Filed electronically with the Securities and Exchange Commission
on October 22, 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. 52
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 36
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)
on November 1, 1997 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(i)
on _______________ pursuant to paragraph (a)(i)
X 75 days after filing pursuant to paragraph (a)(ii)
on _______________ pursuant to paragraph (a)(ii) of
Rule 485.
The Registrant has filed a declaration registering an indefinite amount of
securities pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended. The Registrant filed the notice required by Rule 24f-2 for its most
recent fiscal year on August 28, 1997.
<PAGE>
SCUDDER DEVELOPMENT FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
<TABLE>
<CAPTION>
PART A
<S> <C> <C>
Item No. Item Caption Prospectus Caption
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed FINANCIAL HIGHLIGHTS
Financial
Information
4. General INVESTMENT OBJECTIVES AND POLICIES
Description of WHY INVEST IN THE FUND?
Registrant ADDITIONAL INFORMATION ABOUT POLICIES AND
INVESTMENTS
FUND ORGANIZATION
5. Management of FINANCIAL HIGHLIGHTS
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 NOT APPLICABLE
Discussion of
Fund
Performance
6. Capital Stock DISTRIBUTION AND PERFORMANCE
and Other INFORMATION--Dividends and capital gains distributions
Securities 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 FUND ORGANIZATION-Underwriter
Securities PURCHASES
Being Offered 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 EXCHANGES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION--Redeeming shares,
Tax identification number, Minimum balances
9. Pending Legal NOT APPLICABLE
Proceedings
Cross Reference - Page 1
<PAGE>
PART B
Caption in Statement of
Item No. Item Caption Additional Information
10. Cover Page COVER PAGE
11. Table of TABLE OF CONTENTS
Contents
12. General FUND ORGANIZATION
Information
and History
13. Investment THE FUND'S INVESTMENT OBJECTIVE AND
Objectives and POLICIES PORTFOLIO TRANSACTIONS-Brokerage
Policies Commissions, Portfolio turnover
14. Management of INVESTMENT ADVISER
the Fund TRUSTEES AND OFFICERS
REMUNERATION
15. Control TRUSTEES AND OFFICERS
Persons and
Principal
Holders of
Securities
16. Investment INVESTMENT ADVISER
Advisory and DISTRIBUTOR
Other Services ADDITIONAL INFORMATION-Experts, Other
Information
17. Brokerage PORTFOLIO TRANSACTIONS-Brokerage
Allocation Commissions, Portfolio Turnover
and Other
Practices
18. Capital Stock FUND ORGANIZATION
and DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Other
Securities
19. Purchase, PURCHASES
Redemption and EXCHANGES AND REDEMPTIONS
Pricing of FEATURES AND SERVICES OFFERED BY THE
Securities FUND-Dividend and Capital Gain
Being Offered Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance Data
23. Financial FINANCIAL STATEMENTS
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 HIGHLIGHTS
Financial
Information
4. General INVESTMENT OBJECTIVES AND POLICIES
Description of WHY INVEST IN THE FUND?
Registrant ADDITIONAL INFORMATION ABOUT POLICIES AND
INVESTMENTS
FUND ORGANIZATION
5. Management of FINANCIAL HIGHLIGHTS
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 NOT APPLICABLE
Discussion of
Fund
Performance
6. Capital Stock DISTRIBUTION AND PERFORMANCE
and Other 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 FUND ORGANIZATION-Underwriter
Securities PURCHASES
Being Offered 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 EXCHANGES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION-Redeeming shares,
Tax identification number, Minimum
balances
9. Pending Legal NOT APPLICABLE
Proceedings
Cross Reference - Page 3
<PAGE>
PART B
Caption in Statement of
Item No. Item Caption Additional Information
10. Cover Page COVER PAGE
11. Table of TABLE OF CONTENTS
Contents
12. General FUND ORGANIZATION
Information
and History
13. Investment THE FUND'S INVESTMENT OBJECTIVE AND
Objectives and POLICIES PORTFOLIO TRANSACTIONS-Brokerage
Policies Commissions, Portfolio turnover
14. Management of INVESTMENT ADVISER
the Fund TRUSTEES AND OFFICERS
REMUNERATION
15. Control TRUSTEES AND OFFICERS
Persons and
Principal
Holders of
Securities
16. Investment INVESTMENT ADVISER
Advisory and DISTRIBUTOR
Other Services ADDITIONAL INFORMATION-Experts, Other
Information
17. Brokerage PORTFOLIO TRANSACTIONS-Brokerage
Allocation Commissions, Portfolio Turnover
and Other
Practices
18. Capital Stock FUND ORGANIZATION
and DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Other
Securities
19. Purchase, PURCHASES
Redemption and EXCHANGES AND REDEMPTIONS
Pricing of FEATURES AND SERVICES OFFERED BY THE
Securities FUND-Dividend and Capital Gain
Being Offered Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance
Data
23. Financial FINANCIAL STATEMENTS
Statements
Cross Reference - Page 4
<PAGE>
SCUDDER MICRO CAP FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
PART A
Item Item Caption Prospectus Caption
No.
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed NOT APPLICABLE
Financial
Information
4. General INVESTMENT OBJECTIVE AND POLICIES
Description of WHY INVEST IN THE FUND?
Registrant ADDITIONAL INFORMATION ABOUT POLICIES AND
INVESTMENTS
FUND ORGANIZATION
5. Management of A MESSAGE FROM SCUDDER'S CHAIRMAN
the Fund FUND ORGANIZATION-Investment adviser, Transfer agent
SHAREHOLDER BENEFITS-A team approach to investing
TRUSTEES AND OFFICERS
5A. Management's NOT APPLICABLE
Discussion of
Fund
Performance
6. Capital Stock DISTRIBUTION AND PERFORMANCE
and Other INFORMATION-Dividends and capital gains distributions
Securities 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 FUND ORGANIZATION-Underwriter
Securities PURCHASES
Being Offered 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 EXCHANGES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION-Redeeming shares,
Tax identification number, Minimum balances
9. Pending Legal NOT APPLICABLE
Proceedings
Cross Reference - Page 5
<PAGE>
PART B
Caption in Statement of
Item No. Item Caption Additional Information
10. Cover Page COVER PAGE
11. Table of TABLE OF CONTENTS
Contents
12. General FUND ORGANIZATION
Information
and History
13. Investment THE FUND'S INVESTMENT OBJECTIVE AND
Objectives and POLICIES PORTFOLIO TRANSACTIONS-Brokerage
Policies Commissions, Portfolio turnover
14. Management of INVESTMENT ADVISER
the Fund TRUSTEES AND OFFICERS
REMUNERATION
15. Control TRUSTEES AND OFFICERS
Persons and
Principal
Holders of
Securities
16. Investment INVESTMENT ADVISER
Advisory and DISTRIBUTOR
Other Services ADDITIONAL INFORMATION-Experts, Other
Information
17. Brokerage PORTFOLIO TRANSACTIONS-Brokerage
Allocation Commissions, Portfolio Turnover
and Other
Practices
18. Capital Stock FUND ORGANIZATION
and DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Other
Securities
19. Purchase, PURCHASES
Redemption and EXCHANGES AND REDEMPTIONS
Pricing of FEATURES AND SERVICES OFFERED BY THE
Securities FUND-Dividend and Capital Gain Distribution
Being Offered Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance
Data
23. Financial FINANCIAL STATEMENTS
Statements
Cross Reference - Page 6
<PAGE>
SCUDDER 21ST CENTURY GROWTH FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
PART A
Item Item Caption Prospectus Caption
No.
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed NOT APPLICABLE
Financial
Information
4. General INVESTMENT OBJECTIVE AND POLICIES
Description of WHY INVEST IN THE FUND?
Registrant ADDITIONAL INFORMATION ABOUT POLICIES AND
INVESTMENTS
FUND ORGANIZATION
5. Management of A MESSAGE FROM SCUDDER'S CHAIRMAN
the Fund FUND ORGANIZATION-Investment adviser, Transfer agent
SHAREHOLDER BENEFITS-A team approach to investing
TRUSTEES AND OFFICERS
5A. Management's NOT APPLICABLE
Discussion of
Fund
Performance
6. Capital Stock DISTRIBUTION AND PERFORMANCE
and Other INFORMATION-Dividends and capital gains distributions
Securities 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 FUND ORGANIZATION-Underwriter
Securities PURCHASES
Being Offered 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 EXCHANGES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION-Redeeming shares, Tax
identification number, Minimum balances
9. Pending Legal NOT APPLICABLE
Proceedings
Cross Reference - Page 7
<PAGE>
PART B
Caption in Statement of
Item No. Item Caption Additional Information
10. Cover Page COVER PAGE
11. Table of TABLE OF CONTENTS
Contents
12. General FUND ORGANIZATION
Information
and History
13. Investment THE FUND'S INVESTMENT OBJECTIVE AND
Objectives and POLICIES PORTFOLIO TRANSACTIONS-Brokerage
Policies Commissions, Portfolio turnover
14. Management of INVESTMENT ADVISER
the Fund TRUSTEES AND OFFICERS
REMUNERATION
15. Control TRUSTEES AND OFFICERS
Persons and
Principal
Holders of
Securities
16. Investment INVESTMENT ADVISER
Advisory and DISTRIBUTOR
Other Services ADDITIONAL INFORMATION-Experts, Other Information
17. Brokerage PORTFOLIO TRANSACTIONS-Brokerage Commissions,
Allocation Portfolio Turnover
and Other
Practices
18. Capital Stock FUND ORGANIZATION
and DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Other
Securities
19. Purchase, PURCHASES
Redemption and EXCHANGES AND REDEMPTIONS
Pricing of FEATURES AND SERVICES OFFERED BY THE
Securities FUND--Dividend and Capital Gain Distribution
Being Offered Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance
Data
23. Financial FINANCIAL STATEMENTS
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 NOT APPLICABLE
Financial
Information
4. General INVESTMENT OBJECTIVE AND POLICIES
Description of WHY INVEST IN THE FUND?
Registrant ADDITIONAL INFORMATION ABOUT POLICIES AND
INVESTMENTS
FUND ORGANIZATION
5. Management of A MESSAGE FROM SCUDDER'S CHAIRMAN
the Fund FUND ORGANIZATION-Investment adviser,
Transfer agent
SHAREHOLDER BENEFITS-A team approach to investing
TRUSTEES AND OFFICERS
5A. Management's NOT APPLICABLE
Discussion of
Fund
Performance
6. Capital Stock DISTRIBUTION AND PERFORMANCE
and Other INFORMATION-Dividends and capital gains
Securities distributions
FUND ORGANIZATION
TRANSACTION INFORMATION-Tax information
SHAREHOLDER BENEFITS-SAIL(TM)-Scudder Automated
Information Line, Dividend reinvestmen plan, T.D.D.
service for the hearing impaired
HOW TO CONTACT SCUDDER
7. Purchase of FUND ORGANIZATION-Underwriter
Securities PURCHASES
Being Offered 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 EXCHANGES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION-Redeeming shares,
Tax identification number, Minimum
balances
9. Pending Legal NOT APPLICABLE
Proceedings
Cross Reference - Page 9
<PAGE>
PART B
Caption in Statement of
Item No. Item Caption Additional Information
10. Cover Page COVER PAGE
11. Table of TABLE OF CONTENTS
Contents
12. General FUND ORGANIZATION
Information
and History
13. Investment THE FUND'S INVESTMENT OBJECTIVE AND
Objectives and POLICIES PORTFOLIO TRANSACTIONS-Brokerage
Policies Commissions, Portfolio turnover
14. Management of INVESTMENT ADVISER
the Fund TRUSTEES AND OFFICERS
REMUNERATION
15. Control TRUSTEES AND OFFICERS
Persons and
Principal
Holders of
Securities
16. Investment INVESTMENT ADVISER
Advisory and DISTRIBUTOR
Other Services ADDITIONAL INFORMATION-Experts, Other
Information
17. Brokerage PORTFOLIO TRANSACTIONS-Brokerage
Allocation Commissions, Portfolio Turnover
and Other
Practices
18. Capital Stock FUND ORGANIZATION
and DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Other
Securities
19. Purchase, PURCHASES
Redemption and EXCHANGES AND REDEMPTIONS
Pricing of FEATURES AND SERVICES OFFERED BY THE
Securities FUND-Dividend and Capital Gain
Being Offered Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance Data
23. Financial FINANCIAL STATEMENTS
Statements
Cross Reference - 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 NOT APPLICABLE
Financial
Information
4. General INVESTMENT OBJECTIVE AND POLICIES
Description of WHY INVEST IN THE FUND?
Registrant ADDITIONAL INFORMATION ABOUT POLICIES AND
INVESTMENTS
FUND ORGANIZATION
5. Management of A MESSAGE FROM SCUDDER'S CHAIRMAN
the Fund FUND ORGANIZATION-Investment adviser, Transfer agent
SHAREHOLDER BENEFITS-A team approach to investing
TRUSTEES AND OFFICERS
5A. Management's NOT APPLICABLE
Discussion of
Fund
Performance
6. Capital Stock DISTRIBUTION AND PERFORMANCE
and Other INFORMATION-Dividends and capital gains distributions
Securities 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 FUND ORGANIZATION-Underwriter
Securities PURCHASES
Being Offered 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 EXCHANGES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION-Redeeming shares,
Tax identification number, Minimum
balances
9. Pending Legal NOT APPLICABLE
Proceedings
Cross Reference - Page 11
<PAGE>
PART B
Caption in Statement of
Item No. Item Caption Additional Information
10. Cover Page COVER PAGE
11. Table of TABLE OF CONTENTS
Contents
12. General FUND ORGANIZATION
Information
and History
13. Investment THE FUND'S INVESTMENT OBJECTIVE AND
Objectives and POLICIES PORTFOLIO TRANSACTIONS-Brokerage
Policies Commissions, Portfolio turnover
14. Management of INVESTMENT ADVISER
the Fund TRUSTEES AND OFFICERS
REMUNERATION
15. Control TRUSTEES AND OFFICERS
Persons and
Principal
Holders of
Securities
16. Investment INVESTMENT ADVISER
Advisory and DISTRIBUTOR
Other Services ADDITIONAL INFORMATION-Experts, Other
Information
17. Brokerage PORTFOLIO TRANSACTIONS-Brokerage
Allocation Commissions, Portfolio Turnover
and Other
Practices
18. Capital Stock FUND ORGANIZATION
and Other DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Securities
19. Purchase, PURCHASES
Redemption and EXCHANGES AND REDEMPTIONS
Pricing of FEATURES AND SERVICES OFFERED BY THE
Securities FUND-Dividend and Capital Gain
Being Offered Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance Data
23. Financial FINANCIAL STATEMENTS
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 NOT APPLICABLE
Financial
Information
4. General INVESTMENT OBJECTIVE AND POLICIES
Description of WHY INVEST IN THE FUND?
Registrant ADDITIONAL INFORMATION ABOUT POLICIES AND
INVESTMENTS
FUND ORGANIZATION
5. Management of A MESSAGE FROM SCUDDER'S CHAIRMAN
the Fund FUND ORGANIZATION-Investment adviser,
Transfer agent
SHAREHOLDER BENEFITS-A team approach to investing
TRUSTEES AND OFFICERS
5A. Management's NOT APPLICABLE
Discussion of
Fund
Performance
6. Capital Stock DISTRIBUTION AND PERFORMANCE
and Other 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 FUND ORGANIZATION-Underwriter
Securities PURCHASES
Being Offered 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 EXCHANGES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION-Redeeming shares,
Tax identification number, Minimum
balances
9. Pending Legal NOT APPLICABLE
Proceedings
Cross Reference - Page 13
<PAGE>
PART B
Caption in Statement of
Item No. Item Caption Additional Information
10. Cover Page COVER PAGE
11. Table of TABLE OF CONTENTS
Contents
12. General FUND ORGANIZATION
Information
and History
13. Investment THE FUND'S INVESTMENT OBJECTIVE AND
Objectives and POLICIES PORTFOLIO TRANSACTIONS-Brokerage
Policies Commissions, Portfolio turnover
14. Management of INVESTMENT ADVISER
the Fund TRUSTEES AND OFFICERS
REMUNERATION
15. Control TRUSTEES AND OFFICERS
Persons and
Principal
Holders of
Securities
16. Investment INVESTMENT ADVISER
Advisory and DISTRIBUTOR
Other Services ADDITIONAL INFORMATION-Experts, Other
Information
17. Brokerage PORTFOLIO TRANSACTIONS-Brokerage
Allocation Commissions, Portfolio Turnover
and Other
Practices
18. Capital Stock FUND ORGANIZATION
and DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Other
Securities
19. Purchase, PURCHASES
Redemption and EXCHANGES AND REDEMPTIONS
Pricing of FEATURES AND SERVICES OFFERED BY THE
Securities FUND-Dividend and Capital Gain Distribution Options
Being Offered SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance Data
23. Financial FINANCIAL STATEMENTS
Statements
</TABLE>
Cross Reference - Page 14
<PAGE>
This prospectus sets forth concisely the information about Scudder Financial
Services Fund, Scudder Health Care Fund and Scudder Technology Fund, each a
series of Scudder Securities Trust, an open-end management investment company,
that a prospective investor should know before investing. Please retain it for
future reference.
If you require more detailed information, a Statement of Additional Information
dated January 5, 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 Securities and Exchange Commission'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 3.
- ----------------------------------------------------
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
- ----------------------------------------------------
SCUDDER CHOICE SERIES [logo]
Scudder Financial
Services Fund
Scudder
Health Care Fund
Scudder
Technology Fund
Prospectus
January 5, 1998
Three pure no-load(TM) (no sales charges) mutual funds which each seek long-term
growth of capital by investing primarily in common stocks and other equity
securities of companies in a group of related industries.
<PAGE>
Expense information
How to compare a Scudder pure no-load(TM) fund
This information is designed to help you understand the various costs and
expenses of investing in Scudder Financial Services Fund, Scudder Health Care
Fund and Scudder Technology Fund (the "Funds"). By reviewing this table and
those in other mutual funds' prospectuses, you can compare each 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 for various transactions.
<TABLE>
<CAPTION>
Scudder Scudder Scudder
Financial Health Care Technology
Services Fund Fund Fund
------------- ---- ----
<S> <C> <C> <C>
Sales commissions to purchase shares (sales load) NONE NONE NONE
Commissions to reinvest dividends NONE NONE NONE
Redemption fees 1.00%* 1.00%* 1.00%*
Fees to exchange shares 1.00%* 1.00%* 1.00%*
2) Annual operating expenses: Estimated expenses paid by each Fund before it
distributes its net investment income, expressed as a percentage of the
average daily net assets for the initial fiscal period ended August 31,
1998.
