SCUDDER SECURITIES TRUST, 485APOS, 1998-10-30

SCUDDER SECURITIES TRUST
485APOS, 1998-10-30

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Filed electronically with the Securities and Exchange Commission
on October 30,1998.

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. 60 / X /
And/or
REGISTRATION STATEMENT UNDER THE / /
INVESTMENT COMPANY ACT OF 1940

Amendment No. 44 / X /
------

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 Kemper Investments, Inc.
--------------------------------
Two International Place, Boston MA 02110
----------------------------------------
(Name and Address of Agent for Service)

It is proposed that this filing will become effective (check appropriate box):
<TABLE>
<S> <C>

/ / Immediately upon filing pursuant to paragraph ( b ) / / days after filing pursuant to paragraph ( a ) ( 1 )
/ / days after filing pursuant to paragraph ( a ) ( 2 ) / / On ( date ) pursuant to paragraph ( b )
/ X / On December 31, 1998 pursuant to paragraph ( a ) ( 1 ) / / On ( date ) pursuant to paragraph ( a ) ( 2 ) of Rule
485.

/ / If Appropriate, check the following box:
This post-effective amendment designates a new effective date for a previously filed post-effective amendment

</TABLE>

<PAGE>

SCUDDER DEVELOPMENT FUND
CROSS-REFERENCE SHEET

Items Required By Form N-1A
---------------------------

PART A
- ------

<TABLE>
<CAPTION>
Item No. Item Caption Prospectus Caption
- -------- ------------ ------------------

<S> <C>
1. Cover Page COVER PAGE

2. Synopsis EXPENSE INFORMATION

3. Condensed Financial FINANCIAL HIGHLIGHTS
Information

4. General Description of INVESTMENT OBJECTIVE AND POLICIES
Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
FUND ORGANIZATION

5. Management of the Fund FINANCIAL HIGHLIGHTS
A MESSAGE FROM SCUDDER'S PRESIDENT
FUND ORGANIZATION--Investment adviser, Transfer agent
SHAREHOLDER BENEFITS--A team approach to investing
TRUSTEES AND OFFICERS

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

6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION--Dividends and capital gains
Securities distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax information
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder Automated Information Line, Dividend
reinvestment plan, T.D.D. service for the hearing impaired
HOW TO CONTACT SCUDDER

7. Purchase of Securities FUND ORGANIZATION--Underwriter
Being Offered PURCHASES
TRANSACTION INFORMATION--Purchasing shares, Share price, Processing time,
Minimum balances, Third party transactions
SHAREHOLDER BENEFITS--Dividend reinvestment plan
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
INVESTMENT PRODUCTS AND SERVICES

8. Redemption or Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax identification number,
Minimum balances

9. Pending Legal Proceedings NOT APPLICABLE

1
<PAGE>

SCUDDER DEVELOPMENT FUND
(continued)

PART B
- ------

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

10. Cover Page COVER PAGE

11. Table of Contents TABLE OF CONTENTS

12. General Information and FUND ORGANIZATION
History

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

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

15. Control Persons and TRUSTEES AND OFFICERS
Principal Holders of
Securities

16. Investment Advisory and INVESTMENT ADVISER
Other Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts, Other Information

17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage Commissions, Portfolio Turnover
and Other Practices

18. Capital Stock and FUND ORGANIZATION
Other Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

19. Purchase, Redemption and PURCHASES
Pricing of Securities EXCHANGES AND REDEMPTIONS
Being Offered FEATURES AND SERVICES OFFERED BY THE FUND--Dividend and Capital Gain
Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE

20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES

21. Underwriters DISTRIBUTOR

22. Calculation of Performance PERFORMANCE INFORMATION
Data

23. Financial Statements FINANCIAL STATEMENTS

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. Front and Back Cover Pages FRONT AND BACK COVER

2. Risk / Return Summary: FUND SUMMARY
Investments, Risks and PRINCIPAL STRATEGIES, INVESTMENTS AND RELATED RISKS
Performance ABOUT THE FUND

3. Risk/Return Summary: Fee EXPENSE INFORMATION
Table

4. Investment Objectives, FUND SUMMARY
Principal Investment INVESTMENT OBJECTIVES AND STRATEGIES
Strategies, and Related ABOUT THE FUND
Risks PRINCIPLE STRATEGIES AND OBJECTIVES AND RELATED RISKS

5. Management's Discussion of NOT APPLICABLE
Fund Performance

6. Management, Organization, INVESTMENT ADVISER
and Capital Structure PORTFOLIO MANAGEMENT

7. Shareholder Information ABOUT YOUR INVESTMENT
DISTRIBUTIONS

8. Distribution Arrangements DISTRIBUTIONS
EXPENSE INFORMATION

9. Financial Highlights ABOUT THE FUND
Information FINANCIAL HIGHLIGHTS

3
<PAGE>

SCUDDER SMALL COMPANY VALUE FUND
(continued)

PART B
- ------

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

10. Cover Page and Table of COVER PAGE
Contents TABLE OF CONTENTS

11. Fund History FUND ORGANIZATION

12. Description of the Fund THE FUNDS INVESTMENT OBJECTIVE AND POLICIES
and Its Investments and
Risks.

13. Management of the Fund REMUNERATION
TRUSTEES AND OFFICERS

14. Control Persons and TRUSTEES AND OFFICERS
Principal Holders of
Securities

15. Investment Advisory and INVESTMENT ADVISER
Other Services DISTRIBUTOR
ADDITIONAL INFORMATION- Experts, Other Information

16. Brokerage Allocation PORTFOLIO TRANSACTIONS
and Other Practices BROKERAGE COMMISSIONS
PORTFOLIO TURNOVER

17. Capital Stock and FUND ORGANIZATION
Other Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

18. Purchase, Redemption and PURCHASES
Pricing of Shares. EXCHANGES AND REDEMPTIONS
FEATURES AND SERVICES OFFERED BY THE FUND--Dividend and Capital Gain
Distribution Options
NET ASSET VALUE

19. Taxation of the Fund. TAXES

20. Underwriters. DISTRIBUTOR

21. Calculation of Performance PERFORMANCE INFORMATION
Data.

22. Financial Statements. FINANCIAL STATEMENTS

4
<PAGE>

SCUDDER MICRO CAP FUND
CROSS-REFERENCE SHEET

Items Required By Form N-1A
---------------------------

PART A
- ------

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

1. Front and Back Cover Pages. FRONT AND BACK COVER

2. Risk / Return Summary: FUND SUMMARY
Investments, Risks and PRINCIPAL STRATEGIES, INVESTMENTS AND RELATED RISKS
Performance. ABOUT THE FUND

3. Risk/Return Summary: Fee EXPENSE INFORMATION
Table

4. Investment Objectives, FUND SUMMARY
Principal Investment INVESTMENT OBJECTIVES AND STRATEGIES
Strategies, and Related ABOUT THE FUND
Risks. PRINCIPLE STRATEGIES AND OBJECTIVES AND RELATED RISKS

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

6. Management, Organization, INVESTMENT ADVISER
and Capital Structure. PORTFOLIO MANAGEMENT

7. Shareholder Information. ABOUT YOUR INVESTMENT
DISTRIBUTIONS

8. Distribution Arrangements. DISTRIBUTIONS
EXPENSE INFORMATION

9. Financial Highlights ABOUT THE FUND
Information. FINANCIAL HIGHLIGHTS

5
<PAGE>

SCUDDER MICRO CAP FUND
(continued)

PART B
- ------

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

10. Cover Page and Table of COVER PAGE
Contents TABLE OF CONTENTS

11. Fund History FUND ORGANIZATION

12. Description of the Fund THE FUNDS INVESTMENT OBJECTIVE AND POLICIES
and Its Investments and
Risks.

13. Management of the Fund REMUNERATION
TRUSTEES AND OFFICERS

14. Control Persons and TRUSTEES AND OFFICERS
Principal Holders of
Securities

15. Investment Advisory and INVESTMENT ADVISER
Other Services DISTRIBUTOR
ADDITIONAL INFORMATION- Experts, Other Information

16. Brokerage Allocation PORTFOLIO TRANSACTIONS
and Other Practices BROKERAGE COMMISSIONS
PORTFOLIO TURNOVER

17. Capital Stock and FUND ORGANIZATION
Other Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

18. Purchase, Redemption and PURCHASES
Pricing of Shares. EXCHANGES AND REDEMPTIONS
FEATURES AND SERVICES OFFERED BY THE FUND--Dividend and Capital Gain
Distribution Options
NET ASSET VALUE

19. Taxation of the Fund. TAXES

20. Underwriters. DISTRIBUTOR

21. Calculation of Performance PERFORMANCE INFORMATION
Data.

22. Financial Statements. FINANCIAL STATEMENTS

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. Front and Back Cover Pages. FRONT AND BACK COVER

