

Paul Bancroft III Trustee Venture Capitalist --
(67) and Consultant;
1120 Cheston Lane Retired President,
Queenstown, MD 21658 Chief Executive
Officer and Director
of Bessemer
Securities Corporation

Sheryle J. Bolton Trustee Consultant; Chief --
(51) Executive Officer,
560 White Plains Scientific Learning
Road Corporation
Tarrytown, NY 10591

William T. Burgin Trustee General Partner, --
(54) Bessemer Venture
P. O. Box 580 Partners
Dover, MA
02030-0580

40
<PAGE>

Position with
Underwriter,
Name Position Scudder Investor
and Address with Fund Principal Occupation** Services, Inc.
- ----------- --------- ---------------------- --------------

Thomas J. Devine Trustee Consultant --
(70)
641 Lexington Avenue,
28th Floor
New York, NY 10022

Keith R. Fox (43) Trustee Private Equity --
10 East 53rd Street Investor,
New York, NY 10022 Exeter Capital
Management
Corporation

William H. Luers Trustee President, The --
(68) Metropolitan Museum
993 Fifth Avenue of Art
New York, NY 10028

Wilson Nolen (71) Trustee Consultant (1989 --
1120 Fifth Avenue until present);
New York, NY 10128 Corporate Vice
President of Becton,
Dickinson & Company,
manufacturer of medical
and scientific
products (until June
1989)

Kathryn L. Quirk++#* Trustee, Managing Director of Vice President
(44) Vice Scudder, Stevens &
President Clark, Inc.
and
Assistant
Secretary

Robert W. Lear (80) Honorary Executive-in-Residence, --
429 Silvermine Road Trustee Visiting Professor,
New Canaan, CT 06840 Columbia University
Graduate School of
Business

Robert G. Stone, Jr. Honorary Chairman of the Board --
(74) Trustee and Director, Kirby
405 Lexington Avenue, Corporation (inland
39th Floor and offshore marine
New York, NY 10174 transportation and
diesel repairs)

Edmund R. Swanberg++ Honorary Advisory Managing --
(76) Trustee Director of Scudder,
Stevens & Clark, Inc.

Peter Chin++ (55) Vice Principal of Scudder, --
President Stevens & Clark, Inc.

James M. Eysenbach@ Vice Vice President of --
(35) President Scudder, Stevens &
Clark, Inc.

Philip S. Fortuna++ Vice Managing Director of --
(40) President Scudder, Stevens &
Clark, Inc.

Jerard K. Hartman++ Vice Managing Director of --
(64) President Scudder, Stevens &
Clark, Inc.

41
<PAGE>

Position with
Underwriter,
Name Position Scudder Investor
and Address with Fund Principal Occupation** Services, Inc.
- ----------- --------- ---------------------- --------------

Thomas W. Joseph+ Vice Principal of Scudder, Vice President,
(58) President Stevens & Clark, Inc. Director, Treasurer
and Assistant Clerk

Thomas F. McDonough+ Vice Principal of Scudder, Clerk
(50) President Stevens & Clark, Inc.
and
Secretary

Pamela A. McGrath+ Vice Managing Director of --
(44) President Scudder, Stevens &
and Clark, Inc.
Treasurer

Roy C. McKay++ (54) Vice Managing Director of --
President Scudder, Stevens &
Clark, Inc.

Edward J. Vice Principal of Scudder, Assistant Treasurer
O'Connell++ (52) President Stevens & Clark, Inc.
and
Assistant
Treasurer

Richard W. Desmond++ Assistant Vice President of Vice President
(61) Secretary Scudder, Stevens &
Clark, Inc.

* Messrs. Lee, Pierce and Ms. Quirk 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 1940 Act, 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.
# Mr. Pierce and Ms. Quirk 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
@ Address: 101 California Street, Suite 4100, San Francisco, CA 94111-5886

The Trustees and Officers of the Fund also serve in similar capacities
with other Scudder Funds.

To the knowledge of the Trust, as of November 30, 1997, all Directors and
officers as a group owned beneficially (as that term is defined in Section 13(d)
of the Securities Exchange Act of 1934) _______ shares, or ____% of the shares
of the Fund.

Certain accounts for which the Adviser acts as investment adviser owned
_________ shares in the aggregate, or _____% of the outstanding shares on
November 30, 1997. The Adviser may be deemed to be the beneficial owner of such
shares but disclaims any beneficial ownership in such shares.

To the knowledge of the Trust, as of November 30, 1997, no person owned
beneficially more than 5% of the Fund's outstanding shares except as stated
above.

REMUNERATION

Responsibilities of the Board--Board and Committee Meetings

The Board of Trustees is responsible for the general oversight of each
Fund's business. A majority of the Board's members are not affiliated with the
Adviser. These "Independent Trustees" have primary responsibility for assuring
that each Fund is managed in the best interests of its shareholders.

42
<PAGE>

The Board of Trustees meets at least quarterly to review the investment
performance of each Fund and other operational matters, including policies and
procedures designated to assure compliance with various regulatory requirements.
At least annually, the Independent Trustees review the fees paid to the Adviser
and its affiliates for investment advisory services and other administrative and
shareholder services. In this regard, they evaluate, among other things, each
Fund's investment performance, the quality and efficiency of the various other
services provided, costs incurred by the Adviser and its affiliates, and
comparative information regarding fees and expenses of competitive funds. They
are assisted in this process by the Funds' independent public accountants and by
independent legal counsel selected by the Independent Trustees.

All of the Independent Trustees serve on the Committee on Independent
Trustees, which nominates Independent Trustees and considers other related
matters, and the Audit Committee, which selects each Fund's independent public
accountants and reviews accounting policies and controls.

The Independent Trustees met 16 times during 1996, including Board and
Committee meetings and meetings to review each Fund's contractual arrangements
as described above.

Compensation of Officers and Trustees

The Independent Trustees receive the following compensation from each
Fund: an annual trustee's fee of $4,000; a fee of $400 for attendance at each
Board meeting, audit committee meeting, or other meeting held for the purposes
of considering arrangements between each Fund and the Adviser or any affiliate
of the Adviser; $150 for any other committee meeting (although in some cases the
Independent Trustees have waived committee meeting fees); and reimbursement of
expenses incurred for travel to and from Board Meetings. No additional
compensation is paid to any Independent Trustee for travel time to meetings or
other activities.

The Independent Trustees may also serve in the same capacity for other
funds managed by the Adviser. These funds differ broadly in type and complexity
and in some cases have substantially different Trustee fee schedules. The
following table shows the aggregate compensation received by each Independent
Trustee during 1996 from the Trust and from all of Scudder funds as a group.

Name Scudder Securities Trust* All Scudder Funds
---- ------------------------- -----------------

Paul Bancroft III, $17,572 $143,358 (16 funds)
Trustee
Sheryle J. Bolton, $0 $71,200 (9 funds)
Trustee
William T. Burgin, ____ ____ ____
Trustee
Thomas J. Devine, $18,672 $156,058 (18 funds)
Trustee
Keith R. Fox, $18,372 $87,508 (10 funds)
Trustee
Robert W. Lear, ____ $33,049 (11 funds)
Honorary Trustee
William H. Luers, ____ $100,486 (11 funds)
Trustee
Wilson Nolen, $19,172 $165,608 (17 funds)
Trustee
Dr. Gordon Shillinglaw, $10,222 $119,918 (19 funds)
Trustee
Robert G. Stone, Jr.,** $1,272 $12,272** (2 funds)
Honorary Trustee

43
<PAGE>

* Scudder Securities Trust consists of seven funds: Scudder Development Fund,
Scudder Small Company Value Fund, Scudder Micro Cap Fund, Scudder 21st
Century Growth Fund, Scudder Financial Services Fund, Scudder Health Care
Fund and Scudder Technology Fund. Scudder Micro Cap Fund commenced
operations on August 12, 1996. Scudder 21st Century Growth Fund commenced
operations on September 9, 1996. Scudder Financial Services Fund commenced
operations on September 30, 1997. As of January 1, 1998 Scudder Health
Care Fund and Scudder Technology Fund each had not commenced operations.

** This amount does not reflect $6,189 in retirement benefits accrued as part
of Fund Complex expenses, and $6,000 in estimated annual benefits payable
upon retirement. Retirement benefits accrued and proposed are to be paid to
Mr. Stone as additional compensation for serving on the Board of The Japan
Fund, Inc.

DISTRIBUTOR

The Trust has an underwriting agreement with Scudder Investor Services,
Inc. (the "Distributor"), a Massachusetts corporation, which is a subsidiary of
the Adviser, a Delaware corporation. The Trust's underwriting agreement dated
September 30, 1995 will remain in effect until September 30, 1998 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 10, 1997.

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
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.

44
<PAGE>

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 percent 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. From November 1, 1995 through August 31, 1996 the
Fund incurred $6,985 of net realized capital losses which the Fund intends to
elect to defer and treat as arising in the fiscal year ending August 31, 1997.

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.

To the extent that dividends from domestic corporations 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.

Properly designated 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.

45
<PAGE>

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 of up to
$2,000 or, if less, the amount of the individual's earned income (up to $2,000
per individual for married couples if only one spouse has earned income) 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 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. (Different provisions may apply to Roth IRAs. See discussion above under
Special Plan Accounts.)

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.

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 and 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. Under present law, it does not appear that any long term capital gains
attributable to Section 1256 contracts will be eligible for the 20% capital
gains vote. Moreover, 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 capital
gain or loss. 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.

46
<PAGE>

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 nonequity 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.

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
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.

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.

47
<PAGE>

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
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.

In the fiscal period ended August 31, 1997, the Fund paid brokerage
commissions of $_______. For the fiscal period ended August 31, 1997, $______
(_____% 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.