Investment management fee** (after waiver) 0.00%** ----%** ----%**
12b-1 fees NONE NONE NONE
Other expenses (after waiver) 1.50%** ----% ----%
Total operating expenses (after waiver) 1.50%** ----%** ----%**
</TABLE>
Example
Based on the estimated 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 each Fund before it distributes its
net investment income to shareholders.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 Year $15 $-- $--
3 Years $47 $-- $--
</TABLE>
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 each Fund which is imposed only on
redemptions or exchanges of shares held less than one year. You may redeem
by writing or calling a 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 ____________, the Adviser and certain of its subsidiaries have agreed
to waive all or portions of their fees payable by each Fund to the extent
necessary so that the total annualized expenses of a Fund do not exceed
____% of average daily net assets. If the Adviser and its subsidiaries had
not agreed to waive all or portions of their fees, it is estimated that
annualized Fund expenses would have been: investment management fee ____%,
other expenses ____% and total operating expenses ____% for the initial
fiscal year for each Fund. To the extent that expenses fall below the
current expense limitation, the Adviser and its subsidiaries reserve the
right to recoup, during the fiscal year incurred, amounts waived during the
period, but only to the extent that the Fund's expenses do not exceed
____%.
2
<PAGE>
A message from Scudder's chairman
Scudder Kemper Investments Inc., investment adviser to the Scudder Family of
Funds, was founded in 1919. We offered America's first no-load mutual fund in
1928. During the past year, Scudder entered into an alliance with Zurich
Insurance Company in which Zurich has acquired a majority interest in Scudder
and combined Scudder with Zurich Kemper Investments, Inc. Scudder's name has
been changed to Scudder Kemper Investments, Inc. Today, the combined forces of
Scudder Kemper manage in excess of $___ billion for many private accounts and
over ___ mutual fund portfolios. We continue to manage the mutual funds in a
special program for the American Association of Retired Persons, as well as the
fund options available through Scudder Horizon Plan, a tax-advantaged variable
annuity. We also advise The Japan Fund and nine closed-end funds that invest in
countries around the world.
The Scudder Family of Funds is designed to make investing easy and less costly.
It includes money market, tax free, income and growth funds as well as IRAs,
401(k)s, Keoghs and other retirement plans.
Services available to all shareholders include toll-free access to the
professional service representatives of Scudder Investor Relations, easy
exchange among funds, shareholder reports, informative newsletters and the
walk-in convenience of Scudder Investor Centers.
The funds of the Scudder Family of Funds are pure no-load(TM). This means you
pay no commissions to purchase or redeem your shares or to exchange from one
fund to another. There are no "12b-1" fees either, which many other funds now
charge to support their marketing efforts. All of your investment goes to work
for you. We look forward to welcoming you as a shareholder.
/s/Daniel Pierce
Scudder Financial Services Fund,
Scudder Health Care Fund and
Scudder Technology Fund
Investment objective
o long-term growth of capital by investing in equity securities of companies in
a group of related industries
Investment characteristics
o actively managed equity portfolios of companies in either the financial
services, health care or technology industries
o designed as long-term investments with above-average growth potential and risk
o pure no-load(TM) funds 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 each Fund for the benefit of remaining shareholders
Contents
Investment objective and policies 4
Why invest in Scudder Financial
Services Fund? 5
Why invest in Scudder Health Care Fund? 5
Why invest in Scudder Technology Fund? 6
U.S. investment experience 6
Additional information about policies
and investments 6
Distribution and performance information 10
Fund organization 11
Transaction information 12
Shareholder benefits 16
Purchases 19
Exchanges and redemptions 20
Trustees and Officers 22
Investment products and services 23
How to contact Scudder Back cover
3
<PAGE>
Investment objectives and policies
Scudder Financial Services Fund, Scudder Health Care Fund and Scudder Technology
Fund (collectively the "Funds" and individually the "Fund"), each a
non-diversified series of Scudder Securities Trust (the "Trust"), seek long-term
growth of capital. Each Fund pursues its investment objective by investing
primarily in common stocks and other equity securities of companies in a group
of related industries.
In the opinion of the Funds' investment adviser, Scudder Kemper Investments,
Inc. (the "Adviser"), the Funds offer investors the opportunity to participate
in the substantial long-term appreciation potential of companies in these large,
dynamic industry sectors. An investment in these more concentrated Funds may
involve significantly greater risks and greater volatility than in a diversified
equity mutual fund which is invested in securities of issuers in various
industries. Each Fund is subject to the risk that a particular group of related
stocks will decline in price due to industry-specific developments. As a result,
each Fund should be considered a long-term investment and part of a
well-diversified portfolio. To encourage a long-term investment holding period
and to facilitate portfolio management, a 1% redemption and exchange fee is
payable to each Fund for the benefit of remaining shareholders on shares held
less than one year. This fee is described more fully under "Transaction
information--Exchanging and redeeming shares."
Except as otherwise indicated, each Fund's investment objective and policies are
not fundamental and may be changed without a vote of shareholders. If there is a
change in a Fund's investment objective, shareholders should consider whether
that Fund remains an appropriate investment in light of their then current
financial position and needs. There can be no assurance that any Fund's
objective will be met.
Investments
Under normal circumstances, each Fund will invest at least 80% of its assets in
equity securities of companies in a group of related industries as described
below. Scudder Financial Services Fund, Scudder Health Care Fund and Scudder
Technology Fund will each invest primarily in securities of U.S. companies, but
may invest in foreign companies as well. A security will be considered
appropriate for a given Fund if at least 50% of its assets, revenues, or net
income are related to or derived from the industry or industries designated for
the Fund.
While each Fund invests predominantly in common stocks, each Fund may purchase
other types of equity securities including preferred stock, convertible or
non-convertible securities, rights and warrants. Securities may be listed on
national exchanges or traded over-the-counter. Each Fund may invest up to 20% of
its assets in U.S. Treasury securities, agency and instrumentality obligations.
In addition, each Fund may enter into repurchase agreements and, further, may
engage in strategic transactions to attempt to increase stock market
participation or for hedging purposes, enhance liquidity and manage transaction
costs. For temporary defensive purposes, each 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 accurately predict
for how long such alternate strategies may be utilized. More information about
these investment techniques is provided under "Additional information about
policies and investments."
The specific investment policies of the three Funds are listed below:
o Scudder Financial Services Fund invests in securities of financial services
companies including commercial banks, insurance companies, thrifts, consumer
4
<PAGE>
finance companies, commercial finance companies, leasing companies, securities
brokerage firms, asset management firms, and government-sponsored financial
enterprises.
o Scudder Health Care Fund invests in securities of companies that are engaged
in the development, production or distribution of products or services related
to the treatment or prevention of diseases and other medical problems. These
include companies that operate hospitals and other health care facilities;
companies that design, manufacture or sell medical supplies, equipment and
support services; and pharmaceutical firms. The Fund may also invest in
companies engaged in medical, diagnostic, biochemical, and biotechnological
research and development.
o Scudder Technology Fund invests in securities of companies engaged in the
development, production, or distribution of technology-related products or
services. These types of products and services currently include computer
hardware and software, computer-based services, semi-conductors, office
equipment and automation, and Internet-related products and services.
Why invest in Scudder Financial Services Fund?
Scudder Financial Services Fund invests in the equity securities of a broad
array of companies whose mission is to help their customers to save and invest,
access credit or capital, or insure personal or business risks. The Fund can
also invest in companies that assist financial services firms in providing these
services in an efficient, cost-effective manner. The Fund's portfolio is
represented by large, diversified companies doing business on a national or even
global scale, as well as smaller companies operating on more of a regional
basis.
In the opinion of the Adviser, the financial services industry has the potential
to benefit from economic, social and political trends and thus offers
substantial investment opportunity for the long-term investor. The types of
companies referenced above can produce earnings and realize value for investors
through expanding or tapping into new markets, introducing new products and
services, and engaging in merger and acquisition activity. More specifically,
some firms may benefit from key demographic changes, particularly the aging of
the population in the U.S. and other developed nations. Others may take
advantage of innovation in telecommunications, data processing, the Internet and
other technology. Still other companies may respond to global developments such
as deregulation of industry and capital markets, privatization of government-run
financial enterprises and activities, and a growing need for capital, especially
in the emerging markets.
In addition to the traditional risks associated with an equity sector fund, this
Fund exposes investors to special risks as a result of being concentrated in the
financial services industries. As discussed below in "Risk factors," these more
pronounced risks revolve around changes in interest rates, economic growth, and
governmental regulation.
Why invest in Scudder Health Care Fund?
Scudder Health Care Fund invests in the equity securities of health care
companies located throughout the world. In the opinion of the Adviser,
investments in the health care industry offer potential for significant growth
due to favorable demographic trends, technological advances in the industry, and
innovations by companies in the diagnosis and treatment of illnesses.
The aging of the world's population, including U.S. "baby boomers," will likely
5
<PAGE>
create significant demand for health care products and services. The Adviser
seeks to include companies in the portfolio that, because of their innovative
products and services and efficient operations, will be well-positioned for
growth. The Adviser may also invest in companies that develop less-invasive
means of diagnosing and treating illness, such as biotechnology companies,
pharmaceutical companies and medical device companies.
As discussed below in "Risk factors," investment in the Fund involves
above-average risk because the assets in the portfolio are concentrated in
related industries. The Adviser attempts to mitigate the overall portfolio
volatility by diversifying across the many industries of the health care sector,
but the investment is still subject to special industry risks. In the U.S., a
substantial portion of total health care expenses are paid by government
programs such as Medicaid and Medicare. If state or federal health care programs
change to control costs or for other reasons, the value of stocks in the
portfolio would be affected.
Why invest in Scudder Technology Fund?
Scudder Technology Fund offers more aggressive investors participation in one of
the highest- growth sectors, historically, of the U.S. economy. Technology
industries include a wide array of producers of software and hardware,
semiconductors, information technology equipment and services, as well as
technology supporting Internet access and electronic commerce. The Fund seeks to
invest in securities of companies that have current leadership positions in the
production, development or sale of technology. Also, the Fund's portfolio will
seek to include holdings of companies that, in the opinion of the Adviser, will
occupy leadership positions in the future.
The past growth of the technology sector is evident, not simply in terms of the
impact of technological advances, but also in the increase in the amount and
value of technology within so many products. For example, automobiles,
appliances, and entertainment all utilize technology to perform important
functions or enhance performance. Consumer demand for these functions has
continued to grow, both domestically and abroad. As the standard of living
increases around the globe, the demand for products that simplify daily life and
work will likely increase as well.
As discussed below in "Risk factors," investment in the Fund involves
above-average risk due to rapid growth and intense competition in the technology
field. Technology-related product development moves at a rapid pace, therefore
current products and services are continually at risk of becoming obsolete.
Competitive pressures caused by new companies and products may constrain a
company's flexibility in pricing products and services.
U.S. investment experience
The Adviser is one of America's largest investment managers and has been
involved in U.S. stock investing since its founding over 75 years ago. As of
December 31, 1997, Scudder managed in excess of $__ billion in U.S. equity
securities, including over $__ billion in domestically-oriented growth mutual
funds. Among other funds, the Adviser manages a number of aggressive growth
funds, including Scudder Development Fund, one of America's first small company
mutual funds, Scudder 21st Century Growth Fund, Scudder Small Company Value Fund
and Scudder Micro Cap Fund.
Additional information about policies and investments
Investment restrictions
Each Fund has adopted certain fundamental policies which may not be changed
6
<PAGE>
without a vote of shareholders and which are designed to reduce each Fund's
investment risk.
Each Fund may not borrow money except as permitted under the Investment Company
Act of 1940, as amended (the "1940 Act"), and as interpreted or modified by
regulatory authority having jurisdiction, from time to time, and may not make
loans except through the lending of portfolio securities, the purchase of debt
securities or interests in indebtedness in accordance with each Fund's
investment objective and policies, or through repurchase agreements.
A complete description of these and other policies and restrictions is contained
under "Investment Restrictions" in the Funds' Statement of Additional
Information.
Common stocks
Under normal circumstances, each Fund invests primarily in common stocks issued
by companies in a particular industry or group of related industries. Common
stock is issued by companies to raise cash for business purposes and represents
a proportionate interest in the issuing companies. Therefore, a Fund
participates in the success or failure of any company in which it holds stock.
The market values of equity securities 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 other classes of financial assets such as bonds
or cash equivalents.
Debt securities
Consistent with each Fund's investment objective of long-term capital growth, a
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 a Fund's objective of long-term growth of capital.
Convertible securities
The convertible securities in which the Funds may invest consist of bonds,
notes, debentures and preferred stocks which may be converted or exchanged at a
stated or determinable exchange ratio into underlying shares of common stock.
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, a Fund may enter
into repurchase agreements with selected banks and broker/dealers. Under a
repurchase agreement, a Fund acquires securities, subject to the seller's
agreement to repurchase at a specified time and price.
Foreign securities
While the Funds generally emphasizes investments in companies domiciled in the
U.S., they may invest in listed and unlisted foreign securities that meet the
same criteria as each Fund's domestic holdings. The Funds may invest in foreign
securities when the anticipated performance of the foreign securities is
believed by the Adviser to offer more return potential than domestic
alternatives in keeping with the investment objective of a Fund. The Funds may
enter into forward foreign currency exchange contracts in connection with the
purchase and sale of securities denominated in a foreign currency.
Real estate investment trusts
Scudder Health Care Fund may purchase real estate investment trusts ("REITs"),
which pool investors' funds for investment primarily in income-producing real
estate or real estate-related loans or interests. REITs cangenerally be
classified as equity REITs, mortgage REITs or hybrid REITs. Equity REITs, which
invest the majority of their assets directly in real property, derive their
7
<PAGE>
income primarily from rents. Equity REITs can also realize capital gains by
selling properties that have appreciated in value. Mortgage REITs, which invest
the majority of their assets in real estate mortgages, derive their income
primarily from interest payments on real estate mortgages in which they are
invested. Hybrid REITs combine the characteristics of both equity REITs and
mortgage REITs.
Strategic Transactions and derivatives
The Funds may, but are not required to, utilize various other investment
strategies as described below to hedge various market risks 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 Funds may purchase
and sell exchange-listed and over-the-counter put and call options on
securities, equity and other financial instruments, and purchase and sell
financial futures contracts and options thereon (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 a Fund's portfolio resulting from securities market fluctuations, to protect
a 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 a 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 a Fund to
utilize these Strategic Transactions successfully will depend on the Adviser's
ability to predict pertinent market movements, which cannot be assured. The
Funds will comply with applicable regulatory requirements when implementing
these strategies, techniques and instruments. Strategic Transactions involving
financial futures and options thereon will be purchased, sold or entered into
only for bona fide hedging, risk management or portfolio management purposes and
not for speculative purposes. Please refer to "Risk factors--Strategic
Transactions and derivatives" for more information.
Risk factors
Each 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 a
Fund may use from time to time.
Non-diversified investment companies. Each Fund is classified as a
non-diversified investment company under the 1940 Act, which means that each
Fund is not limited by the 1940 Act in the proportion of its assets that it may
invest in the obligations of a single issuer. The investment of a large
percentage of a Fund's assets in the securities of a small number of issuers may
cause that Fund's share price to fluctuate more than that of a diversified
investment company.
Concentration. Each Fund "concentrates" (for purposes of the 1940 Act) its
assets in securities related to a particular industry, which means that at least
25% of its assets will be invested in these assets at all times. As a result,
8
<PAGE>
each Fund may be subject to greater market fluctuation than a fund which has
securities representing a broader range of investment alternatives. For a more
detailed discussion of the risks associated with a particular industry, please
see "Why Invest in the Funds."
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, a Fund's right to dispose of the securities may be restricted, or the
value of the securities may decline before a 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, a Fund may encounter delay and incur costs,
including a decline in the value of the securities, before being able to sell
the securities.
Illiquid and restricted securities. The absence of a trading market can make it
difficult to ascertain a market value for illiquid or restricted securities.
Disposing of illiquid or restricted securities may involve time-consuming
negotiation and legal expenses, and it may be difficult or impossible for a Fund
to sell them promptly at an acceptable price.
Foreign securities. Investments in foreign securities involve special
considerations due to limited information, higher brokerage costs, different
accounting standards, thinner trading markets as compared to domestic markets
and the likely impact of foreign taxes. They may also entail other risks, such
as the possibility of one or more of the following: imposition of dividend or
interest withholding or confiscatory taxes; currency blockages or transfer
restrictions; expropriation, nationalization or other adverse political or
economic developments; less governmental supervision and regulation of
securities exchanges, brokers and listed companies; and the difficulty of
enforcing obligations in other countries. Purchases of foreign securities are
usually made in foreign currencies and, as a result, the Funds may incur
currency conversion costs and may be affected favorably or unfavorably by
changes in the value of foreign currencies against the U.S. dollar.
Further, it may be more difficult for the Funds' agents to keep currently
informed about corporate actions which may affect the prices of portfolio
securities. Communications between the U.S. and foreign countries may be less
reliable than within the U.S., increasing the risk of delayed settlements of
portfolio transactions or loss of certificates for portfolio securities. The
Fund's ability and decisions to purchase and sell portfolio securities may be
affected by laws or regulations relating to the convertibility of currencies and
repatriation of assets. Some countries restrict the extent to which foreigners
may invest in their securities markets.
Real estate investment trusts. Investment in REITs may subject Scudder Health
Care Fund to risks similar to those associated with the direct ownership of real
estate (in addition to securities markets risks). REITs are sensitive to factors
such as changes in real estate values and property taxes, interest rates, cash
flow of underlying real estate assets, supply and demand, and the management
skill and creditworthiness of the issuer. REITs may also be affected by tax and
regulatory requirements.
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 a Fund,
9
<PAGE>
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 a Fund can
realize on its investments or cause a 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 a
Fund creates the possibility that losses on the hedging instrument may be
greater than gains in the value of a 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, a
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 a Fund may
use and some of their risks are described more fully in the Funds' Statement of
Additional Information.
Distribution and performance information
Dividends and capital gains distributions
Each 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 a month and paid the following
January will be treated by shareholders for federal income tax purposes as if
received on December 31 of the calendar year declared. According to preference,
shareholders may receive distributions in cash or have them reinvested in
additional shares of a 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.
