Filed with the Securities and Exchange Commission on December 2, 1997.
File No. 2-78724
File No. 811-1444
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. 26
----
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 26
----
Scudder Equity Trust
--------------------------
(Exact Name of Registrant as Specified in Charter)
Two International Place, Boston, MA 02110
---------------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (617) 295-2567
--------------
Thomas F. McDonough
Scudder, Stevens & Clark, Inc.
Two International Place, Boston, MA 02110
--------------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
______ immediately upon filing pursuant to paragraph (b)
______ on February 1, 1997 pursuant to paragraph (b)
X 60 days after filing pursuant to paragraph (a)(i)
_______
_______ on __________ pursuant to paragraph (a)(i)
_______ 75 days after filing pursuant to paragraph (a)(ii)
_______ on __________ pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following:
_____ this post-effective amendment designates a new
effective date for a previously filed post-effective
amendment
<PAGE>
SCUDDER LARGE COMPANY VALUE FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
PART A
Item
No. Item Caption Prospectus Caption
- --- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information DISTRIBUTION AND PERFORMANCE
INFORMATION
4. General Description INVESTMENT OBJECTIVE AND POLICIES
of Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT
POLICIES AND INVESTMENTS
FUND ORGANIZATION
5. Management of the A MESSAGE FROM SCUDDER'S CHAIRMAN
Fund FINANCIAL HIGHLIGHTS
FUND ORGANIZATION-Investment
adviser, Transfer agent
TRUSTEES AND OFFICERS
5A. Management's Discussion SHAREHOLDER BENEFITS-A team approach
of Fund Performance to investing
6. Capital Stock and Other TRANSACTION INFORMATION-Tax
Securities information
DISTRIBUTION AND PERFORMANCE
INFORMATION-Dividends and capital
gains distributions
SHAREHOLDER BENEFITS-SAIL(TM)-Scudder
Automated Information Line,
T.D.D. service for the hearing
impaired, Dividend reinvestment
plan
FUND ORGANIZATION
HOW TO CONTACT SCUDDER
7. Purchase of Securities PURCHASES
Being Offered TRANSACTION INFORMATION-Purchasing
shares, Share price, Processing
time, Third party transactions,
Minimum balances
SHAREHOLDER BENEFITS-Dividend
Reinvestment Plan
INVESTMENT PRODUCTS AND SERVICES
SCUDDER TAX-ADVANTAGED RETIREMENT
PLANS
FUND ORGANIZATION-Underwriter
8. Redemption or EXCHANGES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION-Redeeming
shares, Tax Identification
Number, Minimum balances
9. Pending Legal NOT APPLICABLE
Proceedings
CROSS REFERENCE SHEET - Page 1
<PAGE>
SCUDDER LARGE COMPANY VALUE FUND
CROSS-REFERENCE SHEET
PART B
Item
No. Item Caption Caption in Statement of Additional Information
- --- ------------ ----------------------------------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and FUND ORGANIZATION
History
13. Investment Objectives THE FUND'S INVESTMENT OBJECTIVE AND
and Policies POLICIES
PORTFOLIO TRANSACTIONS-Brokerage
Commissions and 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
and Other Practices Commissions and Portfolio
Turnover
18. Capital Stock and Other FUND ORGANIZATION
Securities DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS
19. Purchase, Redemption PURCHASES
and Pricing of EXCHANGES AND REDEMPTIONS
Securities Being FEATURES AND SERVICES OFFERED BY THE
Offered FUND-Distribution Plans
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance Data
23. Financial Statements FINANCIAL STATEMENTS
CROSS REFERENCE SHEET - Page 2
<PAGE>
SCUDDER VALUE FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
PART A
Item
No. Item Caption Prospectus Caption
- --- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information DISTRIBUTION AND PERFORMANCE
INFORMATION
4. General Description INVESTMENT OBJECTIVE AND POLICIES
of Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT
POLICIES AND INVESTMENTS
FUND ORGANIZATION
5. Management of the A MESSAGE FROM SCUDDER'S CHAIRMAN
Fund FINANCIAL HIGHLIGHTS
FUND ORGANIZATION-Investment
adviser, Transfer agent
TRUSTEES AND OFFICERS
5A. Management's Discussion SHAREHOLDER BENEFITS-A team approach
of Fund Performance to investing
6. Capital Stock and Other TRANSACTION INFORMATION-Tax
Securities information
DISTRIBUTION AND PERFORMANCE
INFORMATION-Dividends and capital
gains distributions
SHAREHOLDER BENEFITS-SAIL(TM)-Scudder
Automated Information Line,
T.D.D. service for the hearing
impaired, Dividend reinvestment
plan
FUND ORGANIZATION
HOW TO CONTACT SCUDDER
7. Purchase of Securities PURCHASES
Being Offered TRANSACTION INFORMATION-Purchasing
shares, Share price, Processing
time, Third party transactions,
Minimum balances
SHAREHOLDER BENEFITS-Dividend
Reinvestment Plan
INVESTMENT PRODUCTS AND SERVICES
SCUDDER TAX-ADVANTAGED RETIREMENT
PLANS
FUND ORGANIZATION-Underwriter
8. Redemption or EXCHANGES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION-Redeeming
shares, Tax Identification
Number, Minimum balances
9. Pending Legal NOT APPLICABLE
Proceedings
CROSS REFERENCE SHEET - Page 3
<PAGE>
SCUDDER LARGE COMPANY VALUE FUND
CROSS-REFERENCE SHEET
PART B
Item
No. Item Caption Caption in Statement of Additional Information
- --- ------------ ----------------------------------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and FUND ORGANIZATION
History
13. Investment Objectives THE FUND'S INVESTMENT OBJECTIVE AND
and Policies POLICIES
PORTFOLIO TRANSACTIONS-Brokerage
Commissions and 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
and Other Practices Commissions and Portfolio
Turnover
18. Capital Stock and Other FUND ORGANIZATION
Securities DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS
19. Purchase, Redemption PURCHASES
and Pricing of EXCHANGES AND REDEMPTIONS
Securities Being FEATURES AND SERVICES OFFERED BY THE
Offered FUND-Distribution Plans
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance Data
23. Financial Statements FINANCIAL STATEMENTS
CROSS REFERENCE SHEET - Page 4
<PAGE>
This prospectus sets forth concisely the information about Scudder Large Company
Value Fund, a series of Scudder Equity Trust, an open-end management investment
company, that a prospective investor should know before investing.
Please retain it for future reference.
If you require more detailed information, a combined Statement of Additional
Information dated February 1, 1998, as amended from time to time, may be
obtained without charge by writing Scudder Investor Services, Inc., Two
International Place, Boston, MA 02110-4103 or calling 1-800-225-2470. The
Statement, which is incorporated by reference into this prospectus, has been
filed with the Securities and Exchange Commission and is available along with
other related materials on the SEC's Internet Web site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Contents--see page 4.
- -------------------------------
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
- -------------------------------
Scudder Large Company Value Fund
Prospectus
February 1, 1998
A pure no-load(TM) (no sales charges) mutual fund which seeks to maximize
long-term capital appreciation through a value-driven investment program.
<PAGE>
- ---------------------
Expense information
- ---------------------
- --------------------------------------------------------------------------------
How to compare a Scudder pure no-load(TM) fund
This information is designed to help you understand the various costs and
expenses of investing in Scudder Large Company Value Fund (the "Fund"). By
reviewing this table and those in other mutual funds' prospectuses, you can
compare the Fund's fees and expenses with those of other funds. With Scudder's
pure no-load(TM) funds, you pay no commissions to purchase or redeem shares, or
to exchange from one fund to another. As a result, all of your investment goes
to work for you.
1) Shareholder transaction expenses: Expenses charged directly to your
individual account in the Fund for various transactions.
Sales commissions to purchase shares (sales load) NONE
Commissions to reinvest dividends NONE
Redemption fees NONE*
Fees to exchange shares NONE
2) Annual Fund operating expenses: Expenses paid by the Fund before it
distributes its net investment income, expressed as a percentage of the
Fund's average daily net assets for the fiscal year ended September 30,
1997.
Investment management fee 0.66%
12b-1 fees NONE
Other expenses 0.26%
-----
Total Fund operating expenses 0.92%
=====
Example
Based on the level of total Fund operating expenses listed above, the total
expenses relating to a $1,000 investment, assuming a 5% annual return and
redemption at the end of each period, are listed below. Investors do not pay
these expenses directly; they are paid by the Fund before it distributes its net
investment income to shareholders. (As noted above, the Fund has no redemption
fees of any kind.)
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$9 $29 $51 $113
See "Fund organization--Investment adviser" for further information about the
investment management fee. This example assumes reinvestment of all dividends
and distributions and that the percentage amounts listed under "Annual Fund
operating expenses" remain the same each year. This example should not be
considered a representation of past or future expenses or return. Actual Fund
expenses and return vary from year to year and may be higher or lower than those
shown.
* You may redeem by writing or calling the Fund. If you wish to receive your
redemption proceeds via wire, there is a $5 wire service fee. For
additional information, please refer to "Transaction
information--Redeeming shares."
- --
2
<PAGE>
Financial highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the audited
financial statements.
The Fund changed its name from Scudder Capital Growth Fund on February 1, 1997.
If you would like more detailed information concerning the Fund's performance,
a complete portfolio listing and audited financial statements are available in
the Fund's Annual Report dated September 30, 1997 and may be obtained without
charge by writing or calling Scudder Investor Services, Inc.
<TABLE>
<CAPTION>
Years Ended September 30,
1997(a)* 1996 1995 1994 1993(c) 1992 1991 1990 1989 1988
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $22.64 $22.92 $19.54 $23.06 $19.12 $19.30 $14.77 $22.30 $16.10 $20.41
Income from investment
operations: .38 .36 .13 (.02) .06 .12 .20 .30(b) .21 .09
Net investment income (loss)
Net realized and unrealized
gain (loss) on investment
transactions 8.60 2.94 3.98 (.88) 5.23 .90 6.05 (6.22) 6.61 (1.82)
Total from investment
operations 8.98 3.30 4.11 (.90) 5.29 1.02 6.25 (5.92) 6.82 (1.73)
Less distributions from:
Net investment income (.16) (.08) -- -- (.10) (.22) (.37) (.16) (.07) (.20)
Net realized gains on
investment transactions (2.48) (3.50) (.73) (2.62) (1.25) (.98) (1.35) (1.45) (.55) (2.38)
Total distributions (2.64) (3.58) (.73) (2.62) (1.35) (1.20) (1.72) (1.61) (.62) (2.58)
Net asset value, end of
period $28.98 $22.64 $22.92 $19.54 $23.06 $19.12 $19.30 $14.77 $22.30 $16.10
- -----------------------------------------------------------------------------------------------------------------------
Total Return (%) 43.06 15.94 21.96 (4.72) 28.83 5.61 45.85 (28.20) 44.05 (5.61)
Ratios and Supplemental Data
Net assets, end of period
($ millions) 2,213 1,651 1,492 1,338 1,387 1,054 1,058 712 1,013 491
Ratio of operating expenses
to average daily net
assets (%) .93 .92 .98 .97 .96 .98 1.04 .94 .88 .95
Ratio of net investment
income (loss) to average
daily net assets (%) 1.51 1.62 .62 (.12) .22 .57 1.24 1.56 1.22 .63
Portfolio turnover rate (%) 43.02 150.7 153.6 75.8 92.2 92.4 93.2 87.9 55.7 48.5
Average commission rate
paid (d) $.0562 $.0533 $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Net investment income per share includes nonrecurring dividend income
amounting to $.14 per share.
(c) Effective October 1, 1992, the Fund discontinued using equalization
accounting.
(d) Average commission rate paid per share of common and preferred stocks is
calculated for fiscal years ending on or after September 30, 1996.
* On February 1, 1997, the Fund adopted its current name. Prior to that date,
the Fund was known as the Scudder Capital Growth Fund.
--
3
<PAGE>
- ---------------------------------
A message from Scudder's chairman
- ---------------------------------
Scudder, Stevens & Clark, Inc., investment adviser to the Scudder Family of
Funds, was founded in 1919. We offered America's first no-load mutual fund in
1928. During the past year, Scudder entered into an alliance with Zurich
Insurance Company in which Zurich has acquired a majority interest in Scudder
and combined Scudder with Zurich Kemper Investments, Inc. Scudder's name has
been changed to Scudder Kemper Investments, Inc. Today, the combined forces of
Scudder Kemper manage in excess of $___ billion for many private accounts and
over ___ mutual fund portfolios. We continue to manage the mutual funds in a
special program for the American Association of Retired Persons, as well as the
fund options available through Scudder Horizon Plan, a tax-advantaged variable
annuity. We also advise The Japan Fund and nine closed-end funds that invest in
countries around the world.
The Scudder Family of Funds is designed to make investing easy and less costly.
It includes money market, tax free, income and growth funds as well as IRAs,
401(k)s, Keoghs and other retirement plans.
Services available to all shareholders include toll-free access to the
professional service representatives of Scudder Investor Relations, easy
exchange among funds, shareholder reports, informative newsletters and the
walk-in convenience of Scudder Investor Centers.
The funds of the Scudder Family of Funds are pure no-load(TM). This means you
pay no commissions to purchase or redeem your shares or to exchange from one
fund to another. There are no "12b-1" fees either, which many other funds now
charge to support their marketing efforts. All of your investment goes to work
for you. We look forward to welcoming you as a shareholder.
/s/ Daniel Pierce
- ---------------------------------
Scudder Large Company
Value Fund
- ---------------------------------
Investment objective
o to maximize long-term capital appreciation
through a value-driven investment program
Investment characteristics
o a value-driven investment program
o focus on larger U.S. companies
o a pure no-load(TM) fund
- ---------------------------------
Contents
- ---------------------------------
Investment objective and policies 5
Why invest in the Fund? 5
Investment results 6
Additional information about policies
and investments 7
Distribution and performance information 10
Fund organization 12
Transaction information 16
Shareholder benefits 18
Purchases 19
Exchanges and redemptions 21
Trustees and Officers 23
Investment products and services
How to contact Scudder
- --
4
<PAGE>
- ---------------------------------
Investment objective and
policies
- ---------------------------------
Scudder Large Company Value Fund (the "Fund"), a diversified series of Scudder
Equity Trust, seeks to maximize long-term capital appreciation through a
value-driven investment program. The Fund invests in marketable securities,
principally common stocks and, consistent with its objective of long-term
capital appreciation, preferred stocks. Additionally, the Fund may invest in
debt securities, repurchase agreements, convertible securities, and may engage
in strategic transactions as described under "Investment restrictions."
Except as otherwise indicated, the Fund's investment objective and policies are
not fundamental and may be changed without a vote of shareholders. If there is a
change in investment objective, shareholders should consider whether the Fund
remains an appropriate investment in light of their then current financial
position and needs. There can be no assurance that the Fund's objective will be
met.
Investments
The Fund is free to invest in a wide range of marketable securities which the
Fund's investment adviser, Scudder Kemper Investments, Inc. (the "Adviser"),
believes offer the potential for long-term appreciation. The Fund will normally
invest at least 65% of its assets in the equity securities of large U.S.
companies, i.e. those with $1 billion or more in total market capitalization.
The Fund's investment flexibility enables it to pursue investment value in all
sectors of the stock market, including:
o companies that generate or apply new technologies, new and improved
distribution techniques or new services, such as those in the business
equipment, electronics, specialty merchandising and health service
industries;
o companies that own or develop natural resources, such as energy
exploration companies;
o companies that may benefit from changing consumer demands and lifestyles,
such as financial service organizations and telecommunications companies;
o foreign companies, including those in countries with more rapid economic
growth than the U.S.;
o companies whose earnings are temporarily depressed and are currently out
of favor with most investors.
In addition, the Fund may borrow from banks and other financial institutions in
an amount not exceeding the value of one-third of the Fund's total assets.
Reverse repurchase agreements are not subject to the one-third asset coverage
requirement. The Fund currently intends to borrow only for temporary or
emergency purposes, such as providing for redemptions or distributions, and not
for investment purposes.
- ---------------------------------
Why invest in the Fund?
- ---------------------------------
The Fund uses a value-based investment approach to pursue a range of investment
opportunities, principally among larger, established U.S. companies. Given this
approach, the Fund may be appropriate as a core investment holding for
retirement or other long-term goals.
In seeking capital appreciation, the Fund looks for companies whose securities
appear to present a favorable relationship between market price and opportunity.
These may include securities of companies whose fundamentals or products may be
of only average promise.
Market misconceptions, temporary bad news, and other factors may cause a
security to be out of favor in the stock market and to trade at a price below
its potential value. Accordingly, the prices of such securities can rise either
as a result of improved business fundamentals, particularly when earnings grow
faster than general expectations, or as more investors come to recognize the
full extent of a company's underlying potential. These "undervalued" securities
can provide the opportunity for above-average market performance.
In addition, the Fund offers all the benefits of the Scudder Family of Funds.
the Adviser manages a diverse family of pure no-load(TM) funds and provides a
wide range of services to help
--
5
<PAGE>
- ---------------------------------
Investment results
- ---------------------------------
The Fund is designed for long-term investors who can accept stock market risk.
The value of the Fund's portfolio securities fluctuates with market and
economic conditions, causing returns and principal value to fluctuate.
Depending upon when shares are sold, their value may be higher or lower than
when purchased. In return for accepting stock market risk, there may be a
greater return on investment than from a money market or income fund. Annual
capital changes?*
Standard & Poor's
<TABLE>
<CAPTION>
Net Asset Capital Gains Capital Price Capital
September 30, Value/Share Dividends Distributions Change Level Change
------------- ----------- --------- ------------- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
1986 $17.17 -- -- -- 231 --
1987 20.41 $0.23 $2.46 +37.3 322 +39.4%
1988 16.10 0.20 2.38 -6.8 272 -15.5
1989 22.30 0.07 0.55 +43.4 349 +28.3
1990 14.77 0.16 1.45 -28.8 306 -12.3
1991 19.30 0.37 1.35 +42.6 388 +26.7
1992 19.12 0.22 0.98 +4.4 418 +7.7
1993 23.06 0.10 1.25 +28.2 459 +9.8
1994 19.54 -- 2.62 -4.7 463 +0.9
1995 22.92 -- 0.73 +22.0 584 +26.3
1996 22.64 0.08 3.50 +15.6 687 +17.6
</TABLE>
Growth of a $10,000 investment
Standard & Poor's
<TABLE>
<CAPTION>
Years Ended Value of Initial Average Value of Initial Average
September 30, 1996 $10,000 Investment Cumulative Annual $10,000 Investment Cumulative Annual
------------------ ------------------ ---------- ------ ------------------ ---------- ------
<S> <C> <C> <C> <C> <C> <C>
One Year $11,594 + 15.94% +15.94% $12,034 + 20.34% +20.34%
Five Years 18,332 + 83.32 +12.89 20,315 + 103.15 +15.21
Ten Years 36,288 + 262.88 +13.76 40,429 + 304.29 +14.98
</TABLE>
All total return calculations assume that income dividends and capital gains
distributions, if any, were reinvested. The performance of Scudder Large
Company Value Fund is compared with that of Standard & Poor's 500 Stock Index,
an unmanaged index of 500 industrial, transportation, utility and financial
companies, widely regarded as representative of the equity market in general.
The Standard & Poor's 500 Stock Index does not take into account the brokerage
and other transaction costs investors incur when investing directly in stocks
on the index. The Fund's performance reflects actual investment experience, net
of all operating expenses, which are paid from the Fund's gross investment
income. * For definition of "capital change" please see "Distribution and
performance information." ** Scudder Large Company Value Fund changed its name
from Scudder Capital Growth Fund on February 1, 1997. Performance figures are
historical and are not intended to indicate future investment performance.
- --
6
<PAGE>
investors meet their investment needs. Please refer to "Investment products and
services" for additional information
- -----------------------------------------------------
Additional information about policies and investments
- -----------------------------------------------------
Investment restrictions
The Fund has adopted certain fundamental policies which may not be changed
without a vote of shareholders and which are designed to reduce the Fund's
investment risk.
As discussed in "Investment objective and policies," the Fund may borrow money
provided that the Fund maintains asset coverage of 300% for all borrowings
except for reverse repurchase agreements and may not make loans except through
the lending of portfolio securities, the purchase of debt securities or through
repurchase agreements.
The Fund may invest:
1) in debt securities and short term indebtedness as market or economic
conditions may warrant, and 2) up to 20% of its net assets in debt securities
and may enter into repurchase agreements and reverse repurchase agreements when
management anticipates that the capital appreciation on debt securities is
likely to equal or exceed the capital appreciation on common stocks over a
selected time, such as during periods of unusually high interest rates. As
interest rates fall, the prices of debt securities tend to rise.
A complete description of these and other policies and restrictions is contained
under "Investment Restrictions" in the Fund's combined Statement of Additional
Information.
Common stocks
Under normal circumstances, the Fund invests primarily in common stocks. Common
stock is issued by companies to raise cash for business purposes and represents
a proportionate interest in the issuing companies. Therefore, the Fund
participates in the success or failure of any company in which it holds stock.
The market values of common stock can fluctuate significantly, reflecting the
business performance of the issuing company, investor perception and general
economic or financial market movements. Smaller companies are especially
sensitive to these factors and may even become valueless. Despite the risk of
price volatility, however, common stocks also offer the greatest potential for
gain on investment, compared to other classes of financial assets such as bonds
or cash equivalents.
Debt securities
The Fund may purchase investment-grade debt securities, which are those rated
Aaa, Aa, A or Baa by Moody's Investors Service, Inc. ("Moody's"), or AAA, AA, A
or BBB by Standard & Poor's ("S&P") or, if unrated, of equivalent quality as
determined by the Adviser. The Fund may also purchase debt securities which are
rated below investment-grade. (See "Risk factors.")
Repurchase agreements
As a means of earning income for periods as short as overnight, the Fund may
enter into repurchase agreements with selected banks and broker/dealers. Under a
repurchase agreement, the Fund acquires securities, subject to the seller's
agreement to repurchase them at a specified time and price.
Convertible securities
The convertible securities in which the Fund may invest consist of bonds, notes,
debentures and preferred stocks which may be converted or exchanged at a stated
or determinable exchange ratio into underlying shares of common stock.
--
7
<PAGE>
Prior to their conversion, convertible securities may have characteristics
similar to nonconvertible securities of the same type.
Foreign securities
In addition to investments in companies domiciled in the U.S., the Fund may
invest in listed and unlisted foreign securities that meet the same criteria as
the Fund's domestic holdings. The Fund may invest in foreign securities when the
anticipated performance of foreign securities is believed by the Adviser to
offer more potential than domestic alternatives in keeping with the investment
objective of the Fund.
Strategic Transactions and derivatives
The Fund may, but is not required to, utilize various other investment
strategies as described below to hedge various market risks (such as interest
rates, currency exchange rates, and broad or specific equity or fixed-income
market movements), to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio or to enhance potential gain. These
strategies may be executed through the use of derivative contracts. Such
strategies are generally accepted as a part of modern portfolio management and
are regularly utilized by many mutual funds and other institutional investors.
Techniques and instruments may change over time as new instruments and
strategies are developed or regulatory changes occur.
In the course of pursuing these investment strategies, the Fund may purchase and
sell exchange-listed and over-the-counter put and call options on securities,
equity and fixed-income indices and other financial instruments, purchase and
sell financial futures contracts and options thereon, enter into various
interest rate transactions such as swaps, caps, floors or collars, and enter
into various currency transactions such as currency forward contracts, currency
futures contracts, currency swaps or options on currencies or currency futures
(collectively, all the above are called "Strategic Transactions").
Strategic Transactions may be used without limit to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for the Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio, or to establish a position in the
derivatives markets as a temporary substitute for purchasing or selling
particular securities. Some Strategic Transactions may also be used to enhance
potential gain although no more than 5% of the Fund's assets will be committed
to Strategic Transactions entered into for non-hedging purposes. Any or all of
these investment techniques may be used at any time and in any combination, and
there is no particular strategy that dictates the use of one technique rather
than another, as use of any Strategic Transaction is a function of numerous
variables including market conditions. The ability of the Fund to utilize these
Strategic Transactions successfully will depend on the Adviser's ability to
predict pertinent market movements, which cannot be assured. The Fund will
comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. Strategic Transactions involving
financial futures and options thereon will be purchased, sold or entered into
only for bona fide hedging, risk management or portfolio management purposes and
not for speculative purposes. Please refer to "Risk factors--Strategic
Transactions and derivatives" for more information.
Portfolio turnover
Recent economic and market conditions have necessitated more active trading,
resulting in a higher portfolio turnover rate for the Fund. A higher rate
involves greater transaction costs to the Fund and may result in the realization
of net
- --
8
<PAGE>
capital gains, which would be taxable to shareholders when distributed.
Risk factors
The Fund's risks are determined by the nature of the securities held and the
portfolio management strategies used by the Adviser. The following are
descriptions of certain risks related to the investments and techniques that the
Fund may use from time to time.
Debt securities. The Fund may invest in bonds rated Baa or BBB. Moody's
considers bonds it rates Baa to have speculative elements as well as
investment-grade characteristics. The Fund may also invest up to 20% of its net
assets in debt securities which are rated below investment- grade, or of
equivalent quality as determined by the Adviser (commonly referred to as "junk
bonds"). The lower the ratings of such debt securities, the greater their risks
render them like equity securities. The Fund will invest no more than 10% of its
net assets in securities rated B or lower by Moody's or S&P, but may invest in
securities rated C by Moody's or D by S&P, which may be in default with respect
to payment of principal or interest. Also, longer maturity bonds tend to
fluctuate more in price as interest rates change than do short-term bonds,
providing both opportunity and risk.
Repurchase agreements. If the seller under a repurchase agreement becomes
insolvent, the Fund's right to dispose of the securities may be restricted. In
the event of the commencement of bankruptcy or insolvency proceedings of the
seller of the securities before repurchase of the securities under a repurchase
agreement, the Fund may encounter delay and incur costs, including a decline in
value of the securities, before being able to sell the securities.
Convertible securities. While convertible securities generally offer lower
yields than nonconvertible debt securities of similar quality, their prices may
reflect changes in the value of the underlying common stock. Convertible
securities entail less credit risk than the issuer's common stock.
Illiquid or restricted investments. The absence of a trading market can make it
difficult to ascertain a market value for illiquid or restricted investments.
Disposing of illiquid or restricted investments may involve time-consuming
negotiation and legal expenses, and it may be difficult or impossible for the
Fund to sell them promptly at an acceptable price.
Foreign securities. Investments in foreign securities involve special
considerations, due to more limited information, higher brokerage costs and
different accounting standards. They may also entail certain risks, such as
possible imposition of dividend or interest withholding or confiscatory taxes,
possible currency blockages or transfer restrictions, expropriation,
nationalization or other adverse political or economic developments and the
difficulty of enforcing obligations in other countries. Foreign securities may
be less liquid and more volatile than comparable domestic securities, and there
is less government regulation of stock exchanges, brokers, listed companies and
banks than in the U.S. Purchases of foreign securities are usually made in
foreign currencies and, as a result, the Fund may incur currency conversion
costs and may be affected favorably or unfavorably by changes in the value of
foreign currencies against the U.S. dollar.
Strategic Transactions and derivatives. Strategic Transactions, including
derivative contracts, have risks associated with them including possible default
by the other party to the transaction, illiquidity and, to the extent the
Adviser's view as to certain market movements is incorrect, the risk that the
use of such Strategic Transactions could result in losses greater than if they
had not been used. Use of put and call options may result in losses to the Fund,
force the sale or purchase of portfolio securities at inopportune times or for
prices higher than (in the case of put options) or lower than (in the case of
call options) current
--
9
<PAGE>
market values, limit the amount of appreciation the Fund can realize on its
investments or cause the Fund to hold a security it might otherwise sell. The
use of currency transactions can result in the Fund incurring losses as a result
of a number of factors including the imposition of exchange controls, suspension
of settlements or the inability to deliver or receive a specified currency. The
use of options and futures transactions entails certain other risks. In
particular, the variable degree of correlation between price movements of
futures contracts and price movements in the related portfolio position of the
Fund creates the possibility that losses on the hedging instrument may be
greater than gains in the value of the Fund's position. In addition, futures and
options markets may not be liquid in all circumstances and certain
over-the-counter options may have no markets.
As a result, in certain markets, the Fund might not be able to close out a
transaction without incurring substantial losses, if at all. Although the use of
futures contracts and options transactions for hedging should tend to minimize
the risk of loss due to a decline in the value of the hedged position, at the
same time they tend to limit any potential gain which might result from an
increase in value of such position. Finally, the daily variation margin
requirements for futures contracts would create a greater ongoing potential
financial risk than would purchases of options, where the exposure is limited to
the cost of the initial premium. Losses resulting from the use of Strategic
Transactions would reduce net asset value, and possibly income, and such losses
can be greater than if the Strategic Transactions had not been utilized. The
Strategic Transactions that the Fund may use and some of their risks are
described more fully in the Fund's combined Statement of Additional Information.
- ----------------------------------------
Distribution and performance information
- ----------------------------------------
Dividends and capital gains distributions
The Fund intends to distribute any dividends from its net investment income and
net realized capital gains after utilization of capital loss carryforwards, if
any, annually in December to prevent application of federal excise tax, although
an additional distribution may be made if required, at a later date. Any
dividends or capital gains distributions declared in October, November or
December with a record date in such a month and paid the following January will
be treated by shareholders for federal income tax purposes as if received on
December 31 of the calendar year declared. According to preference, shareholders
may receive distributions in cash or have them reinvested in additional shares
of the Fund. If an investment is in the form of a retirement plan, all dividends
and capital gains distributions must be reinvested into the shareholder's
account.
Generally, dividends from net investment income are taxable to shareholders as
ordinary income. Long-term capital gains distributions, if any, are taxable as
long-term capital gains regardless of the length of time shareholders have owned
their shares. Short-term capital gains and any other taxable income
distributions are taxable as ordinary income. A portion of dividends from net
investment income may qualify for the dividends-received deduction for
corporations.
The Fund sends detailed tax information about the amount and type of its
distributions to shareholders by January 31 of the following year.
Performance information
From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature or shareholder reports. All performance figures
are historical, show the performance of a hypothetical investment and are not
intended to indicate future performance. "Total return" is the change in value
of an
- --
10
<PAGE>
investment in the Fund for a specified period. The "average annual total
return" of the Fund is the average annual compound rate of return of an
investment in the Fund assuming the investment has been held for one year, five
years and ten years as of a stated ending date. "Cumulative total return"
represents the cumulative change in value of an investment in the Fund for
various periods. All types of total return calculations assume that all
dividends and capital gains distributions during the period were reinvested in
shares of the Fund. Performance will vary based upon, among other things,
changes in market conditions and the level of the Fund's expenses.
- -----------------
Fund organization
- -----------------
Scudder Large Company Value Fund is a diversified series of Scudder Equity Trust
(the "Trust"), an open-end management investment company registered under the
Investment Company Act of 1940 (the "1940 Act"). The Trust's predecessor was
organized as a Delaware corporation in May 1966. The Trust was reorganized as a
Massachusetts business trust in October 1985.
The Fund changed its name from Scudder Capital Growth Fund on February 1, 1997.
The Fund's activities are supervised by the Trust's Board of Trustees.
Shareholders have one vote for each share held on matters on which they are
entitled to vote. The Trust is not required to hold and has no current intention
of holding annual shareholder meetings, although special meetings may be called
for purposes such as electing or removing Trustees, changing fundamental
investment policies or approving an investment management contract. Shareholders
will be assisted in communicating with other shareholders in connection with
removing a Trustee as if Section 16(c) of the 1940 Act were applicable.
Investment adviser
The Fund retains the investment management firm of Scudder, Stevens & Clark,
Inc., a Delaware corporation, to manage the Fund's daily investment and business
affairs subject to the policies established by the Board of Trustees. The
Trustees have overall responsibility for the management of the Fund under
Massachusetts law.
For the fiscal year ended September 30, 1997, the Adviser received an investment
management fee of ____% of the Fund's average daily net assets on an annual
basis. The fee is graduated so that increases in the Fund's net assets may
result in a lower fee and decreases in the Fund's net assets may result in a
higher fee. The fee is payable monthly, provided that the Fund will make such
interim payments as may be requested by the Adviser not to exceed 75% of the
amount of the fee then accrued on the books of the Fund and unpaid.
Under the Investment Management Agreement with the Adviser, the Fund is
responsible for all of its expenses, including fees and expenses incurred in
connection with membership in investment company organizations; fees and
expenses of the Fund's accounting agent; brokers' commissions; legal, auditing
and accounting expenses; taxes and governmental fees; the fees and expenses of
the transfer agent; the expenses of and the fees for registering or qualifying
securities for sale; the fees and expenses of Trustees, officers and employees
of the Trust who are not affiliated with the Adviser; the cost of printing and
distributing reports and notices to shareholders; and the fees and disbursements
of custodians.
All the Fund's expenses are paid out of gross investment income. Shareholders
pay no direct charges or fees for investment or administrative services.
Scudder, Kemper Investments, Inc. is located at 345 Park Avenue, New York, New
York 10154-0010.
--
11
<PAGE>
Transfer agent
Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts 02107-2291, a
subsidiary of the Adviser, is the transfer, shareholder servicing and
dividend-paying agent for the Fund.
Underwriter
Scudder Investor Services, Inc., a subsidiary of the Adviser, is the Fund's
principal underwriter. Scudder Investor Services, Inc. confirms, as agent, all
purchases of shares of the Fund. Scudder Investor Relations is a telephone
information service provided by Scudder Investor Services, Inc.
Custodian
State Street Bank and Trust Company is the Fund's custodian.
Fund accounting agent
Scudder Fund Accounting Corporation, a subsidiary of the Adviser, is responsible
for determining the daily net asset value per share and maintaining the general
accounting records of the Fund.
- -----------------------
Transaction information
- -----------------------
Purchasing shares
Purchases are executed at the next calculated net asset value per share after
the Fund's transfer agent receives the purchase request in good order. Purchases
are made in full and fractional shares. (See "Share price.")
By check. If you purchase shares with a check that does not clear, your purchase
will be canceled and you will be subject to any losses or fees incurred in the
transaction. Checks must be drawn on or payable through a U.S. bank. If you
purchase shares by check and redeem them within seven business days of purchase,
the Fund may hold redemption proceeds until the purchase check has cleared. If
you purchase shares by federal funds wire, you may avoid this delay. Redemption
requests by telephone prior to the expiration of the seven-day period will not
be accepted.
By wire. To open a new account by wire, first call Scudder at 1-800-225-5163 to
obtain an account number. A representative will instruct you to send a
completed, signed application to the transfer agent. Accounts cannot be opened
without a completed, signed application and a Scudder fund account number.
Contact your bank to arrange a wire transfer to:
The Scudder Funds
State Street Bank and Trust Company
Boston, MA 02101
ABA Number 011000028
DDA Account 9903-5552
Your wire instructions must also include:
- - the name of the fund in which the money is to be invested,
- - the account number of the fund, and
- - the name(s) of the account holder(s).
The account will be established once the application and money order are
received in good order.
You may also make additional investments of $100 or more to your existing
account by wire.
By telephone order. Existing shareholders may purchase shares at a certain day's
price by calling 1-800-225-5163 before the close of regular trading on the New
York Stock Exchange (the "Exchange"), normally 4 p.m. eastern time, on that day.
Orders must be for $10,000 or more and cannot be for an amount greater than four
times the value of your account at the time the order is placed. A confirmation
with complete purchase information is sent shortly after your order is received.
You must include with your payment the order number given at the time the order
is placed. If payment by check or wire is not received within three business
days, the order is subject to cancellation and the shareholder will be
responsible for any loss to the Fund resulting from this cancellation. Telephone
orders are not available for shares held in Scudder IRA accounts
- --
12
<PAGE>
and most other Scudder retirement plan accounts.
By "QuickBuy." If you elected "QuickBuy" for your account, you can call
toll-free to purchase shares. The money will be automatically transferred from
your predesignated bank checking account. Your bank must be a member of the
Automated Clearing House for you to use this service. If you did not elect
"QuickBuy," call 1-800-225-5163 for more information.
To purchase additional shares, call 1-800-225-5163. Purchases may not be for
more than $250,000. Proceeds in the amount of your purchase will be transferred
from your bank checking account in two or three business days following your
call. For requests received by the close of regular trading on the Exchange,
shares will be purchased at the net asset value per share calculated at the
close of trading on the day of your call. "QuickBuy" requests received after the
close of regular trading on the Exchange will begin their processing and be
purchased at the net asset value calculated the following business day.
If you purchase shares by "QuickBuy" and redeem them within seven days of the
purchase, the Fund may hold the redemption proceeds for a period of up to seven
business days. If you purchase shares and there are insufficient funds in your
bank account, the purchase will be canceled and you will be subject to any
losses or fees incurred in the transaction. "QuickBuy" transactions are not
available for most retirement plan accounts. However, "QuickBuy" transactions
are available for Scudder IRA accounts.
By exchange. The Fund may be exchanged for shares of other funds in the Scudder
Family of Funds unless otherwise determined by the Board of Trustees. Your new
account will have the same registration and address as your existing account.
The exchange requirements for corporations, other organizations, trusts,
fiduciaries, agents, institutional investors and retirement plans may be
different from those for regular accounts. Please call 1-800-225-5163 for more
information, including information about the transfer of special account
features.
You can also make exchanges among your Scudder fund accounts on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.
Redeeming shares
The Fund allows you to redeem shares (i.e., sell them back to the Fund) without
redemption fees.
By telephone. This is the quickest and easiest way to sell Fund shares. If you
provided your banking information on your application, you can call to request
that federal funds be sent to your authorized bank account. If you did not
include your banking information on your application, call 1-800-225-5163 for
more information.
Redemption proceeds will be wired to your bank unless otherwise requested. If
your bank cannot receive federal reserve wires, redemption proceeds will be
mailed to your bank. There will be a $5 charge for all wire redemptions.
You can also make redemptions from your Scudder fund account on SAIL by calling
1-800-343-2890.
If you open an account by wire, you cannot redeem shares by telephone until the
Fund's transfer agent has received your completed and signed application.
Telephone redemption is not available for shares held in Scudder IRA accounts
and most other Scudder retirement plan accounts.
In the event that you are unable to reach the Fund by telephone, you should
write to the Fund; see "How to contact Scudder" for the address.
In the event that you are unable to reach the Fund by telephone, you should
write to the Fund; see "How to contact Scudder" for the address.
By "QuickSell." If you elected "QuickSell" for your account, you can call
toll-free to redeem shares. The money will be automatically transferred to your
predesignated bank checking account. Your bank must be a member of the
--
13
<PAGE>
Automated Clearing House for you to use this service. If you did not elect
"QuickSell," call 1-800-225-5163 for more information.
To redeem shares, call 1-800-225-5163. Redemptions must be for at least $250.
Proceeds in the amount of your redemption will be transferred to your bank
checking account in two or three business days following your call. For requests
received by the close of regular trading on the Exchange, shares will be
redeemed at the net asset value per share calculated at the close of trading on
the day of your call. "QuickSell" requests received after the close of regular
trading on the Exchange will begin their processing and be redeemed at the net
asset value calculated the following business day.
"QuickSell" transactions are not available for Scudder IRA accounts and most
other retirement plan accounts.
Signature guarantees. For your protection and to prevent fraudulent redemptions,
on written redemption requests in excess of $100,000 we require an original
signature and an original signature guarantee for each person in whose name the
account is registered. (The Fund reserves the right, however, to require a
signature guarantee for all redemptions.) You can obtain a signature guarantee
from most banks, credit unions or savings associations, or from broker/dealers,
municipal securities broker/dealers, government securities broker/dealers,
national securities exchanges, registered securities associations or clearing
agencies deemed eligible by the Securities and Exchange Commission. Signature
guarantees by notaries public are not acceptable. Redemption requirements for
corporations, other organizations, trusts, fiduciaries, agents, institutional
investors and retirement plans may be different from those for regular accounts.
For more information, please call 1-800-225-5163.
Telephone transactions
Shareholders automatically receive the ability to exchange by telephone and the
right to redeem by telephone up to $100,000 to their address of record.
Shareholders also may, by telephone, request that redemption proceeds be sent to
a predesignated bank account. The Fund uses procedures designed to give
reasonable assurance that telephone instructions are genuine, including
recording telephone calls, testing a caller's identity and sending written
confirmation of telephone transactions. If the Fund does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Fund will not be liable for acting upon instructions
communicated by telephone that it reasonably believes to be genuine.
Share price
Purchases and redemptions, including exchanges, are made at net asset value.
Scudder Fund Accounting Corporation determines net asset value per share as of
the close of regular trading on the Exchange, normally 4 p.m. eastern time, on
each day the Exchange is open for trading. Net asset value per share is
calculated by dividing the value of total Fund assets, less all liabilities, by
the total number of shares outstanding.
