SCUDDER SECURITIES TRUST, 485BPOS, 1997-12-31

SCUDDER SECURITIES TRUST
485BPOS, 1997-12-31

Previous: TRANSTECH INDUSTRIES INC, 8-K, 1997-12-31

Next: SCUDDER PORTFOLIO TRUST/, 497, 1997-12-31

Filed electronically with the Securities and Exchange Commission
on December 31, 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. 55
-----

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 39
-----

Scudder Securities Trust
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)

Two International Place, Boston, MA 02110-4103
---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (617) 295-2567
--------------

Thomas F. McDonough
Scudder, Stevens & Clark, Inc.
Two International Place, Boston MA 02110
------------------------------------------------
(Name and Address of Agent for Service)

It is proposed that this filing will become effective

immediately upon filing pursuant to paragraph (b)
------

X on January 5, 1998 pursuant to paragraph (b)
------

60 days after filing pursuant to paragraph (a)(i)
------

on _______________ pursuant to paragraph (a)(i)
------

75 days after filing pursuant to paragraph (a)(ii)
------

on _______________ pursuant to paragraph (a)(ii) of Rule 485.
------
<PAGE>

SCUDDER DEVELOPMENT FUND
CROSS-REFERENCE SHEET

Items Required By Form N-1A

PART A

Item No. Item Caption Prospectus Caption
- -------- ------------ ------------------

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 the FINANCIAL HIGHLIGHTS
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 and DISTRIBUTION AND PERFORMANCE
Other Securities INFORMATION--Dividends and capital gains
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 Being PURCHASES
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>

SCUDDER DEVELOPMENT FUND
(continued)

PART B

Caption in Statement of
Item No. Item Caption Additional Information
- -------- ------------ ----------------------

10. Cover Page COVER PAGE

11. Table of Contents TABLE OF CONTENTS

12. General FUND ORGANIZATION
Information and
History

13. Investment THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
Objectives and PORTFOLIO TRANSACTIONS--Brokerage Commissions,
Policies Portfolio turnover

14. Management of the INVESTMENT ADVISER
Fund TRUSTEES AND OFFICERS
REMUNERATION

15. Control Persons TRUSTEES AND OFFICERS
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 and FUND ORGANIZATION
Other Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

19. Purchase, PURCHASES
Redemption and EXCHANGES AND REDEMPTIONS
Pricing of FEATURES AND SERVICES OFFERED BY THE FUND--
Securities Being Dividend and Capital Gain Distribution Options
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

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 the FINANCIAL HIGHLIGHTS
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

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>

SCUDDER SMALL COMPANY VALUE FUND
(continued)

PART B

Caption in Statement of
Item No. Item Caption Additional Information
- -------- ------------ ----------------------

10. Cover Page COVER PAGE

11. Table of Contents TABLE OF CONTENTS

12. General FUND ORGANIZATION
Information and
History

13. Investment THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
Objectives and PORTFOLIO TRANSACTIONS--Brokerage Commissions,
Policies Portfolio turnover

14. Management of the INVESTMENT ADVISER
Fund TRUSTEES AND OFFICERS
REMUNERATION

15. Control Persons TRUSTEES AND OFFICERS
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 and FUND ORGANIZATION
Other Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

19. Purchase, PURCHASES
Redemption and EXCHANGES AND REDEMPTIONS
Pricing of FEATURES AND SERVICES OFFERED BY THE
Securities Being FUND--Dividend and Capital Gain Distribution
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 4
<PAGE>

SCUDDER MICRO CAP FUND
CROSS-REFERENCE SHEET

Items Required By Form N-1A

PART A

Item No. Item Caption Prospectus Caption
- -------- ------------ ------------------

1. Cover Page COVER PAGE

2. Synopsis EXPENSE INFORMATION

3. Condensed 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 the A MESSAGE FROM SCUDDER'S CHAIRMAN
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

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>

SCUDDER MICRO CAP FUND
(continued)

PART B

Caption in Statement of
Item No. Item Caption Additional Information
- -------- ------------ ----------------------

10. Cover Page COVER PAGE

11. Table of Contents TABLE OF CONTENTS

12. General FUND ORGANIZATION
Information and
History

13. Investment THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
Objectives and PORTFOLIO TRANSACTIONS--Brokerage Commissions,
Policies Portfolio turnover

14. Management of the INVESTMENT ADVISER
Fund TRUSTEES AND OFFICERS
REMUNERATION

15. Control Persons TRUSTEES AND OFFICERS
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 and FUND ORGANIZATION
Other Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES

21. Underwriters DISTRIBUTOR

22. Calculation of PERFORMANCE 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 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 the A MESSAGE FROM SCUDDER'S CHAIRMAN
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

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>

SCUDDER 21ST CENTURY GROWTH FUND
(continued)

PART B

Caption in Statement of
Item No. Item Caption Additional Information
- -------- ------------ ----------------------

10. Cover Page COVER PAGE

11. Table of Contents TABLE OF CONTENTS

12. General FUND ORGANIZATION
Information and
History

13. Investment THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
Objectives and PORTFOLIO TRANSACTIONS--Brokerage Commissions,
Policies Portfolio turnover

14. Management of the INVESTMENT ADVISER
Fund TRUSTEES AND OFFICERS
REMUNERATION

15. Control Persons TRUSTEES AND OFFICERS
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 and FUND ORGANIZATION
Other Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES

21. Underwriters DISTRIBUTOR

22. Calculation of PERFORMANCE 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 the A MESSAGE FROM SCUDDER'S CHAIRMAN
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

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>

SCUDDER FINANCIAL SERVICES FUND
(continued)

PART B

Caption in Statement of
Item No. Item Caption Additional Information
- -------- ------------ ----------------------

10. Cover Page COVER PAGE

11. Table of Contents TABLE OF CONTENTS

12. General FUND ORGANIZATION
Information and
History

13. Investment THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
Objectives and PORTFOLIO TRANSACTIONS--Brokerage Commissions,
Policies Portfolio turnover

14. Management of the INVESTMENT ADVISER
Fund TRUSTEES AND OFFICERS
REMUNERATION

15. Control Persons TRUSTEES AND OFFICERS
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 and FUND ORGANIZATION
Other Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES

21. Underwriters DISTRIBUTOR

22. Calculation of PERFORMANCE INFORMATION
Performance Data

23. Financial FINANCIAL STATEMENTS
Statements

Cross Reference - Page 10
<PAGE>

SCUDDER HEALTH CARE FUND
CROSS-REFERENCE SHEET

Items Required By Form N-1A

PART A

Item No. Item Caption Prospectus Caption
- -------- ------------ ------------------

1. Cover Page COVER PAGE

2. Synopsis EXPENSE INFORMATION

3. Condensed 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 the A MESSAGE FROM SCUDDER'S CHAIRMAN
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

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>

SCUDDER HEALTH CARE FUND
(continued)

PART B

Caption in Statement of
Item No. Item Caption Additional Information
- -------- ------------ ----------------------

10. Cover Page COVER PAGE

11. Table of Contents TABLE OF CONTENTS

12. General FUND ORGANIZATION
Information and
History

13. Investment THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
Objectives and PORTFOLIO TRANSACTIONS--Brokerage Commissions,
Policies Portfolio turnover

14. Management of the INVESTMENT ADVISER
Fund TRUSTEES AND OFFICERS
REMUNERATION

15. Control Persons TRUSTEES AND OFFICERS
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 and FUND ORGANIZATION
Other Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES

21. Underwriters DISTRIBUTOR

22. Calculation of PERFORMANCE 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 the A MESSAGE FROM SCUDDER'S CHAIRMAN
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

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>

SCUDDER TECHNOLOGY FUND
(continued)

PART B

Caption in Statement of
Item No. Item Caption Additional Information
- -------- ------------ ----------------------

10. Cover Page COVER PAGE

11. Table of Contents TABLE OF CONTENTS

12. General FUND ORGANIZATION
Information and
History

13. Investment THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
Objectives and PORTFOLIO TRANSACTIONS--Brokerage Commissions,
Policies Portfolio turnover

14. Management of the INVESTMENT ADVISER
Fund TRUSTEES AND OFFICERS
REMUNERATION

15. Control Persons TRUSTEES AND OFFICERS
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 and FUND ORGANIZATION
Other Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES

21. Underwriters DISTRIBUTOR

22. Calculation of PERFORMANCE INFORMATION
Performance Data

23. Financial FINANCIAL STATEMENTS
Statements

Cross Reference - Page 14
<PAGE>

SCUDDER
CHOICE SERIES [LOGO]

Prospectus

Scudder Financial
Services Fund

September 30, 1997,
as revised January 5, 1998

Scudder
Health Care Fund

January 5, 1998

Scudder
Technology Fund

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.

This prospectus sets forth concisely the information about Scudder Financial
Services Fund, Scudder Health Care Fund and Scudder Technology Fund, each a
non-diversified series of Scudder Securities Trust, an open-end management
investment company, that a prospective investor should know before investing.
Please retain it for future reference. If you require more detailed information,
a Statement of Additional Information dated January 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
- ---------------------------------------

- -------------------
[LOGO] Printed with [RECYCLE LOGO] Printed on recycled paper
SOY INK
- -------------------

376-2-18
M1S350P
PR3500198

<PAGE>

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

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

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

Scudder
Financial Scudder Scudder
Services Health Care Technology
Fund Fund Fund
-------- ----------- ----------
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%** 0.00%** 0.00%**
12b-1 fees NONE NONE NONE
Other expenses (after reimbursements) 1.50%** 1.75%** 1.75%**
------- ------- -------
Total operating expenses (after waiver
and reimbursements) 1.50%** 1.75%** 1.75%**
======= ======= =======
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.

1 Year $15 $18 $18
3 Years $47 $55 $55

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 December 31, 1998, the Adviser and certain of its subsidiaries have
agreed to waive and/or reimburse all or portions of their fees payable by
each Fund to the extent necessary so that the total annualized expenses of
Scudder Financial Services Fund, Scudder Health Care Fund and Scudder
Technology Fund do not exceed 1.50%, 1.75% and 1.75%, respectively, of each
Fund's 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 for each Fund would be: investment management fee
0.75%, 0.85% and 0.85%, respectively; other expenses 2.30%, 2.27% and 2.27%,
respectively; and total operating expenses 3.05%, 3.12% and 3.12%,
respectively, for the initial fiscal period for each Fund.
- --------------------------------------------------------------------------------

- --
2
<PAGE>

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

[PHOTO OMITTED]
Edmond D. Villani, President
and CEO, Scudder Kemper
Investments, Inc.