2. Risk / Return Summary: FUND SUMMARY
Investments, Risks and PRINCIPAL STRATEGIES, INVESTMENTS AND RELATED RISKS
Performance. ABOUT THE FUND

3. Risk/Return Summary: Fee EXPENSE INFORMATION
Table

4. Investment Objectives, FUND SUMMARY
Principal Investment INVESTMENT OBJECTIVES AND STRATEGIES
Strategies, and Related ABOUT THE FUND
Risks. PRINCIPLE STRATEGIES AND OBJECTIVES AND RELATED RISKS

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

6. Management, Organization, INVESTMENT ADVISER
and Capital Structure. PORTFOLIO MANAGEMENT

7. Shareholder Information. ABOUT YOUR INVESTMENT
DISTRIBUTIONS

8. Distribution Arrangements. DISTRIBUTIONS
EXPENSE INFORMATION

9. Financial Highlights ABOUT THE FUND
Information. FINANCIAL HIGHLIGHTS

7
<PAGE>

SCUDDER 21ST CENTURY GROWTH FUND
(continued)

PART B
- ------

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

10. Cover Page and Table of COVER PAGE
Contents TABLE OF CONTENTS

11. Fund History FUND ORGANIZATION

12. Description of the Fund THE FUNDS INVESTMENT OBJECTIVE AND POLICIES
and Its Investments and
Risks.

13. Management of the Fund REMUNERATION
TRUSTEES AND OFFICERS

14. Control Persons and TRUSTEES AND OFFICERS
Principal Holders of
Securities

15. Investment Advisory and INVESTMENT ADVISER
Other Services DISTRIBUTOR
ADDITIONAL INFORMATION- Experts, Other Information

16. Brokerage Allocation PORTFOLIO TRANSACTIONS
and Other Practices BROKERAGE COMMISSIONS
PORTFOLIO TURNOVER

17. Capital Stock and FUND ORGANIZATION
Other Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

18. Purchase, Redemption and PURCHASES
Pricing of Shares. EXCHANGES AND REDEMPTIONS
FEATURES AND SERVICES OFFERED BY THE FUND--Dividend and Capital Gain
Distribution Options
NET ASSET VALUE

19. Taxation of the Fund. TAXES

20. Underwriters. DISTRIBUTOR

21. Calculation of Performance PERFORMANCE INFORMATION
Data.

22. Financial Statements. FINANCIAL STATEMENTS

8
<PAGE>

SCUDDER FINANCIAL SERVICES FUND
CROSS-REFERENCE SHEET

Items Required By Form N-1A
---------------------------

PART A
- ------

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

1. Cover Page COVER PAGE

2. Synopsis EXPENSE INFORMATION

3. Condensed Financial NOT APPLICABLE
Information

4. General Description of INVESTMENT OBJECTIVE AND POLICIES
Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
FUND ORGANIZATION

5. Management of the Fund A MESSAGE FROM SCUDDER'S CHAIRMAN
FUND ORGANIZATION--Investment adviser, Transfer agent
SHAREHOLDER BENEFITS--A team approach to investing
TRUSTEES AND OFFICERS

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

8. Redemption or Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax identification number,
Minimum balances

9. Pending Legal Proceedings NOT APPLICABLE

9
<PAGE>

SCUDDER FINANCIAL SERVICES FUND
(continued)

PART B
- ------

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

10. Cover Page COVER PAGE

11. Table of Contents TABLE OF CONTENTS

12. General Information and FUND ORGANIZATION
History

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

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

15. Control Persons and TRUSTEES AND OFFICERS
Principal Holders of
Securities

16. Investment Advisory and INVESTMENT ADVISER
Other Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts, Other Information

17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage Commissions, Portfolio Turnover
and Other Practices

18. Capital Stock and FUND ORGANIZATION
Other Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES

21. Underwriters DISTRIBUTOR

22. Calculation of Performance PERFORMANCE INFORMATION
Data

23. Financial Statements FINANCIAL STATEMENTS

10
<PAGE>

SCUDDER HEALTH CARE FUND
CROSS-REFERENCE SHEET

Items Required By Form N-1A
---------------------------

PART A
- ------

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

1. Cover Page COVER PAGE

2. Synopsis EXPENSE INFORMATION

3. Condensed Financial NOT APPLICABLE
Information

4. General Description of INVESTMENT OBJECTIVE AND POLICIES
Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
FUND ORGANIZATION

5. Management of the Fund A MESSAGE FROM SCUDDER'S CHAIRMAN
FUND ORGANIZATION--Investment adviser, Transfer agent
SHAREHOLDER BENEFITS--A team approach to investing
TRUSTEES AND OFFICERS

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

8. Redemption or Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax identification number,
Minimum balances

9. Pending Legal Proceedings NOT APPLICABLE

11
<PAGE>

SCUDDER HEALTH CARE FUND
(continued)

PART B
- ------

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

10. Cover Page COVER PAGE

11. Table of Contents TABLE OF CONTENTS

12. General Information and FUND ORGANIZATION
History

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

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

15. Control Persons and TRUSTEES AND OFFICERS
Principal Holders of
Securities

16. Investment Advisory and INVESTMENT ADVISER
Other Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts, Other Information

17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage Commissions, Portfolio Turnover
and Other Practices

18. Capital Stock and FUND ORGANIZATION
Other Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES

21. Underwriters DISTRIBUTOR

22. Calculation of Performance PERFORMANCE INFORMATION
Data

23. Financial Statements FINANCIAL STATEMENTS

12
<PAGE>

SCUDDER TECHNOLOGY FUND
CROSS-REFERENCE SHEET

Items Required By Form N-1A
---------------------------

PART A
- ------

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

1. Cover Page COVER PAGE

2. Synopsis EXPENSE INFORMATION

3. Condensed Financial NOT APPLICABLE
Information

4. General Description of INVESTMENT OBJECTIVE AND POLICIES
Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
FUND ORGANIZATION

5. Management of the Fund A MESSAGE FROM SCUDDER'S CHAIRMAN
FUND ORGANIZATION--Investment adviser, Transfer agent
SHAREHOLDER BENEFITS--A team approach to investing
TRUSTEES AND OFFICERS

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

8. Redemption or Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax identification number,
Minimum balances

9. Pending Legal Proceedings NOT APPLICABLE

13
<PAGE>

SCUDDER TECHNOLOGY FUND
(continued)

PART B
- ------

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

10. Cover Page COVER PAGE

11. Table of Contents TABLE OF CONTENTS

12. General Information and FUND ORGANIZATION
History

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

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

15. Control Persons and TRUSTEES AND OFFICERS
Principal Holders of
Securities

16. Investment Advisory and INVESTMENT ADVISER
Other Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts, Other Information

17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage Commissions, Portfolio Turnover
and Other Practices

18. Capital Stock and FUND ORGANIZATION
Other Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS

20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES

21. Underwriters DISTRIBUTOR

22. Calculation of Performance PERFORMANCE INFORMATION
Data

23. Financial Statements FINANCIAL STATEMENTS
</TABLE>

14
<PAGE>

The Securities and Exchange Commission is not responsible for the accuracy or
completeness of the information in any prospectus, and gives no opinion as to
the merit of any mutual fund as an investment.

SCUDDER SMALL COMPANY VALUE FUND

PROSPECTUS
JANUARY 1, 1999

Seeking to increase your capital over the long term by investing primarily in
undervalued stocks of small U.S. companies.

Mutual funds:
o are not FDIC-insured
o have no bank guarantees
o may lose value

- -------------------------
No Sales Charges
- -------------------------
PURE NO-LOAD(TM)
- -------------------------

<PAGE>

CONTENTS

FUND SUMMARY.........................................................3
An overview of the fund's goal and strategy, main risks,
performance and expenses
ABOUT THE FUND.......................................................6
Additional information that you should know about the fund
PRINCIPAL STRATEGIES, INVESTMENTS AND RELATED RISKS................6
INVESTMENT ADVISER.................................................9
DISTRIBUTIONS.....................................................10
FINANCIAL HIGHLIGHTS..............................................12
ABOUT YOUR INVESTMENT...............................................13
Information about managing your fund account
TRANSACTION INFORMATION...........................................13
BUYING AND SELLING SHARES.........................................15
PURCHASES.........................................................15
EXCHANGES AND REDEMPTIONS.........................................16
INVESTMENT PRODUCTS AND SERVICES..................................17

2
<PAGE>

FUND SUMMARY

INVESTMENT OBJECTIVES AND STRATEGIES

Scudder Small Company Value Fund pursues long-term growth of capital by seeking
out undervalued stocks of small U.S. companies. The fund normally invests at
least 90% of its assets in common stocks of companies that are similar in size
to those included in the Russell 2000 index--a widely used benchmark of small
stock performance. Typically, these companies have a stock market value of less
than $1.5 billion.