Processing time
All purchase and redemption requests must be received in good order by the
Fund's transfer agent. Those requests received by the close of regular trading
on the Exchange are executed at the net asset value per share calculated at the
close of regular trading that day.
Purchase and redemption requests received after the close of regular trading on
the Exchange will be executed the following business day.
If you wish to make a purchase of $500,000 or more, you should notify Scudder
Investor Relations by calling 1-800-225-5163.
- --
14
<PAGE>
The Fund will normally send your redemption proceeds within one business day
following the redemption request, but may take up to seven business days (or
longer in the case of shares recently purchased by check).
Purchase restrictions
Purchases and sales should be made for long-term investment purposes only. The
Fund and Scudder Investor Services, Inc. each reserves the right to reject
purchases of Fund shares (including exchanges) for any reason, including when a
pattern of frequent purchases and sales made in response to short-term
fluctuations in the Fund's share price appears evident.
Tax information
A redemption of shares, including an exchange into another Scudder fund, is a
sale of shares and may result in a gain or loss for income tax purposes.
Tax identification number
Be sure to complete the Tax Identification Number section of the Fund's
application when you open an account. Federal tax law requires the Fund to
withhold 31% of taxable dividends, capital gains distributions and redemption
and exchange proceeds from accounts (other than those of certain exempt payees)
without a correct certified Social Security or tax identification number and
certain other certified information or upon notification from the IRS or a
broker that withholding is required. The Fund reserves the right to reject new
account applications without a correct certified Social Security or tax
identification number. The Fund also reserves the right, following 30 days'
notice, to redeem all shares in accounts without a correct certified Social
Security or tax identification number. A shareholder may avoid involuntary
redemption by providing the Fund with a tax identification number during the
30-day notice period.
Minimum balances
Shareholders should maintain a share balance worth at least $2,500, which amount
may be changed by the Board of Trustees. Scudder retirement plans and certain
other accounts have similar or lower minimum balance requirements. A shareholder
may open an account with at least $1,000, if an automatic investment plan of
$100/month is established.
Shareholders who maintain a non-fiduciary account balance of less than $2,500 in
the Fund, without establishing an automatic investment plan, will be assessed an
annual $10.00 per fund charge with the fee to be paid to the Fund. The $10.00
charge will not apply to shareholders with a combined household account balance
in any of the Scudder Funds of $25,000 or more. The Fund reserves the right,
following 60 days' written notice to shareholders, to redeem all shares in
accounts below $250, including accounts of new investors, where a reduction in
value has occurred due to a redemption or exchange out of the account. The Fund
will mail the proceeds of the redeemed account to the shareholder. Reductions in
value that result solely from market activity will not trigger an involuntary
redemption. Retirement accounts and certain other accounts will not be assessed
the $10.00 charge or be subject to automatic liquidation. Please refer to
"Exchanges and Redemptions--Other information" in the Fund's Statement of
Additional Information for more information.
Third party transactions
If purchases and redemptions of Fund shares are arranged and settlement is made
at an investor's election through a member of the National Association of
Securities Dealers, Inc., other than Scudder Investor Services, Inc., that
member may, at its discretion, charge a fee for that service.
Redemption-in-kind
The Fund reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase order by making
payment in whole or in part in readily marketable securities chosen by the Fund
and valued as they are for purposes of computing the Fund's net asset value (a
redemption-in-kind). If
--
15
<PAGE>
payment is made in securities, a shareholder may incur transaction expenses in
converting these securities to cash. The Trust has elected, however, to be
governed by Rule 18f-1 under the 1940 Act, as a result of which the Fund is
obligated to redeem shares, with respect to any one shareholder during any
90-day period, solely in cash up to the lesser of $250,000 or 1% of the net
asset value of the Fund at the beginning of the period.
- --------------------
Shareholder benefits
- --------------------
Experienced professional management
Scudder, Stevens & Clark, Inc., one of the nation's most experienced investment
management firms, actively manages your Scudder fund investment. Professional
management is an important advantage for investors who do not have the time or
expertise to invest directly in individual securities.
A team approach to investing
Scudder Large Company Value Fund is managed by a team of Scudder investment
professionals who each play an important role in the Fund's management process.
Team members work together to develop investment strategies and select
securities for the Fund's portfolio. They are supported by Scudder's large staff
of economists, research analysts, traders and other investment specialists who
work in Scudder's offices across the United States and abroad. Scudder believes
its team approach benefits Fund investors by bringing together many disciplines
and leveraging Scudder's extensive resources.
Lead Portfolio Manager Kathleen T. Millard assumed responsibility for the Fund's
day-to-day management in 1995. Ms. Millard, who joined Scudder in 1991, has been
involved in the investment industry since 1983 and has worked as a portfolio
manager since 1986. Lois R. Friedman Roman, Portfolio Manager, joined the Fund
in 1995 and Scudder in 1994 and has nine years of experience as an equity
analyst.
SAIL(TM)--Scudder Automated Information Line
For personalized account information including fund prices, yields and account
balances, to perform transactions in existing Scudder fund accounts, or to
obtain information on any Scudder fund, shareholders can call Scudder's
Automated Information Line (SAIL) at 1-800-343-2890, 24 hours a day. During
periods of extreme economic or market changes, or other conditions, it may be
difficult for you to effect telephone transactions in your account. In such an
event you should write to the Fund; please see "How to contact Scudder" for the
address.
Investment flexibility
Scudder offers toll-free telephone exchange between funds at current net asset
value. You can move your investments among money market, income, growth,
tax-free and growth and income funds with a simple toll-free call or, if you
prefer, by sending your instructions through the mail or by fax. (The exchange
privilege may not be available for certain Scudder funds. For more information,
please call 1-800-225-5163.) Telephone and fax redemptions and exchanges are
subject to termination and their terms are subject to change at any time by the
Fund or the transfer agent. In some cases, the transfer agent or Scudder
Investor Services, Inc. may impose additional conditions on telephone
transactions.
Personal Counsel(SM)--A Managed Fund Portfolio Program
If you would like to receive direct guidance and management of your overall
mutual fund portfolio to help you pursue your investment goals, you may be
interested in Personal Counsel from Scudder. Personal Counsel, a program of
Scudder Investor Services, Inc., a registered investment adviser and a
subsidiary of Scudder, Stevens & Clark, Inc., combines the benefits of a
customized portfolio of pure no-load Scudder Funds with ongoing portfolio
monitoring and individualized service, for an annual fee of
- --
16
<PAGE>
generally 1% or less of assets (with a $1,000 minimum). In addition, it draws
upon Scudder's more than 75-year heritage of providing investment counsel to
large corporate and private clients. If you have $100,000 or more to invest
initially and would like more information about Personal Counsel, please call
1-800-700-0183.
Dividend reinvestment plan
You may have dividends and distributions automatically reinvested in additional
Fund shares. Please call 1-800-225-5163 to request this feature.
Shareholder statements
You receive a detailed account statement every time you purchase or redeem
shares. All of your statements should be retained to help you keep track of
account activity and the cost of shares for tax purposes.
Shareholder reports
In addition to account statements, you receive periodic shareholder reports
highlighting relevant information, including investment results and a review of
portfolio changes.
To reduce the volume of mail you receive, only one copy of most Fund reports,
such as the Fund's Annual Report, may be mailed to your household (same surname,
same address). Please call 1-800-225-5163 if you wish to receive additional
shareholder reports.
Newsletters
Four times a year, Scudder sends you Perspectives, an informative newsletter
covering economic and investment developments, service enhancements and other
topics of interest to Scudder fund investors.
Scudder Investor Centers
As a convenience to shareholders who like to conduct business in person, Scudder
Investor Services, Inc. maintains Investor Centers in Boca Raton, Boston,
Chicago, New York and San Francisco.
T.D.D. service for the hearing impaired
Scudder's full range of investor information and shareholder services is
available to hearing impaired investors through a toll-free T.D.D. (Telephone
Device for the Deaf) service. If you have access to a T.D.D., call
1-800-543-7916 for investment information or specific account questions and
transactions.
--
17
<PAGE>
- ---------
Purchases
- ---------
<TABLE>
<CAPTION>
<S> <C> <C>
Opening Minimum initial investment: $2,500; IRAs $1,000
an account Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums. See appropriate
plan literature.
Make checks o By Mail Send your completed and signed application and check
payable to "The
Scudder Funds." by regular mail to; or by express, registered,
or certified mail to;
The Scudder Funds Scudder Shareholder Service
P.O. Box 2291 Center
Boston, MA 42 Longwater Drive
02107-2291 Norwell, MA
02061-1612
o By Wire Please see Transaction information--Purchasing shares--
By wire following these tables for details, including the ABA wire
transfer number. Then call 1-800-225-5163 for instructions.
o In Person Visit one of our Investor Centers to complete your application with the
help of a Scudder representative. Investor Center locations are listed
under Shareholder benefits.
- -----------------------------------------------------------------------------------------------------------------------
Purchasing Minimum additional investment: $100; IRAs $50
additional shares Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums. See appropriate
plan literature.
Make checks o By Mail Send a check with a Scudder investment slip, or with a letter of
payable to "The instruction including your account number and the complete Fund name, to
Scudder Funds." the appropriate address listed above.
o By Wire Please see Transaction information--Purchasing shares--
By wire following these tables for details, including the ABA
wire transfer number.
o In Person Visit one of our Investor Centers to make an additional
investment in your Scudder fund account. Investor Center locations
are listed under Shareholder benefits.
o By Telephone Please see Transaction information--Purchasing shares--
By QuickBuy or By telephone order for more details.
o By Automatic You may arrange to make investments on a regular basis
Investment Plan through automatic deductions from your bank checking
($50 minimum) account. Please call 1-800-225-5163 for more information and an
enrollment form.
</TABLE>
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18
<PAGE>
- -------------------------
Exchanges and redemptions
- -------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Exchanging Minimum investments: $2,500 to establish a new
shares account; $100 to exchange among existing accounts
o By Telephone To speak with a service representative, call 1-800-225-5163 from
8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day).
o By Mail Print or type your instructions and include:
or Fax - the name of the Fund and the account number you are exchanging from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to exchange;
- the name of the Fund you are exchanging into;
- your signature(s) as it appears on your account; and
- a daytime telephone number.
Send your instructions
by regular mail to: or by express, registered, or by fax to:
or certified mail to:
The Scudder Funds Scudder Shareholder Service 1-800-821-6234
P.O. Box 2291 Center
Boston, MA 02107-2291 42 Longwater Drive
Norwell, MA
02061-1612
- -----------------------------------------------------------------------------------------------------------------------
Redeeming o By Telephone To speak with a service representative, call 1-800-225-5163 from 8 a.m. to 8 p.m.
shares eastern time or to access SAIL(TM), Scudder's Automated Information
Line, call 1-800-343-2890 (24 hours a day). You may have redemption
proceeds sent to your predesignated bank account, or redemption
proceeds of up to $100,000 sent to your address of record.
o By Mail Send your instructions for redemption to the appropriate address or fax number
or Fax 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.
A signature guarantee is required for redemptions over $100,000. See
Transaction information--Redeeming shares.
o By Automatic You may arrange to receive automatic cash payments periodically.
Withdrawal Call 1-800-225-5163 for more information and an enrollment form.
Plan
</TABLE>
--
19
<PAGE>
- ---------------------------------------
Scudder tax-advantaged retirement plans
- ---------------------------------------
Scudder offers a variety of tax-advantaged retirement plans for individuals,
businesses and non-profit organizations. These flexible plans are designed for
use with the Scudder Family of Funds (except Scudder tax-free funds, which are
inappropriate for such plans). Scudder Funds offer a broad range of investment
objectives and can be used to seek almost any investment goal. Using Scudder's
retirement plans can help shareholders save on current taxes while building
their retirement savings.
o Scudder No-Fee IRAs. These retirement plans allow a maximum annual
contribution of up to $2,000 per person for anyone with earned
income (up to $2,000 per individual for married couples if only one
spouse has earned income). Many people can deduct all or part of
their contributions from their taxable income, and all investment
earnings accrue on a tax-deferred basis. The Scudder No-Fee IRA
charges you no annual custodial fee. 401(k) Plans.
o 401(k) plans allow employers and employees to make tax-deductible
retirement contributions. Scudder offers a full service program that
includes recordkeeping, prototype plan, employee communications and
trustee services, as well as investment options.
o Profit Sharing and Money Purchase Pension Plans. These plans allow
corporations, partnerships and people who are self-employed to make
annual, tax-deductible contributions of up to $30,000 for each
person covered by the plans. Plans may be adopted individually or
paired to maximize contributions. These are sometimes known as Keogh
plans. The Scudder Keogh charges you no annual custodial fee.
o 403(b) Plans. Retirement plans for tax-exempt organizations and
school systems to which employers and employees may both contribute.
o SEP-IRAs. Easily administered retirement plans for small businesses
and self-employed individuals. The maximum annual contribution to
SEP-IRA accounts is adjusted each year for inflation. The Scudder
SEP-IRA charges you no annual custodial fee.
o Scudder Horizon Plan. A no-load variable annuity that lets you build
assets by deferring taxes on your investment earnings. You can start
with $2,500 or more.
Scudder Trust Company (an affiliate of the Adviser) is Trustee or Custodian for
some of these plans and is paid an annual fee for some of the above retirement
plans. For information about establishing a Scudder No-Fee IRA, SEP-IRA, Profit
Sharing Plan, Money Purchase Pension Plan or a Scudder Horizon Plan, please call
1-800-225-2470. For information about 401(k)s or 403(b)s please call
1-800-323-6105. To effect transactions in existing IRA, SEP-IRA, Profit Sharing
or Pension Plan accounts, call 1-800-225-5163.
The variable annuity contract is provided by Charter National Life Insurance
Company (in New York State, Intramerica Life Insurance Company [S 1802]). The
contract is offered by Scudder Insurance Agency, Inc. (in New York State, Nevada
and Montana, Scudder Insurance Agency of New York, Inc.). CNL, Inc. is the
Principal Underwriter. Scudder Horizon Plan is not available in all states.
Scudder Investor Relations is a service provided through Scudder Investor
Services, Inc., Distributor.
- --
20
<PAGE>
- ---------------------
Trustees and Officers
- ---------------------
Daniel Pierce*
President and Trustee
Paul Bancroft III
Trustee; Venture Capitalist and Consultant
Sheryle J. Bolton
Trustee; Chief Executive Officer, Scientific Learning Corporation
William T. Burgin
Trustee, General Partner, Bessemer Venture Partners
Thomas J. Devine
Trustee; Consultant
Keith R. Fox
Trustee; President, Exeter Capital
Management Corporation
William H. Luers
Trustee; President, The Metropolitan Museum of Art
Dr. Wilson Nolen
Trustee; Consultant
Kathryn L. Quirk*
Trustee, Vice President and
Assistant Secretary
Robert W. Lear
Honorary Trustee; Executive-in-Residence,
Columbia University Graduate School of Business
Robert G. Stone, Jr.
Honorary Trustee; Chairman of the
Board and Director, Kirby Corporation
Donald E. Hall*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Kathleen T. Millard*
Vice President
Thomas F. McDonough*
Vice President, Secretary and Assistant Treasurer
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
*Scudder, Stevens & Clark, Inc.
--
21
<PAGE>
- --------------------------------
Investment products and services
- --------------------------------
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series--
Premium Shares*
Managed Shares*
Scudder Government Money Market Series--Managed Shares*
Tax Free Money Market+
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited
Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
Scudder Balanced Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
U.S. Growth
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
Worldwide
Scudder Global Fund
Scudder International Growth and Income Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Retirement Programs
IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan **+++ +++
(a variable annuity)
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed in order from
expected least risk to most risk. Certain Scudder funds may not be available for
purchase or exchange. +A portion of the income from the tax-free funds may be
subject to federal, state, and local taxes. *A class of shares of the Fund.
**Not available in all states. ++++++A no-load variable annuity contract
provided by Charter National Life Insurance Company and its affiliate, offered
by Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by
Scudder Kemper Investments, Inc., are traded on various stock exchanges.
- --
22
<PAGE>
- ----------------------
How to contact Scudder
- ----------------------
Account Service and Information:
For existing account service and transactions
Scudder Investor Relations--1-800-225-5163
For 24 hour account information, fund information, exchanges, and an
overview of all the services available to you
Scudder Electronic Account Services -- http://funds.scudder.com
For personalized information about your Scudder
accounts, exchanges and redemptions
Scudder Automated Information Line(SAIL)--1-800-343-2890
Investment Information:
For information about the Scudder funds, including additional applications
and prospectuses, or for answers to investment questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services--1-800-323-6105
Scudder Brokerage Services:
To receive information about this discount brokerage service and to obtain
an application
Scudder Brokerage Services* -- 1-800-700-0820
Personal Counsel(SM)--A Managed Fund Portfolio Program:
To receive information about this mutual fund portfolio guidance and
management program
Personal Counsel from Scudder--1-800-700-0183
Please address all correspondence to:
The Scudder Funds
P.O. Box 2291
Boston, Massachusetts
02107-2291
Or Stop by a Scudder Investor Center:
Many shareholders enjoy the personal, one-on-one service of the Scudder
Investor Centers. Check for an Investor Center near you--they can be found
in the following cities:
Boca Raton Chicago San Francisco
Boston New York
Scudder Investor Relations and Scudder Investor Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA
02061--Member NASD/SIPC.
--
23
<PAGE>
This prospectus sets forth concisely the information about Scudder Value Fund, a
series of Scudder Equity Trust, an open-end management investment company, that
a prospective investor should know before investing. Please retain it for future
reference.
If you require more detailed information, a combined Statement of Additional
Information dated February 1, 1998, as amended from time to time, may be
obtained without charge by writing Scudder Investor Services, Inc., Two
International Place, Boston, MA 02110-4103 or calling 1-800-225-2470. The
Statement, which is incorporated by reference into this prospectus, has been
filed with the Securities and Exchange Commission and is available along with
other related materials on the SEC's Internet Web site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Contents--see page 4.
Scudder
Value
Fund
Prospectus
February 1, 1998
A pure no-load(TM) (no sales charges) mutual fund which seeks long-term growth
of capital through investment in undervalued equity securities.
<PAGE>
Expense information
How to compare a Scudder pure no-load(TM) fund
This information is designed to help you understand the various costs and
expenses of investing in Scudder Value Fund (the "Fund"). By reviewing this
table and those in other mutual funds' prospectuses, you can compare the Fund's
fees and expenses with those of other funds. With Scudder's pure no-load(TM)
funds, you pay no commissions to purchase or redeem shares, or to exchange from
one fund to another. As a result, all of your investment goes to work for you.
1) Shareholder transaction expenses: Expenses charged directly to your
individual account in the Fund for various transactions.
Sales commissions to purchase shares (sales load) NONE
Commissions to reinvest dividends NONE
Redemption fees NONE*
Fees to exchange shares NONE
2) Annual Fund operating expenses: Expenses paid by the Fund before it
distributes its net investment income, expressed as a percentage of the
Fund's average daily net assets for the fiscal year ended September 30,
1997.
Investment management fee (after waiver) 0.64%**
12b-1 fees NONE
Other expenses 0.61%
Total Fund operating expenses 1.25%**
Example
Based on the level of total Fund operating expenses listed above, the total
expenses relating to a $1,000 investment, assuming a 5% annual return and
redemption at the end of each period, are listed below. Investors do not pay
these expenses directly; they are paid by the Fund before it distributes its net
investment income to shareholders. (As noted above, the Fund has no redemption
fees of any kind.)
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$13 $40 $69 $151
See "Fund organization--Investment adviser" for further information about the
investment management fee. This example assumes reinvestment of all dividends
and distributions and that the percentage amounts listed under "Annual Fund
operating expenses" remain the same each year. This example should not be
considered a representation of past or future expenses or return. Actual Fund
expenses and return vary from year to year and may be higher or lower than those
shown.
* You may redeem by writing or calling the Fund. If you wish to receive your
redemption proceeds via wire, there is a $5 wire service fee. For
additional information, please refer to "Transaction information--Redeeming
shares."
** Until July 31, 1997, the Adviser has agreed to waive a portion of its fee
to the extent necessary so that the total annualized expenses of the Fund
do not exceed 1.25% of average daily net assets. If the Adviser had not
agreed to waive a portion of its fee, Fund expenses would have been:
investment management fee 0.70%, other expenses 0.61% and total operating
expenses 1.31% for the fiscal year ended September 30, 1996.
2
<PAGE>
Financial highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the audited financial
statements.
If you would like more detailed information concerning the Fund's performance, a
complete portfolio listing and audited financial statements are available in the
Fund's Annual Report dated September 30, 1997 and may be obtained without charge
by writing or calling Scudder Investor Services, Inc.
<TABLE>
<CAPTION>
For the Period
December 31, 1992
(commencement of
operations) to
Years Ended September 30, September 30,
1997(a) 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------
Net asset value, beginning of period ....... $17.52 $15.87 $13.08 $13.38 $12.00
Income from investment operations: --------------------------------------------------------------------------------
Net investment income ...................... .34 .21 .18 .13 .10
Net realized and unrealized gain on
investments ............................. 7.22 2.40 2.86 .11 1.28
--------------------------------------------------------------------------------
Total from investment operations ........... 7.56 2.61 3.04 .24 1.38
Less distributions from: --------------------------------------------------------------------------------
Net investment income ...................... (.07) (.04) (.12) (.11) --
Net realized gains on investment
transactions (1.48) (.92) (.13) (.43) --
--------------------------------------------------------------------------------
Total distributions ........................ (1.55) (.96) (.25) (.54) --
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net asset value, end of period ............. $23.53 $17.52 $15.87 $13.08 $13.38
--------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Return (%) (b) ....................... 45.80 17.18 23.62 1.88 11.50**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ..... 298 89 68 35 29
Ratio of operating expenses, net to
average daily net assets (%) ............ 1.24 1.25 1.25 1.25 1.25*
Ratio of operating expenses before expense
reductions, to average daily net
assets (%) .............................. 1.28 1.31 1.44 1.61 2.16*
Ratio of net investment income to average
daily net assets (%) .................... 1.67 1.34 1.57 1.16 1.56*
Portfolio turnover rate (%) ................ 47.40 90.8 98.2 74.6 60.8*
Average commission rate paid (c) ........... $.0577 $.0577 $ -- $ -- $ --
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been reduced.
(c) Average commission rate paid per share of common and preferred stocks is
calculated for fiscal years beginning on or after October 1, 1995.
* Annualized
** Not annualized
3
<PAGE>
A message from Scudder's chairman
Scudder, Stevens & Clark, Inc., investment adviser to the Scudder Family of
Funds, was founded in 1919. We offered America's first no-load mutual fund in
1928. During the past year, Scudder entered into an alliance with Zurich
Insurance Company in which Zurich has acquired a majority interest in Scudder
and combined Scudder with Zurich Kemper Investments, Inc. Scudder's name has
been changed to Scudder Kemper Investments, Inc. Today the combined forces of
Scudder Kemper manage in excess of $___ billion for many private accounts and
over __ mutual fund portfolios. We continue to manage the mutual funds in a
special program for the American Association of Retired Persons, as well as the
fund options available through Scudder Horizon Plan, a tax-advantaged variable
annuity. We also advise The Japan Fund and nine closed-end funds that invest in
countries around the world.
The Scudder Family of Funds is designed to make investing easy and less costly.
It includes money market, tax free, income and growth funds as well as IRAs,
401(k)s, Keoghs and other retirement plans.
Services available to all shareholders include toll-free access to the
professional service representatives of Scudder Investor Relations, easy
exchange among funds, shareholder reports, informative newsletters and the
walk-in convenience of Scudder Investor Centers.
The funds of the Scudder Family of Funds are pure no-load(TM). This means you
pay no commissions to purchase or redeem your shares or to exchange from one
fund to another. There are no "12b-1" fees either, which many other funds now
charge to support their marketing efforts. All of your investment goes to work
for you. We look forward to welcoming you as a shareholder.
/s/Daniel Pierce
Scudder Value Fund
Investment objective
o long-term growth of capital through investment in undervalued equity
securities
Investment characteristics
o a portfolio composed primarily of equity securities that are considered
undervalued relative to current and estimated future earnings and dividends
o a highly disciplined investment management process incorporating both
traditional fundamental research and modern quantitative techniques
o a focus on medium- to large-sized companies
o daily liquidity at current net asset value
Contents
Investment objective and policies......................5
Why invest in the Fund?................................6
Additional information about policies
and investments.....................................6
Distribution and performance information..............10
Fund organization.....................................10
Transaction information...............................11
Shareholder benefits..................................15
Purchases.............................................17
Exchanges and redemptions.............................18
Trustees and Officers.................................20
Investment products and services......................21
How to contact Scudder................................22
4
<PAGE>
Investment objective and policies
Scudder Value Fund (the "Fund"), a diversified series of Scudder Equity Trust,
seeks long-term growth of capital through investment in undervalued equity
securities. The Fund invests in the securities of companies that, in the opinion
of its investment adviser, Scudder Kemper Investments, Inc. (the "Adviser"), are
undervalued in the marketplace in relation to current and estimated future
earnings and dividends. These companies generally sell at price-earnings ratios
below the market average, as defined by the Standard & Poor's 500 Composite
Price Index.
The Fund invests at least 80% of its assets in equity securities, which consist
of common stocks, preferred stocks and securities convertible into common
stocks. The Fund changes its portfolio securities for long-term investment
considerations and not for trading purposes.
Except as otherwise indicated, the Fund's investment objective and policies are
not fundamental and may be changed without a vote of shareholders. If there is a
change in investment objective, shareholders should consider whether the Fund
remains an appropriate investment in light of their then current financial
position and needs. There can be no assurance that the Fund's objective will be
met.
Investments
The Fund invests primarily in the equity securities of medium- to large-sized
domestic companies with annual revenues or market capitalization of at least
$600 million. The Adviser uses in-depth fundamental research and a proprietary
computerized quantitative model to identify companies that are currently
undervalued in relation to current and estimated future earnings and dividends.
The investment process also involves an assessment of business risk, including
the Adviser's analysis of the strength of a company's balance sheet, the
accounting practices a company follows, the volatility of a company's earnings
over time, and the vulnerability of earnings to changes in external factors,
such as the general economy, the competitive environment, governmental action,
and technological change.
The current share price or other valuation measures of these companies may not
reflect their business potential because investors may perform incomplete
analyses, have limited time horizons, or allow emotions to influence their
investment decisions. Other similar factors can also influence short-term market
behavior. The Adviser's quantitative approach is designed to help avoid these
pitfalls.
While a broad range of investments are considered, only those that, in the
Adviser's opinion, are selling at comparatively large discounts to intrinsic
value will be purchased for the Fund. It is anticipated that the prices of the
Fund's investments will rise as a result of both earnings growth and rising
price-earnings ratios over time.
While the Fund emphasizes U.S. investments, it can invest its assets in
securities of foreign companies which meet the same criteria applicable to
domestic investments. The Fund may invest up to 20% of its total assets in debt
obligations, including zero coupon securities and may enter into repurchase
agreements and reverse repurchase agreements. In addition, the Fund may engage
in strategic transactions. See "Additional information about policies and
investments" for more information about these investment techniques.
In addition, the Fund may borrow from banks and other financial institutions in
an amount not exceeding the value of one-third of the Fund's total assets.
Reverse repurchase agreements are not subject to the one-third asset coverage
requirement. The Fund currently intends to borrow only for temporary or
emergency purposes, such as providing for redemptions or distributions, and not
for investment purposes.
5
<PAGE>
From time to time, the Fund may invest a portion of its assets in cash and cash
equivalents when the Adviser deems such a position advisable in light of
economic or market conditions.
Why invest in the Fund?
Scudder Value Fund provides investors with convenient, low-cost access to a
diversified portfolio of stocks believed to be undervalued by the Adviser. The
Fund invests predominantly in the equity securities of financially sound U.S.
companies. These companies tend to have below-market price-earnings ratios yet,
in the opinion of the Adviser, will reward investors with above-average
appreciation over time.
The Fund is distinctive in the manner in which it combines systematic valuation
techniques with intensive, traditional fundamental research. The Adviser's
proprietary computer-based valuation model was developed and tested over several
years before being first implemented in 1987. In addition to identifying
undervalued securities, the quantitative model also provides the discipline
required to sell appreciated securities as their prices rise to reflect their
earnings potential. The model relies on the Adviser's independent equity
research effort for estimates of future earnings and dividend growth and
proprietary quality ratings. The Adviser maintains one of the largest equity
research departments in the industry and has done so for more than 60 years. The
Adviser oversees in excess of $400 million in institutional assets using this
price-sensitive approach.
The Fund is appropriate for investors who understand the risks of stock market
investing. Although the Fund emphasizes securities of companies the Adviser
believes are undervalued, movements of the stock market will affect the Fund's
share price.
While the Fund may invest in a broad range of industries, it is not, by itself,
a complete investment program. Nonetheless, it can serve as a core component of
an investment program that includes money market, bond and specialized equity
investments. Moreover, growth portfolios and value portfolios generally do not
move in tandem, so adding the Fund to your portfolio of growth stocks or growth
mutual funds should increase diversification and reduce investment risk.
In addition, the Fund offers all the benefits of the Scudder Family of Funds.
The Adviser manages a diverse family of pure no-load(TM) funds and provides a
wide range of services to help investors meet their investment needs. Please
refer to "Investment products and services" for additional information.
Additional information about policies and investments
Investment restrictions
The Fund has adopted certain fundamental policies which may not be changed
without a vote of shareholders and which are designed to maintain the
portfolio's diversity and reduce investment risk.
As discussed in "Investment objective and policies--Investments" above, the Fund
may borrow money provided that the Fund maintain asset coverage of 300% for all
borrowings except for reverse repurchase agreements and may not make loans
except through the lending of portfolio securities, the purchase of debt
securities or through repurchase agreements.
A complete description of these and other policies and restrictions is contained
under "Investment Restrictions" in the Fund's combined Statement of Additional
Information.
Common stocks
Under normal circumstances, the Fund invests primarily in common stocks. Common
stock is issued by companies to raise cash for business purposes and represents
a proportionate interest in the issuing companies. Therefore, the Fund
6
<PAGE>
participates in the success or failure of any company in which it holds stock.
The market values of common stock can fluctuate significantly, reflecting the
business performance of the issuing company, investor perception and general
economic or financial market movements. Smaller companies are especially
sensitive to these factors and may even become valueless. Despite the risk of
price volatility, however, common stocks also offer the greatest potential for
gain on investment, compared to other classes of financial assets such as bonds
or cash equivalents.
Debt securities
Consistent with the Fund's investment objective of long-term capital growth, the
Fund may purchase investment-grade debt securities, which are those rated Aaa,
Aa, A or Baa by Moody's Investors Service, Inc. ("Moody's"), or AAA, AA, A or
BBB by Standard & Poor's ("S&P") or, if unrated, of equivalent quality as
determined by the Adviser. The Fund may also purchase debt securities which are
rated below investment- grade. Capital appreciation in such debt securities may
arise from a favorable change in relative interest rate levels, or in the
creditworthiness of issuers. Receipt of income from debt securities is
incidental to the Fund's objective of long-term growth of capital. (See "Risk
factors.")
Repurchase agreements
As a means of earning income for periods as short as overnight, the Fund may
enter into repurchase agreements with selected banks and broker/dealers. Under a
repurchase agreement, the Fund acquires securities, subject to the seller's
agreement to repurchase at a specified time and price.
Convertible securities
The Fund may invest in convertible securities (bonds, notes, debentures,
preferred stocks and other securities convertible into common stocks) that may
offer higher income than the common stocks into which they are convertible. The
convertible securities in which the Fund may invest include fixed-income or zero
coupon debt securities, which may be converted or exchanged at a stated or
determinable exchange ratio into underlying shares of common stock. Prior to
their conversion, convertible securities may have characteristics similar to
nonconvertible debt securities.
Foreign securities
While the Fund generally emphasizes investments in companies domiciled in the
U.S., it may invest in listed and unlisted foreign securities that meet the same
criteria as the Fund's domestic holdings. The Fund may invest in foreign
securities when the anticipated performance of foreign securities is believed by
the Adviser to offer more potential than domestic alternatives in keeping with
the investment objective of the Fund.
Strategic Transactions and derivatives
The Fund may, but is not required to, utilize various other investment
strategies as described below to hedge various market risks (such as interest
rates, currency exchange rates, and broad or specific equity or fixed-income
market movements), to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio or to enhance potential gain. These
strategies may be executed through the use of derivative contracts. Such
strategies are generally accepted as a part of modern portfolio management and
are regularly utilized by many mutual funds and other institutional investors.
Techniques and instruments may change over time as new instruments and
strategies are developed or regulatory changes occur.
In the course of pursuing these investment strategies, the Fund may purchase and
sell exchange-listed and over-the-counter put and call options on securities,
equity and fixed-income indices and other financial instruments, purchase and
sell financial futures contracts and options thereon, enter into various
interest rate transactions such as swaps, caps, floors or collars, and enter
into various currency transactions such as currency forward contracts, currency
7
<PAGE>
futures contracts, currency swaps or options on currencies or currency futures
(collectively, all the above are called "Strategic Transactions").
Strategic Transactions may be used without limit to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for the Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio, or to establish a position in the
derivatives markets as a temporary substitute for purchasing or selling
particular securities. Some Strategic Transactions may also be used to enhance
potential gain although no more than 5% of the Fund's assets will be committed
to Strategic Transactions entered into for non-hedging purposes. Any or all of
these investment techniques may be used at any time and in any combination, and
there is no particular strategy that dictates the use of one technique rather
than another, as use of any Strategic Transaction is a function of numerous
variables including market conditions. The ability of the Fund to utilize these
Strategic Transactions successfully will depend on the Adviser's ability to
predict pertinent market movements, which cannot be assured. The Fund will
comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. Strategic Transactions involving
financial futures and options thereon will be purchased, sold or entered into
only for bona fide hedging, risk management or portfolio management purposes and
not for speculative purposes. Please refer to "Risk factors--Strategic
Transactions and derivatives" for more information.
Risk factors
The Fund's risks are determined by the nature of the securities held and the
portfolio management strategies used by the Adviser. The following are
descriptions of certain risks related to the investments and techniques that the
Fund may use from time to time.
Debt securities.
The Fund may invest up to 20% of its net assets in debt securities, including
securities which are rated below investment- grade or, if unrated, are
considered by the Adviser to be equivalent to below investment-grade debt
securities (commonly referred to as "junk bonds"). The lower the ratings of such
debt securities, the greater their risks render them like equity securities. The
Fund will invest no more than 10% of its net assets in securities rated B or
lower by Moody's or S&P, and may not invest more than 5% of its net assets in
securities rated C by Moody's or D by S&P, which may be in default with respect
to payment of principal or interest. Also, longer-maturity bonds tend to
fluctuate more in price as interest rates change than do short-term bonds,
providing both opportunity and risk.
Zero coupon bonds, which do not pay interest until maturity, and pay-in-kind
securities, which pay interest in the form of additional securities, may be more
speculative than debt securities which pay income periodically in cash.
Repurchase agreements. If a seller under a repurchase agreement becomes
insolvent, the Fund's right to dispose of the securities may be restricted. In
the event of the commencement of bankruptcy or insolvency proceedings of the
seller of the securities before repurchase of the securities under a repurchase
agreement, the Fund may encounter delay and incur costs including a decline in
value of the securities before being able to sell the securities.
8
<PAGE>
Convertible securities.
While convertible securities generally offer lower yields than nonconvertible
debt securities of similar quality, their prices may reflect changes in the
value of the underlying common stock. Convertible securities entail less credit
risk than the issuer's common stock.
Illiquid or restricted investments.
The absence of a trading market can make it difficult to ascertain a market
value for illiquid or restricted investments. Disposing of illiquid or
restricted investments may involve time-consuming negotiation and legal
expenses, and it may be difficult or impossible for the Fund to sell them
promptly at an acceptable price.
Foreign securities.
Investments in foreign securities involve special considerations, due to more
limited information, higher brokerage costs and different accounting standards.
They may also entail certain risks, such as possible imposition of dividend or
interest withholding or confiscatory taxes, possible currency blockages or
transfer restrictions, expropriation, nationalization or other adverse political
or economic developments and the difficulty of enforcing obligations in other
countries. Foreign securities may be less liquid and more volatile than
comparable domestic securities, and there is less government regulation of stock
exchanges, brokers, listed companies and banks than in the U.S. Purchases of
foreign securities are usually made in foreign currencies and, as a result, the
Fund may incur currency conversion costs and may be affected favorably or
unfavorably by changes in the value of foreign currencies against the U.S.
dollar.
Strategic Transactions and derivatives.
Strategic Transactions, including derivative contracts, have risks associated
with them including possible default by the other party to the transaction,
illiquidity and, to the extent the Adviser's view as to certain market movements
is incorrect, the risk that the use of such Strategic Transactions could result
in losses greater than if they had not been used. Use of put and call options
may result in losses to the Fund, force the sale or purchase of portfolio
securities at inopportune times or for prices higher than (in the case of put
options) or lower than (in the case of call options) current market values,
limit the amount of appreciation the Fund can realize on its investments or
cause the Fund to hold a security it might otherwise sell. The use of currency
transactions can result in the Fund incurring losses as a result of a number of
factors including the imposition of exchange controls, suspension of settlements
or the inability to deliver or receive a specified currency. The use of options
and futures transactions entails certain other risks. In particular, the
variable degree of correlation between price movements of futures contracts and
price movements in the related portfolio position of the Fund creates the
possibility that losses on the hedging instrument may be greater than gains in
the value of the Fund's position. In addition, futures and options markets may
not be liquid in all circumstances and certain over-the-counter options may have
no markets. As a result, in certain markets, the Fund might not be able to close
out a transaction without incurring substantial losses, if at all. Although the
use of futures contracts and options transactions for hedging should tend to
minimize the risk of loss due to a decline in the value of the hedged position,
at the same time they tend to limit any potential gain which might result from
an increase in value of such position. Finally, the daily variation margin
requirements for futures contracts would create a greater ongoing potential
financial risk than would purchases of options, where the exposure is limited to
the cost of the initial premium. Losses resulting from the use of Strategic
Transactions would reduce net asset value, and possibly income, and such losses
can be greater than if the Strategic Transactions had not been utilized. The
Strategic Transactions that the Fund may use and some of their risks are
described more fully in the Fund's combined Statement of Additional Information.
9
<PAGE>
Distribution and performance information
Dividends and capital gains distributions
The Fund intends to distribute any dividends from its net investment income and
net realized capital gains after utilization of capital loss carryforwards, if
any, annually in December to prevent application of federal excise tax, although
an additional distribution may be made if required, at a later date. Any
dividends or capital gains distributions declared in October, November or
December with a record date in such a month and paid the following January will
be treated by shareholders for federal income tax purposes as if received on
December 31 of the calendar year declared. According to preference, shareholders
may receive distributions in cash or have them reinvested in additional shares
of the Fund. If an investment is in the form of a retirement plan, all dividends
and capital gains distributions must be reinvested into the shareholder's
account.
Generally, dividends from net investment income are taxable to shareholders as
ordinary income. Long-term capital gains distributions, if any, are taxable as
long-term capital gains regardless of the length of time shareholders have owned
their shares. Short-term capital gains and any other taxable income
distributions are taxable as ordinary income. A portion of such dividends from
net investment income may qualify for the dividends-received deduction for
corporations.
The Fund sends detailed tax information about the amount and type of its
distributions to shareholders by January 31 of the following year.
Performance information
From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature or shareholder reports. All performance figures
are historical, show the performance of a hypothetical investment and are not
intended to indicate future performance. "Total return" is the change in value
of an investment in the Fund for a specified period. The "average annual total
return" of the Fund is the average annual compound rate of return of an
investment in the Fund assuming the investment has been held for one year and
the life of the Fund, as of a stated ending date. "Cumulative total return"
represents the cumulative change in value of an investment in the Fund for
various periods. All types of total return calculations assume that all
dividends and capital gains distributions during the period were reinvested in
shares of the Fund. Performance will vary based upon, among other things,
changes in market conditions and the level of the Fund's expenses.
Fund organization
Scudder Value Fund is a diversified series of Scudder Equity Trust (the
"Trust"), an open-end management investment company registered under the
Investment Company Act of 1940 (the "1940 Act"). The Trust's predecessor was
organized as a Delaware corporation in May 1966. The Trust was reorganized as a
Massachusetts business trust in October 1985.
The Fund's activities are supervised by the Trust's Board of Trustees.
Shareholders have one vote for each share held on matters on which they are
entitled to vote. The Trust is not required and has no current intention of
holding annual shareholder meetings, although special meetings may be called for
purposes such as electing or removing Trustees, changing fundamental investment
policies or approving an investment management contract. Shareholders will be
assisted in communicating with other shareholders in connection with removing a
Trustee as if Section 16(c) of the 1940 Act were applicable.