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

We offered America's first no-load mutual fund in 1928, and today the Scudder
Family of Funds includes over 45 no-load mutual fund portfolios. We also manage
the mutual funds in a special program for the American Association of Retired
Persons, as well as the fund options available through Scudder Horizon Plan, a
tax-advantaged variable annuity. We also advise The Japan Fund, and numerous
other open and closed-end funds that invest in this country and other countries
around the world.

The Scudder Family of Funds is designed to make investing easy and less costly.
It includes money market, tax free, income and growth funds as well as IRAs,
401(k)s, Keoghs and other retirement plans.

Services available to shareholders include toll-free access to the professional
service representatives of Scudder Investor Relations, easy exchange among
funds, shareholder reports, informative newsletters and the walk-in convenience
of Scudder Investor Centers.

The Scudder Family of Funds includes those Funds, or classes of Funds, advised
by Scudder Kemper Investments, Inc., that are offered without commissions to
purchase or redeem shares or to exchange from one fund to another. There are no
12b-1 fees either, which many other funds now charge to support their marketing
efforts. All of your investment goes to work for you. We look forward to
welcoming you as a shareholder.

/s/ Edmond D. Villani

- --------------------------------------------------------------------------------
Scudder Financial Services Fund
Scudder Health Care Fund

Scudder Technology Fund
- --------------------------------------------------------------------------------

Investment objective

o long-term growth of capital by investing in common stocks and other 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 ......................................................... 7
Distribution and performance information .................................. 10
Fund organization ......................................................... 11
Transaction information ................................................... 12
Shareholder benefits ...................................................... 17
Purchases ................................................................. 20
Exchanges and redemptions ................................................. 21
Trustees and Officers ..................................................... 23
Investment products and services .......................................... 24
How to contact Scudder .................................................... 25

--
3
<PAGE>
- --------------------------------------------------------------------------------
Investment objective and policies
- --------------------------------------------------------------------------------

Scudder Financial Services Fund, Scudder Health Care Fund and Scudder Technology
Fund (collectively the "Funds" and individually a "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 concentrated Funds may involve
significantly greater risks and greater share price 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
convertible securities, rights, warrants and illiquid and restricted securities.
Each Fund may enter into repurchase agreements and reverse repurchase
agreements, and may engage in strategic transactions, using such derivatives
contracts as index options and futures, to increase stock market participation,
enhance liquidity and manage transaction costs. 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.
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 predict accurately how long
such alternate strategies may be utilized. More information about these
investment techniques is provided under "Additional information about policies
and investments."

- --
4
<PAGE>

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
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, technology-based service industry companies,
semiconductors, office equipment and automation, data networking and
telecommunications equipment 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

--
5
<PAGE>

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.

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.

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 for over 75 years. The Adviser manages in
excess of $200 billion in assets globally. 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.

- --
6
<PAGE>
- --------------------------------------------------------------------------------
Additional information about policies and investments
- --------------------------------------------------------------------------------

Investment restrictions

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

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

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

A complete description of these and other policies and restrictions is contained
under "Investment Restrictions" in the 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 common stocks can fluctuate significantly, reflecting the
business performance of the issuing company, investor perception and general
economic or financial market movements. Smaller companies are especially
sensitive to these factors and may even become valueless. Despite the risk of
price volatility, however, common stocks also offer the greatest potential for
gain on investment, compared to 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.

Illiquid securities

The Funds may invest in securities for which there is not an active trading
market, or which have resale restrictions. These types of securities generally
offer a higher return than more readily

--
7
<PAGE>

marketable securities, but carry the risk that the Funds may not be able to
dispose of them at an advantageous time or price.

Foreign securities

While the Funds generally emphasize 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 interests in 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
can generally 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 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

- --
8
<PAGE>

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 Investment Company Act of 1940 (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,
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 "Why Invest" section for each Fund.

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 securities. The absence of a trading market can make it difficult to
ascertain a market value for these investments. Disposing of illiquid
investments may involve time- consuming negotiation and legal expenses, and it
may be difficult or impossible for the Funds 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

--
9
<PAGE>

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,
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 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.

- --
10
<PAGE>

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 and Scudder Health Care Fund
will not exceed 75% and Scudder Technology Fund will not exceed 200% 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. Performance will vary
based upon, among other things, changes in market conditions and the level of a
Fund's expenses.

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

--
11
<PAGE>

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

Scudder Financial Services Fund, Scudder Health Care Fund and Scudder Technology
Fund each pays the Adviser an annual fee of 0.75%, 0.85% and 0.85%,
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 each of Scudder
Health Care Fund and Scudder Technology Fund at no more than 1.75% of the
average daily net assets of the relevant Fund until December 31, 1998.

Under each 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.

- --
12
<PAGE>

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:

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"

--
13
<PAGE>

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 any IRA or SEP-IRA
accounts. This fee 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 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.

Exchanges. 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.

Redemptions 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 a 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

- --
14
<PAGE>

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,
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

--
15
<PAGE>

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
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

- --
16
<PAGE>

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 Kemper investment professionals, who
each play an important role in the Funds' management process. Team members work
together to develop investment strategies and select securities for each Fund's
portfolio. They are supported by the Adviser's large staff of quantitative
analysts, traders and other investment specialists who work in the Adviser's
offices across the United States and abroad. Scudder Kemper believes its team
approach benefits Fund investors by bringing together many disciplines and
leveraging its 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 the Adviser in 1993, has 18 years of investment
industry experience and specializes in global banking, consumer finance,
commercial finance and financial transaction processing companies. Mr. Taylor
joined the Adviser in 1989 as an equity analyst and focuses on insurance
companies, 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 the Adviser 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 the Adviser's Director of Global Equity Research.

Scudder Health Care Fund

Co-Lead Portfolio Managers Kimberly Purvis and Jim Fenger have responsibility
for the Fund's day-to-day management and investment strategies. Ms. Purvis, who
joined the Adviser 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 has 15 years of investment industry
experience and specializes in pharmaceutical (domestic and foreign) and
biotechnology companies, as well as medical technology and hospital supply
firms. Mr. Fenger has been a healthcare investment analyst with the Adviser for
15 years. Sally Yanchus, Portfolio Manager, contributes expertise in small cap
medical devices and medical technology companies for the global equity group.
Prior to joining the Adviser in September 1997, Ms. Yanchus was a sell-side
analyst for six years covering various health care industries. Leefin Lai,
Portfolio Manager, has over 5 years of investment industry experience and
specializes in small- and mid-cap technology and biotechnology companies. Prior
to joining the Adviser, Ms. Lai was a senior tax accountant for Baxter
Healthcare Corporation and a tax specialist for KPMG Peat Marwick.

Scudder Technology Fund

Brooks Dougherty, Lead Portfolio Manager, joined the Adviser in 1993 as an
equity analyst specializing in technology companies. Mr. Dougherty has 14 years
of industry experience. Robert Horton, Portfolio Manager, joined the Adviser in
1996 and has 9 years of industry experience. Virginea Stuart, Portfolio Manager,
joined the Adviser in 1996 and has 4 years of industry experience. Paul Svetz,
Portfolio Manager, joined the

- --
17
<PAGE>

Adviser in 1988 and has over 25 years of industry experience. Christine Chien,
Portfolio Manager, specializes in networking, semiconductors, semiconductor
equipment, personal computers, workstations, CAD/CAM and household products. Ms.
Chien, who has 11 years of investment industry experience, joined the Adviser in
1991. Deb Koch, Portfolio Manager, is responsible for security analysis for
software/data services, aerospace/defense and conglomerates. Ms. Koch joined the
Adviser in 1992.

SAIL(TM)--Scudder Automated Information Line

For personalized account information including fund prices, yields and account
balances, to perform transactions in existing Scudder fund accounts, or to
obtain information on any Scudder fund, shareholders can call Scudder's
Automated Information Line (SAIL) at 1-800-343-2890, 24 hours a day. During
periods of extreme economic or market changes, or other conditions, it may be
difficult for you to effect telephone transactions in your account. In such an
event you should write to the Fund; please see "How to contact Scudder" for the
address.

Investment flexibility

Scudder offers toll-free telephone exchange between funds at current net asset
value. You can move your investments among money market, income, growth,
tax-free and growth and income funds with a simple toll-free call or, if you
prefer, by sending your instructions through the mail or by fax. (The exchange
privilege may not be available for certain Scudder funds. For more information,
please call 1-800-225-5163.) Telephone and fax redemptions and exchanges are
subject to termination and their terms are subject to change at any time by the
Fund or the transfer agent. In some cases, the transfer agent or Scudder
Investor Services, Inc. may impose additional conditions on telephone
transactions.

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

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

Dividend reinvestment plan

You may have dividends and distributions automatically reinvested in additional
Fund shares. Please call 1-800-225-5163 to request this feature.

Shareholder statements

You receive a detailed account statement every time you purchase or redeem
shares. All of your statements should be retained to help you keep track of
account activity and the cost of shares for tax purposes.

Shareholder reports

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

To reduce the volume of mail you receive, only one copy of most Fund reports,
such as the Fund's Annual Report, may be mailed to your household (same surname,
same address). Please call 1-800-225-5163 if you wish to receive additional
shareholder reports.

- --
18
<PAGE>

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.

--
19
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

- --
20
<PAGE>

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

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

<S> <C> <C>
o By Telephone To speak with a service representative, call 1-800-225-5163 from
8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day).

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

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

The Scudder Funds Scudder Shareholder 1-800-821-6234
P.O. Box 2291 Service Center
Boston, MA 02107-2291 42 Longwater Drive
Norwell, MA
02061-1612
- ------------------------------------------------------------------------------------------------------------------------
Redeeming shares o By Telephone To speak with a service representative, call 1-800-225-5163 from
8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day). You may
have redemption proceeds sent to your predesignated bank account, or
redemption proceeds of up to $50,000 sent to your address of record.

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

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

o By Automatic You may arrange to receive automatic cash payments periodically if the value
Withdrawal of your account is $10,000 or more. Call 1-800-225-5163 for more information
Plan and an enrollment form.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>

--
21
<PAGE>

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

Scudder Kemper offers a variety of tax-advantaged retirement plans for
individuals, businesses and non-profit organizations. These flexible plans are
designed for use with the Scudder Family of Funds (except Scudder tax-free
funds, which are inappropriate for such plans). Scudder Funds offer a broad
range of investment objectives and can be used to seek almost any investment
goal. Using Scudder's retirement plans can help shareholders save on current
taxes while building their retirement savings.

o Scudder No-Fee IRAs. These retirement plans allow a maximum annual
contribution of up to $2,000 per person for anyone with earned income (up to
$2,000 per individual for married couples if only one spouse has earned
income). Many people can deduct all or part of their contributions from their
taxable income, and all investment earnings accrue on a tax-deferred basis.
The Scudder No-Fee IRA charges you no annual custodial fee.

