Filed electronically with the Securities and Exchange Commission
on August 28, 1997.
File No. 2-13628
File No. 811-43
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
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Post-Effective Amendment No. 84
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and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 36
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Scudder Investment Trust
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(Exact Name of Registrant as Specified in Charter)
Two International Place, Boston, MA 02110
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(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)
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X on August 29, 1997 pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(i)
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on pursuant to paragraph (a)(i)
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75 days after filing pursuant to paragraph (a)(ii)
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on pursuant to paragraph (a)(ii) of Rule 485.
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The Registrant has filed a declaration registering an indefinite amount of
securities pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended. The Registrant filed the notice required by Rule 24f-2 for its most
recent fiscal year on February 27, 1997.
<PAGE>
SCUDDER INVESTMENT TRUST
SCUDDER GROWTH AND INCOME FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
---------------------------
PART A
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<TABLE>
<S> <C> <C> <C>
<CAPTION>
Item No. Item Caption Prospectus Caption
-------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information
4. General Description of INVESTMENT OBJECTIVE AND POLICIES
Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND
INVESTMENTS
FUND ORGANIZATION
5. Management of the Fund A MESSAGE FROM SCUDDER'S CHAIRMAN
FUND ORGANIZATION--Investment adviser and Transfer
agent
TRUSTEES AND OFFICERS
SHAREHOLDER BENEFITS--A team approach to investing
5A. Management Discussion of NOT APPLICABLE
Fund Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION--
Securities Dividends and capital gains distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax Information
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder Automated
Information Line, Dividend reinvestment plan, T.D.D.
service for the hearing impaired
HOW TO CONTACT SCUDDER
7. Purchase of Securities PURCHASES
Being Offered FUND ORGANIZATION--Underwriter
TRANSACTION INFORMATION--Purchasing shares, Share
price, Processing time, Minimum balances, Third party
transactions
SHAREHOLDER BENEFITS--Dividend reinvestment plan
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
8. Redemption or EXCHANGES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION--Redeeming shares, Tax
identification number, Minimum balances
9. Pending Legal NOT APPLICABLE
Proceedings
Cross Reference - Page 1
<PAGE>
SCUDDER GROWTH AND INCOME FUND
CROSS-REFERENCE SHEET
(continued)
PART B
- ------
Caption in Statement of
Item No. Item Caption Additional Information
-------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and FUND ORGANIZATION
History
13. Investment Objectives and THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
Policies PORTFOLIO TRANSACTIONS--Portfolio turnover
14. Management of the Fund INVESTMENT ADVISER
TRUSTEES AND OFFICERS
REMUNERATION
15. Control Persons and Principal TRUSTEES AND OFFICERS
Holders of Securities
16. Investment Advisory and Other INVESTMENT ADVISER
Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts and Other Information
17. Brokerage Allocation and Other PORTFOLIO TRANSACTIONS--Brokerage, Portfolio Turnover
Practices
18. Capital Stock and Other FUND ORGANIZATION
Securities DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
19. Purchase, Redemption and PURCHASES
Pricing of Securities Being EXCHANGES AND REDEMPTIONS
Offered FEATURES AND SERVICES OFFERED BY THE FUND--Dividend and Capital
Gain Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of Performance Data PERFORMANCE INFORMATION
23. Financial Statements FINANCIAL STATEMENTS
Cross Reference - Page 2
<PAGE>
SCUDDER INVESTMENT TRUST
SCUDDER LARGE COMPANY GROWTH FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
---------------------------
PART A
- ------
Item No. Item Caption Prospectus Caption
-------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information DISTRIBUTION AND FINANCIAL INFORMATION
4. General Description of INVESTMENT OBJECTIVE AND POLICIES
Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND
INVESTMENTS
FUND ORGANIZATION
5. Management of the Fund FINANCIAL HIGHLIGHTS
A MESSAGE FROM SCUDDER'S CHAIRMAN
FUND ORGANIZATION--Investment adviser and Transfer
agent
TRUSTEES AND OFFICERS
5A. Management Discussion SHAREHOLDER BENEFITS--A team approach to investing
of Fund Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION--
Securities Dividends and capital gains distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax information
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder Automated
Information Line, Dividend reinvestment plan, T.D.D.