Portfolio Turnover

The Fund's average annual portfolio turnover rate is the ratio of the
lesser of sales or purchases to the monthly average value of the portfolio
securities owned during the year, excluding all securities with maturities or
expiration dates at the time of acquisition of one year or less. A higher rate
involves greater brokerage transaction expenses to the Fund and may result in
the realization of net capital gains, which would be taxable to shareholders
when distributed. Purchases and sales are made for the Fund's portfolio whenever
necessary, in management's opinion, to

48
<PAGE>

meet the Fund's objective. For the fiscal period ended August 31, 1997 the
portfolio turnover rate was ___%.

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, Martin Luther King, Jr. 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 Nasdaq
Stock Market (Nasdaq) system is valued at its most recent sale price. Lacking
any sales, the security is valued at the most recent bid quotation. The value of
an equity security not quoted on the Nasdaq , 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 shall be 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
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 currency exchange rates as of
the date on which the net asset value per share is to be determined.

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.

49
<PAGE>

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.

The name "Scudder Securities Trust" is a 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 of the Fund, 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 Fund has a fiscal year end of August 31.

The CUSIP number of the Fund is 811196-20-3.

The Fund employs State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110 as custodian.

The firm of Dechert Price & Rhoads is counsel to the Fund.

Costs of $23,751.06 incurred by the Fund in conjunction with its
organization are amortized over the five year period beginning October 6, 1995.

Scudder Fund Accounting Corporation ("SFAC"), Two International Place,
Boston, Massachusetts, 02110-4103, a subsidiary of the Adviser, computes net
asset value for the Fund. The Fund pays SFAC 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. For the period October 6, 1995
(commencement of operations) to August 31, 1996, SFAC did not impose a portion
of their fee amounting to $31,965 and the fee imposed amounted to $36,531. For
the fiscal year ended August 31, 1997, the amount charged to the Fund by SFAC
aggregated $57,935, of which $5,139 was unpaid at August 31, 1997.

50
<PAGE>

Scudder Service Corporation ("SSC"), P.O. Box 2291, Boston, Massachusetts
02107-2291, a subsidiary of the Adviser, is the transfer and dividend paying
agent for the Fund. The Fund pays SSC an annual fee for each account maintained
for a participant. For the period October 6, 1995 (commencement of operations)
to August 31, 1996, SSC did not impose a portion of their fee amounting to
$50,693, and the fee imposed amounted to $57,935. For the year ended August 31,
1997, the amount charged by SSC aggregated $285,621 of which $31,498 was unpaid
at August 31, 1997.

Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the period October 6, 1995
(commencement of operations) to August 31,1996, STC did not impose a portion of
their fee amounting to $1,082, and the fee imposed amounted to $1,236. For the
year ended August 31, 1997, the amount charged to the Fund by STC aggregated
$20,160, of which $3,172 was unpaid at August 31, 1997.

The Fund's prospectus and this Statement of Additional Information omit
certain information contained in the Registration Statement 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
Small Company Value Fund, which are included on pages 17-23, inclusive, in the
Annual Report to the Shareholders of the Fund dated August 31, 1997, together
with the Report of the 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.

51
<PAGE>

This prospectus sets forth concisely the information about Scudder Micro Cap
Fund, a diversified 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.

Contents--see page 4.

- ---------------------------------------
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
- ---------------------------------------

[RECYCLE LOGO] Printed on recycled paper

[GRAPHIC OMITTED]

[Scudder LOGO]

Scudder
Micro Cap
Fund

Prospectus
January 1, 1998

A pure no-load(TM) (no sales charges) mutual fund which seeks long-term growth
of capital by investing primarily in a diversified portfolio of U.S. micro-cap
stocks.

Due to the size of the Fund's assets and investment considerations, Scudder
Micro Cap Fund is presently closed to new individual investors.

<PAGE>

- ---------------------------------------
Expense information
- ---------------------------------------

- --------------------------------------------------------------------------------
How to compare a Scudder Family of Funds pure no-load(TM) fund

This information is designed to help you understand the various costs and
expenses of investing in Scudder Micro Cap 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.

Investment management fee 0.75%**
12b-1 fees NONE
Other expenses 1.44%
----
Total Fund operating expenses 2.19%**
====

Example

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$22 $69 $117 $252

** Until December 31, 1997, the Adviser waived a portion of its investment
management fee to the extent necessary so that the total annualized expenses
of the Fund did not exceed 1.75% of average daily net assets. Expenses shown
above are restated to reflect what the Fund would have paid during the fiscal
year ended August 31, 1997 absent such waiver.

- --------------------------------------------------------------------------------

- --
2
<PAGE>

- ---------------------------------------
Financial highlights
- ---------------------------------------

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 August 31, 1997, which may be obtained without charge
by writing or calling Scudder Investor Services, Inc.

<TABLE>
<CAPTION>
For the Period
August 12, 1996
Year Ended (commencement of
August 31, operations) to
l997 August 31, 1996
- ---------------------------------------------------------------------------------------------------
-----------------------------
<S> <C> <C>
Net asset value, beginning of period ................................ $12.07 $12.00
-----------------------------
Income from investment operations:
Net investment income (loss) ........................................ (.03) .01
Net realized and unrealized gain on investments ..................... 4.74 .06
-----------------------------
Total from investment operations .................................... 4.71 .07
-----------------------------
Less distributions from net investment income ....................... (.02) --
Redemption fees ..................................................... .01 --
-----------------------------
Net asset value, end of period ...................................... $16.77 $12.07
-----------------------------
- ---------------------------------------------------------------------------------------------------
Total Return (%) (b) ................................................ 39.10(c) .58(c)**
Ratios and Supplemental Data
Net assets, end of period ($ millions) .............................. 92 8
Ratio of operating expenses, net to average daily net assets (%) .... 1.75 1.75*
Ratio of operating expenses before expense reductions,
to average daily net assets (%) ................................... 2.19 22.06*
Ratio of net investment income (loss) to average daily net assets (%) (.21) 2.58*
Portfolio turnover rate (%) ......................................... 17.13 None
Average commission rate paid ........................................ $.0318 $.0323
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been reduced.
(c) Total return does not reflect the effect to the shareholder of the 1%
redemption fee on shares held less than one year.
* Annualized
** Not annualized

- --------------------------------------------------------------------------------

--
3
<PAGE>

- ---------------------------------------
A message from the President
- ---------------------------------------

[PHOTO OMITTED]

Edmond D. Villani, President
and CEO, Scudder Kemper
Investments, Inc.

/s/ Edmond D. Villani

- ---------------------------------------
Scudder Micro Cap Fund
- ---------------------------------------

Investment objective
o long-term growth of capital by investing primarily in a diversified
portfolio of U.S. micro-cap stocks

Investment characteristics
o a diversified, actively managed portfolio of domestic micro-capitalization
stocks

o designed as a long-term investment for above-average growth potential and
enhanced investor portfolio diversification

o a pure no-load(TM) fund with no sales charges, commissions or 12b-1 fees

o a 1% redemption and exchange fee on shares held less than one year,
retained by the Fund for the benefit of remaining shareholders

- ---------------------------------------
Contents
- ---------------------------------------

Investment objective and policies .......................................... 5

Why invest in the Fund? .................................................... 6

U.S. investment experience ................................................. 6

What are the Fund's special risks? ......................................... 7

Additional information about policies
and investments .......................................................... 7

Distribution and performance information ................................... 10

Fund organization .......................................................... 10

Transaction information .................................................... 11

Shareholder benefits ....................................................... 16

Purchases .................................................................. 18

Exchanges and redemptions .................................................. 19

Trustees and Officers ...................................................... 21

Investment products and services ........................................... 22

How to contact Scudder ..................................................... 23

- --
4
<PAGE>

- ---------------------------------------
Investment objective and policies
- ---------------------------------------

Scudder Micro Cap Fund (the "Fund"), a diversified series of Scudder Securities
Trust, seeks long-term growth of capital. The Fund pursues its investment
objective by investing primarily in a diversified portfolio of U.S.
micro-capitalization ("micro-cap") common stocks. These domestic securities
provide little or no current income but, in the opinion of the Fund's investment
adviser, Scudder Kemper Investments, Inc. (the "Adviser"), offer substantial
long-term appreciation potential as well as the opportunity to enhance the
overall diversification of an investor's portfolio.

Due to the inherent business characteristics and risks of small companies, along
with the relatively limited trading market for micro-cap stocks, the Fund's
share price can experience periods of significant volatility. As a result, the
Fund should be considered a long-term investment and only one part of a
well-diversified personal investment portfolio. To encourage a long-term
investment holding period and to facilitate portfolio management, a 1%
redemption and exchange fee, described in greater detail below, is payable to
the Fund for the benefit of remaining shareholders on shares held less than one
year.

Due to investment considerations, the Fund is presently closed to new individual
investors. Current individual shareholders of the Fund are able to continue to
invest in the Fund. Further, the Fund remains open to investment through certain
retirement plans.

The Trustees may determine to reopen the Fund at some point in the future based
on market conditions and other factors.

Investments

The Fund seeks to provide long-term growth of capital by investing, under normal
market conditions, at least 80% of its assets in common stocks issued by U.S.
micro-cap companies. The Fund will typically invest in companies that, at the
time of purchase, are smaller than the smallest stocks in the Russell 2000 Index
at its annual reconstitution. The median market capitalization (i.e., current
stock price times shares outstanding) of the portfolio is not expected to exceed
$125 million.

While the Fund invests predominantly in common stocks, it can purchase other
types of securities, including preferred stocks, convertible or non-convertible
securities, rights, warrants, and restricted and illiquid securities. Securities
may be listed on national exchanges or traded over-the-counter. The Fund may
invest up to 20% of its assets in U.S. Treasury securities, agency and
instrumentality obligations, may enter into repurchase agreements and reverse
repurchase agreements and may engage in strategic transactions to increase stock
market participation, enhance liquidity and manage transaction costs. The Fund
currently intends to borrow only for temporary or emergency purposes, such as
providing for redemptions or distributions and not for investment leverage
purposes.