Investment adviser
The Fund retains the investment management firm of Scudder Kemper Investments,
Inc., a Delaware corporation, to manage its daily investment and business
10
<PAGE>
affairs subject to the policies established by the Board of Trustees. The
Trustees have overall responsibility for the management of the Fund under
Massachusetts law.
The Fund pays the Adviser an annual fee of 0.70% of the Fund's average daily net
assets. The Adviser has agreed to maintain the annualized expenses of the Fund
at not more than 1.25% of the average daily net assets of the Fund until July
31, 1997. For the fiscal year ended September 30, 1996, the Adviser took action
to reduce the Fund's total expenses and as a result received an investment
management fee of 0.64% of the Fund's average daily net assets.
The fee is payable monthly, provided that the Fund will make such interim
payments as may be requested by the Adviser not to exceed 75% of the amount of
the fee then accrued on the books of the Fund and unpaid.
Under the Investment Management Agreement with the Adviser, the Fund is
responsible for all of its expenses, including fees and expenses incurred in
connection with membership in investment company organizations; fees and
expenses of the Fund's accounting agent; brokers' commissions; legal, auditing
and accounting expenses; taxes and governmental fees; the fees and expenses of
the transfer agent; the expenses of and the fees for registering or qualifying
securities for sale; the fees and expenses of Trustees, officers and employees
of the Trust who are not affiliated with the Adviser; the cost of printing and
distributing reports and notices to shareholders; and the fees and disbursements
of custodians.
All the Fund's expenses are paid out of gross investment income. Shareholders
pay no direct charges or fees for investment or administrative services.
Scudder Kemper Investments, Inc. is located at 345 Park Avenue, New York, New
York.
Transfer agent
Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts 02107-2291, a
subsidiary of the Adviser, is the transfer, shareholder servicing and
dividend-paying agent for the Fund.
Underwriter
Scudder Investor Services, Inc., a subsidiary of the Adviser, is the Fund's
principal underwriter. Scudder Investor Services, Inc. confirms, as agent, all
purchases of shares of the Fund. Scudder Investor Relations is a telephone
information service provided by Scudder Investor Services, Inc.
Custodian
State Street Bank and Trust Company is the Fund's custodian.
Fund accounting agent
Scudder Fund Accounting Corporation, a subsidiary of the Adviser, is responsible
for determining the daily net asset value per share and maintaining the general
accounting records of the Fund.
Transaction information
Purchasing shares
Purchases are executed at the next calculated net asset value per share after
the Fund's transfer agent receives the purchase request in good order. Purchases
are made in full and fractional shares. (See "Share price.")
By check. If you purchase shares with a check that does not clear, your purchase
will be canceled and you will be subject to any losses or fees incurred in the
transaction. Checks must be drawn on or payable through a U.S. bank. If you
purchase shares by check and redeem them within seven business days of purchase,
the Fund may hold redemption proceeds until the purchase check has cleared. If
you purchase shares by federal funds wire, you may avoid this delay. Redemption
requests by telephone prior to the expiration of the seven-day period will not
11
<PAGE>
be accepted.
By wire. To open a new account by wire, first call Scudder at 1-800-225-5163 to
obtain an account number. A representative will instruct you to send a
completed, signed application to the transfer agent. Accounts cannot be opened
without a completed, signed application and a Scudder fund account number.
Contact your bank to arrange a wire transfer to:
The Scudder Funds
State Street Bank and Trust Company
Boston, MA 02101
ABA Number 011000028
DDA Account 9903-5552
Your wire instructions must also include:
- -- the name of the fund in which the money is to be invested,
- -- the account number of the fund, and
- -- the name(s) of the account holder(s).
The account will be established once the application and money order are
received in good order.
You may also make additional investments of $100 or more to your existing
account by wire.
By telephone order. Existing shareholders may purchase shares at a certain day's
price by calling 1-800-225-5163 before the close of regular trading on the New
York Stock Exchange (the "Exchange"), normally 4 p.m. eastern time, on that day.
Orders must be for $10,000 or more and cannot be for an amount greater than four
times the value of your account at the time the order is placed. A confirmation
with complete purchase information is sent shortly after your order is received.
You must include with your payment the order number given at the time the order
is placed. If payment by check or wire is not received within three business
days, the order is subject to cancellation and the shareholder will be
responsible for any loss to the Fund resulting from this cancellation. Telephone
orders are not available for shares held in Scudder IRA accounts and most other
Scudder retirement plan accounts.
By "QuickBuy." If you elected "QuickBuy" for your account, you can call
toll-free to purchase shares. The money will be automatically transferred from
your predesignated bank checking account. Your bank must be a member of the
Automated Clearing House for you to use this service. If you did not elect
"QuickBuy," call 1-800-225-5163 for more information.
To purchase additional shares, call 1-800-225-5163. Purchases may not be for
more than $250,000. Proceeds in the amount of your purchase will be transferred
from your bank checking account in two or three business days following your
call. For requests received by the close of regular trading on the Exchange,
shares will be purchased at the net asset value per share calculated at the
close of trading on the day of your call. "QuickBuy" requests received after the
close of regular trading on the Exchange will begin their processing and be
purchased at the net asset value calculated the following business day.
If you purchase shares by "QuickBuy" and redeem them within seven days of the
purchase, the Fund may hold the redemption proceeds for a period of up to seven
business days. If you purchase shares and there are insufficient funds in your
bank account, the purchase will be canceled and you will be subject to any
losses or fees incurred in the transaction. "QuickBuy" transactions are not
available for most retirement plan accounts. However, "QuickBuy" transactions
are available for Scudder IRA accounts.
By exchange. The Fund may be exchanged for shares of other funds in the Scudder
Family of Funds unless otherwise determined by the Board of
(Directors/Trustees). Your new account will have the same registration and
address as your existing account.
The exchange requirements for corporations, other organizations, trusts,
fiduciaries, agents, institutional investors and retirement plans may be
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<PAGE>
different from those for regular accounts. Please call 1-800-225-5163 for more
information, including information about the transfer of special account
features.
You can also make exchanges among your Scudder fund accounts on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.
Redeeming shares
The Fund allows you to redeem shares (i.e., sell them back to the Fund) without
redemption fees.
By telephone. This is the quickest and easiest way to sell Fund shares. If you
provided your banking information on your application, you can call to request
that federal funds be sent to your authorized bank account. If you did not
include your banking information on your application, call 1-800-225-5163 for
more information.
Redemption proceeds will be wired to your bank unless otherwise requested. If
your bank cannot receive federal reserve wires, redemption proceeds will be
mailed to your bank. There will be a $5 charge for all wire redemptions. You can
also make redemptions from your Scudder fund account on SAIL by calling
1-800-343-2890.
If you open an account by wire, you cannot redeem shares by telephone until the
Fund's transfer agent has received your completed and signed application.
Telephone redemption is not available for shares held in Scudder IRA accounts
and most other Scudder retirement plan accounts.
In the event that you are unable to reach the Fund by telephone, you should
write to the Fund; see "How to contact Scudder" for the address.
By "QuickSell." If you elected "QuickSell" for your account, you can call
toll-free to redeem shares. The money will be automatically transferred to your
predesignated bank checking account. Your bank must be a member of the Automated
Clearing House for you to use this service. If you did not elect "QuickSell,"
call 1-800-225-5163 for more information.
To redeem shares, call 1-800-225-5163. Redemptions must be for at least $250.
Proceeds in the amount of your redemption will be transferred to your bank
checking account in two or three business days following your call. For requests
received by the close of regular trading on the Exchange, shares will be
redeemed at the net asset value per share calculated at the close of trading on
the day of your call. "QuickSell" requests received after the close of regular
trading on the Exchange will begin their processing and be redeemed at the net
asset value calculated the following business day.
"QuickSell" transactions are not available for Scudder IRA accounts and most
other retirement plan accounts.
Signature guarantees. For your protection and to prevent fraudulent redemptions,
on written redemption requests in excess of $100,000 we require an original
signature and an original signature guarantee for each person in whose name the
account is registered. (The Fund reserves the right, however, to require a
signature guarantee for all redemptions.) You can obtain a signature guarantee
from most banks, credit unions or savings associations, or from broker/dealers,
municipal securities broker/dealers, government securities broker/dealers,
national securities exchanges, registered securities associations or clearing
agencies deemed eligible by the Securities and Exchange Commission. Signature
guarantees by notaries public are not acceptable. Redemption requirements for
corporations, other organizations, trusts, fiduciaries, agents, institutional
investors and retirement plans may be different from those for regular accounts.
For more information, please call 1-800-225-5163.
Telephone transactions
Shareholders automatically receive the ability to exchange by telephone and the
right to redeem by telephone up to $100,000 to their address of record.
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<PAGE>
Shareholders also may, by telephone, request that redemption proceeds be sent to
a predesignated bank account. The Fund uses procedures designed to give
reasonable assurance that telephone instructions are genuine, including
recording telephone calls, testing a caller's identity and sending written
confirmation of telephone transactions. If the Fund does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Fund will not be liable for acting upon instructions
communicated by telephone that it reasonably believes to be genuine.
Share price
Purchases and redemptions, including exchanges, are made at net asset value.
Scudder Fund Accounting Corporation determines net asset value per share as of
the close of regular trading on the Exchange, normally 4 p.m. eastern time, on
each day the Exchange is open for trading. Net asset value per share is
calculated by dividing the value of total Fund assets, less all liabilities, by
the total number of shares outstanding.
Processing time
All purchase and redemption requests must be received in good order by the
Fund's transfer agent. Those requests received by the close of regular trading
on the Exchange are executed at the net asset value per share calculated at the
close of regular trading that day.
Purchase and redemption requests received after the close of regular trading on
the Exchange will be executed the following business day.
If you wish to make a purchase of $500,000 or more, you should notify Scudder
Investor Relations by calling 1-800-225-5163.
The Fund will normally send your redemption proceeds within one business day
following the redemption request, but may take up to seven business days (or
longer in the case of shares recently purchased by check).
Purchase restrictions
Purchases and sales should be made for long-term investment purposes only. The
Fund and Scudder Investor Services, Inc. each reserves the right to reject
purchases of Fund shares (including exchanges) for any reason, including when a
pattern of frequent purchases and sales made in response to short-term
fluctuations in the Fund's share price appears evident.
Tax information
A redemption of shares, including an exchange into another Scudder fund, is a
sale of shares and may result in a gain or loss for income tax purposes.
Tax identification number
Be sure to complete the Tax Identification Number section of the Fund's
application when you open an account. Federal tax law requires the Fund to
withhold 31% of taxable dividends, capital gains distributions and redemption
and exchange proceeds from accounts (other than those of certain exempt payees)
without a correct certified Social Security or tax identification number and
certain other certified information or upon notification from the IRS or a
broker that withholding is required. The Fund reserves the right to reject new
account applications without a correct certified Social Security or tax
identification number. The Fund also reserves the right, following 30 days'
notice, to redeem all shares in accounts without a correct certified Social
Security or tax identification number. A shareholder may avoid involuntary
redemption by providing the Fund with a tax identification number during the
30-day notice period.
Minimum balances
Shareholders should maintain a share balance worth at least $2,500, which amount
may be changed by the Board of Trustees. Scudder retirement plans and certain
other accounts have similar or lower minimum balance requirements. A shareholder
may open an account with at least $1,000, if an automatic investment plan of
14
<PAGE>
$100/month is established.
Shareholders who maintain a non-fiduciary account balance of less than $2,500 in
the Fund, without establishing an automatic investment plan, will be assessed an
annual $10.00 per fund charge with the fee to be paid to the Fund. The $10.00
charge will not apply to shareholders with a combined household account balance
in any of the Scudder Funds of $25,000 or more. The Fund reserves the right,
following 60 days' written notice to shareholders, to redeem all shares in
accounts below $250, including accounts of new investors, where a reduction in
value has occurred due to a redemption or exchange out of the account. The Fund
will mail the proceeds of the redeemed account to the shareholder. Reductions in
value that result solely from market activity will not trigger an involuntary
redemption. Retirement accounts and certain other accounts will not be assessed
the $10.00 charge or be subject to automatic liquidation. Please refer to
"Exchanges and Redemptions--Other information" in the Fund's Statement of
Additional Information for more information.
Third party transactions
If purchases and redemptions of Fund shares are arranged and settlement is made
at an investor's election through a member of the National Association of
Securities Dealers, Inc., other than Scudder Investor Services, Inc., that
member may, at its discretion, charge a fee for that service.
Redemption-in-kind
The Fund reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase order by making
payment in whole or in part in readily marketable securities chosen by the Fund
and valued as they are for purposes of computing the Fund's net asset value (a
redemption-in-kind). If payment is made in securities, a shareholder may incur
transaction expenses in converting these securities to cash. The Trust has
elected, however, to be governed by Rule 18f-1 under the 1940 Act, as a result
of which the Fund is obligated to redeem shares, with respect to any one
shareholder during any 90-day period, solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Fund at the beginning of the
period.
Shareholder benefits
Experienced professional management
Scudder Kemper Investments, Inc., one of the nation's most experienced
investment management firms, actively manages your Scudder fund investment.
Professional management is an important advantage for investors who do not have
the time or expertise to invest directly in individual securities.
A team approach to investing
Scudder Value Fund is managed by a team of Scudder investment professionals who
each play an important role in the Fund's management process. Team members work
together to develop investment strategies and select securities for the Fund's
portfolio. They are supported by Scudder's large staff of economists, research
analysts, traders and other investment specialists who work in Scudder's offices
across the United States and abroad. Scudder believes its team approach benefits
Fund investors by bringing together many disciplines and leveraging Scudder's
extensive resources.
Lead Portfolio Manager Donald E. Hall has had responsibility for the Fund's
day-to-day management since its inception in 1992. Mr. Hall, who has 14 years of
experience in the value style of investing, joined Scudder in 1982. William J.
Wallace, Portfolio Manager, has been a member of the Fund's team since 1992 and
has 16 years of investment experience.
SAIL(TM)--Scudder Automated Information Line
For personalized account information including fund prices, yields and account
balances, to perform transactions in existing Scudder fund accounts, or to
15
<PAGE>
obtain information on any Scudder fund, shareholders can call Scudder's
Automated Information Line (SAIL) at 1-800-343-2890, 24 hours a day. During
periods of extreme economic or market changes, or other conditions, it may be
difficult for you to effect telephone transactions in your account. In such an
event you should write to the Fund; please see "How to contact Scudder" for the
address.
Investment flexibility
Scudder offers toll-free telephone exchange between funds at current net asset
value. You can move your investments among money market, income, growth,
tax-free and growth and income funds with a simple toll-free call or, if you
prefer, by sending your instructions through the mail or by fax. (The exchange
privilege may not be available for certain Scudder funds. For more information,
please call 1-800-225-5163.) Telephone and fax redemptions and exchanges are
subject to termination and their terms are subject to change at any time by the
Fund or the transfer agent. In some cases, the transfer agent or Scudder
Investor Services, Inc. may impose additional conditions on telephone
transactions.
Personal Counsel(SM) -- A Managed Fund Portfolio Program
If you would like to receive direct guidance and management of your overall
mutual fund portfolio to help you pursue your investment goals, you may be
interested in Personal Counsel from Scudder. Personal Counsel, a program of
Scudder Investor Services, Inc., a registered investment adviser and a
subsidiary of Scudder, Stevens & Clark, Inc., combines the benefits of a
customized portfolio of pure no-load Scudder Funds with ongoing portfolio
monitoring and individualized service, for an annual fee of generally 1% or less
of assets (with a $1,000 minimum). In addition, it draws upon Scudder's more
than 75-year heritage of providing investment counsel to large corporate and
private clients. If you have $100,000 or more to invest initially and would like
more information about Personal Counsel, please call 1-800-700-0183.
Dividend reinvestment plan
You may have dividends and distributions automatically reinvested in additional
Fund shares. Please call 1-800-225-5163 to request this feature.
Shareholder statements
You receive a detailed account statement every time you purchase or redeem
shares. All of your statements should be retained to help you keep track of
account activity and the cost of shares for tax purposes.
Shareholder reports
In addition to account statements, you receive periodic shareholder reports
highlighting relevant information, including investment results and a review of
portfolio changes.
To reduce the volume of mail you receive, only one copy of most Fund reports,
such as the Fund's Annual Report, may be mailed to your household (same surname,
same address). Please call 1-800-225-5163 if you wish to receive additional
shareholder reports.
Newsletters
Four times a year, Scudder sends you Perspectives, an informative newsletter
covering economic and investment developments, service enhancements and other
topics of interest to Scudder fund investors.
Scudder Investor Centers
As a convenience to shareholders who like to conduct business in person, Scudder
Investor Services, Inc. maintains Investor Centers in Boca Raton, Boston,
Chicago, New York and San Francisco.
T.D.D. service for the hearing impaired
Scudder's full range of investor information and shareholder services is
available to hearing impaired investors through a toll-free T.D.D. (Telephone
Device for the Deaf) service. If you have access to a T.D.D., call
1-800-543-7916 for investment information or specific account questions and
transactions.
16
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<TABLE>
<CAPTION>
Purchases
Opening Minimum initial investment: $2,500; IRAs $1,000
an account Group retirement plans (401(k), 403(b), etc.) have similar
or lower minimums.
See appropriate plan literature.
<S> <C> <C> <C> <C>
Make checks
payable to "The o By Mail Send your completed and signed application and check
Scudder Funds."
by regular mail to: or by express, registered,
or certified mail to:
The Scudder Funds Scudder Shareholder Service
P.O. Box 2291 Center
Boston, MA 42 Longwater Drive
02107-2291 Norwell, MA
02061-1612
o By Wire Please see Transaction information--Purchasing shares--
By wire for details, including the ABA wire transfer number.
Then call 1-800-225-5163 for instructions.
o In Person Visit one of our Investor Centers to complete your application with the
help of a Scudder representative. Investor Center locations are listed
under Shareholder benefits.
- ----------------------------------------------------------------------------------------------------------------------
Purchasing Minimum additional investment: $100; IRAs $50
additional Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums.
shares See appropriate plan literature.
Make checks o By Mail Send a check with a Scudder investment slip, or with a letter of
payable to "The instruction including your account number and the complete Fund name, to
Scudder Funds." the appropriate address listed above.
o By Wire Please see Transaction information--Purchasing shares-- By
wire for details, including the ABA wire transfer number.
o In Person Visit one of our Investor Centers to make an additional
investment in your Scudder fund account. Investor Center locations
are listed under Shareholder benefits.
o By Telephone Please see Transaction information--Purchasing shares-- By
QuickBuy or By telephone order for more details.
o By Automatic You may arrange to make investments on a regular basis through automatic
Investment Plan deductions from your bank checking account. Please call 1-800-225-5163
($50 minimum) for more information and an enrollment form.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Exchanges and redemptions
Exchanging Minimum investments: $2,500 to establish a new account;
shares $100 to exchange among existing accounts
<S> <C> <C> <C> <C>
o By Telephone To speak with a service representative, call 1-800-225-5163 from
8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day).
o By Mail Print or type your instructions and include:
or Fax - the name of the Fund and the account number you are exchanging from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to exchange;
- the name of the Fund you are exchanging into;
- your signature(s) as it appears on your account; and
- a daytime telephone number.
Send your instructions
by regular mail to: or by express, registered, or by fax to:
or certified mail to:
The Scudder Funds Scudder Shareholder 1-800-821-6234
P.O. Box 2291 Service Center
Boston, MA 02107-2291 42 Longwater Drive
Norwell, MA
02061-1612
-----------------------------------------------------------------------------------------------------------------------
Redeeming o By Telephone To speak with a service representative, call 1-800-225-5163 from
shares 8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day). You may
have redemption proceeds sent to your predesignated bank account, or redemption
proceeds of up to $100,000 sent to your address of record.
o By Mail Send your instructions for redemption to the appropriate address or fax number
or Fax 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.
A signature guarantee is required for redemptions over $100,000. See Transaction
information--Redeeming shares.
o By Automatic You may arrange to receive automatic cash payments periodically. Call
Withdrawal 1-800-225-5163 for more information and an enrollment form.
Plan
</TABLE>
18
<PAGE>
Scudder tax-advantaged retirement plans
Scudder offers a variety of tax-advantaged retirement plans for individuals,
businesses and non-profit organizations. These flexible plans are designed for
use with the Scudder Family of Funds (except Scudder tax-free funds, which are
inappropriate for such plans). Scudder Funds offer a broad range of investment
objectives and can be used to seek almost any investment goal. Using Scudder's
retirement plans can help shareholders save on current taxes while building
their retirement savings.
o Scudder No-Fee IRAs. These retirement plans allow a maximum annual
contribution of up to $2,000 per person for anyone with earned income (up
to $2,000 per individual for married couples if only one spouse has earned
income). Many people can deduct all or part of their contributions from
their taxable income, and all investment earnings accrue on a tax-deferred
basis. The Scudder No-Fee IRA charges you no annual custodial fee. 401(k)
Plans.
o 401(k) plans allow employers and employees to make tax-deductible
retirement contributions. Scudder offers a full service program that
includes recordkeeping, prototype plan, employee communications and trustee
services, as well as investment options.
o Profit Sharing and Money Purchase Pension Plans. These plans allow
corporations, partnerships and people who are self-employed to make annual,
tax-deductible contributions of up to $30,000 for each person covered by
the plans. Plans may be adopted individually or paired to maximize
contributions. These are sometimes known as Keogh plans. The Scudder Keogh
charges you no annual custodial fee.
o 403(b) Plans. Retirement plans for tax-exempt organizations and school
systems to which employers and employees may both contribute.
o SEP-IRAs. Easily administered retirement plans for small businesses and
self-employed individuals. The maximum annual contribution to SEP-IRA
accounts is adjusted each year for inflation. The Scudder SEP-IRA charges
you no annual custodial fee.
o Scudder Horizon Plan. A no-load variable annuity that lets you build assets
by deferring taxes on your investment earnings. You can start with $2,500
or more.
Scudder Trust Company (an affiliate of the Adviser) is Trustee or Custodian for
some of these plans and is paid an annual fee for some of the above retirement
plans. For information about establishing a Scudder No-Fee IRA, SEP-IRA, Profit
Sharing Plan, Money Purchase Pension Plan or a Scudder Horizon Plan, please call
1-800-225-2470. For information about 401(k)s or 403(b)s please call
1-800-323-6105. To effect transactions in existing IRA, SEP-IRA, Profit Sharing
or Pension Plan accounts, call 1-800-225-5163.
The variable annuity contract is provided by Charter National Life Insurance
Company (in New York State, Intramerica Life Insurance Company [S 1802]). The
contract is offered by Scudder Insurance Agency, Inc. (in New York State, Nevada
and Montana, Scudder Insurance Agency of New York, Inc.). CNL, Inc. is the
Principal Underwriter. Scudder Horizon Plan is not available in all states.
Scudder Investor Relations is a service provided through Scudder Investor
Services, Inc., Distributor.
19
<PAGE>
Trustees and Officers
Daniel Pierce*
President and Trustee
Paul Bancroft III
Trustee; Venture Capitalist and Consultant
Sheryle J. Bolton
Trustee; Chief Executive Officer, Scientific Learning Corporation
William T. Burgin
Trustee; General Partner, Bessemer Venture Partners
Thomas J. Devine
Trustee; Consultant
Keith R. Fox
Trustee; President, Exeter Capital
Management Corporation
William H. Luers
Trustee; President, The Metropolitan Museum of Art
Kathryn L. Quirk*
Trustee, Vice President and
Assistant Secretary
Robert W. Lear
Honorary Trustee; Executive-in-Residence,
Columbia University Graduate School of Business
Robert G. Stone, Jr.
Honorary Trustee; Chairman of the Board
and Director, Kirby Corporation
Donald E. Hall*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Kathleen T. Millard*
Vice President
Thomas F. McDonough*
Vice President, Secretary and Assistant Treasurer
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
*Scudder, Stevens & Clark, Inc.
20
<PAGE>
Investment products and services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Premium Shares*
Managed Shares*
Scudder Government Money Market Series --
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Growth and Income Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Retirement Programs
IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan **+++ +++
(a variable annuity)
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed in order from
expected least risk to most risk. +A portion of the income from the tax-free
funds may be subject to federal, state, and local taxes. *A class of shares of
the Fund. **Not available in all states. +++ +++A no-load variable annuity
contract provided by Charter National Life Insurance Company and its affiliate,
offered by Scudder's insurance agencies, 1-800-225-2470. #These funds, advised
by Scudder, Stevens & Clark, Inc., are traded on various stock exchanges.
21
<PAGE>
<TABLE>
<CAPTION>
How to contact Scudder
Account Service and Information:
<S> <C>
For existing account service and transactions
Scudder Investor Relations -- 1-800-225-5163
For 24 hour account information, fund information, exchanges, and an
overview of all the services available to you
Scudder Electronic Account Services -- http://funds.scudder.com
For personalized information about your Scudder accounts, exchanges and redemptions
Scudder Automated Information Line (SAIL) -- 1-800-343-2890
Investment Information:
For information about the Scudder funds, including additional
applications and prospectuses, or for answers to investment questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services -- 1-800-323-6105
Scudder Brokerage Services:
To receive information about this discount brokerage service and to obtain an application
Scudder Brokerage Services* -- 1-800-700-0820
Personal Counsel(SM) -- A Managed Fund Portfolio Program:
To receive information about this mutual fund portfolio guidance and management program
Personal Counsel from Scudder -- 1-800-700-0183
Please address all correspondence to:
The Scudder Funds
P.O. Box 2291
Boston, Massachusetts
02107-2291
Or Stop by a Scudder Investor Center:
Many shareholders enjoy the personal, one-on-one service of the Scudder
Investor Centers. Check for an Investor Center near you--they can be
found in the following cities:
Boca Raton Chicago San Francisco
Boston New York
Scudder Investor Relations and Scudder Investor Centers are services provided
through Scudder Investor Services, Inc., Distributor.
</TABLE>
* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA
02061--Member NASD/SIPC.
22
<PAGE>
SCUDDER LARGE COMPANY VALUE FUND
A Pure No-Load(TM) (No Sales Charges) Diversified Mutual Fund
which Seeks to Maximize Long-Term Capital Appreciation
and
SCUDDER VALUE FUND
A Pure No-Load(TM) (No Sales Charges) Diversified Mutual Fund
which Seeks Long-Term Growth of Capital through
Investment in Undervalued Equity Securities
STATEMENT OF ADDITIONAL INFORMATION
February 1, 1998
This combined Statement of Additional Information is not a prospectus and
should be read in conjunction with the prospectuses of Scudder Large Company
Value Fund and Scudder Value Fund each dated February 1, 19981997, as amended
from time to time, copies of which may be obtained without charge by writing to
Scudder Investor Services, Inc., Two International Place, Boston, Massachusetts
02110-4103.
<PAGE>
TABLE OF CONTENTS
Page
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES .......................... 1
General Investment Objective and Policies of Scudder Large
Company Value Fund .............................................. 1
General Investment Objective and Policies of Scudder Value
Fund ............................................................ 1
Master-feeder fund structure ...................................... 3
Investments and Investment Techniques ............................. 3
Investment Restrictions ........................................... 13
Other Investment Policies ......................................... 15
PURCHASES .............................................................. 16
Additional Information About Opening An Account ................... 16
Additional Information About Making Subsequent Investments 17
Additional Information About Making Subsequent Investments
by QuickBuy ..................................................... 17
Checks ............................................................ 18
Wire Transfer of Federal Funds .................................... 18
Share Price ....................................................... 18
Share Certificates ................................................ 19
Other Information ................................................. 19
EXCHANGES AND REDEMPTIONS .............................................. 19
Exchanges ......................................................... 19
Redemption by Telephone ........................................... 20
Redemption By QuickSell ........................................... 21
Redemption by Mail or Fax ......................................... 21
Redemption-in-Kind ................................................ 22
Other Information ................................................. 22
FEATURES AND SERVICES OFFERED BY THE FUNDS ............................. 23
The Pure No-Load(TM) Concept ...................................... 23
Dividends and Capital Gains Distribution Options .................. 24
Diversification ................................................... 24
Scudder Investor Centers .......................................... 24
Reports to Shareholders ........................................... 25
Transaction Summaries ............................................. 25
THE SCUDDER FAMILY OF FUNDS ............................................ 25
SPECIAL PLAN ACCOUNTS .................................................. 29
Scudder Retirement Plans: Profit-Sharing and Money
Purchase Pension Plans for Corporations and
Self-Employed Individuals ....................................... 29
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for
Corporations and Self-Employed Individuals ...................... 30
Scudder IRA: Individual Retirement Account ....................... 30
Scudder 403(b) Plan ............................................... 31
Automatic Withdrawal Plan ......................................... 31
Group or Salary Deduction Plan .................................... 31
Automatic Investment Plan ......................................... 32
Uniform Transfers/Gifts to Minors Act ............................. 32
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS .............................. 32
PERFORMANCE INFORMATION ................................................ 32
Average Annual Total Return ....................................... 33
Cumulative Total Return ........................................... 33
Total Return ...................................................... 34
Comparison of Fund Performance .................................... 35
i
<PAGE>
ORGANIZATION OF THE FUNDS .............................................. 38
INVESTMENT ADVISER ..................................................... 39
Personal Investments by Employees of the Adviser .................. 43
TRUSTEES AND OFFICERS .................................................. 44
REMUNERATION ........................................................... 46
DISTRIBUTOR ............................................................ 47
TAXES .................................................................. 48
PORTFOLIO TRANSACTIONS ................................................. 51
Brokerage Commissions ............................................. 51
Portfolio Turnover ................................................ 52
NET ASSET VALUE ........................................................ 53
ADDITIONAL INFORMATION ................................................. 54
Experts ........................................................... 54
Shareholder Indemnification ....................................... 54
Other Information ................................................. 54
FINANCIAL STATEMENTS ................................................... 55
APPENDIX
ii
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES
(See "Investment objective and policies" and "Additional information
about policies and investments" in the Funds' prospectuses.)
Scudder Large Company Value Fund and Scudder Value Fund (each a "Fund,"
collectively, the "Funds") are diversified series of Scudder Equity Trust (the
"Trust"), a pure no-load(TM), open-end, management investment company organized
as a Massachusetts business trust. Scudder Large Company Value Fund changed its
name from Scudder Capital Growth Fund on February 1, 1997.
General Investment Objective and Policies of Scudder Large Company
Value Fund
Scudder Large Company Value Fund ("Large Company Value Fund") seeks to
maximize long-term capital appreciation through a broad and flexible investment
program. The Fund seeks to achieve its objective by investing: (i) in marketable
securities, principally common stocks; (ii) up to 20% of its net assets in debt
securities where capital appreciation from debt securities is expected to exceed
the capital appreciation available from common stocks; and (iii) for temporary
defensive purposes, during periods when market or economic conditions may
warrant, in debt securities and short-term indebtedness. The Fund may also
invest in preferred stocks consistent with its objective. The securities in
which the Fund may invest are described under "Investment objective and
policies" in the Fund's prospectus.
Investments in common stocks have a wide range of characteristics, and
management of the Fund believes that opportunity for long-term capital
appreciation may be found in all sectors of the market for publicly traded
equity securities. Thus the search for equity investments for the Fund may
encompass any sector of the market and companies of all sizes. It is a
fundamental policy of the Fund, which may not be changed without approval of a
majority of the Fund's outstanding shares, that the Fund will not concentrate
its investments in any particular industry. However, the Fund reserves the right
to invest up to 25% of its total assets (taken at market value) in any one
industry. The use of this tactic is, in the opinion of management, consistent
with the Fund's flexible approach of seeking to maximize long-term growth of
capital.
The Fund may purchase, for capital appreciation, investment- grade debt
securities including zero coupon bonds. Investment- grade debt securities are
those rated Aaa, Aa, A or Baa by Moody's Investors Service, Inc. ("Moody's"), or
AAA, AA, A or BBB by Standard & Poor's ("S&P") or, if unrated, of equivalent
quality as determined by the Fund's investment adviser, Scudder, Stevens &
Clark, Inc. (the "Adviser"). Moody's considers bonds it rates Baa to have
speculative elements as well as investment-grade characteristics.
The Fund may also purchase debt securities which are rated below
investment-grade (that is, rated below Baa by Moody's or below BBB by S&P), and
unrated securities of comparable quality in the Adviser's judgment, which
usually entail greater risk (including the possibility of default or bankruptcy
of the issuers of such securities), generally involve greater volatility of
price and risk of principal and income, and may be less liquid and more
difficult to value than securities in the higher rating categories. The Fund may
invest up to 10% of its net assets in securities rated B or lower by Moody's or
S&P and may invest in securities which are rated as low as C by Moody's or D by
S&P. Securities rated B or lower involve a high degree of speculation with
respect to the payment of principal and interest and those securities rated C or
D may be in default with respect to payment of principal or interest.
(See "High Yield, High Risk Securities.")
The Fund may borrow money for temporary, emergency or other purposes,
including investment leverage purposes, as determined by the Trustees. The Fund
may also borrow under reverse repurchase agreements. The Investment Company Act
of 1940 (the "1940 Act") requires borrowings to have 300% asset coverage.
Changes in portfolio securities are made on the basis of investment
considerations and it is against the policy of management to make changes for
trading purposes.
The objective of the Fund is not fundamental and may be changed by the
Trustees without a vote of shareholders. The Fund cannot guarantee a gain or
eliminate the risk of loss. The net asset value of the Fund's shares will
increase or decrease with changes in the market price of the Fund's investments
and there is no assurance that the Fund's objective will be achieved.
General Investment Objective and Policies of Scudder Value Fund
Scudder Value Fund ("Value Fund") seeks long-term growth of capital
through investment in undervalued equity securities. This objective is not
fundamental and may be changed by the Trustees without a shareholder vote.
<PAGE>
The Fund seeks to achieve its objective by investing in the equity securities of
companies that, in the opinion of its Adviser, are undervalued in the
marketplace in relation to current and estimated future earnings and dividends.
These companies generally sell at price-earnings ratios below the market
average, as defined by the Standard & Poor's 500 Composite Price Index (S&P
500). The securities in which the Fund may invest are described under
"Investment objective and policies" in the Fund's prospectus.
The Fund invests at least 80% of its assets in equity securities
consisting of common stocks, preferred stocks and securities convertible into
common stocks. The Fund changes its portfolio securities for long-term
investment considerations and not for trading purposes.
The Fund invests primarily in the equity securities of medium-to-large
size domestic companies with annual revenues or market capitalization of at
least $600 million. The Adviser uses in-depth fundamental research and a
proprietary computerized quantitative model to identify companies that are
currently undervalued in relation to current and estimated future earnings and
dividends. The investment process also involves an assessment of business risk,
including the Adviser's analysis of the strength of a company's balance sheet,
the accounting practices a company follows, the volatility of a company's
earnings over time, and the vulnerability of earnings to changes in external
factors, such as the general economy, the competitive environment, governmental
action and technological change.
While a broad range of investments are considered, only those that, in the
Adviser's opinion, are selling at comparatively large discounts to intrinsic
value will be purchased for the Fund. It is anticipated that the prices of the
Fund's investments will rise as a result of both earnings growth and rising
price-earnings ratios over time.
Value investing, as measured by the Wilshire Large Company Value Index--a
well-known source of value-oriented portfolio returns--has provided an average
annual return of 14.27% for the ten-year period ended September 30, 1996. This
compares to a 14.99% return for the S&P 500, 13.28% for the Lipper Growth Fund
Average, and 12.69% for the Lipper Growth and Income Fund Average over the same
period. Using active investment management, the Fund hopes to outperform passive
indices. The performance of the indices is not representative of the performance
of the Fund or the future performance of the Fund. The indices do not bear the
transaction and other costs that the Fund will bear.
While the Fund emphasizes U.S. investments, it can invest in securities of
foreign companies that meet the same criteria applicable to domestic investments
if the performance of foreign securities is believed by the Adviser to offer
more potential than domestic investments.
For capital appreciation, the Fund may use up to 20% of its assets to
purchase debt securities, including zero coupon bonds. Investment-grade debt
securities are those rated Aaa, Aa, A or Baa by Moody's, or AAA, AA, A or BBB by
S&P or, if unrated, of equivalent quality as determined by the Adviser.
The Fund may also purchase debt securities which are rated below
investment-grade (that is, rated below Baa by Moody's or below BBB by S&P) and
unrated securities of equivalent quality as determined by the Adviser, which
usually entail greater risk (including the possibility of default or bankruptcy
of the issues of such securities), generally involve greater volatility of price
and risk of principal and income, and may be less liquid and more difficult to
value than securities in the higher rating categories. The Fund may invest up to
20% of its net assets in such securities ("high yield/high risk securities") but
will invest no more than 10% of its net assets in securities rated B or lower by
Moody's or S&P and may not invest more than 5% of its net assets in securities
which are rated C by Moody's or D by S&P or of equivalent quality as determined
by the Adviser. Securities rated C or D may be in default with respect to
payment of principal or interest. Also, longer maturity bonds tend to fluctuate
more in price as interest rates change than do short-term bonds, providing both
opportunity and risk. (See "High Yield, High Risk Securities.")
The Fund may borrow money for temporary, emergency or other purposes,
including investment leverage purposes, as determined by the Trustees. The Fund
may also borrow under reverse repurchase agreements. The Investment Company Act
of 1940 (the "1940 Act") requires borrowings to have 300% asset coverage.
2
<PAGE>
The objective of the Fund is not fundamental and may be changed by the
Trustees without a vote of shareholders. The Fund cannot guarantee a gain or
eliminate the risk of loss. The net asset value of the Fund's shares will
increase or decrease with changes in the market price of the Fund's investments,
and there is no assurance that the Fund's objective will be achieved.
Master-feeder Fund Structure
At a special meeting of shareholders held on October 27, 1997, a majority
of the shareholders of each fund approved a proposal which gives the Funds'
Board of Trustees the discretion to retain the current distribution arrangement
while investing in a master fund in a master/feeder fund structure as described
below.
A master/feeder fund structure is one in which a fund (a "feeder fund"),
instead of investing directly in a portfolio of securities, invests all of its
investment assets in a separate registered investment company (the "master
fund") with substantially the same investment objective and policies as the
feeder fund. Such a structure permits the pooling of assets of two or more
feeder funds preserving separate identities, management or distribution channels
at the feeder fund level, based on the premise that certain of the expenses of
operating an investment portfolio are relatively fixed and that a larger
investment portfolio may eventually achieve a lower ratio of operating expenses
to average net assets. An existing investment company is able to convert to a
feeder fund by selling all of its investments, which involves brokerage and
other transaction costs and realization of a taxable gain or loss.
Investments and Investment Techniques
Foreign Securities. While the Funds generally emphasize investments in companies
domiciled in the U.S., they may invest in listed and unlisted foreign securities
of the same types as the domestic securities in which they may invest, when the
anticipated performance of foreign securities is believed by the Adviser to
offer more potential than domestic alternatives, in keeping with the investment
objectives of the Funds.
Investors should recognize that investing in foreign securities involves
certain special considerations, including those set forth below, which are not
typically associated with investing in U.S. securities and which may favorably
or unfavorably affect the Funds' performance. As foreign companies are not
generally subject to uniform accounting, auditing and financial reporting
standards, practices and requirements comparable to those applicable to domestic
companies, there may be less publicly available information about a foreign
company than about a domestic company. Many foreign stock markets, while growing
in volume of trading activity, have substantially less volume than the New York
Stock Exchange (the "Exchange") and securities of some foreign companies are
less liquid and more volatile than securities of domestic companies. Similarly,
volume and liquidity in most foreign bond markets are less than the volume and
liquidity in the U.S. and at times, volatility of price can be greater than in
the U.S. Further, foreign markets have different clearance and settlement
procedures and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when assets of the Funds are uninvested and no return is
earned thereon. The inability of the Funds to make intended security purchases
due to settlement problems could cause the Funds to miss attractive investment
opportunities. Inability to dispose of portfolio securities due to settlement
problems either could result in losses to the Funds due to subsequent declines
in value of the portfolio security or, if the Funds have entered into a contract
to sell the security, could result in possible liability to the purchaser. Fixed
commissions on some foreign stock exchanges are generally higher than negotiated
commissions on U.S. exchanges although the Funds will endeavor to achieve the
most favorable net results on their portfolio transactions. Further, the Funds
may encounter difficulties or be unable to pursue legal remedies and obtain
judgments in foreign courts. There is generally less government supervision and
regulation of business and industry practices, stock exchanges, brokers and
listed companies than in the U.S. It may be more difficult for the Funds' agents
to keep currently informed about corporate actions such as stock dividends or
other matters which may affect the prices of portfolio securities.