Each Fund sends detailed tax information to shareholders about the amount and
type of their distributions by January 31 of the following year.
Under normal investment conditions, it is anticipated that the portfolio
turnover rates for Scudder Financial Services Fund, Scudder Health Care Fund and
10
<PAGE>
Scudder Technology Fund will not exceed 75%, 75% and 200%, respectively, for
each Fund's initial fiscal year. However, economic and market conditions may
necessitate more active trading, resulting in a higher portfolio turnover rate.
A higher rate involves greater brokerage expenses to a Fund and may result in
the realization of net capital gains, which would be taxable to shareholders
when distributed.
Performance information
From time to time, quotations of a 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 a Fund for a specified period. The "average annual total
return" of a Fund is the average annual compound rate of return of an investment
in a Fund assuming the investment has been held for the life of a Fund as of a
stated ending date. "Cumulative total return" represents the cumulative change
in value of an investment in a 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 a Fund.
Fund organization
Scudder Financial Services Fund, Scudder Health Care Fund and Scudder Technology
Fund are each a non-diversified series of Scudder Securities Trust (the
"Trust"), formerly known as Scudder Development Fund, an open-end, management
investment company registered under 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 Funds' 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
Each Fund retains the investment management firm of Scudder Kemper Investments,
Inc., a Delaware corporation, to manage its daily investment and business
affairs pursuant to investment management agreements and subject to the policies
established by the Board of Trustees. The Trustees have overall responsibility
for the management of each Fund under Massachusetts law.
Scudder Financial Services Fund, Scudder Health Care Fund and Scudder Technology
Fund each pays the Adviser an annual fee of 0.75%, ____% and ____%,
respectively, of the Fund's average daily net assets. The fee is payable
monthly, provided that each 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 that 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 has agreed to maintain the annualized expenses of Scudder Financial
Services Fund at no more than 1.50% of the average daily net assets of the Fund
until December 31, 1998.
The Adviser has agreed to maintain the annualized expenses of Scudder Health
11
<PAGE>
Care Fund at no more than ____% of the average daily net assets of the Fund
until _________________.
The Adviser has agreed to maintain the annualized expenses of Scudder Technology
Fund at no more than ____% of the average daily net assets of the Fund until
_________________.
Under the Investment Management Agreement with the Adviser, each Fund is
responsible for all of its expenses, including fees and expenses incurred in
connection with membership in investment company organizations; fees and
expenses of each Fund's accounting agent; brokers' commissions; legal, auditing
and accounting expenses; taxes and governmental fees; the fees and expenses of
the transfer agent; the expenses of and the fees for registering or qualifying
securities for sale; the fees and expenses of Trustees, officers and employees
of the Trust 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.
Each 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 each Fund.
Underwriter
Scudder Investor Services, Inc., a subsidiary of the Adviser, is each Fund's
principal underwriter. Scudder Investor Services, Inc. confirms, as agent, all
purchases of shares of a Fund. Scudder Investor Relations is a telephone
information service provided by Scudder Investor Services, Inc.
Custodian
State Street Bank and Trust Company is each 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 each Fund.
Transaction information
Purchasing shares
Purchases are executed at the next calculated net asset value per share after a
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,
a 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 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:
12
<PAGE>
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 a 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, a 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
Upon the redemption or exchange of shares held less than one year, a fee of 1%
of the current net asset value of the shares will be assessed and retained by
the applicable Fund for the benefit of the remaining shareholders of that Fund.
The fee is waived for all shares purchased through certain retirement plans,
including 401(k) plans, 403(b) plans, 457 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 IRA and SEP-IRA
accounts. This fee is intended to encourage long-term investment in a Fund, to
13
<PAGE>
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. Each Fund reserves the right to modify the terms of or
terminate this fee at any time.
The fee applies to redemptions from a Fund and exchanges to other Scudder funds,
but not to dividend or capital gains distributions which have been automatically
reinvested in a 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 Funds' Statement of Additional Information for a more
detailed description of the redemption fee.
By exchange. A 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.
Redeeming shares
The Fund allows you to redeem shares (i.e., sell them back to the Fund) without
redemption fees.
By telephone. This is the quickest and easiest way to sell Fund shares. If you
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.
To redeem shares, call 1-800-225-5163. Redemptions must be for at least $250.
Proceeds in the amount of your redemption will be transferred to 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
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.
Signature guarantees. For your protection and to prevent fraudulent redemptions,
14
<PAGE>
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. (Each 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. Each 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 a Fund does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. Each 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 a 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 a 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.
Each 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. Each
Fund and Scudder Investor Services, Inc. each reserve the right to reject
purchases of Fund shares (including exchanges) when a pattern of frequent
purchases and sales made in response to short-term fluctuations in a 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 a Fund's
application when you open an account. Federal tax law requires a Fund to
withhold 31% of taxable dividends, capital gains distributions and redemption
15
<PAGE>
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. Each Fund reserves the right to reject new
account applications without a correct certified Social Security or tax
identification number. Each 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 a 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 in a Fund,
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
a Fund, without establishing an AIP, will be assessed an annual $10.00 per fund
charge with the fee to be paid to that 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. Each 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. A 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 Funds' 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
Each 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.
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 Financial Services Fund, Scudder Health Care Fund and Scudder Technology
Fund are each managed by a team of Scudder investment professionals, who each
play an important role in the Fund's management process. Team members work
together to develop investment strategies and select securities for each Fund's
16
<PAGE>
portfolio. They are supported by Scudder's large staff of quantitative analysts,
traders and other investment specialists who work in Scudder's offices across
the United States and abroad. Scudder believes its team approach benefits Fund
investors by bringing together many disciplines and leveraging Scudder's
extensive resources.
Scudder Financial Services Fund
Co-Lead Portfolio Managers Thaddeus Paluszek and Peter Taylor have
responsibility for the Fund's day-to-day management and investment strategies.
Mr. Paluszek, who joined Scudder in 1993, has 18 years of investment industry
experience and specializes in global banking, consumer finance, commercial
finance, financial transaction processing and domestic brokerage companies. Mr.
Taylor joined Scudder in 1989 as an equity analyst and focuses on insurance
companies, thrifts, asset management companies and government-sponsored
enterprises. Mr. Taylor has 29 years of investment industry experience. William
Truscott serves as a Portfolio Manager for the Fund. Mr. Truscott, who joined
Scudder in 1992 and has 15 years of investment industry experience, was a
portfolio manager and equity research analyst from 1992 to 1996, focusing on
Latin American securities. He is currently Scudder's Director of Global Equity
Research.
Scudder Health Care Fund
[THE FOLLOWING PARAGRAPH IS TO BE UPDATED]
Co-Lead Portfolio Managers Kim Purvis and Jim Fenger have responsibility for the
Fund's day-to-day management and investment strategies. Ms. Purvis, who joined
Scudder in 1997, has 14 years of industry experience and focuses on health care
services (hospitals, HMO's, etc.), medical supply distributors and medical
device companies. Mr. Fenger...
Sally Yanchus, Portfolio Manager,... Leefin Lai, Portfolio Manager,...
Scudder Technology Fund
[THE FOLLOWING PARAGRAPH IS TO BE UPDATED]
Brooks Dougherty, Lead Portfolio Manager, joined Scudder in 1993 as an equity
analyst for technology companies and has 14 years of industry experience. Robert
Horton, Portfolio Manager, joined Scudder in 1996 and has 9 years of industry
experience. Virginea Stuart, Portfolio Manager, joined Scudder in 1996 and has 4
years of industry experience. Paul Svetz, Portfolio Manager, joined Scudder in
1988 and has over 25 years of industry experience.
Christine Chien, Portfolio Manager,... Deb Koch, Portfolio Manager,...
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.
17
<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, Stevens & Clark, 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 Scudder'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.
18
<PAGE>
<TABLE>
<CAPTION>
Purchases
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Opening
an account Minimum initial investment: $2,500; IRAs $1,000
Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums.
See appropriate plan literature.
Make checks o By Mail Send your completed and signed application and check
payable to "The
Scudder Funds."
by regular mail to: or by express, registered,
or certified mail to:
The Scudder Funds Scudder Shareholder Service
P.O. Box 2291 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.
-----------------------------------------------------------------------------------------------------------------------
Purchasing
additional shares Minimum additional investment: $100; IRAs $50
Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums.
See appropriate plan literature.
Make checks o By Mail Send a check with a Scudder investment slip, or with a
letter of payable to "The instruction including your account number and the
complete Fund name, to Scudder Funds." 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 a regular basis through
Investment Plan automatic deductions from your bank checking account. Please call
($50 minimum) 1-800-225-5163 for more information and an enrollment form.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Exchanges and redemptions
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Exchanging Minimum investments: $2,500 to establish a new account;
shares $100 to exchange among existing accounts
o By Telephone To speak with a service representative, call 1-800-225-5163 from
8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day).
There is a 1% o By Mail Print or type your instructions and include:
fee payable to or Fax
the Fund for - the name of the Fund and the account number you are exchanging from;
exchanges of - your name(s) and address as they appear on your account;
shares held less - the dollar amount or number of shares you wish to exchange;
than one year. - the name of the Fund you are exchanging into; and
- your signature(s) as it appears on your account and a daytime telephone
number.
Send your instructions
by regular mail to: or by express, registered, or by fax to:
or certified mail to:
The Scudder Funds Scudder Shareholder Service 1-800-821-6234
P.O. Box 2291 Center
Boston, MA 02107-2291 42 Longwater Drive
Norwell, MA
02061-1612
-----------------------------------------------------------------------------------------------------------------------
Redeeming o By Telephone To speak with a service representative, call 1-800-225-5163 from
shares 8 a.m. to 8 p.m.eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day). You may have
redemption proceeds sent to your predesignated bank account, or redemption
proceeds of up to $50,000 sent to your address of record.
There is a 1% o By Mail Send your instructions for redemption to the appropriate address or fax number
fee payable to or Fax above and include:
the Fund for
redemption of - the name of the Fund and account number you are redeeming from;
shares held less - your name(s) and address as they appear on your account;
than one year. - the dollar amount or number of shares you wish to redeem; and
- your signature(s) as it appears on your account and a daytime telephone
number.
A signature guarantee is required for redemptions over $100,000. See Transaction
information--Redeeming shares following these tables.
o By Automatic You may arrange to receive automatic cash payments periodically if the value of
Withdrawal Plan your account is $10,000 or more. Call 1-800-225-5163 for more information and an
enrollment form.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
Scudder tax-advantaged retirement plans
Scudder offers a variety of tax-advantaged retirement plans for individuals,
businesses and non-profit organizations. These flexible plans are designed for
use with the Scudder Family of Funds (except Scudder tax-free funds, which are
inappropriate for such plans). Scudder Funds offer a broad range of investment
objectives and can be used to seek almost any investment goal. Using Scudder's
retirement plans can help shareholders save on current taxes while building
their retirement savings.
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 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.
21
<PAGE>
Trustees and Officers
Daniel Pierce*
President and Trustee
Paul Bancroft III
Trustee; Venture Capitalist and Consultant
Sheryle J. Bolton
Trustee; Consultant
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
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
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Richard W. Desmond*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
22
<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.
Scudder Choice Series
- ---------------------
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
Retirement Plans
- --------------------------------------------------------------------------------
[THE FOLLOWING INFORMATION IS TO BE UPDATED]
IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan **+++ +++
(a variable annuity)
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. +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, Stevens & Clark, Inc., are traded on various stock exchanges.
23
<PAGE>
<TABLE>
<CAPTION>
How to contact Scudder
Account Service and Information:
<S> <C>
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.
</TABLE>
SCUDDER FINANCIAL SERVICES FUND
SCUDDER HEALTH CARE FUND
SCUDDER TECHNOLOGY FUND
Three Pure No-LoadT (No Sales Charges) Mutual Funds Which Each Seek
Long-Term Growth of Capital Through Investment
Primarily in Common Stocks and Other Equity Securities of Companies
in a Group of Related Industries
STATEMENT OF ADDITIONAL INFORMATION
January 5, 1998
This combined Statement of Additional Information is not a prospectus and
should be read in conjunction with the combined prospectus of Scudder Financial
Services Fund, Scudder Health Care Fund and Scudder Technology Fund dated
January 5, 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>
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES 1
General Investment Objective and Policies 1
Scudder Financial Services Fund 1
Scudder Health Care Fund 1
Scudder Technology Fund 2
Specialized Investment Techniques 2
Investment Restrictions 10
PURCHASES 11
Additional Information About Opening An Account 11
Additional Information About Making Subsequent Investments 11
Additional Information About Making Subsequent Investments
by QuickBuy 11
Checks 12
Wire Transfer of Federal Funds 12
Share Price 12
Share Certificates 13
Other Information 13
EXCHANGES AND REDEMPTIONS 13
Exchanges 13
Special Redemption and Exchange Information 14
Redemption by Telephone 14
Redemption by QuickSell 15
Redemption by Mail or Fax 16
Redemption-in-Kind 16
Other Information 16
FEATURES AND SERVICES OFFERED BY THE FUNDS 17
The Pure No-LoadT Concept 17
Internet access 18
Dividend and Capital Gain Distribution Options 19
Scudder Investor Centers 19
Reports to Shareholders 19
Transaction Summaries 19
THE SCUDDER FAMILY OF FUNDS 20
SPECIAL PLAN ACCOUNTS 24
Scudder Retirement Plans: Profit-Sharing and Money
Purchase Pension Plans for Corporations and
Self-Employed Individuals 24
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for
Corporations and Self-Employed Individuals 24
Scudder IRA: Individual Retirement Account 25
Scudder 403(b) Plan 25
Automatic Withdrawal Plan 26
Group or Salary Deduction Plan 26
Automatic Investment Plan 26
Uniform Transfers/Gifts to Minors Act 27
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS 27
PERFORMANCE INFORMATION 27
Average Annual Total Return 27
Cumulative Total Return 28
Total Return 28
Comparison of Fund Performance 28
i
<PAGE>
TABLE OF CONTENTS (continued)
Page
ORGANIZATION OF THE FUNDS 31
INVESTMENT ADVISER 32
Personal Investments by Employees of the Adviser 35
TRUSTEES AND OFFICERS 36
REMUNERATION 38
Responsibilities of the Board-Board and Committee Meetings 38
Compensation of Officers and Trustees 38
DISTRIBUTOR 39
TAXES 40
PORTFOLIO TRANSACTIONS 43
Brokerage Commissions 43
Portfolio Turnover 44
NET ASSET VALUE 44
ADDITIONAL INFORMATION 45
Experts 45
Other Information 45
FINANCIAL STATEMENTS 46
ii
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES
(See "Investment objective and policies" in the Funds' prospectus.)
Scudder Financial Services Fund, Scudder Health Care Fund and Scudder
Technology Fund (individually the "Fund," collectively the "Funds") are each
series of Scudder Securities Trust (the "Trust"), an open-end management
investment company, which continuously offer and redeem shares at net asset
value. Each Fund is a company of the type commonly known as a mutual fund.
General Investment Objective and Policies
Scudder Financial Services Fund
Scudder Financial Services Fund's ("Financial Services Fund") investment
objective is to seek long-term growth of capital primarily through investment in
equity securities of financial services companies, including commercial banks,
insurance companies, thrifts, consumer finance, commercial finance, leasing,
securities brokerage firms, asset management firms and government- sponsored
financial enterprises.
Financial Services Fund invests in a broad array of companies whose mission is
to help their customers to save and invest, access credit or capital, or insure
personal or business risks. The Fund can also invest in companies that assist
financial service firms in providing these services in an efficient,
cost-effective manner. The Fund's portfolio is represented by large, diversified
companies doing business on a national or even global scale, as well as smaller
companies operating on more of a regional basis.
In the opinion of the Fund's investment adviser, Scudder Kemper Investments,
Inc., (the "Adviser"), the financial services industries has the potential to
benefit from economic, social and political trends and thus offers substantial
investment opportunity for the long-term investor. The types of companies
referenced above can produce earnings and realize value for investors through
expanding or tapping into new markets, introducing new products and services,
and engaging in merger and acquisition activity. More specifically, some firms
may benefit from key demographic changes, particularly the aging of the
population in the U.S. and other developed nations. Others may take advantage of
innovation in telecommunications, data processing, the Internet and other
technology. Still other companies may respond to global developments such as
deregulation of industry and capital markets, privatization of government-run
financial enterprises and activities, and a growing need for capital, especially
in the emerging markets.
In addition to the traditional risks associated with an equity sector fund, this
Fund exposes investors to special risks as a result of being concentrated in the
financial services industries. These more pronounced risks revolve around
changes in interest rates, economic growth, and governmental regulation.
Scudder Health Care Fund
Scudder Health Care Fund's ("Health Care Fund") investment objective is to seek
long-term growth of capital primarily through investment in securities of
companies that are engaged in the development, production or distribution of
products or services related to the treatment or prevention of diseases and
other medical problems. These include companies that operate hospitals and other
health care facilities; companies that design, manufacture or sell medical
supplies, equipment and support services; and pharmaceutical firms. Health Care
Fund may also invest in companies engaged in medical, diagnostic, biochemical
and biotechnological research and development.
Health Care Fund invests in the equity securities of health care companies
located throughout the world. In the opinion of the Adviser, investments in the
health care industry offer potential for significant growth due to favorable
demographic trends, technological advances in the industry, and innovations by
companies in the diagnosis and treatment of illnesses.
The aging of the world's population, including U.S. "baby boomers," will likely
create significant demand for health care products and services. The Adviser
seeks to include companies in the portfolio that, because of their innovative
products and services and efficient operations, will be well-positioned for
growth. The Adviser may also invest in companies that develop less invasive
means of diagnosing and treating illness such as biotechnology companies,
pharmaceutical companies, and medical device companies.
<PAGE>
Investment in the Fund involves above-average risk because the assets in the
portfolio are concentrated in related industries. The Adviser attempts to
mitigate the overall portfolio volatility by diversifying across the many
industries of the health care sector, but the investment is still subject to
special industry risks. In the U.S., a substantial portion of total health care
expenses are paid by government programs such as Medicaid and Medicare. If state
or federal health care programs change to control costs or for other reasons,
the value of stocks in the portfolio would be affected.
Scudder Technology Fund
Scudder Technology Fund's ("Technology Fund") investment objective is to seek
long-term growth of capital primarily through investment in securities of
companies engaged in the development, production or distribution of
technology-related products or services. These types of products and services
currently include computer hardware and software, computer-based services,
semi-conductors, office equipment and automation, and Internet-related products
and services.