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

o 401(k) Plans. 401(k) plans allow employers and employees to make
tax-deductible retirement contributions. Scudder offers a full service
program that includes recordkeeping, prototype plan, employee communications
and trustee services, as well as investment options.

o Profit Sharing and Money Purchase Pension Plans. These plans allow
corporations, partnerships and people who are self-employed to make annual,
tax-deductible contributions of up to $30,000 for each person covered by the
plans. Plans may be adopted individually or paired to maximize contributions.
These are sometimes known as Keogh plans. The Scudder Keogh charges you no
annual custodial fee.

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

o SEP-IRAs. Easily administered retirement plans for small businesses and
self-employed individuals. The maximum annual contribution to SEP-IRA
accounts is adjusted each year for inflation. The Scudder SEP-IRA charges you
no annual custodial fee.

o Scudder Horizon Plan. A no-load variable annuity that lets you build assets
by deferring taxes on your investment earnings. You can start with $2,500 or
more.

Scudder Trust Company (an affiliate of the Adviser) is Trustee or Custodian for
some of these plans and is paid an annual fee for some of the above retirement
plans. For information about establishing a Scudder No-Fee IRA, SEP-IRA, Profit
Sharing Plan, Money Purchase Pension Plan or a Scudder Horizon Plan, please call
1-800-225-2470. For information about 401(k)s or 403(b)s please call
1-800-323-6105. To effect transactions in existing IRA, SEP-IRA, Profit Sharing
or Pension Plan accounts, call 1-800-225-5163.

The variable annuity contract is provided by Charter National Life Insurance
Company (in New York State, Intramerica Life Insurance Company [S 1802]). The
contract is offered by Scudder Insurance Agency, Inc. (in New York State,
Nevada and Montana, Scudder Insurance Agency of New York, Inc.). CNL, Inc. is
the Principal Underwriter. Scudder Horizon Plan is not available in all states.

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

- --
22
<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

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

Richard W. Desmond*
Assistant Secretary

Caroline Pearson*
Assistant Secretary

*Scudder Kemper Investments, Inc.

--
23
<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 Programs

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

Education Accounts

Education IRA
UGMA/UTMA

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

For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. ++Funds within categories are listed in order from
expected least risk to most risk. Certain Scudder funds may not be available for
purchase or exchange. +A portion of the income from the tax-free funds may be
subject to federal, state, and local taxes. *A class of shares of the Fund.
**Not available in all states. ++++A no-load variable annuity contract provided
by Charter National Life Insurance Company and its affiliate, offered by
Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by Scudder
Kemper Investments, Inc., are traded on the New York Stock Exchange and, in some
cases, on various foreign stock exchanges.

- --
24
<PAGE>

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

Account Service and Information:

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

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

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

Investment Information:

For information about the Scudder funds, including additional applications
and prospectuses, or for answers to investment questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com

For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services -- 1-800-323-6105

Scudder Brokerage Services:

To receive information about this discount brokerage service and to
obtain an application
Scudder Brokerage Services* -- 1-800-700-0820

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

To receive information about this mutual fund portfolio guidance and
management program
Personal Counsel from Scudder -- 1-800-700-0183

Please address all correspondence to:

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

Or Stop by a Scudder Investor Center:

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

Boca Raton Chicago San Francisco
Boston New York

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

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

--
25
<PAGE>

SCUDDER FINANCIAL SERVICES FUND

SCUDDER HEALTH CARE FUND

SCUDDER TECHNOLOGY FUND

Three Pure No-Load(TM) (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>

TABLE OF CONTENTS

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........................................3
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..12
Checks..................................................................12
Wire Transfer of Federal Funds..........................................12
Share Price.............................................................13
Share Certificates......................................................13
Other Information.......................................................13

EXCHANGES AND REDEMPTIONS.....................................................13
Exchanges...............................................................13
Special Redemption and Exchange Information.............................14
Redemption by Telephone.................................................15
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-Load(TM) Concept............................................17
Internet access.........................................................18
Dividend and Capital Gain Distribution Options..........................19
Scudder Investor Centers................................................19
Reports to Shareholders.................................................20
Transaction Summaries...................................................20

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........................................25
Scudder IRA: Individual Retirement Account.............................25
Scudder Roth IRA: Individual Retirement Account........................26
Scudder 403(b) Plan.....................................................26
Automatic Withdrawal Plan...............................................26
Group or Salary Deduction Plan..........................................27
Automatic Investment Plan...............................................27
Uniform Transfers/Gifts to Minors Act...................................27

DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.....................................28

PERFORMANCE INFORMATION.......................................................28
Average Annual Total Return.............................................28
Cumulative Total Return.................................................29
Total Return............................................................29

i
<PAGE>

TABLE OF CONTENTS (continued)

Page

Comparison of Fund Performance..........................................29

ORGANIZATION OF THE FUNDS.....................................................32

INVESTMENT ADVISER............................................................33
Personal Investments by Employees of the Adviser........................37

TRUSTEES AND OFFICERS.........................................................37

REMUNERATION..................................................................39
Responsibilities of the Board--Board and Committee Meetings.............39
Compensation of Officers and Trustees...................................40

DISTRIBUTOR...................................................................40

TAXES.........................................................................41

PORTFOLIO TRANSACTIONS........................................................45
Brokerage Commissions...................................................45
Portfolio Turnover......................................................46

NET ASSET VALUE...............................................................46

ADDITIONAL INFORMATION........................................................47
Experts.................................................................47
Other Information.......................................................47

FINANCIAL STATEMENTS..........................................................48

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"), financial services industries have the
potential to benefit from economic, social and political trends and thus offer
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. The Fund may borrow money for temporary, emergency or
other purposes, including investment leverage purposes, as determined by the
Trustees. The Fund may also borrow under reverse repurchase agreements. The
Investment Company Act of 1940 (the "1940 Act") requires borrowings to have 300%
asset coverage.

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.

<PAGE>

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.
The Fund may borrow money for temporary, emergency or other purposes, including
investment leverage purposes, as determined by the Trustees. The Fund may also
borrow under reverse repurchase agreements. The 1940 Act requires borrowings to
have 300% asset coverage.

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. The Fund may borrow money for temporary,
emergency or other purposes, including investment leverage purposes, as
determined by the Trustees. The Fund may also borrow under reverse repurchase
agreements. The 1940 Act requires borrowings to have 300% asset coverage.

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 Board of Trustees has the discretion to retain the
current distribution arrangement for the Fund while investing in a master fund
in a master/feeder structure as described below.

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

2
<PAGE>

Specialized Investment Techniques

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.

3
<PAGE>

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.

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.

Borrowing. As a matter of fundamental policy, each Fund will not borrow money,
except as permitted under the 1940 Act, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time. While
the Trustees do not currently intend to borrow for investment leverage purposes,
if such a strategy were implemented in the future it would increase a Fund's
volatility and the risk of loss in a declining market. Borrowing by a Fund will

4
<PAGE>

involve special risk considerations. Although the principal of a Fund's
borrowings will be fixed, the Fund's assets may change in value during the time
a borrowing is outstanding, thus increasing exposure to capital risk.

Illiquid or Restricted Securities. 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 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. 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.

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

5
<PAGE>

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
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

6
<PAGE>

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.

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

7
<PAGE>

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
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.

8
<PAGE>

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 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
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

9
<PAGE>

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.")

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;

10
<PAGE>

(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.

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

11
<PAGE>

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
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).

12
<PAGE>

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 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.

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 at an investor's election through a member of the NASD, other than the
Distributor, that member may, at its discretion, charge a fee for that service.
The Board of Trustees and the Distributor, also the 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 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

13
<PAGE>

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.")

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

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

Special Redemption and Exchange Information

In general, shares of 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

14
<PAGE>

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 $100,000 and have the proceeds mailed to
their address of record. Shareholders may request to have the proceeds mailed or
wired to their predesignated bank account. In order to request redemptions by
telephone, shareholders must have completed and returned to the Transfer Agent
the application, including the designation of a bank account to which the
redemption proceeds are to be sent.

(a) NEW INVESTORS wishing to establish telephone redemption to a
predesignated bank account must complete the appropriate section on
the application.

(b) EXISTING SHAREHOLDERS (except those who are Scudder IRA, Scudder
Pension and Profit-Sharing, Scudder 401(k) and Scudder 403(b)
Planholders) who wish to establish telephone redemption to a
predesignated bank account or who want to change the bank account
previously designated to receive redemption proceeds should either
return a Telephone Redemption Option Form (available upon request)
or send a letter identifying the account and specifying the exact
information to be changed. The letter must be signed exactly as the
shareholder's name(s) appears on the account. An original signature
and an original signature guarantee are required for each person in
whose name the account is registered.

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

15
<PAGE>

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.

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

16
<PAGE>

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.

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-Load(TM) Concept

Investors are encouraged to be aware of the full ramifications of mutual
fund fee structures, and of how Scudder distinguishes its Scudder Family of 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

17
<PAGE>

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 funds in the Scudder Family of Funds do not pay any asset-based
sales charges or service fees, Scudder developed and trademarked the phrase pure
no-load(TM) to distinguish Scudder funds from other no-load mutual funds.
Scudder pioneered the no-load concept when it created the nation's first no-load
fund in 1928, and later developed the nation's first family of no-load mutual
funds.

The following chart shows the potential long-term advantage of investing
$10,000 in a Scudder Family of Funds 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 No-Load Fund
YEARS Pure No-Load(TM) 8.50% Load Load Fund with with 0.25%
Fund Fund 0.75% 12b-1 Fee 12b-1 Fee
- --------------------------------------------------------------------------------

10 $25,937 $23,733 $24,222 $25,354
- --------------------------------------------------------------------------------

15 41,772 38,222 37,698 40,371
- --------------------------------------------------------------------------------

20 67,275 61,557 58,672 64,282
================================================================================

Investors are encouraged to review the fee tables on page 2 of the 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.

18
<PAGE>

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.

A Call Me(TM) feature enables users to speak with a Scudder Investor
Relations telephone representative while viewing their account on the Web site.
In order to use the Call 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

19
<PAGE>

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.

THE SCUDDER FAMILY OF FUNDS

(See "Investment products and services" in the Funds' prospectuses.)

The Scudder Family of Funds is America's first family of mutual funds and
the nation's oldest family of no-load mutual funds. To assist investors in
choosing a Scudder fund, descriptions of the Scudder funds' objectives follow.

MONEY MARKET

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

Scudder Cash Investment Trust ("SCIT") seeks to maintain the stability of
capital and, consistent therewith, to maintain the liquidity of capital
and to provide current income. SCIT seeks to maintain a constant net asset
value of $1.00 per share, although in certain circumstances this may not
be possible, and declares dividends daily.