Communications between the U.S. and foreign countries may be less reliable than
within the U.S. thereby increasing the risk of delayed settlements of portfolio
transactions or loss of certificates for portfolio securities. Delivery of
securities without payment is required in some foreign markets. In addition,
with respect to certain foreign countries, there is the possibility of
nationalization, expropriation, the imposition of withholding or confiscatory
taxes, political, social, or economic instability, or diplomatic developments
which could affect U.S. investments in those countries. Investments in foreign
securities may also entail certain risks, such as possible currency blockages or
transfer restrictions, and the difficulty of enforcing rights in other
countries. Moreover, individual foreign economies
3
<PAGE>
may differ favorably or unfavorably from the U.S. economy in such respects as
growth of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position.
These considerations generally are more of a concern in developing
countries. For example, the possibility of revolution and the dependence on
foreign economic assistance may be greater in those countries than in developed
countries. The management of the Funds seeks to mitigate the risks associated
with these considerations through diversification and active professional
management. Although investments in companies domiciled in developing countries
may be subject to potentially greater risks than investments in developed
countries, the Funds will not invest in any securities of issuers located in
developing countries if the securities, in the judgment of the Adviser, are
speculative.
Investments in foreign securities usually will involve currencies of
foreign countries. Moreover, the Funds may temporarily hold funds in bank
deposits in foreign currencies during the completion of investment programs and
the value of the assets for the Funds, as measured in U.S. dollars, may be
affected favorably or unfavorably by changes in foreign currency exchange rates
and exchange control regulations, and the Funds may incur costs in connection
with conversions between various currencies. Although the Funds value their
assets daily in terms of U.S. dollars, the Funds do not intend to convert their
holdings of foreign currencies, if any, into U.S. dollars on a daily basis. The
Funds may do so from time to time, and investors should be aware of the costs of
currency conversion. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference (the "spread")
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Funds at one rate,
while offering a lesser rate of exchange should the Funds desire to resell that
currency to the dealer. The Funds will conduct their foreign currency exchange
transactions, if any, either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market or through forward foreign
currency exchange contracts.
To the extent that the Funds invest in foreign securities, each Fund's
share price could reflect the movements of both the different stock and bond
markets in which it is invested and the currencies in which the investments are
denominated: the strength or weakness of the U.S. dollar against foreign
currencies could account for part of each Fund's investment performance.
High Yield, High Risk Securities. Below investment-grade securities (rated below
Baa by Moody's and below BBB by S&P) or unrated securities of equivalent quality
in the Adviser's judgment, carry a high degree of risk (including the
possibility of default or bankruptcy of the issuers of such securities),
generally involve greater volatility of price and risk of principal and income,
may be less liquid and more difficult to value than securities in the higher
ratings categories and are considered speculative. The lower the ratings of such
debt securities the greater their risks render them like equity securities. See
the Appendix to this Statement of Additional Information for a more complete
description of the ratings assigned by ratings organizations and their
respective characteristics.
Each Fund may invest up to 20% of its net assets in debt securities rated
below investment-grade but will invest no more than 10% of its net assets in
securities rated B or lower by Moody's or by S&P.
An economic downturn could disrupt the high yield market and impair the
ability of issuers to repay principal and interest. Also, an increase in
interest rates could adversely affect the value of such obligations held by the
Funds. Prices and yields of high yield securities will fluctuate over time and
may affect each Fund's net asset value. In addition, investments in high yield
zero coupon or pay-in-kind bonds, rather than income-bearing high yield
securities, may be more speculative and may be subject to greater fluctuations
in value due to changes in interest rates.
The trading market for high yield securities may be thin to the extent
that there is no established retail secondary market or because of a decline in
the value of such securities. A thin trading market may limit the ability of a
Fund to accurately value high yield securities in the Fund's portfolio and to
dispose of those securities. Adverse publicity and investor perceptions may
decrease the value and liquidity of high yield securities. These securities may
also involve special registration responsibilities, liabilities and costs.
Credit quality in the high-yield securities market can change suddenly and
unexpectedly and even recently issued credit ratings may not fully reflect the
actual risks posed by a particular high-yield security. For these reasons, it is
the policy of the Adviser not to rely exclusively on ratings issued by
established credit rating agencies, but to supplement such ratings with its own
independent and on-going review of credit quality. The achievement of each
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Fund's investment objective may be more dependent on the Adviser's credit
analysis than is the case for higher quality bonds. Should the rating of a
portfolio security be downgraded the Adviser will determine whether it is in the
best interest of a Fund to retain or dispose of the security.
Prices for below investment-grade securities may be affected by
legislative and regulatory developments. For example, federal rules require
savings and loan institutions to gradually reduce their holdings of this type of
security. Also, Congress has from time to time considered legislation which
would restrict or eliminate the corporate tax deduction for interest payments in
these securities and regulate corporate restructurings. Such legislation may
significantly depress the prices of outstanding securities of this type. For
more information regarding tax issues related to high yield securities see
"TAXES."
Convertible Securities. The Funds may each invest in convertible securities,
that is, bonds, notes, debentures, preferred stocks and other securities which
are convertible into common stock. Investments in convertible securities can
provide an opportunity for capital appreciation and/or income through interest
and dividend payments by virtue of their conversion or exchange features. The
Funds will limit their purchases of convertible securities to debt securities
convertible into common stocks.
The convertible securities in which the Funds may invest are either fixed
income or zero coupon debt securities which may be converted or exchanged at a
stated or determinable exchange ratio into underlying shares of common stock.
The exchange ratio for any particular convertible security may be adjusted from
time to time due to stock splits, dividends, spin-offs, other corporate
distributions or scheduled changes in the exchange ratio. Convertible debt
securities and convertible preferred stocks, until converted, have general
characteristics similar to both debt and equity securities. Although to a lesser
extent than with debt securities generally, the market value of convertible
securities tends to decline as interest rates increase and, conversely, tends to
increase as interest rates decline. In addition, because of the conversion or
exchange feature, the market value of convertible securities typically changes
as the market value of the underlying common stocks changes, and, therefore,
also tends to follow movements in the general market for equity securities. A
unique feature of convertible securities is that as the market price of the
underlying common stock declines, convertible securities tend to trade
increasingly on a yield basis, and so may not experience market value declines
to the same extent as the underlying common stock. When the market price of the
underlying common stock increases, the prices of the convertible securities tend
to rise as a reflection of the value of the underlying common stock, although
typically not as much as the underlying common stock. While no securities
investments are without risk, investments in convertible securities generally
entail less risk than investments in common stock of the same issuer.
As debt securities, convertible securities are investments which provide
for a stream of income (or in the case of zero coupon securities, accretion of
income) with generally higher yields than common stocks. Of course, like all
debt securities, there can be no assurance of income or principal payments
because the issuers of the convertible securities may default on their
obligations. Convertible securities generally offer lower yields than
non-convertible securities of similar quality because of their conversion or
exchange features.
Convertible securities generally are subordinated to other similar but
non-convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock, of the
same issuer. However, because of the subordination feature, convertible bonds
and convertible preferred stock typically have lower ratings than similar
non-convertible securities.
Convertible securities may be issued as fixed income obligations that pay
current income or as zero coupon notes and bonds, including Liquid Yield Option
Notes ("LYONs"). Zero coupon securities pay no cash income and are sold at
substantial discounts from their value at maturity. When held to maturity, their
entire income, which consists of accretion of discount, comes from the
difference between the purchase price and their value at maturity. Zero coupon
convertible securities offer the opportunity for capital appreciation as
increases (or decreases) in market value of such securities closely follows the
movements in the market value of the underlying common stock. Zero coupon
convertible securities are generally expected to be less volatile than the
underlying common stocks as they are usually issued with short to medium length
maturities (15 years or less) and are issued with options and/or redemption
features exercisable by the holder of the obligation entitling the holder to
redeem the obligation and receive a defined cash payment.
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Illiquid and Restricted Securities. Each Fund may occasionally purchase
securities other than in the open market. While such purchases may often offer
attractive opportunities for investment not otherwise available on the open
market, the securities so purchased are often "restricted securities", i.e.,
securities which cannot be sold to the public without registration under the
Securities Act of 1933 or the availability of an exemption from registration
(such as Rules 144 or 144A), or which are "not readily marketable" because they
are subject to other legal or contractual delays in or restrictions on resale.
The absence of a trading market can make it difficult to ascertain a
market value for illiquid investments. Disposing of illiquid investments may
involve time-consuming negotiation and legal expenses, and it may be difficult
or impossible for the Fund to sell them promptly at an acceptable price. The
Fund may have to bear the extra expense of registering such securities for
resale and the risk of substantial delay in effecting such registration. Also
market quotations are less readily available. The judgment of the Adviser may at
times play a greater role in valuing these securities than in the case of
unrestricted securities.
Generally speaking, restricted securities may be sold only to qualified
institutional buyers, or in a privately negotiated transaction to a limited
number of purchasers, or in limited quantities after they have been held for a
specified period of time and other conditions are met pursuant to an exemption
from registration, or in a public offering for which a registration statement is
in effect under the Securities Act of 1933. The Funds may be deemed to be an
"underwriter" for purposes of the Securities Act of 1933 when selling restricted
securities to the public, and in such event the Fund may be liable to purchasers
of such securities if the registration statement prepared by the issuer, or the
prospectus forming a part of it, is materially inaccurate or misleading.
Each Fund will not invest more than 10% of its total assets in securities
which are not readily marketable, the disposition of which is restricted under
Federal securities laws or in repurchase agreements not terminable within seven
days.
Borrowing. As a matter of fundamental policy, the Funds will not borrow money,
except as permitted under the 1940 Act, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time. While
the Trustees do not currently intend to borrow for investment leverage purposes,
if such a strategy were implemented in the future it would increase the Funds'
volatility and the risk of loss in a declining market. Borrowing by the Funds'
will involve special risk considerations. Although the principal of the Funds'
borrowings will be fixed, the Funds' assets may change in value during the time
a borrowing is outstanding, thus increasing exposure to capital risk.
Repurchase Agreements. Each Fund may enter into repurchase agreements with any
member bank of the Federal Reserve System or any broker/dealer which is
recognized as a reporting government securities dealer if the creditworthiness
of the bank or broker/dealer has been determined by the Adviser to be at least
equal to that of issuers of commercial paper rated within the two highest grades
assigned by Moody's or by S&P.
A repurchase agreement provides a means for a Fund to earn income on funds
for periods as short as overnight. It is an arrangement under which a Fund
acquires a debt security ("Obligation") and the seller agrees, at the time of
sale, to repurchase the Obligation at a specified time and price. Obligations
subject to a repurchase agreement are held in a segregated account and the value
of such Obligations kept at least equal to the repurchase price on a daily
basis. The repurchase price may be higher than the purchase price, the
difference being income to the Fund, or the purchase and repurchase prices may
be the same, with interest at a stated rate due to the Fund together with the
repurchase price upon repurchase. In either case, the income to the Fund is
unrelated to the interest rate on the Obligation subject to the repurchase
agreement. Obligations will be held by the Fund's custodian or in the Federal
Reserve Book Entry system.
For purposes of the Investment Company Act of 1940, as amended (the "1940
Act"), a repurchase agreement is deemed to be a loan from a Fund to the seller
of the Obligation subject to the repurchase agreement and is therefore subject
to that Fund's investment restriction applicable to loans. It is not clear
whether a court would consider the Obligation purchased by a Fund subject to a
repurchase agreement as being owned by the Fund or as being collateral for a
loan by the Fund to the seller. In the event of the commencement of bankruptcy
or insolvency proceedings with respect to the seller of the Obligation before
repurchase of the Obligation under a repurchase agreement, a Fund may encounter
delay and incur costs before being able to sell the security. Delays may involve
loss of interest or decline in price of the Obligation. If the court
characterizes the transaction as a loan and the Fund has not perfected a
security
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interest in the Obligation, the Fund may be required to return the Obligation to
the seller's estate and be treated as an unsecured creditor of the seller. As an
unsecured creditor, the Fund would risk losing some or all of the principal and
income involved in the transaction. As with any unsecured debt instrument
purchased for the Fund, the Adviser seeks to minimize the risk of loss through
repurchase agreements by analyzing the creditworthiness of the obligor, in this
case the seller of the Obligation. Apart from the risk of bankruptcy or
insolvency proceedings, there is also the risk that the seller may fail to
repurchase the Obligation, in which case the Fund may incur a loss if the
proceeds to the Fund of the sale to a third party are less than the repurchase
price. However, if the market value of the Obligation subject to the repurchase
agreement becomes less than the repurchase price (including interest), the Fund
involved will direct the seller of the Obligation to deliver additional
securities so that the market value of all securities subject to the repurchase
agreement will equal or exceed the repurchase price. It is possible that the
Fund will be unsuccessful in seeking to impose on the seller a contractual
obligation to deliver additional securities.
Strategic Transactions and Derivatives. Each Fund may, but is not required to,
utilize various other investment strategies as described below to hedge various
market risks (such as interest rates, currency exchange rates, and broad or
specific equity or fixed-income market movements), to manage the effective
maturity or duration of fixed-income securities of a Fund's portfolio, or to
enhance potential gain. These strategies may be executed through the use of
derivative contracts. Such strategies are generally accepted as a part of modern
portfolio management and are regularly utilized by many mutual funds and other
institutional investors. Techniques and instruments may change over time as new
instruments and strategies are developed or regulatory changes occur.
In the course of pursuing these investment strategies, a Fund may purchase
and sell exchange-listed and over-the-counter put and call options on
securities, equity and fixed-income indices and other financial instruments,
purchase and sell financial futures contracts and options thereon, enter into
various interest rate transactions such as swaps, caps, floors or collars, and
enter into various currency transactions such as currency forward contracts,
currency futures contracts, currency swaps or options on currencies or currency
futures (collectively, all the above are called "Strategic Transactions").
Strategic Transactions may be used without limit to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for a Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect a Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of fixed-income
securities in a Fund's portfolio, or to establish a position in the derivatives
markets as a temporary substitute for purchasing or selling particular
securities. Some Strategic Transactions may also be used to enhance potential
gain although no more than 5% of a Fund's assets will be committed to Strategic
Transactions entered into for non-hedging purposes. Any or all of these
investment techniques may be used at any time and in any combination, and there
is no particular strategy that dictates the use of one technique rather than
another, as use of any Strategic Transaction is a function of numerous variables
including market conditions. The ability of a Fund to utilize these Strategic
Transactions successfully will depend on the Adviser's ability to predict
pertinent market movements, which cannot be assured. Each Fund will comply with
applicable regulatory requirements when implementing these strategies,
techniques and instruments. Strategic Transactions involving financial futures
and options thereon will be purchased, sold or entered into only for bona fide
hedging, risk management or portfolio management purposes and not for
speculative purposes.
Strategic Transactions, including derivative contracts, have risks
associated with them including possible default by the other party to the
transaction, illiquidity and, to the extent the Adviser's view as to certain
market movements is incorrect, the risk that the use of such Strategic
Transactions could result in losses greater than if they had not been used. Use
of put and call options may result in losses to a Fund, force the sale or
purchase of portfolio securities at inopportune times or for prices higher than
(in the case of put options) or lower than (in the case of call options) current
market values, limit the amount of appreciation a Fund can realize on its
investments or cause a Fund to hold a security it might otherwise sell. The use
of currency transactions can result in a Fund incurring losses as a result of a
number of factors including the imposition of exchange controls, suspension of
settlements, or the inability to deliver or receive a specified currency. The
use of options and futures transactions entails certain other risks. In
particular, the variable degree of correlation between price movements of
futures contracts and price movements in the related portfolio position of a
Fund creates the possibility that losses on the hedging instrument may be
greater than gains in the value of a Fund's position. In addition, futures and
options markets may not be liquid in all circumstances and certain
over-the-counter options may have no markets. As a result, in certain markets, a
Fund might not be able to close out a transaction without incurring substantial
losses, if at all. Although the use of futures and options transactions for
hedging should tend to minimize the risk of loss due to a decline in the value
of the hedged position, at
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the same time they tend to limit any potential gain which might result from an
increase in value of such position. Finally, the daily variation margin
requirements for futures contracts would create a greater ongoing potential
financial risk than would purchases of options, where the exposure is limited to
the cost of the initial premium. Losses resulting from the use of Strategic
Transactions would reduce net asset value, and possibly income, and such losses
can be greater than if the Strategic Transactions had not been utilized.
General Characteristics of Options. Put options and call options typically have
similar structural characteristics and operational mechanics regardless of the
underlying instrument on which they are purchased or sold. Thus, the following
general discussion relates to each of the particular types of options discussed
in greater detail below. In addition, many Strategic Transactions involving
options require segregation of Fund assets in special accounts, as described
below under "Use of Segregated and Other Special Accounts."
A put option gives the purchaser of the option, upon payment of a premium,
the right to sell, and the writer the obligation to buy, the underlying
security, commodity, index, currency or other instrument at the exercise price.
For instance, a Fund's purchase of a put option on a security might be designed
to protect its holdings in the underlying instrument (or, in some cases, a
similar instrument) against a substantial decline in the market value by giving
a Fund the right to sell such instrument at the option exercise price. A call
option, upon payment of a premium, gives the purchaser of the option the right
to buy, and the seller the obligation to sell, the underlying instrument at the
exercise price. A Fund's purchase of a call option on a security, financial
future, index, currency or other instrument might be intended to protect a Fund
against an increase in the price of the underlying instrument that it intends to
purchase in the future by fixing the price at which it may purchase such
instrument. An American style put or call option may be exercised at any time
during the option period while a European style put or call option may be
exercised only upon expiration or during a fixed period prior thereto. Each Fund
is authorized to purchase and sell exchange listed options and over-the-counter
options ("OTC options"). Exchange listed options are issued by a regulated
intermediary such as the Options Clearing Corporation ("OCC"), which guarantees
the performance of the obligations of the parties to such options. The
discussion below uses the OCC as an example, but is also applicable to other
financial intermediaries.
With certain exceptions, OCC issued and exchange listed options generally
settle by physical delivery of the underlying security or currency, although in
the future cash settlement may become available. Index options and Eurodollar
instruments are cash settled for the net amount, if any, by which the option is
"in-the-money" (i.e., where the value of the underlying instrument exceeds, in
the case of a call option, or is less than, in the case of a put option, the
exercise price of the option) at the time the option is exercised. Frequently,
rather than taking or making delivery of the underlying instrument through the
process of exercising the option, listed options are closed by entering into
offsetting purchase or sale transactions that do not result in ownership of the
new option.
A Fund's ability to close out its position as a purchaser or seller of an
OCC or exchange listed put or call option is dependent, in part, upon the
liquidity of the option market. Among the possible reasons for the absence of a
liquid option market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange; (iii)
trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities including
reaching daily price limits; (iv) interruption of the normal operations of the
OCC or an exchange; (v) inadequacy of the facilities of an exchange or OCC to
handle current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. Each
Fund will only sell OTC options (other than OTC currency options) that are
subject to a buy-back
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provision permitting a Fund to require the Counterparty to sell the option back
to a Fund at a formula price within seven days. Each Fund expects generally to
enter into OTC options that have cash settlement provisions, although it is not
required to do so.
Unless the parties provide for it, there is no central clearing or
guaranty function in an OTC option. As a result, if the Counterparty fails to
make or take delivery of the security, currency or other instrument underlying
an OTC option it has entered into with the Fund or fails to make a cash
settlement payment due in accordance with the terms of that option, a Fund will
lose any premium it paid for the option as well as any anticipated benefit of
the transaction. Accordingly, the Adviser must assess the creditworthiness of
each such Counterparty or any guarantor or credit enhancement of the
Counterparty's credit to determine the likelihood that the terms of the OTC
option will be satisfied. Each Fund will engage in OTC option transactions only
with U.S. government securities dealers recognized by the Federal Reserve Bank
of New York as "primary dealers" or broker/dealers, domestic or foreign banks or
other financial institutions which have received (or the guarantors of the
obligation of which have received) a short-term credit rating of A-1 from S&P or
P-1 from Moody's or an equivalent rating from any nationally recognized
statistical rating organization ("NRSRO") or, in the case of OTC currency
transactions, are determined to be of equivalent credit quality by the Adviser.
The staff of the Securities and Exchange Commission ("SEC") currently takes the
position that OTC options purchased by a Fund, and portfolio securities
"covering" the amount of a Fund's obligation pursuant to an OTC option sold by
it (the cost of the sell-back plus the in-the-money amount, if any) are
illiquid, and are subject to each Fund's limitation on investing no more than
10% of its assets in illiquid securities.
If a Fund sells a call option, the premium that it receives may serve as a
partial hedge, to the extent of the option premium, against a decrease in the
value of the underlying securities or instruments in its portfolio or will
increase a Fund's income. The sale of put options can also provide income.
Each Fund may purchase and sell call options on securities including U.S.
Treasury and agency securities, mortgage-backed securities, corporate debt
securities, equity securities (including convertible securities) and Eurodollar
instruments that are traded on U.S. and foreign securities exchanges and in the
over-the-counter markets, and on securities indices, currencies and futures
contracts. All calls sold by a Fund must be "covered" (i.e., the Fund must own
the securities or futures contract subject to the call) or must meet the asset
segregation requirements described below as long as the call is outstanding.
Even though a Fund will receive the option premium to help protect it against
loss, a call sold by a Fund exposes that Fund during the term of the option to
possible loss of opportunity to realize appreciation in the market price of the
underlying security or instrument and may require that Fund to hold a security
or instrument which it might otherwise have sold.
Each Fund may purchase and sell put options on securities including U.S.
Treasury and agency securities, mortgage-backed securities, corporate debt
securities, equity securities (including convertible securities) and Eurodollar
instruments (whether or not it holds the above securities in its portfolio), and
on securities, indices, currencies and futures contracts other than futures on
individual corporate debt and individual equity securities. Each Fund will not
sell put options if, as a result, more than 50% of a Fund's assets would be
required to be segregated to cover its potential obligations under such put
options other than those with respect to futures and options thereon. In selling
put options, there is a risk that a Fund may be required to buy the underlying
security at a disadvantageous price above the market price.
General Characteristics of Futures. Each Fund may enter into financial futures
contracts or purchase or sell put and call options on such futures as a hedge
against anticipated interest rate, currency or equity market changes, for
duration management and for risk management purposes. Futures are generally
bought and sold on the commodities exchanges where they are listed with payment
of initial and variation margin as described below. The sale of a futures
contract creates a firm obligation by a Fund, as seller, to deliver to the buyer
the specific type of financial instrument called for in the contract at a
specific future time for a specified price (or, with respect to index futures
and Eurodollar instruments, the net cash amount). Options on futures contracts
are similar to options on securities except that an option on a futures contract
gives the purchaser the right in return for the premium paid to assume a
position in a futures contract and obligates the seller to deliver such
position.
Each Fund's use of financial futures and options thereon will in all cases
be consistent with applicable regulatory requirements and in particular the
rules and regulations of the Commodity Futures Trading Commission and will be
entered into only for bona fide hedging, risk management (including duration
management) or other portfolio
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management purposes. Typically, maintaining a futures contract or selling an
option thereon requires a Fund to deposit with a financial intermediary as
security for its obligations an amount of cash or other specified assets
(initial margin) which initially is typically 1% to 10% of the face amount of
the contract (but may be higher in some circumstances). Additional cash or
assets (variation margin) may be required to be deposited thereafter on a daily
basis as the mark to market value of the contract fluctuates. The purchase of an
option on financial futures involves payment of a premium for the option without
any further obligation on the part of a Fund. If a Fund exercises an option on a
futures contract it will be obligated to post initial margin (and potential
subsequent variation margin) for the resulting futures position just as it would
for any position. Futures contracts and options thereon are generally settled by
entering into an offsetting transaction but there can be no assurance that the
position can be offset prior to settlement at an advantageous price, nor that
delivery will occur.
Each Fund will not enter into a futures contract or related option (except
for closing transactions) if, immediately thereafter, the sum of the amount of
its initial margin and premiums on open futures contracts and options thereon
would exceed 5% of that Fund's total assets (taken at current value); however,
in the case of an option that is in-the-money at the time of the purchase, the
in-the-money amount may be excluded in calculating the 5% limitation. The
segregation requirements with respect to futures contracts and options thereon
are described below.
Options on Securities Indices and Other Financial Indices. Each Fund also may
purchase and sell call and put options on securities indices and other financial
indices and in so doing can achieve many of the same objectives it would achieve
through the sale or purchase of options on individual securities or other
instruments. Options on securities indices and other financial indices are
similar to options on a security or other instrument except that, rather than
settling by physical delivery of the underlying instrument, they settle by cash
settlement, i.e., an option on an index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the index
upon which the option is based exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option (except if, in the case
of an OTC option, physical delivery is specified). This amount of cash is equal
to the excess of the closing price of the index over the exercise price of the
option, which also may be multiplied by a formula value. The seller of the
option is obligated, in return for the premium received, to make delivery of
this amount. The gain or loss on an option on an index depends on price
movements in the instruments making up the market, market segment, industry or
other composite on which the underlying index is based, rather than price
movements in individual securities, as is the case with respect to options on
securities.
Currency Transactions. Each Fund may engage in currency transactions with
Counterparties in order to hedge the value of portfolio holdings denominated in
particular currencies against fluctuations in relative value. Currency
transactions include forward currency contracts, exchange listed currency
futures, exchange listed and OTC options on currencies, and currency swaps. A
forward currency contract involves a privately negotiated obligation to purchase
or sell (with delivery generally required) a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. A currency swap is
an agreement to exchange cash flows based on the notional difference among two
or more currencies and operates similarly to an interest rate swap, which is
described below. Each Fund may enter into currency transactions with
Counterparties which have received (or the guarantors of the obligations which
have received) a credit rating of A-1 or P-1 by S&P or Moody's, respectively, or
that have an equivalent rating from a NRSRO or are determined to be of
equivalent credit quality by the Adviser.
Each Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is entering into a currency transaction with
respect to specific assets or liabilities of a Fund, which will generally arise
in connection with the purchase or sale of its portfolio securities or the
receipt of income therefrom. Position hedging is entering into a currency
transaction with respect to portfolio security positions denominated or
generally quoted in that currency.
Each Fund will not enter into a transaction to hedge currency exposure to
an extent greater, after netting all transactions intended wholly or partially
to offset other transactions, than the aggregate market value (at the time of
entering into the transaction) of the securities held in its portfolio that are
denominated or generally quoted in or currently convertible into such currency,
other than with respect to proxy hedging or cross hedging as described below.
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Each Fund may also cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which that Fund has or in which that Fund
expects to have portfolio exposure.
To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings of portfolio securities, each Fund may also engage in proxy
hedging. Proxy hedging is often used when the currency to which a Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar. Proxy
hedging entails entering into a commitment or option to sell a currency whose
changes in value are generally considered to be correlated to a currency or
currencies in which some or all of a Fund's portfolio securities are or are
expected to be denominated, in exchange for U.S. dollars. The amount of the
commitment or option would not exceed the value of that Fund's securities
denominated in correlated currencies. For example, if the Adviser considers that
the Austrian schilling is correlated to the German deutschemark (the "D-mark"),
a Fund holds securities denominated in schillings and the Adviser believes that
the value of schillings will decline against the U.S. dollar, the Adviser may
enter into a commitment or option to sell D-marks and buy dollars. Currency
hedging involves some of the same risks and considerations as other transactions
with similar instruments. Currency transactions can result in losses to a Fund
if the currency being hedged fluctuates in value to a degree or in a direction
that is not anticipated. Further, there is the risk that the perceived
correlation between various currencies may not be present or may not be present
during the particular time that a Fund is engaging in proxy hedging. If a Fund
enters into a currency hedging transaction, that Fund will comply with the asset
segregation requirements described below.
Risks of Currency Transactions. Currency transactions are subject to risks
different from those of other portfolio transactions. Because currency control
is of great importance to the issuing governments and influences economic
planning and policy, purchases and sales of currency and related instruments can
be negatively affected by government exchange controls, blockages, and
manipulations or exchange restrictions imposed by governments. These can result
in losses to a Fund if it is unable to deliver or receive currency or funds in
settlement of obligations and could also cause hedges it has entered into to be
rendered useless, resulting in full currency exposure as well as incurring
transaction costs. Buyers and sellers of currency futures are subject to the
same risks that apply to the use of futures generally. Further, settlement of a
currency futures contract for the purchase of most currencies must occur at a
bank based in the issuing nation. Trading options on currency futures is
relatively new, and the ability to establish and close out positions on such
options is subject to the maintenance of a liquid market which may not always be
available. Currency exchange rates may fluctuate based on factors extrinsic to
that country's economy.
Combined Transactions. Each Fund may enter into multiple transactions, including
multiple options transactions, multiple futures transactions, multiple currency
transactions (including forward currency contracts) and multiple interest rate
transactions and any combination of futures, options, currency and interest rate
transactions ("component" transactions), instead of a single Strategic
Transaction, as part of a single or combined strategy when, in the opinion of
the Adviser, it is in the best interests of a Fund to do so. A combined
transaction will usually contain elements of risk that are present in each of
its component transactions. Although combined transactions are normally entered
into based on the Adviser's judgment that the combined strategies will reduce
risk or otherwise more effectively achieve the desired portfolio management
goal, it is possible that the combination will instead increase such risks or
hinder achievement of the portfolio management objective.
Swaps, Caps, Floors and Collars. Among the Strategic Transactions into which
each Fund may enter are interest rate, currency and index swaps and the purchase
or sale of related caps, floors and collars. Each Fund expects to enter into
these transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities a Fund anticipates purchasing at a later
date. Each Fund intends to use these transactions as hedges and not as
speculative investments and will not sell interest rate caps or floors where it
does not own securities or other instruments providing the income stream a Fund
may be obligated to pay. Interest rate swaps involve the exchange by a Fund with
another party of their respective commitments to pay or receive interest, e.g.,
an exchange of floating rate payments for fixed rate payments with respect to a
notional amount of principal. A currency swap is an agreement to exchange cash
flows on a notional amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash flows on
a notional amount based on changes in the values of the reference indices. The
purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling such cap to the extent that a specified
index exceeds a predetermined interest rate or amount. The purchase of a floor
entitles the purchaser to receive payments on a notional principal amount from
the party selling
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such floor to the extent that a specified index falls below a predetermined
interest rate or amount. A collar is a combination of a cap and a floor that
preserves a certain return within a predetermined range of interest rates or
values.
Each Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with a Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as these swaps, caps,
floors and collars are entered into for good faith hedging purposes, the Adviser
and the Funds believe such obligations do not constitute senior securities under
the 1940 Act and, accordingly, will not treat them as being subject to its
borrowing restrictions. The Funds will not enter into any swap, cap, floor or
collar transaction unless, at the time of entering into such transaction, the
unsecured long-term debt of the Counterparty, combined with any credit
enhancements, is rated at least A by S&P or Moody's or has an equivalent rating
from a NRSRO or is determined to be of equivalent credit quality by the Adviser.
If there is a default by the Counterparty, a Fund may have contractual remedies
pursuant to the agreements related to the transaction. The swap market has grown
substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid.
Caps, floors and collars are more recent innovations for which standardized
documentation has not yet been fully developed and, accordingly, they are less
liquid than swaps.
Eurodollar Instruments. Each Fund may make investments in Eurodollar
instruments. Eurodollar instruments are U.S. dollar-denominated futures
contracts or options thereon which are linked to the London Interbank Offered
Rate ("LIBOR"), although foreign currency-denominated instruments are available
from time to time. Eurodollar futures contracts enable purchasers to obtain a
fixed rate for the lending of funds and sellers to obtain a fixed rate for
borrowings. The Funds might use Eurodollar futures contracts and options thereon
to hedge against changes in LIBOR, to which many interest rate swaps and fixed
income instruments are linked.
Risks of Strategic Transactions Outside the U.S. When conducted outside the
U.S., Strategic Transactions may not be regulated as rigorously as in the U.S.,
may not involve a clearing mechanism and related guarantees, and are subject to
the risk of governmental actions affecting trading in, or the prices of, foreign
securities, currencies and other instruments. The value of such positions also
could be adversely affected by: (i) other complex foreign political, legal and
economic factors, (ii) lesser availability than in the U.S. of data on which to
make trading decisions, (iii) delays in a Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the U.S., (iv)
the imposition of different exercise and settlement terms and procedures and
margin requirements than in the U.S., and (v) lower trading volume and
liquidity.
Use of Segregated and Other Special Accounts. Many Strategic Transactions, in
addition to other requirements, require that the Funds segregate liquid high
grade assets with their custodian to the extent that obligations of the Funds
are not otherwise "covered" through ownership of the underlying security,
financial instrument or currency. In general, either the full amount of any
obligation by a Fund to pay or deliver securities or assets must be covered at
all times by the securities, instruments or currency required to be delivered,
or, subject to any regulatory restrictions, an amount of cash or liquid high
grade securities at least equal to the current amount of the obligation must be
segregated with the custodian. The segregated assets cannot be sold or
transferred unless equivalent assets are substituted in their place or it is no
longer necessary to segregate them. For example, a call option written by a Fund
will require that Fund to hold the securities subject to the call (or securities
convertible into the needed securities without additional consideration) or to
segregate liquid high-grade securities sufficient to purchase and deliver the
securities if the call is exercised. A call option sold by a Fund on an index
will require that Fund to own portfolio securities which correlate with the
index or to segregate liquid high grade assets equal to the excess of the index
value over the exercise price on a current basis. A put option written by a Fund
requires that Fund to segregate liquid, high grade assets equal to the exercise
price.
Except when a Fund enters into a forward contract for the purchase or sale
of a security denominated in a particular currency, which requires no
segregation, a currency contract which obligates a Fund to buy or sell currency
will generally require that Fund to hold an amount of that currency or liquid
securities denominated in that currency equal to that Fund's obligations or to
segregate liquid high grade assets equal to the amount of that Fund's
obligation.
OTC options entered into by a Fund, including those on securities,
currency, financial instruments or indices and OCC issued and exchange listed
index options, will generally provide for cash settlement. As a result, when a
Fund sells these instruments it will only segregate an amount of assets equal to
its accrued net obligations, as there is no requirement for payment or delivery
of amounts in excess of the net amount. These amounts will equal 100% of the
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exercise price in the case of a non cash-settled put, the same as an OCC
guaranteed listed option sold by a Fund, or the in-the-money amount plus any
sell-back formula amount in the case of a cash-settled put or call. In addition,
when a Fund sells a call option on an index at a time when the in-the-money
amount exceeds the exercise price, that Fund will segregate, until the option
expires or is closed out, cash or cash equivalents equal in value to such
excess. OCC issued and exchange listed options sold by a Fund other than those
above generally settle with physical delivery, or with an election of either
physical delivery or cash settlement and that Fund will segregate an amount of
assets equal to the full value of the option. OTC options settling with physical
delivery, or with an election of either physical delivery or cash settlement
will be treated the same as other options settling with physical delivery.
In the case of a futures contract or an option thereon, a Fund must deposit
initial margin and possible daily variation margin in addition to segregating
assets sufficient to meet its obligation to purchase or provide securities or
currencies, or to pay the amount owed at the expiration of an index-based
futures contract. Such assets may consist of cash, cash equivalents, liquid debt
or equity securities or other acceptable assets.
With respect to swaps, a Fund will accrue the net amount of the excess, if
any, of its obligations over its entitlements with respect to each swap on a
daily basis and will segregate an amount of cash or liquid high grade securities
having a value equal to the accrued excess. Caps, floors and collars require
segregation of assets with a value equal to a Fund's net obligation, if any.
Strategic Transactions may be covered by other means when consistent with
applicable regulatory policies. Each Fund may also enter into offsetting
transactions so that its combined position, coupled with any segregated assets,
equals its net outstanding obligation in related options and Strategic
Transactions. For example, a Fund could purchase a put option if the strike
price of that option is the same or higher than the strike price of a put option
sold by that Fund. Moreover, instead of segregating assets if a Fund held a
futures or forward contract, it could purchase a put option on the same futures
or forward contract with a strike price as high or higher than the price of the
contract held. Other Strategic Transactions may also be offset in combinations.
If the offsetting transaction terminates at the time of or after the primary
transaction no segregation is required, but if it terminates prior to such time,
assets equal to any remaining obligation would need to be segregated.
Each Fund's activities involving Strategic Transactions may be limited by
the requirements of Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), for qualification as a regulated investment company. (See
"TAXES.")
Investment Restrictions
Unless specified to the contrary, the following restrictions are
fundamental policies of each Fund and may not be changed without the approval of
a majority of the outstanding voting securities of that Fund which, under the
1940 Act and the rules thereunder and as used in this Statement of Additional
Information, means the lesser of (1) 67% or more of the shares of the Fund
present at a meeting if the holders of more than 50% of the outstanding shares
of the Fund are present in person or represented by proxy; or (2) more than 50%
of the outstanding shares of the Fund.
As a matter of fundamental policy, each Fund may not:
(1) borrow money, except as permitted under the 1940 Act, as amended,
and as interpreted or modified by regulatory authority having
jurisdiction, from time to time;
(2) issue senior securities, except as permitted under the 1940 Act, as
amended, and as interpreted or modified by regulatory authority
having jurisdiction, from time to time;
(3) concentrate its investments in a particular industry, as that term
is used in the 1940 Act, as amended, and as interpreted or modified
by regulatory authority having jurisdiction, from time to time;
(4) engage in the business of underwriting securities issued by others,
except to the extent that the Fund may be deemed to be an
underwriter in connection with the disposition of portfolio
securities;
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(5) purchase or sell real estate, which term does not include securities
of companies which deal in real estate or mortgages or investments
secured by real estate or interests therein, except that the Fund
reserves freedom of action to hold and to sell real estate acquired
as a result of the Fund's ownership of securities;
(6) purchase physical commodities or contracts relating to physical
commodities; or
(7) make loans to other persons, except (i) loans of portfolio
securities, and (ii) to the extent that entry into repurchase
agreements and the purchase of debt instruments or interests in
indebtedness in accordance with the Fund's objective and policies
may be deemed to be loans.
(1) with respect to 75% of its total assets, taken at market value,
purchase more than 10% of the outstanding voting securities of any
one issuer or invest more than 5% of the value of its total assets
in the securities of any one issuer, except obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities
and except securities of other investment companies;
(2) borrow money, except as a temporary measure for extraordinary or
emergency purposes or except in connection with reverse repurchase
agreements; provided that the Fund maintains asset coverage of 300%
for all borrowings;
(3) act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the
disposition of portfolio securities of the Fund;
(4) make loans to other persons, except (a) loans of portfolio
securities, and (b) to the extent the entry into repurchase
agreements and the purchase of debt securities in accordance with
its investment objective and investment policies may be deemed to be
loans;
(5) issue senior securities, except as appropriate to evidence
indebtedness which it is permitted to incur, and except for shares
of the separate classes or series of the Trust, provided that
collateral arrangements with respect to currency-related contracts,
futures contracts, options or other permitted investments, including
deposits of initial and variation margin, are not considered to be
the issuance of senior securities for purposes of this restriction;
and
(6) purchase any securities which would cause more than 25% of the
market value of its total assets at the time of such purchase to be
invested in the securities of one or more issuers having their
principal business activities in the same industry, provided that
there is no limitation with respect to investments in obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities (for the purposes of this restriction, telephone
companies are considered to be in a separate industry from gas and
electric public utilities, and wholly-owned finance companies are
considered to be in the industry of their parents if their
activities are primarily related to financing the activities of
their parents).
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Other Investment Policies
The Trustees of the Trust have voluntarily adopted certain policies and
restrictions which are observed in the conduct of each Fund's affairs. These
represent intentions of the Trustees based upon current circumstances. They
differ from fundamental investment policies in that they may be changed or
amended by action of the Trustees without requiring prior notice to or approval
of shareholders.
As a matter of nonfundamental policy, each Fund may not:
(a) purchase or retain securities of any open-end investment company, or
securities of closed-end investment companies except by purchase in
the open market where no commission or profit to a sponsor or dealer
results from such purchases, or except when such purchase, though
not made in the open market, is part of a plan of merger,
consolidation, reorganization or acquisition of assets; in any event
the Fund may not purchase more than 3% of the outstanding voting
securities of another investment company, may not invest more than
5% of its assets in another investment company, and may not invest
more than 10% of its assets in other investment companies;
(b) pledge, mortgage or hypothecate its assets in excess, together with
permitted borrowings, of 1/3 of its total assets;
(c) purchase or retain securities of an issuer any of whose officers,
directors, trustees or security holders is an officer, director or
trustee of the Fund or a member, officer, director or trustee of the
investment adviser of the Fund if one or more of such individuals
owns beneficially more than one-half of one percent (1/2%) of the
outstanding shares or securities or both (taken at market value) of
such issuer and such individuals owning more than one-half of one
percent (1/2%) of such shares or securities together own
beneficially more than 5% of such shares or securities or both;
(d) purchase securities on margin or make short sales, unless, by virtue
of its ownership of other securities, it has the right to obtain
securities equivalent in kind and amount to the securities sold and,
if the right is conditional, the sale is made upon the same
conditions, except in connection with arbitrage transactions, and
except that the Fund may obtain such short-term credits as may be
necessary for the clearance of purchases and sales of securities;
(e) invest more than 10% of its total assets in securities which are not
readily marketable, the disposition of which is restricted under
federal securities laws, or in repurchase agreements not terminable
within seven days, and the Fund will not invest more than 10% of its
total assets in restricted securities; Large Company Value Fund has
no current intention of investing more than 5% of its assets in
repurchase agreements;
(f) purchase securities of any issuer with a record of less than three
years continuous operations, including predecessors, except U.S.