service for the hearing impaired
HOW TO CONTACT SCUDDER
7. Purchase of Securities PURCHASES
Being Offered FUND ORGANIZATION--Underwriter
TRANSACTION INFORMATION--Purchasing shares, Share
price, Processing time, Minimum balances, Third party
transactions
SHAREHOLDER BENEFITS--Dividend reinvestment plan
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
INVESTMENT PRODUCTS AND SERVICES
8. Redemption or Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax
identification number and Minimum balances
9. Pending Legal NOT APPLICABLE
Proceedings
Cross Reference - Page 3
<PAGE>
SCUDDER LARGE COMPANY GROWTH FUND
CROSS-REFERENCE SHEET
(continued)
PART B
- ------
Caption in Statement of
Item No. Item Caption Additional Information
-------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and FUND ORGANIZATION
History
13. Investment Objectives and THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
Policies PORTFOLIO TRANSACTIONS--Portfolio turnover
14. Management of the Fund INVESTMENT ADVISER
TRUSTEES AND OFFICERS
REMUNERATION
15. Control Persons and Principal TRUSTEES AND OFFICERS
Holders of Securities
16. Investment Advisory and INVESTMENT ADVISER
Other Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts and Other
Information
17. Brokerage Allocation and PORTFOLIO TRANSACTIONS--Brokerage commissions
Other Practices
18. Capital Stock and Other FUND ORGANIZATION
Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
19. Purchase, Redemption and PURCHASES
Pricing of Securities Being EXCHANGES AND REDEMPTIONS
Offered FEATURES AND SERVICES OFFERED BY THE FUND--
Dividend and Capital Gain Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of Performance PERFORMANCE INFORMATION
Data
23. Financial Statements FINANCIAL STATEMENTS
Cross Reference - Page 4
<PAGE>
SCUDDER INVESTMENT TRUST
SCUDDER CLASSIC GROWTH FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
---------------------------
PART A
- ------
Item No. Item Caption Prospectus Caption
-------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information
4. General Description of INVESTMENT OBJECTIVES AND POLICIES
Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND
INVESTMENTS
FUND ORGANIZATION
5. Management of the Fund A MESSAGE FROM SCUDDER'S CHAIRMAN
FUND ORGANIZATION--Investment adviser and Transfer
agent
TRUSTEES AND OFFICERS
SHAREHOLDER BENEFITS--A team approach to investing
5A. Management Discussion of NOT APPLICABLE
Fund Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION--
Securities Dividends and capital gains distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax information
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder Automated
Information Line, Dividend reinvestment plan, T.D.D.
service for the hearing impaired
HOW TO CONTACT SCUDDER
7. Purchase of Securities PURCHASES
Being Offered FUND ORGANIZATION--Underwriter
TRANSACTION INFORMATION--Purchasing shares, Share
price, Processing time, Minimum balances, Third party
transactions
SHAREHOLDER BENEFITS--Dividend reinvestment plan
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
8. Redemption or Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax
identification number, Minimum balances
9. Pending Legal NOT APPLICABLE
Proceedings
Cross Reference - Page 5
<PAGE>
SCUDDER CLASSIC GROWTH FUND
CROSS-REFERENCE SHEET
(continued)
PART B
- ------
Caption in Statement of
Item No. Item Caption Additional Information
-------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and FUND ORGANIZATION
History
13. Investment Objectives and THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
Policies PORTFOLIO TRANSACTIONS--Portfolio turnover
14. Management of the Fund INVESTMENT ADVISER
TRUSTEES AND OFFICERS
REMUNERATION
15. Control Persons and Principal TRUSTEES AND OFFICERS
Holders of Securities
16. Investment Advisory and Other INVESTMENT ADVISER
Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts and Other
Information
17. Brokerage Allocation and PORTFOLIO TRANSACTIONS--Brokerage, Portfolio
Other Practices Turnover
18. Capital Stock and Other FUND ORGANIZATION
Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
19. Purchase, Redemption and PURCHASES
Pricing of Securities Being EXCHANGES AND REDEMPTIONS
Offered FEATURES AND SERVICES OFFERED BY THE FUND--
Dividend and Capital Gain Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of Performance PERFORMANCE INFORMATION
Data
23. Financial Statements FINANCIAL STATEMENTS
Cross Reference - Page 6
<PAGE>
SCUDDER INVESTMENT TRUST
SCUDDER S&P 500 INDEX FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
---------------------------
PART A
- ------
Item No. Item Caption Prospectus Caption
-------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information
4. General Description of INVESTMENT OBJECTIVES AND POLICIES
Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND
INVESTMENTS
FUND AND PORTFOLIO ORGANIZATION
5. Management of the Fund A MESSAGE FROM SCUDDER'S CHAIRMAN
FUND AND PORTFOLIO ORGANIZATION--Investment
adviser and Transfer agent
TRUSTEES AND OFFICERS OF THE FUND
SHAREHOLDER BENEFITS--A team approach to investing
5A. Management Discussion NOT APPLICABLE
of Fund Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION--
Securities Dividends and capital gains distributions
FUND AND PORTFOLIO ORGANIZATION
TRANSACTION INFORMATION--Tax information
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder Automated
Information Line, Dividend reinvestment plan, T.D.D.