The fund is designed to capture the long term growth potential of small company
stocks while reducing the downside risk typically associated with investing in
these securities. The fund utilizes a disciplined strategy in pursuing this
goal. This strategy attempts to uncover small company stocks that are
undervalued but appear to be on the rise, while controlling the overall risk of
the fund. These stocks are often out of favor or simply overlooked by investors,
and thus their stock prices may not accurately reflect their long-term business
potential. Accordingly, the prices of these stocks may rise dramatically as
business fundamentals improve and these companies become more widely known. In
addition, the fund attempts to manage its risk exposure by, among other things,
investing in over one hundred small companies across a broad range of U.S.
industries. This fund may be appropriate for the aggressive portion of an
investor's portfolio. It should not be viewed as a complete investment program.

PRINCIPAL RISKS

The principal risks of investing in the fund are stock market risk and, more
specifically, the risks associated with investing in small company stocks. In
pursuit of higher investment returns, this fund may incur greater risks and more
dramatic fluctuations in value than stocks of larger companies. Therefore, this
fund is suitable for long-term investors that have a high degree of risk
tolerance.

As with all investments in the stock market, the value of your
investment will fluctuate, and your shares, when sold, could be worth less than
what you paid for them. Declines in the overall stock market and the
underperformance of the fund's securities in comparison to other types of
securities are some of the factors that may reduce the value of your investment.
In addition, the portfolio management team's strategy and skill in choosing
appropriate investments for the fund will determine in large part the fund's
ability to achieve its objective.

Investing in small company stocks entails more risk than investing in larger
companies. The inherent business characteristics and risks of small companies
include such things as untested management, less diversified product lines and
weaker financial positions. Also, small companies tend to have less predictable
earnings and less liquid securities than more established companies. As a result
of these factors, the

3
<PAGE>

fund is likely to experience greater share-price volatility than a fund that
invests in larger stocks.

PAST PERFORMANCE

The chart and table below illustrate how the fund has performed, and compare
this information to a broad measure of market performance. Of course, past
performance is not necessarily an indication of future performance.

Total return for year ended December 31 [Bar Graphics To Be Inserted]

- ------------------------
Total
Return: 23.84 37.01
- ------------------------
Year: 1996 1997
- ------------------------
For the years included in the bar chart, the fund's highest return for a
calendar quarter was 17.56% (the second quarter of 1997), and the fund's lowest
return for a calendar quarter was -.31% (the fourth quarter of 1997).

The fund's year-to-date total return as of 9/30/98 was -12.39.

- --------------------------------------------------------------------------------
Average annual total returns
- --------------------------------------------------------------------------------

For periods ended Russell 2000 Russell 2000 Lipper Small
December 31, 1997 Fund Value Index Index Cap Funds
- --------------------------------------------------------------------------------
One Year 37.01% 31.70% 22.36% 20.75
- --------------------------------------------------------------------------------
Since Inception (10/6/95) 29.21% 28.17% 7.96% N/A
- --------------------------------------------------------------------------------

The Russell 2000 Index is an unmanaged capitalization-weighted measure of
approximately 2000 small U.S. stocks. The Russell 2000 Value Index measures the
performance of those Russell 2000 companies with lower price-to-book ratios and
lower forecasted growth rates.

Lipper Analytical Services, Inc. (Lipper) issues a weekly publication of
industry-wide mutual fund averages by type of fund.

Index returns assume reinvestment of dividends and, unlike fund returns, do not
reflect any fees or expenses.

4
<PAGE>

EXPENSE INFORMATION

Scudder Family of Funds pure no-load(TM) fund

This information is designed to help you understand the costs of investing in
the fund. With Scudder's pure no-load(TM) funds, you pay no charges 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.

-------------------------------------------------------------------------------
Shareholder Fees: Fees charged directly to your account in the fund
for various transactions.
- --------------------------------------------------------------------------------
Charges to purchase shares (sales load) NONE
- --------------------------------------------------------------------------------
Deferred charges on purchase of shares NONE
- --------------------------------------------------------------------------------
Charges to reinvest dividends NONE
- --------------------------------------------------------------------------------
Fees to redeem shares 1.00%*
- --------------------------------------------------------------------------------
Fees to exchange shares 1.00%*
- --------------------------------------------------------------------------------
Annual fund operating expenses: Expenses paid by the fund before it distributes
its net investment income. These are expressed as a percentage of the fund's
average daily net assets for the year ended August 31, 1998.
- --------------------------------------------------------------------------------
Investment management fee x.xx%
- --------------------------------------------------------------------------------
Distribution (12b-1) fees NONE
- --------------------------------------------------------------------------------
Other expenses x.xx%
- --------------------------------------------------------------------------------
Total fund operating expenses x.xx%
- --------------------------------------------------------------------------------

* There is a 1% fee retained by the Fund which is imposed only on redemptions
or exchanges of shares held less than one year. You may redeem by writing or
calling the Fund. If you wish to receive your redemption proceeds via wire,
there is a $5 wire service fee. For additional information, please refer to
"Transaction information -- Exchanges or Redemptions."

Example

This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the expenses shown above. It
assumes a 5% annual return, the reinvestment of all dividends and distributions
and "annual fund operating expenses" remaining the same each year. Investors do
not pay these expenses directly; they are paid by the fund before it distributes
its net investment income to shareholders. The expenses would be the same
whether you sold your shares at the end of each period or continued to hold
them.

- --------------------------------------------------------------------------------
One Year $___
- --------------------------------------------------------------------------------
Three Years $___
- --------------------------------------------------------------------------------
Five Years $___
- --------------------------------------------------------------------------------
Ten Years $___
- --------------------------------------------------------------------------------

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.

5
<PAGE>

ABOUT THE FUND

PRINCIPAL STRATEGIES, INVESTMENTS AND RELATED RISKS

Principal strategies and investments

The fund attempts to achieve its objective by investing predominantly in U.S.
small company stocks. The fund's portfolio management team follows a highly
disciplined strategy that focuses on selecting stocks using a value style of
investing while attempting to manage the overall risks of the fund.

Highly Disciplined Strategy. The fund uses a proprietary computer model to
assess the thousands of stocks that comprise the small company sector. In
particular, this model searches for companies that appear to be undervalued
relative to the Russell 2000 index and have favorable trends in areas such as
earnings growth rates and stock price momentum. A company's valuation is
measured by comparing its stock price to its business fundamentals, such as
sales, cash flow and earnings. The higher the valuation, the more "expensive"
the stock. In addition, the fund also looks for companies with business
momentum, or a catalyst, that may trigger a price increase going forward. The
fund's portfolio management team then proceeds to further analyze the most
promising stocks and select the stocks they believe will enhance the overall
diversification of the fund, and enable the fund to meet its objective.

Similarly, the fund is also committed to using a disciplined approach in
deciding when to sell a stock. A stock is typically sold when it reaches the
portfolio management's team target price or if its business fundamentals
deteriorate.

Value Style Investing. The fund's portfolio management team uses a
value-oriented approach to selecting small company stocks--that is, they look
for stocks that appear to be undervalued. A stock is undervalued if its stock
price does not reflect its potential worth.

Stocks trade at a discount for many reasons. Typically, these companies, or
their industries, have fallen out of favor, or are not closely followed by
investors, and thus their stock prices do not adequately reflect their true
value. As the business fundamentals of a small company improve, its stock price
may rise significantly. For example, stock prices are often affected when a
company's earnings exceed general expectations or when investors begin to
appreciate the full extent of a company's business potential.

Managing Overall Risk. Managing the risk exposure of the fund is an important
component of the fund's investment strategy. The fund attempts to control its
risk at both the security and the portfolio level. At the security level, the
fund's systematic approach to selecting undervalued stocks is designed to reduce
the volatility of the individual stocks held by the fund. In addition, the
portfolio management team attempts to control the fund's risk exposure by
building a diversified portfolio that consists of over 150 small company stocks,
representing a broad cross-section of U.S.

6
<PAGE>

industries. Typically, the fund limits its investment in a particular security
to no more than 2% of the fund's assets.

The fund also uses risk management software to assess the expected volatility of
its portfolio and the impact of different trading decisions on the fund's risk
level. Although the fund cannot eliminate the above-average risks of investing
in small company stocks, this risk management strategy may enable the fund to be
less volatile than the small company sector of the U.S. stock market.

Of course, there can be no guarantee that, by following these investment
strategies, the fund will achieve its objective.

From time to time, the fund may invest, without limit, in cash and cash
equivalents for temporary defensive purposes. Because this defensive policy
differs from the fund's investment objective, the fund may not achieve its goal
during a defensive period.

Except as otherwise indicated, the fund's investment objective and policies may
be changed without a vote of shareholders.

More information about investments and strategies of the fund is provided in the
Statement of Additional Information.