Government securities, securities of such issuers which are rated by
at least one nationally recognized statistical rating organization,
municipal obligations and obligations issued or guaranteed by any
foreign government or its agencies or instrumentalities, if such
purchase would cause the investments of the Fund in all such issuers
to exceed 5% of the total assets of the Fund taken at market value;
(g) buy options on securities or financial instruments, unless the
aggregate premiums paid on all such options held by the Fund at any
time do not exceed 20% of its net assets; or sell put options on
securities if, as a result, the aggregate value of the obligations
underlying such put options would exceed 50% of the Fund's net
assets;
(h) enter into futures contracts or purchase options thereon unless
immediately after the purchase, the value of the aggregate initial
margin with respect to all futures contracts entered into on behalf
of the
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Fund and the premiums paid for options on futures contracts does
not exceed 5% of the fair market value of the Fund's total assets;
provided that in the case of an option that is in-the-money at the
time of purchase, the in-the-money amount may be excluded in computing
the 5% limit;
(i) invest in oil, gas or other mineral leases, or exploration or
development programs (although it may invest in issuers which own or
invest in such interests);
(j) borrow money, including reverse repurchase agreements, in excess of
5% of its total assets (taken at market value) except for temporary
or emergency purposes or borrow other than from banks;
(k) purchase warrants if as a result warrants taken at the lower of cost
or market value would represent more than 5% of the value of the
Fund's total net assets or more than 2% of its net assets in
warrants that are not listed on the New York or American Stock
Exchanges or on an exchange with comparable listing requirements
(for this purpose, warrants attached to securities will be deemed to
have no value);
(l) purchase or sell real estate limited partnership interests; or
(m) make securities loans if the value of such securities loaned exceeds
30% of the value of the Fund's total assets at the time any loan is
made; all loans of portfolio securities will be fully collateralized
and marked to market daily. Each Fund has no current intention of
making loans of portfolio securities that would amount to greater
than 5% of its total assets.
In addition, as a matter of nonfundamental policy, Large Company Value
Fund may not:
(n) invest more than 20% of its net assets in debt securities (including
convertible securities), and not more than 10% of its net assets in
those rated B or lower by Moody's or S&P and may invest in
securities rated D by S&P.
If a percentage restriction on investment or utilization of assets as set
forth under "Investment Restrictions" and "Other Investment Policies" above is
adhered to at the time an investment is made, a later change in percentage
resulting from changes in the value or the total cost of a Fund's assets will
not be considered a violation of the restriction.
In addition, other nonfundamental policies may be established from time to
time by the Funds' Trustees and would not require the approval of shareholders.
PURCHASES
(See "Purchases" and "Transaction information" in the Funds' prospectuses.)
Additional Information About Opening An Account
Clients having a regular investment counsel account with the Adviser or
its affiliates and members of their immediate families, officers and employees
of the Adviser or of any affiliated organization and their immediate families,
members of the National Association of Securities Dealers, Inc. ("NASD") and
banks may, if they prefer, subscribe initially for at least $2,500 of Fund
shares through Scudder Investor Services, Inc. (the "Distributor") by letter,
fax, or telephone.
Shareholders of other Scudder funds who have submitted an account
application and have certified a tax identification number, clients having a
regular investment counsel account with the Adviser or its affiliates and
members of their immediate families, officers and employees of the Adviser or of
any affiliated organization and their immediate families, members of the NASD
and banks may open an account by wire. These investors must call 1- 800-225-5163
to get an account number. During the call, the investor will be asked to
indicate the Fund name, amount to be wired ($2,500 minimum), name of bank or
trust company from which the wire will be sent, the exact registration of the
new account, the tax identification or Social Security number, address and
telephone number. The investor must
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then call the bank to arrange a wire transfer to The Scudder Funds, State Street
Bank and Trust Company, Boston, MA 02110, ABA Number 011000028, DDA Account
Number 9903-5552. The investor must give the Scudder fund name, account name and
the new account number. Finally, the investor must send the completed and signed
application to the Fund promptly.
The minimum initial purchase amount may be less than $2,500 under certain
special plan accounts.
Additional Information About Making Subsequent Investments
Subsequent purchase orders for $10,000 or more and for an amount not
greater than four times the value of the shareholder's account may be placed by
telephone, fax, etc. by established shareholders (except by Scudder Individual
Retirement Account (IRA), Scudder Horizon Plan, Scudder Profit Sharing and Money
Purchase Pension Plans, Scudder 401(k) and Scudder 403(b) Plan holders), members
of the NASD, and banks. Orders placed in this manner may be directed to any
office of the Distributor listed in each Fund's prospectus. A confirmation of
the purchase will be mailed out promptly following receipt of a request to buy.
Federal regulations require that payment be received within three business days.
If payment is not received within that time, the order is subject to
cancelation. In the event of such cancelation or cancelation at the purchaser's
request, the purchaser will be responsible for any loss incurred by a Fund or
the principal underwriter by reason of such cancelation. If the purchaser is a
shareholder, the Trust shall have the authority, as agent of the shareholder, to
redeem shares in the account in order to reimburse the relevant Fund or the
principal underwriter for the loss incurred. Net losses on such transactions
which are not recovered from the purchaser will be absorbed by the principal
underwriter. Any net profit on the liquidation of unpaid shares will accrue to
the relevant Fund.
Additional Information About Making Subsequent Investments by
QuickBuy
Shareholders, whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and who have elected to participate
in the QuickBuy program, may purchase shares of the Fund by telephone. Through
this service shareholders may purchase up to $250,000. To purchase shares by
QuickBuy, shareholders should call before 4 p.m. eastern time. Proceeds in the
amount of your purchase will be transferred from your bank checking account two
or three business days following your call. For requests received by the close
of regular trading on the Exchange, shares will be purchased at the net asset
value per share calculated at the close of trading on the day of your call.
QuickBuy requests received after the close of regular trading on the Exchange
will begin their processing and be purchased at the net asset value calculated
the following business day. If you purchase shares by QuickBuy and redeem them
within seven days of the purchase, the Fund may hold the redemption proceeds for
a period of up to seven business days. If you purchase shares and there are
insufficient funds in your bank account the purchase will be canceled and you
will be subject to any losses or fees incurred in the transaction. QuickBuy
transactions are not available for most retirement plan accounts. However,
QuickBuy transactions are available for Scudder IRA accounts.
In order to request purchases by QuickBuy, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account from which the purchase payment will be debited.
New investors wishing to establish QuickBuy may so indicate on the application.
Existing shareholders who wish to add QuickBuy to their account may do so by
completing an QuickBuy Enrollment Form. After sending in an enrollment form
shareholders should allow for 15 days for this service to be available.
The Fund employs procedures, including recording telephone calls, testing
a caller's identity, and sending written confirmation of telephone transactions,
designed to give reasonable assurance that instructions communicated by
telephone are genuine, and to discourage fraud. To the extent that the Fund does
not follow such procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. The Fund will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine.
Additional Information About Making Subsequent Investments by AutoBuy
Shareholders, whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and who have elected to participate
in the AutoBuy program, may purchase shares of the Fund by telephone. Through
this service shareholders may purchase up to $50,000 but not less than $250. To
purchase shares by AutoBuy, shareholders should call before 4 p.m. eastern time.
Proceeds in the amount of your purchase will be transferred from your bank
checking account two or three business days following your call. For requests
received by
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the close of regular trading on the Exchange, shares will be purchased at the
net asset value per share calculated at the close of trading on the day of your
call. AutoBuy requests received after the close of regular trading on the
Exchange will begin their processing and be purchased at the net asset value
calculated the following business day. If you purchase shares by AutoBuy and
redeem them within seven days of the purchase, the Fund may hold the redemption
proceeds for a period of up to seven business days. If you purchase shares and
there are insufficient funds in your bank account the purchase will be canceled
and you will be subject to any losses or fees incurred in the transaction.
AutoBuy transactions are not available for Scudder IRA accounts and most other
retirement plan accounts.
In order to request purchases by AutoBuy, shareholders must have completed
and returned to the Transfer Agent the application, including the designation of
a bank account from which the purchase payment will be debited. New investors
wishing to establish AutoBuy may so indicate on the application. Existing
shareholders who wish to add AutoBuy to their account may do so by completing an
AutoBuy Enrollment Form. After sending in an enrollment form shareholders should
allow for 15 days for this service to be available.
The Fund employs procedures, including recording telephone calls, testing
a caller's identity, and sending written confirmation of telephone transactions,
designed to give reasonable assurance that instructions communicated by
telephone are genuine. and to discourage fraud. To the extent that the Fund does
not follow such procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. The Fund will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine.
Checks
A certified check is not necessary, but checks are accepted
subject to collection at full face value in U.S. funds and must be
drawn on, or payable through, a U.S. bank.
If shares are purchased by a check which proves to be uncollectible, the
Trust reserves the right to cancel the purchase immediately and the purchaser
will be responsible for any loss incurred by a Fund or the principal underwriter
by reason of such cancellation. If the purchaser is a shareholder, the Trust
will have the authority, as agent of the shareholder, to redeem shares in the
account in order to reimburse a Fund or the principal underwriter for the loss
incurred. Investors whose orders have been canceled may be prohibited from or
restricted in placing future orders in any of the Scudder funds.
Wire Transfer of Federal Funds
To obtain the net asset value determined as of the close of regular
trading on the Exchange (normally 4 p.m. eastern time) on a selected day, your
bank must forward federal funds by wire transfer and provide the required
account information so as to be available to the Fund prior to 4 p.m.
The bank sending an investor's federal funds by bank wire may charge for
the service. Presently the Distributor pays a fee for receipt by State Street
Bank and Trust Company (the "Custodian") of "wired funds," but the right to
charge investors for this service is reserved.
Boston banks are closed on certain holidays although the Exchange may be
open. These holidays include: Martin Luther King, Jr. Day (the 3rd Monday in
January), Columbus Day (the 2nd Monday in October) and Veterans Day (November
11). Investors are not able to purchase shares by wiring federal funds on such
holidays because the Custodian is not open to receive such federal funds on
behalf of a Fund.
Share Price
Purchases will be filled without sales charge at the net asset value next
computed after receipt of the application in good order. Net asset value
normally will be computed as of the close of regular trading on each day during
which the Exchange is open for trading. Orders received after the close of
regular trading on the Exchange will be executed at the next business day's net
asset value. If the order has been placed by a member of the NASD, other than
the Distributor, it is the responsibility of that member broker, rather than the
Fund, to forward the purchase order to the Fund's transfer agent in Boston by
the close of regular trading on the Exchange.
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Share Certificates
Due to the desire of Trust management to afford ease of redemption,
certificates will not be issued to indicate ownership in the Funds. With respect
to Large Company Value Fund, formerly known as Capital Growth Fund, share
certificates now in a shareholder's possession may be sent to the Trust's
transfer agent, Scudder Service Corporation (the "Transfer Agent"), for
cancellation and credit to such shareholder's account. Shareholders who prefer
may hold the certificates in their possession until they wish to exchange or
redeem such shares. See "Purchases" and "Exchanges and redemptions" in Large
Company Value Fund's prospectus.
Other Information
If purchases or redemptions of the Funds' shares are arranged and
settlement is made at an the investor's election through a member of the NASD,
other than the Distributor, that member may, at its discretion, charge a fee for
that service. The Trustees and Scudder Investor Services, Inc., the Trust's
principal underwriter, each has the right to limit the amount of purchases by,
and to refuse to sell to, any person. The Trustees and the Distributor each may
suspend or terminate the offering of shares of either Fund at any time.
The Tax Identification Number section of the Funds' application must be
completed when opening an account. Applications and purchase orders without a
correct certified tax identification number and certain other certified
information (e.g., from exempt investors, certification of exempt status) may be
returned to the investor if a certified tax identification number and certain
other required certificates are not supplied.
The Trust may issue shares of either Fund at net asset value in connection
with any merger or consolidation with, or acquisition of the assets of, any
investment company or personal holding company, subject to the requirements of
the 1940 Act.
EXCHANGES AND REDEMPTIONS
(See "Exchanges and redemptions" and "Transaction information"
in the Funds' prospectuses.)
Exchanges
Exchanges are comprised of a redemption from one Scudder fund and a
purchase into another Scudder fund. The purchase side of the exchange either may
be an additional investment into an existing account or may involve opening a
new account in the other fund. When an exchange involves a new account, the new
account will be established with the same registration, tax identification
number, address, telephone redemption option, "Scudder Automated Information
Line" (SAIL) transaction authorization and dividend option as the existing
account. Other features will not carry over automatically to the new account.
Exchanges to a new fund account must be for a minimum of $2,500. When an
exchange represents an additional investment into an existing account, the
account receiving the exchange proceeds must have identical registration,
address, and account options/features as the account of origin. Exchanges into
an existing account must be for $100 or more. If the account receiving the
exchange proceeds is to be different in any respect, the exchange request must
be in writing and must contain an original signature guarantee as described
under "Transaction Information-Signature guarantees" in the Funds' prospectuses.
Exchange orders received before the close of regular trading on the
Exchange on any business day ordinarily will be executed at the respective net
asset values determined on that day. Exchange orders received after the close of
regular trading on the Exchange will be executed on the following business day.
Investors may also request, at no extra charge, to have exchanges
automatically executed on a predetermined schedule from one Scudder fund to an
existing account in another Scudder fund at current net asset value through
Scudder's Automatic Exchange Program. Exchanges must be for a minimum of $50.
Shareholders may add this free feature over the phone or in writing. Automatic
Exchanges will continue until the shareholder requests by telephone or in
writing to have the feature removed, or until the originating account is
depleted. The Trust and the Transfer Agent each reserves the right to suspend or
terminate the privilege of the Automatic Exchange Program at any time.
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There is no charge to the shareholder for any exchange described above. An
exchange into another Scudder fund is a redemption of shares, and therefore may
result in tax consequences (gain or loss) to the shareholder, and the proceeds
of such an exchange may be subject to backup withholding. (See "TAXES.")
Investors currently receive the exchange privilege, including exchange by
telephone, automatically without having to elect it. The Trust employs
procedures, including recording telephone calls, testing a caller's identity,
and sending written confirmation of telephone transactions, designed to give
reasonable assurance that instructions communicated by telephone are genuine,
and to discourage fraud. To the extent that the Trust does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Trust will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine. The Trust and the Transfer Agent each reserves the right to suspend or
terminate the privilege of exchanging by telephone or fax at any time.
The Scudder funds into which investors may make an exchange are listed
under "THE SCUDDER FAMILY OF FUNDS" herein. Before making an exchange,
shareholders should obtain from the Distributor a prospectus of the Scudder fund
into which the exchange is being contemplated. The exchange privilege may not be
available for certain Scudder funds. For more information, please call
1-800-225-5163.
The Scudder funds into which investors may make an exchange are listed
under "THE SCUDDER FAMILY OF FUNDS" herein. Before making an exchange,
shareholders should obtain from the Distributor a prospectus of the Scudder fund
into which the exchange is being contemplated.
Scudder retirement plans may have different exchange requirements. Please
refer to appropriate plan literature.
Redemption by Telephone
Shareholders currently receive the right, automatically without having to
elect it, to redeem by telephone up to $100,000 and have the proceeds mailed to
their address of record. Shareholders may request to have the proceeds mailed or
wired to their pre-designated bank account. In order to request redemptions by
telephone, shareholders must have completed and returned to the Transfer Agent
the application, including the designation of a bank account to which the
redemption proceeds are to be sent.
(a) NEW INVESTORS wishing to establish telephone redemption to a
predesignated bank account must complete the appropriate section on
the application.
(b) EXISTING SHAREHOLDERS (except those who are Scudder IRA, Scudder
Pension and Profit-Sharing, Scudder 401(k) and Scudder 403(b)
Planholders) who wish to establish telephone redemption to a
predesignated bank account or who want to change the bank account
previously designated to receive redemption payments should either
return a Telephone Redemption Option Form (available upon request)
or send a letter identifying the account and specifying the exact
information to be changed. The letter must be signed exactly as the
shareholder's name(s) appears on the account. An original signature
and an original signature guarantee are required for each person in
whose name the account is registered.
Telephone redemption is not available with respect to shares represented
by share certificates for Large Company Value Fund, formerly known as Capital
Growth Fund, or shares held in certain retirement accounts for both Funds.
If a request for redemption to a shareholder's bank account is made by
telephone or fax, payment will be by Federal Reserve bank wire to the bank
account designated on the application, unless a request is made that the
redemption check be mailed to the designated bank account. There will be a $5
charge for all wire redemptions.
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Note: Investors designating a savings bank to receive their telephone
redemption proceeds are advised that if the savings bank is not a participant in
the Federal Reserve System, redemption proceeds must be wired through a
commercial bank which is a correspondent of the savings bank. As this may delay
receipt by the shareholder's account, it is suggested that investors wishing to
use a savings bank discuss wire procedures with their bank and submit any
special wire transfer information with the telephone redemption authorization.
If appropriate wire information is not supplied, redemption proceeds will be
mailed to the designated bank.
Each Fund employs procedures, including recording telephone calls, testing
a caller's identity, and sending written confirmation of telephone transactions,
designed to give reasonable assurance that instructions communicated by
telephone are genuine, and to discourage fraud. To the extent that a Fund does
not follow such procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. A Fund will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine.
Redemption requests by telephone (technically a repurchase by agreement
between the Fund and the shareholder) of shares purchased by check will not be
accepted until the purchase check has cleared which may take up to seven
business days.
Redemption By QuickSellAutoSell
Shareholders, whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and who have elected to participate
in the QuickSellAutoSell program may sell shares of the Fund by telephone. To
sell shares by QuickSellAutoSell, shareholders should call before 4 p.m. eastern
time. Redemptions must be for at least $250. Proceeds in the amount of your
redemption will be transferred to your bank checking account two or three
business days following your call. For requests received by the close of regular
trading on the Exchange, shares will be redeemed at the net asset value per
share calculated at the close of trading on the day of your call.
QuickSellAutoSell requests received after the close of regular trading on the
Exchange will begin their processing and be redeemed at the net asset value
calculated the following business day. QuickSellAutoSell transactions are not
available for Scudder IRA accounts and most other retirement plan accounts.
In order to request redemptions by QuickSellAutoSell, shareholders must
have completed and returned to the Transfer Agent the application, including the
designation of a bank account from which the purchase payment will be debited.
New investors wishing to establish QuickSellAutoSell may so indicate on the
application. Existing shareholders who wish to add QuickSellAutoSell to their
account may do so by completing an QuickSellAutoSell Enrollment Form. After
sending in an enrollment form, shareholders should allow for 15 days for this
service to be available.
The Fund employs procedures, including recording telephone calls, testing
a caller's identity, and sending written confirmation of telephone transactions,
designed to give reasonable assurance that instructions communicated by
telephone are genuine, and to discourage fraud. To the extent that the Fund does
not follow such procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. The Fund will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine.
Redemption by Mail or Fax
Any existing share certificates for Large Company Value Fund, formerly
known as Capital Growth Fund, representing shares being redeemed must accompany
a request for redemption and be duly endorsed or accompanied by a proper stock
assignment form with signature guaranteed as explained in that Fund's
prospectus.
In order to ensure proper authorization before redeeming shares, the
Transfer Agent may request additional documents such as, but not limited to,
stock powers, trust instruments, certificates of death, appointments as
executor, certificates of corporate authority and waivers of tax (required in
some states when settling estates).
It is suggested that shareholders holding certificated shares or shares
registered in other than individual names contact the Transfer Agent prior to
redemptions to ensure that all necessary documents accompany the request. When
shares are held in the name of a corporation, trust, fiduciary agent, attorney
or partnership, the Transfer Agent requires, in addition to the stock power,
certified evidence of authority to sign. These procedures are for the protection
of shareholders and should be followed to ensure prompt payment. Redemption
requests must not be conditional as to
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<PAGE>
date or price of the redemption. Proceeds of a redemption will be sent within
five business days after receipt by the Transfer Agent of a request for
redemption that complies with the above requirements. Delays of more than seven
days of payment for shares tendered for repurchase or redemption may result but
only until the purchase check has cleared.
The requirements for IRA redemptions are different from those for regular
accounts. For more information call 1-800-225-5163.
Redemption-in-Kind
The Trust reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase order by making
payment in whole or in part in readily marketable securities chosen by a Fund
and valued as they are for purposes of computing a Fund's net asset value (a
redemption-in-kind). If payment is made in securities, a shareholder may incur
transaction expenses in converting these securities into cash. The Trust has
elected, however, to be governed by Rule 18f-1 under the 1940 Act as a result of
which a Fund is obligated to redeem shares, with respect to any one shareholder
during any 90 day period, solely in cash up to the lesser of $250,000 or 1% of
the net asset value of that Fund at the beginning of the period.
Other Information
Clients, officers or employees of the Adviser or of an affiliated
organization, and members of such clients', officers' or employees' immediate
families, banks and members of the NASD may direct redemption requests to the
Trust through Scudder Investor Services, Inc. at Two International Place,
Boston, Massachusetts 02110-4103 by letter, fax, TWX, or telephone. A two-part
confirmation will be mailed out promptly after receipt of the request. A written
request in good order as described above and any certificates with a proper
original signature guarantee(s), as described in the Funds' prospectuses under
"Transaction information-Signature guarantees", should be sent with a copy of
the invoice to Scudder Service Corporation, Confirmed Processing Department, Two
International Place, Boston, Massachusetts 02110- 4103. Failure to deliver
shares or required documents (see above) by the settlement date may result in
cancellation of the trade and the shareholder will be responsible for any loss
incurred by a Fund or the principal underwriter by reason of such cancellation.
The Trust shall have the authority, as agent of the shareholder, to redeem
shares in the account to reimburse a Fund or the principal underwriter for the
loss incurred. Net losses on such transactions which are not recovered from the
shareholder will be absorbed by the principal underwriter. Any net gains so
resulting will accrue to a Fund. For this group, repurchases will be carried out
at the net asset value next computed after such repurchase requests have been
received. The arrangements described in this paragraph for repurchasing shares
are discretionary and may be discontinued at any time.
If a shareholder redeems all shares in the account after the record date
of a dividend, the shareholder will receive in addition to the net asset value
thereof, all declared but unpaid dividends thereon. The value of shares redeemed
or repurchased may be more or less than the shareholder's cost depending on the
net asset value at the time of redemption or repurchase. The Funds do not impose
a redemption or repurchase charge, although a wire charge may be applicable for
redemption proceeds wired to an investor's bank account. Redemption of shares,
including an exchange into another Scudder fund, may result in tax consequences
(gain or loss) to the shareholder and the proceeds of such redemptions may be
subject to backup withholding. (See "TAXES.")
Shareholders who wish to redeem shares from Special Plan Accounts should
contact the employer, trustee or custodian of the Plan for the requirements.
The Trust's Declaration of Trust provides that the determination of net
asset value may be suspended and a shareholder's right to redeem shares and to
receive payments may be suspended at times during which a) the Exchange is
closed, other than customary weekend and holiday closings, (b) trading on the
Exchange is restricted, (c) an emergency exists as a result of which disposal by
the Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, or (d) a governmental body having jurisdiction over the Trust may, by
order, permit such a suspension for the protection of the Fund's shareholders;
provided that applicable rules and regulations of the SEC (or any succeeding
governmental authority) shall govern as to whether the conditions prescribed in
(b), (c) or (d) exist.
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If transactions at any time reduce a shareholder's account balance in the
Fund to below $1,000 in value, the Trust may notify the shareholder that, unless
the account balance is brought up to at least $1,000, the Trust will redeem all
shares in the Fund and close the account by making payment to the shareholder.
The shareholder has sixty days to bring the account balance up to $1,000 before
any action will be taken by the Trust. No transfer from an existing account to a
new Scudder fund account should be for less than $1,000; otherwise the new
account may be redeemed as described above. (This policy applies to accounts of
new shareholders but does not apply to certain Special Plan Accounts.) The
Trustees have the authority to change the minimum account size.
FEATURES AND SERVICES OFFERED BY THE FUNDS
(See "Shareholder benefits" in the Funds' prospectuses.)
The Pure No-Load(TM) Concept
Investors are encouraged to be aware of the full ramifications of mutual
fund fee structures, and of how Scudder distinguishes its funds from the vast
majority of mutual funds available today. The primary distinction is between
load and no-load funds.
Load funds generally are defined as mutual funds that charge a fee for the
sale and distribution of fund shares. There are three types of loads: front-end
loads, back-end loads, and asset-based 12b-1 fees. 12b-1 fees are
distribution-related fees charged against fund assets and are distinct from
service fees, which are charged for personal services and/or maintenance of
shareholder accounts. Asset-based sales charges and service fees are typically
paid pursuant to distribution plans adopted under 12b-1 under the 1940 Act.
A front-end load is a sales charge, which can be as high as 8.50% of the
amount invested. A back-end load is a contingent deferred sales charge, which
can be as high as 8.50% of either the amount invested or redeemed. The maximum
front-end or back-end load varies, and depends upon whether or not a fund also
charges a 12b-1 fee and/or a service fee or offers investors various sales-
related services such as dividend reinvestment. The maximum charge for a 12b-1
fee is 0.75% of a fund's average annual net assets, and the maximum charge for a
service fee is 0.25% of a fund's average annual net assets.
A no-load fund does not charge a front-end or back-end load, but can
charge a small 12b-1 fee and/or service fee against fund assets. Under the NASD
Conduct Rules, of Fair Practice, a mutual fund can call itself a "no-load" fund
only if the 12b-1 fee and/or service fee does not exceed 0.25% of a fund's
average annual net assets.
Because Scudder funds do not pay any asset-based sales charges or service
fees, Scudder developed and trademarked the phrase pure no-load(TM) to
distinguish Scudder funds from other no-load mutual funds. Scudder pioneered the
no-load concept when it created the nation's first no-load fund in 1928, and
later developed the nation's first family of no-load mutual funds.
The following chart shows the potential long-term advantage of investing
$10,000 in a Scudder pure no-load fund over investing the same amount in a load
fund that collects an 8.50% front-end load, a load fund that collects only a
0.75% 12b-1 and/or service fee, and a no-load fund charging only a 0.25% 12b-1
and/or service fee. The hypothetical figures in the chart show the value of an
account assuming a constant 10% rate of return over the time periods indicated
and reinvestment of dividends and distributions.
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================================================================================
No-Load
Scudder Load Fund Fund with
Pure No- 8.50% Load with 0.75% 0.25% 12b-1
YEARS Load(TM) Fund Fund 12b-1 Fee Fee
- --------------------------------------------------------------------------------
10 $25,937 $23,733 $24,222 $25,354
- --------------------------------------------------------------------------------
15 41,772 38,222 37,698 40,371
- --------------------------------------------------------------------------------
20 67,275 61,557 58,672 64,282
================================================================================
Investors are encouraged to review the fee tables on page 2 of each Fund's
prospectus for more specific information about the rates at which management
fees and other expenses are assessed.
Dividends and Capital Gains Distribution Options
Investors have freedom to choose whether to receive cash or to reinvest any
dividends from net investment income or distributions from realized capital
gains in additional shares of a Fund. A change of instructions for the method of
payment must be received by the Transfer Agent at least five days prior to a
dividend record date. Shareholders also may change their dividend option either
by calling 1-800-225-5163 or by sending written instructions to the Transfer
Agent. Please include your account number with your written request. See "How to
contact Scudder" in the Funds' prospectuses for the address.
Reinvestment is usually made at the closing net asset value determined on
the business day following the record date. Investors may leave standing
instructions with the Transfer Agent designating their option for either
reinvestment or cash distribution of any income dividends or capital gains
distributions. If no election is made, dividends and distributions will be
invested in additional shares of a Fund.
Investors may also have dividends and distributions automatically
deposited in their predesignated bank account through Scudder's
DistributionsDirect Program. Shareholders who elect to participate in the
DistributionsDirect Program, and whose predesignated checking account of record
is with a member bank of the Automated Clearing House Network (ACH) can have
income and capital gain distributions automatically deposited to their personal
bank account usually within three business days after the Fund pays its
distribution. A DistributionsDirect request form can be obtained by calling
1-800-225-5163. Confirmation statements will be mailed to shareholders as
notification that distributions have been deposited.
Investors choosing to participate in Scudder's Automatic Withdrawal Plan
must reinvest any dividends or capital gains. For most retirement plan accounts,
the reinvestment of dividends and capital gains is also required.
Diversification
Your investment in each Fund represents an interest in a large,
diversified portfolio of carefully selected securities. Diversification may
protect you against the possible risks associated with concentrating in fewer
securities.
Scudder InvestorFunds Centers
Investors may visit any of the InvestorFund Centers maintained by the
Distributor listed in the Funds' prospectuses. The Centers are designed to
provide individuals with services during any business day. Investors may pick up
literature or obtain assistance with opening an account, adding monies or
special options to existing accounts, making exchanges within the Scudder Family
of Funds, redeeming shares or opening retirement plans. Checks should not be
mailed to the Centers but should be mailed to "The Scudder Funds" at the address
listed under "How to contact Scudder" in the prospectuses.
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Reports to Shareholders
The Trust issues shareholders unaudited semiannual financial statements
and annual financial statements audited by independent accountants, including a
list of investments held and statements of assets and liabilities, operations,
changes in net assets and financial highlights. The Trust presently intends to
distribute to shareholders informal quarterly reports during the intervening
quarters, containing a statement of the investments of the Funds.
Transaction Summaries
Annual summaries of all transactions in each Fund account are available to
shareholders. The summaries may be obtained by calling 1-800-225-5163.
THE SCUDDER FAMILY OF FUNDS
(See "Investment products and services" in the Funds' prospectuses.)
The Scudder Family of Funds is America's first family of mutual funds and
the nation's oldest family of no-load mutual funds. To assist investors in
choosing a Scudder fund, descriptions of the Scudder funds' objectives follow.
MONEY MARKET
Scudder U.S. Treasury Money Fund seeks to provide safety, liquidity and
stability of capital and, consistent therewith, to provide current income.
The Fund seeks to maintain a constant net asset value of $1.00 per share,
although in certain circumstances this may not be possible, and declares
dividends daily.
Scudder Cash Investment Trust ("SCIT") seeks to maintain the stability of
capital and, consistent therewith, to maintain the liquidity of capital
and to provide current income. SCIT seeks to maintain a constant net asset
value of $1.00 per share, although in certain circumstances this may not
be possible, and declares dividends daily.
Scudder Money Market Series seeks to provide investors with as high a
level of current income as is consistent with its investment polices and
with preservation of capital and liquidity. The Fund seeks to maintain a
constant net asset value of $1.00 per share, but there is no assurance
that it will be able to do so. The institutional class of shares of this
Fund is not within the Scudder Family of Funds.
Scudder Government Money Market Series seeks to provide investors with as
high a level of current income as is consistent with its investment
polices and with preservation of capital and liquidity. The Fund seeks to
maintain a constant net asset value of $1.00 per share, but there is no
assurance that it will be able to do so. The institutional class of shares
of this Fund is not within the Scudder Family of Funds.
TAX FREE MONEY MARKET
Scudder Tax Free Money Fund ("STFMF") seeks to provide income exempt from
regular federal income tax and stability of principal through investments
primarily in municipal securities. STFMF seeks to maintain a constant net
asset value of $1.00 per share, although in extreme circumstances this may
not be possible.
Scudder Tax Free Money Market Series seeks to provide investors with as
high a level of current income that cannot be subjected to federal income
tax by reason of federal law as is consistent with its investment policies
and with preservation of capital and liquidity. The Fund seeks to maintain
a constant net asset value of $1.00 per share, but there is no assurance
that it will be able to do so. The institutional class of shares of this
Fund is not within the Scudder Family of Funds.
Scudder California Tax Free Money Fund* seeks stability of capital and the
maintenance of a constant net asset value of $1.00 per share while
providing California taxpayers income exempt from both California State
- ----------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
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<PAGE>
personal and regular federal income taxes. The Fund is a professionally
managed portfolio of high quality, short-term California municipal
securities. There can be no assurance that the stable net asset value will
be maintained.
Scudder New York Tax Free Money Fund* seeks stability of capital and the
maintenance of a constant net asset value of $1.00 per share, while
providing New York taxpayers income exempt from New York State and New
York City personal income taxes and regular federal income tax. There can
be no assurance that the stable net asset value will be maintained.
TAX FREE
Scudder Limited Term Tax Free Fund seeks to provide as high a level of
income exempt from regular federal income tax as is consistent with a high
degree of principal stability.
Scudder Medium Term Tax Free Fund seeks to provide a high level of income
free from regular federal income taxes and to limit principal fluctuation.
The Fund will invest primarily in high-grade, intermediate-term bonds.
Scudder Managed Municipal Bonds seeks to provide income exempt from
regular federal income tax primarily through investments in high-grade,
long-term municipal securities.
Scudder High Yield Tax Free Fund seeks to provide a high level of interest
income, exempt from regular federal income tax, from an actively managed
portfolio consisting primarily of investment-grade municipal securities.
Scudder California Tax Free Fund* seeks to provide California taxpayers
with income exempt from both California State personal income and regular
federal income tax. The Fund is a professionally managed portfolio
consisting primarily of California municipal securities.
Scudder Massachusetts Limited Term Tax Free Fund* seeks to provide
Massachusetts taxpayers with as high a level of income exempt from
Massachusetts personal income tax and regular federal income tax, as is
consistent with a high degree of price stability, through a professionally
managed portfolio consisting primarily of investment-grade municipal
securities.
Scudder Massachusetts Tax Free Fund* seeks to provide Massachusetts
taxpayers with income exempt from both Massachusetts personal income tax
and regular federal income tax. The Fund is a professionally managed
portfolio consisting primarily of investment-grade municipal securities.
Scudder New York Tax Free Fund* seeks to provide New York taxpayers with
income exempt from New York State and New York City personal income taxes
and regular federal income tax. The Fund is a professionally managed
portfolio consisting primarily of New York municipal securities.
Scudder Ohio Tax Free Fund* seeks to provide Ohio taxpayers with income
exempt from both Ohio personal income tax and regular federal income tax.
The Fund is a professionally managed portfolio consisting primarily of
investment-grade municipal securities.
Scudder Pennsylvania Tax Free Fund* seeks to provide Pennsylvania
taxpayers with income exempt from both Pennsylvania personal income tax
and regular federal income tax. The Fund is a professionally managed
portfolio consisting primarily of investment-grade municipal securities.
U.S. INCOME
Scudder Short Term Bond Fund seeks to provide a high level of income
consistent with a high degree of principal stability by investing
primarily in high quality short-term bonds.
- ----------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
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<PAGE>
Scudder Zero Coupon 2000 Fund seeks to provide as high an investment
return over a selected period as is consistent with investment in U.S.
Government securities and the minimization of reinvestment risk.
Scudder GNMA Fund seeks to provide high current income primarily from U.S.
Government guaranteed mortgage-backed (Ginnie Mae) securities.
Scudder Income Fund seeks a high level of income, consistent with the
prudent investment of capital, through a flexible investment program
emphasizing high-grade bonds.
Scudder High Yield Bond Fund seeks a high level of current income and,
secondarily, capital appreciation through investment primarily in below
investment-grade domestic debt securities.
GLOBAL INCOME
Scudder Global Bond Fund seeks to provide total return with an emphasis on
current income by investing primarily in high-grade bonds denominated in
foreign currencies and the U.S. dollar. As a secondary objective, the Fund
will seek capital appreciation.
Scudder International Bond Fund seeks to provide income primarily by
investing in a managed portfolio of high-grade international bonds. As a
secondary objective, the Fund seeks protection and possible enhancement of
principal value by actively managing currency, bond market and maturity
exposure and by security selection.
Scudder Emerging Markets Income Fund seeks to provide high current income
and, secondarily, long-term capital appreciation through investments
primarily in high-yielding debt securities issued by governments and
corporations in emerging markets.
ASSET ALLOCATION
Scudder Pathway Series: Conservative Portfolio seeks primarily current
income and secondarily long-term growth of capital. In pursuing these
objectives, the Portfolio, under normal market conditions, will invest
substantially in a select mix of Scudder bond mutual funds, but will have
some exposure to Scudder equity mutual funds.
Scudder Pathway Series: Balanced Portfolio seeks to provide investors with
a balance of growth and income by investing in a select mix of Scudder
money market, bond and equity mutual funds.
Scudder Pathway Series: Growth Portfolio seeks to provide investors with
long-term growth of capital. In pursuing this objective, the Portfolio
will, under normal market conditions, invest predominantly in a select mix
of Scudder equity mutual funds designed to provide long-term growth.
Scudder Pathway Series: International Portfolio seeks maximum total return
for investors. Total return consists of any capital appreciation plus
dividend income and interest. To achieve this objective, the Portfolio
invests in a select mix of established international and global Scudder
funds.
U.S. GROWTH AND INCOME
Scudder Balanced Fund seeks a balance of growth and income from a
diversified portfolio of equity and fixed-income securities. The Fund also
seeks long-term preservation of capital through a quality-oriented
approach that is designed to reduce risk.
Scudder Growth and Income Fund seeks long-term growth of capital, current
income, and growth of income.
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Scudder S&P 500 Index Fund seeks to provide investment results that,
before expenses, correspond to the total return of common stocks publicly
traded in the United States, as represented by the Standard & Poor's 500
Composite Stock Price Index.
U.S. GROWTH
Value
Scudder Large Company Value Fund seeks to maximize long-term capital
appreciation through a value-driven investment program.
Scudder Value Fund seeks long-term growth of capital through investment in
undervalued equity securities.
Scudder Small Company Value Fund invests for long-term growth of capital
by seeking out undervalued stocks of small U.S. companies.
Scudder Micro Cap Fund seeks long-term growth of capital by investing
primarily in a diversified portfolio of U.S. micro- capitalization
("micro-cap") common stocks.
Growth
Scudder Classic Growth Fund seeks to provide long-term growth of capital
and to keep the value of its shares more stable than other growth mutual
funds.
Scudder Large Company Growth Fund seeks to provide long-term growth of
capital through investment primarily in the equity securities of seasoned,
financially strong U.S. growth companies.
Scudder Development Fund seeks long-term growth of capital by investing
primarily in securities of small and medium-size growth companies.
Scudder 21st Century Growth Fund seeks long-term growth of capital by
investing primarily in the securities of emerging growth companies poised
to be leaders in the 21st century.
GLOBAL GROWTH
Worldwide
Scudder Global Fund seeks long-term growth of capital through a diversified
portfolio of marketable securities, primarily equity securities, including
common stocks, preferred stocks and debt securities convertible into common
stocks.
Scudder International Growth and Income Fund seeks long-term growth of
capital and current income primarily from foreign equity securities.
Scudder International Fund seeks long-term growth of capital primarily
through a diversified portfolio of marketable foreign equity securities.
Scudder Global Discovery Fund seeks above-average capital appreciation over
the long term by investing primarily in the equity securities of small
companies located throughout the world.
Scudder Emerging Markets Growth Fund seeks long-term growth of capital
primarily through equity investment in emerging markets around the globe.
Scudder Gold Fund seeks maximum return (principal change and income)
consistent with investing in a portfolio of gold- related equity securities
and gold.
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Regional
Scudder Greater Europe Growth Fund seeks long-term growth of capital
through investments primarily in the equity securities of European
companies.
Scudder Pacific Opportunities Fund seeks long-term growth of capital
through investment primarily in the equity securities of Pacific Basin
companies, excluding Japan.
Scudder Latin America Fund seeks to provide long-term capital appreciation
through investment primarily in the securities of Latin American issuers.
The Japan Fund, Inc. seeks long-term capital appreciation by
investing primarily in equity securities (including American
Depository Receipts) of Japanese companies.
The net asset values of most Scudder funds can be found daily in the
"Mutual Funds" section of The Wall Street Journal under "Scudder Funds," and in
other leading newspapers throughout the country. Investors will notice the net
asset value and offering price are the same, reflecting the fact that no sales
commission or "load" is charged on the sale of shares of the Scudder funds. The
latest seven-day yields for the money-market funds can be found every Monday and
Thursday in the "Money-Market Funds" section of The Wall Street Journal. This
information also may be obtained by calling the Scudder Automated Information
Line (SAIL) at 1-800-343-2890.
The Scudder Family of Funds offers many conveniences and services,
including: active professional investment management; broad and diversified
investment portfolios; pure no-load funds with no commissions to purchase or
redeem shares or Rule 12b-1 distribution fees; individual attention from a
service representative of Scudder Investor Relations; and easy telephone
exchanges into other Scudder funds. Certain Scudder funds may not be available
for purchase or exchange. For more information, please call 1-800-225-5163.