--
5
<PAGE>

Systematic investment approach

The Fund is actively managed using a quantitative, value-oriented investment
approach. The Adviser selects investments from among the more than 4,000
publicly-traded U.S. micro-cap stocks based on a proprietary, quantitative
investment strategy. Using this approach, the Adviser looks for companies
selling at prices that, in the opinion of the Adviser, do not reflect adequately
their long-term business potential. Because of their small size, and less
frequent trading activity, the companies represented in the Fund are often
overlooked or not closely followed by investors. Accordingly, their prices can
rise either as a result of improved business fundamentals, particularly when
earnings grow faster than general expectations, or as more investors appreciate
the full extent of a company's underlying business potential. The Fund seeks to
avoid what are judged in the opinion of the Adviser to be overpriced companies
with high investment risk and deteriorating fundamentals.

Portfolio diversification is an important component of the investment management
process. To help manage the Fund's above-average investment risk and improve
liquidity, the Adviser expects to invest in hundreds of small, publicly-traded
companies, representing a broad cross-section of U.S. industries. The Fund's
systematic, value-oriented approach to investing is designed to mitigate
volatility of the Fund's share price relative to the micro-capitalization sector
of the U.S. stock market. Risk is further managed by employing specialized
portfolio management and trading techniques. Despite these techniques, the
Fund's share price can move up and down significantly, even over short periods
of time.

- ---------------------------------------
Why invest in the Fund?
- ---------------------------------------

Scudder Micro Cap Fund invests in some of America's smallest, most dynamic
publicly-traded companies. These emerging growth companies are typically in the
early stages of a long-term development cycle. In many cases, these companies
offer unique products, services or technologies and often serve special or
expanding market niches. Despite these benefits, these firms are often
overlooked or under- appreciated, thus in the opinion of the Fund's Adviser,
they offer substantial appreciation potential for meeting retirement and other
long-term goals.

While there are special risks associated with micro-cap investing, an investment
in the Fund can improve the diversification of a personal investment portfolio
already holding other types of securities, including other types of U.S. stocks
or stock mutual funds. Historically, the prices of U.S. micro-cap stocks have
had relatively low correlation with the prices of mid-cap or large-cap stocks.
Thus, Fund shares can add balance to a personal investment portfolio.

The Fund offers professional investment management and recordkeeping
convenience, which may be particularly valuable in the smaller sectors of the
U.S. stock market. Investors interested in buying and selling micro-cap issues
directly may find it a challenge to collect and process data on these companies,
receive up-to-date financial information, and transact in securities at
favorable prices. The Adviser assumes these varied responsibilities on behalf of
shareholders.

- ---------------------------------------
U.S. investment experience
- ---------------------------------------

- --
6
<PAGE>

- ---------------------------------------
What are the Fund's special risks?
- ---------------------------------------

While, historically, micro-cap company stocks have outperformed the stocks of
large companies, the former have customarily involved more investment risk as
well. Micro-cap companies may have limited product lines, markets or financial
resources; may lack management depth or experience; and may be more vulnerable
to adverse general market or economic developments than large companies. Some of
the companies in which the Fund may invest may distribute, sell or produce
products which have recently been brought to market and may be dependent on key
personnel.

The prices of small company securities are often more volatile than prices
associated with large company issues, and can display abrupt or erratic
movements at times, due to limited trading volumes and less publicly available
information.

Also, because micro-cap companies normally have fewer shares outstanding and
these shares trade less frequently than large companies, it may be more
difficult for the Fund to buy and sell significant amounts of such shares
without an unfavorable impact on prevailing market prices.

- ---------------------------------------
Additional information about
policies and investments
- ---------------------------------------

Investment restrictions

A complete description of these and other policies and restrictions is contained
under "Investment Restrictions" in the Fund's Statement of Additional
Information.

Common stocks

Under normal circumstances, the Fund invests at least 80% of its assets in
common stocks issued by U.S. micro-cap companies. Common stock is issued by
companies to raise cash for business purposes and represents a proportionate
interest in the issuing companies. Therefore, the Fund participates in the
success or failure of any company in which it holds stock. The market values of
common stocks can fluctuate significantly, reflecting the business performance
of the issuing company, investor perception and general economic or financial
market movements. Smaller companies are especially sensitive to these factors
and may even become valueless. Despite the risk of price volatility, however,
common stocks also offer the greatest potential for gain on investment, compared
to

--
7

<PAGE>

other classes of financial assets such as bonds or cash equivalents.

Debt securities

Consistent with the Fund's investment objective of long-term capital growth, the
Fund may purchase investment-grade debt securities, which are rated Aaa, Aa, A
or Baa by Moody's Investor Services, Inc. ("Moody's"), or AAA, AA, A or BBB by
Standard & Poor's Corporation ("S&P") or, if unrated, of equivalent quality as
determined by the Adviser. Receipt of income from debt securities is incidental
to the Fund's objective of long-term growth of capital. (See "Risk factors.")

Convertible securities

Prior to their conversion, convertible securities may have characteristics
similar to nonconvertible securities of the same type.

Repurchase agreements

Illiquid securities

Strategic Transactions and derivatives

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 market 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, 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

- --
8
<PAGE>

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.

Risk factors

--
9
<PAGE>

- ---------------------------------------
Distribution and performance
information
- ---------------------------------------

Dividends and capital gains distributions

Generally, dividends from net investment income are taxable to shareholders as
ordinary income. Long-term capital gains distributions, if any, are taxable as
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

- ---------------------------------------
Fund organization
- ---------------------------------------

Scudder Micro Cap Fund is a diversified series of Scudder Securities Trust (the
"Trust"), formerly known as 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.

- --
10
<PAGE>

Investment adviser

The Fund retains the investment management firm of Scudder Kemper Investments,
Inc., a Delaware corporation formerly known as Scudder, Stevens & Clark, Inc.,
to manage its daily investment and business affairs subject to the policies
established by the Board of Trustees. The Trustees have overall responsibility
for the management of the Fund under Massachusetts law.

The Fund pays the Adviser an annual fee of 0.75% of the Fund's average daily net
assets. The fee is payable monthly, provided that the Fund will make such
interim payments as may be requested by the Adviser not to exceed 75% of the
amount of the fee then accrued on the books of the Fund and unpaid. The fee is
higher than the average management fee, but not necessarily higher than that
charged by funds with a similar investment objective.

The Adviser agreed to maintain the annualized expenses of the Fund at no more
than 1.75% of the average daily net assets of the Fund until December 31, 1997.
As a result of this waiver, the Adviser received an investment management fee of
0.31% of the Fund's average daily net assets for the fiscal year ended August
31, 1997.

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 Kemper Investments, Inc. is located at 345 Park Avenue, New York, New
York.

Transfer agent

Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts 02107-2291, a
subsidiary of the Adviser, is the transfer, shareholder servicing and
dividend-paying agent for the Fund.

Underwriter

Custodian

State Street Bank and Trust Company is the Fund's custodian.

Fund accounting agent

Scudder Fund Accounting Corporation, a 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 receives the purchase request in good order. Purchases
are made in full and fractional shares. (See "Share price.")

--
11
<PAGE>

Redemption requests by telephone prior to the expiration of the seven-day period
will not be accepted.

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.

Exchanging and redeeming shares

- --
12
<PAGE>

plans, Keogh accounts, and Profit Sharing and Money Purchase Pension Plans.
However, if such shares are purchased through a broker, financial institution or
recordkeeper maintaining an omnibus account for the shares, such waiver may not
apply. (Before purchasing shares, please check with your account representative
concerning the availability of the fee waiver.) In addition, this waiver does
not apply to any IRA or SEP-IRA accounts. This fee is intended to encourage
long-term investment in the Fund, to avoid transaction and other expenses caused
by early redemptions, and to facilitate portfolio management. The fee is not a
deferred sales charge, is not a commission paid to the Adviser or its
subsidiaries, and does not benefit the Adviser in any way. The Fund reserves the
right to modify the terms of or terminate this fee at any time.

The fee applies to redemptions from the Fund and exchanges to other Scudder
funds, but not to dividend or capital gains distributions which have been
automatically reinvested in the Fund. The fee is applied to the shares being
redeemed or exchanged in the order in which they were purchased. See "Exchanges
and Redemptions" in the Fund's Statement of Additional Information for a more
detailed description of the redemption fee.

You can also make exchanges among your Scudder fund accounts on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.

Redemptions 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.

You can also make redemptions from your Scudder fund account on SAIL by calling
1-800-343-2890.

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.

--
13

<PAGE>

"QuickSell" transactions are not available for Scudder IRA accounts and most
other retirement plan accounts.

Telephone transactions

Share price

Processing time

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.

Purchase restrictions

Purchases and sales should be made for long-term investment purposes only. The
Fund and Scudder Investor Services, Inc. each reserves the right to reject
purchases of Fund shares (including exchanges) for any reason including when a
pattern of frequent purchases and sales made in

- --
14
<PAGE>

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

Minimum balances

Shareholders should maintain a share balance worth at least $2,500, which amount
may be changed by the Board of Trustees. Scudder retirement plans and certain
other accounts have similar or lower minimum balance requirements. A shareholder
may open an account with at least $1,000, if an automatic investment plan (AIP)
of $100/month is established.

Shareholders who maintain a non-fiduciary account balance of less than $2,500 in
the Fund, without establishing an AIP, will be assessed an annual $10.00 per
fund charge with the fee to be paid to the Fund. The $10.00 charge will not
apply to shareholders with a combined household account balance in any of the
Scudder Funds of $25,000 or more. The Fund reserves the right, following 60
days' written notice to shareholders, to redeem all shares in accounts below
$250, including accounts of new investors, where a reduction in value has
occurred due to a redemption or exchange out of the account. The Fund will mail
the proceeds of the redeemed account to the shareholder. Reductions in value
that result solely from market activity will not trigger an involuntary
redemption. Retirement accounts and certain other accounts will not be assessed
the $10.00 charge or be subject to automatic liquidation. Please refer to
"Exchanges and Redemptions--Other information" in the Fund's Statement of
Additional Information for more information.