RELATED RISKS

Small Company Risk. While small company stocks have historically outperformed
large company stocks, they also have been subject to greater investment risk.
The special risks generally associated with small companies include limited
product lines, markets and financial resources, lack of management depth or
experience, dependency on key personnel and vulnerability to adverse market and
economic developments. Accordingly, the prices of small company stocks tend to
be more volatile than prices of large company stocks. Further, the prices of
small company stocks are often adversely affected by limited trading volumes and
the lack of publicly available information.

Because small companies normally have fewer shares outstanding and these shares
trade less frequently than large companies, it may be more difficult for the
fund to buy and sell significant amounts of small company shares without having
an unfavorable impact on the stock market price. In addition, this may cause the
fund to discount the price at which it sells a security or dispose of an
investment over a long period of time.

Equity Investing Risk. An investment in the common stock of a company represents
a proportionate ownership interest in that company. Therefore, the fund
participates in the success or failure of any company in which it holds stock.
Compared to other classes of financial assets, such as bonds or cash
equivalents, common stocks have historically offered a greater potential for
gain on your investment. However, the market value of common stocks can
fluctuate significantly, reflecting such things as the business performance of
the issuing company, investors' perceptions of the

7
<PAGE>

company or the overall stock market and general economic or financial market
movements. Smaller companies are especially sensitive to these factors and may
even become valueless.

Value Investing Risk. The determination that a stock is undervalued is
subjective; the market may not agree, and a stock's price may not rise to what
the portfolio management team believes is its full value. It may even decrease
in value. However, because of the fund's focus on undervalued stocks, the fund's
downside risk may be less than other small company stocks since value stocks are
in theory already underpriced.

Inflation Risk. There is a possibility that the rising prices of goods and
services may have the effect of offsetting a fund's real return.

A MESSAGE FROM THE PRESIDENT

Scudder Kemper Investments, Inc., investment adviser to the Scudder Family of
Funds, is one of the largest and most experienced investment management
organizations worldwide. We are one of the ten largest mutual fund companies in
the U.S., managing more than $230 billion in assets globally for mutual fund
investors, retirement and pension plans, institutional and corporate clients,
and private family and individual accounts.

We offered America's first no-load mutual fund in 1928, and today the Scudder
Family of Funds includes over 50 no-load mutual fund portfolios or classes of
shares. We also manage 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: IRAs, 401(k)s,
Keoghs and other retirement plans are also available.

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

The Scudder Family of Funds is offered without charges to purchase or redeem
shares or to exchange from one fund to another. There are no distribution
(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.

8
<PAGE>

INVESTMENT ADVISER

The fund retains the investment management firm of Scudder Kemper Investments,
Inc. (the "Adviser"), 345 Park Avenue, New York, NY, to manage the fund's daily
investment and business affairs subject to the policies established by the Board
of Trustees. The Adviser actively manages your investment in the fund.
Professional management can be an important advantage for investors who do not
have the time or expertise to invest directly in individual securities.

The fund pays the Adviser an annual fee of 0.75% of the fund's average daily net
assets.

From September 1, 1997 until December 31, 1997, the Adviser agreed to maintain
the annualized expenses of the fund at no more than 1.50% of the average daily
net assets of the fund. As a result of this waiver, the Adviser received an
investment management fee of _____% of the fund's average daily net assets for
the fiscal year ended August 31, 1998.

The fund is managed by a team of investment professionals who each play an
important role in the fund's management process. Team members work together to
develop investment strategies and select securities for the fund's portfolio.
They are supported by the Adviser's large staff of economists, research
analysts, traders and other investment specialists who work in the Adviser's
offices across the United States and abroad. The Adviser believes its team
approach benefits fund investors by bringing together many disciplines and
leveraging its extensive resources.

PORTFOLIO MANAGEMENT

The following investment professionals are associated with the fund as
indicated:
- --------------------------------------------------------------------------------
Name and Title Joined the Fund Responsibilities and Background
- --------------------------------------------------------------------------------
Philip S. Fortuna 1996 Mr. Fortuna, who joined the
Co-Lead Manager Adviser in 1986 as a manager of
institutional equity accounts, has
oversight of the fund's day-to-day
management and investment strategies. In
addition to his portfolio management
responsibilities, Mr. Fortuna is currently
director of the Adviser's quantitative
group.
- --------------------------------------------------------------------------------
James M. Eysenbach 1996 Mr. Eysenbach, who joined the
Co-Lead Manager Adviser in 1991 as a senior
quantitative analyst, assists
with the fund's day-to-day
management and investment
strategies. Mr. Eysenbach has
more than 11 years investment
management experience,
specializing in quantitative
research, analysis and portfolio
management.
- --------------------------------------------------------------------------------

9
<PAGE>

- --------------------------------------------------------------------------------
Calvin S. Young 1998 Mr. Young joined the Adviser in
Manager 1990 as a quantitative analyst.
Since 1995 he has been providing analytical
support for the Adviser's quantitative
equity products. Mr. Young has more than
nine years of investment industry
experience, with a special focus on small
companies.
- --------------------------------------------------------------------------------

YEAR 2000 ISSUE

Like other mutual funds and financial and business organizations worldwide, the
fund could be adversely affected if computer systems on which the fund relies,
which primarily include those used by the Adviser, its affiliates or other
service providers, are unable to correctly process date-related information on
and after January 1, 2000. The risk is commonly called the Year 2000 issue.
Failure to successfully address the Year 2000 issue could result in
interruptions to and other material adverse effects on the fund's business and
operations. The Adviser has commenced a review of the Year 2000 issue as it may
affect the fund and is taking steps it believes are reasonably designed to
address the Year 2000 issue, although there can be no assurances that these
steps will be sufficient. In addition, there can be no assurances that the Year
2000 issue will not have an adverse effect on the companies whose securities are
held by the fund or on global markets or economies generally.

DISTRIBUTIONS

Dividends and capital gains distributions

The fund intends to distribute dividends from its net investment income
annually, in November or December. The fund intends to distribute net realized
capital gains after utilization of capital loss carryforwards, if any, in
November or December. An additional distribution may be made at a later date, if
necessary.

Any dividends or capital gains distributions declared in October, November or
December with a record date in such month and paid during the following January
will be treated by shareholders for federal income tax purposes as if received
on December 31 of the calendar year declared.

A shareholder may choose to 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. Distributions are generally taxable,
whether received in cash or reinvested. Exchanges among funds are also taxable
events.

10
<PAGE>

TAXES

Generally, dividends from net investment income are taxable to shareholders as
ordinary income. Long-term capital gains distributions, if any, are taxable to
individual shareholders at a maximum 20% or 28% capital gains rate (depending on
the fund's holding period for the assets giving rise to the gain), regardless of
the length of time shareholders have owned shares. Short-term capital gains and
any other taxable income distributions are taxable as ordinary income. A portion
of dividends from ordinary income may qualify for the dividends-received
deduction for corporations.

Unless your investment is in a tax-deferred account, you may want to avoid
investing a large amount close to the date of a fund's distribution, because you
may receive part of your investment back as a taxable distribution.

The fund sends detailed tax information to its shareholders about the amount and
type of its distributions by January 31 of the following year.

11
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the fund's
financial performance for the fiscal periods indicated. The total returns
figures represent the rate that an investor would have earned (or lost) on an
investment in the fund assuming reinvestment of all dividends and distributions.
This information has been audited by PricewaterhouseCoopers LLP whose report,
along with the fund's financial statements, is included in the annual report,
which is available upon request (see back cover).

[TO BE UPDATED]
-------------------------------------------------------------------------------
For the Period
Year October 6, 1995
Ended (commencement
August of operations) to
31, August 31,
Per-share data 1997 1996
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
Net asset value, beginning of period $13.57 $12.00
-------------------------------------------------------------------------------
Income from investment operations:
-------------------------------------------------------------------------------
Net investment income .01 .07
-------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investment transactions 6.03 1.53
-------------------------------------------------------------------------------
Total from investment operations 6.04 1.60
-------------------------------------------------------------------------------
Less distributions:
-------------------------------------------------------------------------------
From net investment income (.03) (.05)
-------------------------------------------------------------------------------
From net realized gains on investment (.01) --
transactions
-------------------------------------------------------------------------------
Total distributions (.04) (.05)
-------------------------------------------------------------------------------
Redemption fees .01 .02
-------------------------------------------------------------------------------
Net asset value, end of period $19.58 $13.57
-------------------------------------------------------------------------------
Total Return (%) 44.67(b) 13.54(b)(c)**
-------------------------------------------------------------------------------
Ratios and Supplemental Data
-------------------------------------------------------------------------------
Net assets, end of period ($ millions) 123 41
-------------------------------------------------------------------------------
Ratio of operating expenses, net to
average daily net assets (%) 1.50 1.50*
-------------------------------------------------------------------------------
Ratio of operating expenses before
expense reductions, to average daily 1.63 2.61*
net assets (%)
-------------------------------------------------------------------------------
Ratio of net investment income to average
daily net assets (%) .07 .67*
-------------------------------------------------------------------------------
Portfolio turnover rate (%) 43.6 34.0*
-------------------------------------------------------------------------------

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

12
<PAGE>

ABOUT YOUR INVESTMENT

TRANSACTION INFORMATION

Share price

Scudder Fund Accounting Corporation determines the net asset value per share of
the fund as of the close of regular trading on the New York Stock Exchange (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.
Market prices are used to determine the value of the fund's assets, but when no
reliable market quotations are available, the fund may use valuation procedures
established by its Board of Trustees.