SPECIAL PLAN ACCOUNTS
(See "Scudder tax-advantaged retirement plans," "Purchases--By Automatic
Investment Plan" and "Exchanges and redemptions--By Automatic Withdrawal Plan"
in the Fund's prospectus.)
Detailed information on any Scudder investment plan, including the
applicable charges, minimum investment requirements and disclosures made
pursuant to Internal Revenue Service (the "IRS") requirements, may be obtained
by contacting Scudder Investor Services, Inc., Two International Place, Boston,
Massachusetts 02110-4103 or by calling toll free, 1-800-225-2470. It is
advisable for an investor considering the funding of the investment plans
described below to consult with an attorney or other investment or tax adviser
with respect to the suitability requirements and tax aspects thereof.
Shares of the Fund may also be a permitted investment under profit sharing
and pension plans and IRA's other than those offered by the Fund's distributor
depending on the provisions of the relevant plan or IRA.
None of the plans assures a profit or guarantees protection against
depreciation, especially in declining markets.
Scudder Retirement Plans: Profit-Sharing and Money Purchase
Pension Plans for Corporations and Self-Employed Individuals
Shares of the Fund may be purchased as the investment medium under a plan
in the form of a Scudder Profit-Sharing Plan (including a version of the Plan
which includes a cash-or-deferred feature) or a Scudder Money Purchase Pension
Plan (jointly referred to as the Scudder Retirement Plans) adopted by a
corporation, a self-employed individual or a group of self-employed individuals
(including sole proprietorships and partnerships), or other qualifying
organization. Each of these forms was approved by the IRS as a prototype. The
IRS's approval of an employer's plan under Section 401(a) of the Internal
Revenue Code will be greatly facilitated if it is in such approved form. Under
certain circumstances, the IRS will assume that a plan, adopted in this form,
after special notice to any employees, meets the requirements of Section 401(a)
of the Internal Revenue Code.
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<PAGE>
Scudder 401(k): Cash or Deferred Profit-Sharing Plan
for Corporations and Self-Employed Individuals
Shares of the Fund may be purchased as the investment medium under a plan
in the form of a Scudder 401(k) Plan adopted by a corporation, a self-employed
individual or a group of self-employed individuals (including sole proprietors
and partnerships), or other qualifying organization. This plan has been approved
as a prototype by the IRS.
Scudder IRA: Individual Retirement Account
Shares of the Fund may be purchased as the underlying investment for an
Individual Retirement Account which meets the requirements of Section 408(a) of
the Internal Revenue Code.
A single individual who is not an active participant in an
employer-maintained retirement plan, a simplified employee pension plan, or a
tax-deferred annuity program (a "qualified plan"), and a married individual who
is not an active participant in a qualified plan and whose spouse is also not an
active participant in a qualified plan, are eligible to make tax deductible
contributions of up to $2,000 to an IRA prior to the year such individual
attains age 70 1/2. In addition, certain individuals who are active participants
in qualified plans (or who have spouses who are active participants) are also
eligible to make tax-deductible contributions to an IRA; the annual amount, if
any, of the contribution which such an individual will be eligible to deduct
will be determined by the amount of his, her, or their adjusted gross income for
the year. Whenever the adjusted gross income limitation prohibits an individual
from contributing what would otherwise be the maximum tax-deductible
contribution he or she could make, the individual will be eligible to contribute
the difference to an IRA in the form of nondeductible contributions.
An eligible individual may contribute as much as $2,000 of qualified income
(earned income or, under certain circumstances, alimony) to an IRA each year (up
to $2,000 per individual for married couples if only one spouse has earned
income). All income and capital gains derived from IRA investments are
reinvested and compound tax-deferred until distributed. Such tax-deferred
compounding can lead to substantial retirement savings.
The table below shows how much individuals would accumulate in a fully
tax-deductible IRA by age 65 (before any distributions) if they contribute
$2,000 at the beginning of each year, assuming average annual returns of 5, 10,
and 15%. (At withdrawal, accumulations in this table will be taxable.)
Value of IRA at Age 65
Assuming $2,000 Deductible Annual Contribution
- --------------------------------------------------------------------------------
Starting
Age of Annual Rate of Return
-----------------------------------------------
Contributions 5% 10% 15%
- --------------------------------------------------------------------------------
25 $253,680 $973,704 $4,091,908
35 139,522 361,887 999,914
45 69,439 126,005 235,620
55 26,414 35,062 46,699
This next table shows how much individuals would accumulate in non-IRA
accounts by age 65 if they start with $2,000 in pretax earned income at the
beginning of each year (which is $1,380 after taxes are paid), assuming average
annual returns of 5, 10 and 15%. (At withdrawal, a portion of the accumulation
in this table will be taxable.)
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<PAGE>
Value of a Non-IRA Account at
Age 65 Assuming $1,380 Annual Contributions
(post tax, $2,000 pretax) and a 31% Tax Bracket
- --------------------------------------------------------------------------------
Starting
Age of Annual Rate of Return
-----------------------------------------------
Contributions 5% 10% 15%
- --------------------------------------------------------------------------------
25 $119,318 $287,021 $741,431
35 73,094 136,868 267,697
45 40,166 59,821 90,764
55 16,709 20,286 24,681
Scudder 403(b) Plan
Shares of the Fund may also be purchased as the underlying investment for
tax sheltered annuity plans under the provisions of Section 403(b)(7) of the
Internal Revenue Code. In general, employees of tax-exempt organizations
described in Section 501(c)(3) of the Internal Revenue Code (such as hospitals,
churches, religious, scientific, or literary organizations and educational
institutions) or a public school system are eligible to participate in a 403(b)
plan.
Automatic Withdrawal Plan
Non-retirement plan shareholders may establish an Automatic Withdrawal Plan
to receive monthly, quarterly or periodic redemptions from his or her account
for any designated amount of $50 or more. Shareholders may designate which day
they want the automatic withdrawal to be processed. The check amounts may be
based on the redemption of a fixed dollar amount, fixed share amount, percent of
account value or declining balance. The Plan provides for income dividends and
capital gains distributions, if any, to be reinvested in additional shares.
Shares are then liquidated as necessary to provide for withdrawal payments.
Since the withdrawals are in amounts selected by the investor and have no
relationship to yield or income, payments received cannot be considered as yield
or income on the investment and the resulting liquidations may deplete or
possibly extinguish the initial investment and any reinvested dividends and
capital gains distributions. Requests for increases in withdrawal amounts or to
change the payee must be submitted in writing, signed exactly as the account is
registered, and contain signature guarantee(s) as described under "Transaction
information-Redeeming shares-Signature guarantees" in the Fund's prospectus. Any
such requests must be received by the Fund's transfer agent ten days prior to
the date of the first automatic withdrawal. An Automatic Withdrawal Plan may be
terminated at any time by the shareholder, the [Trust, Corporation] or its agent
on written notice, and will be terminated when all shares of the Fund under the
Plan have been liquidated or upon receipt by the [Trust, Corporation] of notice
of death of the shareholder.
An Automatic Withdrawal Plan request form can be obtained by calling
1-800-225-5163.
Group or Salary Deduction Plan
An investor may join a Group or Salary Deduction Plan where satisfactory
arrangements have been made with Scudder Investor Services, Inc. for forwarding
regular investments through a single source. The minimum annual investment is
$240 per investor which may be made in monthly, quarterly, semiannual or annual
payments. The minimum monthly deposit per investor is $20. Except for trustees
or custodian fees for certain retirement plans, at present there is no separate
charge for maintaining group or salary deduction plans; however, the [Trust,
Corporation] and its agents reserve the right to establish a maintenance charge
in the future depending on the services required by the investor.
The [Trust, Corporation] reserves the right, after notice has been given to
the shareholder, to redeem and close a shareholder's account in the event that
the shareholder ceases participating in the group plan prior to investment of
$1,000 per individual or in the event of a redemption which occurs prior to the
accumulation of that amount or which reduces the account value to less than
$1,000 and the account value is not increased to $1,000 within a reasonable time
after notification. An investor in a plan who has not purchased shares for six
months shall be presumed to have stopped making payments under the plan.
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<PAGE>
Automatic Investment Plan
Shareholders may arrange to make periodic investments through automatic
deductions from checking accounts by completing the appropriate form and
providing the necessary documentation to establish this service. The minimum
investment is $50.
The Automatic Investment Plan involves an investment strategy called dollar
cost averaging. Dollar cost averaging is a method of investing whereby a
specific dollar amount is invested at regular intervals. By investing the same
dollar amount each period, when shares are priced low the investor will purchase
more shares than when the share price is higher. Over a period of time this
investment approach may allow the investor to reduce the average price of the
shares purchased. However, this investment approach does not assure a profit or
protect against loss. This type of regular investment program may be suitable
for various investment goals such as, but not limited to, college planning or
saving for a home.
Uniform Transfers/Gifts to Minors Act
Grandparents, parents or other donors may set up custodian accounts for
minors. The minimum initial investment is $1,000 unless the donor agrees to
continue to make regular share purchases for the account through Scudder's
Automatic Investment Plan (AIP). In this case, the minimum initial investment is
$500.
The [Trust, Corporation] reserves the right, after notice has been given to
the shareholder and custodian, to redeem and close a shareholder's account in
the event that regular investments to the account cease before the $1,000
minimum is reached.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
(See "Distribution and performance information--Dividends and capital gains
distributions" in the Funds' prospectuses.)
Each Fund intends to follow the practice of distributing substantially all
of its investment company taxable income, which includes any excess of net
realized short-term capital gains over net realized long-term capital losses. A
Fund may follow the practice of distributing the entire excess of net realized
long-term capital gains over net realized short-term capital losses. If it
appears to be in the best interest of a Fund and its shareholders, a Fund may
retain all or part of such gain for reinvestment after paying the related
federal income taxes which shareholders may then claim as a credit on their
returns. (See "TAXES.") If a Fund does not distribute the amount of capital gain
and/or ordinary income required to be distributed by an excise tax provision of
the Code, a Fund may be subject to that excise tax. (See "TAXES.") In certain
circumstances, a Fund may determine that it is in the interest of shareholders
to distribute less than the required amount.
The Funds intend to declare in December any net realized capital gains
resulting from its investment activity and any dividend from investment company
taxable income. The Funds intend to distribute the December dividends and
capital gains either in December or in the following January. Any dividends or
capital gains distributions declared in October, November, or December with a
record date in that 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. If a shareholder has elected to reinvest any
dividends and/or other distributions, such distributions will be made in shares
of that Fund and confirmations will be mailed to each shareholder. If a
shareholder has chosen to receive cash, a check will be sent.
PERFORMANCE INFORMATION
(See "Distribution and performance information--Performance information"
in the Funds' prospectuses.)
From time to time, quotations of the Funds' performance may be included in
advertisements, sales literature or reports to shareholders or prospective
investors. These performance figures are calculated in the following manner:
32
<PAGE>
Average Annual Total Return
Average annual total return is the average annual compound rate of return
for the periods of one year, five years and ten years (or such shorter periods
as may be applicable dating from the commencement of a Fund's operations), all
ended on the last day of a recent calendar quarter. Average annual total return
quotations reflect changes in the price of the Funds' shares and assume that all
dividends and capital gains distributions during the respective periods were
reinvested in Fund shares. Average annual total return is calculated by
computing the average annual compound rates of return of a hypothetical
investment over such periods, according to the following formula (average annual
total return is then expressed as a percentage):
T = (ERV/P)^1/n - 1
Where:
T = Average Annual Total Return
P = a hypothetical initial investment of $1,000
n = number of years
ERV = ending redeemable value: ERV is the value, at the end
of the applicable period, of a hypothetical $1,000
investment made at the beginning of the applicable
period.
Average Annual Total Return for the periods ended September 30, 19971996
[TO BE UPDATED]
One year Five years Ten years
-------- ---------- ---------
Large Company 15.94% 12.89% 13.76%
Value Fund
One year Life of Fund(1)
-------- ------------
Value Fund 17.18%* 14.20%*
(1) For the period beginning December 31, 1992 (commencement of
operations).
[TO BE UPDATED]
* The Adviser maintained Fund expenses for the period December 31,
1992 through September 30, 1993 and for the three fiscal years ended
September 30, 19971996. The Average Annual Total Return for one year
and for the life of the Fund, had the Adviser not maintained Fund
expenses, would have been lower.
As described above, average annual total return is based on historical
earnings and is not intended to indicate future performance. Average annual
total return for a Fund will vary based on changes in market conditions and the
level of a Fund's expenses.
In connection with communicating its average annual total return to
current or prospective shareholders, the Fund also may compare these figures to
the performance of other mutual funds tracked by mutual fund rating services or
to unmanaged indices which may assume reinvestment of dividends but generally do
not reflect deductions for administrative and management costs.
Cumulative Total Return
Cumulative total return is the cumulative rate of return on a hypothetical
initial investment of $1,000 for a specified period. Cumulative total return
quotations reflect changes in the price of the Funds' shares and assume that all
dividends and capital gains distributions during the period were reinvested in
Fund shares. Cumulative total return is calculated by computing the cumulative
rates of return of a hypothetical investment over such periods, according to the
following formula (cumulative total return is then expressed as a percentage):
33
<PAGE>
C = (ERV/P) - 1
Where:
C = Cumulative Total Return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value: ERV is the value, at the end of
the applicable period, of a hypothetical $1,000
investment made at the beginning of the applicable
period.
Cumulative Total Return for the periods ended September 30, 19971996
[TO BE UPDATED]
One year Five years Ten years
-------- ---------- ---------
Large Company 20.34% 83.32% 262.88%
Value Fund
One year Life of Fund(1)
-------- ------------
Value Fund 17.18%* 64.56%*
(1) For the period beginning December 31, 1992 (commencement of
operations).
* The Adviser maintained Fund expenses for the period December 31,
1992 through September 30, 1993 and for the three fiscal years ended
September 30, 1996. The Cumulative Total Return for one year and for
the life of the Fund, had the Adviser not maintained Fund expenses,
would have been lower.
Total Return
Total return is the rate of return on an investment for a specified period
of time calculated in the same manner as cumulative total return.
Capital Change
Capital change measures the return from invested capital including
reinvested capital gains distributions. Capital change does not include the
reinvestment of income dividends.
From time to time, in advertisements, sales literature, and reports to
shareholders or prospective investors, figures relating to the growth in the
total net assets of a Fund apart from capital appreciation will be cited, as an
update to the information in this section, including, but not limited to: net
cash flow, net subscriptions, gross subscriptions, net asset growth, net account
growth, and subscription rates. Capital appreciation generally will be covered
by marketing literature as part of the Funds' performance data.
These figures can be described in the following manner:
Net cash flow is gross subscriptions minus gross redemptions for a
particular time period. Net cash flow is a negative number when redemptions
exceed subscriptions.
Net subscriptions is any positive net cash flow.
[TO BE UPDATED]
Gross subscriptions are the sum of all the individual subscriptions over a
specified period of time. It should be noted that subscriptions include
distributions reinvested at the shareholders' request.
34
<PAGE>
In the period from September 30, 1995, to September 30, 1996, Large
Company Value Fund went from 84,417 accounts to 83,490 accounts and Value Fund
went from 6,953 accounts to 8,649 accounts. During the same period, net assets
for Large Company Value Fund went from $1.491 billion to $1.659 billion and from
$68.1 million to $88.8 million for Value Fund. In this period, gross
subscriptions for the Large Company Value Fund and Value Fund were $465.3
million and $39.1 million, respectively.
Net asset growth is any positive outcome of the following: gross
subscriptions less gross redemptions plus any capital change due to the
fluctuating prices of the securities in a Fund. Basically, therefore, it is net
cash flow plus any capital change where the outcome of that summation is
positive. The formula is:
Net Asset Growth = Gross Subscriptions - Gross Redemptions +
Capital Change
Net account growth is the total number of accounts in a Fund at one point
in time minus the total number of accounts at an earlier point in time where the
outcome of the calculation is positive. This is a quick way of describing what
is in fact a more complicated process of adding new accounts even as some old
accounts are closing. If new accounts open faster than old accounts close, there
is net account growth. This growth can also be expressed as a percentage.
The net subscription rate is described as a matter of those new net assets
not due to capital change. Specifically, the net subscription rate is the net
cash flow divided by the average asset size of a Fund for the period in
question, expressed as a percentage.
The gross subscription rate can also be similarly described. In fact, the
formula would follow the pattern for the net subscription rate, but uses a gross
figure instead of a net figure. Gross subscriptions would be substituted for net
cash flow in a simple variation on the same basic idea.
Comparison of Fund Performance
A comparison of the quoted non-standard performance offered for various
investments is valid only if performance is calculated in the same manner. Since
there are different methods of calculating performance, investors should
consider the effects of the methods used to calculate performance when comparing
performance of the Fund with performance quoted with respect to other investment
companies or types of investments.
In connection with communicating its performance to current or prospective
shareholders, the Fund also may compare these figures to the performance of
unmanaged indices which may assume reinvestment of dividends or interest but
generally do not reflect deductions for administrative and management costs.
Examples include, but are not limited to the Dow Jones Industrial Average, the
Consumer Price Index, Standard & Poor's 500 Composite Stock Price Index (S&P
500), the Nasdaq OTC Composite Index, the Nasdaq Industrials Index, the Russell
2000 Index, and statistics published by the Small Business Administration.
From time to time, in advertising and marketing literature, this Fund's
performance may be compared to the performance of broad groups of mutual funds
with similar investment goals, as tracked by independent organizations such as,
Investment Company Data, Inc. ("ICD"), Lipper Analytical Services, Inc.
("Lipper"), CDA Investment Technologies, Inc. ("CDA"), Morningstar, Inc., Value
Line Mutual Fund Survey and other independent organizations. When these
organizations' tracking results are used, the Fund will be compared to the
appropriate fund category, that is, by fund objective and portfolio holdings, or
to the appropriate volatility grouping, where volatility is a measure of a
fund's risk. For instance, a Scudder growth fund will be compared to funds in
the growth fund category; a Scudder income fund will be compared to funds in the
income fund category; and so on. Scudder funds (except for money market funds)
may also be compared to funds with similar volatility, as measured statistically
by independent organizations.
From time to time, in marketing and other Fund literature,
(Trustees)(Directors) and officers of the Fund, the Fund's portfolio manager, or
members of the portfolio management team may be depicted and quoted to give
prospective and current shareholders a better sense of the outlook and approach
of those who manage the Fund. In addition, the amount of assets that the Adviser
has under management in various geographical areas may be quoted in advertising
and marketing materials.
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<PAGE>
The Fund may be advertised as an investment choice in Scudder's college
planning program. The description may contain illustrations of projected future
college costs based on assumed rates of inflation and examples of hypothetical
fund performance, calculated as described above.
Statistical and other information, as provided by the Social Security
Administration, may be used in marketing materials pertaining to retirement
planning in order to estimate future payouts of social security benefits.
Estimates may be used on demographic and economic data.
Marketing and other Fund literature may include a description of the
potential risks and rewards associated with an investment in the Fund. The
description may include a "risk/return spectrum" which compares the Fund to
other Scudder funds or broad categories of funds, such as money market, bond or
equity funds, in terms of potential risks and returns. Money market funds are
designed to maintain a constant $1.00 share price and have a fluctuating yield.
Share price, yield and total return of a bond fund will fluctuate. The share
price and return of an equity fund also will fluctuate. The description may also
compare the Fund to bank products, such as certificates of deposit. Unlike
mutual funds, certificates of deposit are insured up to $100,000 by the U.S.
government and offer a fixed rate of return.
Because bank products guarantee the principal value of an investment and
money market funds seek stability of principal, these investments are considered
to be less risky than investments in either bond or equity funds, which may
involve the loss of principal. However, all long-term investments, including
investments in bank products, may be subject to inflation risk, which is the
risk of erosion of the value of an investment as prices increase over a long
time period. The risks/returns associated with an investment in bond or equity
funds depend upon many factors. For bond funds these factors include, but are
not limited to, a fund's overall investment objective, the average portfolio
maturity, credit quality of the securities held, and interest rate movements.
For equity funds, factors include a fund's overall investment objective, the
types of equity securities held and the financial position of the issuers of the
securities. The risks/returns associated with an investment in international
bond or equity funds also will depend upon currency exchange rate fluctuation.
A risk/return spectrum generally will position the various investment
categories in the following order: bank products, money market funds, bond funds
and equity funds. Shorter-term bond funds generally are considered less risky
and offer the potential for less return than longer-term bond funds. The same is
true of domestic bond funds relative to international bond funds, and bond funds
that purchase higher quality securities relative to bond funds that purchase
lower quality securities. Growth and income equity funds are generally
considered to be less risky and offer the potential for less return than growth
funds. In addition, international equity funds usually are considered more risky
than domestic equity funds but generally offer the potential for greater return.
Risk/return spectrums also may depict funds that invest in both domestic
and foreign securities or a combination of bond and equity securities.
Evaluation of Fund performance or other relevant statistical information
made by independent sources may also be used in advertisements concerning the
Fund, including reprints of, or selections from, editorials or articles about
this Fund. Sources for Fund performance information and articles about the Fund
include the following:
American Association of Individual Investors' Journal, a monthly publication of
the AAII that includes articles on investment analysis techniques.
Asian Wall Street Journal, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.
Banxquote, an on-line source of national averages for leading money
market and bank CD interest rates, published on a weekly basis by
Masterfund, Inc. of Wilmington, Delaware.
Barron's, a Dow Jones and Company, Inc. business and financial
weekly that periodically reviews mutual fund performance data.
Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing abroad.
36
<PAGE>
CDA Investment Technologies, Inc., an organization which provides performance
and ranking information through examining the dollar results of hypothetical
mutual fund investments and comparing these results against appropriate market
indices.
Consumer Digest, a monthly business/financial magazine that includes a "Money
Watch" section featuring financial news.
Financial Times, Europe's business newspaper, which features from time to time
articles on international or country-specific funds.
Financial World, a general business/financial magazine that includes a "Market
Watch" department reporting on activities in the mutual fund industry.
Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.
The Frank Russell Company, a West-Coast investment management firm that
periodically evaluates international stock markets and compares foreign equity
market performance to U.S. stock market performance.
Global Investor, a European publication that periodically reviews
the performance of U.S. mutual funds investing internationally.
IBC Money Fund Report, a weekly publication of IBC Financial Data, Inc.,
reporting on the performance of the nation's money market funds, summarizing
money market fund activity and including certain averages as performance
benchmarks, specifically "IBC's Money Fund Average," and "IBC's Government Money
Fund Average."
Ibbotson Associates, Inc., a company specializing in investment research and
data.
Investment Company Data, Inc., an independent organization which provides
performance ranking information for broad classes of mutual funds.
Investor's Business Daily, a daily newspaper that features financial, economic,
and business news.
Kiplinger's Personal Finance Magazine, a monthly investment advisory publication
that periodically features the performance of a variety of securities.
Lipper Analytical Services, Inc.'s Mutual Fund Performance
Analysis, a weekly publication of industry-wide mutual fund
averages by type of fund.
Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.
Morgan Stanley International, an integrated investment banking firm that
compiles statistical information.
Mutual Fund Values, a biweekly Morningstar, Inc. publication that
provides ratings of mutual funds based on fund performance, risk
and portfolio characteristics.
The New York Times, a nationally distributed newspaper which regularly covers
financial news.
The No-Load Fund Investor, a monthly newsletter, published by Sheldon Jacobs,
that includes mutual fund performance data and recommendations for the mutual
fund investor.
37
<PAGE>
No-Load Fund*X, a monthly newsletter, published by DAL Investment Company, Inc.,
that reports on mutual fund performance, rates funds and discusses investment
strategies for the mutual fund investor.
Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.
Personal Investor, a monthly investment advisory publication that includes a
"Mutual Funds Outlook" section reporting on mutual fund performance measures,
yields, indices and portfolio holdings.
SmartMoney, a national personal finance magazine published monthly
by Dow Jones and Company, Inc. and The Hearst Corporation. Focus
is placed on ideas for investing, spending and saving.
Success, a monthly magazine targeted to the world of entrepreneurs and growing
business, often featuring mutual fund performance data.
United Mutual Fund Selector, a semi-monthly investment newsletter, published by
Babson United Investment Advisors, that includes mutual fund performance data
and reviews of mutual fund portfolios and investment strategies.
USA Today, a leading national daily newspaper.
U.S. News and World Report, a national news weekly that
periodically reports mutual fund performance data.
Value Line Mutual Fund Survey, an independent organization that provides
biweekly performance and other information on mutual funds.
The Wall Street Journal, a Dow Jones and Company, Inc. newspaper
which regularly covers financial news.
Wiesenberger Investment Companies Services, an annual compendium of information
about mutual funds and other investment companies, including comparative data on
funds' backgrounds, management policies, salient features, management results,
income and dividend records and price ranges.
Working Woman, a monthly publication that features a "Financial Workshop"
section reporting on the mutual fund/financial industry.
Worth, a national publication issued 10 times per year by Capital Publishing
Company, a subsidiary of Fidelity Investments. Focus is placed on personal
financial journalism.
ORGANIZATION OF THE FUNDS
(See "Fund organization" in the Funds' prospectuses.)
The Funds are separate series of Scudder Equity Trust. Scudder Equity
Trust, formerly Scudder Capital Growth Fund, is a Massachusetts business trust
established under a Declaration of Trust dated October 16, 1985, as amended. The
Trust's authorized capital consists of an unlimited number of shares of
beneficial interest, par value $0.01 per share. The Trustees have the authority
to issue additional series of shares. If more than one series of shares were
issued and a series were unable to meet its obligations, the remaining series
might have to assume the unsatisfied obligations of that series. All shares of
Scudder Large Company Value Fund and Scudder Value Fund are of one class and
have equal rights as to voting, dividends and liquidation. All shares issued and
outstanding will be fully paid and nonassessable by the Trust, and redeemable as
described in this Statement of Additional Information and in the Funds'
prospectuses.
The Trustees, in their discretion, may authorize the division of shares of
a Fund (or shares of a series) into different classes, permitting shares of
different classes to be distributed by different methods. Although shareholders
of different classes of a series would have an interest in the same portfolio of
assets, shareholders of different classes may bear different expenses in
connection with different methods of distribution. The Trustees have no present
intention of taking the action necessary to effect the division of shares into
separate classes (which under present regulations would
38
<PAGE>
require a Fund first to obtain an exemptive order of the SEC), nor of changing
the method of distribution of shares of a Fund.
Currently, the assets of Scudder Equity Trust received for the issue or
sale of the shares of each series and all income, earnings, profits and proceeds
thereof, subject only to the rights of creditors, are specifically allocated to
such series and constitute the underlying assets of such series. The underlying
assets of each series are segregated on the books of account, and are to be
charged with the liabilities in respect to such series and with a proportionate
share of the general liabilities of Scudder Equity Trust. If a series were
unable to meet its obligations, the assets of all other series may in some
circumstances be available to creditors for that purpose, in which case the
assets of such other series could be used to meet liabilities which are not
otherwise properly chargeable to them. Expenses with respect to any two or more
series are to be allocated in proportion to the asset value of the respective
series except where allocations of direct expenses can otherwise be fairly made.
The officers of Scudder Equity Trust, subject to the general supervision of the
Trustees, have the power to determine which liabilities are allocable to a given
series, or which are general or allocable to two or more series. In the event of
the dissolution or liquidation of Scudder Equity Trust, the holders of the
shares of any series are entitled to receive as a class the underlying assets of
such shares available for distribution to shareholders.
The Trust's predecessor was organized in 1966 as a Delaware corporation
under the name "Scudder Duo-Vest Inc." as a closed-end, diversified dual-purpose
investment company. Effective April 1, 1982, its original dual-purpose nature
was terminated and it became an open-end investment company with only one class
of shares outstanding. At a Special Meeting of Shareholders held May 18, 1982,
the shareholders voted to amend the investment objective to seek to maximize
long-term growth of capital and to change the name of the corporation to
"Scudder Capital Growth Fund, Inc." ("SCGF, Inc."). The fiscal year end of SCGF,
Inc. was changed from March 31 to September 30 by action of its Directors on May
18, 1982. Effective as of September 30, 1982, Scudder Special Fund, Inc. was
merged into SCGF, Inc. In October 1985, the Fund's form of organization was
changed to a Massachusetts business trust upon approval of the shareholders.
Shares of Scudder Equity Trust entitle their holders to one vote per
share; however, separate votes are taken by each series on matters affecting an
individual series. For example, a change in investment policy for a series would
be voted upon only by shareholders of the series involved. Additionally,
approval of the investment advisory agreement is a matter to be determined
separately by each series. Approval by the shareholders of one series is
effective as to that series whether or not enough votes are received from the
shareholders of the other series to approve such agreement as to the other
series.
The Trust has a Declaration of Trust which provides that obligations of a
Fund are not binding upon the Trustees individually but only upon the property
of that Fund, that the Trustees and officers will not be liable for errors of
judgment or mistakes of fact or law, and that a Fund involved will indemnify the
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with the
Trust, except if it is determined in the manner provided in the Declaration of
Trust that they have not acted in good faith in the reasonable belief that their
actions were in the best interests of the Fund involved. However, n Nothing in
the Declaration of Trust, however, protects or indemnifies a Trustee or officer
against any liability to which that person he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of that person's his office.
No series of the Trust shall be liable for the obligations of any other
series.
INVESTMENT ADVISER
(See "Fund organization--Investment adviser" in the Funds' prospectuses.)
Scudder Kemper Investments, Inc., , Stevens & Clark, Inc., an investment
counsel firm, acts as investment adviser to each Fund. Scudder, Stevens & Clark,
Inc. ("Scudder"), the predecessor organization to the Adviser, the Adviser This
organization is one of the most experienced investment management firms in the
U.S. It was established in 1919 and pioneered the practice of providing
investment counsel to individual clients on a fee basis. In 1928 it introduced
the first no-load mutual fund to the public. In 1953, the Adviser introduced
Scudder International Fund, Inc. the first mutual fund available in the U.S.
investing internationally in securities of issuers in several foreign
39
<PAGE>
countries. The firm reorganized from a partnership to a corporation on June 28,
1985. On June 26, 1997, Scudder entered into an agreement with Zurich Insurance
Company ("Zurich") pursuant to which Scudder and Zurich agreed to form an
alliance. On November __, 1997, Zurich acquired a majority interest in Scudder,
and Zurich Kemper Investments, Inc., a Zurich subsidiary, became part of
Scudder. Scudder's name has been changed to Scudder Kemper Investments, Inc.
Founded in 1872, Zurich is a multinational, public corporation organized
under the laws of Switzerland. Its home office is located at Mythenquai 2, 8002
Zurich, Switzerland. Historically, Zurich's earnings have resulted from its
operations as an insurer as well as from its ownership of its subsidiaries and
affiliated companies (the "Zurich Insurance Group"). Zurich and the Zurich
Insurance Group provide an extensive range of insurance products and services
and have branch offices and subsidiaries in more than 40 countries throughout
the world. Zurich Insurance Group is particularly strong in the insurance of
international companies and organizations. Over the past few years, Zurich's
global presence, particularly in the United States, has been strengthened by
means of selective acquisitions.
The principal source of the Adviser's income is professional fees received
from providing continuous investment advice, and the firm derives no income from
brokerage or underwriting of securities. Today, it provides investment counsel
for many individuals and institutions, including insurance companies, colleges,
industrial corporations, and financial and banking organizations. In addition,
it manages Montgomery Street Income Securities, Inc., Scudder California Tax
Free Trust, Scudder Cash Investment Trust, Scudder Equity Trust, Scudder Fund,
Inc., Scudder Funds Trust, Scudder Global Fund, Inc., Scudder GNMA Fund, Scudder
Portfolio Trust, Scudder Institutional Fund, Inc., Scudder International Fund,
Inc., Scudder Investment Trust, Scudder Municipal Trust, Scudder Mutual Funds,
Inc., Scudder New Asia Fund, Inc., Scudder New Europe Fund, Inc., Scudder
Pathway Series, Scudder Securities Trust, Scudder State Tax Free Trust, Scudder
Tax Free Money Fund, Scudder Tax Free Trust, Scudder U.S. Treasury Money Fund,
Scudder Variable Life Investment Fund, Scudder World Income Opportunities Fund,
Inc., The Argentina Fund, Inc., The Brazil Fund, Inc., The Korea Fund, Inc., The
Japan Fund, Inc., The Latin America Dollar Income Fund, Inc. and Scudder Spain
and Portugal Fund, Inc. Some of the foregoing companies or trusts have two or
more series.
The Adviser also provides investment advisory services to the mutual funds
which comprise the AARP Investment Program from Scudder. The AARP Investment
Program from Scudder has assets over $13 billion and includes the AARP Growth
Trust, AARP Income Trust, AARP Tax Free Income Trust, AARP Managed Investment
Portfolios Trust and AARP Cash Investment Funds.
Pursuant to an Agreement between Scudder, Stevens & Clark, Inc. and AMA
Solutions, Inc., a subsidiary of the American Medical Association (the "AMA"),
dated May 9, 1997, Scudder has agreed, subject to applicable state regulations,
to pay AMA Solutions, Inc. royalties in an amount equal to 5% of the management
fee received by Scudder with respect to assets invested by AMA members in
Scudder funds in connection with the AMA InvestmentLink(SM) Program. Scudder
will also pay AMA Solutions, Inc. a general monthly fee, currently in the amount
of $833. The AMA and AMA Solutions, Inc. are not engaged in the business of
providing investment advice and neither is registered as an investment adviser
or broker/dealer under federal securities laws. Any person who participates in
the AMA InvestmentLink(SM) Program will be a customer of Scudder (or of a
subsidiary thereof) and not the AMA or AMA Solutions, Inc. AMA
InvestmentLink(SM) is a service mark of AMA Solutions, Inc.
The principal source of the Adviser's income is professional fees received
from providing continuous investment advice, and the firm derives no income from
brokerage or underwriting of securities. Today, it provides investment counsel
for many individuals and institutions, including insurance companies, colleges,
industrial corporations, and financial and banking organizations. In addition,
it manages Montgomery Street Income Securities, Inc., Scudder California Tax
Free Trust, Scudder Cash Investment Trust, Scudder Equity Trust, Scudder Fund,
Inc., Scudder Funds Trust, Scudder Global Fund, Inc., Scudder GNMA Fund, Scudder
Portfolio Trust, Scudder Institutional Fund, Inc., Scudder International Fund,
Inc., Scudder Investment Trust, Scudder Municipal Trust, Scudder Mutual Funds,
Inc., Scudder New Asia Fund, Inc., Scudder New Europe Fund, Inc., Scudder
Pathway Series, Scudder Securities Trust, Scudder State Tax Free Trust, Scudder
Tax Free Money Fund, Scudder Tax Free Trust, Scudder U.S. Treasury Money Fund,
Scudder Variable Life Investment Fund, Scudder World Income Opportunities Fund,
Inc., The Argentina Fund, Inc., The Brazil Fund, Inc., The First Iberian Fund,
Inc., The Korea Fund, Inc., The Japan Fund, Inc. and The Latin America Dollar
Income Fund, Inc. Some of the foregoing companies or trusts have two or more
series.
40
<PAGE>
The Adviser also provides investment advisory services to the mutual funds
which comprise the AARP Investment Program from Scudder. The AARP Investment
Program from Scudder has assets over $12 billion and includes the AARP Growth
Trust, AARP Income Trust, AARP Tax Free Income Trust, AARP Managed Investment
Portfolios Trust and AARP Cash Investment Funds.
The Adviser maintains a large research department, which conducts ongoing
studies of the factors that affect the position of various industries, companies
and individual securities. In this work, the Adviser utilizes certain reports
and statistics from a wide variety of sources, including brokers and dealers who
may execute portfolio transactions for the Fund and other clients of the
Adviser, but conclusions are based primarily on investigations and critical
analyses by its own research specialists.
Certain investments may be appropriate for more than one Fund and also for
other clients advised by the Adviser. Investment decisions for a Fund and other
clients are made with a view to achieving their respective investment objectives
and after consideration of such factors as their current holdings, availability
of cash for investment and the size of their investments generally. Frequently,
a particular security may be bought or sold for only one client or in different
amounts and at different times for more than one but less than all clients.
Likewise, a particular security may be bought for one or more clients when one
or more other clients are selling the security. In addition, purchases or sales
of the same security may be made for two or more clients on the same date. In
such event, such transactions will be allocated among the clients in a manner
believed by the Adviser to be equitable to each. In some cases, this procedure
could have an adverse effect on the price or amount of the securities purchased
or sold by a Fund. Purchase and sale orders for a Fund may be combined with
those of other clients of the Adviser in the interest of the most favorable net
results to a Fund.
The Investment Management Agreement An investment management agreement
between the Trust, on behalf of Capital Growth Fund, and the Adviser was last
approved by the Trustees on September 4, 1996 and by the Fund's shareholders on
December 13, 1990. The Investment Management Agreement between the Trust, on
behalf of Value Fund, and the Adviser was last approved by the Trustees on
September 4, 1996 and by the initial shareholders of the Fund on December 30,
1992. Because the transaction between Scudder and Zurich resulted in the
assignment of the Fund's investment management agreement with Scudder, that
agreement was deemed to be automatically terminated at the consummation of the
transaction. In anticipation of the transaction, however, a new investment
management agreement between the Fund and the Adviser was approved by the Fund's
Trustees. At the special meeting of the Fund's stockholders held on October 27,
1997, the stockholders also approved a proposed new investment management
agreement. The new investment management agreement (the "Agreement") became
effective as of November __, 1997 and will be in effect for an initial term
ending on September 30, 1998. The Agreement is in all material respects on the
same terms as the previous investment management agreement which it supersedes.
The Agreement incorporates conforming changes which promote consistency among
all of the funds advised by the Adviser and which permit ease of administration.
The Capital Growth Fund Agreement dated December 14, 1990 and the Value Fund
Agreement dated December 28, 1992 (collectively, the "Agreements") will continue
in effect until September 30, 1997 and from year to year thereafter only if
their continuance is approved annually by the vote of a majority of those
Trustees who are not parties to such Agreements or interested persons of the
Adviser or the Trust, cast in person at a meeting called for the purpose of
voting on such approval, and either by vote of the Trustees or by a majority of
the outstanding voting securities of that Fund. The Agreements may be terminated
at any time without payment of penalty by either party on sixty days' written
notice, and automatically terminates in the event of their assignment.
Under each Agreement, the Adviser regularly provides a Fund with
continuing investment management for the Fund's portfolio consistent with the
Fund's investment objective, policies and restrictions and determines which
securities shall be purchased for the portfolio of that Fund, which portfolio
securities shall be held or sold by the Fund, and what portion of the Fund's
assets shall be held uninvested, subject always to the provisions of the
Declaration of Trust and By-Laws, of the 1940 Act and the Code, and to the
Fund's investment objective, policies and restrictions, and subject, further, to
such policies and instructions as the Trustees may from time to time establish.
The Adviser also advises and assists the officers of a Fund in taking such steps
as are necessary or appropriate to carry out the decisions of its Trustees and
the appropriate committees of the Trustees regarding the conduct of the business
of a Fund.
The Adviser pays the compensation and expenses (except those for attending
Board and Committee meetings outside New York, New York or Boston,
Massachusetts) of all Trustees, officers and executive employees of the Trust
affiliated with the Adviser and makes available, without expense to the Funds,
the services of the Adviser's directors,
41
<PAGE>
officers, and employees as may duly be elected officers, subject to their
individual consent to serve and to any limitations imposed by law, and provides
the Trust's office space and facilities and provides investment advisory,
research and statistical facilities and all clerical services relating to
research, statistical and investment work.
[TO BE UPDATED]
For the Adviser's services, Capital Growth Fund pays the Adviser a fee
equal to 0.75 of 1% on the first $500 million of average daily net assets; 0.65
of 1% on the next $500 million of such assets; and 0.60 of 1% on assets in
excess of $1 billion, payable monthly, provided the Fund will make such interim
payments as may be requested by the Adviser not to exceed 75% of the amount of
the fee then accrued on the books of the Fund and unpaid.
For the fiscal years ended September 30, 1995, 1996 and 1997, 1994, 1995
and 1996, Large Company Value Fund incurred aggregate fees pursuant to its then
effective investment advisory agreement of $9,199,315, $9,118,015 and
$10,505,409, respectively.
For the Adviser's services, Value Fund pays the Adviser an annual fee
equal to 0.70% of average daily net assets, payable monthly, provided the Fund
will make such interim payments as may be requested by the Adviser not to exceed
75% of the amount of the fee then accrued on the books of the Fund and unpaid.