Third party transactions

Redemption-in-kind

--
15
<PAGE>

net asset value of the Fund at the beginning of the period.

- ---------------------------------------
Shareholder benefits
- ---------------------------------------

Experienced professional management

A team approach to investing

Scudder Micro Cap Fund is managed by a team of Scudder Kemper 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 the Adviser's large
staff of quantitative analysts, traders and other investment specialists who
work in the Adviser's offices across the United States and abroad. Scudder
Kemper believes its team approach benefits Fund investors by bringing together
many disciplines and leveraging the Adviser's extensive resources.

Co-lead Portfolio Managers Philip S. Fortuna and James M. Eysenbach have the
responsibility for the Fund's day-to-day management and investment strategies.
Mr. Fortuna joined the Adviser in 1986 as a manager of institutional equity
accounts, served as director of quantitative services from 1987 to 1993 and
director of investment operations from 1993 to 1995. From 1995 to 1997 he was
involved in global planning and new product development in addition to his
portfolio management responsibilities. Mr. Fortuna is currently director of the
Adviser's quantitative group.

Calvin S. Young serves as Portfolio Manager for the Fund. Mr. Young joined the
Adviser in 1990 as a quantitative analyst. Since 1995 he has been providing
analytical support for the Adviser's quantitative equity products. Mr. Young
has more than nine years of investment industry experience with a special focus
on small companies.

SAIL(TM)--Scudder Automated Information Line

Investment flexibility

- --
16
<PAGE>

Personal Counsel(SM) -- A Managed Fund Portfolio Program

If you would like to receive direct guidance and management of your overall
mutual fund portfolio to help you pursue your investment goals, you may be
interested in Personal Counsel from Scudder. Personal Counsel, a program of
Scudder Investor Services, Inc., a registered investment adviser and a
subsidiary of Scudder Kemper Investments, Inc., combines the benefits of a
customized portfolio of pure no-load Scudder Funds with ongoing portfolio
monitoring and individualized service, for an annual fee of generally 1% or less
of assets (with a $1,000 minimum). In addition, it draws upon the Adviser's more
than 75-year heritage of providing investment counsel to large corporate and
private clients. If you have $100,000 or more to invest initially and would like
more information about Personal Counsel, please call 1-800-700-0183.

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

Shareholder reports

In addition to account statements, you receive periodic shareholder reports
highlighting relevant information, including investment results and a review of
portfolio changes.

Newsletters

Scudder Investor Centers

As a convenience to shareholders who like to conduct business in person, Scudder
Investor Services, Inc. maintains Investor Centers in Boca Raton, Boston,
Chicago, New York and San Francisco.

T.D.D. service for the hearing impaired

--
17
<PAGE>

- ---------------------------------------
Purchases
- ---------------------------------------

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Opening Minimum initial investment: $2,500; IRAs $1,000
an account
Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums.
See appropriate plan literature.

<S> <C> <C>
Make checks o By Mail Send your completed and signed application and check
payable to "The
Scudder Funds." by regular mail to: or by express, registered,
or certified mail to:

The Scudder Funds Scudder Shareholder
P.O. Box 2291 Service Center
Boston, MA 42 Longwater Drive
02107-2291 Norwell, MA
02061-1612

o By Wire Please see Transaction information--Purchasing shares--
By wire for details, including the ABA wire transfer number.
Then call 1-800-225-5163 for instructions.

o In Person Visit one of our Investor Centers to complete your application with the
help of a Scudder representative. Investor Center locations are listed
under Shareholder benefits.

Due to investment considerations, Scudder Micro Cap Fund is presently closed to new individual
investors.

<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Purchasing Minimum additional investment: $100; IRAs $50
additional
shares Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums.
See appropriate plan literature.

o By Wire Please see Transaction information--Purchasing shares--
By wire for details, including the ABA wire transfer number.

o In Person Visit one of our Investor Centers to make an additional
investment in your Scudder fund account. Investor Center
locations are listed under Shareholder benefits.

o By Telephone Please see Transaction information--Purchasing shares--
By QuickBuy or By telephone order for more details.

- --
18
<PAGE>

- ---------------------------------------
Exchanges and redemptions
- ---------------------------------------

Send your instructions
by regular mail to: or by express, registered, or by fax to:
or certified mail to:

The Scudder Funds Scudder Shareholder 1-800-821-6234
P.O. Box 2291 Service Center
Boston, MA 02107-2291 42 Longwater Drive
Norwell, MA
02061-1612
- ------------------------------------------------------------------------------------------------------------------------
Redeeming shares 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). You may
have redemption proceeds sent to your predesignated bank account, or
redemption proceeds of up to $100,000 sent to your address of record.

A signature guarantee is required for redemptions over $100,000.
See Transaction information--Redeeming shares.

--
19
<PAGE>

- ---------------------------------------
Scudder Kemper tax-advantaged
retirement plans
- ---------------------------------------

o 403(b) Plans. Retirement plans for tax-exempt organizations and school
systems to which employers and employees may both contribute.

o 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 Investor Relations is a service provided through Scudder Investor
Services, Inc., Distributor.

- --
20
<PAGE>

- --------------------------------------------------------------------------------
Trustees and Officers
- --------------------------------------------------------------------------------

Daniel Pierce*
President and Trustee

Paul Bancroft III
Trustee; Venture Capitalist and Consultant

Sheryle J. Bolton
Trustee; Chief Executive Officer, Scientific Learning Corporation

William T. Burgin
Trustee; General Partner, Bessemer Venture Partners

Thomas J. Devine
Trustee; Consultant

Keith R. Fox
Trustee; President, Exeter Capital Management Corporation

William H. Luers
Trustee; President, The Metropolitan Museum of Art

Dr. Wilson Nolen
Trustee; Consultant

Kathryn L. Quirk*
Trustee, Vice President and Assistant Secretary

Robert W. Lear
Honorary Trustee; Executive-in-Residence, Visiting Professor, Columbia
University Graduate School of Business

Robert G. Stone, Jr.
Honorary Trustee; Chairman of the Board and Director, Kirby Corporation

Edmund R. Swanberg*
Honorary Trustee

Peter Chin*
Vice President

James M. Eysenbach*
Vice President

Philip S. Fortuna*
Vice President

Jerard K. Hartman*
Vice President

Thomas W. Joseph*
Vice President

Roy C. McKay*
Vice President

Thomas F. McDonough*
Vice President and Secretary

Edward J. O'Connell*
Vice President and Assistant Treasurer

Richard W. Desmond*
Assistant Secretary

Caroline Pearson*
Assistant Secretary

*Scudder Kemper Investments, Inc.

--
21
<PAGE>

- --------------------------------------------------------------------------------
Investment products and services
- --------------------------------------------------------------------------------

The Scudder Family of Funds(dag)
- --------------------------------------------------------------------------------

Money Market
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series--
Premium Shares*
Managed Shares*
Scudder Government Money Market Series--Managed Shares*

Tax Free Money Market+
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**

U.S. Income
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund

Global Income
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund

Asset Allocation
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio

U.S. Growth and Income
Scudder Balanced Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund

U.S. Growth
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund

Global Growth
Worldwide
Scudder Global Fund
Scudder International Growth and Income Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.

Retirement Programs
Traditional IRA
Roth IRA
SEP-IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan **(dag)(dag)
(a variable annuity)

Education Accounts
Education IRA
UGMA/UTMA

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. (dag)Funds within categories are listed in order from
expected least risk to most risk. Certain Scudder funds may not be available for
purchase or exchange. +A portion of the income from the tax-free funds may be
subject to federal, state, and local taxes. *A class of shares of the Fund.
**Not available in all states. (dag)(dag)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 Kemper Investments, Inc., are traded on the New York Stock Exchange and,
in some cases, on various foreign stock exchanges.

- --
22
<PAGE>

- --------------------------------------------------------------------------------
How to contact Scudder
- --------------------------------------------------------------------------------

Account Service and Information:

For existing account service and transactions
Scudder Investor Relations -- 1-800-225-5163

For 24 hour account information, fund information, exchanges, and an
overview of all the services available to you
Scudder Electronic Account Services -- http://funds.scudder.com

For personalized information about your Scudder accounts, exchanges and
redemptions
Scudder Automated Information Line (SAIL) -- 1-800-343-2890

Investment Information:

For information about the Scudder funds, including additional applications
and prospectuses, or for answers to investment questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com

For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services -- 1-800-323-6105

Scudder Brokerage Services:

To receive information about this discount brokerage service and to
obtain an application
Scudder Brokerage Services* -- 1-800-700-0820

Personal Counsel(SM) -- A Managed Fund Portfolio Program:

To receive information about this mutual fund portfolio guidance and
management program
Personal Counsel from Scudder -- 1-800-700-0183

Please address all correspondence to:
The Scudder Funds
P.O. Box 2291
Boston, Massachusetts
02107-2291

Or Stop by a Scudder Investor Center:

Many shareholders enjoy the personal, one-on-one service of the Scudder
Investor Centers. Check for an Investor Center near you--they can be found
in the following cities:
Boca Raton Chicago San Francisco
Boston New York

Scudder Investor Relations and Scudder Investor Centers are services provided
through Scudder Investor Services, Inc., Distributor.

* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA
02061--Member NASD/SIPC.

--
23
<PAGE>

SCUDDER MICRO CAP FUND

A Pure No-Load(TM) (No Sales Charges) Diversified Mutual Fund Seeking
Long-Term Growth of Capital Through Investment
Primarily in a Diversified Portfolio of U.S. Micro-cap Stocks

- --------------------------------------------------------------------------------

STATEMENT OF ADDITIONAL INFORMATION

January 1, 1998

- --------------------------------------------------------------------------------

This combined Statement of Additional Information is not a prospectus and
should be read in conjunction with the prospectus of Scudder Micro Cap Fund
dated January 1, 1998, as amended from time to time, copies of which may be
obtained without charge by writing to Scudder Investor Services, Inc., Two
International Place, Boston, Massachusetts 02110-4103.