service for the hearing impaired
HOW TO CONTACT SCUDDER
7. Purchase of Securities PURCHASES
Being Offered FUND AND PORTFOLIO ORGANIZATION--Underwriter
TRANSACTION INFORMATION--Purchasing shares, Share
price, Processing time, Minimum balances, Third party
transactions
SHAREHOLDER BENEFITS--Dividend reinvestment plan
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
8. Redemption or Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax
identification number, Minimum balances
9. Pending Legal Proceedings NOT APPLICABLE
Cross Reference - Page 7
<PAGE>
SCUDDER S&P 500 INDEX FUND
CROSS-REFERENCE SHEET
(continued)
PART B
- ------
Caption in Statement of
Item No. Item Caption Additional Information
-------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and FUND ORGANIZATION
History
13. Investment Objectives and THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
Policies PORTFOLIO TRANSACTIONS--Portfolio turnover
14. Management of the Fund INVESTMENT ADVISER AND ADMINISTRATOR
INVESTMENT MANAGER AND ADMINISTRATOR
TRUSTEES AND OFFICERS OF THE FUND
REMUNERATION
15. Control Persons and Principal TRUSTEES AND OFFICERS OF THE FUND
Holders of Securities
16. Investment Advisory and INVESTMENT ADVISER AND ADMINISTRATOR
Other Services INVESTMENT MANAGER AND ADMINISTRATOR
DISTRIBUTOR
ADDITIONAL INFORMATION--Experts and Other
Information
17. Brokerage Allocation and Other PORTFOLIO TRANSACTIONS--Brokerage, Portfolio
Practices Turnover
18. Capital Stock and Other FUND ORGANIZATION
Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
19. Purchase, Redemption and PURCHASES
Pricing of Securities Being EXCHANGES AND REDEMPTIONS
Offered FEATURES AND SERVICES OFFERED BY THE FUND--
Dividend and Capital Gain Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of Performance PERFORMANCE INFORMATION
Data
23. Financial Statements FINANCIAL STATEMENTS
</TABLE>
Cross Reference - Page 8
<PAGE>
This prospectus sets forth concisely the information about Scudder S&P 500 Index
Fund that a prospective investor should know before investing. Please retain it
for future reference. The Fund is a series of Scudder Investment Trust, an
open-end management investment company.
If you require more detailed information, a Statement of Additional Information
dated August 29, 1997, 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.
SCUDDER S&P 500 INDEX FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY
INVESTING ALL OF ITS INVESTABLE ASSETS IN THE EQUITY 500 INDEX PORTFOLIO, WHICH
IS A SEPARATE MUTUAL FUND WITH AN IDENTICAL INVESTMENT OBJECTIVE ADVISED BY
BANKERS TRUST COMPANY. THE INVESTMENT PERFORMANCE OF THE FUND WILL CORRESPOND
DIRECTLY TO THE INVESTMENT PERFORMANCE OF THE PORTFOLIO.
Scudder
S&P 500 Index
Fund
Prospectus
August 29, 1997
A pure no-load(TM) (no sales charges) mutual fund seeking 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.
<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 S&P 500 Index Fund (the "Fund") and the Equity
500 Index Portfolio (the "Portfolio"). 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. The Fund's
Trustees believe that the aggregate per share expenses of the Fund and the
Portfolio will be less than or approximately equal to the expenses which the
Fund would incur if the investable assets of the Fund were invested directly in
the types of securities being held by the Portfolio.
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: Estimated expenses paid by the Fund and the
Portfolio before the Fund distributes its net investment income, expressed
as a percentage of the Fund's average daily net assets for the initial
fiscal period.
Investment management fee (after waiver) 0.07%**
12b-1 fees NONE
Other expenses (after reimbursements) 0.33%**
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Total Fund operating expenses (after waiver
and reimbursements) 0.40%**
=====
Example
Based on the estimated level of total Fund operating expenses listed above, the
total expenses relating to a $1,000 investment, assuming a 5% annual return and
redemption at the end of each period, are listed below. Investors do not pay
these expenses directly; they are paid by 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
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$4 $13
See "Fund and Portfolio organization" for further information about the expenses
of the Fund and the Portfolio. 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
redemption proceeds via wire, there is a $5 wire service fee. For
additional information, please refer to "Transaction information--Redeeming
shares."