For the period December 31, 1992 (commencement of operations) to September 30,
1993 and for the fiscal years ended September 30, 1995, 1996 and 1997, 1994,
1995 and 1996, the Adviser did not impose a portion of its management fees
amounting to $29,834, $119,841 and $43,951, respectively and the amounts imposed
amounted to $17,827, $112,125 and $508,822, respectively. The Adviser has
voluntarily agreed to waive management fees or reimburse the Fund to the extent
necessary so that the total annualized expenses of the Fund do not exceed 1.25%
of the average daily net assets until ___________. July 31, 1997. The Adviser
retains the ability to be repaid by the Fund if expenses fall below the
specified limit prior to the end of the fiscal year. These expense limitation
arrangements can decrease the Fund's expenses and improve its performance.
Under each Agreement a Fund is responsible for all of its other expenses
including broker's commissions; legal, auditing and accounting expenses; the
calculation of net asset value; taxes and governmental fees; the fees and
expenses of the Transfer Agent; the cost of preparing share certificates or any
other expenses including clerical expenses of issue, sale, underwriting,
distribution, redemption or repurchase of shares; the expenses of and the fees
for registering or qualifying securities for sale; fees and expenses incurred in
connection with membership in investment company organizations; the fees and
expenses of the Trustees, officers and employees of the Fund who are not
affiliated with the Adviser; the cost of printing and distributing reports and
notices to shareholders; and the fees and disbursements of custodians. The Trust
may arrange to have third parties assume all or part of the expenses of sale,
underwriting and distribution of shares of the Funds. The Funds are also
responsible for expenses incurred in connection with litigation, proceedings and
claims and the legal obligation it may have to indemnify its officers and
Trustees with respect thereto. Each Agreement expressly provides that the
Adviser shall not be required to pay a pricing agent of any Fund for portfolio
pricing services, if any.
Each Agreement requires the Adviser to reimburse the Funds for annual
expenses in excess of the lowest applicable expense limitation imposed by the
states in which a Fund is at the time offering its shares for sale, although no
payments are required to be made by the Adviser pursuant to this reimbursement
provision in excess of the annual fee paid by a Fund to the Adviser. Management
has been advised that, while some states have eliminated expense limitations and
others may do so in the future, the lowest of such limitations is presently 2
1/2% of such net assets up to $30 million, 2% of the next $70 million of such
net assets and 1 1/2% of such net assets in excess of that amount. Certain
expenses such as brokerage commissions, taxes, extraordinary expenses and
interest are excluded from such limitation. For the fiscal years ended September
30, 1995, 1996 and 1997, 1994, 1995 and 1996, such expenses for Large Company
Value Fund equaled _____, ____ and _____, 0.97%, 0.98% and 0.92%, respectively,
of the Fund's average net assets. For the fiscal years ended September 30, 1995,
1996 and 1997 1994, 1995 and 1996 such expenses for Value Fund equaled
_____1.25% of the Fund's average net assets. If reimbursement is required, it
will be made as promptly as practicable after the end of the Funds' fiscal year.
However, no fee payment will be made to the Adviser during any fiscal year which
will cause year-to-date expenses to exceed the cumulative pro-rata expense
limitation at the time of such payment.
The Adviser renders significant administrative services (not otherwise
provided by third parties) necessary for a Fund's operations as an open-end
investment company including, but not limited to, preparing reports and notices
to
42
<PAGE>
the Trustees and shareholders; supervising, negotiating contractual arrangements
with, and monitoring various third-party service providers to the Funds (such as
the Funds' transfer agent, pricing agents, custodian, accountants and others);
preparing and making filings with the SEC and other regulatory agencies;
assisting in the preparation and filing of the Funds' federal, state and local
tax returns; preparing and filing the Funds' federal excise tax returns;
assisting with investor and public relations matters; monitoring the valuation
of securities and the calculation of net asset value, monitoring the
registration of shares of the Funds under applicable federal and state
securities laws; maintaining the Funds' books and records to the extent not
otherwise maintained by a third party; assisting in establishing accounting
policies of the Funds; assisting in the resolution of accounting and legal
issues; establishing and monitoring the Funds' operating budget; processing the
payment of the Funds' bills; assisting the Funds in, and otherwise arranging
for, the payment of distributions and dividends and otherwise assisting the
Funds in the conduct of its business, subject to the direction and control of
the Trustees.
The Agreement identifies the Adviser as the exclusive licensee of the
rights to use and sublicense the names "Scudder," "Scudder Kemper Investments,
Inc." and "Scudder Stevens and Clark, Inc." (together, the "Scudder Marks").
Under this license, the Trust, with respect to the Fund, has the non-exclusive
right to use and sublicense the Scudder name and marks as part of its name, and
to use the Scudder Marks in the Trust's investment products and services.
Each Agreement also provides that the Trust and a Fund may use any name
derived from the name "Scudder, Stevens & Clark" only as long as that Agreement
or any extension, renewal or amendment thereof remains in effect.
In reviewing the terms of each Agreement and in discussions with the
Adviser concerning each Agreement, Trustees who are not "interested persons" of
the Trust are represented by independent counsel at the Funds' expense.
Each Agreement provides that the Adviser shall not be liable for any error
of judgment or mistake of law or for any loss suffered by a Fund in connection
with matters to which each Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of the Adviser in
the performance of its duties or from reckless disregard by the Adviser of its
obligations and duties under the Agreements.
Officers and employees of the Adviser from time to time may have
transactions with various banks, including the Funds' custodian bank. It is the
Adviser's opinion that the terms and conditions of those transactions were not
influenced by existing or potential custodial or other Fund relationships.
None of the officers or Trustees of the Trust may have dealings with a
Fund as principals in the purchase or sale of securities, except as individual
subscribers or holders of shares of a Fund.
Personal Investments by Employees of the Adviser
Employees of the Adviser are permitted to make personal securities
transactions, subject to requirements and restrictions set forth in the
Adviser's Code of Ethics. The Code of Ethics contains provisions and
requirements designed to identify and address certain conflicts of interest
between personal investment activities and the interests of investment advisory
clients such as the Funds. Among other things, the Code of Ethics, which
generally complies with standards recommended by the Investment Company
Institute's Advisory Group on Personal Investing, prohibits certain types of
transactions absent prior approval, imposes time periods during which personal
transactions may not be made in certain securities, and requires the submission
of duplicate broker confirmations and monthly reporting of securities
transactions. Additional restrictions apply to portfolio managers, traders,
research analysts and others involved in the investment advisory process.
Exceptions to these and other provisions of the Code of Ethics may be granted in
particular circumstances after review by appropriate personnel.
43
<PAGE>
TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>
Position with
Underwriter,
Name Position Principal Scudder Investor
and Address with Trust Occupation** Services, Inc.
- ----------- ---------- ------------ --------------
<S> <C> <C> <C>
Daniel Pierce*#+ President Chairman of the Vice
and Trustee Board and Managing President,
Director of Assistant
Scudder, Stevens & Treasurer and
Clark, Inc. Director
Paul Bancroft III Trustee Venture Capitalist -
1120 Cheston Lane and Consultant;
Queenstown, MD Retired President
and Chief
Executive Officer
of Bessemer
Securities
Corporation
Sheryle J. Bolton Trustee Chief Executive -
20 Hilltop Road Officer,
Waccabue, NY 10597 Scientific
Learning
Corporation
Consultant
Thomas J. Devine Trustee President, Exeter -
641 Lexington Capital Management
Avenue Corporation
New York, NY Consultant
Keith R. Fox Trustee President, Exeter -
10 East 53rd Street Capital
New York, NY 10022 Management
Corporation
Dudley H. Ladd*+ Trustee Managing Director Director and
of Scudder, Senior Vice
Stevens and Clark, Inc. President
David S. Lee*+ Vice Managing Director President,
President of Scudder, Assistant
and Trustee Stevens and Clark, Treasurer and
Inc. Director
William T. Burgin Trustee General Partner,
Bessemer Venture
Partners
William H. Luers Trustee President, The
Metropolitan
Museum of Art
Dr. Wilson Nolen Trustee Consultant, June -
1120 Fifth Avenue 1989 to present,
New York, NY Corporate Vice
President of Becton,
Dickinson & Company
(manufacturer of medical
and scientific
products), from 1973
to June 1989
Kathryn L. Quirk*++ Trustee, Managing Director Vice
Vice of Scudder, President
President Stevens and Clark,
and Inc.
Assistant
Secretary
Gordon Shillinglaw Trustee Professor Emeritus -
196 Villard Avenue of Accounting,
Hastings-on-Hudson, Columbia
NY University
Graduate School of
Business
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
Position with
Underwriter,
Name Position Principal Scudder Investor
and Address with Trust Occupation** Services, Inc.
- ----------- ---------- ------------ --------------
<S> <C> <C> <C>
Robert W. Lear Honorary Executive-in- -
429 Silvermine Road Trustee Residence Columbia
New Canaan, CT University
Graduate School of
Business
Robert G. Stone,Jr. Honorary Chairman of the -
405 Lexington Trustee Board and
Avenue Director, Kirby
39th Floor Corporation
New York, NY 10174 (marine
transportation,
diesel repair and
property and
casualty insurance
in Puerto Rico)
Donald E. Hall@ Vice Managing Director -
President of Scudder,
Stevens and Clark, Inc.
Jerard K. Hartman++ Vice Managing Director -
President of Scudder,
Stevens and Clark, Inc.
Thomas W. Joseph+ Vice Principal of Vice
President Scudder, Stevens & President,
Clark, Inc. Director,
Treasurer,
and Assistant
Clerk
Kathleen T. Vice Principal of -
Millard++ President Scudder, Stevens &
Clark, Inc.
Thomas F. Vice Principal of Clerk
McDonough+ President, Scudder, Stevens &
Secretary Clark, Inc.
and
Assistant
Treasurer
Pamela A. McGrath+ Vice Managing Director -
President of Scudder,
and Stevens & Clark,
Treasurer Inc.
Edward J. O'Connell ++ Vice Principal of Assistant
President Scudder, Stevens & Treasurer
and Clark, Inc.
Assistant
Treasurer
</TABLE>
* Messrs. Ladd, Lee, Padegs and Mr. Pierce and Ms. Quirk are
considered by the Trust and its counsel to be persons who are
"interested persons" of the Adviser or of the Trust (within
the meaning of the 1940 Act).
** Unless otherwise stated, all the Trustees and officers have been associated
with their respective companies for more than five years, but not
necessarily in the same capacity.
# Messrs. Padegs and Mr. Pierce and Ms. Quirk are members of the
Executive Committee, which may exercise all of the powers of
the Trustees when they are not in session.
+ Address: Two International Place, Boston, Massachusetts
++ Address: 345 Park Avenue, New York, New York
@ Address: 333 South Hope Street, Los Angeles, California
[TO BE UPDATED]
As of December 31, 19971996 all Trustees and officers of the Trust as a
group owned beneficially (as that term is defined in Section 13(d) under the
Securities and Exchange Act of 1934) ________ 1,155,453 shares, or ____% 5.54%
of the shares of Large Company Value Fund.
As of December 31, 19971996 all Trustees and officers of the Trust as a
group owned beneficially (as that term is defined in Section 13(d) under the
Securities and Exchange Act of 1934) ________ 196,268 shares, or ____% 3.41% of
the shares of Value Fund. Certain accounts for which the Adviser acts as
investment adviser owned _______
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895,658 shares in the aggregate of Value Fund, or ____% 15.5% of the outstanding
shares on December 31, 19971996. The Adviser may be deemed to be the beneficial
owner of such shares but disclaims any beneficial ownership in such shares.
To the best of the Trust's knowledge, as of December 31, 1996 no person
owned beneficially more than 5% of a Fund's outstanding shares.
Scudder Large Company Value Fund changed its name from Scudder Capital
Growth Fund on February 1, 1997.
The Trustees and officers of the Trust also serve in similar capacities
with other Scudder funds.
REMUNERATION
[TO BE UPDATED]
Several of the officers and Trustees of the Trust may be officers or
employees of the Adviser, the Distributor, the Transfer Agent, Scudder Trust
Company or Scudder Fund Accounting Corporation, from whom they receive
compensation, as a result of which they may be deemed to participate in the fees
paid by the Trust. The Funds pay no direct remuneration to any officer of the
Trust. However, each of the Trustees who is not affiliated with the Adviser will
be paid by the Trust. Each of these unaffiliated Trustees receives an annual
Trustee's fee of $______4,000 plus $___400 for attending each Trustees' meeting,
audit committee meeting or meeting held for the purpose of considering
arrangements between the Fund and the Adviser or any of its affiliates. Each
unaffiliated Trustee also receives $150 per committee meeting attended other
than those set forth above. For the fiscal year ended September 30, 19971996,
Large Company Value Fund paid such Trustees $______52,867 and Value Fund paid
such Trustees $______52,626.
The following Compensation Table provides, in tabular form, the following data:
Column (1): All Trustees who receive compensation from the Trust.
Column (2): Aggregate compensation received by a Trustee from all the series
of the Trust.
Columns (3) and (4): Pension or retirement benefits accrued or proposed be paid
by the Fund Complex. Scudder Equity Trust does not pay its Trustees such
benefits.
Column (5): Total compensation received by a Trustee from the Trust,
plus compensation received from all funds managed by the Adviser for which a
Trustee serves. The total number of funds from which a Trustee receives such
compensation is also provided in column (5). Generally, compensation received by
a Trustee for serving on the board of a closed-end fund is greater than the
compensation received by a Trustee for serving on the board of an open-end fund.
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Compensation Table
for the year ended December 31, 19971996
[TO BE UPDATED]
================================================================================
(1) (2) (3) (4) (5)
Aggregate
Compensation
from
Scudder Equity Total
Trust Compensation
(consisting of Pension or From
two Funds: Retirement Scudder
Scudder Large Benefits Estimated Equity Trust
Company Accrued As Annual and Fund
Name of Value Fund Part of Benefits Complex
Person, and Scudder Fund Upon Paid to
Position Value Fund) Expenses Retirement Trustee
================================================================================
Paul $16,300 N/A N/A $143,385
Bancroft III, (16 funds)
Trustee
Sheryle J. $17,400 N/A N/A $71,200
Bolton, (9 funds)
Trustee
Thomas J. $17,400 N/A N/A $156,058
Devine, (18 funds)
Trustee
Keith R. $17,100 N/A N/A $87,508
Fox, (10 funds)
Trustee
Wilson $17,900 N/A N/A $165,608
Nolen, (17 funds)
Trustee
Gordon $17,900 N/A N/A $119,918
Shillinglaw, (19 funds)
Trustee
Robert G. $0 N/A N/A $12,272
Stone, Jr., (2 funds)
Honorary
Trustee
DISTRIBUTOR
The Trust has an underwriting agreement with Scudder Investor Services,
Inc. (the "Distributor"), a Massachusetts corporation, which is a subsidiary of
the Adviser. This underwriting agreement dated May 1, 1987 will remain in effect
until September 30, 199__7 and from year to year thereafter only if its
continuance is approved annually by a majority of the Trustees who are not
parties to such agreement or interested persons of any such party and either by
vote of a majority of the Trustees or a majority of the outstanding voting
securities of the Trust. The underwriting agreement was last approved by the
Trustees on September 4, 1996.
Under the principal underwriting agreement, the Trust is responsible for:
the payment of all fees and expenses in connection with the preparation and
filing with the SEC of the Trust's registration statement and prospectuses and
any amendments and supplements thereto; the registration and qualification of
shares for sale in the various states, including registering the Trust or a Fund
as a broker/dealer in various states, as required; the fees and expenses of
preparing, printing and mailing prospectuses (see below for expenses relating to
prospectuses paid by the Distributor), notices, proxy statements, reports or
other communications (including newsletters) to shareholders of a Fund; the cost
of printing and mailing confirmations of purchases of shares and the
prospectuses accompanying such confirmations; any issuance taxes or any initial
transfer taxes; a portion of shareholder toll-free telephone charges and
expenses of service representatives; the cost of wiring funds for share
purchases and redemptions (unless paid by the shareholder who initiates the
transaction); the cost of printing and postage of business reply envelopes; and
a portion of the cost of computer terminals used by both a Fund and the
Distributor.
The Distributor will pay for printing and distributing prospectuses or
reports prepared for its use in connection with the offering of a Fund's shares
to the public and preparing, printing and mailing any other literature or
advertising in connection with the offering of shares of the Funds to the
public. The Distributor will pay all fees and expenses in connection with its
qualification and registration as a broker or dealer under federal and state
laws, a portion of the cost of toll-free telephone service and expenses of
service representatives, a portion of the cost of computer terminals, and of any
activity which is primarily intended to result in the sale of the Fund's shares.
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<PAGE>
Note: Although each Fund currently has no 12b-1 Plan and shareholder
approval would be required in order to adopt one, the underwriting
agreement provides that a Fund will also pay those fees and expenses
permitted to be paid or assumed by a Fund pursuant to a 12b-1 Plan, if any,
adopted by a Fund, notwithstanding any other provision to the contrary in
the underwriting agreement and a Fund or a third party will pay those fees
and expenses not specifically allocated to the Distributor in the
underwriting agreement.
As agent, the Distributor currently offers shares of a Fund on a continuous
basis to investors in all states. The underwriting agreement provides that the
Distributor accepts orders for shares at net asset value as no sales commission
or load is charged the investor. The Distributor has made no firm commitment to
acquire shares of a Fund.
TAXES
(See "Distribution and performance information--Dividends and capital gains
distributions" and "Transaction information--Tax information and Tax
identification number" in the Funds' prospectuses.)
Each Fund has elected to be treated as a regulated investment company
under Subchapter M of the Code or a predecessor statute and has qualified as
such from its inception. Each Fund intends to continue to qualify for such
treatment. Such qualification does not involve governmental supervision of
management or investment practices or policies.
A regulated investment company qualifying under Subchapter M of the Code
is required to distribute to its shareholders at least 90% of its investment
company taxable income (including net short-term capital gain in excess of net
long-term capital loss) and generally is not subject to federal income tax to
the extent that it distributes annually its investment company taxable income
and net realized capital gains in the manner required under the Code.
Investment company taxable income generally is made up of dividends,
interest, and net short-term capital gains in excess of net long-term capital
losses, less expenses. Net capital gains (the excess of net long-term capital
gain over net short-term capital loss) are computed by taking into account any
capital loss carryforward of a Fund. Presently, each Fund has no capital loss
carryforward.
Each Fund is subject to a 4% nondeductible excise tax on amounts required
to be but not distributed under a prescribed formula. The formula requires
payment to shareholders during a calendar year of distributions at least equal
to the sum of 98% of a Fund's ordinary income for the calendar year, at least
98% of the excess of its capital gains over capital losses (adjusted for certain
ordinary losses as prescribed in the Code) realized during the one-year period
ending October 31 during such year, and all ordinary income and capital gains
for prior years that were not previously distributed.
Distributions of investment company taxable income are taxable to
shareholders as ordinary income.
Dividends from domestic corporations are expected to comprise a
substantial part of each Fund's gross income. To the extent that such dividends
constitute a portion of each Fund's gross income, a portion of the income
distributions of a Fund may be eligible for the dividends received deduction for
corporations. Shareholders will be informed of the portion of dividends which so
qualify. The dividends-received deduction is reduced to the extent the shares
with respect to which the dividends are received are treated as debt-financed
under the federal income tax law and is eliminated if the shares are deemed to
have been held for less than 46 days.
Distributions of net capital gains are taxable to shareholders as long-term
capital gain, regardless of the length of time the shares of a Fund have been
held by such shareholders. Such distributions are not eligible for the dividends
received deduction. Any loss realized upon the redemption of shares held at the
time of redemption for six months or less will be treated as a long-term capital
loss to the extent of any amounts treated as long-term capital gain
distributions during such six-month period.
If any net capital gains are retained by a Fund for reinvestment,
requiring federal income taxes to be paid thereon by that Fund, each Fund
intends to elect to treat such capital gains as having been distributed to
shareholders. As a result, each shareholder will report such capital gains as
long-term capital gains, will be able to claim a relative
48
<PAGE>
share of the federal income taxes paid by a Fund on such gains as a credit
against personal federal income tax liabilities, and will be entitled to
increase the adjusted tax basis on Fund shares by the difference between a
pro-rata share of such gains and the individual tax credit. However, retention
of such gains by a Fund may cause the Fund to be liable for an excise tax on all
or a portion of those gains.
Distributions of investment company taxable income and net realized
capital gains will be taxable as described above, whether made in shares or in
cash. Shareholders electing to receive distributions in the form of additional
shares will have a cost basis for federal income tax purposes in each share so
received equal to the net asset value of a share on the reinvestment date.
All distributions of investment company taxable income and net realized
capital gains, whether received in shares or cash, must be reported by each
shareholder on his or her federal income tax return. Dividends declared in
October, November or December with a record date in such a month 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.
Redemptions of shares, including exchanges for shares of another Scudder fund,
may result in tax consequences (gain or loss) to the shareholder and are also
subject to these reporting requirements.
An individual may make a deductible IRA contribution for any taxable year
only if (i) neither the individual nor his or her spouse (unless filing separate
returns) is an active participant in an employer's retirement plan, or (ii) the
individual (and his or her spouse, if applicable) has an adjusted gross income
below a certain level ($40,050 for married individuals filing a joint return,
with a phase-out of the deduction for adjusted gross income between $40,050 and
$50,000; $25,050 for a single individual, with a phase-out for adjusted gross
income between $25,050 and $35,000). However, an individual not permitted to
make a deductible contribution to an IRA for any such taxable year may
nonetheless make nondeductible contributions up to $2,000 to an IRA (up to
$2,250 to IRAs for an individual and his or her nonearning spouse) for that
year. There are special rules for determining how withdrawals are to be taxed if
an IRA contains both deductible and nondeductible amounts. In general, a
proportionate amount of each withdrawal will be deemed to be made from
nondeductible contributions; amounts treated as a return of nondeductible
contributions will not be taxable. Also, contributions may be made to a spousal
IRA even if the spouse has earnings in a given year, if the spouse elects to be
treated as having no earnings (for IRA contribution purposes) for the year.
Distributions by a Fund result in a reduction in the net asset value of
that Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares just prior to a distribution. The price of shares purchased at
that time includes the amount of the forthcoming distribution. Those purchasing
just prior to a distribution will then receive a partial return of capital upon
the distribution, which will nevertheless be taxable to them.
If a Fund invests in stock of certain foreign investment companies, that
Fund may be subject to U.S. federal income taxation on a portion of any "excess
distribution" with respect to, or gain from the disposition of, such stock. The
tax would be determined by allocating such distribution or gain ratably to each
day of the Fund's holding period for the stock. The distribution or gain so
allocated to any taxable year of the Fund, other than the taxable year of the
excess distribution or disposition, would be taxed to the Fund at the highest
ordinary income rate in effect for such year, and the tax would be further
increased by an interest charge to reflect the value of the tax deferral deemed
to have resulted from the ownership of the foreign company's stock. Any amount
of distribution or gain allocated to the taxable year of the distribution or
disposition would be included in the Fund's investment company taxable income
and, accordingly, would not be taxable to the Fund to the extent distributed by
the Fund as a dividend to its shareholders.
Proposed regulations have been issued which may allow a Fund to make an
election to mark to market its shares of these foreign investment companies in
lieu of being subject to U.S. federal income taxation. At the end of each
taxable year to which the election applies, a Fund would report as ordinary
income the amount by which the fair market value of the foreign company's stock
exceeds the Fund's adjusted basis in these shares. No mark to market losses may
be recognized. The effect of the election would be to treat excess distributions
and gain on dispositions as ordinary income which is not subject to a fund level
tax when distributed to shareholders as a dividend. Alternatively, a Fund may
elect to include as income and gain its share of the ordinary earnings and net
capital gain of certain foreign investment companies in lieu of being taxed in
the manner described above.
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Equity options (including covered call options written on portfolio stock)
and over-the-counter options on debt securities written or purchased by the Fund
will be subject to tax under Section 1234 of the Code. In general, no loss will
be recognized by a Fund upon payment of a premium in connection with the
purchase of a put or call option. The character of any gain or loss recognized
(i.e. long-term or short-term) will generally depend, in the case of a lapse or
sale of the option, on a Fund's holding period for the option, and in the case
of the exercise of a put option, on a Fund's holding period for the underlying
property. The purchase of a put option may constitute a short sale for federal
income tax purposes, causing an adjustment in the holding period of the
underlying security or a substantially identical security in a Fund's portfolio.
If a Fund writes a covered call option on portfolio stock, no gain is
recognized upon its receipt of a premium. If the option lapses or is closed out,
any gain or loss is treated as short-term capital gain or loss. If the option is
exercised, the character of the gain or loss depends on the holding period of
the underlying stock.
Positions of a Fund which consist of at least one stock and at least one
stock option or other position with respect to a related security which
substantially diminishes a Fund's risk of loss with respect to such stock could
be treated as a "straddle" which is governed by Section 1092 of the Code, the
operation of which may cause deferral of losses, adjustments in the holding
periods of stocks or securities and conversion of short-term capital losses into
long-term capital losses. An exception to these straddle rules exists for
certain "qualified covered call options" on stock written by a Fund.
Many or all futures and forward contracts entered into by a Fund and many
or all listed nonequity options written or purchased by a Fund (including
options on debt securities, options on futures contracts, options on foreign
currencies and options on securities indices) will be governed by Section 1256
of the Code. Absent a tax election to the contrary, gain or loss attributable to
the lapse, exercise or closing out of any such position generally will be
treated as 60% long-term and 40% short-term capital gain or loss, and on the
last day of the Funds' fiscal year (as well as on October 31 for purposes of the
4% excise tax), all outstanding Section 1256 positions will be marked to market
(i.e. treated as if such positions were sold at their closing price on such
day), with any resulting gain or loss recognized as 60% long-term and 40%
short-term capital gain or loss. Under Section 988 of the Code, discussed below,
foreign currency gain or loss from foreign currency-related forward contracts,
certain futures and options, and similar financial instruments entered into or
acquired by the Fund will be treated as ordinary income. Under certain
circumstances, entry into a futures contract to sell a security may constitute a
short sale for federal income tax purposes, causing an adjustment in the holding
period of the underlying security or a substantially identical security in the
relevant Fund's portfolio.
Subchapter M of the Code requires that a Fund realize less than 30% of its
annual gross income from the sale or other disposition of stock or securities
held for less than three months and from options, futures and forward contracts
(not including certain foreign currency options, futures and forward contracts)
and certain foreign currencies held less than three months. Options, futures and
forward activities of a Fund may increase the amount of gains realized by the
Fund that are subject to the 30% limitation. Accordingly, the amount of such
activities that each Fund may engage in may be limited.
Positions of a Fund which consist of at least one position not governed by
Section 1256 and at least one futures or forward contract or nonequity option or
other position governed by Section 1256 which substantially diminishes a Fund's
risk of loss with respect to such other position may be treated as a "mixed
straddle." Mixed straddles are subject to the straddle rules of Section 1092 of
the Code and may result in the deferral of losses if the non-Section 1256
position is in an unrealized gain at the end of a reporting period.
Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time a Fund accrues receivables or liabilities
denominated in a foreign currency and the time a Fund actually collects such
receivables or pays such liabilities generally are treated as ordinary income or
ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency and on disposition of certain futures contracts, forward
contracts and options, gains or losses attributable to fluctuations in the value
of foreign currency between the date of acquisition of the security or contract
and the date of disposition are also treated as ordinary gain or loss. These
gains or losses, referred to under the Code as "Section 988" gains or losses,
may increase or decrease the amount of a Fund's investment company taxable
income to be distributed to its shareholders as ordinary income.
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Each Fund will be required to report to the IRS all distributions of
taxable income and capital gains as well as gross proceeds from the redemption
or exchange of Fund shares, except in the case of certain exempt shareholders.
Under the backup withholding provisions of Section 3406 of the Code
distributions of taxable income and capital gains and proceeds from the
redemption or exchange of the shares of a regulated investment company may be
subject to withholding of federal income tax at the rate of 31% in the case of
nonexempt shareholders who fail to furnish the investment company with their
taxpayer identification numbers and with required certifications regarding their
status under the federal income tax law. Withholding may also be required if a
Fund is notified by the IRS or a broker that the taxpayer identification number
furnished by the shareholder is incorrect or that the shareholder has previously
failed to report interest or dividend income. If the withholding provisions are
applicable, any such distributions and proceeds, whether taken in cash or
reinvested in shares, will be reduced by the amounts required to be withheld.
Shareholders may be subject to state and local taxes on distributions
received from a Fund and on redemptions of each Fund's shares. Each distribution
is accompanied by a brief explanation of the form and character of the
distribution. By January 31 of each year the Fund issues to each shareholder a
statement of the federal income tax status of all distributions.
The Trust is organized as a Massachusetts business trust. Neither the
Trust nor a Fund is expected to be liable for any income or franchise tax in the
Commonwealth of Massachusetts, provided that each Fund qualifies as a regulated
investment company under the Code.
The foregoing discussion of U.S. federal income tax law relates solely to
the application of that law to U.S. persons, i.e., U.S. citizens and residents
and U.S. corporations, partnerships, trusts and estates. Each shareholder who is
not a U.S. person should consider the U.S. and foreign tax consequences of
ownership of shares of the Fund, including the possibility that such a
shareholder may be subject to a U.S. withholding tax at a rate of 30% (or at a
lower rate under an applicable income tax treaty) on amounts constituting
ordinary income received by him or her, where such amounts are treated as income
from U.S. sources under the Code.
Shareholders should consult their tax advisers about the application of
the provisions of tax law described in this statement of additional information
in light of their particular tax situations.
PORTFOLIO TRANSACTIONS
Brokerage Commissions
To the maximum extent feasible the Adviser places orders for portfolio
transactions for each Fund through the Distributor which in turn places orders
on behalf of a Fund with other brokers and dealers. The Distributor receives no
commission, fees or other remuneration for this service. Allocation of brokerage
is supervised by the Adviser.
The primary objective of the Adviser in placing orders for the purchase and
sale of securities for a Fund is to obtain the most favorable net results,
taking into account such factors as price, commission where applicable
(negotiable in the case of U.S. national securities exchange transactions), size
of order, difficulty of execution and skill required of the executing
broker/dealer. The Adviser seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) through the familiarity of
the Distributor with commissions charged on comparable transactions, as well as
by comparing commissions paid by a Fund to reported commissions paid by others.
The Adviser reviews on a routine basis commission rates, execution and
settlement services performed, making internal and external comparisons.
The Funds' purchases and sales of fixed-income securities are generally
placed by the Adviser with primary market makers for these securities on a net
basis, without any brokerage commission being paid by a Fund. Trading does,
however, involve transaction costs. Transactions with dealers serving as primary
market makers reflect the spread between the bid and asked prices. Purchases of
underwritten issues may be made, which will include an underwriting fee paid to
the underwriter.
When it can be done consistently with the policy of obtaining the most
favorable net results, it is the Adviser's practice to place such orders with
broker/dealers who supply market quotations to Scudder Fund Accounting
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Corporation for appraisal purposes, or who supply research, market and
statistical information to a Fund or the Adviser. The term "research, market and
statistical information" includes advice as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities, and
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts.
The Adviser is not authorized when placing portfolio transactions for a Fund to
pay a brokerage commission (to the extent applicable) in excess of that which
another broker might charge for executing the same transaction solely on account
of the receipt of research, market or statistical information. The Adviser will
not place orders with broker/dealers on the basis that the broker/dealer has or
has not sold shares of a Fund. Except for implementing the policy stated above,
there is no intention to place portfolio transactions with particular brokers or
dealers or groups thereof. In effecting transactions in over-the-counter
securities, orders are placed with the principal market makers for the security
being traded unless, after exercising care, it appears that more favorable
results are available elsewhere.
Subject also to obtaining the most favorable net results, the Adviser may
place brokerage transactions with Bear, Stearns & Co. A credit against the
custodian fee due to State Street Bank and Trust Company equal to one-half of
the commission on any such transaction will be given on any such transaction.
Although certain research, market and statistical information from
broker/dealers may be useful to a Fund and to the Adviser, it is the opinion of
the Adviser that such information is only supplementary to the Adviser's own
research effort since the information must still be analyzed, weighed, and
reviewed by the Adviser's staff. Such information may be useful to the Adviser
in providing services to clients other than a Fund, and not all such information
is used by the Adviser in connection with a Fund. Conversely, such information
provided to the Adviser by broker/dealers through whom other clients of the
Adviser effect securities transactions may be useful to the Adviser in providing
services to a Fund.
In the fiscal years ended September 30, 1995, 1996 and 1997, 1994, 1995
and 1996, Large Company Value Fund paid brokerage commissions of $5,222,945,
$5,768,334 and $_________, $2,242,087, $5,222,945 and $5,768,334, respectively.
In the fiscal year ended September 30, 19971996, the Fund paid brokerage
commissions of $________$5,308,816 (___% 92% of the total brokerage
commissions), resulting from orders placed, consistent with the policy of
seeking to obtain the most favorable net results, for transactions placed with
brokers and dealers who provided supplementary research, market and statistical
information to the Trust or Adviser. The amount of such transactions aggregated
$____________4,030,902,599 (___% 86% of all brokerage transactions). The balance
of such brokerage was not allocated to any particular broker or dealer or with
regard to the above-mentioned or any other special factors.
For the fiscal years ended September 30, 1995, 1996 and 1997, 1994, 1995
and 1996, Value Fund paid brokerage commissions of $_______78,912, $165,577, and
$181,652 and $_________, respectively. For the fiscal year ended September 30,
1996, the Fund paid brokerage commissions of $157,582 (87% of the total
brokerage commissions), resulting from orders placed consistent with the policy
of seeking to obtain the most favorable net results for transactions placed with
brokers and dealers who provided supplementary research, market and statistical
information to the Trust or Adviser. The amount of such transactions aggregated
$__________98,422,516 (___% 70% of all brokerage transactions). The balance of
such brokerage was not allocated to any particular broker or dealer or with
regard to the above-mentioned or any other special factors.
The Trustees review from time to time whether the recapture for the
benefit of a Fund of some portion of the brokerage commissions or similar fees
paid by a Fund on portfolio transactions is legally permissible and advisable.
To date no such recapture has been effected.
Portfolio Turnover
Large Company Value Fund's average annual portfolio turnover rate, i.e.
the ratio of the lesser of sales or purchases to the monthly average value of
the portfolio (excluding from both the numerator and the denominator all
securities with maturities at the time of acquisition of one year or less), for
the fiscal years ended September 30, 1995, 1996 and 1997 1994, 1995 and 1996 was
75.8%, 153.6%, and 150.7% and ______%, respectively. For the fiscal years ended
September 30, 1995, 1996 and 1997, 1994, 1995 and 1996, Value Fund had an
annualized portfolio turnover rate of 74.6%, 98.2%, and 90.8% and _____%,
respectively. Higher levels of activity by the Funds result in higher
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<PAGE>
transaction costs and may also result in taxes on realized capital gains to be
borne by the Funds' shareholders. Purchases and sales are made for a Fund
whenever necessary, in management's opinion, to meet the Funds' objectives.
NET ASSET VALUE
The net asset value of shares of each Fund is computed as of the close of
regular trading on the Exchange on each day the Exchange is open for trading.
The Exchange is scheduled to be closed on the following holidays: New Year's
Day, Dr. Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas. Net asset value
per share is determined by dividing the value of the total assets of the Fund,
less all liabilities, by the total number of shares outstanding.
An exchange-traded equity security is valued at its most recent sale
price. Lacking any sales, the security is valued at the calculated mean between
the most recent bid quotation and the most recent asked quotation (the
"Calculated Mean"). Lacking a Calculated Mean, the security is valued at the
most recent bid quotation. An equity security which is traded on the National
Association of Securities Dealers Automated Quotation ("Nasdaq""NASDAQ") system
is valued at its most recent sale price. Lacking any sales, the security is
valued at the high or "inside" bid quotation. The value of an equity security
not quoted on the NasdaqNASDAQ System, but traded in another over-the-counter
market, is its most recent sale price. Lacking any sales, the security is valued
at the Calculated Mean. Lacking a Calculated Mean, the security is valued at the
most recent bid quotation.
Debt securities, other than short-term securities, are valued at prices
supplied by the Fund's pricing agent(s) which reflect broker/dealer supplied
valuations and electronic data processing techniques. Short-term securities with
remaining maturities of sixty days or less are valued by the amortized cost
method, which the Board believes approximates market value. If it is not
possible to value a particular debt security pursuant to these valuation
methods, the value of such security is the most recent bid quotation supplied by
a bona fide marketmaker. If it is not possible to value a particular debt
security pursuant to the above methods, the Adviser may calculate the price of
that debt security, subject to limitations established by the Board.
An exchange traded options contract on securities, currencies, futures and
other financial instruments is valued at its most recent sale price on such
exchange. Lacking any sales, the options contract is valued at the Calculated
Mean. Lacking any Calculated Mean, the options contract is valued at the most
recent bid quotation in the case of a purchased options contract, or the most
recent asked quotation in the case of a written options contract. An options
contract on securities, currencies and other financial instruments traded
over-the-counter is valued at the most recent bid quotation in the case of a
purchased options contract and at the most recent asked quotation in the case of
a written options contract. Futures contracts are valued at the most recent
settlement price. Foreign currency exchange forward contracts are valued at the
value of the underlying currency at the prevailing exchange rate.
If a security is traded on more than one exchange, or upon one or more
exchanges and in the over-the-counter market, quotations are taken from the
market in which the security is traded most extensively.
If, in the opinion of the Trust's Valuation Committee, the value of a
portfolio asset as determined in accordance with these procedures does not
represent the fair market value of the portfolio asset, the value of the
portfolio asset is taken to be an amount which, in the opinion of the Valuation
Committee, represents fair market value on the basis of all available
information. The value of other portfolio holdings owned by a Fund is determined
in a manner which, in the discretion of the Valuation Committee most fairly
reflects fair market value of the property on the valuation date.
Following the valuations of securities or other portfolio assets in terms
of the currency in which the market quotation used is expressed ("Local
Currency"), the value of these portfolio assets in terms of U.S. dollars is
calculated by converting the Local Currency into U.S. dollars at the prevailing
currency exchange rate on the valuation date.
53
<PAGE>
ADDITIONAL INFORMATION
Experts
The Financial Highlights of each Fund included in the Funds' prospectuses
and the Financial Statements incorporated by reference in this Statement of
Additional Information have been so included or incorporated by reference in
reliance on the report of Coopers & Lybrand, L.L.P., One Post Office Square,
Boston, Massachusetts 02109, independent accountants, and given on the authority
of that firm as experts in accounting and auditing.
Shareholder Indemnification
The Trust is an organization of the type commonly known as a
"Massachusetts business trust". Under Massachusetts law, shareholders of such a
trust may, under certain circumstances, be held personally liable as partners
for the obligations of the Trust. The Declaration of Trust contains an express
disclaimer of shareholder liability in connection with a Fund's property or the
acts, obligations or affairs of a Fund. The Declaration of Trust also provides
for indemnification out of a Fund's property of any shareholder of a Fund held
personally liable for the claims and liabilities to which a shareholder may
become subject by reason of being or having been a shareholder of a Fund. Thus,
the risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which a Fund itself would be unable to
meet its obligations.
Other Information
Many of the investment changes in a Fund will be made at prices different
from those prevailing at the time they may be reflected in regular reports to
shareholders of a Fund. These transactions will reflect investment decisions
made by the Adviser in light of the objectives and policies of a Fund, and other
factors, such as its other portfolio holdings and tax considerations should not
be construed as recommendations for similar action by other investors.
The name "Scudder Equity Trust" is the designation of the Trustees for the
time being under a Declaration of Trust dated October 16, 1985, as amended, and
all persons dealing with a Fund must look solely to the property of a Fund for
the enforcement of any claims against a Fund as neither the Trustees, officers,
agents, shareholders nor other series of the Trust assumes any personal
liability for obligations entered into on behalf of a Fund. Upon the initial
purchase of shares of a Fund, the shareholder agrees to be bound by the Trust's
Declaration of Trust, as amended from time to time. The Declaration of Trust is
on file at the Massachusetts Secretary of State's Office in Boston,
Massachusetts. All persons dealing with the Fund must look only to the assets of
the Fund for the enforcement of any claims against a Fund as no other series of
the Trust assumes any liabilities for obligations entered into on behalf of a
Fund.
The CUSIP number of Large Company Value Fund is 81114T-10-9.
The CUSIP number of Value Fund is 811114T-20-8.
Each Fund has a fiscal year end of September 30.
The Trust employs State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110 as custodian for each Fund.
[TO BE UPDATED]
Scudder Fund Accounting Corporation, Two International Place, Boston,
Massachusetts 02110-4103, a subsidiary of the Adviser, computes net asset values
for the Funds. Each Fund pays Scudder Fund Accounting Corporation an annual fee
equal to 0.025% of the first $150 million of average daily net assets, 0.0075%
of such assets in excess of $150 million and 0.0045% of such assets in excess of
$1 billion, plus holding and transaction charges for this service. For the
fiscal year ended September 30, 1996, Large Company Value Fund and Value Fund
incurred annual fees of $158,045 and $38,190, respectively, of which $12,860 and
$1,640, respectively, are unpaid at September 30, 1996.