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

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

TAX FREE MONEY MARKET

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

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

20
<PAGE>

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

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

TAX FREE

Scudder Limited Term Tax Free Fund seeks to provide as high a level of
income exempt from regular federal income tax as is consistent with a high
degree of principal stability.

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

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

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

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

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

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

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

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

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

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

21
<PAGE>

U.S. INCOME

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

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

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

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

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

GLOBAL INCOME

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

Scudder International Bond Fund seeks to provide income primarily by
investing in a managed portfolio of high-grade international bonds. As a
secondary objective, the Fund seeks protection and possible enhancement of
principal value by actively managing currency, bond market and maturity
exposure and by security selection.

Scudder Emerging Markets Income Fund seeks to provide high current income
and, secondarily, long-term capital appreciation through investments
primarily in high-yielding debt securities issued by governments and
corporations in emerging markets.

ASSET ALLOCATION

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

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

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

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

U.S. GROWTH AND INCOME

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

22
<PAGE>

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

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

U.S. GROWTH

Value

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

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

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

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

Growth

Scudder Classic Growth Fund seeks to provide long-term growth of capital
with reduced share price volatility compared to other growth mutual

Scudder Large Company Growth Fund seeks to provide long-term growth of
capital through investment primarily in the equity securities of seasoned,
financially strong U.S. growth companies.

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

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

GLOBAL GROWTH

Worldwide

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

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

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

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

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

23
<PAGE>

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

Regional

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

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

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

The Japan Fund, Inc. seeks long-term capital appreciation by investing
primarily in equity securities (including American Depository Receipts) of
Japanese companies.

The net asset values of most Scudder funds can be found daily in the
"Mutual Funds" section of The Wall Street Journal under "Scudder Funds," and in
other leading newspapers throughout the country. Investors will notice the net
asset value and offering price are the same, reflecting the fact that no sales
commission or "load" is charged on the sale of shares of the Scudder funds. The
latest seven-day yields for the money-market funds can be found every Monday and
Thursday in the "Money-Market Funds" section of The Wall Street Journal. This
information also may be obtained by calling the Scudder Automated Information
Line (SAIL) at 1-800-343-2890.

The Scudder Family of Funds offers many conveniences and services,
including: active professional investment management; broad and diversified
investment portfolios; pure no-load funds with no commissions to purchase or
redeem shares or Rule 12b-1 distribution fees; individual attention from a
service representative of Scudder Investor Relations; and easy telephone
exchanges into other Scudder funds. Certain Scudder funds may not be available
for purchase or exchange. For more information, please call 1-800-225-5163.

SPECIAL PLAN ACCOUNTS

(See "Scudder tax-advantaged retirement plans," "Purchases--By Automatic
Investment Plan" and "Exchanges and redemptions--By Automatic Withdrawal Plan"
in the Fund's prospectus.)

Detailed information on any Scudder investment plan, including the
applicable charges, minimum investment requirements and disclosures made
pursuant to Internal Revenue Service (the "IRS") requirements, may be obtained
by contacting Scudder Investor Services, Inc., Two International Place, Boston,
Massachusetts 02110-4103 or by calling toll free, 1-800-225-2470. It is
advisable for an investor considering the funding of the investment plans
described below to consult with an attorney or other investment or tax adviser
with respect to the suitability requirements and tax aspects thereof.

Shares of the Fund may also be a permitted investment under profit sharing
and pension plans and IRA's other than those offered by the Fund's distributor
depending on the provisions of the relevant plan or IRA.

None of the plans assures a profit or guarantees protection against
depreciation, especially in declining markets.

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

24
<PAGE>

organization. Each of these forms was approved by the IRS as a prototype. The
IRS's approval of an employer's plan under Section 401(a) of the Internal
Revenue Code will be greatly facilitated if it is in such approved form. Under
certain circumstances, the IRS will assume that a plan, adopted in this form,
after special notice to any employees, meets the requirements of Section 401(a)
of the Internal Revenue Code.

Scudder 401(k): Cash or Deferred Profit-Sharing Plan
for Corporations and Self-Employed Individuals

Shares of the Fund may be purchased as the investment medium under a plan
in the form of a Scudder 401(k) Plan adopted by a corporation, a self-employed
individual or a group of self-employed individuals (including sole proprietors
and partnerships), or other qualifying organization. This plan has been approved
as a prototype by the IRS.

Scudder IRA: Individual Retirement Account

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

A single individual who is not an active participant in an
employer-maintained retirement plan, a simplified employee pension plan, or a
tax-deferred annuity program (a "qualified plan"), and a married individual who
is not an active participant in a qualified plan and whose spouse is also not an
active participant in a qualified plan, are eligible to make tax deductible
contributions of up to $2,000 to an IRA prior to the year such individual
attains age 70 1/2. In addition, certain individuals who are active participants
in qualified plans (or who have spouses who are active participants) are also
eligible to make tax-deductible contributions to an IRA; the annual amount, if
any, of the contribution which such an individual will be eligible to deduct
will be determined by the amount of his, her, or their adjusted gross income for
the year. Whenever the adjusted gross income limitation prohibits an individual
from contributing what would otherwise be the maximum tax-deductible
contribution he or she could make, the individual will be eligible to contribute
the difference to an IRA in the form of nondeductible contributions.

An eligible individual may contribute as much as $2,000 of qualified
income (earned income or, under certain circumstances, alimony) to an IRA each
year (up to $2,000 per individual for married couples if only one spouse has
earned income). All income and capital gains derived from IRA investments are
reinvested and compound tax-deferred until distributed. Such tax-deferred
compounding can lead to substantial retirement savings.

The table below shows how much individuals would accumulate in a fully
tax-deductible IRA by age 65 (before any distributions) if they contribute
$2,000 at the beginning of each year, assuming average annual returns of 5, 10,
and 15%. (At withdrawal, accumulations in this table will be taxable.)

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

- -------------------------------------------------------------------------
Starting Annual Rate of Return
Age of ------------------------------------------------------
Contributions 5% 10% 15%
- -------------------------------------------------------------------------
25 $253,680 $973,704 $4,091,908
35 139,522 361,887 999,914
45 69,439 126,005 235,620
55 26,414 35,062 46,699

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.)

25
<PAGE>

Value of a Non-IRA Account at
Age 65 Assuming $1,380 Annual Contributions
(post tax, $2,000 pretax) and a 31% Tax Bracket

- -------------------------------------------------------------------------
Starting Annual Rate of Return
Age of ------------------------------------------------------
Contributions 5% 10% 15%
- -------------------------------------------------------------------------
25 $119,318 $287,021 $741,431
35 73,094 136,868 267,697
45 40,166 59,821 90,764
55 16,709 20,286 24,681

Scudder Roth IRA: Individual Retirement Account

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

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

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

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

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

Scudder 403(b) Plan

Shares of the Fund may also be purchased as the underlying investment for
tax sheltered annuity plans under the provisions of Section 403(b)(7) of the
Internal Revenue Code. In general, employees of tax-exempt organizations
described in Section 501(c)(3) of the Internal Revenue Code (such as hospitals,
churches, religious, scientific, or literary organizations and educational
institutions) or a public school system are eligible to participate in a 403(b)
plan.

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

26
<PAGE>

provides for income dividends and capital gains distributions, if any, to be
reinvested in additional shares. Shares are then liquidated as necessary to
provide for withdrawal payments. Since the withdrawals are in amounts selected
by the investor and have no relationship to yield or income, payments received
cannot be considered as yield or income on the investment and the resulting
liquidations may deplete or possibly extinguish the initial investment and any
reinvested dividends and capital gains distributions. Requests for increases in
withdrawal amounts or to change the payee must be submitted in writing, signed
exactly as the account is registered, and contain signature guarantee(s) as
described under "Transaction information--Redeeming shares--Signature
guarantees" in the Fund's prospectus. Any such requests must be received by the
Fund's transfer agent ten days prior to the date of the first automatic
withdrawal. An Automatic Withdrawal Plan may be terminated at any time by the
shareholder, the [Trust or its agent on written notice, and will be terminated
when all shares of the Fund under the Plan have been liquidated or upon receipt
by the Trust of notice of death of the shareholder.

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

Group or Salary Deduction Plan

An investor may join a Group or Salary Deduction Plan where satisfactory
arrangements have been made with Scudder Investor Services, Inc. for forwarding
regular investments through a single source. The minimum annual investment is
$240 per investor which may be made in monthly, quarterly, semiannual or annual
payments. The minimum monthly deposit per investor is $20. Except for trustees
or custodian fees for certain retirement plans, at present there is no separate
charge for maintaining group or salary deduction plans; however, the Trust and
its agents reserve the right to establish a maintenance charge in the future
depending on the services required by the investor.

The Trust reserves the right, after notice has been given to the
shareholder, to redeem and close a shareholder's account in the event that the
shareholder ceases participating in the group plan prior to investment of $1,000
per individual or in the event of a redemption which occurs prior to the
accumulation of that amount or which reduces the account value to less than
$1,000 and the account value is not increased to $1,000 within a reasonable time
after notification. An investor in a plan who has not purchased shares for six
months shall be presumed to have stopped making payments under the plan.

Automatic Investment Plan

Shareholders may arrange to make periodic investments through automatic
deductions from checking accounts by completing the appropriate form and
providing the necessary documentation to establish this service. The minimum
investment is $50.

The Automatic Investment Plan involves an investment strategy called
dollar cost averaging. Dollar cost averaging is a method of investing whereby a
specific dollar amount is invested at regular intervals. By investing the same
dollar amount each period, when shares are priced low the investor will purchase
more shares than when the share price is higher. Over a period of time this
investment approach may allow the investor to reduce the average price of the
shares purchased. However, this investment approach does not assure a profit or
protect against loss. This type of regular investment program may be suitable
for various investment goals such as, but not limited to, college planning or
saving for a home.

Uniform Transfers/Gifts to Minors Act

Grandparents, parents or other donors may set up custodian accounts for
minors. The minimum initial investment is $1,000 unless the donor agrees to
continue to make regular share purchases for the account through Scudder's
Automatic Investment Plan (AIP). In this case, the minimum initial investment is
$500.

The Trust reserves the right, after notice has been given to the
shareholder and custodian, to redeem and close a shareholder's account in the
event that regular investments to the account cease before the $1,000 minimum is
reached.

27
<PAGE>

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):

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.

28
<PAGE>

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.

Quotations of the Fund's performance are historical and are not intended
to indicate future performance. An investor's shares when redeemed may be worth
more or less than their original cost. Performance of the Fund will vary based
on changes in market conditions and the level of the Fund's expenses.