Redemption fee

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 fund for the benefit of the remaining shareholders. The fee is waived for
all shares purchased through certain Scudder retirement plans, including 401(k)
plans, 403(b) plans, 457 plans, Keogh accounts, and Profit Sharing and Money
Purchase Pension Plans. 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. The fund
reserves the right to modify the terms of or terminate this fee at any time.

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

The fee is applied to the shares being redeemed or exchanged in the order in
which they were purchased.

Processing time

All purchase and redemption requests received in good order at the fund's
transfer agent by the close of regular trading on the Exchange are executed at
the net asset value per share calculated at the close of trading that day. All
other requests that are in good order will be executed the following business
day.

Signature guarantees

13
<PAGE>

following the redemption request, but may take up to seven business days (or
longer in the case of shares recently purchased by check).

Purchase restrictions

Purchases and sales should be made for long-term investment purposes only. The
fund and Scudder Investor Services, Inc. each reserves the right to reject
purchases of fund shares (including exchanges) for any reason including when
there is evidence of a pattern of frequent purchases and sales made in response
to short-term fluctuations in the fund's share price.

Minimum balances

Generally, shareholders who maintain a non-fiduciary account balance of less
than $2,500 in the fund and have not established an automatic investment plan
will be assessed an annual $10.00 per fund charge; this fee is paid to the fund.
The fund reserves the right, following 60 days written notice to shareholders,
to redeem all shares in accounts that have a value below $1,000 where such a
reduction in value has occurred due to a redemption, exchange or transfer out of
the account.

Third party transactions

If you buy and sell shares of the fund through a member of the National
Association of Securities Dealers, Inc. (other than Scudder Investor Services,
Inc.), that member may charge a fee for that service.

Redemption-in-kind

The fund reserves the right to honor requests for redemption or repurchase
orders by making payment in whole or in part in readily marketable securities
("redemption in kind"). These securities will be chosen by the fund and valued
as they are for purposes of computing the fund's net asset value. A shareholder
may incur transaction expenses in converting these securities to cash.

14
<PAGE>

BUYING AND SELLING SHARES

Please refer to the following charts for information on how to buy and sell fund
shares. Additional information, including special investment features, may be
found in the Shareholder Services Guide. For information about No-Fee IRAs, Roth
IRAs and other retirement options, call Scudder Investor Relations at
1-800-225-2470. For information on establishing 401(k) and 403(b) plans, call
Scudder Defined Contribution Services at 1-800-323-6105.

PURCHASES

To open an account

The minimum initial investment is $2,500; $1,000 for IRAs. Group retirement
plans (401(k), 403(b), etc.) have similar or lower minimums--see appropriate
plan literature. Make checks payable to "The Scudder Funds."
- --------------------------------------------------------------------------------
By Mail Send your completed and signed application and check
by regular mail to: or by express, registered, or
certified mail to:
The Scudder Funds The Scudder Funds
P.O. Box 2291 66 Brooks Drive
Boston, MA Braintree, MA 02184
02107-2291
- --------------------------------------------------------------------------------
By Wire Call 1-800-225-5163 for instructions.
- --------------------------------------------------------------------------------
In Person Visit one of our Investor Centers to complete your
application with the help of a Scudder representative. Investor
Centers are located in Boca Raton, Boston, Chicago, New York and
San Francisco.
- --------------------------------------------------------------------------------

To buy additional shares

The minimum additional investment is $100; $50 for IRAs. Group retirement plans
(401(k), 403(b), etc.) have similar or lower minimums--see appropriate plan
literature. Make checks payable to "The Scudder Funds."
- --------------------------------------------------------------------------------
By Mail Send a check with a Scudder investment slip, or with a
letter of instruction including your account number
and the complete fund name, to the appropriate address
listed above.
- --------------------------------------------------------------------------------
By Wire Call 1-800-225-5163 for instructions.
- --------------------------------------------------------------------------------
In Person Visit one of our Investor Centers to make an additional
investment in your Scudder fund account. Investor Center
locations are listed above.
- --------------------------------------------------------------------------------
By Phone Call 1-800-225-5163 for instructions.
- --------------------------------------------------------------------------------
By Automatic You may arrange to make investments of $50 or more on a
Investment regular basis through automatic deductions from your bank
Plan checking account. Please call 1-800-225-5163 for more
information and an enrollment form.
- --------------------------------------------------------------------------------

15
<PAGE>

EXCHANGES AND REDEMPTIONS

To exchange shares

The minimum investments are $2,500 to establish a new account and $100 to
exchange among existing accounts.
- --------------------------------------------------------------------------------
By Telephone To speak with a service representative, call
1-800-225-5163 from 8 a.m. to 8 p.m. eastern time. To
access SAIL(TM), The Scudder Automated Information Line,
call 1-800-343-2890 (24 hours a day).
- --------------------------------------------------------------------------------
By Mail Print or type your instructions and include:
or Fax - the name of the fund and the account number
you are exchanging from;
- your name(s) and address as they appear on your
account;
- the dollar amount or number of shares you wish to
exchange;
- the name of the fund you are exchanging into;
- your signature(s) as it appears on your account; and
- a daytime telephone number.
Send your or by express, or by fax to:
instructions by registered, or
regular mail to: certified mail to:

The Scudder Funds The Scudder Funds 1-800-821-6234
P.O. Box 2291 66 Brooks Drive
Boston, MA Braintree, MA 02184
02107-2291
- --------------------------------------------------------------------------------

To sell shares
- --------------------------------------------------------------------------------
By Telephone To speak with a service representative, call
1-800-225-5163 from 8 a.m. to 8 p.m. eastern time. To access
SAIL(TM), The Scudder Automated Information Line, call
1-800-343-2890 (24 hours a day). You may have redemption
proceeds sent to your predesignated bank account, or redemption
proceeds of up to $100,000 sent to your address of record.
- --------------------------------------------------------------------------------
By Mail or Fax Send your instructions for redemption to the
appropriate address or fax number above and include:
- the name of the fund and account number you are
redeeming from;
- your name(s) and address as they appear on your
account;
- the dollar amount or number of shares you wish to
redeem;
- your signature(s) as it appears on your account;
and
- a daytime telephone number.
- --------------------------------------------------------------------------------
By Automatic You may arrange to receive automatic cash payments
Withdrawal Plan periodically. Call 1-800-225-5163 for more
information and an enrollment form.
- --------------------------------------------------------------------------------

16
<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 --
Prime Reserve Shares*
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 Corporate Bond 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 Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment 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 Equity
- -------------
Worldwide
Scudder Global Fund
Scudder International Value Fund
Scudder International Growth and Income Fund
Scudder International Fund++
Scudder International Growth 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.

Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund

Preferred Series
- ----------------
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small Company Fund

17
<PAGE>

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

Closed-end funds#
The Argentina Fund, Inc. Scudder Global High Income Fund, Inc.
The Brazil Fund, Inc. Scudder New Asia Fund, Inc.
The Korea Fund, Inc. Scudder New Europe Fund, Inc.
Montgomery Street Income Scudder Spain and Portugal Fund, Inc.
Securities, 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 or classes thereof 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. ***Only the Scudder Shares of
the fund are part of the Scudder Family of Funds. ++Only the International
Shares of the fund are part of the Scudder Family of Funds. +++ +++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.

18
<PAGE>

Additional information about the fund may be found in the Statement of
Additional Information, the Shareholder Service Guide and in shareholder
reports. The Statement of Additional Information contains more detailed
information on fund investments and operations. The Shareholder Service Guide
contains more detailed information about purchases and sales of fund shares. The
semiannual and annual shareholder reports contain a discussion of the market
conditions and the investment strategies that significantly affected the fund's
performance during the last fiscal year, as well as a listing of portfolio
holdings and financial statements. These and other fund documents may be
obtained without charge from the following sources:

- --------------------------------------------------------------------------------
By phone: In person:
- --------------------------------------------------------------------------------
Call Scudder Investor Relations Public Reference Room
at 1-800-225-2470 Securities and Exchange
Or Commission,
For existing Scudder investors, call Washington, D.C.
the Scudder Automated Information Line (Call 1-800-SEC-0330 for more
(SAIL) at 1-800-343-2890 (24 hours a day). information).
- --------------------------------------------------------------------------------
By mail: By internet:
- --------------------------------------------------------------------------------
Scudder Investor Services, Inc. http://www.sec.gov
Two International Place http://www.scudder.com
Boston, MA 02110-4103
Or
Public Reference Section,
Securities and Exchange
Commission,
Washington, D.C. 20549-6009
(a duplication fee is charged)
- --------------------------------------------------------------------------------
The Statement of Additional Information is incorporated by reference into this
prospectus (is legally a part of this prospectus).