** Until May 1, 1998, the Manager of the Fund has agreed to reimburse other
expenses to the extent necessary so that the total annualized expenses of
the Fund do not exceed 0.40% of average daily net assets. In addition, the
Adviser of the Portfolio has agreed to waive a portion of its management
fee and reimburse expenses to the extent necessary so that the total
annualized expenses of the Portfolio do not exceed 0.08% of the Portfolio's
average daily net assets. If the Manager and the Adviser each had not
agreed to reimburse expenses and to waive a portion of its management fee,
respectively, it is estimated that the annualized Fund expenses would be:
investment management fee 0.10%, other expenses 1.78%, and total operating
expenses 1.88% for the initial fiscal period.
2
<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. Today, we manage in excess of $125 billion for many private accounts and
over 50 mutual fund portfolios. We 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.
All Scudder mutual 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 S&P 500 Index Fund
Investment objective
o 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 (the "S&P 500")
Investment characteristics
o opportunity to conveniently achieve participation in a broadly-diversified
portfolio of S&P 500 companies
o a low cost, "passive" approach to U.S. stock market investing
o a pure no-load(TM) fund--no sales charges or 12b-1 fees
Contents
Investment objective and policies 4
About the S&P 500 6
Why invest in the Fund? 7
Additional information about policies
and investments 7
Distribution and performance information 12
Fund and Portfolio organization 12
Transaction information 15
Shareholder benefits 19
Purchases 21
Exchanges and redemptions 22
Trustees and Officers of the Fund 24
Investment products and services 25
How to contact Scudder 26
3
<PAGE>
Investment objective and policies
Scudder S&P 500 Index Fund (the "Fund") seeks to provide investment results
that, before expenses, correspond to the total return (the combination of
capital changes and income) of common stocks publicly traded in the United
States, as represented by the Standard & Poor's 500 Composite Price Index (the
"S&P 500" or the "Index")(1). The Fund, a diversified series of Scudder
Investment Trust (the "Trust"), offers investors a convenient means of
participating in the stock market as measured by the S&P 500, while relieving
them of the administrative burdens typically associated with purchasing and
holding these instruments directly.
Instead of investing directly in a portfolio of securities, the Fund seeks to
achieve its investment objective by investing substantially all of its assets in
the Equity 500 Index Portfolio (the "Portfolio"), which has the same investment
objective as the Fund. Bankers Trust Company ("Bankers Trust" or the "Adviser"),
acts as investment adviser to the Portfolio. Scudder, Stevens & Clark, Inc.
("Scudder" or the "Manager") is the investment manager to the Fund and, as such,
monitors the Fund's investments in the Portfolio.
Except as otherwise indicated, the investment objective and policies of the Fund
and the Portfolio 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
common objective of the Fund and the Portfolio will be met.
Equity 500 Index Portfolio
The Portfolio is not managed according to traditional methods of "active"
investment management, which involve the buying and selling of securities based
upon economic, financial, and market analyses and investment judgment. Instead,
the Portfolio, utilizing a "passive" or "indexing" investment approach, attempts
to duplicate, before expenses, the overall performance of the S&P 500.
Under normal market conditions, when the Portfolio's assets are above $10
million, the Portfolio will invest at least 80% of its assets in common stocks
of companies that comprise the S&P 500. As of December 31, 1996 the assets of
the Portfolio were in excess of $1.2 billion. In seeking to duplicate the
performance of the S&P 500, the Adviser will attempt, over time, to allocate the
Portfolio's portfolio of investments among common stocks in approximately the
same weightings as the S&P 500, beginning with the heaviest-weighted stocks that
make up a larger portion of the Index's value. Over the long term, the Adviser
seeks a correlation between the performance of the Portfolio, before expenses,
and that of the S&P 500 of 0.98 or better (0.95 or better if Portfolio asset
levels significantly decline). A figure of 1.00 would indicate perfect
correlation. In the unlikely event that the targeted correlation is not
achieved, the Portfolio's Board of Trustees will consider alternative
structures.
The Adviser utilizes a two-stage sampling approach in managing the Portfolio.