<PAGE>

TABLE OF CONTENTS
Page

THE FUND'S INVESTMENT OBJECTIVES AND POLICIES .............................. 1
General Investment Objective and Policies ............................ 1
A Master/Feeder Fund Structure ....................................... 2
Special Considerations ............................................... 2
Specialized Investment Techniques .................................... 5
Investment Restrictions .............................................. 13

PURCHASES .................................................................. 15
Additional Information About Opening An Account ...................... 15
Additional Information About Making Subsequent Investments ........... 16
Additional Information About Making Subsequent Investments
by QuickBuy .................................................... 16
Checks ............................................................... 16
Wire Transfer of Federal Funds ....................................... 17
Share Price .......................................................... 17
Share Certificates ................................................... 17
Other Information .................................................... 17

EXCHANGES AND REDEMPTIONS .................................................. 17
Exchanges ............................................................ 17
Special Redemption and Exchange Information .......................... 18
Redemption by Telephone .............................................. 19
Redemption by QuickSell .............................................. 20
Redemption by Mail or Fax ............................................ 20
Redemption-in-Kind ................................................... 20
Other Information .................................................... 21

FEATURES AND SERVICES OFFERED BY THE FUND .................................. 22
The Pure No-Load(TM) Concept ......................................... 22
Internet access ...................................................... 22
Dividend and Capital Gain Distribution Options ....................... 23
Scudder Investor Centers ............................................. 24
Reports to Shareholders .............................................. 24
Transaction Summaries ................................................ 24

THE SCUDDER FAMILY OF FUNDS ................................................ 24

SPECIAL PLAN ACCOUNTS ...................................................... 29
Scudder Retirement Plans: Profit-Sharing and Money Purchase
Pension Plans for Corporations and Self-Employed
Individuals .................................................... 29
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for
Corporations and Self-Employed Individuals ..................... 29
Scudder IRA: Individual Retirement Account .......................... 29
Scudder Roth IRA: Individual Retirement Account ..................... 30
Scudder 403(b) Plan .................................................. 31
Automatic Withdrawal Plan ............................................ 31
Group or Salary Deduction Plan ....................................... 31
Automatic Investment Plan ............................................ 32
Uniform Transfers/Gifts to Minors Act ................................ 32

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS .................................. 32

PERFORMANCE INFORMATION .................................................... 33
Average Annual Total Return .......................................... 33
Cumulative Total Return .............................................. 33
Total Return ......................................................... 33
Comparison of Fund Performance ....................................... 34

i
<PAGE>

TABLE OF CONTENTS (continued)
Page

ORGANIZATION OF THE FUND ................................................... 37

INVESTMENT ADVISER ......................................................... 38
Personal Investments by Employees of the Adviser ..................... 41

TRUSTEES AND OFFICERS ...................................................... 41

REMUNERATION ............................................................... 44
Responsibilities of the Board--Board and Committee Meetings .......... 44
Compensation of Officers and Trustees ................................ 44

DISTRIBUTOR ................................................................ 45

TAXES ...................................................................... 46

PORTFOLIO TRANSACTIONS ..................................................... 49
Brokerage Commissions ................................................ 49
Portfolio Turnover ................................................... 50

NET ASSET VALUE ............................................................ 51

ADDITIONAL INFORMATION ..................................................... 51
Experts .............................................................. 51
Other Information .................................................... 52

FINANCIAL STATEMENTS ....................................................... 52

ii
<PAGE>

THE FUND'S INVESTMENT OBJECTIVES AND POLICIES

(See "Investment objective and policies" in the Fund's prospectus.)

Scudder Micro Cap Fund (the "Fund") is a series of Scudder Securities
Trust (the "Trust"); the Fund is a pure no-load(TM), diversified, open-end
management investment company which continuously offers and redeems shares at
net asset value. Scudder Micro Cap Fund is a company of the type commonly known
as a mutual fund.

General Investment Objective and Policies

The Fund's investment objective is to seek long-term growth of capital
through investment primarily in a diversified portfolio of U.S.
micro-capitalization ("micro-cap") common stocks. These domestic emerging growth
securities provide little or no current income but, in the opinion of the Fund's
investment adviser, Scudder Kemper Investments, Inc. (the "Adviser"), offer
substantial long-term appreciation potential as well as the opportunity to
enhance the overall diversification of an investor's portfolio.

Due to the inherent business characteristics and risks of small companies,
along with the relatively limited trading market for micro-cap stocks, the
Fund's share price can experience periods of significant volatility. As a
result, the Fund should be considered a long-term investment and only one part
of a well-diversified personal investment portfolio. To encourage a long-term
investment holding period and to facilitate portfolio management, a 1%
redemption and exchange fee, described in greater detail below, is payable to
the Fund for the benefit of remaining shareholders on shares held less than one
year.

Due to investment considerations, the Fund is presently closed to new
individual investors. Current individual shareholders of the Fund will be able
to continue to invest in the Fund. Further, the Fund remains open to investment
through qualified retirement plans.

Qualified retirement plans may choose Scudder Micro Cap Fund as an option
for participants. Investors in the Fund through a qualified retirement plan who
terminate participation and/or take a distribution of assets from the plan will
be permitted to transfer those assets to an individual account in Scudder Micro
Cap Fund.

The Trustees may determine to reopen the Fund at some point based on
market conditions and other factors.

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 investment
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.

The Fund seeks to provide long-term growth of capital by investing, under
normal market conditions, at least 80% of its assets in common stocks issued by
U.S. micro-cap companies. The Fund will typically invest in companies that, at
the time of purchase, are smaller than the smallest stocks in the Russell 2000R
Index at its annual reconstitution. The median market capitalization (i.e.,
current stock price times shares outstanding) of the portfolio is not expected
to exceed $125 million.

While the Fund invests predominantly in common stocks, it can purchase
other types of equity securities, including preferred stocks (either convertible
or non-convertible), rights and warrants. Securities may be listed on national
exchanges, or much more commonly, traded over-the-counter. The Fund may invest
up to 20% of its assets in U.S. Treasuries, agency and instrumentality
obligations, may enter into repurchase agreements and may engage in strategic
transactions to increase stock market participation, enhance liquidity and
manage transaction costs. The Fund may borrow money for temporary, emergency or
other purposes, including investment leverage purposes as determined by the
Trustees. The Fund may

<PAGE>

also borrow under reverse repurchase agreements. The Investment Company Act of
1940 as amended (the "1940 Act") requires borrowings to have 300% asset average.

For temporary defensive purposes, the Fund may invest without limit in
cash and cash equivalents when the Adviser deems such a position advisable in
light of economic or market conditions. It is impossible to predict for how long
such alternative strategies may be utilized. More information about these
investment techniques is provided under "Additional information about policies
and investments" in the Fund's prospectus.

The Fund is actively managed using a quantitative, value-oriented
investment approach. The Adviser selects investments from among the more than
4,000 publicly traded U.S. micro-cap stocks based on a proprietary, quantitative
investment strategy. Using this approach, the Adviser looks for companies
selling at a discount to estimated fair value. Because of their small size, and
less frequent trading activity, the companies represented in the Fund are often
overlooked or not closely followed by investors. Accordingly, their prices can
rise either as a result of improved business fundamentals, particularly when
earnings grow faster than general expectations, or as more investors appreciate
the full extent of a company's underlying business potential. The Fund seeks to
avoid what are judged in the opinion of the Fund's Adviser to be overpriced
companies with high investment risk and deteriorating fundamentals.

Portfolio diversification is an important component of the investment
management process. To help manage the Fund's above-average investment risk and
improve liquidity, the Adviser expects to invest in hundreds of small, publicly
traded companies, representing a broad cross-section of U.S. industries. The
Fund's systematic, value-oriented approach to investing is designed to mitigate
volatility of the Fund's share price relative to the micro-capitalization sector
of the U.S. stock market. Risk is further managed by employing specialized
portfolio management and trading techniques. Despite these techniques, the
Fund's share price can move up and down significantly, even over short periods
of time.

A Master/Feeder Fund Structure

At a special meetingthe shareholders approved a proposal which gives the
Trust's Board of Trustees the discretion to retain the current distribution
arrangement for the Fund while investing in a master fund in a master/feeder
fund structure as described below.

Special Considerations

While, historically, micro-capitalization company stocks have outperformed
the stocks of large companies, the former have customarily involved more
investment risk as well. Micro-capitalization companies may have limited product
lines, markets or financial resources; may lack management depth or experience;
and may be more vulnerable to adverse general market or economic developments
than large companies. The prices of micro-capitalization company securities are
often more volatile than prices associated with large company issues, and can
display abrupt or erratic movements at times, due to limited trading volumes and
less publicly available information.

Also, because micro-capitalization companies normally have fewer shares
outstanding and these shares trade less frequently than large companies, it may
be more difficult for the Fund to buy and sell significant amounts of such
shares without an unfavorable impact on prevailing market prices.

2
<PAGE>

Some of the companies in which the Fund may invest may distribute, sell or
produce products which have recently been brought to market and may be dependent
on key personnel.

The securities of micro-capitalization 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.

Large selection universe

Over half of the U.S. companies traded on the three primary U.S. exchanges
(NYSE, AMEX and NASDAQ) are micro-cap companies. Of the more than 7000
securities of U.S. companies traded on these exchanges, the 1000 largest (market
capitalizations greater than $1.2 billion) are generally considered to be
large-cap stocks. The next 2000 largest (with market caps currently in the range
of $200 to $1.2 billion) are often referred to as small-cap stocks. This group
roughly corresponds to the Russell 2000 Index, a widely followed index of small
companies. The remaining stocks -- over 4000 securities -- are considered
micro-cap issues (currently below $200 million in market capitalization).