54
<PAGE>
Scudder Service Corporation ("Service Corporation"), P.O. Box 2291,
Boston, Massachusetts 02107-2291, a subsidiary of the Adviser, is the transfer,
dividend disbursing and shareholder service agent for each Fund. Service
Corporation also provides subaccounting and recordkeeping services for
shareholder accounts in certain retirement and employee benefit plans. Each Fund
pays Service Corporation a fee for each account maintained for a participant of
$17.55 which is $8.05 for its services as transfer and dividend paying agent and
$9.50 for its services as shareholder service agent. For the fiscal year ended
September 30, 1996, Large Company Value Fund and Value Fund incurred annual fees
of $1,715,004 and $174,570, respectively, of which $142,526 and $15,126,
respectively, are unpaid at September 30, 1996.
The Funds' prospectuses and this Statement of Additional Information omit
certain information contained in the Registration Statement which the Trust has
filed with the SEC under the Securities Act of 1933 and reference is hereby made
to the Registration Statement for further information with respect to the Fund
and the securities offered hereby. The Registration Statement is available for
inspection by the public at the SEC in Washington, D.C.
This Statement of Additional Information combines the information of both
Scudder Capital Growth Fund and Scudder Value Fund. Each Fund, through its
individual prospectus, offers only its own shares, yet it is possible that one
Fund might become liable for a misstatement regarding the other Fund. The
Trustees of each Fund have considered this, and have approved the use of a
combined Statement of Additional Information.
Costs of $44,657 incurred by Value Fund in conjunction with its
organization are amortized over the five year period beginning December 31,
1992.
FINANCIAL STATEMENTS
Large Company Value Fund
The financial statements, including the investment portfolio of Large
Company Value Fund, together with the Report of Independent Accountants,
Financial Highlights, and notes to financial statements are incorporated by
reference and attached hereto in the Annual Report to Shareholders of the Fund
dated September 30, 1996, and are hereby deemed to be part of this Statement of
Additional Information.
Value Fund
The financial statements, including the investment portfolio of Value Fund
together with the Report of Independent Accountants, Financial Highlights and
notes to financial statements are incorporated by reference and attached hereto
in the Annual Report to Shareholders of the Fund dated September 30, 1996, and
are hereby deemed to be part of this Statement of Additional Information.
55
<PAGE>
APPENDIX
The following is a description of the ratings given by Moody's and Standard
& Poor's to corporate and municipal bonds.
Ratings of Municipal and Corporate Bonds
Standard & Poor's:
Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong. Debt rated AA has a very
strong capacity to pay interest and repay principal and differs from the highest
rated issues only in small degree. Debt rated A has a strong capacity to pay
interest and repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than debt in
higher rated categories. Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major exposures to adverse conditions.
Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating. Debt rated B has a greater
vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay interest and repay
principal. The B rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB- rating.
Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal in the event of adverse
business, financial, or economic conditions. It is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating. The rating CC typically is applied to debt subordinated to
senior debt that is assigned an actual or implied CCC rating. The rating C
typically is applied to debt subordinated to senior debt which is assigned an
actual or implied CCC- debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt service payments
are continued. The rating C1 is reserved for income bonds on which no interest
is being paid. Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period had not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
Moody's:
Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Bonds which are rated Aa are
judged to be of high quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks appear
somewhat larger than in Aaa securities. Bonds which are rated A possess many
favorable investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to
<PAGE>
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. Bonds which are rated Ba are
judged to have speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during other good and bad times over
the future. Uncertainty of position characterizes bonds in this class. Bonds
which are rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest. Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
<PAGE>
SCUDDER EQUITY TRUST
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
a. Financial Statements
Included in Part A of this Registration Statement:
For Scudder Large Company Value Fund:
Financial Highlights for the ten fiscal years ended
September 30, 1996.
(Incorporated by reference to Post-Effective
Amendment No. 24 to this Registration Statement.)
For Scudder Value Fund:
Financial Highlights for the period December 31,
1992 (commencement of operations) to September 30,
1994 and for the three fiscal years ended September
30, 1996.
(Incorporated by reference to Post-Effective
Amendment No. 24 to this Registration Statement.)
Included in Part B of this Registration Statement:
For Scudder Large Company Value Fund:
Investment Portfolio as of September 30, 1996
Statement of Assets and Liabilities as of September
30, 1996
Statement of Operations for the fiscal year ended
September 30, 1996
Statements of Changes in Net Assets for the three
fiscal years ended September 30, 1996
Financial Highlights for the ten fiscal years ended
September 30, 1996
Notes to Financial Statements
Report of Independent Accountants
(Incorporated by reference to Post-Effective
Amendment No. 24 to this Registration Statement.)
For Scudder Value Fund:
Investment Portfolio as of September 30, 1996
Statement of Assets and Liabilities as of
September 30, 1996
Statement of Operations for the fiscal year ended
September 30, 1996
Statements of Changes in Net Assets for the three
fiscal years ended September 30, 1996
Financial Highlights for the period December 31,
1992 (commencement of operations) to September 30,
1993 and for the three fiscal years ended
September 30, 1996
Notes to Financial Statements
Report of Independent Accountants
(Incorporated by reference to Post-Effective
Amendment No. 24 to this Registration Statement.)
Statements, schedules and historical information other than
those listed above have been omitted since they are either not
applicable or are not required.
Part C - Page 1
<PAGE>
b. Exhibits:
1. (a) Amended and Restated Declaration of
Trust dated March 17, 1988.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(b) Establishment and Designation of
Series dated December 15, 1986.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(c) Amended Establishment and Designation
of Series dated May 4, 1987.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(d) Certificate of Amendment dated
December 13, 1990.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(e) Establishment and Designation of
Series dated October 6, 1992.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(f) Redesignation of Series by the
Registrant on behalf of Scudder
Capital Growth Fund, dated December 2,
1996.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
2. (a) By-Laws as of October 16, 1985.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(b) Amendment to the By-Laws of Registrant
as amended through December 9, 1985.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(c) Amendment to the Registrant's By-Laws
dated December 12, 1991.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(d) Amendment to the Registrant's By-Laws
dated September 17, 1992.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
3. Inapplicable.
4. Specimen certificate representing
shares of beneficial interest ($.01
par value).
(Incorporated by reference to Exhibit
4 to Post-Effective Amendment No. 12
to this Registration Statement.)
Part C - Page 2
<PAGE>
5. (a) Investment Advisory Agreement between
the Registrant (on behalf of Scudder
Capital Growth Fund) and Scudder,
Stevens & Clark Ltd. dated March 31,
1986.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.).
(b) Investment Advisory Agreement between
the Registrant (on behalf of Scudder
Equity Income Fund) and Scudder,
Stevens & Clark Ltd. dated May 1,
1987.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(c) Investment Management Agreement
between Scudder Capital Growth Fund
and Scudder, Stevens & Clark, Inc.
dated December 14, 1990.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(d) Investment Management Agreement
between the Registrant (on behalf of
Scudder Value Fund) and Scudder,
Stevens & Clark, Inc. dated December
28, 1992.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
6. Underwriting Agreement between the
Registrant and Scudder Fund
Distributors, Inc. dated May 1, 1987.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
7. Inapplicable.
8. (a)(1) Custodian Agreement between the
Registrant and State Street Bank and
Trust Company dated October 1, 1982.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(a)(2) Fee schedule for Exhibit 8(a)(l).
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(a)(3) Amendment to Custodian Contract dated
March 31, 1986.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(a)(4) Amendment to Custodian Contract dated
October 1, 1982.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(a)(5) Amendment to Custodian Contract dated
September 16, 1988.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(a)(6) Amendment to Custodian Contract dated
December 13, 1990.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
Part C - Page 3
<PAGE>
(a)(7) Fee schedule for Exhibit 8(a)(1).
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(b)(1) Agency Agreement between State Street
Bank and Trust Company and The Bank of
New York, London office dated January
1, 1979.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(c)(1) Subcustody Agreement between State
Street Bank and the Chase Manhattan
Bank, N.A. dated September 1, 1986.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
9. (a)(1) Transfer Agency and Service Agreement
between the Registrant and Scudder
Service Corporation dated October 2,
1989.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(a)(2) Fee schedule for Exhibit 9(a)(1).
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(a)(3) Form of revised fee schedule for
Exhibit 9(a)(1) is filed herein.
(Incorporated by reference to Exhibit
9(a)(3) to Post-Effective Amendment
No. 23 to this Registration
Statement.)
(b)(1) Compass Service Agreement between the
Registrant and Scudder Trust Company
dated January 1, 1990.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(b)(2) Fee Schedule for Exhibit 9(b)(1).
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(b)(3) COMPASS Service Agreement between
Scudder Trust Company and the
Registrant dated October 1, 1995.
(Incorporated by reference to Post-
Effective Amendment No. 24 to this
Registration Statement.)
(c) Shareholder Services Agreement between
the Registrant and Charles Schwab &
Co., Inc. dated June 1, 1990.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(c)(1) Service Agreement between Copeland
Associates, Inc. and Scudder Service
Corporation (on behalf of Scudder
Equity Trust) dated June 8, 1995.
(Incorporated by reference to Exhibit
9(c)(1) to Post-Effective Amendment
No. 23 to this Registration
Statement.)
(d) Inapplicable.
Part C - Page 4
<PAGE>
(1)(e) Fund Accounting Services Agreement
between the Registrant, on behalf of
Scudder Capital Growth Fund, and
Scudder Fund Accounting Corporation
dated October 19, 1994.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(e)(2) Fund Accounting Services Agreement
between the Registrant, on behalf of
Scudder Value Fund, and Scudder Fund
Accounting Corporation dated October
24, 1994.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(f) Special Servicing Agreement dated
November 15, 1996, between Scudder
Pathway Series and the Registrant, on
behalf of Scudder Capital Growth Fund
and Scudder Value Fund.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
10. Inapplicable.
11. Inapplicable.
12. Inapplicable.
13. Inapplicable.
14. (a) Scudder Flexi-Plan for Corporations
and Self-Employed Individuals.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(b) Scudder Individual Retirement Plan.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(c) SEP-IRA.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(d) Scudder Funds 403(b) Plan.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
(e) Scudder Cash or Deferred Profit
Sharing Plan under Section 401(k).
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
15. Inapplicable.
16. Schedule for Computation of
Performance Quotation.
(Incorporated by reference to Post-
Effective Amendment No. 25 to the
Registration Statement.)
17. Financial Data Schedules.
(Incorporated by reference to Exhibit
17 to Post-Effective Amendment No. 24
to this Registration Statement.)
Part C - Page 5
<PAGE>
Item 25. Persons Controlled by or Under Common Control with Registrant.
None
Item 26. Number of Holders of Securities (as of November 3, 1997).
(1) (2)
Title of Class Number of Record Shareholders
-------------- -----------------------------
Scudder Large Company Value 80,032
Fund
shares of beneficial interest
($.01 par value)
Scudder Value Fund 18,243
shares of beneficial interest
($.01 par value)
Item 27. Indemnification.
A policy of insurance covering Scudder, Stevens & Clark, Inc., its
affiliates including Scudder Investor Services, Inc., and all of the
registered investment companies advised by Scudder, Stevens & Clark, Inc.
insures the Registrant's trustees and officers and others against
liability arising by reason of an alleged breach of duty caused by any
negligent act, error or accidental omission in the scope of their duties.
Article IV, Sections 4.1 - 4.3 of the Registrant's Declaration of Trust
states as follows:
Section 4.1. No Personal Liability of Shareholders, Trustees, Etc.
No Shareholder shall be subject to any personal liability whatsoever to
any Person in connection with Trust Property or the acts, obligations or
affairs of the Trust. No Trustee, officer, employee or agent of the Trust
shall be subject to any personal liability whatsoever to any Person, other
than to the Trust or its Shareholders, in connection with Trust Property
or the affairs of the Trust, save only that arising from bad faith,
willful misfeasance, gross negligence or reckless disregard of his duties
with respect to such Person; and all such Persons shall look solely to the
Trust Property for satisfaction of claims of any nature arising in
connection with the affairs of the Trust. If any Shareholder, Trustee,
officer, employee, or agent, as such, of the Trust, is made a party to any
suit or proceeding to enforce any such liability of the Trust, he shall
not, on account thereof, be held to any personal liability. The Trust
shall indemnify and hold each Shareholder harmless from and against all
claims and liabilities, to which such Shareholder may become subject by
reason of his being or having been a Shareholder, and shall reimburse such
Shareholder for all legal and other expenses reasonably incurred by him in
connection with any such claim or liability. The indemnification and
reimbursement required by the preceding sentence shall be made only out of
the assets of the one or more Series of which the shareholder who is
entitled to indemnification or reimbursement was a shareholder at the time
the act or event occurred which gave rise to the claim against or
liability of said shareholder. The rights accruing to a Shareholder under
this Section 4.1 shall not impair any other right to which such
Shareholder may be lawfully entitled, nor shall anything herein contained
restrict the right of the Trust to indemnify or reimburse a Shareholder in
any appropriate situation even though not specifically provided herein.
Section 4.2. Non-Liability of Trustees, Etc. No Trustee, officer, employee
or agent of the Trust shall be liable to the Trust, its Shareholders, or
to any Shareholder, Trustee, officer, employee, or agent thereof for any
action or failure to act (including without limitation the failure to
compel in any way any former or acting Trustee to redress any breach of
trust) except for his own bad faith, willful misfeasance, gross negligence
or reckless disregard of the duties involved in the conduct of his office.
Section 4.3. Mandatory Indemnification. (a) Subject to the exceptions and
limitations contained in paragraph (b) below:
Part C - Page 6
<PAGE>
(i) every person who is, or has been, a Trustee or officer of the
Trust shall be indemnified by the Trust to the fullest extent permitted by
law against all liability and against all expenses reasonably incurred or
paid by him in connection with any claim, action, suit or proceeding in
which he becomes involved as a party or otherwise by virtue of his being
or having been a Trustee or officer and against amounts paid or incurred
by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil, criminal,
administrative or other, including appeals), actual or threatened; and the
words "liability" and "expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines,
penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a
Trustee or officer:
(i) against any liability to the Trust, a series thereof, or the
Shareholders by reason of a final adjudication by a court or other body
before which a proceeding was brought that he engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office;
(ii) with respect to any matter as to which he shall have been
finally adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust;
(iii) in the event of a settlement or other disposition not
involving a final adjudication as provided in paragraph (b)(i) or (b)(ii)
resulting in a payment by a Trustee or officer, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office:
(A) by the court or other body approving the settlement or other
disposition; or
(B) based upon a review of readily available facts (as opposed to a
full trial-type inquiry) by (x) vote of a majority of the Disinterested
Trustees acting on the matter (provided that a majority of the
Disinterested Trustees then in office act on the matter) or (y) written
opinion of independent legal counsel.
(c) The rights of indemnification herein provided may be insured against
by policies maintained by the Trust, shall be severable, shall not affect
any other rights to which any Trustee or officer may now or hereafter be
entitled, shall continue as to a person who has ceased to be such Trustee
or officer and shall insure to the benefit of the heirs, executors,
administrators and assigns of such a person. Nothing contained herein
shall affect any rights to indemnification to which personnel of the Trust
other than Trustees and officers may be entitled by contract or otherwise
under law.
(d) Expenses of preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in paragraph (a) of
this Section 4.3 may be advanced by the Trust prior to final disposition
thereof upon receipt of an undertaking by or on behalf of the recipient to
repay such amount if it is ultimately determined that he is not entitled
to indemnification under this Section 4.3, provided that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security provided by the recipient, or the Trust shall be
insured against losses arising out of any such advances; or
(ii) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees act on the matter)
or an independent legal counsel in a written opinion shall determine,
based upon a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
Part C - Page 7
<PAGE>
As used in this Section 4.3, a "Disinterested Trustee" is one who is not
(i) an Interested Person of the Trust (including anyone who has been
exempted from being an Interested Person by any rule, regulation or order
of the Commission), or (ii) involved in the claim, action, suit or
proceeding.
Item 28. Business or Other Connections of Investment Adviser
The Adviser has stockholders and employees who are denominated
officers but do not as such have corporation-wide responsibilities.
Such persons are not considered officers for the purpose of this
Item 28.
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
---- ----------------------------------------
Stephen R. Director, Vice President, Treasurer, Chief
Beckwith Operating Officer & Chief Financial Officer,
Scudder, Stevens & Clark, Inc. (investment
adviser)**
Lynn S. Director, Scudder, Stevens & Clark, Inc.
Birdsong (investment adviser)**
President & Director, The Latin America Dollar
Income Fund, Inc. (investment company)**
President & Director, Scudder World Income
Opportunities Fund, Inc. (investment
company)**
President, The Japan Fund, Inc. (investment
company)**
Supervisory Director, The Latin America Income
and Appreciation Fund N.V. (investment
company) +
Supervisory Director, The Venezuela High Income
Fund N.V. (investment company) xx
Supervisory Director, Scudder Mortgage Fund
(investment company)+
Supervisory Director, Scudder Floating Rate
Funds for Fannie Mae Mortgage Securities I &
II (investment company) +
Director, Canadian High Income Fund (investment
company)#
Director, Hot Growth Companies Fund (investment
company)#
Director, Sovereign High Yield Investment
Company (investment company)+
Director, Scudder, Stevens & Clark (Luxembourg)
S.A. (investment manager) #
Nicholas Bratt Director, Scudder, Stevens & Clark, Inc.
(investment adviser)**
President & Director, Scudder New Europe Fund,
Inc. (investment company)**
President & Director, The Brazil Fund, Inc.
(investment company)**
President & Director, The First Iberian Fund,
Inc. (investment company)**
President & Director, Scudder International
Fund, Inc. (investment company)**
President & Director, Scudder Global Fund, Inc.
(President on all series except Scudder
Global Fund) (investment company)**
President & Director, The Korea Fund, Inc.
(investment company)**
President & Director, Scudder New Asia Fund,
Inc. (investment company)**
President, The Argentina Fund, Inc. (investment
company)**
Vice President, Scudder, Stevens & Clark
Corporation (Delaware) (investment adviser)**
Vice President, Scudder, Stevens & Clark Japan,
Inc. (investment adviser)###
Vice President, Scudder, Stevens & Clark of
Canada Ltd. (Canadian investment adviser)
Toronto, Ontario, Canada
Vice President, Scudder, Stevens & Clark
Overseas Corporation(oo)
E. Michael Director, Chief Administrative Officer, Scudder,
Brown Stevens & Clark, Inc. (investment adviser)**
Trustee, Scudder GNMA Fund (investment company)*
Trustee, Scudder Portfolio Trust (investment
company)*
Trustee, Scudder U.S. Treasury Fund (investment
company)*
Part C - Page 8
<PAGE>
Trustee, Scudder Tax Free Money Fund (investment
company)*
Trustee, Scudder State Tax Free Trust
(investment company)*
Trustee, Scudder Cash Investment Trust
(investment company)*
Assistant Treasurer, Scudder Investor Services,
Inc. (broker/dealer)*
Director & President, Scudder Realty Holding
Corporation (a real estate holding company)*
Director & President, Scudder Trust Company (a
trust company)+++
Director, Scudder Trust (Cayman) Ltd.
Mark S. Casady Director, Scudder, Stevens & Clark, Inc.
(investment adviser)**
Director & Vice President, Scudder Investor
Services, Inc. (broker/dealer)*
Director & Vice President, Scudder Service
Corporation (in-house transfer agent)*
Director, SFA, Inc. (advertising agency)*
Linda C. Director, Scudder, Stevens & Clark, Inc.
Coughlin (investment adviser)**
Chairman & Trustee, AARP Cash Investment Funds
(investment company)**
Chairman & Trustee, AARP Growth Trust
(investment company)**
Chairman & Trustee, AARP Income Trust
(investment company)**
Chairman & Trustee, AARP Tax Free Income Trust
(investment company)**
Chairman & Trustee, AARP Managed Investment
Portfolios Trust (investment company)**
Director & Senior Vice President, Scudder
Investor Services, Inc. (broker/dealer)*
Director, SFA, Inc. (advertising agency)*
Margaret D. Director, Scudder, Stevens & Clark, Inc.
Hadzima (investment adviser)**
Assistant Treasurer, Scudder Investor Services,
Inc. (broker/dealer)*
Jerard K. Director, Scudder, Stevens & Clark, Inc.
Hartman (investment adviser)**
Vice President, Scudder California Tax Free
Trust (investment company)*
Vice President, Scudder Equity Trust (investment
company)**
Vice President, Scudder Cash Investment Trust
(investment company)*
Vice President, Scudder Fund, Inc. (investment
company)**
Vice President, Scudder Global Fund, Inc.
(investment company)**
Vice President, Scudder GNMA Fund (investment
company)*
Vice President, Scudder Portfolio Trust
(investment company)*
Vice President, Scudder Institutional Fund, Inc.
(investment company)**
Vice President, Scudder International Fund, Inc.
(investment company)**
Vice President, Scudder Investment Trust
(investment company)*
Vice President, Scudder Municipal Trust
(investment company)*
Vice President, Scudder Mutual Funds, Inc.
(investment company)**
Vice President, Scudder New Asia Fund, Inc.
(investment company)**
Vice President, Scudder New Europe Fund, Inc.
(investment company)**
Vice President, Scudder Securities Trust
(investment company)*
Vice President, Scudder State Tax Free Trust
(investment company)*
Vice President, Scudder Funds Trust (investment
company)**
Vice President, Scudder Tax Free Money Fund
(investment company)*
Vice President, Scudder Tax Free Trust
(investment company)*
Vice President, Scudder U.S. Treasury Money Fund
(investment company)*
Vice President, Scudder Pathway Series
(investment company)*
Vice President, Scudder Variable Life Investment
Fund (investment company)*
Vice President, The Brazil Fund, Inc.
(investment company)**
Vice President, The Korea Fund, Inc. (investment
company)**
Vice President, The Argentina Fund, Inc.
(investment company)**
Vice President & Director, Scudder, Stevens &
Clark of Canada, Ltd. (Canadian investment
adviser) Toronto, Ontario, Canada
Vice President, The First Iberian Fund, Inc.
(investment company)**
Part C - Page 9
<PAGE>
Vice President, The Latin America Dollar Income
Fund, Inc. (investment company)**
Vice President, Scudder World Income
Opportunities Fund, Inc. (investment
company)**
Richard A. Director, Scudder, Stevens & Clark, Inc.
Holt (investment adviser)**
Vice President, Scudder Variable Life Investment
Fund (investment company)*
John T. Director, Scudder, Stevens & Clark, Inc.
Packard (investment adviser)**
President, Montgomery Street Income Securities,
Inc. (investment company) o
Chairman, Scudder Realty Advisors, Inc. (realty
investment adviser) x
Daniel Pierce Chairman & Director, Scudder, Stevens & Clark,
Inc. (investment adviser)**
Chairman, Vice President & Director, Scudder
Global Fund, Inc. (investment company)**
Chairman & Director, Scudder New Europe Fund,
Inc. (investment company)**
Chairman & Director, The First Iberian Fund,
Inc. (investment company)**
Chairman & Director, Scudder International Fund,
Inc. (investment company)**
Chairman & Director, Scudder New Asia Fund, Inc.
(investment company)**
President & Trustee, Scudder Equity Trust
(investment company)**
President & Trustee, Scudder GNMA Fund
(investment company)*
President & Trustee, Scudder Portfolio Trust
(investment company)*
President & Trustee, Scudder Funds Trust
(investment company)**
President & Trustee, Scudder Securities Trust
(investment company)*
President & Trustee, Scudder Investment Trust
(investment company)*
President & Director, Scudder Institutional
Fund, Inc. (investment company)**
President & Director, Scudder Fund, Inc.
(investment company)**
President & Director, Scudder Mutual Funds, Inc.
(investment company)**
Vice President & Trustee, Scudder Municipal
Trust (investment company)*
Vice President & Trustee, Scudder Variable Life
Investment Fund (investment company)*
Vice President & Trustee, Scudder Pathway Series
(investment company)*
Trustee, Scudder California Tax Free Trust
(investment company)*
Trustee, Scudder State Tax Free Trust
(investment company)*
Vice President, Montgomery Street Income
Securities, Inc. (investment company)o
Chairman & President, Scudder, Stevens & Clark
of Canada, Ltd. (Canadian investment
adviser), Toronto, Ontario, Canada
Chairman & Director, Scudder Global
Opportunities Funds (investment company)
Luxembourg
Chairman, Scudder, Stevens & Clark, Ltd.
(investment adviser) London, England
President & Director, Scudder Precious Metals,
Inc. xxx
Vice President, Director & Assistant Secretary,
Scudder Realty Holdings Corporation
(a real estate holding company)*
Vice President, Director & Assistant Treasurer,
Scudder Investor Services, Inc.
(broker/dealer)*
Director, Scudder Latin America Investment Trust
PLC (investment company)@
Director, Fiduciary Trust Company (banking &
trust company) Boston, MA
Director, Fiduciary Company Incorporated
(banking & trust company) Boston, MA
Trustee, New England Aquarium, Boston, MA
Incorporator, Scudder Trust Company (a trust
company)+++
Kathryn L. Director, Chief Legal Officer, Chief Compliance
Quirk Officer and Secretary, Scudder, Stevens &
Clark, Inc. (investment adviser)**
Director, Vice President & Assistant Secretary,
The Argentina Fund, Inc. (investment
company)**
Director, Vice President & Assistant Secretary,
Scudder International Fund, Inc. (investment
company)**
Part C - Page 10
<PAGE>
Director, Vice President & Assistant Secretary,
Scudder New Asia Fund (investment company)**
Director, Vice President & Assistant Secretary,
Scudder Global Fund, Inc. (investment
company)**
Trustee, Vice President & Assistant Secretary,
Scudder Equity Trust (investment company)**
Trustee, Vice President & Assistant Secretary,
Scudder Securities Trust (investment
company)*
Trustee, Vice President & Assistant Secretary,
Scudder Funds Trust (investment company)**
Trustee, Scudder Investment Trust (investment
company)*
Trustee, Scudder Municipal Trust (investment
company)*
Vice President & Trustee, Scudder Cash
Investment Trust (investment company)*
Vice President & Trustee, Scudder Tax Free Money
Fund (investment company)*
Vice President & Trustee, Scudder Tax Free Trust
(investment company)*
Vice President & Secretary, AARP Growth Trust
(investment company)**
Vice President & Secretary, AARP Income Trust
(investment company)**
Vice President & Secretary, AARP Tax Free Income
Trust (investment company)**
Vice President & Secretary, AARP Cash Investment
Funds (investment company)**
Vice President & Secretary, AARP Managed
Investment Portfolios Trust (investment
company)**
Vice President & Secretary, The Japan Fund, Inc.
(investment company)**
Vice President & Assistant Secretary, Scudder
World Income Opportunities Fund, Inc.
(investment company)**
Vice President & Assistant Secretary, The Korea
Fund, Inc. (investment company)**
Vice President & Assistant Secretary, The Brazil
Fund, Inc. (investment company)**
Vice President & Assistant Secretary, Montgomery
Street Income Securities, Inc. (investment
company)o
Vice President & Assistant Secretary, Scudder
Mutual Funds, Inc. (investment company)**
Vice President & Assistant Secretary, Scudder
Pathway Series (investment company)*
Vice President & Assistant Secretary, Scudder
New Europe Fund, Inc. (investment company)**
Vice President & Assistant Secretary, Scudder
Variable Life Investment Fund (investment
company)*
Vice President & Assistant Secretary, The First
Iberian Fund, Inc. (investment company)**
Vice President & Assistant Secretary, The Latin
America Dollar Income Fund, Inc. (investment
company)**
Vice President, Scudder Fund, Inc. (investment
company)**
Vice President, Scudder Institutional Fund, Inc.
(investment company)**
Vice President, Scudder GNMA Fund (investment
company)*
Director, Senior Vice President & Clerk, Scudder
Investor Services, Inc. (broker/dealer)*
Director, Vice President & Secretary, Scudder
Fund Accounting Corporation (in-house fund
accounting agent)*
Director, Vice President & Secretary, Scudder
Realty Holdings Corporation (a real estate
holding company)*
Director & Clerk, Scudder Service Corporation
(in-house transfer agent)*
Director, SFA, Inc. (advertising agency)*
Vice President, Director & Assistant Secretary,
Scudder Precious Metals, Inc. xxx
Cornelia M. Director, Scudder, Stevens & Clark, Inc.
Small (investment adviser)**
President, AARP Cash Investment Funds
(investment company)**
President, AARP Growth Trust (investment
company)**
President, AARP Income Trust (investment
company)**
Part C - Page 11
<PAGE>
President, AARP Tax Free Income Trust
(investment company)**
President, AARP Managed Investment Portfolio
Trust (investment company)**
Edmond D. Director, President & Chief Executive Officer,
Villani Scudder, Stevens & Clark, Inc. (investment
adviser)**
Chairman & Director, The Argentina Fund, Inc.
(investment company)**
Chairman & Director, The Latin America Dollar
Income Fund, Inc. (investment company)**
Chairman & Director, Scudder World Income
Opportunities Fund, Inc. (investment
company)**
Supervisory Director, Scudder Mortgage Fund
(investment company) +
Supervisory Director, Scudder Floating Rate
Funds for Fannie Mae Mortgage Securities I &
II (investment company)+
Director, Scudder, Stevens & Clark Japan, Inc.
(investment adviser)###
Director, The Brazil Fund, Inc. (investment
company)**
Director, Indosuez High Yield Bond Fund
(investment company) Luxembourg
President & Director, Scudder, Stevens & Clark
Overseas Corporationoo
President & Director, Scudder, Stevens & Clark
Corporation (Delaware) (investment adviser)**
Director, Scudder Realty Advisors, Inc. (realty
investment adviser) x
Director, IBJ Global Investment Management S.A.,
(Luxembourg investment management company)
Luxembourg, Grand-Duchy of Luxembourg
Stephen A. Director, Scudder, Stevens & Clark, Inc.
Wohler (investment adviser)**
Vice President, Montgomery Street Income
Securities, Inc. (investment company)o
* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
++ Two Prudential Plaza, 180 N. Stetson Avenue,
Chicago, IL
+++ 5 Industrial Way, Salem, NH
o 101 California Street, San Francisco, CA
# Societe Anonyme, 47, Boulevard Royal, L-2449
Luxembourg, R.C. Luxembourg B 34.564
+ John B. Gorsiraweg 6, Willemstad Curacao,
Netherlands Antilles
xx De Ruyterkade 62, P.O. Box 812, Willemstad
Curacao, Netherlands Antilles
## 2 Boulevard Royal, Luxembourg
*** B1 2F3F 248 Section 3, Nan King East Road, Taipei,
Taiwan
xxx Grand Cayman, Cayman Islands, British West Indies
oo 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
@ c/o Sinclair Hendersen Limited, 23 Cathedral Yard,
Exeter, Devon, U.K.
Item 29. Principal Underwriters.
(a) Scudder California Tax Free Trust
Scudder Cash Investment Trust
Scudder Equity Trust
Scudder Fund, Inc.
Scudder Funds Trust
Scudder Global Fund, Inc.
Scudder GNMA Fund
Scudder Institutional Fund, Inc.
Scudder International Fund, Inc.
Scudder Investment Trust
Scudder Municipal Trust
Scudder Mutual Funds, Inc.
Part C - Page 12
<PAGE>
Scudder Pathway Series
Scudder Portfolio Trust
Scudder Securities Trust
Scudder State Tax Free Trust
Scudder Tax Free Money Fund
Scudder Tax Free Trust
Scudder U.S. Treasury Money Fund
Scudder Variable Life Investment
Fund
AARP Cash Investment Funds
AARP Growth Trust
AARP Income Trust
AARP Tax Free Income Trust
AARP Managed Investment Portfolios
Trust
The Japan Fund, Inc.
(b)
(1) (2) (3)
Name and Position and Offices
Principal with Positions and
Business Scudder Investor Offices with
Address Services, Inc. Registrant
--------- --------------- ----------------
Lynn S. Birdsong Senior Vice President None
345 Park Avenue
New York, NY
10154
E. Michael Brown Assistant Treasurer None
Two International
Place
Boston, MA 02110
Mark S. Casady Director and Vice None
Two International President
Place
Boston, MA 02110
Linda Coughlin Director and Senior None
Two International Vice President
Place
Boston, MA 02110
Richard W. Vice President None
Desmond
345 Park Avenue
New York, NY
10154
Paul J. Elmlinger Senior Vice President None
345 Park Avenue and Assistant Clerk
New York, NY
10154
Margaret D. Assistant Treasurer None
Hadzima
Two International
Place
Boston, MA 02110
Thomas W. Joseph Director, Vice Vice
Two International President, President
Place Treasurer and
Boston, MA 02110 Assistant Clerk
Part C - Page 13
<PAGE>
Name and Position and Offices
Principal with Positions and
Business Scudder Investor Offices with
Address Services, Inc. Registrant
--------- --------------- ----------------
David S. Lee Director, President None
Two International and Assistant
Place Treasurer
Boston, MA 02110
Thomas F. Clerk Vice
McDonough President,
Two International Secretary and
Place Assistant
Boston, MA 02110 Treasurer
Thomas H. O'Brien Assistant Treasurer None
345 Park Avenue
New York, NY
10154
Edward J. Assistant Treasurer Vice
O'Connell President and
345 Park Avenue Assistant
New York, NY Treasurer
10154
Daniel Pierce Director, Vice President and
Two International President Trustee
Place and Assistant
Boston, MA 02110 Treasurer
Kathryn L. Quirk Director, Senior Vice Trustee, Vice
345 Park Avenue President and President and
New York, NY Assistant Clerk Assistant
10154 Secretary
Robert A. Rudell Vice President None
Two International
Place
Boston, MA 02110
Edmund J. Thimme Vice President None
345 Park Avenue
New York, NY
10154
Benjamin Vice President None
Thorndike
Two International
Place
Boston, MA 02110
Sydney S. Tucker Vice President None
Two International
Place
Boston, MA 02110
David B. Watts Assistant Treasurer None
Two International
Place
Boston, MA 02110
Linda J. Wondrack Vice President None
Two International
Place
Boston, MA 02110
The Underwriter has employees who are denominated officers of
an operational area. Such persons do not have
corporation-wide responsibilities and are not considered
officers for the purpose of this Item 29.
Part C - Page 14
<PAGE>
(c)
(1) (2) (3) (4) (5)
Name of Net Underwriting Compensation on
Principal Discounts and Redemptions Brokerage Other
Underwriter Commissions and Repurchases Commisions Compensation
- ----------- ----------- --------------- ---------- ------------
Scudder None None None None
Investor
Services, Inc.
Item 30. Location of Accounts and Records.
Certain accounts, books and other documents required to be
maintained by Section 31(a) of the 1940 Act and the Rules
promulgated thereunder are maintained by Scudder, Stevens & Clark,
Inc., Two International Place, Boston, Massachusetts 02110. Records
relating to the duties of the Registrant's custodian are maintained
by State Street Bank and Trust Company, Heritage Drive, North
Quincy, Massachusetts. Records relating to the duties of the
Registrant's transfer agent are maintained by Scudder Service
Corporation, Two International Place, Boston, Massachusetts.
Item 31. Management Services.
Inapplicable.
Item 32. Undertakings.
Inapplicable.
Part C - Page 15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereto duly authorized, in the City of Boston and the
Commonwealth of Massachusetts on the 26th day of November, 1997.
SCUDDER EQUITY TRUST
By /s/ Thomas F. McDonough
------------------------
Thomas F. McDonough,
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Daniel Pierce
- -----------------
Daniel Pierce* President (Principal November 26, 1997
Executive Officer)
/s/ Paul Bancroft III
- ---------------------
Paul Bancroft III* Trustee November 26, 1997
/s/ Sheryle J. Bolton
- -----------------
Sheryle J. Bolton* Trustee November 26, 1997
/s/ William T. Burgin
- ---------------------
William T. Burgin Trustee November 26, 1997
/s/ Thomas J. Devine
- --------------------
Thomas J. Devine* Trustee November 26, 1997
/s/ Keith R. Fox
- ----------------
Keith R. Fox* Trustee November 26, 1997
/s/ William H. Luers
- --------------------
William H. Luers Trustee November 26, 1997
/s/ Wilson Nolen
- ----------------
Wilson Nolen* Trustee November 26, 1997
/s/ Kathryn L. Quirk
- --------------------
Kathryn L. Quirk* Vice President, November 26, 1997
Assistant Secretary
and Trustee
/s/ Pamela A. McGrath
- ---------------------
Pamela A. McGrath Vice President and November 26, 1997
Treasurer (Principal
Financial and Accounting
Officer)
*By: /s/ Thomas F. McDonough
------------------------
Thomas F. McDonough
Attorney-in-Fact pursuant to powers of attorney
contained in the signature pages of
Post-Effective Amendment Nos. 12, 16, 23, 24,
and 25 to the Registration Statement, filed
December 2, 1988, November 2, 1992, November 30, 1996,
December 3, 1996, and November __, ____, respectively.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized in the City of Boston, and
Commonwealth of Massachusetts on the ___ day of November, 1997.
SCUDDER EQUITY TRUST
By /s/ Thomas F. McDonough
------------------------------------
Thomas F. McDonough, Vice President,
Secretary and Assistant Treasurer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to its Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated. By so signing, the undersigned in his
capacity as trustee or officer, or both, as the case may be of the Registrant,
does hereby appoint Kathryn L. Quirk, Thomas F. McDonough and Sheldon A. Jones
and each of them, severally, or if more than one acts, a majority of them, his
true and lawful attorney and agent to execute in his name, place and stead (in
such capacity) any and all amendments to the Registration Statement and any
post-effective amendments thereto and all instruments necessary or desirable in
connection therewith, to attest the seal of the Registrant thereon and to file
the same with the Securities and Exchange Commission. Each of said attorneys and
agents shall have power to act with or without the other and have full power and
authority to do and perform in the name and on behalf of the undersigned, in any
and all capacities, every act whatsoever necessary or advisable to be done in
the premises as fully and to all intents and purposes as the undersigned might
or could do in person, hereby ratifying and approving the act of said attorneys
and agents and each of them.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ William T. Burgin
- --------------------
William T. Burgin Trustee November __, 1997
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized in the City of Boston, and
Commonwealth of Massachusetts on the ___ day of November, 1997.
SCUDDER EQUITY TRUST
By /s/ Thomas F. McDonough
------------------------------------
Thomas F. McDonough, Vice President,
Secretary and Assistant Treasurer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to its Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated. By so signing, the undersigned in his
capacity as trustee or officer, or both, as the case may be of the Registrant,
does hereby appoint Kathryn L. Quirk, Thomas F. McDonough and Sheldon A. Jones
and each of them, severally, or if more than one acts, a majority of them, his
true and lawful attorney and agent to execute in his name, place and stead (in
such capacity) any and all amendments to the Registration Statement and any
post-effective amendments thereto and all instruments necessary or desirable in
connection therewith, to attest the seal of the Registrant thereon and to file
the same with the Securities and Exchange Commission. Each of said attorneys and
agents shall have power to act with or without the other and have full power and
authority to do and perform in the name and on behalf of the undersigned, in any
and all capacities, every act whatsoever necessary or advisable to be done in
the premises as fully and to all intents and purposes as the undersigned might
or could do in person, hereby ratifying and approving the act of said attorneys
and agents and each of them.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ William H. Luers
- --------------------
William H. Luers Trustee November __, 1997
4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized in the City of Boston, and
Commonwealth of Massachusetts on the ___ day of November, 1997.
SCUDDER EQUITY TRUST
By /s/ Thomas F. McDonough
------------------------------------
Thomas F. McDonough, Vice President,
Secretary and Assistant Treasurer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to its Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated. By so signing, the undersigned in her
capacity as trustee or officer, or both, as the case may be of the Registrant,
does hereby appoint Daniel Pierce, Thomas F. McDonough and Sheldon A. Jones and
each of them, severally, or if more than one acts, a majority of them, her true
and lawful attorney and agent to execute in her name, place and stead (in such
capacity) any and all amendments to the Registration Statement and any
post-effective amendments thereto and all instruments necessary or desirable in
connection therewith, to attest the seal of the Registrant thereon and to file
the same with the Securities and Exchange Commission. Each of said attorneys and
agents shall have power to act with or without the other and have full power and
authority to do and perform in the name and on behalf of the undersigned, in any
and all capacities, every act whatsoever necessary or advisable to be done in
the premises as fully and to all intents and purposes as the undersigned might
or could do in person, hereby ratifying and approving the act of said attorneys
and agents and each of them.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Kathryn L. Quirk
- --------------------
Kathryn L. Quirk Trustee November __, 1997
5
<PAGE>
File No. 2-78724
File No. 811-1444
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 26
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 26
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
SCUDDER EQUITY TRUST
<PAGE>
SCUDDER EQUITY TRUST
EXHIBIT INDEX