Technology Fund offers more aggressive investors participation in one of the
highest-growth sectors, historically, of the U.S. economy. Technology industries
include a wide array of producers of software and hardware, semiconductors,
information technology equipment and services, as well as technology supporting
Internet access and electronic commerce. The Fund seeks to invest in securities
of companies that have current leadership positions in the production,
development or sale of technology. Also, the Fund's portfolio will seek to
include holdings of companies that, in the opinion of the Adviser, will occupy
leadership positions in the future.
The past growth of the technology sector is evident, not simply in terms of the
impact of technological advances, but also in the increase in the amount and
value of technology within so many products. For example, automobiles,
appliances, and entertainment all utilize technology to perform important
functions or enhance performance. Consumer demand for these functions has
continued to grow, both domestically and abroad. As the standard of living
increases around the globe, the demand for products that simplify daily life and
work will likely increase as well.
Investment in the Fund involves above-average risk due to rapid growth and
intense competition in the technology field. Technology- related product
development moves at a rapid pace, therefore current products and services are
continually at risk of becoming obsolete. Competitive pressures caused by new
companies and products may constrain a company's flexibility in pricing products
and services.
Master/feeder structure. The Trust's Board of Trustees may determine that the
objective of each Fund would be achieved more efficiently, while retaining its
current distribution arrangement, by investing in a master fund in a
master/feeder fund structure as described below, and in that case cause a Fund
to do so without prior approval by shareholders.
A master/feeder fund structure is one in which a fund (a "feeder fund"), instead
of investing directly in a portfolio of securities, invests 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, management 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.
Specialized Investment Techniques
Concentration. Each Fund "concentrates" (for purposes of the 1940 Act) its
assets in securities related to a particular industry, which means that at least
25% of its assets will be invested in these assets at all times. As a result,
each Fund may be subject to greater market fluctuation than a fund which has
securities representing a broader range of investment alternatives. For a more
detailed discussion of the risks associated with a particular industry, please
see "THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES."
2
<PAGE>
Debt Securities. When the Adviser believes that it is appropriate to do so in
order to achieve a Fund's objective of long-term capital appreciation, each 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.
Convertible Securities. Each 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.
The convertible securities in which a 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 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 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 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. Each 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 a
Fund may purchase.
3
<PAGE>
A repurchase agreement provides a means for a 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 a Fund, or the purchase and repurchase
prices may be the same, with interest at a stated rate due to a Fund together
with the repurchase price upon repurchase. In either case, the income to a 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.
For purposes of the 1940 Act a repurchase agreement is deemed to be a loan
from a Fund to the seller of the Obligation subject to the repurchase agreement
and is therefore subject to a Fund's investment restriction applicable to loans.
It is not clear whether a court would consider the Obligation purchased by a
Fund subject to a repurchase agreement as being owned by a Fund or as being
collateral for a loan by a 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, a
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 a Fund has not perfected a
security interest in the Obligation, a 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, a 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 a 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 a Fund may incur a loss if the
proceeds to a 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), a 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 a Fund will be
unsuccessful in seeking to enforce the seller's contractual 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 and Restricted Investments. Each Fund may invest a portion of its
assets in securities for which there is not an active trading market including
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933 or which are otherwise not
readily marketable. The absence of a trading market can make it difficult to
ascertain a market value for illiquid or restricted investments. Disposing of
illiquid or restricted investments may involve time-consuming negotiation and
legal expenses, and it may be difficult or impossible for a Fund to sell them
promptly at an acceptable price. Each Fund may have to bear the extra expense of
registering such securities for resale and the risk of substantial delay in
effecting such registration. Also market quotations are less readily available.
The judgment of the Funds' Adviser may at times play a greater role in valuing
these securities than in the case of unrestricted securities.
Strategic Transactions and Derivatives. Each 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 a 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.
4
<PAGE>
In the course of pursuing these investment strategies, each 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 a 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 a 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 a 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 a Fund to utilize these Strategic
Transactions successfully will depend on the Adviser's ability to predict
pertinent market movements, which cannot be assured. Each 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 a Fund to hold a security it might otherwise sell. The use
of currency transactions can result in a 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 a
Fund creates the possibility that losses on the hedging instrument may be
greater than gains in the value of a 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, a
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, a 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
a 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. A Fund's purchase of a call option on a security, financial
future, index, currency or other instrument might be intended to protect a 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
5
<PAGE>
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. Each Fund
is authorized to purchase and sell exchange listed options and over-the-counter
options ("OTC options"). Exchange listed options are issued by a regulated
intermediary such as the Options Clearing Corporation ("OCC"), which guarantees
the performance of the obligations of the parties to such options. The
discussion below uses the OCC as an example, but is also applicable to other
financial intermediaries.
With certain exceptions, OCC issued and exchange listed options generally
settle by physical delivery of the underlying security or currency, although in
the future cash settlement may become available. Index options and Eurodollar
instruments are cash settled for the net amount, if any, by which the option is
"in-the-money" (i.e., where the value of the underlying instrument exceeds, in
the case of a call option, or is less than, in the case of a put option, the
exercise price of the option) at the time the option is exercised. Frequently,
rather than taking or making delivery of the underlying instrument through the
process of exercising the option, listed options are closed by entering into
offsetting purchase or sale transactions that do not result in ownership of the
new option.
A 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. A Fund
will only sell OTC options (other than OTC currency options) that are subject to
a buy-back provision permitting a Fund to require the Counterparty to sell the
option back to the Fund at a formula price within seven days. A 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, a 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. Each 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 a 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 a Fund's
limitation on investing its assets in illiquid securities.
6
<PAGE>
If a 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 a Fund's income. The sale of put options can also provide income.
Each 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 a 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 a Fund will receive the option premium to help protect it against
loss, a call sold by a Fund exposes that 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 a Fund to hold a security or
instrument which it might otherwise have sold.
Each Fund may purchase and sell put options on securities including U.S.
Treasury and agency securities, mortgage-backed securities, corporate debt
securities, equity securities (including convertible securities), and on
securities indices and futures contracts other than futures on individual
corporate debt and individual equity securities. A Fund will not sell put
options if, as a result, more than 50% of that 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 a Fund may be required to buy the underlying security at a
disadvantageous price above the market price.
General Characteristics of Futures. Each 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 a 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.
A 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 a 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 a Fund. If
a 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.
Each 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 a 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. Each 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
7
<PAGE>
settling by physical delivery of the underlying instrument, they settle by cash
settlement, i.e., an option on an index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the index
upon which the option is based exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option (except if, in the case
of an OTC option, physical delivery is specified). This amount of cash is equal
to the excess of the closing price of the index over the exercise price of the
option, which also may be multiplied by a formula value. The seller of the
option is obligated, in return for the premium received, to make delivery of
this amount. The gain or loss on an option on an index depends on price
movements in the instruments making up the market, market segment, industry or
other composite on which the underlying index is based, rather than price
movements in individual securities, as is the case with respect to options on
securities.
Combined Transactions. Each 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 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 a
Fund may enter are interest rate, and index swaps and the purchase or sale of
related caps, floors and collars. Each 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 a Fund anticipates purchasing at
a later date. Each 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 a 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.
Each 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 Funds believe 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 a Fund segregate cash or liquid
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 a 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 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
8
<PAGE>
or it is no longer necessary to segregate them. For example, a call option
written by a Fund will require that 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 a
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 a Fund requires the Fund to segregate cash or liquid assets
equal to the exercise price.
Except when a 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 a Fund to buy or sell currency
will generally require a Fund to hold an amount of that currency or liquid
securities denominated in that currency equal to a Fund's obligations or to
segregate cash or liquid assets equal to the amount of the Fund's obligation.
OTC options entered into by a 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 a 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 a Fund sells a call option on an index at a time when the in-the-money
amount exceeds the exercise price, a 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 a Fund other than those
above generally settle with physical delivery, and a 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, each 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, a 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 securities having a
value equal to the accrued excess. Caps, floors and collars require segregation
of assets with a value equal to a Fund's net obligation, if any.
Strategic Transactions may be covered by other means when consistent with
applicable regulatory policies. Each 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, a 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 a Fund. Moreover, instead of segregating assets if a 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.
Each 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.")
Borrowing. The Funds are each authorized to borrow money from banks and other
financial institutions in an amount equal to up to 33 1/3% of a Fund's net
assets for purposes of liquidity and to provide for redemptions and
distributions. Each Fund will borrow only when the Adviser believes that
borrowing will benefit the Fund after taking into account considerations such as
the costs of the borrowing. Each Fund will not borrow for investment purposes,
to increase return or leverage the portfolio. Borrowing by a Fund will involve
special risk considerations. Although the principal of a Fund's borrowings will
9
<PAGE>
be fixed, a Fund's assets may change in value during the time a borrowing is
outstanding, thus increasing exposure to capital risk.
When-Issued Securities. Each 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 a Fund. To the extent that assets of a Fund are held
in cash pending the settlement of a purchase of securities, that Fund would earn
no income; however, it is a 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, a Fund
intends to purchase such securities with the purpose of actually acquiring them
unless a sale appears desirable for investment reasons. At the time a 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 Funds do
not believe that their net asset value or income will be adversely affected by
its purchase of securities on a when-issued or forward delivery basis.
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 a 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 a Fund are present or
represented by proxy, or (2) more than 50% of the outstanding voting securities
of a 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, a Fund.
As a matter of fundamental policy, each 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) 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;
(4) 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;
(5) purchase physical commodities or contracts related to physical
commodities; or
(6) 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, each Fund may not:
(a) invest more than 15% of the Fund's total assets in securities which
are not readily marketable, the disposition of which is restricted
under Federal securities laws, or in repurchase agreements not
terminable within 7 days.
10
<PAGE>
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, a Fund.
PURCHASES
(See "Purchases" and "Transaction information" in the
Funds' 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 a Fund's
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 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, 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 a 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 Funds' 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 a Fund or the principal underwriter by reason of such
cancellation. If the purchaser is a shareholder, a Fund shall have the
authority, as agent of the shareholder, to redeem shares in the account in order
to reimburse a 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 a 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. 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
11
<PAGE>
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.
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 in U.S. funds and must be drawn on, or payable
through, a U.S. bank.
If shares of a Fund are purchased by a check which proves to be
uncollectible, that Fund reserves the right to cancel the purchase immediately
and 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, a Fund shall have the authority, as agent of the shareholder, to
redeem shares in the account in order to reimburse a 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 a 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 Funds.
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 Funds, to
forward the purchase order to Scudder Service Corporation (the "Transfer Agent")
in Boston by the close of regular trading on the Exchange.
12
<PAGE>
Share Certificates
Due to the desire of Fund management to afford ease of redemption,
certificates will not be issued to indicate ownership in a Fund.
Other Information
If purchases or redemptions of a 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 Directors
and the Distributor, also the Funds' principal underwriter, the Funds' 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 a 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.
Each 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 Funds' 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 either may
be an additional investment into an existing account or may involve opening a
new account in the other fund. When an exchange involves a new account, the new
account will be established with the same registration, tax identification
number, address, telephone redemption option, "Scudder Automated Information
Line" (SAIL) transaction authorization and dividend option as the existing
account. Other features will not carry over automatically to the new account.
Exchanges to a new fund account must be for a minimum of $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
Funds' 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 a Fund may be subject to the Funds' 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.")
13
<PAGE>
Investors currently receive the exchange privilege, including exchange by
telephone, automatically without having to elect it. Each 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 a Fund does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. Each Fund will not be liable for acting upon
instructions communicated by telephone that they reasonably believe to be
genuine. The Funds and the Transfer Agent each reserve the right to suspend or
terminate the privilege of exchanging by telephone or fax at any time.
The Scudder funds into which investors may make an exchange are listed
under "THE SCUDDER FAMILY OF FUNDS" herein. Before making an exchange,
shareholders should obtain from the Distributor a prospectus of the Scudder fund
into which the exchange is being contemplated.
Scudder retirement plans may have different exchange requirements. Please
refer to appropriate plan literature.
Special Redemption and Exchange Information
In general, shares of each Fund may be exchanged or redeemed at net asset
value. However, shares of a Fund held for less than one year are redeemable at a
price equal to 99% of that 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 a 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. Each Fund
reserves the right to modify the terms of or terminate this fee at any time.
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 a 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 a Fund), (d) 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, or (e) a redemption of shares by a
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. 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 a 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.
14
<PAGE>
(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.
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 Funds employ 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 a Fund does
not follow such procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. A Fund will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine.
Redemption requests by telephone (technically a repurchase by agreement
between a 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
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 to which redemption proceeds will be credited. 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 a QuickSell Enrollment Form. After sending in an enrollment form,
shareholders should allow for 15 days for this service to be available.
The Funds employ 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 a Fund does
not follow such procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. A Fund will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine.
15
<PAGE>
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 a Fund
and valued as they are for purposes of computing a 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 a 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 a Fund at the beginning of the period.
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 a 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. A 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.
16
<PAGE>
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 a Fund of securities
owned by it is not reasonably practicable or it is not reasonably practicable
for a 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 a 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. Each 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. A 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.
FEATURES AND SERVICES OFFERED BY THE FUNDS
(See "Shareholder benefits" in the Funds' prospectus.)
The Pure No-LoadT 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 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 front-end load is a sales charge, which can be as high as 8.50% of the
amount invested. A back-end load is a contingent deferred sales charge, which
can be as high as 8.50% of either the amount invested or redeemed. The maximum
front-end or back-end load varies, and depends upon whether or not a fund also
charges a 12b-1 fee and/or a service fee or offers investors various sales-
related services such as dividend reinvestment. The maximum charge for a 12b-1
fee is 0.75% of a fund's average annual net assets, and the maximum charge for a
service fee is 0.25% of a fund's average annual net assets.
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.
Because Scudder funds do not pay any asset-based sales charges or service
fees, Scudder developed and trademarked the phrase pure no-loadT 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.
17
<PAGE>
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.
Scudder 8.50% Load Fund No-Load
YEARS Pure No- Load with 0.75% Fund with
Load(tm) Fund Fund 12b-1 Fee 0.25% 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 Funds'
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.
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.
18
<PAGE>
A Call MeTM 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 MeTM 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.
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 a 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 Funds' 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 a 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 a 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.
Scudder Investor Centers
Investors may visit any of the Investor Centers maintained by the
Distributor listed in the Funds' prospectus. The Investor 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 Investor Centers but should be mailed to "The Scudder Funds" at
the address listed under "How to contact Scudder" in the prospectus.
Reports to Shareholders
Each 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.
19
<PAGE>
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.
Initial purchases in most Scudder funds must be at least $2,500 or $1,000 in the
case of IRAs. Subsequent purchases must be for $100 or more. Minimum investments
for special plan accounts may be lower. The minimum initial purchase required
for the Cash Fund's Premium Shares is $25,000 and subsequent purchases must be
for $1,000 or more. The minimum initial required purchase for each Fund's
Managed Shares is $100,000 and subsequent purchases must be for $1,000 or more.
The minimum initial purchase required for a Fund's Institutional Shares is
$1,000,000 and there is no minimum subsequent purchase. Please see the
respective prospectuses for these classes of shares for further information
regarding minimum balance requirements.
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 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
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 investors with
income exempt from regular federal income tax while seeking stability of
principaland 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 certainextreme circumstances this may not be
possible.
Scudder Tax Free Money Market Series seeks to provide investors with
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.
Scudder California Tax Free Money Fund* seeks stability of capital and the
maintenance of a constant net asset value of $1.00 per share, although in
certain circumstances this may not be possible. 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.
- ---------------------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
20
<PAGE>
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
by investing in high-grade municipal securities of intermediate maturitie.
The Fund will invest primarily in high-grade, intermediate-term bonds.
Scudder Managed Municipal Bonds seeks to provide income which is 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 high income which isa
high level of interest income, exempt from regular federal income tax by
investing in, 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 and regular federal income taxes
through the professional and efficient management of a portfolio consisting
of California state, municipal and local government obligations.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 principalce 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 and regular federal
income taxes through the professional and efficient management of a
portfolio consisting of Massachusetts state, municipal and local government
obligationpersonal 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 income exempt from New
York state, New York City and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
investments in New York state, municipal and local government
obligations.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 income exempt from both Ohio
and regular federal income taxes through the professional and efficient
management of a portfolio consisting of Ohio state, municipal and local
government obligations.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 taxes through a portfolio consisting of Pennsylvania state,
municipal and local government obligations.. The Fund is a professionally
managed portfolio consisting primarily of investment-grade municipal
securities.
U.S. INCOME
Scudder Short Term Bond Fund seeks to provide a higher and more stable
level of income than is normally provided by money market investments, and
more price stability than investments in intermediate- and long- 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 risks through investments
primarily in zero coupon securities.
Scudder GNMA Fund seeks to provide investors with high current income from
a portfolio of high-quality GNMAprimarily 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.
- ---------------------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
21
<PAGE>
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 from aprimarily by
investing in a managed portfolio of high-grade bonds denominated in foreign
currencies. 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
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, as well as
long-term preservation of capital, 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.
Scudder Growth and Income Fund seeks long-term growth of capital, current
income, and growth of income through a portfolio invested primarily in
common stocks and convertible securities by companies which offer the
prospect of growth of earnings while paying current dividends.
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
22
<PAGE>
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
with reduced share price volatility compared to other growth mutual funds.
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
largeseasoned, financially strong U.S. growth companies.
Scudder Development Fund seeks long-term growth of capital primarily
through investments in marketable securities, principally common stocks, of
relatively small or little-known companies which in the opinion of
management have promise of expanding their size and profitability or of
gaining increased market recognition for their securities, or both.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 equity securities selected on a worldwide basis. It
may also invest in debt securities of U.S. and foreign issuers. Income is
an incidental consideration.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 through
investment principally inprimarily through a diversified portfolio of
marketable equity securities selected primarily to permit participation in
non-U.S. companies and economies with prospects for growth. It also invests
in fixed-income securities of foreign governments and companies, with a
view toward total investment 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.
23
<PAGE>
The Japan Fund, Inc. seeks capital appreciation through investment in
Japanese securities, primarily in common stockslong-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 Auto
matic 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.
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.
24
<PAGE>
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
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 Ratof 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 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
25
<PAGE>
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.
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, Corporation] 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, Corporation] 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,
Corporation] and its agents reserve the right to establish a maintenance charge
in the future depending on the services required by the investor.