Investment Company Act file number: 811-2021

Printed with SOY INK Printed on recycled paper

19
<PAGE>
The Securities and Exchange Commission is not responsible for the accuracy or
completeness of the information in any prospectus, and gives no opinion as to
the merit of any mutual fund as an investment.

SCUDDER MICRO CAP FUND

PROSPECTUS
JANUARY 1, 1999

Seeking to increase your capital over the long term by investing primarily in
U.S. micro-cap stocks.

Mutual funds:
o are not FDIC-insured
o have no bank guarantees
o may lose value

- ------------------------------
No Sales Charges
- ------------------------------
PURE NO-LOAD(TM)
- ------------------------------

<PAGE>

CONTENTS

FUND SUMMARY................................................................3
An overview of the fund's goal and strategy, main risks,
performance and expenses
ABOUT THE FUND..............................................................6
Additional information that you should know about the fund
PRINCIPAL STRATEGIES, INVESTMENTS AND RELATED RISKS......................6
INVESTMENT ADVISER.......................................................9
DISTRIBUTIONS...........................................................11
FINANCIAL HIGHLIGHTS....................................................13
ABOUT YOUR INVESTMENT......................................................14
Information about managing your fund account
TRANSACTION INFORMATION.................................................14
BUYING AND SELLING SHARES...............................................16
PURCHASES...............................................................16
EXCHANGES AND REDEMPTIONS...............................................17
INVESTMENT PRODUCTS AND SERVICES........................................18

2
<PAGE>

FUND SUMMARY

INVESTMENT OBJECTIVES AND STRATEGIES
Scudder Micro Cap Fund pursues long-term growth of capital by investing
primarily in micro-cap common stocks. The micro-cap sector represents the stocks
of America's smallest public companies -- companies with a stock market value
(or "market capitalization") of $200 million or less. The emerging-growth
companies that normally comprise this sector include, among others, companies
that may be in the earliest stages of development, that offer unique products,
services or technologies, or that serve special or rapidly expanding niches. The
fund normally invests at least 80% of its assets in U.S. micro-cap common
stocks.

The fund utilizes a disciplined strategy in pursuing its objective. This
strategy is designed to uncover micro-cap stocks that are undervalued while
controlling the overall risk of the fund. Because micro-cap stocks are often
overlooked by investors, their stock price may not reflect their long-term
business potential. Accordingly, the prices of these stocks may rise
dramatically as these companies develop and become more widely known. In
addition, the fund attempts to manage its risk exposure by, among other things,
investing in hundreds of micro-cap companies across a broad range of U.S.
industries. This fund may be appropriate for the aggressive portion of a
long-term investor's portfolio. It should not be viewed as a complete investment
program.

When total assets reach $150 million, the fund intends to close to new
individual investors. The fund believes that by limiting its assets it will be
in a position to react quickly to new investment opportunities and remain
focused on only the most promising micro-cap stocks. It is expected that shares
of the fund will continue to be available to existing shareholders, as well as
certain retirement plans and investors of Personal Counsel from Scudder.

PRINCIPAL RISKS
The principal risks of investing in the fund are stock market risk and, more
specifically, the risks associated with investing in micro-cap stocks. In
pursuit of higher investment returns, this fund may incur greater risks and more
dramatic fluctuations in value than stocks of larger companies. Therefore, this
fund is suitable for long-term investors that have a high degree of risk
tolerance.

As with all investments in the stock market, the value of your investment will
fluctuate, and your shares, when sold, could be worth less than what you paid
for them. Declines in the overall stock market and the underperformance of the
fund's securities in comparison to other types of securities are some of the
factors that may reduce the value of your investment. In addition, the portfolio
management team's strategy and skill in choosing appropriate investments for the
fund will determine in large part the fund's ability to achieve its objective.

3
<PAGE>

Investing in micro-cap stocks entails more risk than investing in larger
companies. The inherent business characteristics and risks of micro-cap
companies include such things as untested management, less diversified product
lines and weaker financial positions. Also, micro-cap companies tend to have
less predictable earnings and less liquid securities than more established
companies. As a result of these factors, the fund is likely to experience
greater share-price volatility than a fund that invests in larger stocks.

PAST PERFORMANCE
The chart and table below illustrate how the fund has performed, and compare
this information to a broad measure of market performance. Of course, past
performance is not necessarily an indication of future performance.

Total return for year ended December 31
[Bar Graphics To Be Inserted]

- ----------------- -------
Total
Return: 35.19
- ----------------- -------
Year: 1997
- ----------------- -------
For the period included in the bar chart, the fund's highest return for a
calendar quarter was 20.46% (the third quarter of 1997), and the fund's lowest
return for a calendar quarter was -3.46% (the fourth quarter of 1997). The
fund's year-to-date total return as of 9/30/98 was -17.10%.

- --------------------------------------------------------------------------------
Average annual total returns
- --------------------------------------------------------------------------------
For periods ended
December 31, 1997 Fund S&P 500 Index Russell 2000 Index
- --------------------------------------------------------------------------------
One Year 35.19% 33.38% 22.37%
- --------------------------------------------------------------------------------
Since Inception (8/12/96) 31.72% 37.29% 24.37%
- --------------------------------------------------------------------------------

The Standard & Poor's (S&P) 500 Index is an unmanaged capitalization-weighted
measure of 500 widely held common stocks listed on the New York Stock Exchange,
American Stock Exchange, and Nasdaq Stock Market. The Russell 2000 Index is an
unmanaged capitalization-weighted measure of approximately 2000 small U.S.
stocks.

Index returns assume reinvestment of dividends and, unlike fund returns, do not
reflect any fees or expenses.

4
<PAGE>

EXPENSE INFORMATION

Scudder Family of Funds pure no-load(TM) fund
This information is designed to help you understand the costs of investing in
the fund. With Scudder's pure no-load(TM) funds, you pay no charges 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.

------------------------------------------------------------------------------
Shareholder Fees: Fees charged directly to your account in the fund for
various transactions.
------------------------------------------------------------------------------
Charges to purchase shares (sales load) NONE
------------------------------------------------------------------------------
Deferred charges on purchase of shares NONE
------------------------------------------------------------------------------
Charges to reinvest dividends NONE
------------------------------------------------------------------------------
Fees to redeem shares 1.00%*
------------------------------------------------------------------------------
Fees to exchange shares 1.00%*
------------------------------------------------------------------------------
Annual fund operating expenses: Expenses paid by the fund before it
distributes its net investment income. These are expressed as a percentage of
the fund's average daily net assets for the year ended August 31, 1998.
------------------------------------------------------------------------------
Investment management fee x.xx%
------------------------------------------------------------------------------
Distribution (12b-1) fees NONE
------------------------------------------------------------------------------
Other expenses x.xx%
------------------------------------------------------------------------------
Total fund operating expenses x.xx%
------------------------------------------------------------------------------

* There is a 1% fee retained by the Fund which is imposed only on redemptions
or exchanges of shares held less than one year. You may redeem by writing
or calling the Fund. If you wish to receive your redemption proceeds via
wire, there is a $5 wire service fee. For additional information, please
refer to "Transaction information--Exchanges or Redemptions."

5
<PAGE>

Example
This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the expenses shown above. It
assumes a 5% annual return, the reinvestment of all dividends and distributions
and "annual fund operating expenses" remaining the same each year. Investors do
not pay these expenses directly; they are paid by the fund before it distributes
its net investment income to shareholders. The expenses would be the same
whether you sold your shares at the end of each period or continued to hold
them.

ABOUT THE FUND

PRINCIPAL STRATEGIES, INVESTMENTS AND RELATED RISKS
Principal strategies and investments

The fund attempts to achieve its objective by investing predominantly in U.S.
micro-cap stocks. The median market value of the companies in the fund's
portfolio is not expected to exceed $125 million. The fund's portfolio
management team determines what stocks to invest in by following a highly
disciplined strategy that focuses on using a value style of investing while
attempting to manage the overall risks of the fund.

Highly Disciplined Strategy - The fund uses a proprietary computer model to
assess the more than 4,000 stocks that comprise the micro-cap sector and uncover
promising investment opportunities. In particular, this model combs through
financial data of these micro-cap companies analyzing such things as earning
trends, valuation measures and financial strength, and ranks these companies
based on their attractiveness. The fund's portfolio management team then
proceeds to further analyze the highest ranking stocks and select the
investments they believe are undervalued, have strong long-term business
potential and will enhance the overall diversification of the fund.