US Equity Market Size Profile Needs to be updated

o US Companies on NYSE, NASDAQ, AMEX with Prices > $1

[GRAPHIC OMITTED]

Large Cap
(1000 Stocks)
> $1.2 Billion Market Cap
Small Cap
(2000 Stocks)
> $200.0 Million Market Cap
Micro Cap
(4000+ Stocks)

Source: FactSet Research Systems, Scudder, 6/97

Because of the small size, limited liquidity and vast numbers of micro-cap
stocks, this segment (shown at the base of the pyramid in the diagram above) is
often overlooked by Wall Street analysts, offering a wide range of investment
opportunities. The Fund's Advisor seeks to exploit these opportunities using a
proprietary quantitative model.

The "micro-cap stock effect"

According to Ibbotson Associates, who has compiled market data back to
1926, the growth of $1 invested in smaller stocks over the period through
December 1996 would have grown to $4,496 compared to $1,371 invested in large
company stocks. Traditionally referred to as "small company stocks," the
Ibbotson index is actually a better representation of what are now called
micro-capitalization issues. With a median market cap of only $67 million, the
stocks in this index are far smaller than the $557 million median market cap of
the

3
<PAGE>

typical small company mutual fund [Morningstar Principia 12/31/96]. A micro-cap
stock fund offers investors the opportunity to experience the greater return
potential represented in the study by Ibbotson Associates and others.

Needs to be updated
[GRAPHIC OMITTED]

Source: Ibbotson Associates

With the potential for higher returns comes higher risk, as shown in the chart
below:

Needs to be updated
[GRAPHIC OMITTED]

Source: Ibbotson Associates, Micro-Cap based on Ibbotson Small Co. Portfolio.

Annualized returns for micro-cap stocks (12/26-12/96) are higher -- versus
10.7% for large-cap -- but this category experienced greater volatility as
measured by standard deviation (34.1% for micro-cap versus 20.3% for large-cap).
This higher volatility suggests the need for a long-term horizon when investing
in micro-capitalization stocks.

Diversification benefits

In addition to their return potential, smaller capitalization stocks are
often sought out by investors because they do not necessarily move in the same
direction at the same time as larger stocks. Indeed, the correlation coefficient
(one

4
<PAGE>

measure of this potential for diversification) between small-cap and large-cap
stock returns is only 0.61. Because of their low profile, micro-cap stocks have
an even lower correlation of 0.44 with large-cap stock returns.

Needs to be updated
Correlation of Total Returns
60 Months Ending 12/96

Micro Cap Small Cap
(CRSP 9-10) (S&P)
----------- -----

S&P 500 0.44 0.61
S&P Mid Cap 0.74 0.91
S&P Small Cap 0.88 1.00

[Ibbotson Associates.]

As a result, adding micro-cap stocks to a portfolio of larger stock funds
can provide excellent diversification. Furthermore, investors in the fund will
gain exposure to hundreds of micro-cap stocks, reducing the relatively high risk
associated with individual micro-cap issues.

Specialized Investment Techniques

Debt Securities. When the Adviser believes that it is appropriate to do so in
order to achieve the Fund's objective of long-term capital appreciation, the
Fund may invest in debt securities, including bonds of private issuers.
Portfolio debt investments will be selected on the basis of, among other things,
credit quality, and the fundamental outlooks for currency, economic and interest
rate trends, taking into account the ability to hedge a degree of currency or
local bond price risk. The Fund may purchase "investment-grade" bonds, rated
Aaa, Aa, A or Baa by Moody's Investor Services, Inc. ("Moody's") or AAA, AA, A
or BBB by Standard & Poor's Corporation ("S&P") or, if unrated, judged to be of
equivalent quality as determined by the Adviser.

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 the 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 the 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,

5
<PAGE>

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
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.

6
<PAGE>

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.

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 are determined to be of equivalent
credit quality by the Adviser. The staff of the Securities and Exchange
Commission (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 its assets in illiquid securities.

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.

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<PAGE>

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 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, the net cash
amount). Options on futures contracts 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.

Combined Transactions. The Fund may enter into multiple transactions, including
multiple options transactions, multiple futures transactions, and multiple
interest rate transactions and any combination of futures, options, 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

8
<PAGE>

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, 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 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
they do 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. 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 believes such obligations do not constitute senior securities under
the Investment Company Act of 1940 (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.

Use of Segregated and Other Special Accounts. Many Strategic Transactions, in
addition to other requirements, require that the Fund segregate cash or liquid
high grade assets with its custodian, State Street Bank and Trust Company (the
"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 cash or 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
cash or 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 cash or 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
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.

9
<PAGE>

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, 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.

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.")

Convertible Securities. The Fund may invest in convertible securities which are
bonds, notes, debentures, preferred stocks, and other securities which are
convertible into common stocks. Investments in convertible securities can
provide income through interest and dividend payments and/or an opportunity for
capital appreciation by virtue of their conversion or exchange features.

10
<PAGE>

As fixed income securities, convertible securities are investments which
provide for a stream of income (or in the case of zero coupon securities,
accretion of income) with generally higher yields than common stocks. Of course,
like all fixed income securities, there can be no assurance of income or
principal payments because the issuers of the convertible securities may default
on their obligations. Convertible securities generally offer lower yields than
non-convertible securities of similar quality because of their conversion or
exchange features.

Convertible securities may be issued as fixed income obligations that pay
current income or as zero coupon notes and bonds, including Liquid Yield Option
Notes (LYONs). Zero coupon securities pay no cash income and are sold at
substantial discounts from their value at maturity. When held to maturity, their
entire income, which consists of accretion of discount, comes from the
difference between the purchase price and their value at maturity. Zero coupon
convertible securities offer the opportunity for capital appreciation as
increases (or decreases) in market value of such securities closely follow the
movements in the market value of the underlying common stock. Zero coupon
convertible securities generally are expected to be less volatile than the
underlying common stocks as they usually are issued with shorter maturities (15
years or less) and are issued with options and/or redemption features
exercisable by the holder of the obligation entitling the holder to redeem the
obligation and receive a defined cash payment.

Repurchase Agreements. The Fund may enter into repurchase agreements with member
banks of the Federal Reserve System, any foreign bank or with any domestic or
foreign 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.

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 held by the Custodian or in the Federal Reserve Book Entry system. Some
repurchase commitment transactions may not provide the Fund with collateral
marked-to-market during the term of the commitment.

For purposes of the 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 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 instrument 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
Obligation, in which case the Fund may incur a loss if the proceeds to the Fund
of the sale to a third party are less than the repurchase price. 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. It is possible that the Fund will be unsuccessful in seeking
to enforce the seller's contractual

11
<PAGE>

obligation to deliver additional securities. A repurchase agreement with foreign
banks may be available with respect to government securities of the particular
foreign jurisdiction, and such repurchase agreements involve risks similar to
repurchase agreements with U.S. entities.

Illiquid Securities. 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" or "not readily marketable," 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 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 such sale is made in violation of the 1933 Act or if the
registration statement prepared by the issuer, or the prospectus forming a part
of it, is materially inaccurate or misleading.

When-Issued Securities. The Fund may from time to time purchase equity and debt
securities on a "when-issued" or "forward delivery" basis. The price of such
securities, which may be expressed in yield terms, is fixed at the time the
commitment to purchase is made, but delivery and payment for the when-issued or
forward delivery securities takes place at a later date. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. To the extent that assets of the Fund are
held in cash pending the settlement of a purchase of securities, the Fund would
earn no income; however, it is the Fund's intention to be fully invested to the
extent practicable and subject to the policies stated above. While when-issued
or forward delivery securities may be sold prior to the settlement date, the
Fund intends to purchase such securities with the purpose of actually acquiring
them unless a sale appears desirable for investment reasons. At the time the
Fund makes the commitment to purchase a security on a when-issued or forward
delivery basis, it will record the transaction and reflect the value of the
security in determining its net asset value. The market value of the when-issued
or forward delivery securities may be more or less than the purchase price. The
Fund does not believe that its net asset value or income will be adversely
affected by its purchase of securities on a when-issued or forward delivery
basis.

12
<PAGE>

least equal to the market value and accrued interest of the securities loaned.
The Fund would have the right to call a loan and obtain the securities loaned on
no more than five days' notice. During the existence of a loan, the Fund would
continue to receive the equivalent of the interest paid by the issuer on the
securities loaned and would also receive compensation based on investment of the
collateral. As with other extensions of credit there are risks of delay in
recovery or even loss of rights in the collateral should the borrower of the
securities fail financially. However, the loans would be made only to firms
deemed by the Adviser to be of good standing, and when, in the judgment of the
Adviser, the consideration which can be earned currently from securities loans
of this type justifies the attendant risk. If the Fund determines to make
securities loans, the value of the securities loaned will not exceed 30% of the
value of the Fund's total assets at the time any loan is made.

Investment Restrictions

As a matter of fundamental policy, the Fund may not:

(1) borrow money, except as permitted under the Investment Company Act
of 1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time;

(2) issue senior securities, except as permitted under the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time;

(3) concentrate its investments in a particular industry, as that term
is used in the Investment Company Act of 1940 as amended, and as
interpreted or modified by regulatory authority having jurisdiction
from time to time;

(6) purchase physical commodities or contracts related to physical
commodities; or

As a matter of non-fundamental policy, the Fund currently does not intend
to:

(b) enter into either of reverse repurchase agreements or dollar rolls
in an amount greater than 5% of its total assets;

13
<PAGE>

(g) lend portfolio securities in an amount greater than 5% of its total
assets.

14
<PAGE>

PURCHASES

(See "Purchases" and "Transaction information" in the Fund's prospectus.)