Comparison of Fund Performance

A comparison of the quoted non-standard performance offered for various
investments is valid only if performance is calculated in the same manner. Since
there are different methods of calculating performance, investors should
consider the effects of the methods used to calculate performance when comparing
performance of 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.

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.

29
<PAGE>

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.

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.

30
<PAGE>

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.

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.

31
<PAGE>

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
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

32
<PAGE>

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 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. (the "Adviser"), an investment counsel
firm, acts as investment adviser to the Fund. This organization, the predecessor
of which is Scudder, Stevens & Clark, Inc., is one of the most experienced
investment counsel firms in the U. S. It was established as a partnership in
1919 and pioneered the practice of providing investment counsel to individual
clients on a fee basis. In 1928 it introduced the first no-load mutual fund to
the public. In 1953 the Adviser introduced Scudder International Fund, Inc., the
first mutual fund available in the U.S. investing internationally in securities
of issuers in several foreign countries. The predecessor firm reorganized from a
partnership to a corporation on June 28, 1985. On June 26, 1997, Scudder,
Stevens & Clark, Inc. ("Scudder") entered into an agreement with Zurich
Insurance Company ("Zurich") pursuant to which Scudder and Zurich agreed to form
an alliance. On December 31, 1997, Zurich acquired a majority interest in
Scudder, and Zurich Kemper Investments, Inc., a Zurich subsidiary, became part
of Scudder. Scudder's name has been changed to Scudder Kemper Investments, Inc.

Founded in 1872, Zurich is a multinational, public corporation organized
under the laws of Switzerland. Its home office is located at Mythenquai 2, 8002
Zurich, Switzerland. Historically, Zurich's earnings have resulted from its
operations as an insurer as well as from its ownership of its subsidiaries and
affiliated companies (the "Zurich Insurance Group"). Zurich and the Zurich
Insurance Group provide an extensive range of insurance products and services
and have branch offices and subsidiaries in more than 40 countries throughout
the world.

33
<PAGE>

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 Global High Income
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,
The Argentina Fund, Inc., The Brazil Fund, Inc., The Korea Fund, Inc., The Japan
Fund, Inc. and Scudder Spain and Portugal Fund, Inc. Some of the foregoing
companies or trusts have two or more series.

The Adviser also provides investment advisory services to the mutual funds
which comprise the AARP Investment Program from Scudder. The AARP Investment
Program from Scudder has assets over $13 billion and includes the AARP Growth
Trust, AARP Income Trust, AARP Tax Free Income Trust, AARP Managed Investment
Portfolios Trust and AARP Cash Investment Funds.

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

34
<PAGE>

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
those of other clients of the Adviser in the interest of achieving the most
favorable net results to a Fund.

The transaction between Scudder and Zurich resulted in the assignment of
the Financial Services Fund's investment management agreement with Scudder, that
agreement 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 on
September 11, 1997. 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. The Investment Management Agreements between the Health Care
Fund and the Technology Fund and the Adviser are each dated December 31, 1997
and were approved by the Trustees on December 3, 1997 and by the initial
shareholder of each Fund on January 2, 1998. 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 Trust's Trustees
on behalf of the Fund 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 Trust's 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 Trust may from time to time establish. The Adviser also
advises and assists the officers of the Trust 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.

35
<PAGE>

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 0.75%, 0.85%
and 0.85%, 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 December 31, 1998 to
maintain the total annualized expenses of each of the Financial Services Fund,
Health Care Fund and Technology Fund at no more than 1.50%, 1.75% and 1.75%,
respectively, of the average daily net assets of each Fund.

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 Agreements identify 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 Funds, 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.

36
<PAGE>

The Adviser may serve as adviser to other funds with investment objectives
and policies similar to those of the Funds that may have different distribution
arrangements or expenses, which may affect performance.

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.
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

<TABLE>
<CAPTION>
Position with
Underwriter,
Name, Age Position Scudder Investor
and Address with Trust Principal Occupation** Services, Inc.
- ----------- ---------- ---------------------- --------------

<S> <C> <C> <C>
Daniel Pierce+*(63) President and Chairman of the Board and Vice President,
Trustee Managing Director of Director and
Scudder Kemper Assistant Treasurer
Investments, Inc.

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

Sheryle J. Bolton (51) Trustee Consultant --
560 White Plains Road
Tarrytown, NY 10591

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

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

Keith R. Fox (43) Trustee President, Exeter Capital --
10 East 53rd Street Management Corporation
New York, NY 10022
</TABLE>

37
<PAGE>

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

Wilson Nolen (70) Trustee Consultant (1989 until --
1120 Fifth Avenue present); Corporate Vice
New York, NY 10128 President of Becton,
Dickinson & Company,
manufacturer of medical
and scientific products
(until June 1989)

Kathryn L. Quirk++ (44) Trustee, Vice Managing Director of Vice President
President and Scudder Kemper
Assistant Secretary Investments, Inc.

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

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

Edmund R. Swanberg++ (75) Honorary Trustee Advisory Managing --
Director of Scudder
Kemper Investments, Inc.

Peter Chin++ (55) Vice President Principal of Scudder --
Kemper Investments, Inc.

James M. Eysenbach@ (35) Vice President Vice President of Scudder --
Kemper Investments, Inc.

Philip S. Fortuna++ (39) Vice President Managing Director of --
Scudder Kemper
Investments, Inc.

Jerard K. Hartman++ (64) Vice President Managing Director of --
Scudder Kemper
Investments, Inc.

Thomas W. Joseph+ (58) Vice President Principal of Scudder Vice President,
Kemper Investments, Inc. Director, Treasurer
and Assistant Clerk
</TABLE>

38
<PAGE>

<S> <C> <C> <C>
Thomas F. McDonough+ (50) Vice President and Principal of Scudder Clerk
Secretary Kemper Investments, Inc.

Roy C. McKay++ (54) Vice President Managing Director of --
Scudder Kemper
Investments, Inc.

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

Richard W. Desmond++ (61) Assistant Vice President of Scudder Vice President
Secretary Kemper Investments, Inc.

Caroline Pearson (35) Assistant Secretary Vice President of Scudder --
Kemper Investments, Inc.
</TABLE>

* Mr. Pierce and Ms. Quirk are considered by the Funds and counsel to be
persons who are "interested persons" of the Adviser or of the Funds,
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

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

39
<PAGE>

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 14 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
Robert G. Stone, Jr., $1,272 $12,272 ** (2 funds)
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

40
<PAGE>

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 December 3,
1997.

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.

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.

41
<PAGE>

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
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

42
<PAGE>

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
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

43
<PAGE>

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.

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.

44
<PAGE>

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
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

45
<PAGE>

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, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas. Net asset value per
share is determined by dividing the value of the total assets of 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
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

46
<PAGE>

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. Coopers & Lybrand L.L.P. is
responsible for performing annual (semi-annual) audits of the financial
statements and financial highlights of the Funds in accordance with Generally
Accepted Auditing Standards, and the preparation of federal tax returns.

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 811196-50-0.

The CUSIP number of Scudder Health Care Fund is 811196-60-9.

The CUSIP number of Scudder Technology Fund is 811196-70-8.

Each Fund has a fiscal year end of August 31.

Dechert Price & Rhoads acts as counsel for the Funds.

The Funds employ State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110 as Custodian.

Costs of $27,984.26 incurred by Financial Services Fund in conjunction
with its organization are amortized over the five year period beginning November
3, 1997. Costs of $___ and $___ incurred by Health Care Fund and Technology
Fund, respectively, in conjunction with their organization are amortized over
the five-year period beginning ______, 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.

The Fund(s), or the Adviser (including any affiliate of the Adviser), or
both, may pay unaffiliated third parties for providing recordkeeping and other
administrative services with respect to accounts of participants in retirement
plans or other beneficial owners of Fund shares whose interests are held in an
omnibus account.

47
<PAGE>

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 September 25, 1997 for
Financial Services Fund and ________________ for Health Care Fund and Technology
Fund, and the Report of Independent Accountants for each Fund are filed herein.

48
<PAGE>

- --------------------------------------------------------------------------------
SCUDDER HEALTH CARE FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------

December 26,1997

Assets
Cash ............................................................. $1,200
Deferred organization expense (Note) ............................. 28,000
--------
Total assets ..................................................... 29,200
--------
Liabilities
Accrued liabilities (Note) ....................................... 28,000
--------
Total liabilities ................................................ 28,000
--------
Net Assets ......................................................... $1,200
========
Net Assets consist of:
Shares of beneficial interest .................................... 1
Additional paid-in capital ....................................... 1,199
--------
Net Assets ......................................................... $1,200
========
Net asset value, offering and redemption price per share
($1,200/100 outstanding shares of beneficial interest,
$.01 par value, unlimited number of shares authorized) ............. $12.00
========

The accompanying note is an integral part of the financial statement.

Scudder Health Care Fund (the "Fund") is 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 Investment Company
Act of 1940, as amended, (the "1940 Act"). The Trust was organized as a
Massachusetts business trust under a Declaration of Trust dated October 16,
1985. The Trust assumed the business of its predecessor on December 31, 1985.
The Trust's predecessor was organized as a Delaware corporation in February
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 Fund has equal rights with each other share of the
Fund as to voting, dividends and liquidation. The Fund has had no operations to
date other than matters relating to its organization and registration as a
non-diversified series.

Costs incurred by the Fund in connection with its organization, estimated at
$28,000, will be amortized on a straight-line basis over a five-year period
beginning at the commencement of operations of the Fund. In the event that any
of the initial shares of the Fund are redeemed during the amortization period,
the redemption proceeds will be reduced by any unamortized organization expenses
in the same proportion as the number of shares being redeemed bears to the
number of initial shares outstanding at the time of such redemption. Offering
costs, including initial registration costs, will be charged to expense during
the Fund's first year of operations.
<PAGE>

- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------

To the Trustees of Scudder Securities Trust and the Shareholder of Scudder
Health Care Fund:

We have audited the accompanying statement of assets and liabilities of Scudder
Health Care Fund as of December 26, 1997. This financial statement is the
responsibility of the Fund's management. Our responsibility is to express an
opinion on this financial statement based on our audit.

We have conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of Scudder Health Care Fund as of
December 26, 1997 in conformity with generally accepted accounting principles.

Boston, Massachusetts COOPERS & LYBRAND L.L.P.
December 29, 1997
<PAGE>

- --------------------------------------------------------------------------------
SCUDDER TECHNOLOGY FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------

December 26, 1997

The accompanying note is an integral part of the financial statement.

Scudder Technology Fund (the "Fund") is 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 Investment Company
Act of 1940, as amended, (the "1940 Act"). The Trust was organized as a
Massachusetts business trust under a Declaration of Trust dated October 16,
1985. The Trust assumed the business of its predecessor on December 31, 1985.
The Trust's predecessor was organized as a Delaware corporation in February
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 Fund has equal rights with each other share of the
Fund as to voting, dividends and liquidation. The Fund has had no operations to
date other than matters relating to its organization and registration as a
non-diversified series.

- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------

To the Trustees of Scudder Securities Trust and the Shareholder of Scudder
Technology Fund:

We have audited the accompanying statement of assets and liabilities of Scudder
Technology Fund as of December 26, 1997. This financial statement is the
responsibility of the Fund's management. Our responsibility is to express an
opinion on this financial statement based on our audit.

In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of Scudder Technology Fund as of
December 26, 1997 in conformity with generally accepted accounting principles.

Boston, Massachusetts COOPERS & LYBRAND L.L.P.
December 29, 1997
<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. 45 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 and for
the fiscal year ended August 31, 1997.
(Incorporated by reference.)

For Scudder Micro Cap Fund:

Financial highlights for the period August 12, 1996
(commencement of operations) to August 31, 1996 and for
the fiscal year ended August 31, 1997.
(Incorporated by reference.)

For Scudder 21st Century Growth Fund:

Financial highlights for the period September 9, 1996
(commencement of operations) to February 28, 1997 and
for the fiscal period ended August 31, 1997.
(Incorporated by reference.)

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
Notes to Financial Statements

Part C - Page 1
<PAGE>

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, 1997
Statement of Assets and Liabilities as of August 31,
1997
Statement of Operations for the period October 6, 1995
(commencement of operations) to August 31, 1996 and for
the fiscal year ended August 31, 1997
Statement of Changes in Net Assets for the period
October 6, 1995 (commencement of operations) to August
31, 1996 and for the fiscal year ended August 31, 1997
Financial Highlights for the period October 6, 1995
(commencement of operations) to August 31, 1996 and for
the fiscal year ended August 31, 1997
Notes to Financial Statements
(Incorporated by reference.)

For Scudder Micro Cap Fund:

Investment Portfolio as of August 31, 1997
Statement of Assets and Liabilities as of August 31,
1997
Statement of Operations for the period August 12, 1996
(commencement of operations) to August 31, 1996 and for
the fiscal year ended August 31, 1997
Statement of Changes in Net Assets for the period August
12, 1996 (commencement of operations) to August 31, 1996
and for the fiscal year ended August 31, 1997
Financial Highlights for the period August 12, 1996
(commencement of operations) to August 31, 1996 and for
the fiscal year ended August 31, 1997
Notes to Financial Statements
Report of Independent Accountants
(Incorporated by reference.)

For Scudder 21st Century Growth Fund:

Investment Portfolio as of August 31, 1997
Statement of Assets and Liabilities as of August 31,
1997
Statement of Operations for the period September 9, 1996
(commencement of operations) to February 28, 1997 and
for the fiscal year ended August 31, 1997
Statement of Changes in Net Assets for the period
September 9, 1996 (commencement of operations) to
February 28, 1997 and for the fiscal year ended August
31, 1997
Financial Highlights for the period September 9, 1996
(commencement of operations) to February 28, 1997 and
for the fiscal year ended August 31, 1997
Notes to Financial Statements
(Incorporated by reference.)

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.)

For Scudder Health Care Fund:

Statement of Assets and Liabilities as of December 26,
1997 is filed herein.

Part C - Page 2
<PAGE>

For Scudder Technology Fund:

Statement of Assets and Liabilities as of December 26,
1997 is filed herein.

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 Exhibit 1 (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.)

(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.

Part C - Page 3
<PAGE>

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.)

(c)(1) Investment Management Agreement between the
Registrant, on behalf of Scudder Small Company
Value Fund, and Scudder Kemper Investments,
Inc. dated December 31, 1997.
(Incorporated by reference to Exhibit 5(c)(1)
to Post-Effective Amendment No. 54 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.)

(d)(1) Investment Management Agreement between the
Registrant, on behalf of Scudder Micro Cap
Fund, and Scudder Kemper Investments, Inc.
dated December 31, 1997.
(Incorporated by reference to Exhibit 5(d)(1)
to Post-Effective Amendment No. 54 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
December 4, 1997 is filed herein.

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
December 4, 1997 is filed herein.

(e)(4) Investment Management Agreement between the
Registrant, on behalf of Scudder 21st Century
Growth Fund, and Scudder Kemper Investments,
Inc. dated December 31, 1997.
(Incorporated by reference to Exhibit 5(e)(4)
to Post-Effective Amendment No. 54 to the
Registration Statement.)

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.)

Part C - Page 5
<PAGE>

(a)(2) Fee schedule for Exhibit 9(a)(1).
(Incorporated by Reference to Post-Effective
Amendment No. 43 to the Registration
Statement.)

(a)(3) Service Agreement between Copeland Associates,
Inc., on behalf of Scudder Development Fund,
and Scudder Service Corporation dated June 8,
1995.
(Incorporated by reference to Exhibit 9(a)(3)
to Post-Effective Amendment No. 35 to the
Registration Statement.)

(a)(4) 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.)

Part C - Page 6
<PAGE>

(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.
(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. Consents of Independent Accountants are filed
herein.

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.)

(b)(1) Scudder IRA Custodian Disclosure Statement and
Plan Agreement.
To be filed by amendment.

(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.

Part C - Page 7
<PAGE>

16. Schedule for Computation of Performance Data.
(Incorporated by Reference to Post-Effective
Amendment No. 43 to the Registration Statement.)

17. Inapplicable.

18. Inapplicable.

Item 25. Persons Controlled by or under Common Control with Registrant

None

Item 26. Number of Holders of Securities (as of December 19, 1997).

(1) (2)
Title of Class Number of Record Shareholders
-------------- -----------------------------

Shares of beneficial interest
($.01 par value)

Scudder Development Fund 82,541
Scudder Micro Cap Fund 11,319
Scudder Small Company Value Fund 19,358
Scudder 21st Century Growth Fund 3,112
Scudder Financial Services Fund 3,615
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

Part C - Page 8
<PAGE>

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.

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

Part C - Page 9
<PAGE>

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

Stephen R. Director, Vice President, Treasurer, Chief Operating
Beckwith 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)**

Part C - Page 10
<PAGE>

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)

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. Director, Scudder, Stevens & Clark, Inc. (investment
Coughlin 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. Director, Scudder, Stevens & Clark, Inc. (investment
Hadzima adviser)**
Assistant Treasurer, Scudder Investor Services, Inc.
(broker/dealer)*

Jerard K. Director, Scudder, Stevens & Clark, Inc. (investment
Hartman 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)*

Part C - Page 11
<PAGE>

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)**
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)*

Part C - Page 12
<PAGE>

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)+++

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)*

Part C - Page 13
<PAGE>

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)*
Vice President, Director & Assistant Secretary, Scudder
Precious Metals, Inc. xxx

Cornelia M. Director, Scudder, Stevens & Clark, Inc. (investment
Small 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. Director, President & Chief Executive Officer, Scudder,
Villani 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. Director, Scudder, Stevens & Clark, Inc. (investment
Wohler adviser)**
Vice President, Montgomery Street Income Securities, Inc.
(investment company)(o)

* 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
# Societe 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.

Part C - Page 14
<PAGE>

(a) Scudder California Tax Free Trust
Scudder Cash Investment Trust
Scudder Equity Trust
Scudder Fund, Inc.
Scudder Funds Trust
Scudder Global Fund, Inc.
Scudder GNMA Fund
Scudder Institutional Fund, Inc.
Scudder International Fund, Inc.
Scudder Investment Trust
Scudder Municipal Trust
Scudder Mutual Funds, Inc.
Scudder 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)

<TABLE>
<CAPTION>
(1) (2) (3)

Name and Principal Position and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
---------------- ------------------------------- -----------------------

<S> <C> <C>
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 President None
Two International Place
Boston, MA 02110

Linda Coughlin Director and Senior Vice President None
Two International Place
Boston, MA 02110

Richard W. Desmond Vice President None
345 Park Avenue
New York, NY 10154
</TABLE>

Part C - Page 15
<PAGE>

<TABLE>
<CAPTION>
Name and Principal Position and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
---------------- ------------------------------- -----------------------

<S> <C> <C>
Paul J. Elmlinger Senior Vice President and Assistant None
345 Park Avenue Clerk
New York, NY 10154

Margaret D. Hadzima Assistant Treasurer None
Two International Place
Boston, MA 02110

Thomas W. Joseph Director, Vice President, Vice President
Two International Place Treasurer and Assistant Clerk
Boston, MA 02110

David S. Lee Director, President and Assistant Vice President
Two International Place Treasurer
Boston, MA 02110

Thomas F. McDonough Clerk Vice President and
Two International Place Secretary
Boston, MA 02110

Thomas H. O'Brien Assistant Treasurer None
345 Park Avenue
New York, NY 10154

Edward J. O'Connell Assistant Treasurer Vice President and
345 Park Avenue Assistant Treasurer
New York, NY 10154

Daniel Pierce Director, Vice President President and Trustee
Two International Place and Assistant Treasurer
Boston, MA 02110

Kathryn L. Quirk Director, Senior Vice President and Trustee, Vice President
345 Park Avenue Assistant Clerk and Assistant Secretary
New York, NY 10154

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 Thorndike Vice President None
Two International Place
Boston, MA 02110
</TABLE>

Part C - Page 16
<PAGE>

<S> <C> <C>
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
</TABLE>

The Underwriter has employees who are denominated officers of an
operational area. Such persons do not have corporation-wide
responsibilities and are not considered officers for the purpose of
this Item 29.

(c)

<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Net Underwriting Compensation on
Name of Principal Discounts and Redemptions Brokerage Other
Underwriter Commissions and Repurchases Commissions Compensation
----------- ----------- --------------- ----------- ------------

<S> <C> <C> <C> <C>
Scudder Investor None None None None
Services, Inc.
</TABLE>

Item 30. Location of Accounts and Records.

Certain accounts, books and other documents required to be
maintained by Section 31(a) of the 1940 Act and the Rules
promulgated thereunder are maintained by Scudder, Stevens & Clark,
Inc., Two International Place, Boston, MA 02110-4103. Records
relating to the duties of the Registrant's custodian are maintained
by State Street Bank and Trust Company, Heritage Drive, North
Quincy, Massachusetts. Records relating to the duties of the
Registrant's transfer agent are maintained by Scudder Service
Corporation, Two International Place, Boston, Massachusetts.

Item 31. Management Services.

Inapplicable.

Item 32. Undertakings.

The Registrant hereby undertakes to file a post-effective amendment,
using reasonably current financial statements of Scudder Small
Company Value Fund, within four to six months from the effective
date of the Registrant's Registration Statement under the 1933 Act.