In stage one, which encompasses large capitalization stocks defined as those
securities which represent 0.10% or more of the Index, the Adviser maintains the
stock holdings at or very near their benchmark weights. In stage two, the
remaining stocks are analyzed and selected based on risk characteristics and
(1) "Standard & Poor's (registered trademark)," "S&P (registered trademark),"
"Standard & Poor's 500," "S&P 500 (registered trademark)," and "500" are
trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by
Scudder, Stevens & Clark.
4
<PAGE>
industry weights in order to match the sector and risk characteristics of the
smaller companies in the S&P 500. This two-tiered approach helps to maximize
portfolio liquidity while minimizing transactions and holding costs.
Thus, the Adviser generally will seek to match the composition of the S&P 500,
but usually will not invest the Portfolio's stock portfolio to mirror the Index
exactly. Because of the difficulty and expense of executing relatively small
stock transactions, the Portfolio may not always be invested in the less heavily
weighted S&P 500 stocks, and may at times have its portfolio weighted
differently from the S&P 500, particularly if the Portfolio's asset size is
relatively small. When the Portfolio's asset size is larger, the Adviser expects
to purchase more of the stocks in the S&P 500 and to match the relative
weighting of the S&P 500 more closely, and anticipates that the Portfolio will
be able to mirror, before expenses, the performance of the S&P 500 with little
variance at asset levels of $10 million or more. In addition, the Portfolio may
omit or remove any S&P 500 stock from the Portfolio if, following objective
criteria, the Adviser judges the stock to be insufficiently liquid or believes
the merit of the investment has been substantially impaired by extraordinary
events or financial conditions. The Adviser will not purchase the stock of
Bankers Trust New York Corporation, which is included in the Index, and instead
will overweight its holdings of companies engaged in similar businesses.
Under normal conditions, the Adviser will attempt to invest as much of the
Portfolio's assets as is practical in common stocks included in the S&P 500.
However, the Portfolio may maintain up to 20% of its assets in short-term debt
securities and money market instruments hedged with stock index futures and
options to meet redemption requests or to facilitate the investment in common
stocks.
When the Portfolio has cash from new investments in the Portfolio or holds a
portion of its assets in money market instruments, it may enter into stock index
futures or options to attempt to increase its exposure to the stock market.
Strategies the Portfolio could use to accomplish this include purchasing futures
contracts, writing put options, and purchasing call options. When the Portfolio
wishes to sell securities, because of shareholder redemptions or otherwise, it
may use stock index futures or options to hedge against market risk until the
sale can be completed. These strategies could include selling futures contracts,
writing call options, and purchasing put options.
The Adviser will choose among futures and options strategies based on its
judgment of how best to meet the Portfolio's goals. In selecting futures and
options, the Adviser will assess such factors as current and anticipated stock
prices, relative liquidity and price levels in the options and futures markets
compared to the securities markets, and the Portfolio's cash flow and cash
management needs. If the Adviser judges these factors incorrectly, or if price
changes in the Portfolio's futures and options positions are not well correlated
with those of its other investments, the Portfolio could be hindered in the
pursuit of its objective and could suffer losses. The Portfolio could also be
exposed to risk if it could not close out its futures or options positions
because of an illiquid secondary market. A description of the futures and
options that the Portfolio may use and some of their associated risks is found
under "Risk Factors."
The Portfolio intends to stay invested in the securities described above to the
extent practical in light of its objective and long-term investment perspective.
However, the Portfolio's assets may be invested in short-term instruments with
remaining maturities of 397 calendar days or less to meet anticipated
redemptions and expenses or for day-to-day operating purposes. Short-term
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instruments consist of: (1) short-term obligations of the U.S. Government, its
agencies, instrumentalities, authorities or political subdivisions; (2) other
short-term debt securities rated Aa or higher by Moody's Investors Service, Inc.
("Moody's") or AA or higher by Standard & Poor's Corporation ("S&P") or, if
unrated, of comparable quality in the opinion of the Adviser; (3) commercial
paper; (4) bank obligations, including negotiable certificates of deposit, time
deposits and bankers' acceptances; and (5) repurchase agreements. At the time
the Portfolio invests in commercial paper, bank obligations or repurchase
agreements, the issuer or the issuer's parent must have outstanding debt rated
Aa or higher by Moody's or AA or higher by S&P or outstanding commercial paper
or bank obligations rated Prime-1 by Moody's or A-1 by S&P; or, if no such
ratings are available, the instrument must be of comparable quality in the
opinion of the Adviser.