Additional Information About Opening An Account

Shareholders of other Scudder funds who have submitted an account
application and have certified a Tax Identification Number, clients having a
regular investment counsel account with the Adviser or its affiliates and
members of their immediate families, officers and employees of the Adviser or of
any 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 ($2,500 minimum), name of bank or trust
company from which the wire will be sent, the exact registration of the new
account, the tax 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, Boston, MA 02110, ABA Number 011000028,

15
<PAGE>

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 $2,500 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 pension and profit sharing, 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 Scudder Investor Services, Inc. office listed
in the Fund's prospectus. A two-part invoice of the purchase will be mailed out
promptly following receipt of a request to buy. Payment should be attached to a
copy of the invoice for proper identification. Federal regulations require that
payment be received within three business days. If payment is not received
within that time, the shares may be canceled. In the event of such cancellation
or cancellation 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
cancellation. If the purchaser is a shareholder, the Fund 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.

Additional Information About Making Subsequent Investments by QuickBuy

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.

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.

16
<PAGE>

underwriter by reason of such cancellation. If the purchaser is a shareholder,
the Fund 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. Investors whose orders have been canceled may be prohibited
from or restricted in placing future orders in any of the Scudder funds.

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 the Custodian
of "wired funds," but the right to charge investors for this service is
reserved.

Boston banks are closed on certain local 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 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 the
Exchange is open for trading. Orders received after the close of regular trading
on the Exchange will be executed at the next business day's net asset value. If
the order has been placed by a member of the NASD, other than the Distributor,
it is the responsibility of that member broker, rather than the Fund, to forward
the purchase order to Scudder Service Corporation (the "Transfer Agent") in
Boston by the close of regular trading on the Exchange.

Share Certificates

Due to the desire of Fund management to afford ease of redemption,
certificates will not be issued to indicate ownership in the Fund.

Other Information

If purchases or redemptions of the Fund's shares are arranged and
settlement is made 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, the Fund's principal underwriter, each has the
right to limit the amount of purchases by, and to refuse to sell to, any person.
The Trustees and the Distributor each may suspend or terminate the offering of
shares of the Fund at any time for any reason.

The Tax Identification Number section of the application must be completed
when opening an account. Applications and purchase orders without a correct
certified tax identification number and certain other certified information
(e.g., certification of exempt status from exempt investors), will be returned
to the investor.

The Fund 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

17
<PAGE>

opening a new account in the other fund. When an exchange involves a new
account, the new account will be established with the same registration, tax
identification number, address, telephone redemption option, "Scudder Automated
Information Line" (SAIL) transaction authorization and dividend option as the
existing account. Other features will not carry over automatically to the new
account. Exchanges to a new fund account must be for a minimum of $2,500. When
an exchange represents an additional investment into an existing account, the
account receiving the exchange proceeds must have identical registration,
address, and account options/features as the account of origin. Exchanges into
an existing account must be for $100 or more. 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 net asset value
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 phone or in writing. Automatic
exchanges will continue until the shareholder requests by phone or in writing to
have the feature removed, or until the originating account is depleted. The
Trust and the Transfer Agent each reserve 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.
However, shares that are exchanged from the Fund may be subject to the Fund's 1%
redemption fee. (See "Special Redemption and Exchange Information") An exchange
into another Scudder fund is a redemption of shares, and therefore may result in
tax consequences (gain or loss) to the shareholder, and the proceeds of such an
exchange may be subject to backup withholding. (See "TAXES.")

Investors currently receive the exchange privilege, including exchange by
telephone, automatically without having to elect it. The Fund employs
procedures, including recording telephone calls, testing a caller's identity,
and sending written confirmation of telephone transactions, designed to give
reasonable assurance that instructions communicated by telephone are genuine,
and to discourage fraud. To the extent that the Fund does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Fund will not be liable for acting upon instructions
communicated by telephone that they reasonably believe to be genuine. The Fund
and the Transfer Agent each reserve the right to suspend or terminate the
privilege of exchanging by telephone or fax at any time.

Scudder retirement plans may have different exchange requirements. Please
refer to appropriate plan literature.

Special Redemption and Exchange Information

In general, shares of the Fund may be exchanged or redeemed at net asset
value. However, shares of the Fund held for less than one year are redeemable at
a price equal to 99% of the Fund's then current net asset value per share. This
1% discount, referred to in the prospectus and this Statement of Additional
Information as a redemption fee, directly affects the amount a shareholder who
is subject to the discount receives upon exchange or redemption. It is intended
to encourage long-term investment in the Fund, to avoid transaction and other
expenses caused by early redemptions and to facilitate portfolio management. The
fee is not a deferred sales charge, is not a commission paid to the Adviser or
its subsidiaries, and does not benefit the Adviser in any way. The Fund reserves
the right to modify the terms of or terminate this fee at any time.

18
<PAGE>

The redemption fee will not be applied to (a) a redemption of shares held
in certain retirement plans, including 401(k) plans, 403(b) plans, 457 plans,
Keogh accounts, and profit sharing and money purchase pension plans (however,
this fee waiver does not apply to IRA and SEP-IRA accounts), (b) a redemption of
any shares of the Fund outstanding for one year or more, (c) a redemption of
reinvestment shares (i.e., shares purchased through the reinvestment of
dividends or capital gains distributions paid by the Fund), (d) a redemption of
shares by the Fund upon exercise of its right to liquidate accounts (i) falling
below the minimum account size by reason of shareholder redemptions or (ii) when
the shareholder has failed to provide tax identification information or (e) a
redemption of shares due to the death of the registered shareholder of a Fund
account or due to the death of all registered shareholders of a Fund account
with more than one registered shareholder, (i.e. joint tenant account), upon
receipt from Scudder Service Corporation of appropriate written instructions and
documentation satisfactory to Scudder Service Corporation. However, if shares
are purchased for a retirement plan account through a broker, financial
institution or recordkeeper maintaining an omnibus account for the shares, such
waiver may not apply. For this purpose and without regard to the shares actually
redeemed, shares will be redeemed as follows: first, reinvestment shares;
second, purchased shares held one year or more; and third, purchased shares held
for less than one year. Finally, if a shareholder enters into a transaction in
Fund shares which, although it may technically be treated as a redemption and
purchase for recordkeeping purposes, does not involve the termination of
economic interest in the Fund, no redemption fee will apply and applicability of
the redemption fee, if any, on any subsequent redemption or exchange will be
determined by reference to the date the shares were originally purchased, and
not the date of the transaction.

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 request to have the proceeds mailed or
wired to their predesignated bank account. In order to request 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 proceeds should either
return a Telephone Redemption Option Form (available upon request)
or send a letter identifying the account and specifying the exact
information to be changed. The letter must be signed exactly as the
shareholder's name(s) appears on the account. An original signature
and an original signature guarantee are required for each person in
whose name the account is registered.

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.

19
<PAGE>

Redemption requests by telephone (technically a repurchase by agreement
between the Fund and the shareholder) of shares purchased by check will not be
accepted until the purchase check has cleared which may take up to seven
business days.

Redemption by QuickSell

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

In order to ensure proper authorization before redeeming shares, the
Transfer Agent may request documents such as, but not restricted to, stock
powers, trust instruments, certificates of death, appointments as executor,
certificates of corporate authority and waivers of tax required in some states
when settling estates.

It is suggested that shareholders holding shares registered in other than
individual names contact the Transfer Agent prior to any redemptions to ensure
that all necessary documents accompany the request. When shares are held in the
name of a corporation, trust, fiduciary agent, attorney or partnership, the
Transfer Agent requires, in addition to the stock power, certified evidence of
authority to sign. These procedures are for the protection of shareholders and
should be followed to ensure prompt payment. Redemption requests must not be
conditional as to date or price of the redemption. Proceeds of a redemption will
be sent within seven business days after receipt by the Transfer Agent of a
request for redemption that complies with the above requirements. Delays of more
than seven days of payment for shares tendered for repurchase or redemption may
result, but only until the purchase check has cleared.

The requirements for IRA redemptions are different from those for regular
accounts. For more information call 1-800-225-5163.

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 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 into cash. The Trust 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.

20
<PAGE>

Other Information

Clients, officers or employees of the Adviser or of an affiliated
organization, and members of such clients', officers' or employees' immediate
families, banks and members of the NASD may direct repurchase requests to the
Fund through Scudder Investor Services, Inc. at Two International Place, Boston,
Massachusetts 02110-4103 by letter, fax, TWX, or telephone. A two-part
confirmation will be mailed out promptly after receipt of the repurchase
request. A written request in good order with a proper original signature
guarantee, as described in the Fund's prospectus under "Transaction
information--Signature guarantees," should be sent with a copy of the invoice to
Scudder Funds, c/o Scudder Confirmed Processing, Two International Place,
Boston, Massachusetts 02110-4103. Failure to deliver shares or required
documents (see above) by the settlement date may result in cancellation of the
trade and the shareholder will be responsible for any loss incurred by the Fund
or the principal underwriter by reason of such cancellation. Net losses on such
transactions which are not recovered from the shareholder will be absorbed by
the principal underwriter. Any net gains so resulting will accrue to the Fund.
For this group, repurchases will be carried out at the net asset value next
computed after such repurchase requests have been received. The arrangements
described in this paragraph for repurchasing shares are discretionary and may be
discontinued at any time.

If a shareholder redeems all shares in the account after the record date
of a dividend, the shareholder receives 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 repurchase charge, although a wire charge may be applicable for
redemption proceeds wired to an investor's bank account. Redemption of shares,
including redemptions undertaken to effect an exchange for shares of 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 and a shareholder's right to redeem
shares and to receive payment may be suspended at times (a) during which the
Exchange is closed, other than customary weekend and holiday closings, (b)
during which trading on the Exchange is restricted for any reason, (c) during
which 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)
during which the SEC by order permits a suspension of the right of redemption or
a postponement of the date of payment or of redemption; 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.