The [Trust, Corporation] 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.
26
<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, Corporation] 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.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
(See "Distribution and performance information-Dividends and capital gains
distributions" in the Funds' prospectus.)
Each 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. Each 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, a
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 a 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, a 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 a Fund, to the extent permissible, as part of that
Fund's dividend paid deduction on its federal tax return.
The Trust intends to distribute a 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 a 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 a Fund issues to each shareholder a statement of the
federal income tax status of all distributions in the prior calendar year.
PERFORMANCE INFORMATION
(See "Distribution and performance information-Performance information"
in the Funds' prospectus.)
From time to time, quotations of a 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 a Fund, ended on the last day of a
recent calendar quarter. Average annual total return quotations reflect changes
in the price of a 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):
27
<PAGE>
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 a 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:
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.
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.
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 a 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, a 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, a 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, a 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.
28
<PAGE>
From time to time, in marketing and other Fund literature, Trustees and
officers of the Funds, a 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
Funds. 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 Funds 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 Funds. The
description may include a "risk/return spectrum" which compares the Funds 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 Funds to bank products, such as certificates of deposit. Unlike
mutual funds, certificates of deposit are insured up to $100,000 by the U.S.
government and offer a fixed rate of return.
Because bank products guarantee the principal value of an investment and
money market funds seek stability of principal, these investments are considered
to be less risky than investments in either bond or equity funds, which may
involve the loss of principal. However, all long-term investments, including
investments in bank products, may be subject to inflation risk, which is the
risk of erosion of the value of an investment as prices increase over a long
time period. The risks/returns associated with an investment in bond or equity
funds depend upon many factors. For bond funds these factors include, but are
not limited to, a fund's overall investment objective, the average portfolio
maturity, credit quality of the securities held, and interest rate movements.
For equity funds, factors include a fund's overall investment objective, the
types of equity securities held and the financial position of the issuers of the
securities. The risks/returns associated with an investment in international
bond or equity funds also will depend upon currency exchange rate fluctuation.
A risk/return spectrum generally will position the various investment
categories in the following order: bank products, money market funds, bond funds
and equity funds. Shorter-term bond funds generally are considered less risky
and offer the potential for less return than longer-term bond funds. The same is
true of domestic bond funds relative to international bond funds, and bond funds
that purchase higher quality securities relative to bond funds that purchase
lower quality securities. Growth and income equity funds are generally
considered to be less risky and offer the potential for less return than growth
funds. In addition, international equity funds usually are considered more risky
than domestic equity funds but generally offer the potential for greater return.
Risk/return spectrums also may depict funds that invest in both domestic
and foreign securities or a combination of bond and equity securities.
Evaluation of Fund performance or other relevant statistical information
made by independent sources may also be used in advertisements concerning the
Funds, including reprints of, or selections from, editorials or articles about
these Funds. Sources for Fund performance information and articles about the
Funds 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.
29
<PAGE>
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.
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.
30
<PAGE>
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.
Smart Money, a national personal finance magazine published monthly by Dow Jones
and Company, Inc. and The Hearst Corporation. Focus is placed on ideas for
investing, spending and saving.
Success, a monthly magazine targeted to the world of entrepreneurs and growing
business, often featuring mutual fund performance data.
United Mutual Fund Selector, a semi-monthly investment newsletter, published by
Babson United Investment Advisors, that includes mutual fund performance data
and reviews of mutual fund portfolios and investment strategies.
USA Today, a leading national daily newspaper.
U.S. News and World Report, a national 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.
ORGANIZATION OF THE FUNDS
(See "Fund organization" in the Funds' prospectus.)
The Funds are series of Scudder Securities Trust, formerly Scudder
Development Fund, a Massachusetts business trust established under a Declaration
of Trust dated October 16, 1985. The Trust's predecessor was organized as a
Delaware corporation in 1970. The Trust's authorized capital consists of an
unlimited number of shares of beneficial interest of $0.01 par value, all of
which are of one class and have equal rights as to voting, dividends and
liquidation. The Trust's shares are currently divided into seven series, 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.
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 the Funds has equal rights with each other share of the
31
<PAGE>
Funds 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 the Funds' 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.
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 Funds (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 a
Fund.
The Declaration of Trust provides that obligations of a Fund are not
binding upon the Trustees individually but only upon the property of a Fund,
that a Trustees and officers will not be liable for errors of judgment or
mistakes of fact or law and that a 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 a 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 Funds. 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 Funds'
prospectus.)
Scudder Kemper Investments, Inc., an investment counsel firm, acts as
investment adviser to the Funds. Scudder, Stevens & Clark, Inc. ("Scudder"), the
predecessor organization to the Adviser, is one of the most experienced
investment management firms in the United States. 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 the Scudder
International Fund, 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. As of December
31, 1997, the Adviser was responsible for managing more than $__ billion in U.S.
equity securities, including over $__ billion in domestically oriented growth
mutual funds. 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 December __, 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.
32
<PAGE>
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.
The principal source of the Adviser's income is professional fees received
from providing continuous investment advice, and the firm derives no income from
brokerage or underwriting of securities. Today, it provides investment counsel
for many individuals and institutions, including insurance companies, colleges,
industrial corporations, and financial and banking organizations. In addition,
it manages Montgomery Street Income Securities, Inc., Scudder California Tax
Free Trust, Scudder Cash Investment Trust, Scudder Equity Trust, Scudder Fund,
Inc., Scudder Funds Trust, Scudder Global Fund, Inc., Scudder GNMA Fund, Scudder
Portfolio Trust, Scudder Institutional Fund, Inc., Scudder International Fund,
Inc., Scudder Investment Trust, Scudder Municipal Trust, Scudder Mutual Funds,
Inc., Scudder New Asia Fund, Inc., Scudder New Europe Fund, Inc., Scudder
Pathway Series, Scudder Securities Trust, Scudder State Tax Free Trust, Scudder
Tax Free Money Fund, Scudder Tax Free Trust, Scudder U.S. Treasury Money Fund,
Scudder Variable Life Investment Fund, Scudder World Income Opportunities Fund,
Inc., The Argentina Fund, Inc., The Brazil Fund, Inc., The 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 InvestmentLinkSM 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 InvestmentLinkSM Program will be a customer of Scudder (or of a
subsidiary thereof) and not the AMA or AMA Solutions, Inc. AMA InvestmentLinkSM
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. The Adviser receives published
reports and statistical compilations from issuers and other sources, as well as
analyses from brokers and dealers who may execute portfolio transactions for the
Adviser's clients. However, the Adviser regards this information and material as
an adjunct to its own research activities. Scudder's international investment
management team travels the world, researching hundreds of companies. In
selecting the securities in which a Fund may invest, the conclusions and
investment decisions of the Adviser with respect to a Fund are based primarily
on the analyses of its own research department.
Certain investments may be appropriate for a Fund and also for other
clients advised by the Adviser. Investment decisions for the Funds and other
clients are made with a view to 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 a Fund. Purchase and sale orders for a Fund may be combined with
33
<PAGE>
those of other clients of the Adviser in the interest of achieving the most
favorable net results to a Fund.
The Investment Management Agreements between each Fund and the Adviser are
each dated _____, 1997 and were approved by the Trustees on _______, 1997 and by
the initial shareholder of each Fund on ________. 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 23, 1997, the stockholders also approved a
proposed new investment management agreement. The new investment management
agreement (the "Agreement") became effective as of December __, 1997 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. Each Investment Management Agreement (the
"Agreements") will continue in effect from year to year thereafter only if their
continuance is approved annually by the vote of a majority of those Trustees who
are not parties to the Agreements or interested persons of the Adviser or the
Trust, cast in person at a meeting called for the purpose of voting on such
approval, and either by a vote of the Trustees or of a majority of the
outstanding voting securities of the Fund. The Agreements may be terminated at
any time without payment of penalty by either party on sixty days' written
notice and automatically terminates in the event of its assignment.
Under the Agreements, the Adviser regularly provides a Fund with
continuing investment management for a Fund's portfolio consistent with each
Fund's investment objective, policies and restrictions and determines what
securities shall be purchased, held or sold and what portion of a Fund's assets
shall be held uninvested, subject to the Funds' Declaration of Trust, By-Laws,
the 1940 Act, the Code and to a Fund's investment objective, policies and
restrictions, and subject, further, to such policies and instructions as the
Board of Trustees of the Funds may from time to time establish. The Adviser also
advises and assists the officers of the Funds 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
each Fund.
Under the Agreements, the Adviser renders significant administrative
services (not otherwise provided by third parties) necessary for a 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 a Fund (such as the Funds' 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 each
Fund's federal, state and local tax returns; preparing and filing each 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 Funds under applicable
federal and state securities laws; maintaining each Fund's books and records to
the extent not otherwise maintained by a third party; assisting in establishing
accounting policies of each Fund; assisting in the resolution of accounting and
legal issues; establishing and monitoring each Fund's operating budget;
processing the payment of each Fund's bills; assisting each Fund in, and
otherwise arranging for, the payment of distributions and dividends and
otherwise assisting each Fund in the conduct of its business, subject to the
direction and control of the Trustees.
The Adviser pays the compensation and expenses of all Trustees, officers
and executive employees (except expenses incurred attending Board and committee
meetings outside New York, New York or Boston, Massachusetts) of the Trust
affiliated with the Adviser and makes available, without expense to the Funds,
the services of such Trustees, officers and employees of the Adviser as may duly
be elected officers of the Trust, subject to their individual consent to serve
and to any limitations imposed by law, and provides the Funds' office space and
facilities.
For these services, Financial Services Fund, Health Care Fund and
Technology Fund will each pay the Adviser an annual fee equal to ____%, ____%
and ____%, respectively, of the relevant Fund's average daily net assets payable
monthly, provided each Fund will make 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 to maintain the total
annualized expenses of each of the Financial Services Fund, Health Care Fund and
Technology Fund at no more than ____%, ____% and ____%, respectively, of the
average daily net assets of each Fund.
34
<PAGE>
Under the Agreements, the Funds are responsible for all of its other
expenses including: organizational costs, fees and expenses incurred in
connection with membership in investment company organizations; fees and
expenses of the Funds' accounting agent; brokers' commissions; legal, auditing
and accounting expenses; taxes and governmental fees; the fees and expenses of
the Transfer Agent; any other expenses of issue, sale, underwriting,
distribution, 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 Funds who are not affiliated with the
Adviser; the cost of printing and distributing reports and notices to
stockholders; and the fees and disbursements of custodians. The Funds may
arrange to have third parties assume all or part of the expenses of sale,
underwriting and distribution of shares of a Fund. The Funds are also
responsible for its expenses of shareholders' meetings, the cost of responding
to shareholders' inquiries, and its expenses incurred in connection with
litigation, proceedings and claims and the legal obligation it may have to
indemnify its officers and Trustees of Funds with respect thereto.
The Agreements require the Adviser to reimburse the Funds for all or a
portion of advances of their management fee to the extent annual expenses of a
Fund (including the management fee stated above) exceed the limitations
prescribed by any state in which a Fund's shares are offered for sale.
Management has been advised that, while most states have eliminated expense
limitations, the lowest of such limitations is presently 2 1/2% of average daily
net assets up to $30 million, 2% of the next $70 million of average daily net
assets and 1 1/2% of average daily net assets in excess of that amount. Certain
expenses such as brokerage commissions, taxes, extraordinary expenses and
interest are excluded from such limitations. Any such fee advance required to be
returned to a Fund will be returned as promptly as practicable after the end of
each Fund's fiscal year. However, no fee payment will be made to the Adviser
during any fiscal year which will cause year to date expenses to exceed the
cumulative pro rata expense limitations at the time of such payment.
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 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 Agreements and in discussions with the
Adviser concerning such Agreements, the Trustees of the Trust who are not
"interested persons" of the Adviser are represented by independent counsel at
the Funds' expense.
The Agreements provide that the Adviser shall not be liable for any error
of judgment or mistake of law or for any loss suffered by a Fund in connection
with matters to which the Agreements relate, 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 Agreements.
Officers and employees of the Adviser from time to time may have
transactions with various banks, including the Funds' 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 officers or Trustees of the Trust may have dealings with a
Fund as principals in the purchase or sale of securities, except as individual
subscribers to or holders of shares of that 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.
35
<PAGE>
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,
Scudder
Name, Age Position Principal Investor
and Address with Trust Occupation** Services, Inc
- ---------- ---------- ------------ -------------
Daniel President and Chairman of the Vice
Pierce+*(62) Trustee Board and President,
Managing Director Director and
of Scudder, Assistant
Stevens & Clark, Treasurer
Inc.
Paul Bancroft III (66) Trustee Venture -
1120 Cheston Lane Capitalist and
Queenstown, MD Consultant;
21658 Retired,
President, Chief
Executive Officer
and Director of
Bessemer
Securities
Corporation
Sheryle J. Bolton(50) Trustee Consultant -
560 White Plains Road
Tarrytown, NY 10591
William T. Burgin (54) Trustee General Partner, -
P.O. Box 580 Bessemer Venture
Dover, MA 02030-0580 Partners
Thomas J. Devine(70) Trustee Consultant -
641 Lexington Avenue,
28th Floor
New York, NY 10022
Keith R. Fox (43) Trustee President, Exeter -
10 East 53rd Street Capital
New York, NY 10022 Management
Corporation
William H. Luers Trustee President, The -
(67) Metropolitan
993 Fifth Avenue Museum of Art
New York, NY
10028
Wilson Nolen (70) Trustee Consultant (1989 -
1120 Fifth Avenue until present);
New York, NY Corporate Vice
10128 President of
Becton, Dickinson
& Company,
manufacturer of
medical and
scientific
products (until
June 1989)
Kathryn L. Trustee, Vice Managing Director Vice
Quirk++ (44) President and of Scudder, President
Assistant Stevens & Clark,
Secretary Inc.
Robert W. Lear Honorary Executive-in-Resi -
(80) Trustee dence, Visiting
429 Silvermine Professor,
Road Columbia
New Canaan, CT University
06840 Graduate School
of Business
36
<PAGE>
Position with
Underwriter,
Scudder
Name, Age Position Principal Investor
and Address with Trust Occupation** Services, Inc
- ---------- ---------- ------------ -------------
Robert G. Stone, Honorary Chairman of the -
Jr. (74) Trustee Board and
405 Lexington Director, Kirby
Avenue, Corporation
39th Floor (inland and
New York, NY offshore marine
10174 transportation
and diesel
repairs)
Edmund R. Honorary Advisory Managing -
Swanberg++ (75) Trustee Director of
Scudder, Stevens
& Clark, Inc.
Peter Chin++ (55) Vice Principal of -
President Scudder, Stevens
& Clark, Inc.
James M. Vice Vice President of -
Eysenbach@ (35) President Scudder, Stevens
& Clark, Inc.
Philip S. Vice Managing Director -
Fortuna++ (39) President of Scudder,
Stevens & Clark,
Inc.
Jerard K. Vice Managing Director -
Hartman++ (64) President of Scudder,
Stevens & Clark,
Inc.
Thomas W. Joseph+ Vice Principal of Vice
(58) President Scudder, Stevens President,
& Clark, Inc. Director,
Treasurer and
Assistant
Clerk
Thomas F. Vice Principal of Clerk
McDonough+ (50) President and Scudder, Stevens
Secretary & Clark, Inc.
Pamela A. Vice Managing Director -
McGrath+ (43) President and of Scudder,
Treasurer Stevens & Clark,
Inc.
Roy C. McKay++ Vice Managing Director -
(54) President of Scudder,
Stevens & Clark,
Inc.
Edward J. Vice Principal of Assistant
O'Connell++ (52) President and Scudder, Stevens Treasurer
Assistant & Clark, Inc.
Treasurer
Richard W. Assistant Vice President of Vice
Desmond++ (61) Secretary Scudder, Stevens President
& Clark, Inc.
* Mr. 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 Investment Company Act of 1940, as amended.
** Unless otherwise stated, all the Trustees and officers have been associated
with their respective companies for more than five years, but not
necessarily in the same capacity.
# Ms. Quirk is a member of the Executive Committee for the Trust, 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
37
<PAGE>
The Trustees and officers of the Funds also serve in similar capacities
with other Scudder Funds.
All Trustees and officers as a group owned less than 1% of each Fund's
outstanding shares as of the commencement of operations.
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.
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
Thomas J. Devine, $18,672 $156,058 (18 funds)
Trustee
Keith R. Fox, $18,372 $87,508 (10 funds)
Trustee
Wilson Nolen, $19,172 $165,608 (17 funds)
Trustee
38
<PAGE>
Robert G. Stone, $1,272 $12,272 (2 funds)
Jr.,
Honorary Trustee **
* 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. Scudder Health Care Fund and Scudder
Technology Fund each commenced operations on January 5, 1998.
** 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., 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 their continuance is approved annually by a majority of the
members of the Board of Trustees who are not parties to such agreement or
interested persons of any such party and either by vote of a majority of the
Board of Trustees or a majority of the outstanding voting securities of a Fund.
The underwriting agreement was last approved by the Trustees on ____________.
Under the underwriting agreement, the Funds are 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 each Fund as a broker or dealer in
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 a 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 Funds 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 Funds'
shares to the public and preparing, printing and mailing any other literature or
advertising in connection with the offering of shares of the Funds 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 Funds, unless a Rule 12b-1 Plan is in effect
which provides that the Funds shall bear some or all of such expenses.
Note: Although the Funds do not currently have a 12b-1 Plan, and the Trustees
have no current intention of adopting one, the Funds would also pay those
fees and expenses permitted to be paid or assumed by the Funds pursuant
to a 12b-1 Plan, if any, were adopted by a Fund, notwithstanding any
other provision to the contrary in the underwriting agreement.
As agent, the Distributor currently offers shares of the Funds on a
continuous basis to investors in all states in which shares of a 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 Funds.
39
<PAGE>
TAXES
(See "Distribution and performance information-Dividends and capital
gains distributions" and "Transaction information-Tax information, Tax
identification number" in the Funds' prospectus.)
Each 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. They intend 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.
Each 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 a 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 generally is made up of 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 a Fund.
If any net realized long-term capital gains in excess of net realized
short-term capital losses are retained by a Fund for reinvestment, requiring
federal income taxes to be paid thereon by the Fund, that 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 proportionate share of federal income taxes paid
by a Fund on such gains as a credit against the shareholder's federal income tax
liability, and will be entitled to increase the adjusted tax basis of the
shareholder's Fund shares by the difference between the shareholder's pro rata
share of such gains and the shareholder's tax credit. If a Fund makes such an
election, it may not be treated as having met the excise tax distribution
requirement.