The ability of the Fund and the Portfolio to meet their investment objective
depends to some extent on the cash flow experienced by the Fund and by the other
investors in the Portfolio, since investments and redemptions by shareholders of
the Fund will generally require the Portfolio to purchase or sell securities.
The Adviser will make investment changes to accommodate cash flow in an attempt
to maintain the similarity of the Portfolio to the S&P 500. The S&P 500 is a
hypothetical number which does not take into account brokerage commissions and
other costs of investing, unlike the Portfolio which must bear these costs.
Finally, since the Portfolio seeks to track the S&P 500, the Adviser generally
will not attempt to judge the merits of any particular stock as an investment.
About the S&P 500
The S&P 500 is a well-known stock market index that includes common stocks of
500 companies from several industrial sectors representing a significant portion
of the market value of all common stocks publicly traded in the United States,
most of which are listed on the New York Stock Exchange Inc. Through a broadly-
diversified portfolio consisting of S&P 500 companies, the Fund's performance is
expected to track the overall performance of the U.S. stock market, as
characterized by the S&P 500. The Adviser believes that the performance of the
S&P 500 is representative of the performance of publicly traded United States
common stocks in general. Stocks in the S&P 500 are weighted according to their
market capitalization (i.e., the number of shares outstanding multiplied by the
stock's current price). The composition of the S&P 500 is determined by S&P and
is based on such factors as the market capitalization and trading activity of
each stock and its adequacy as a representation of stocks in a particular
industry group, and may be changed from time to time.
Neither the Fund nor the Portfolio is sponsored, endorsed, sold or promoted by
S&P. S&P makes no representation or warranty, express or implied, to the
shareholders of the Fund or the Portfolio or any member of the public regarding
the advisability of investing in securities generally or in the Fund and the
Portfolio particularly or the ability of the S&P 500 to track general stock
market performance. S&P's only relationship to the Fund or the Portfolio is the
licensing of certain trademarks and trade names of S&P and the S&P 500, which is
determined, composed and calculated by S&P without regard to the Fund or the
Portfolio. S&P does not guarantee the accuracy and/or the completeness of the
S&P 500 or any data included therein. S&P makes no warranty, express or implied,
as to the results to be obtained by the Fund or the Portfolio, shareowners of
the Fund or the Portfolio, or any other person or entity from the use of the S&P
500 or any data included therein. S&P hereby expressly disclaims all such
warranties of merchantability or fitness for a particular purpose or use with
respect to the S&P 500 or any data included therein.
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Why invest in the Fund?
The Fund offers investors a low cost, easy way to participate in a broad array
of U.S. exchange traded common stocks, including those of well established "blue
chip" companies. The Fund, through the Portfolio, follows a "passive" investment
approach, attempting to simply match -- not outperform -- the total return,
before expenses, of the S&P 500 Index, a commonly accepted benchmark of U.S.
stock market performance. The Fund should have lower operating expenses than
many "actively-managed" funds and lower average portfolio turnover as well,
helping control transaction costs and the need for capital gains distributions.
While generally considered a conservative investment, the Fund does entail stock
market risk. As such, it should be considered only as a long-term investment and
only part of a well-balanced personal portfolio. The Fund's share price and
returns will fluctuate -- up and down -- with changes in levels of the U.S.
stock market, which, in turn, is influenced by economic and other factors. The
stock market can rise or fall sharply over a short period, although its returns
have bested the U.S. inflation rate over time.
Additional information about policies and investments
Investment restrictions
The Portfolio and the Fund have each adopted certain fundamental policies which
may not be changed without a vote of shareholders.
The Portfolio and the Fund will not invest more than 25% of its assets in the
securities of issuers in any one industry. In the unlikely event that the S&P
500 should concentrate to an extent greater than this amount, the Portfolio's
ability to achieve its investment objective may be impaired. As a diversified
fund, no more than 5% of the assets of the Portfolio and the Fund may be
invested in the securities of any one issuer (other than U.S. Government
securities), except that up to 25% of the Portfolio's and the Fund's assets may
be invested without regard to this limitation.
The Portfolio and the Fund also comply with the following restriction which is
deemed to be nonfundamental. No more than 15% of the Portfolio's and the Fund's
net assets may be invested in illiquid or not readily marketable securities
(including repurchase agreements and time deposits with remaining maturities of
more than seven days.)
A complete description of these and other policies and restrictions of the
Portfolio and the Fund is contained under "Investment Restrictions" in the
Fund's Statement of Additional Information.
Repurchase agreements
As a means of earning income for periods as short as overnight, the Portfolio
may enter into repurchase agreements with selected banks and broker/dealers.