6
<PAGE>

Value Style Investing - The fund's portfolio management team uses a
value-oriented approach to selecting micro-cap stocks - that is, they look for
micro-cap stocks that appear to be undervalued. A stock is undervalued if its
stock price does not reflect its potential worth.

Because of their small size and less frequent trading activities, micro-cap
stocks are often overlooked or not closely followed by investors. Therefore, the
stock price of a micro-cap company often does not adequately reflect its growth
potential. As the business fundamentals of a micro-cap company improve, its
stock price may rise significantly. In particular, stock prices are affected
when a company's earnings exceed general expectations or when investors begin to
appreciate the full extent of a company's business potential.

Managing Overall Risk - Managing the risk exposure of the fund is an important
component of the fund's investment strategy. The fund attempts to control its
risk at both the security and the portfolio level. At the security level, the
fund's systematic approach to selecting undervalued stocks is designed to reduce
the volatility of the individual stocks held by the fund. In addition, the
portfolio management team attempts to control the fund's risk exposure by
building a diversified portfolio that consists of hundreds of micro-cap stocks,
representing a broad cross-section of U.S. industries. Typically, the fund
limits its investment in a particular security to no more than 1% of the fund's
assets.

The fund also uses risk management software to assess the expected volatility of
its portfolio and the impact of different trading decisions on the fund's risk
level. Although the fund cannot eliminate the above-average risks of investing
in micro-cap stocks, this risk management strategy may enable the fund to be
less volatile than the micro-cap sector of the U.S. stock market.

Of course, there can be no guarantee that, by following these investment
strategies, the fund will achieve its objective.

Except as otherwise indicated, the fund's investment objective and policies may
be changed without a vote of shareholders.

More information about investments and strategies of the fund is provided in the
Statement of Additional Information.

RELATED RISKS
Micro-Cap Risk. While micro-cap stocks have historically outperformed large
company stocks, they also have been subject to greater investment risk. The
special risks generally associated with micro-cap companies include limited
product lines, markets and financial resources, lack of management depth or
experience, dependency on key personnel and vulnerability to adverse market and

7
<PAGE>

economic developments. Accordingly, the prices of micro-cap stocks tend to be
more volatile than prices of large-cap stocks. Further, the prices of micro-cap
stocks are often adversely affected by limited trading volumes and the lack of
publicly available information.

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

Since micro-cap stocks are often traded over-the-counter and in small volumes,
the fund may have problems selling its investment and consequently, have to
discount the price or dispose of the investment over a long period of time.

Equity Investing Risk. An investment in the common stock of a company represents
a proportionate ownership interest in that company. Therefore, the fund
participates in the success or failure of any company in which it holds stock.
Compared to other classes of financial assets, such as bonds or cash
equivalents, common stocks have historically offered the greatest potential for
gain on your investment. However, the market value of common stocks can
fluctuate significantly, reflecting such things as the business performance of
the issuing company, investors' perceptions of the company or the overall stock
market and general economic or financial market movements. Smaller companies are
especially sensitive to these factors and may even become valueless.

Value Investing Risk. The determination that a stock is undervalued is
subjective; the market may not agree, and a stock's price may not rise to what
the portfolio management team believes is its full value. It may even decrease
in value. However, because of the fund's focus on undervalued stocks, the fund's
downside risk may be less than other micro-cap stocks since value stocks are in
theory already underpriced.

Inflation Risk. There is a possibility that the rising prices of goods and
services may have the effect of offsetting a fund's real return.

A MESSAGE FROM THE PRESIDENT
Scudder Kemper Investments, Inc., investment adviser to the Scudder Family of
Funds, is one of the largest and most experienced investment management
organizations worldwide. We are one of the ten largest mutual fund companies in
the U.S., managing more than $230 billion in assets globally for mutual fund
investors, retirement and pension plans, institutional and corporate clients,
and private family and individual accounts.

8
<PAGE>

Japan Fund and numerous other open- and closed-end funds that invest in this
country and other countries around the world.

INVESTMENT ADVISER
The fund retains the investment management firm of Scudder Kemper Investments,
Inc. (the "Adviser"), 345 Park Avenue, New York, NY, to manage the fund's daily
investment and business affairs subject to the policies established by the Board
of Trustees. The Adviser actively manages your investment in the fund.
Professional management can be an important advantage for investors who do not
have the time or expertise to invest directly in individual securities.

The fund pays the Adviser an annual fee of 0.75% of the fund's average daily net
assets.

From September 1, 1997 until December 31, 1997, the Adviser agreed to maintain
the annualized expenses of the fund at no more than 1.75%. As a result of this
waiver, the Adviser received an investment management fee of ____% of the fund's
average daily net assets for the fiscal year ended August 31, 1998.

The fund is managed by a team of investment professionals, who each play an
important role in the fund's management process. Team members work together to
develop investment strategies and select securities for the fund's portfolio.
They are supported by the Adviser's large staff of economists, research
analysts, traders and other investment specialists who work in the Adviser's
offices across the United States and abroad. The Adviser believes its team
approach benefits fund investors by bringing together many disciplines and
leveraging its extensive resources.

9
<PAGE>

PORTFOLIO MANAGEMENT
The following investment professionals are associated with the fund as
indicated:

- --------------------------------------------------------------------------------
Name and Title Joined the Fund Responsibilities and Background
- --------------------------------------------------------------------------------
Philip S. Fortuna 1996 Mr. Fortuna, who joined the Adviser
Co-Lead Manager in 1986 as a manager of institutional
equity accounts, has responsibility
for the fund's day-to-day
management and investment
strategies. In addition to his
portfolio management
responsibilities, Mr. Fortuna is
currently director of the Adviser's
quantitative group.
- --------------------------------------------------------------------------------
James M. Eysenbach 1996 Mr. Eysenbach, who joined the Adviser
Co-Lead Manager in 1991 as a senior quantitative
analyst, assists with the fund's
day-to-day management and
investment strategies. Currently
managing portfolios full time, Mr.
Eysenbach has more than 11 years
investment management experience,
specializing in quantitative
research, analysis and portfolio
management.
- --------------------------------------------------------------------------------
Calvin S. Young 1998 Mr. Young joined the Adviser in 1990
Manager as a quantitative analyst. Since 1995
has been providing analytical support
for the Adviser's quantitative equity
products. Mr. Young has more than nine
years of investment industry
experience, with a special focus on
small companies.
- --------------------------------------------------------------------------------

YEAR 2000 ISSUE
Like other mutual funds and financial and business organizations worldwide, the
fund could be adversely affected if computer systems on which the fund relies,
which primarily include those used by the Adviser, its affiliates or other
service providers, are unable to correctly process date-related information on
and after January 1, 2000. The risk is commonly called the Year 2000 issue.
Failure to successfully address the Year 2000 issue could result in
interruptions to and other material adverse effects on the fund's business and
operations. The Adviser has commenced a review of the Year 2000 issue as it may
affect the fund and is taking steps it believes are reasonably designed to
address the Year 2000 issue, although there can be no assurances that these
steps will be sufficient. In addition, there can be no assurances that the Year
2000 issue will not have an adverse effect on the companies whose securities are
held by the fund or on global markets or economies generally.

10
<PAGE>

DISTRIBUTIONS

Dividends and capital gains distributions
The fund intends to distribute dividends from its net investment income
annually, in November or December. The fund intends to distribute net realized
capital gains after utilization of capital loss carryforwards, if any, in
November or December. An additional distribution may be made at a later date, if
necessary.

TAXES
Generally, dividends from net investment income are taxable to shareholders as
ordinary income. Long-term capital gains distributions, if any, are taxable to
shareholders as long-term capital gains, regardless of the length of time
shareholders have owned shares. Short-term capital gains and any other taxable
income distributions are taxable as ordinary income. A portion of dividends from
ordinary income may qualify for the dividends-received deduction for
corporations.

Unless your investment is in a tax-deferred account, you may want to avoid
investing a large amount close to the date of a fund's distribution because you
may receive part of your investment back as a taxable distribution.

A sale or exchange of shares is a taxable event and may result in a capital gain
or loss if the shares were held as a capital asset. Capital gains may be
long-term or short-term, depending on how long you owned the shares.

The fund sends detailed tax information to its shareholders about the amount and
type of its distributions by January 31 of the following year.

11
<PAGE>
The fund may be required to withhold U.S. federal income tax at the rate of 31%
of all taxable distributions payable to shareholders who fail to provide the
fund with their correct taxpayer identification number or to make required
certifications, or who have been notified by the IRS that they are subject to
backup withholding. Any such withheld amounts may be credited against the
shareholder's U.S. federal income tax liability.

Shareholders may be subject to state, local and foreign taxes on fund
distributions and dispositions of fund shares. You should consult your tax
advisor regarding the particular consequences of an investment in the fund.