Shareholders should maintain a share balance worth at least $2,500 ($1,000
for IRAs, Uniform Gift to Minor Act, and Uniform Trust to Minor Act accounts),
which amount may be changed by the Board of Trustees. Scudder retirement plans
have similar or lower minimum balance requirements. A shareholder may open an
account with at least $1,000 ($500 for an IRA), if an automatic investment plan
(AIP) of $100/month ($50/month for an IRA) is established.

Shareholders who maintain a non-fiduciary account balance of less than
$2,500 in the Fund, without establishing an AIP, will be assessed an annual
$10.00 per fund charge with the fee to be reinvested in the Fund. The $10.00
charge will not apply to shareholders with a combined household account balance
in any of the Scudder Funds of $25,000 or more. The Fund reserves the right,
following 60 days' written notice to shareholders, to redeem all shares in
accounts below $250, including accounts of new investors, where a reduction in
value has occurred due to a redemption or exchange out of the account. The Fund
will mail the proceeds of the redeemed account to the shareholder at the address
of record. Reductions in value that result solely from market activity will not
trigger an involuntary redemption. UGMA, UTMA, IRA and other retirement accounts
will not be assessed the $10.00 charge or be subject to automatic liquidation.

21
<PAGE>

FEATURES AND SERVICES OFFERED BY THE FUND

(See "Shareholder benefits" in the Fund's prospectus.)

The Pure No-Load(TM) Concept

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 Rule 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 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 NASD
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.

================================================================================
Scudder No-Load Fund
YEARS Pure No-Load(TM) 8.50% Load Load Fund with with 0.25%
Fund Fund 0.75% 12b-1 Fee 12b-1 Fee
- --------------------------------------------------------------------------------
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
================================================================================

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.

Internet access

<PAGE>

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 given to the Transfer Agent in writing at least five days
prior to a dividend record date. Shareholders may change their dividend option
by calling 1-800-225-5163 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 Fund's prospectus for the address.

23
<PAGE>

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.

Scudder Investor Centers

Investors may visit any of the Investor Centers maintained by the
Distributor listed in the Fund's prospectus. The Centers are designed to provide
individuals with services during any business day. Investors may pick up
literature or find 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 should be mailed to "The Scudder Funds" at the address listed
under "How to contact Scudder" in the prospectus.

Reports to Shareholders

The Fund issues to its 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. 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 Funds' prospectuses.)

MONEY MARKET

24
<PAGE>

TAX FREE MONEY MARKET

TAX FREE

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 exempt from
regular federal income tax primarily through investments in high-grade,
long-term municipal securities.

- ----------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.

25
<PAGE>

U.S. INCOME

Scudder Short Term Bond Fund seeks to provide a high level of income
consistent with a high degree of principal stability by investing
primarily in high quality short-term bonds.

Scudder GNMA Fund seeks to provide high current income primarily from U.S.
Government guaranteed mortgage-backed (Ginnie Mae) securities.

Scudder Income Fund seeks a high level of income, consistent with the
prudent investment of capital, through a flexible investment program
emphasizing high-grade bonds.

Scudder High Yield Bond Fund seeks a high level of current income and,
secondarily, capital appreciation through investment primarily in below
investment-grade domestic debt securities.

GLOBAL INCOME

ASSET ALLOCATION

Scudder Pathway Series: Balanced Portfolio seeks to provide investors with
a balance of growth and income by investing in a select mix of Scudder
money market, bond and equity mutual funds.

- ----------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.

26
<PAGE>

U.S. GROWTH AND INCOME

Scudder Growth and Income Fund seeks long-term growth of capital, current
income, and growth of income.

U.S. GROWTH

Value

Scudder Large Company Value Fund seeks to maximize long-term capital
appreciation through a value-driven investment program.

Scudder Value Fund seeks long-term growth of capital through investment in
undervalued equity securities.

Scudder Small Company Value Fund invests for long-term growth of capital
by seeking out undervalued stocks of small U.S. companies.

Scudder Micro Cap Fund seeks long-term growth of capital by investing
primarily in a diversified portfolio of U.S. micro-capitalization
("micro-cap") common stocks.

Growth

Scudder Classic Growth Fund seeks to provide long-term growth of capital
and to keep the value of its shares more stable than other growth mutual
funds.

Scudder Large Company 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 Development Fund seeks long-term growth of capital by investing
primarily in securities of small and medium-size growth companies.

Scudder 21st Century Growth Fund seeks long-term growth of capital by
investing primarily in the securities of emerging growth companies poised
to be leaders in the 21st century.

27
<PAGE>

GLOBAL GROWTH

Worldwide

Scudder International Growth and Income Fund seeks long-term growth of
capital and current income primarily from foreign equity securities.

Scudder International Fund seeks long-term growth of capital primarily
through a diversified portfolio of marketable foreign equity securities.

Scudder Global Discovery Fund seeks above-average capital appreciation
over the long term by investing primarily in the equity securities of
small companies located throughout the world.

Scudder Emerging Markets Growth Fund seeks long-term growth of capital
primarily through equity investment in emerging markets around the globe.

Scudder Gold Fund seeks maximum return (principal change and income)
consistent with investing in a portfolio of gold-related equity securities
and gold.

Regional

Scudder Greater Europe Growth Fund seeks long-term growth of capital
through investments primarily in the equity securities of European
companies.

Scudder Pacific Opportunities Fund seeks long-term growth of capital
through investment primarily in the equity securities of Pacific Basin
companies, excluding Japan.

Scudder Latin America Fund seeks to provide long-term capital appreciation
through investment primarily in the securities of Latin American issuers.

The Japan Fund, Inc. seeks long-term capital appreciation by investing
primarily in equity securities (including American Depository Receipts) of
Japanese companies.

28
<PAGE>

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.)

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

Scudder 401(k): Cash or Deferred Profit-Sharing Plan
for Corporations and Self-Employed Individuals

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 Internal Revenue Code.

29
<PAGE>

earned income). 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.

Value of IRA at Age 65
Assuming $2,000 Deductible Annual Contribution

- --------------------------------------------------------------------------------
Starting Annual Rate of Return
Age of -------------------------------------------------------------
Contributions 5% 10% 15%
- --------------------------------------------------------------------------------
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

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 Annual Rate of Return
Age of -------------------------------------------------------------
Contributions 5% 10% 15%
- --------------------------------------------------------------------------------
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

Scudder Roth IRA: Individual Retirement Account

Shares of the Fund(s) may be purchased as the underlying investment for an
individual Retirement Account which meets the requirements of Section 408A of
the Internal Revenue Code.

All income and capital gains derived from Roth IRA investments are
reinvested and compounded tax free. Such tax-free compounding can lead to
substantial retirement savings. No distributions are required to be taken prior
to the death of the original account holder. If a Roth IRA has been established
for a minimum of five years, distributions can be taken tax-free after reaching
age 59 1/2, for a first-time home purchase ($10,000 maximum, one-time use), or
upon death or disability. All other distributions from a Roth IRA are taxable
and subject to a 10% tax penalty unless an exception applies. Exceptions to the
10% penalty include distributions that are (i) properly rolled

30
<PAGE>

over, (ii) one of a series of substantially equal payments over a period that
does not exceed life expectancy, (iii) exempt withdrawals of excess
distributions, (iv) for deductible medical expenses, (v) for certain health
insurance premiums in the event of unemployment, and (vi) for qualified higher
education expenses.

An individual with an income of less than $100,000 (who is not married
filing separately) can roll his or her existing IRA into a Roth IRA. However,
the individual must pay taxes on the taxable amount in his or her traditional
IRA. Individuals who complete the rollover in 1998 will be allowed to spread the
tax payments over a four-year period. After 1998, all taxes on such a rollover
will have to be paid in the tax year in which the rollover is made.

Scudder 403(b) Plan

Automatic Withdrawal Plan

An Automatic Withdrawal Plan request form can be obtained by calling
1-800-225-5163.

Group or Salary Deduction Plan

31
<PAGE>

Automatic Investment Plan

Uniform Transfers/Gifts to Minors Act

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 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. The Fund
may follow 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 then be asked to
claim a credit against their federal income tax liability. (See "TAXES.")

If the Fund does not distribute an amount of capital gain and/or ordinary
income required to be distributed by an excise tax provision of the Code, it may
be subject to such tax. (See "TAXES.") In certain circumstances, the Fund may
determine that it is in the interest of shareholders to distribute less than
such an amount.

Earnings and profits distributed to shareholders on redemptions of Fund
shares may be utilized by the Fund, to the extent permissible, as part of the
Fund's dividend paid deduction on its federal tax return.

The Trust intends to distribute the Fund's investment company taxable
income and any net realized capital gains in November or December, although an
additional distribution may be made if necessary. 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.

Each distribution is accompanied by a brief explanation of the form and
character of the distribution. The characterization of distributions on such
correspondence may differ from the characterization for federal tax purposes. In
January of each year the Fund issues to each shareholder a statement of the
federal income tax status of all distributions in the prior calendar year.

32
<PAGE>

PERFORMANCE INFORMATION

(See "Distribution and performance information--Performance information"
in the Fund's prospectus.)

Average Annual Total Return

Average annual total return is the average annual compound rate of return
for the periods of one year and the life of the Fund, 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:

T = Average Annual Total Return
P = a hypothetical initial payment of $1,000
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.

Cumulative Total Return

Cumulative total return is the compound 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
rate 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:

Needs to be updated

Cumulative Total Return for periods ended August 31, 1997

One Year Life of Fund
-------- ------------

(1) For the period August 12, 1996 (commencement of operations) to
August 31, 1997

* If the Adviser had not absorbed a portion of Fund expenses and had
imposed a full management fee, the cumulative total return for the
life of the Fund would have been approximately ___________.

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.

33
<PAGE>

Quotations of the Fund's Performance are historical and are not intended
to indicate future performance. An investor's share when redeemed may be worth
more or less than the original cost. Performance of the Fund will vary based on
changes in market conditions and the level of Fund's expenses.

Comparison of Fund Performance

34
<PAGE>

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.