The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of such Fund's latest annual
report to shareholders upon request and without change.

The Registrant hereby undertakes to call a meeting of shareholders
for the purpose of voting on the question of removal of a Trustee or
Trustees when requested to do so by the holders of at least 10% of
the Registrant's outstanding shares and in connection with such
meeting to comply with the provisions of Section 16(c) of the
Investment Company Act of 1940 relating to shareholder
communications.

Part C - Page 17
<PAGE>

The Registrant hereby undertakes, insofar as indemnification for
liability arising under the Securities Act of 1933 may be permitted
to trustees, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act, and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
trustee, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such trustee, officer or controlling person in connection with the
securities being registered, the registrant will unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submits to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy
as expressed in the Act and will be governed by the final
adjudication of such issue.

Part C - Page 18
<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 29th day of December, 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.

SIGNATURE TITLE DATE
- --------- ----- ----

/s/ Daniel Pierce
- ---------------------------
Daniel Pierce* President (Principal December 29, 1997
Executive Officer) and
Trustee

/s/ Paul Bancroft III
- ---------------------------
Paul Bancroft III* Trustee December 29, 1997

/s/ Sheryle J. Bolton
- ---------------------------
Sheryle J. Bolton* Trustee December 29, 1997

/s/ William T. Burgin
- ---------------------------
William T. Burgin* Trustee December 29, 1997

/s/ Thomas J. Devine
- ---------------------------
Thomas J. Devine* Trustee December 29, 1997

/s/ Keith R. Fox
- ---------------------------
Keith R. Fox* Trustee December 29, 1997

/s/ William H. Luers
- ---------------------------
William H. Luers* Trustee December 29, 1997

/s/ Wilson Nolen
- ---------------------------
Wilson Nolen* Trustee December 29, 1997
<PAGE>

SIGNATURE TITLE DATE
- --------- ----- ----

/s/ Kathryn L. Quirk
- ---------------------------
Kathryn L. Quirk* Trustee, Vice President December 29, 1997
and Assistant Secretary

/s/ Edward J. O'Connell
- ---------------------------
Edward J. O'Connell Vice President and December 29, 1997
Assistant Treasurer
(Principal Financial and
Accounting Officer)

*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,
Post-Effective Amendment No.
46 filed July 11, 1997 and
Post-Effective Amendment No.
53 filed October 31, 1997.

2
<PAGE>

File No. 2-36238
File No. 811-2021

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

EXHIBITS

FORM N-1A

POST-EFFECTIVE AMENDMENT NO. 55

TO REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

AND

AMENDMENT NO. 39

TO REGISTRATION STATEMENT

UNDER

THE INVESTMENT COMPANY ACT OF 1940

SCUDDER SECURITIES TRUST
<PAGE>

SCUDDER SECURITIES TRUST

EXHIBIT INDEX

Exhibit 5(e)(2)
Exhibit 5(e)(3)
Exhibit 11

Exhibit 5(e)(2)

Scudder Securities Trust
Two International Place
Boston, Massachusetts 02110

December 4, 1997

Scudder, Stevens & Clark, Inc.
345 Park Avenue
New York, New York 10154

Investment Management Agreement
Scudder Health Care Fund

Ladies and Gentlemen:

Scudder Securities Trust (the "Trust"), has been established as a
Massachusetts business Trust to engage in the business of an investment company.
Pursuant to the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees has divided the Trust's shares of
beneficial interest, par value $.01 per share, (the "Shares") into separate
series, or funds, including Scudder Health Care Fund (the "Fund"). Series may be
abolished and dissolved, and additional series established, from time to time by
action of the Trustees.

The Trust, on behalf of the Fund, has selected you to act as the sole
investment manager of the Fund and to provide certain other services, as more
fully set forth below, and you have indicated that you are willing to act as
such investment manager and to perform such services under the terms and
conditions hereinafter set forth. Accordingly, the Trust on behalf of the Fund
agrees with you as follows:

1. Delivery of Documents. The Trust engages in the business of investing
and reinvesting the assets of the Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to the Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement") filed
by the Trust under the Investment Company Act of 1940, as amended, (the "1940
Act") and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you by the Trust.
The Trust has also furnished you with copies properly certified or authenticated
of each of the following additional documents related to the Trust and the Fund:
<PAGE>

(a) The Declaration dated December 21, 1987, as amended to date.

(b) By-Laws of the Trust as in effect on the date hereof (the "By-Laws").

(c) Resolutions of the Trustees of the Trust [and the shareholders of the
Fund] selecting you as investment manager and approving the form of this
Agreement.

(d) Establishment and Designation of Series of Shares of Beneficial Interest
dated June 25, 1997 relating to the Fund.

The Trust will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements, if any, to the
foregoing, including the Prospectus, the SAI and the Registration Statement.

2. Sublicense to Use the Scudder Trademarks. As exclusive licensee of the
rights to use and sublicense the use of the "Scudder" and "Scudder, Stevens &
Clark," trademarks (together, the "Scudder Marks"), you hereby grant the Trust a
nonexclusive right and sublicense to use (i) the "Scudder" name and mark as part
of the Trust's name (the "Fund Name"), and (ii) the Scudder Marks in connection
with the Trust's investment products and services, in each case only for so long
as this Agreement, any other investment management agreement between you and the
Trust, or any extension, renewal or amendment hereof or thereof remains in
effect, and only for so long as you are a licensee of the Scudder Marks,
provided however, that you agree to use your best efforts to maintain your
license to use and sublicense the Scudder Marks. The Trust agrees that it shall
have no right to sublicense or assign rights to use the Scudder Marks, shall
acquire no interest in the Scudder Marks other than the rights granted herein,
that all of the Trust's uses of the Scudder Marks shall inure to the benefit of
Scudder Trust Company as owner and licensor of the Scudder Marks (the "Trademark
Owner"), and that the Trust shall not challenge the validity of the Scudder
Marks or the Trademark Owner's ownership thereof. The Trust further agrees that
all services and products it offers in connection with the Scudder Marks shall
meet commercially reasonable standards of quality, as may be determined by you
or the Trademark Owner from time to time, provided that you acknowledge that the
services and products the Trust rendered during the one-year period preceding
the date of this Agreement are acceptable. At your reasonable request, the Trust
shall cooperate with you and the Trademark Owner and shall execute and deliver
any and all documents necessary to maintain and protect (including but not
limited to in connection with any trademark infringement action) the Scudder
Marks and/or enter the Trust as a registered user thereof. At such time as this
Agreement or any other investment

2
<PAGE>

management agreement shall no longer be in effect between you (or your
successor) and the Trust, or you no longer are a licensee of the Scudder Marks,
the Trust shall (to the extent that, and as soon as, it lawfully can) cease to
use the Fund Name or any other name indicating that it is advised by, managed by
or otherwise connected with you (or any organization which shall have succeeded
to your business as investment manager) or the Trademark Owner. In no event
shall the Trust use the Scudder Marks or any other name or mark confusingly
similar thereto (including, but not limited to, any name or mark that includes
the name "Scudder") if this Agreement or any other investment advisory agreement
between you (or your successor) and the Fund is terminated.

3. Portfolio Management Services. As manager of the assets of the Fund,
you shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Trust's Board of
Trustees. In connection therewith, you shall use reasonable efforts to manage
the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 3, you shall
be entitled to receive and act upon advice of counsel to the Trust or counsel to
you. You shall also make available to the Trust promptly upon request all of the
Fund's investment records and ledgers as are necessary to assist the Trust to
comply with the requirements of the 1940 Act and other applicable laws. To the
extent required by law, you shall furnish to regulatory authorities having the
requisite authority any information or reports in connection with the services
provided pursuant to this Agreement which may be requested in order to ascertain
whether the operations of the Trust are being conducted in a manner consistent
with applicable laws and regulations.

You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what

3
<PAGE>

portion of the Fund's portfolio shall be invested in securities and other assets
and what portion, if any, should be held uninvested.

You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.

4. Administrative Services. In addition to the portfolio management
services specified above in section 3, you shall furnish at your expense for the
use of the Fund such office space and facilities in the United States as the
Fund may require for its reasonable needs, and you (or one or more of your
affiliates designated by you) shall render to the Trust administrative services
on behalf of the Fund necessary for operating as an open-end investment company
and not provided by persons not parties to this Agreement including, but not
limited to, preparing reports to and meeting materials for the Trust's Board of
Trustees and reports and notices to Fund shareholders; supervising, negotiating
contractual arrangements with, to the extent appropriate, and monitoring the
performance of, accounting agents, custodians, depositories, transfer agents and
pricing agents, accountants, attorneys, printers, underwriters, brokers and
dealers, insurers and other persons in any capacity deemed to be necessary or
desirable to Fund operations; preparing and making filings with the Securities
and Exchange Commission (the "SEC") and other regulatory and self-regulatory
organizations, including, but not limited to, preliminary and definitive proxy
materials, post-effective amendments to the Registration Statement, semi-annual
reports on Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act;
overseeing the tabulation of proxies by the Fund's transfer agent; assisting in
the preparation and filing of the Fund's federal, state and local tax returns;
preparing and filing the Fund's federal excise tax return pursuant to Section
4982 of the Code; providing assistance with investor and public relations
matters; monitoring the valuation of portfolio securities, the calculation of
net asset value; monitoring the registration of Shares of the Fund under
applicable federal and state securities laws; maintaining or causing to be
maintained for the Fund all books, records and reports and any other information
required under the 1940 Act, to the extent that such books, records and reports
and other information are not maintained by the Fund's custodian or other agents
of the Fund; assisting in establishing the accounting policies of the Fund;
assisting in the resolution of accounting issues that may arise with respect to
the Fund's operations and consulting with the Fund's independent accountants,
legal counsel and the Fund's other agents as necessary in connection therewith;
establishing and monitoring the Fund's operating expense budgets; reviewing the
Fund's bills; processing the payment of bills that have been approved by an
authorized person; assisting the Fund in

4
<PAGE>

determining the amount of dividends and distributions available to be paid by
the Fund to its shareholders, preparing and arranging for the printing of
dividend notices to shareholders, and providing the transfer and dividend paying
agent, the custodian, and the accounting agent with such information as is
required for such parties to effect the payment of dividends and distributions;
and otherwise assisting the Trust as it may reasonably request in the conduct of
the Fund's business, subject to the direction and control of the Trust's Board
of Trustees. Nothing in this Agreement shall be deemed to shift to you or to
diminish the obligations of any agent of the Fund or any other person not a
party to this Agreement which is obligated to provide services to the Fund.

5. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this section 5, you shall pay the compensation and expenses of all
Trustees, officers and executive employees of the Trust (including the Fund's
share of payroll taxes) who are affiliated persons of you, and you shall make
available, without expense to the Fund, the services of such of your directors,
officers and employees as may duly be elected officers of the Trust, subject to
their individual consent to serve and to any limitations imposed by law. You
shall provide at your expense the portfolio management services described in
section 3 hereof and the administrative services described in section 4 hereof.

You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 5. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out-of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent, custodians,
subcustodians, transfer agents, dividend disbursing agents and registrars;
payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; expenses of preparing share
certificates and, except as provided below in this section 5, other expenses in
connection with the issuance, offering, distribution, sale, redemption or
repurchase of securities issued by the Fund; expenses relating to investor and
public relations; expenses and fees of

5
<PAGE>

registering or qualifying Shares of the Fund for sale; interest charges, bond
premiums and other insurance expense; freight, insurance and other charges in
connection with the shipment of the Fund's portfolio securities; the
compensation and all expenses (specifically including travel expenses relating
to Trust business) of Trustees, officers and employees of the Trust who are not
affiliated persons of you; brokerage commissions or other costs of acquiring or
disposing of any portfolio securities of the Fund; expenses of printing and
distributing reports, notices and dividends to shareholders; expenses of
printing and mailing Prospectuses and SAIs of the Fund and supplements thereto;
costs of stationery; any litigation expenses; indemnification of Trustees and
officers of the Trust; costs of shareholders' and other meetings; and travel
expenses (or an appropriate portion thereof) of Trustees and officers of the
Trust who are directors, officers or employees of you to the extent that such
expenses relate to attendance at meetings of the Board of Trustees of the Trust
or any committees thereof or advisors thereto held outside of Boston,
Massachusetts or New York, New York.

You shall not be required to pay expenses of any activity which is
primarily intended to result in sales of Shares of the Fund if and to the extent
that (i) such expenses are required to be borne by a principal underwriter which
acts as the distributor of the Fund's Shares pursuant to an underwriting
agreement which provides that the underwriter shall assume some or all of such
expenses, or (ii) the Trust on behalf of the Fund shall have adopted a plan in
conformity with Rule 12b-1 under the 1940 Act providing that the Fund (or some
other party) shall assume some or all of such expenses. You shall be required to
pay such of the foregoing sales expenses as are not required to be paid by the
principal underwriter pursuant to the underwriting agreement or are not
permitted to be paid by the Fund (or some other party) pursuant to such a plan.

6. Management Fee. For all services to be rendered, payments to be made
and costs to be assumed by you as provided in sections 3, 4 and 5 hereof, the
Trust on behalf of the Fund shall pay you on the last day of each month the
unpaid balance of a fee equal to the excess of (a) 1/12 of 1 percent of the
average daily net assets as defined below of the Fund for such month; over (b)
the greater of (i) the amount by which the Fund's expenses exceed the lowest
applicable expense limitation (as more fully described below) or (ii) any
compensation waived by you from time to time (as more fully described below).
You shall be entitled to receive during any month such interim payments of your
fee hereunder as you shall request, provided that no such payment shall exceed
75 percent of the amount of your fee then accrued on the books of the Fund and
unpaid.

6
<PAGE>

The "average daily net assets" of the Fund shall mean the average of the
values placed on the Fund's net assets as of 4:00 p.m. (New York time) on each
day on which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 6, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 6.

You agree that your gross compensation for any fiscal year shall not be
greater than an amount which, when added to the other expenses of the Fund,
shall cause the aggregate expenses of the Fund to equal the maximum expenses
under the lowest applicable expense limitation established pursuant to the
statutes or regulations of any jurisdiction in which the Shares of the Fund may
be qualified for offer and sale. Except to the extent that such amount has been
reflected in reduced payments to you, you shall refund to the Fund the amount of
any payment received in excess of the limitation pursuant to this section 6 as
promptly as practicable after the end of such fiscal year, provided that you
shall not be required to pay the Fund an amount greater than the fee paid to you
in respect of such year pursuant to this Agreement. As used in this section 6,
"expenses" shall mean those expenses included in the applicable expense
limitation having the broadest specifications thereof, and "expense limitation"
means a limit on the maximum annual expenses which may be incurred by an
investment company determined (i) by multiplying a fixed percentage by the
average, or by multiplying more than one such percentage by different specified
amounts of the average, of the values of an investment company's net assets for
a fiscal year or (ii) by multiplying a fixed percentage by an investment
company's net investment income for a fiscal year. The words "lowest applicable
expense limitation" shall be construed to result in the largest reduction of
your compensation for any fiscal year of the Fund; provided, however, that
nothing in this Agreement shall limit your fees if not required by an applicable
statute or regulation referred to above in this section 6.

7
<PAGE>

You may waive all or a portion of your fees provided for hereunder and
such waiver shall be treated as a reduction in purchase price of your services.
You shall be contractually bound hereunder by the terms of any publicly
announced waiver of your fee, or any limitation of the Fund's expenses, as if
such waiver or limitation were fully set forth herein.

7. Avoidance of Inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other investments
for the account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.

Your services to the Fund pursuant to this Agreement are not to be deemed
to be exclusive and it is understood that you may render investment advice,
management and services to others. In acting under this Agreement, you shall be
an independent contractor and not an agent of the Trust.

8. Limitation of Liability of Manager. As an inducement to your
undertaking to render services pursuant to this Agreement, the Trust agrees that
you shall not be liable under this Agreement for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, provided that nothing in this Agreement
shall be deemed to protect or purport to protect you against any liability to
the Trust, the Fund or its shareholders to which you would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence in the
performance of your duties, or by reason of your reckless disregard of your
obligations and duties hereunder. Any person, even though also employed by you,
who may be or become an employee of and paid by the Fund shall be deemed, when
acting within the scope of his or her employment by the Fund, to be acting in
such employment solely for the Fund and not as your employee or agent.

9. Duration and Termination of This Agreement. This Agreement shall remain
in force until September 30, 1998, and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Trustees who are not parties
to this

8
<PAGE>

Agreement or interested persons of any party to this Agreement, cast in person
at a meeting called for the purpose of voting on such approval, and (b) by the
Trustees of the Trust, or by the vote of a majority of the outstanding voting
securities of the Fund. The aforesaid requirement that continuance of this
Agreement be "specifically approved at least annually" shall be construed in a
manner consistent with the 1940 Act and the rules and regulations thereunder.

This Agreement may be terminated with respect to the Fund at any time,
without the payment of any penalty, by the vote of a majority of the outstanding
voting securities of the Fund or by the Trust's Board of Trustees on 60 days'
written notice to you, or by you on 60 days' written notice to the Trust. This
Agreement shall terminate automatically in the event of its assignment.

10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved by the vote of a majority of the outstanding voting
securities of the Fund and by the Trust's Board of Trustees, including a
majority of the Trustees who are not parties to this Agreement or interested
persons of any party to this Agreement, cast in person at a meeting called for
the purpose of voting on such approval.

11. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "Scudder Securities
Trust" refers to the Trustees under the Declaration collectively as Trustees and
not as individuals or personally, and that no shareholder of the Fund, or
Trustee, officer, employee or agent of the Trust, shall be subject to claims
against or obligations of the Trust or of the Fund to any extent whatsoever, but
that the Trust estate only shall be liable.

You are hereby expressly put on notice of the limitation of liability as
set forth in the Declaration and you agree that the obligations assumed by the
Trust on behalf of the Fund pursuant to this Agreement shall be limited in all
cases to the Fund and its assets, and you shall not seek satisfaction of any
such obligation from the shareholders or any shareholder of the Fund or any
other series of the Trust, or from any Trustee, officer, employee or agent of
the Trust. You understand that the rights and obligations of each Fund, or
series, under the Declaration are separate and distinct from those of any and
all other series.

9
<PAGE>

12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

In interpreting the provisions of this Agreement, the definitions
contained in Section 2(a) of the 1940 Act (particularly the definitions of
"affiliated person," "assignment" and "majority of the outstanding voting
securities"), as from time to time amended, shall be applied, subject, however,
to such exemptions as may be granted by the SEC by any rule, regulation or
order.

This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code.

If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.

Yours very truly,

SCUDDER SECURITIES TRUST,

on behalf of Scudder Health Care Fund

By: /s/ Daniel Pierce
-------------------------
President

The foregoing Agreement is hereby accepted as of the date thereof.

SCUDDER, STEVENS & CLARK, INC.

By: /s/ David S. Lee
-------------------------
Managing Director

Exhibit 5(e)(3)

Scudder Securities Trust
Two International Place
Boston, Massachusetts 02110

December 4, 1997

Scudder, Stevens & Clark, Inc.
345 Park Avenue
New York, New York 10154

Investment Management Agreement
Scudder Technology Fund

Ladies and Gentlemen:

Scudder Securities Trust (the "Trust"), has been established as a
Massachusetts business Trust to engage in the business of an investment company.
Pursuant to the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees has divided the Trust's shares of
beneficial interest, par value $.01 per share, (the "Shares") into separate
series, or funds, including Scudder Technology Fund (the "Fund"). Series may be
abolished and dissolved, and additional series established, from time to time by
action of the Trustees.

(a) The Declaration dated December 21, 1987, as amended to date.

(b) By-Laws of the Trust as in effect on the date hereof (the "By-Laws").

(c) Resolutions of the Trustees of the Trust [and the shareholders of the
Fund] selecting you as investment manager and approving the form of this
Agreement.

(d) Establishment and Designation of Series of Shares of Beneficial Interest
dated June 25, 1997 relating to the Fund.

2
<PAGE>

3
<PAGE>

portion of the Fund's portfolio shall be invested in securities and other assets
and what portion, if any, should be held uninvested.

4
<PAGE>

5
<PAGE>

6
<PAGE>

7
<PAGE>

8
<PAGE>

9
<PAGE>

Yours very truly,

SCUDDER SECURITIES TRUST,

on behalf of Scudder Technology Fund

By: /s/ Daniel Pierce
------------------------
President

The foregoing Agreement is hereby accepted as of the date thereof.

SCUDDER, STEVENS & CLARK, INC.

By: /s/ David S. Lee
------------------------
Managing Director

Coopers
& Lybrand

Consent of Independent Accountants

To the Trustees of Scudder Securities Trust:

We consent to the inclusion in the Post-Effective Amendment No. 55 to the
Registration Statement of Scudder Securities Trust on Form N-1A of our reports
dated December 29, 1997 on our audits of the Statements of Assets and
Liabilities as of December 26, 1997 of Scudder Healthcare Fund and Scudder
Technology Fund.

We also consent to the reference to our Firm under the caption, "Experts."

/s/Coopers & Lybrand L.L.P.
----------------------------
Boston, Massachusetts Coopers & Lybrand L.L.P.
December 29, 1997