12
<PAGE>

FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the fund's
financial performance for the fiscal periods indicated. The total returns
figures represent the rate that an investor would have earned (or lost) on an
investment in the fund assuming reinvestment of all dividends and distributions.
This information has been audited by PricewaterhouseCoopers LLP whose report,
along with the fund's financial statements, is included in the annual report,
which is available upon request (see back cover).

[TO BE UPDATED]
- ---------------------------------------------------------------------------
For the Period
August 12,
1996
(commencement
of operations)
to August 31,
Per-share data 1997 1996
- ---------------------------------------------------------------------------

Net asset value, beginning of period $12.07 $12.00
- ---------------------------------------------------------------------------
Income from investment operations:
- ---------------------------------------------------------------------------
Net investment income (loss) (.03) .01
- ---------------------------------------------------------------------------
Net realized and unrealized gain on
investments 4.74 .06
- ---------------------------------------------------------------------------
Total from investment operations 4.71 .07
- ---------------------------------------------------------------------------
Less distributions from:
- ---------------------------------------------------------------------------
Net investment income (.02) --
- ---------------------------------------------------------------------------
Net realized gains from investment
transactions -- --
- ---------------------------------------------------------------------------
Total distributions (.02) --
- ---------------------------------------------------------------------------
Redemption fees .01 --
- ---------------------------------------------------------------------------
Net asset value, end of period $16.77 $12.07
- ---------------------------------------------------------------------------
Total Return (%) 39.10(b)(c) .58(b)(c)**
- ---------------------------------------------------------------------------

Ratios and Supplemental Data
- ---------------------------------------------------------------------------
Net assets, end of period ($ millions) 92 8
- ---------------------------------------------------------------------------
Ratio of operating expenses, net to
average daily net assets (%) 1.75 1.75*
- ---------------------------------------------------------------------------
Ratio of operating expenses before expense
reductions, to average daily net assets 2.19 22.06*
(%)
- ---------------------------------------------------------------------------
Ratio of net investment income (loss) to
average daily net assets (%) (.21) 2.58*
- ---------------------------------------------------------------------------
Portfolio turnover rate (%) 17.13 --
- ---------------------------------------------------------------------------
(a) Based on monthly average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been reduced.
(c) Total return does not reflect the effect to the shareholder of the 1%
redemption fee on shares held less than one year.
* Annualized
** Not annualized
- ---------------------------------------------------------------------------

13
<PAGE>

ABOUT YOUR INVESTMENT

TRANSACTION INFORMATION

Share price
Scudder Fund Accounting Corporation determines the net asset value per share of
the fund as of the close of regular trading on the New York Stock Exchange (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.
Market prices are used to determine the value of the fund's assets, but when no
reliable market quotations are available, the fund may use valuation procedures
established by its Board of Trustees.

Redemption fee
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 fund for the benefit of the remaining shareholders. The fee is waived for
all shares purchased through certain Scudder retirement plans, including 401(k)
plans, 403(b) plans, 457 plans, Keogh accounts, and Profit Sharing and Money
Purchase Pension Plans. 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. The fund
reserves the right to modify the terms of or terminate this fee at any time.

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

The fee is applied to the shares being redeemed or exchanged in the order in
which they were purchased.

Processing time
All purchase and redemption requests received in good order at the fund's
transfer agent by the close of regular trading on the Exchange are executed at
the net asset value per share calculated at the close of trading that day. All
other requests that are in good order will be executed the following business
day.

Signature guarantees
A signature guarantee is required for redemptions over $100,000. You can obtain
one from most brokerage houses and financial institutions, although not from a
notary public. The fund will normally send redemption proceeds within one

14
<PAGE>

business day following the redemption request, but may take up to seven business
days (or longer in the case of shares recently purchased by check).

Purchase restrictions
Purchases and sales should be made for long-term investment purposes only. The
fund and Scudder Investor Services, Inc. each reserves the right to reject
purchases of fund shares (including exchanges) for any reason including when
there is evidence of a pattern of frequent purchases and sales made in response
to short-term fluctuations in the fund's share price.

Minimum balances
Generally, shareholders who maintain a non-fiduciary account balance of less
than $2,500 in the fund and have not established an automatic investment plan
will be assessed, an annual $10.00 per fund charge; this fee is paid to the
fund. The fund reserves the right, following 60 days written notice to
shareholders, to redeem all shares in accounts that have a value below $1,000
where such a reduction in value has occurred due to a redemption, exchange or
transfer out of the account.

Third party transactions
If you buy and sell shares of the fund through a member of the National
Association of Securities Dealers, Inc. (other than Scudder Investor Services,
Inc.), that member may charge a fee for that service.

Redemption-in-kind
The fund reserves the right to honor requests for redemption or repurchase
orders by making payment in whole or in part in readily marketable securities
("redemption in kind"). These securities will be chosen by the fund and valued
as they are for purposes of computing the fund's net asset value. A shareholder
may incur transaction expenses in converting these securities to cash.

15
<PAGE>

BUYING AND SELLING SHARES
Please refer to the following charts for information on how to buy and sell fund
shares. Additional information, including special investment features, may be
found in the Shareholder Services Guide. For information about No-Fee IRAs, Roth
IRAs and other retirement options, call Scudder Investor Relations at
1-800-225-2470. For information on establishing 401(k) and 403(b) plans, call
Scudder Defined Contribution Services at 1-800-323-6105.

PURCHASES

To open an account

The Scudder Funds The Scudder Funds
P.O. Box 2291 66 Brooks Drive
Boston, MA Braintree, MA 02184
02107-2291
- --------------------------------------------------------------------------------
By Wire Call 1-800-225-5163 for instructions.
- --------------------------------------------------------------------------------
In Person Visit one of our Investor Centers to complete your
application with the help of a Scudder representative. Investor
Centers are located in Boca Raton, Boston, Chicago, New York and
San Francisco.
- --------------------------------------------------------------------------------

To buy additional shares

The minimum additional investment is $100; $50 for IRAs. Group retirement plans
(401(k), 403(b), etc.) have similar or lower minimums--see appropriate plan
literature. Make checks payable to "The Scudder Funds."
- --------------------------------------------------------------------------------
By Mail Send a check with a Scudder investment slip, or with a letter of
instruction including your account number and the complete fund
name, to the appropriate address listed above.
- --------------------------------------------------------------------------------
By Wire Call 1-800-225-5163 for instructions.
- --------------------------------------------------------------------------------
In Person Visit one of our Investor Centers to make an additional
investment in your Scudder fund account. Investor Center
locations are listed above
- --------------------------------------------------------------------------------
By Phone Call 1-800-225-5163 for instructions.
- --------------------------------------------------------------------------------
By Automatic You may arrange to make investments of $50 or more on a regular
Investment basis through automatic deductions from your bank checking
Plan account. Please call 1-800-225-5163 for more information and an
enrollment form.
- --------------------------------------------------------------------------------

16
<PAGE>

EXCHANGES AND REDEMPTIONS

To exchange shares

The minimum investments are $2,500 to establish a new account and $100 to
exchange among existing accounts.
- --------------------------------------------------------------------------------
By Telephone To speak with a service representative, call 1-800-225-5163
from 8 a.m. to 8 p.m. eastern time. To access SAIL(TM), The
Scudder Automated Information Line, call 1-800-343-2890
(24 hours a day).
- --------------------------------------------------------------------------------
By Mail or Fax Print or type your instructions and include:
- the name of the fund and the account number you are
exchanging from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to exchange;
- the name of the fund you are exchanging into;
- your signature(s) as it appears on your account; and
- a daytime telephone number.
Send your instructions or by express, or by fax to:
by regular mail to: registered, or
certified mail to:

The Scudder Funds The Scudder Funds 1-800-821-6234
P.O. Box 2291 66 Brooks Drive
Boston, MA 02107-2291 Braintree, MA 02184
- --------------------------------------------------------------------------------

To sell shares

- --------------------------------------------------------------------------------
By Telephone To speak with a service representative, call
1-800-225-5163 from 8 a.m. to 8 p.m. eastern time. To access
SAILTM, The Scudder Automated Information Line, call
1-800-343-2890 (24 hours a day). You may have redemption
proceeds sent to your predesignated bank account, or
redemption proceeds of up to $100,000 sent to your address
of record.
- --------------------------------------------------------------------------------
By Mail or Fax Send your instructions for redemption to the appropriate
address or fax number above and include:
- the name of the fund and account number you are redeeming
from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to redeem;
- your signature(s) as it appears on your account; and
- a daytime telephone number.
- --------------------------------------------------------------------------------
By Automatic You may arrange to receive automatic cash payments
Withdrawal Plan periodically. Call 1-800-225-5163 for more information and
an enrollment form.
- --------------------------------------------------------------------------------