Distributions of investment company taxable income are taxable to
shareholders as ordinary income.
Dividends from domestic corporations are not expected to comprise a
substantial part of a Fund's gross income. If any such dividends constitute a
portion of a Fund's gross income, a portion of the income distributions of a
Fund may be eligible for the 70% 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
a Fund with respect to which the dividends are received are treated as
debt-financed under federal income tax law and is eliminated if the shares are
deemed to have been held 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 a Fund have been
held by such shareholders. Such distributions are not eligible for the
dividends-received deduction. Any loss realized upon the redemption of shares
held at the time of redemption for six months or less will be treated as a
long-term capital loss to the extent of any amounts treated as distributions of
long-term capital gain during such six-month period.
Distributions of investment company taxable income and net realized
capital gains will be taxable as described above, whether received in shares or
in cash. Shareholders electing to receive distributions in the form of
additional shares will have a cost basis for federal income tax purposes in each
share so received equal to the net asset value of a share on the reinvestment
date.
All distributions of investment company taxable income and net realized
capital gain, whether received in shares or in cash, must be reported by each
shareholder on his or her federal income tax return. Dividends declared in
40
<PAGE>
October, November or December with a record date 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.
Distributions by a 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.
Each Fund intends to qualify for and may make the election permitted under
Section 853 of the Code so that shareholders may (subject to limitations) be
able to claim a credit or deduction on their federal income tax returns for, and
will be required to treat as part of the amounts distributed to them, their pro
rata portion of qualified taxes paid by a Fund to foreign countries (which taxes
relate primarily to investment income). Each Fund may make an election under
Section 853 of the Code, provided that more than 50% of the value of the total
assets of the Fund at the close of the taxable year consists of securities in
foreign corporations. The foreign tax credit available to shareholders is
subject to certain limitations imposed by the Code.
If a Fund does not make the election permitted under section 853 any
foreign taxes paid or accrued will represent an expense to that Fund which will
reduce its investment company taxable income. Absent this election, shareholders
will not be able to claim either a credit or a deduction for their pro rata
portion of such taxes paid by a Fund, nor will shareholders be required to treat
as part of the amounts distributed to them their pro rata portion of such taxes
paid.
Equity options (including covered call options written on portfolio stock)
and over-the-counter options on debt securities written or purchased by a Fund
will be subject to tax under Section 1234 of the Code. In general, no loss will
be 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 the exercise of a put option, on a Fund's holding period for the underlying
property. The purchase of a put option may constitute a short sale for federal
income tax purposes, causing an adjustment in the holding period of any property
in the Fund's portfolio similar to the property underlying the put option. If a
Fund writes an 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 short-term
capital gain or loss. If the option is exercised, the character of the gain or
loss depends on the holding period of the underlying stock.
Positions of a Fund which consist of at least one stock and at least one
stock option or 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 stocks or securities and conversion of short-term capital losses into
41
<PAGE>
long-term capital losses. An exception to these straddle rules exists for
certain "qualified covered call options" on stock written by a Fund.
Many futures and forward contracts entered into by the Fund and listed
nonequity options written or purchased by a Fund (including options on debt
securities, options on futures contracts, options on securities indices and
options on currencies), will be governed by Section 1256 of the Code. Absent a
tax election to the contrary, gain or loss attributable to the lapse, exercise
or closing out of any such position generally will be treated as 60% long-term
and 40% short-term capital gain or loss, and on the last trading day of a 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 Section 988 of the Code, discussed below,
foreign currency gain or loss from foreign currency-related forward contracts,
certain futures and options and similar financial instruments entered into or
acquired by the Fund will be treated as ordinary income or loss.
Subchapter M of the Code requires a Fund to realize less than 30% of its
annual gross income from the sale or other disposition of stock, securities and
certain options, futures and forward contracts held for less than three months.
Each Fund's options, futures and forward transactions may increase the amount of
gains realized by a Fund that are subject to this 30% limitation. Accordingly,
the amount of such transactions that may undertake may be limited.
Positions of a Fund which consist of at least one position not governed by
Section 1256 and at least one futures or forward contract or nonequity option or
other position governed by Section 1256 which substantially diminishes a 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, the operation of which may cause deferral of losses,
adjustments in the holding periods of securities and conversion of short-term
capital losses into long-term capital losses, certain tax elections exist for
them which reduce or eliminate the operation of these rules. Each Fund will
monitor its transactions in options, foreign currency futures and forward
contracts and may make certain tax elections in connection with these
investments.
Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time a Fund accrues interest or other receivables
or accrues expenses or other liabilities denominated in a foreign currency and
the time a Fund actually collects such receivables or pays such liabilities
generally are treated as ordinary income or ordinary loss. Similarly, on
disposition of debt securities denominated in a foreign currency and on
disposition of certain options, futures and forward contracts, gains or losses
attributable to fluctuations in the value of foreign currency between the date
of acquisition of the security or contract and the date of disposition are also
treated as ordinary gain or loss. These gains or losses, referred to under the
Code as "Section 988" gains or losses, may increase or decrease the amount of a
Fund's investment company taxable income to be distributed to its shareholders
as ordinary income.
If a Fund invests in stock of certain foreign investment companies, that
Fund may be subject to U.S. federal income taxation on a portion of any "excess
distribution" with respect to, or gain from the disposition of, such stock. The
tax would be determined by allocating such distribution or gain ratably to each
day of a Fund's holding period for the stock. The distribution or gain so
allocated to any taxable year of a Fund, other than the taxable year of the
excess distribution or disposition, would be taxed to a Fund at the highest
ordinary income rate in effect for such year, and the tax would be further
increased by an interest charge to reflect the value of the tax deferral deemed
to have resulted from the ownership of the foreign company's stock. Any amount
of distribution or gain allocated to the taxable year of the distribution or
disposition would be included in a Fund's investment company taxable income and,
accordingly, would not be taxable to that Fund to the extent distributed by the
Fund as a dividend to its shareholders.
A Fund may be able to make an election, in lieu of being taxable in the
manner described above, to include annually in income its pro rata share of the
ordinary earnings and net capital gain of the foreign investment company,
regardless of whether it actually received any distributions from the foreign
company. These amounts would be included in a Fund's investment company taxable
income and net capital gain which, to the extent distributed by a Fund as
ordinary or capital gain dividends, as the case may be, would not be taxable to
that Fund. In order to make this election, a Fund would be required to obtain
certain annual information from the foreign investment companies in which it
invests, which in many cases may be difficult to obtain. A Fund may make an
election with respect to those foreign investment companies which provide that
Fund with the required information.
42
<PAGE>
If a Fund invests in certain high yield original issue discount
obligations issued by corporations, a portion of the original issue discount
accruing on the obligation may be eligible for the deduction for dividends
received by corporations. In such event, dividends of investment company taxable
income received from a Fund by its corporate shareholders, to the extent
attributable to such portion of accrued original issue discount, may be eligible
for this deduction for dividends received by corporations if so designated by a
Fund in a written notice to shareholders.
Each Fund will be required to report to the Internal Revenue Service all
distributions of investment company 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 investment company 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 a 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 a Fund may be subject to state and local taxes on
distributions received from that Fund and on redemptions of the Fund's shares.
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 a 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 a Fund through the Distributor which in turn places orders on
behalf of the Funds with issuers, underwriters or other brokers and dealers. The
Distributor receives no commissions, fees or other remuneration from the Funds
for this service. Allocation of brokerage is supervised by the Adviser.
The primary objective of the Adviser in placing orders for the purchase and
sale of securities for a 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 but
which is generally fixed in the case of foreign 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 Scudder Fund Accounting
Corporation for appraisal purposes, or who supply research, market and
statistical information to the Funds. 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
43
<PAGE>
authorized when placing portfolio transactions for a 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 will not
place orders with brokers or dealers on the basis that the broker or dealer has
or has not sold shares of a Fund. Except for implementing the policy stated
above, there is no intention to place portfolio transactions with particular
brokers or dealers or groups thereof. 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.
A Fund's purchases of securities which are traded in the over-the-counter
market are generally placed by the Adviser with primary market makers for these
securities on a net basis, without any brokerage commission being paid by a
Fund. Such trading does, however, involve transaction costs. Transactions with
dealers serving as primary market makers reflect the spread between the bid and
asked prices. Purchases of underwritten issues may be made which will include an
underwriting fee paid to the underwriter.
Although certain research, market and statistical information from brokers
and dealers can be useful to a 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 Funds, and not all such information will be
used by the Adviser in connection with a 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 Funds.
The Trustees intend to review from time to time whether the recapture for
the benefit of the Funds of some portion of the brokerage commissions or similar
fees paid by a Fund on portfolio transactions is legally permissible and
advisable.
Portfolio Turnover
Each 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 Funds and may result in
the realization of net capital gains, which would be taxable to shareholders
when distributed. Purchases and sales are made for a Fund's portfolio whenever
necessary, in management's opinion, to meet each Fund's objective. Under normal
investment conditions, it is anticipated that for Scudder Financial Services
Fund, Scudder Health Care Fund and Scudder Technology Fund, the portfolio
turnover rates in each Fund's initial fiscal year will not exceed 75%, 75% and
200%, respectively.
NET ASSET VALUE
The net asset value of shares of the Funds are computed as of the close of
regular trading on 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 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 a 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") 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 System, but traded in another
over-the-counter market, is its most recent sale price. Lacking any sales, the
security is valued at the Calculated Mean. Lacking a Calculated Mean, the
security is valued at the most recent bid quotation.
Debt securities, other than short-term securities, are valued at prices
supplied by the Fund's pricing agent(s) which reflect broker/dealer supplied
valuations and electronic data processing techniques. Short-term securities
44
<PAGE>
purchased 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 exchange rate.
If a security is traded on more than one exchange, or upon one or more
exchanges and in the over-the-counter market, quotations are taken from the
market in which the security is traded most extensively.
If, in the opinion of the Funds' Valuation Committee, the value of a
portfolio asset as determined in accordance with these procedures does not
represent the fair market value of the portfolio asset, the value of the
portfolio asset is taken to be an amount which, in the opinion of the Valuation
Committee, represents fair market value on the basis of all available
information. The value of other portfolio holdings owned by the Fund is
determined in a manner which, in the discretion of the Valuation Committee most
fairly reflects fair market value of the property on the valuation date.
Following the valuations of securities or other portfolio assets in terms
of the currency in which the market quotation used is expressed ("Local
Currency"), the value of these portfolio assets in terms of U.S. dollars is
calculated by converting the Local Currency into U.S. dollars at the prevailing
currency exchange rate on the valuation date.
ADDITIONAL INFORMATION
Experts
The Financial Statement incorporated by reference in this Statement of
Additional Information is included herein and attached hereto, 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.
Other Information
Many of the investment changes in the Funds will be made at prices
different from those prevailing at the time they may be reflected in a regular
report to shareholders of a Fund. These transactions will reflect investment
decisions made by the Adviser in the light of its other portfolio holdings and
tax considerations and should not be construed as recommendations for similar
action by other investors.
The CUSIP number of Scudder Financial Services Fund is _____ __ ___.
The CUSIP number of Scudder Health Care Fund is _____ __ ___.
The CUSIP number of Scudder Technology Fund is _____ __ ___.
Each Fund has a fiscal year end of _____________.
Dechert Price & Rhoads acts as counsel for the Funds.
45
<PAGE>
The Funds employ State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110 as Custodian.
Costs of $_______ incurred by each Fund in conjunction with its
organization are amortized over the five year period beginning September ___,
1997.
Scudder Service Corporation ("Service Corporation"), P.O. Box 2291,
Boston, Massachusetts, 02107-2291, a subsidiary of the Adviser, is the transfer
and dividend disbursing agent for the Funds. Service Corporation also serves as
shareholder service agent and provides subaccounting and recordkeeping services
for shareholder accounts in certain retirement and employee benefit plans. The
Funds each pay Service Corporation an annual fee for each account maintained for
a participant.
Annual service fees are paid by the Funds to Scudder Trust Company, Two
International Place, Boston, Massachusetts, 02110- 4103, an affiliate of the
Adviser, for certain retirement plan accounts.
Scudder Fund Accounting Corporation, Two International Place, Boston,
Massachusetts 02110-4103, a subsidiary of the Adviser, computes net asset values
for the Funds. Each Fund pays Scudder Fund Accounting Corporation an annual fee
equal to 0.065% of the first $150 million of average daily net assets, 0.04% of
such assets in excess of $150 million and 0.02% of such assets in excess of $1
billion, plus holding and transaction charges for this service.
The Funds' prospectus and this Statement of Additional Information omit
certain information contained in the Registration Statement which the Funds have
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 each 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 Statement of Assets and Liabilities as of ________________ and the
Report of Independent Accountants will be filed by amendment.
46
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
a. Financial Statements
Included in Part A of this Registration Statement:
For Scudder Development Fund:
Financial highlights for the ten fiscal years ended June 30,
1997.
(Incorporated by reference to Post-Effective Amendment No.
50 to the Registration Statement.)
For Scudder Small Company Value Fund:
Financial highlights for the period October 6,
1995 (commencement of operations) to August 31,
1996.
(Incorporated by reference to Post-Effective
Amendment No. 43 to the Registration
Statement.)
For Scudder Micro Cap Fund:
Financial highlights for the period August 12,
1996 (commencement of operations) to August 31,
1996.
(Incorporated by reference to Post-Effective
Amendment No. 44 to the Registration
Statement.)
For Scudder 21st Century Growth Fund:
Financial highlights for the period September
9, 1996 (commencement of operations) to
February 28, 1997.
(Incorporated by reference to Post-Effective
Amendment No. 45 to the Registration
Statement.)
For Scudder Financial Services Fund:
Financial Highlights to be filed by amendment.
For Scudder Health Care Fund:
Financial Highlights to be filed by amendment.
For Scudder Technology Fund:
Financial Highlights to be filed by amendment.
Included in Part B of this Registration Statement:
For Scudder Development Fund:
Investment Portfolio as of June 30, 1997
Statement of Assets and Liabilities as of June 30, 1997
Statement of Operations for the fiscal year ended
June 30, 1997
Statements of Changes in Net Assets for the two fiscal
years ended June 30, 1997
Financial Highlights for the ten fiscal years ended
June 30, 1997
Part C - Page 1
<PAGE>
Notes to Financial Statements Report of Independent
Accountants
(Incorporated by reference to Post-Effective Amendment No.
50 to the Registration Statement.)
For Scudder Small Company Value Fund:
Investment Portfolio as of August 31, 1996
Statement of Assets and Liabilities as of August 31, 1996
Statement of Operations for the period October 6, 1995
(commencement of operations) to August 31, 1996
Statement of Changes in Net Assets for the period
October 6,1995 (commencement of operations) to August 31,
1996
Financial Highlights for the period October 6, 1995
(commencement of operations) to August 31, 1996
Notes to Financial Statements (Incorporated
by reference to Post-Effective Amendment No. 43 to the
Registration Statement.)
For Scudder Micro Cap Fund:
Investment Portfolio as of August 31, 1996
Statement of Assets and Liabilities as of August 31, 1996
Statement of Operations for the period August 12, 1996
(commencement of operations) to August 31, 1996
Statement of Changes in Net Assets for the period
August 12, 1996 (commencement of operations) to August
31, 1996
Financial Highlights for the period August 12, 199
(commencement of operations) to August 31, 1996
Notes to Financial Statements
Report of Independent Accountants (Incorporated by
reference to Post-Effective Amendment No. 44 to the
Registration Statement.)
For Scudder 21st Century Growth Fund:
Investment Portfolio as of February 28, 199
Statement of Assets and Liabilities as of February 28, 1997
Statement of Operations for the period September 9, 1996
(commencement of operations) to February 28, 1997
Statement of Changes in Net Assets for the period
September 9, 1996 (commencement of operations) to
February 28, 1997
Financial Highlights for the period September 9, 1996
(commencement of operations) to February 28, 1997
Notes to Financial Statements
(Incorporated by reference to Post-Effective Amendment No.
45 to the Registration Statement.)
For Scudder Financial Services Fund:
Statement of Assets and Liabilities as of September 25,
1997.
(Incorporated by reference to Post-Effective Amendment No.
50 to the Registration Statement.)
Part C - Page 2
<PAGE>
For Scudder Health Care Fund:
Statement of Assets and Liabilities as of January ___,
1998 to be filed by amendment.
For Scudder Technology Fund:
Statement of Assets and Liabilities as of January ___,
1998 to be filed by amendment.
Statements, schedules and historical information other than those
listed above have been omitted since they are either not
applicable or are not required.
b. Exhibits :
1.(a)(1) Amended and Restated Declaration of Trust dated
December 21, 1987.
(Incorporated by Reference to Post-Effective Amendment
No. 43 to the Registration Statement.)
(a)(2) Amendment to Amended and Restated Declaration of Trust
dated December 13, 1990.
(Incorporated by Reference to Post-Effective Amendment
No. 43 to the Registration Statement.)
(a)(3) Amendment to Amended and Restated Declaration of Trust
to change the name of the Trust dated July 21, 1995
is filed herein.
(Incorporated by reference to Exhibit1 (a)(3) to
Post-Effective Amendment No. 35 to the Registration
Statement.)
(a)(4) Amendment to Amended and Restated Declaration of Trust
to add new series dated July 21, 1995.
(Incorporated by reference to Exhibit 1(a)(4) to Post
Effective Amendment No. 35 to the Registration
Statement.)
(a)(5) Establishment and Designation of Series dated June
6, 1996.
(Incorporated by reference to Exhibit 1(a)(5) to
Post-Effective Amendment No. 40 to the Registration
Statement.)
(a)(6) Establishment and Designation of Series dated June 3,
1997 is filed herein.
(Incorporated by reference to Post-Effective Amendment
No. 46 to the Registration Statement.)
2. (a) Amendment to the By-Laws Article IV: Notice of
Meetings dated December 12, 1991.
(Incorporated by Reference to Post-Effective Amendment
No. 43 to the Registration Statement.)
(b) By-Laws as of October 16, 1985.
(Incorporated by Reference to Post-Effective
Amendment No. 43 to the Registration Statement.)
Part C - Page 3
<PAGE>
(c) Amendment to the By-Laws of Registrant as amended
through December 9, 1985.
(Incorporated by Reference to Post-Effective Amendment
No. 43 to the Registration Statement.)