Under a repurchase agreement, the Portfolio acquires securities, subject to the
seller's agreement to repurchase them at a specified time and price.
Securities lending
The Portfolio may lend up to 30% of the total value of its portfolio securities.
Loans of portfolio securities will be secured continuously by cash or equivalent
collateral or by a letter of credit maintained at all times in an amount at
least equal to the market value of the loaned securities plus accrued income.
The Portfolio will earn any interest or dividends paid on the loaned securities.
When-issued and delayed delivery securities
The Portfolio may purchase securities on a when-issued or delayed delivery
basis, for payment and delivery at a later date. The price and yield are
generally fixed on the date of commitment to purchase. During the period between
purchase and settlement, no interest accrues to the Portfolio.
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Investment company securities
Securities of other investment companies may be acquired by the Portfolio to the
extent permitted under the Investment Company Act of 1940 (the "1940 Act"), that
is, the Portfolio may invest a maximum of up to 10% of its total assets in
securities of other investment companies so long as not more than 3% of the
total outstanding voting stock of any one investment company is held by the
Portfolio. In addition, not more than 5% of the Portfolio's total assets may be
invested in the securities of any one investment company. The Portfolio may be
permitted to exceed these limitations by an exemptive order of the Securities
and Exchange Commission (the "SEC"). Investment companies incur certain expenses
such as management, custodian, and transfer agency fees, and, therefore, any
investment by the Portfolio in shares of other investment companies would be
subject to such duplicate expenses.
Derivatives
The Portfolio may invest in stock index futures and options thereon which are
commonly known as derivatives. Generally, a derivative is a financial
arrangement, the value of which is based on, or "derived" from, a traditional
security, asset or market index. Some "derivatives" such as mortgage-related and
other asset-backed securities are in many respects like any other investment,
although they may be more volatile or less liquid than more traditional debt
securities. There are, in fact, many different types of derivatives and many
different ways to use them. There are a range of risks associated with those
uses. Futures and options are commonly used for traditional hedging purposes to
attempt to protect a fund from exposure to changing interest rates, securities
prices or currency exchange rates and for cash management purposes as a low cost
method of gaining exposure to a particular securities market without investing
directly in those securities. The Adviser will only use derivatives for cash
management purposes. Derivatives will not be used to increase portfolio risk
above the level that could be achieved using only traditional investment
securities or to acquire exposure to changes in the value of assets or indices
that by themselves would not be purchased for the Portfolio.
Options on stock indices
The Portfolio may purchase and write put and call options on stock indices
listed on stock exchanges. A stock index fluctuates with changes in the market
values of the stocks included in the index.
Options on stock indices are generally similar to options on stock except that
the delivery requirements are different. Instead of giving the right to take or
make delivery of stock at a specified price, an option on a stock index gives
the holder the right to receive a cash "exercise settlement amount" equal to (a)
the amount, if any, by which the fixed exercise price of the option exceeds (in
the case of a put) or is less than (in the case of a call) the closing value of
the underlying index on the date of exercise, multiplied by (b) a fixed "index
multiplier." Receipt of this cash amount will depend upon the closing level of
the stock index upon which the option is based being greater than, in the case
of a call, or less than, in the case of a put, the exercise price of the option.
The amount of cash received will be equal to such difference between the closing
price of the index and the exercise price of the option expressed in dollars
times a specified multiple. The writer of the option is obligated, in return for
the premium received, to make delivery of this amount. The writer may offset its
position in stock index options prior to expiration by entering into a closing
transaction on an exchange or the option may expire unexercised.
Futures contracts on stock indices
The Portfolio may enter into contracts providing for the making and acceptance
of a cash settlement based upon changes in the value of an index of securities
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("Futures Contracts"). This investment technique is designed only to hedge
against anticipated future changes in general market prices which otherwise
might either adversely affect the value of securities held by the Portfolio or
adversely affect the prices of securities which are intended to be purchased at
a later date for the Portfolio. A Futures Contract may also be entered into to
close out or offset an existing futures position.
In general, each transaction in Futures Contracts involves the establishment of
a position which will move in a direction opposite to that of the investment
being hedged. If these hedging transactions are successful, the futures
positions taken for the Portfolio will rise in value by an amount which
approximately offsets the decline in value of the portion of the Portfolio's
investments that are being hedged. Should general market prices move in an
unexpected manner, the full anticipated benefits of Futures Contracts may not be
achieved or a loss may be realized.