3. Inapplicable.
4. Specimen certificate representing shares of beneficial
interest ($.01 par value) for Scudder Development
Fund.
(Incorporated by reference to Exhibit 4 to Post-
Effective Amendment No. 28 to the Registration
Statement.)
5. (a) Investment Management Agreement between the Registrant,
on behalf of Scudder Development Fund, and Scudder,
Stevens & Clark, Inc. dated June 9, 1992.
(Incorporated by Reference to Post-Effective Amendment
No. 43 to the Registration Statement.)
(b) Investment Management Agreement between the Registrant,
on behalf of Scudder Development Fund, and Scudder,
Stevens & Clark, Inc. dated December 14, 1990.
(Incorporated by Reference to Post-Effective Amendment
No. 43 to the Registration Statement.)
(c) Investment Management Agreement between the Registrant,
on behalf of Scudder Small Company Value Fund, and
Scudder, Stevens & Clark, Inc. dated October 6, 1995.
(Incorporated by reference to Exhibit 5(c) to Post
Effective Amendment No. 36 to the Registration
Statement.)
(d) Investment Management Agreement between the Registrant,
on behalf of Scudder Micro Cap Fund, and Scudder,
Stevens & Clark, Inc. dated August 12, 1996.
(Incorporated by reference to Exhibit 5(d) to Post-
Effective Amendment No.40 to the Registration
Statement.)
(e) Investment Management Agreement between the Registrant,
on behalf of Scudder 21st Century Growth Fund, and
Scudder, Stevens & Clark, Inc. dated September 9, 1996.
(Incorporated by reference to Exhibit 5(e) to Post-
Effective Amendment No. 41 to the Registration
Statement).
(e) (1) Investment Management Agreement between the Registrant,
on behalf of Scudder Financial Services Fund, and
Scudder, Stevens & Clark, Inc. dated September 30,
1997.
(Incorporated by reference to Post-Effective Amendment
No.50 to the Registration Statement.)
(e) (2) Investment Management Agreement between the Registrant,
on behalf of Scudder Health Care Fund, and Scudder,
Stevens & Clark, Inc. dated _____.
To be filed by amendment.
Part C - Page 4
<PAGE>
(e)(3) Investment Management Agreement between the Registrant,
on behalf of Scudder Technology Fund, and Scudder,
Stevens & Clark, Inc. dated _____.
To be filed by amendment.
6. (a) Underwriting Agreement between the Registrant, on
behalf of Scudder Development Fund, and Scudder
Investor Services, Inc., formerly Scudder Fund
Distributors, Inc., dated December 31, 1985.
(Incorporated by reference to Exhibit 6 to Post-
Effective Amendment No. 25 to the Registration
Statement.)
(b) Underwriting Agreement between the Registrant and
Scudder Investor Services, Inc., dated September 30,
1995.
(Incorporated by Reference to Post-Effective Amendment
No. 43 to the Registration Statement.)
7. Inapplicable.
8. (a)(1) Custodian Contract between the Registrant, on behalf of
Scudder Development Fund, and Brown Brothers Harriman
& Co. dated April 1, 1980.
(Incorporated by Reference to Post-Effective Amendment
No. 43 to the Registration Statement.)
(a)(2) Fee schedule for Exhibit 8(a)(1).
(Incorporated by Reference to Post-Effective Amendment
No. 43 to the Registration Statement.)
(a)(3) Custodian Contract between the Registrant and State
Street Bank and Trust Company dated September 6, 1995.
(Incorporated by reference to Exhibit 8(a)(3) to Post-
Effective Amendment No. 35 to the Registration
Statement.)
(a)(4) Fee schedule for Exhibit 8(a)(3).
(Incorporated by reference to Exhibit 8(a)(4) to Post-
Effective Amendment No. 35 to the Registration
Statement.)
(b)(1) Subcustodian Agreement between Brown Brothers Harriman
& Co. and The Bank of New York, London office, dated
January 30, 1979.
(Incorporated by Reference to Post-Effective Amendment
No. 43 to the Registration Statement.)
(b)(2) Fee schedule for Exhibit 8(b)(1).
(Incorporated by Reference to Post-Effective Amendment
No. 43 to the Registration Statement.)
9. (a)(1) Transfer Agency and Service Agreement between the
Registrant and Scudder Service Corporation dated
October 2, 1989.
(Incorporated by Reference to Post-Effective Amendment
No. 43 to the Registration Statement.)
(a)(2) Fee schedule for Exhibit 9(a)(1).
(Incorporated by Reference to Post-Effective Amendment
No. 43 to the Registration Statement.)
Part C - Page 5
<PAGE>
(a)(3) Service Agreement between Copeland Associates, Inc., on
behalf of Scudder Development Fund, and Scudder Service
Corporation dated June 8, 1995.
(Incorporated by reference to Exhibit 9(a)(3) to Post
Effective Amendment No. 35 to the Registration
Statement.)
(a)(4) Revised fee schedule for Exhibit 9(a)(1).
(Incorporated by reference to Exhibit 9(a)(4) to Post-
Effective Amendment No. 37 to the Registration
Statement.)
(b)(1) COMPASS Service Agreement between the Registrant and
Scudder Trust Company dated January 1, 1990.
(Incorporated by Reference to Post-Effective Amendment
No. 43 to the Registration Statement.)
(b)(2) Fee schedule for Exhibit 9(b)(1).
(Incorporated by Reference to Post-Effective Amendment
No. 43 to the Registration Statement.)
(b)(3) COMPASS Service Agreement between the Registrant and
Scudder Trust Company.
(Incorporated by reference to Exhibit 9(b)(3) to Post-
Effective Amendment No. 37 to the Registration
Statement.)
(d) Shareholder Services Agreement between the Registrant
and Charles Schwab & Co., Inc. dated June 1, 1990.
(Incorporated by Reference to Post-Effective Amendment
No. 43 to the Registration Statement.)
(e) Fund Accounting Services Agreement between the
Registrant, on behalf of Scudder Development Fund, and
Scudder Fund Accounting Corporation dated March 21,
1995.
(Incorporated by reference to Exhibit 9(e) to Post-
Effective Amendment No. 35 to the Registration
Statement.)
(f) Fund Accounting Services Agreement between the
Registrant, on behalf of Scudder Small Company Value
Fund, and Scudder Fund Accounting Corporation dated
October 6, 1995.
(Incorporated by reference to Exhibit 9(f) to Post-
Effective Amendment No. 37 to the Registration
Statement.)
(g) Fund Accounting Services Agreement between the
Registrant, on behalf of Scudder Micro Cap Fund, and
Scudder Fund Accounting Corporation dated August 12,
1996.
(Incorporated by reference to Exhibit 9(g) to Post-
Effective Amendment No. 41 to the Registration
Statement.)
(h) Fund Accounting Services Agreement between the
Registrant, on behalf of Scudder 21st Century Growth
Fund, and Scudder Fund Accounting Corporation
dated September 9, 1996.
(Incorporated by reference to Exhibit 9(h) to Post-
Effective Amendment No. 41 to the Registration
Statement.)
(h)(1) Fund Accounting Services Agreement between the
Registrant, on behalf of Scudder Financial Services
Fund, and Scudder Fund Accounting Corporation
dated September 11, 1997.
Part C - Page 6
<PAGE>
(Incorporated by reference to Post-Effective Amendment
No. 50 to the Registration Statement.)
(h)(2) Fund Accounting Services Agreement between the
Registrant, on behalf of Scudder Health Care Fund, and
Scudder Fund Accounting Corporation dated -----.
To be filed by amendment.
(h)(3) Fund Accounting Services Agreement between the
Registrant, on behalf of Scudder Technology Fund, and
Scudder Fund Accounting Corporation dated
-----.
To be filed by amendment.
10. Inapplicable.
11. Inapplicable.
12. Inapplicable.
13. Inapplicable.
14. (a) Scudder Flexi-Plan for Corporations and Self-Employed
Individuals.
(Incorporated by Reference to Post-Effective Amendment
No. 43 to the Registration Statement.)
(b) Scudder Individual Retirement Plan.
(Incorporated by Reference to Post-Effective Amendment
No. 43 to the Registration Statement.)
(c) Scudder Funds 403(b) Plan.
(Incorporated by Reference to Post-Effective Amendment
No. 43 to the Registration Statement.)
(d) Scudder Employer-Select 403(b) Plan.
(Incorporated by Reference to Post-Effective Amendment
No. 43 to the Registration Statement.)
(e) Scudder Cash or Deferred Profit Sharing Plan under
Section 401(k). (Incorporated by Reference to Post-
Effective Amendment No. 43 to the Registration
Statement.)
15. Inapplicable.
16. Schedule for Computation of Performance Data.
(Incorporated by Reference to Post- Effective Amendment
No. 43 to the Registration Statement.)
17. Inapplicable.
18. Inapplicable.
Power of Attorney is incorporated by reference to the Signature Page of
Post-Effective Amendment No. 30, Post-Effective Amendment No. 37, Post-Effective
Amendment No. 40 and Post-Effective Amendment No. 44.
Part C - Page 7
<PAGE>
Item 25. Persons Controlled by or under Common Control with Registrant
None
Item 26. Number of Holders of Securities (as of October 3, 1997).
(1) (2)
Title of Class Number of Record
Shareholders
Shares of beneficial
interest
($.01 par value)
Scudder Development Fund 45,507
Scudder Micro Cap Fund 10,644
Scudder Small Company Value Fund 12,373
Scudder 21st Century Growth Fund 2,743
Scudder Financial Services Fund n/a
Scudder Health Care Fund n/a
Scudder Technology Fund n/a
Item 27. Indemnification
A policy of insurance covering Scudder, Stevens & Clark, Inc.,
its subsidiaries including Scudder Investor Services, Inc., and
all of the registered investment companies advised by Scudder,
Stevens & Clark, Inc. insures the Registrant's trustees and
officers and others against liability arising by reason of an
alleged breach of duty caused by any negligent act, error or
accidental omission in the scope of their duties.
Article IV, Sections 4.1 - 4.3 of the Registrant's Declaration of
Trust provide as follows:
Section 4.1. No Personal Liability of Shareholders, Trustees,
Etc. No Shareholder shall be subject to any personal liability
whatsoever to any Person in connection with Trust Property or the
acts, obligations or affairs of the Trust. No Trustee, officer,
employee or agent of the Trust shall be subject to any personal
liability whatsoever to any Person, other than to the Trust or
its Shareholders, in connection with Trust Property or the
affairs of the Trust, save only that arising from bad faith,
willful misfeasance, gross negligence or reckless disregard of
his duties with respect to such Person; and all such Persons
shall look solely to the Trust Property for satisfaction of
claims of any nature arising in connection with the affairs of
the Trust. If any Shareholder, Trustee, officer, employee, or
agent, as such, of the Trust, is made a party to any suit or
proceeding to enforce any such liability of the Trust, he shall
not, on account thereof, be held to any personal liability. The
Trust shall indemnify and hold each Shareholder harmless from and
against all claims and liabilities, to which such Shareholder may
become subject by reason of his being or having been a
Shareholder, and shall reimburse such Shareholder for all legal
and other expenses reasonably incurred by him in connection with
any such claim or liability. The indemnification and
reimbursement required by the preceding sentence shall be made
only out of the assets of the one or more Series of which the
Shareholder who is entitled to indemnification or reimbursement
was a Shareholder at the time the act or event occurred which
gave rise to the claim against or liability of said Shareholder.
The rights accruing to a Shareholder under this Section 4.1 shall
not impair any other right to which such Shareholder may be
lawfully entitled, nor shall anything herein contained restrict
the right of the Trust to indemnify or reimburse a Shareholder in
any appropriate situation even though not specifically provided
herein.
Section 4.2. Non-Liability of Trustees, Etc. No Trustee, officer,
employee or agent of the Trust shall be liable to the Trust, its
Shareholders, or to any Shareholder, Trustee, officer, employee,
or agent thereof for any action or failure to act (including
without limitation the failure to compel in any way any former or
acting Trustee to redress any breach of trust) except for his own
bad faith, willful misfeasance, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
Part C - Page 8
<PAGE>
Section 4.3. Mandatory Indemnification. (a) Subject to the
exceptions and limitations contained in paragraph (b) below:
(i) every person who is, or has been, a Trustee or officer
of the Trust shall be indemnified by the Trust to the fullest
extent permitted by law against all liability and against all
expenses reasonably incurred or paid by him in connection with
any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having
been a Trustee or officer and against amounts paid or incurred by
him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil,
criminal, administrative or other, including appeals), actual or
threatened; and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a
Trustee or officer:
(i) against any liability to the Trust, a Series thereof, or
the Shareholders by reason of a final adjudication by a court or
other body before which a proceeding was brought that he engaged
in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office;
(ii) with respect to any matter as to which he shall have
been finally adjudicated not to have acted in good faith in the
reasonable belief that his action was in the best interest of the
Trust;
(iii) in the event of a settlement or other disposition not
involving a final adjudication as provided in paragraph (b)(i) or
(b)(ii) resulting in a payment by a Trustee or officer, unless
there has been a determination that such Trustee or officer did
not engage in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his
office:
(A) by the court or other body approving the
settlement or other disposition; or
(B) based upon a review of readily available facts
(as opposed to a full trial-type inquiry) by (x) vote
of a majority of the Disinterested Trustees acting on
the matter (provided that a majority of the
Disinterested Trustees then in office act on the
matter) or (y) written opinion of independent legal
counsel.
(c) The rights of indemnification herein provided may be
insured against by policies maintained by the Trust, shall be
severable, shall not affect any other rights to which any Trustee
or officer may now or hereafter be entitled, shall continue as to
a person who has ceased to be such Trustee or officer and shall
insure to the benefit of the heirs, executors, administrators and
assigns of such a person. Nothing contained herein shall affect
any rights to indemnification to which personnel of the Trust
other than Trustees and officers may be entitled by contract or
otherwise under law.
(d) Expenses of preparation and presentation of a defense to
any claim, action, suit or proceeding of the character described
in paragraph (a) of this Section 4.3 may be advanced by the Trust
prior to final disposition thereof upon receipt of an undertaking
by or on behalf of the recipient to repay such amount if it is
ultimately determined that he is not entitled to indemnification
under this Section 4.3, provided that either:
(i) such undertaking is secured by a surety bond or some
other appropriate security provided by the recipient, or the
Trust shall be insured against losses arising out of any such
advances; or
(ii) a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees
act on the matter) or an independent legal counsel in a written
opinion shall determine, based upon a review of readily available
Part C - Page 9
<PAGE>
facts (as opposed to a full trial-type inquiry), that there is
reason to believe that the recipient ultimately will be found
entitled to indemnification.
As used in this Section 4.3, a "Disinterested Trustee" is
one who is not (i) an "Interested Person" of the Trust (including
anyone who has been exempted from being an "Interested Person" by
any rule, regulation or order of the Commission), or (ii)
involved in the claim, action, suit or proceeding.
Item 28. Business or Other Connections of Investment Adviser
The Adviser has stockholders and employees who are denominated
officers but do not as such have corporation-wide
responsibilities. Such persons are not considered officers for
the purpose of this Item 28.
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
<TABLE>
<CAPTION>
<S> <C>
Stephen R. Beckwith Director, Vice President, Treasurer, Chief Operating Officer & Chief Financial Officer,
Scudder, Stevens & Clark, Inc. (investment adviser)**
Lynn S. Birdsong Director, Scudder, Stevens & Clark, Inc.(investment adviser)**
President & Director, The Latin America Dollar Income Fund, Inc. (investment company)**
President & Director, Scudder World Income Opportunities Fund, Inc. (investment company)**
President, The Japan Fund, Inc. (investment company)**
Supervisory Director, The Latin America Income and Appreciation Fund N.V. (investment company) +
Supervisory Director, The Venezuela High Income Fund N.V. (investment company) xx
Supervisory Director, Scudder Mortgage Fund (investment company)+
Supervisory Director, Scudder Floating Rate Funds for Fannie Mae Mortgage Securities I &
II (investment company) +
Director, Canadian High Income Fund (investment company)#
Director, Hot Growth Companies Fund (investment company)#
Director, Sovereign High Yield Investment Company (investment company)+
Director, Scudder, Stevens & Clark (Luxembourg) S.A. (investment manager) #
Nicholas Bratt Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
President & Director, Scudder New Europe Fund, Inc. (investment company)**
President & Director, The Brazil Fund, Inc. (investment company)**
President & Director, The First Iberian Fund, Inc. (investment company)**
President & Director, Scudder International Fund, Inc. (investment company)**
President & Director, Scudder Global Fund, Inc. (President on all series except Scudder
Global Fund) (investment company)**
President & Director, The Korea Fund, Inc. (investment company)**
President & Director, Scudder New Asia Fund, Inc. (investment company)**
President, The Argentina Fund, Inc. (investment company)**
Vice President, Scudder, Stevens & Clark Corporation (Delaware) (investment adviser)**
Vice President, Scudder, Stevens & Clark Japan, Inc. (investment adviser)###
Vice President, Scudder, Stevens & Clark of Canada Ltd. (Canadian investment adviser)
Toronto, Ontario, Canada
Vice President, Scudder, Stevens & Clark Overseas Corporation oo
Part C - Page 10
<PAGE>
E. Michael Brown Director, Chief Administrative Officer, Scudder, Stevens & Clark, Inc. (investment adviser)**
Trustee, Scudder GNMA Fund (investment company)*
Trustee, Scudder Portfolio Trust (investment company)*
Trustee, Scudder U.S. Treasury Fund (investment company)*
Trustee, Scudder Tax Free Money Fund (investment company)*
Trustee, Scudder State Tax Free Trust (investment company)*
Trustee, Scudder Cash Investment Trust (investment company)*
Assistant Treasurer, Scudder Investor Services, Inc. (broker/dealer)*
Director & President, Scudder Realty Holding Corporation (a real estate holding company)*
Director & President, Scudder Trust Company (a trust company)+++
Director, Scudder Trust (Cayman) Ltd.
Mark S. Casady Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Director & Vice President, Scudder Investor Services, Inc. (broker/dealer)*
Director & Vice President, Scudder Service
Corporation (in-house transfer agent)*
Director, SFA, Inc. (advertising agency)*
Linda C. Coughlin Director, Scudder, Stevens & Clark, Inc.(investment adviser)**
Chairman & Trustee, AARP Cash Investment Funds (investment company)**
Chairman & Trustee, AARP Growth Trust (investment company)**
Chairman & Trustee, AARP Income Trust (investment company)**
Chairman & Trustee, AARP Tax Free Income Trust (investment company)**
Chairman & Trustee, AARP Managed Investment Portfolios Trust (investment company)**
Director & Senior Vice President, Scudder Investor Services, Inc. (broker/dealer)*
Director, SFA, Inc. (advertising agency)*
Margaret D. Hadzima Director, Scudder, Stevens & Clark, Inc.(investment adviser)**
Assistant Treasurer, Scudder Investor Services, Inc. (broker/dealer)*
Jerard K. Hartman Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President, Scudder California Tax Free Trust (investment company)*
Vice President, Scudder Equity Trust (investment company)**
Vice President, Scudder Cash Investment Trust (investment company)*
Vice President, Scudder Fund, Inc. (investment company)**
Vice President, Scudder Global Fund, Inc. investment company)**
Vice President, Scudder GNMA Fund (investment company)*
Vice President, Scudder Portfolio Trust (investment company)*
Vice President, Scudder Institutional Fund, Inc. (investment company)**
Vice President, Scudder International Fund, Inc. (investment company)**
Vice President, Scudder Investment Trust (investment company)*
Vice President, Scudder Municipal Trust (investment company)*
Vice President, Scudder Mutual Funds, Inc. (investment company)**
Vice President, Scudder New Asia Fund, Inc. (investment company)**
Vice President, Scudder New Europe Fund, Inc. (investment company)**
Vice President, Scudder Securities Trust (investment company)*
Vice President, Scudder State Tax Free Trust (investment company)*
Vice President, Scudder Funds Trust (investment company)**
Vice President, Scudder Tax Free Money Fund (investment company)*
Vice President, Scudder Tax Free Trust (investment company)*
Vice President, Scudder U.S. Treasury Money Fund (investment company)*
Vice President, Scudder Pathway Series (investment company)*
Vice President, Scudder Variable Life Investment Fund (investment company)*
Vice President, The Brazil Fund, Inc. (investment company)**
Part C - Page 11
<PAGE>
Vice President, The Korea Fund, Inc. (investment company)**
Vice President, The Argentina Fund, Inc. (investment company)**
Vice President & Director, Scudder, Stevens & Clark of Canada, Ltd. (Canadian investment
adviser) Toronto, Ontario, Canada
Vice President, The First Iberian Fund, Inc.
(investment company)**
Vice President, The Latin America Dollar Income Fund, Inc. (investment company)**
Vice President, Scudder World Income Opportunities Fund, Inc. (investment company)**
Richard A. Holt Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President, Scudder Variable Life Investment Fund (investment company)*
John T. Packard Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
President, Montgomery Street Income Securities, Inc. (investment company) o
Chairman, Scudder Realty Advisors, Inc. (realty investment adviser) x
Daniel Pierce Chairman & Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Chairman, Vice President & Director, Scudder Global Fund, Inc. (investment company)**
Chairman & Director, Scudder New Europe Fund, Inc. (investment company)**
Chairman & Director, The First Iberian Fund, Inc. (investment company)**
Chairman & Director, Scudder International Fund, Inc. (investment company)**
Chairman & Director, Scudder New Asia Fund, Inc. (investment company)**
President & Trustee, Scudder Equity Trust (investment company)**
President & Trustee, Scudder GNMA Fund (investment company)*
President & Trustee, Scudder Portfolio Trust (investment company)*
President & Trustee, Scudder Funds Trust(investment company)**
President & Trustee, Scudder Securities Trust (investment company)*
President & Trustee, Scudder Investment Trust (investment company)*
President & Director, Scudder Institutional Fund, Inc. (investment company)**
President & Director, Scudder Fund, Inc.(investment company)**
President & Director, Scudder Mutual Funds, Inc. (investment company)**
Vice President & Trustee, Scudder Municipal Trust (investment company)*
Vice President & Trustee, Scudder Variable Life Investment Fund (investment company)*
Vice President & Trustee, Scudder Pathway Series (investment company)*
Trustee, Scudder California Tax Free Trust (investment company)*
Trustee, Scudder State Tax Free Trust (investment company)*
Vice President, Montgomery Street Income Securities, Inc. (investment company)o
Chairman & President, Scudder, Stevens & Clark of Canada, Ltd. (Canadian investment adviser),
Toronto, Ontario, Canada
Chairman & Director, Scudder Global Opportunities Funds (investment company) Luxembourg
Chairman, Scudder, Stevens & Clark, Ltd. investment adviser) London, England
President & Director, Scudder Precious Metals, Inc. xxx
Vice President, Director & Assistant Secretary, Scudder Realty Holdings Corporation
(a real estate holding company)*
Vice President, Director & Assistant Treasurer, Scudder Investor Services, Inc.
(broker/dealer)*
Director, Scudder Latin America Investment Trust PLC (investment company)@
Director, Fiduciary Trust Company (banking & trust company) Boston, MA
Director, Fiduciary Company Incorporated (banking & trust company) Boston, MA
Trustee, New England Aquarium, Boston, MA
Incorporator, Scudder Trust Company (a trust company)+++
Part C - Page 12
<PAGE>
Kathryn L. Quirk Director, Chief Legal Officer, Chief Compliance
Officer and Secretary, Scudder, Stevens &
Clark, Inc. (investment adviser)**
Director, Vice President & Assistant Secretary,
The Argentina Fund, Inc. (investment
company)**
Director, Vice President & Assistant Secretary,
Scudder International Fund, Inc. (investment
company)**
Director, Vice President & Assistant Secretary,
Scudder New Asia Fund (investment company)**
Director, Vice President & Assistant Secretary,
Scudder Global Fund, Inc. (investment
company)**
Trustee, Vice President & Assistant Secretary,
Scudder Equity Trust (investment company)**
Trustee, Vice President & Assistant Secretary,
Scudder Securities Trust (investment
company)*
Trustee, Vice President & Assistant Secretary,
Scudder Funds Trust (investment company)**
Trustee, Scudder Investment Trust (investment
company)*
Trustee, Scudder Municipal Trust (investment
company)*
Vice President & Trustee, Scudder Cash
Investment Trust (investment company)*
Vice President & Trustee, Scudder Tax Free Money
Fund (investment company)*
Vice President & Trustee, Scudder Tax Free Trust
(investment company)*
Vice President & Secretary, AARP Growth Trust
(investment company)**
Vice President & Secretary, AARP Income Trust
(investment company)**
Vice President & Secretary, AARP Tax Free Income
Trust (investment company)**
Vice President & Secretary, AARP Cash Investment
Funds (investment company)**
Vice President & Secretary, AARP Managed
Investment Portfolios Trust (investment
company)**
Vice President & Secretary, The Japan Fund, Inc.
(investment company)**
Vice President & Assistant Secretary, Scudder
World Income Opportunities Fund, Inc.
(investment company)**
Vice President & Assistant Secretary, The Korea
Fund, Inc. (investment company)**
Vice President & Assistant Secretary, The Brazil
Fund, Inc. (investment company)**
Vice President & Assistant Secretary, Montgomery
Street Income Securities, Inc. (investment
company)o
Vice President & Assistant Secretary, Scudder
Mutual Funds, Inc. (investment company)**
Vice President & Assistant Secretary, Scudder
Pathway Series (investment company)*
Vice President & Assistant Secretary, Scudder
New Europe Fund, Inc. (investment company)**
Vice President & Assistant Secretary, Scudder
Variable Life Investment Fund (investment
company)*
Vice President & Assistant Secretary, The First
Iberian Fund, Inc. (investment company)**
Vice President & Assistant Secretary, The Latin
America Dollar Income Fund, Inc. (investment
company)**
Vice President, Scudder Fund, Inc. (investment
company)**
Vice President, Scudder Institutional Fund, Inc.
(investment company)**
Vice President, Scudder GNMA Fund (investment
company)*
Director, Senior Vice President & Clerk, Scudder
Investor Services, Inc. (broker/dealer)*
Director, Vice President & Secretary, Scudder
Fund Accounting Corporation (in-house fund
accounting agent)*
Director, Vice President & Secretary, Scudder
Realty Holdings Corporation (a real estate
holding company)*
Director & Clerk, Scudder Service Corporation
(in-house transfer agent)*
Director, SFA, Inc. (advertising agency)*
Part C - Page 13
<PAGE>
Vice President, Director & Assistant Secretary,
Scudder Precious Metals, Inc. xxx
Cornelia M. Small Director, Scudder, Stevens & Clark, Inc.
(investment adviser)**
President, AARP Cash Investment Funds
(investment company)**
President, AARP Growth Trust (investment
company)**
President, AARP Income Trust (investment
company)**
President, AARP Tax Free Income Trust
(investment company)**
President, AARP Managed Investment Portfolio
Trust (investment company)**
Edmond D. Villani Director, President & Chief Executive Officer,
Scudder, Stevens & Clark, Inc. (investment
adviser)**
Chairman & Director, The Argentina Fund, Inc.
(investment company)**
Chairman & Director, The Latin America Dollar
Income Fund, Inc. (investment company)**
Chairman & Director, Scudder World Income
Opportunities Fund, Inc. (investment
company)**
Supervisory Director, Scudder Mortgage Fund
(investment company) +
Supervisory Director, Scudder Floating Rate
Funds for Fannie Mae Mortgage Securities I &
II (investment company)+
Director, Scudder, Stevens & Clark Japan, Inc.
(investment adviser)###
Director, The Brazil Fund, Inc. (investment
company)**
Director, Indosuez High Yield Bond Fund
(investment company) Luxembourg
President & Director, Scudder, Stevens & Clark
Overseas Corporation oo
President & Director, Scudder, Stevens & Clark
Corporation (Delaware) (investment adviser)**
Director, Scudder Realty Advisors, Inc. (realty
investment adviser) x
Director, IBJ Global Investment Management S.A.,
(Luxembourg investment management company)
Luxembourg, Grand-Duchy of Luxembourg
Stephen A. Wohler Director, Scudder, Stevens & Clark, Inc.
(investment adviser)**
Vice President, Montgomery Street Income
Securities, Inc. (investment company)o
</TABLE>
* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
++ Two Prudential Plaza, 180 N. Stetson Avenue,
Chicago, IL
+++ 5 Industrial Way, Salem, NH
o 101 California Street, San Francisco, CA # Soci,t, Anonyme, 47,
Boulevard Royal, L-2449 Luxembourg, R.C. Luxembourg B 34.564
+ John B. Gorsiraweg 6, Willemstad Curacao,
Netherlands Antilles
xx De Ruyterkade 62, P.O. Box 812, Willemstad
Curacao, Netherlands Antilles
## 2 Boulevard Royal, Luxembourg
*** B1 2F3F 248 Section 3, Nan King East Road, Taipei,
Taiwan
xxx Grand Cayman, Cayman Islands, British West Indies oo 20-5,
Ichibancho, Chiyoda-ku, Tokyo, Japan ### 1-7, Kojimachi, Chiyoda-ku,
Tokyo, Japan
@ c/o Sinclair Hendersen Limited, 23 Cathedral Yard,
Exeter, Devon, U.K.
Item 29. Principal Underwriters.
(a) Scudder California Tax Free Trust
Scudder Cash Investment Trust
Scudder Equity Trust
Scudder Fund, Inc.
Scudder Funds Trust
Scudder Global Fund, Inc.
Part C - Page 14
<PAGE>
Scudder GNMA Fund
Scudder Institutional Fund, Inc
Scudder International Fund, Inc.
Scudder Investment Trust
Scudder Municipal Trust
Scudder Mutual Funds, Inc.
Scudder Pathway Series
Scudder Portfolio Trust
Scudder Securities Trust
Scudder State Tax Free Trust
Scudder Tax Free Money Fund
Scudder Tax Free Trust
Scudder U.S. Treasury Money Fund
Scudder Variable Life Investment Fund
AARP Cash Investment Funds
AARP Growth Trust
AARP Income Trust
AARP Tax Free Income Trust
AARP Managed Investment Portfolios Trust
The Japan Fund, Inc.
(b)
(1) (2) (3)
Name and Position and Offices Positions and
Principal with Offices with
Business Scudder Investor Registrant
Address Services, Inc.
Lynn S. Birdsong Senior Vice President None
345 Park Avenue
New York, NY
10154
E. Michael Brown Assistant Treasurer None
Two International
Place
Boston, MA 02110
Mark S. Casady Director and Vice None
Two International President
Place
Boston, MA 02110
Linda Coughlin Director and Senior None
Two International Vice President
Place
Boston, MA 02110
Richard W. Vice President None
Desmond
345 Park Avenue
New York, NY
10154
Paul J. Elmlinger Senior Vice President None
345 Park Avenue and Assistant Clerk
New York, NY
10154
Margaret D. Assistant Treasurer None
Hadzima
Two International
Place
Boston, MA 02110
Part C - Page 15
<PAGE>
Name and Position and Offices Positions and
Principal with Offices with
Business Scudder Investor Registrant
Address Services, Inc.
Thomas W. Joseph Director, Vice Vice
Two International President, President
Place Treasurer and
Boston, MA 02110 Assistant Clerk
David S. Lee Director, President Trustee and
Two International and Assistant Vice
Place Treasurer President
Boston, MA 02110
Thomas F. Clerk Vice
McDonough President and
Two International Secretary
Place
Boston, MA 02110
Thomas H. O'Brien Assistant Treasurer None
345 Park Avenue
New York, NY
10154
Edward J. Assistant Treasurer Vice
O'Connell President and
345 Park Avenue Assistant
New York, NY Treasurer
10154
Daniel Pierce Director, Vice President and
Two International President Trustee
Place and Assistant
Boston, MA 02110 Treasurer
Kathryn L. Quirk Director, Senior Vice Trustee, Vice
345 Park Avenue President and President
New York, NY Assistant Clerk and Assistant
10154 Secretary
Robert A. Rudell Vice President None
Two International
Place
Boston, MA 02110
Edmund J. Thimme Vice President None
345 Park Avenue
New York, NY
10154
Benjamin Vice President None
Thorndike
Two International
Place
Boston, MA 02110
Sydney S. Tucker Vice President None
Two International
Place
Boston, MA 02110
David B. Watts Assistant Treasurer None
Two International
Place
Boston, MA 02110
Linda J. Wondrack Vice President None
Two International
Place
Boston, MA 02110
Part C - Page 16
<PAGE>
The Underwriter has employees who are denominated officers of an
operational area. Such persons do not have corporation-wide
responsibilities and are not considered officers for the purpose of this
Item 29.
(c)
(1) (2) (3) (4) (5)
Net Compensation
Name of Underwrit on Redemptions Brokerage Other
Principal ing Commission Commissions Compensation
Underwriter Discounts Repurchases
Scudder None None None None
Investor
Services, Inc.
Item 30. Location of Accounts and Records.
Certain accounts, books and other documents required to be maintained
by Section 31(a) of the 1940 Act and the Rules promulgated thereunder
are maintained by Scudder, Stevens & Clark, Inc., Two International
Place, Boston, MA 02110-4103. Records relating to the duties of the
Registrant's custodian are maintained by State Street Bank and Trust
Company, Heritage Drive, North Quincy, Massachusetts. Records relating
to the duties of the Registrant's transfer agent are maintained by
Scudder Service Corporation, Two International Place, Boston,
Massachusetts.
Item 31. Management Services.
Inapplicable.
Item 32. Undertakings.
The Registrant hereby undertakes to file a post-effective amendment,
using reasonably current financial statements of Scudder Financial
Services, Scudder Health Care Fund and Scudder Technology Fund, within
four to six months from the effectiveness date of each Registrant's
Registration Statement under the 1933 Act.
The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of a Fund's latest annual report
to shareholders upon request and without change.
The Registrant hereby undertakes to call a meeting of shareholders for
the purpose of voting on the question of removal of a Trustee or
Trustees when requested to do so by the holders of at least 10% of the
Registrant's outstanding shares and in connection with such meeting to
comply with the provisions of Section 16(c) of the Investment Company
Act of 1940 relating to shareholder communications.
The Registrant hereby undertakes, insofar as indemnification for
liability arising under the Securities Act of 1933 may be permitted to
trustees, officers and controlling persons of the registrant pursuant
to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act,
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a trustee, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such trustee, officer or
controlling person in connection with the securities being registered,
the registrant will unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
Part C - Page 17
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Boston and the Commonwealth of Massachusetts on
the 9th day of October, 1997.
SCUDDER SECURITIES TRUST
By /s/Thomas F. McDonough
----------------------
Thomas F. McDonough, Vice President
and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
amendment to its Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/Daniel Pierce
- ---------------------------------------
Daniel Pierce* President (Principal Executive October 9, 1997
Officer) and Trustee
/s/Paul Bancroft III
- ---------------------------------------
Paul Bancroft III* Trustee October 9, 1997
/s/William T. Burgin
- ---------------------------------------
William T. Burgin* Trustee October 9, 1997
/s/Thomas J. Devine
- ---------------------------------------
Thomas J. Devine* Trustee October 9, 1997
/s/Keith R. Fox
- ---------------------------------------
Keith R. Fox* Trustee October 9, 1997
/s/David S. Lee
- ---------------------------------------
David S. Lee* Trustee and Vice President October 9, 1997
/s/Wilson Nolen
- ---------------------------------------
Wilson Nolen* Trustee October 9, 1997
/s/Kathryn L. Quirk
- ---------------------------------------
Kathryn L. Quirk* Trustee, Vice President and Assistant October 9, 1997
Secretary
<PAGE>
SIGNATURE TITLE DATE
- --------- ----- ----
/s/Gordon Shillinglaw
- ---------------------------------------
Gordon Shillinglaw* Trustee October 9, 1997
/s/Pamela A. McGrath
- ---------------------------------------
Pamela A. McGrath Vice President and Treasurer October 9, 1997
(Principal Financial and Accounting
Officer)
</TABLE>
*By: /s/Thomas F. McDonough
-----------------------
Thomas F. McDonough
Attorney-in-fact pursuant to power of
attorneys contained in the signature pages
of Post-Effective Amendment No. 30 filed
August 26, 1991, Post-Effective Amendment
No. 37 filed April 4, 1996, Post-Effective
Amendment No. 40 filed August 12, 1996,
Post-Effective Amendment No. 44 filed
February 11, 1997 and Post-Effective
Amendment No. 46 filed July 11, 1997.
2
<PAGE>
File No. 2-36238
File No. 811-2021
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 52
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 36
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
SCUDDER SECURITIES TRUST
<PAGE>
SCUDDER SECURITIES TRUST
EXHIBIT INDEX