Options on futures contracts
The Portfolio may invest in options on such Futures Contracts for similar
purposes.
Asset coverage
The Portfolio will cover the Portfolio's transactions in futures and related
options, as well as in when-issued and delayed delivery, as required under
applicable interpretations of the SEC, either by owning the underlying
securities or by segregating liquid assets with the Portfolio's Custodian in an
amount at all times equal to or exceeding the Portfolio's commitment with
respect to these instruments or contracts.
Portfolio turnover
The frequency of portfolio transactions, the Portfolio's turnover rate, will
vary from year to year depending on market conditions and the Portfolio's cash
flows. The Portfolio's annual turnover rate is not expected to exceed 100%. The
Portfolio's turnover rates for the years ended December 31, 1996 and 1995 were
15% and 6%, respectively.
Risk factors
Stock volatility. The stock market can rise and fall--sometimes quite
dramatically over a short period of time. The U.S. stock market tends to be
cyclical, with periods when stock prices generally rise and periods when prices
generally decline.
Repurchase agreements. In the event of the bankruptcy of the other party to a
repurchase agreement, the Portfolio could experience delays and costs in
recovering either its cash or selling the securities subject to the repurchase
agreement. To the extent that, in the meantime, the value of the securities
repurchased had decreased or the value of the securities had increased, the
Portfolio could experience a loss.
Securities lending. By lending its securities, the Portfolio can increase its
income by continuing to receive income on the loaned securities as well as by
the opportunity to receive interest on the collateral. During the term of the
loan, the Portfolio continues to bear the risk of fluctuations in the price of
the loaned securities. In lending securities to brokers, dealers and other
financial organizations, the Portfolio is subject to risk which, like those
associated with other extensions of credit, includes delays in recovery and
possible loss of rights in the securities lent should the borrower fail
financially.
When-issued and delayed delivery securities. Delivery of and payment for these
securities may take place as long as a month or more after the date of the
purchase commitment. The value of these securities is subject to market
fluctuation during this period and no income accrues to the Portfolio until
settlement takes place. The Portfolio segregates with the Custodian liquid
securities in an amount at least equal to these commitments. When entering into
a when-issued or delayed delivery transaction, the Portfolio will rely on the
other party to consummate the transaction; if the other party fails to do so,
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the Portfolio may be disadvantaged.
Options on stock indices. Because the value of an index option depends upon
movements in the level of the index rather than the price of a particular stock,
whether the Portfolio will realize a gain or loss from the purchase or writing
of options on an index depends upon movements in the level of stock prices in
the stock market generally or, in the case of certain indices, in an industry or
market segment, rather than movements in the price of a particular stock.
Accordingly, successful use by the Portfolio of options on stock indices will be
subject to the Adviser's ability to predict correctly movements in the direction
of the stock market generally or of a particular industry. This requires
different skills and techniques than predicting changes in the price of
individual stocks.
Futures contracts on stock indices. Although Futures Contracts would be entered
into for hedging purposes only, such transactions do involve certain risks.
These risks could include a lack of correlation between the Futures Contracts
and the equity market, a potential lack of liquidity in the secondary market and
incorrect assessments of market trends which may result in poorer overall
performance than if a Futures Contract had not been entered into.
Brokerage costs will be incurred and "margin" will be required to be posted and
maintained as a good-faith deposit against performance of obligations under
Futures Contracts written for the Portfolio. The Portfolio may not purchase or
sell a Futures Contract or options thereon if immediately thereafter its margin
deposits on its outstanding Futures Contracts and its premium paid on
outstanding options thereon would exceed 5% of the market value of the
Portfolio's total assets.
Illiquid and restricted securities. The absence of a trading market can make it
difficult to ascertain a market value for illiquid securities. Disposing of
illiquid securities may involve time-consuming negotiation and legal expenses,
and it may be difficult or impossible for the Portfolio to sell them promptly at
an acceptable price.
Derivatives. 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 transactions could result in losses greater than if they
had not been used. 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 Portfolio creates the possibility that losses on the hedging
instrument may be greater than gains in the value of the Portfolio'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 Portfolio 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 derivatives would reduce net
asset value, and possibly income, and such losses can be greater than if the
derivatives had not been utilized. The various derivatives that the Portfolio
may use and some of their risks are described more fully in the Fund's Statement
of Additional Information.
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Special Information Concerning the Master-feeder Fund Structure
Unlike other mutual funds which directly acquire and manage their own portfolio
securities, the Fund seeks to achieve its investment objective by investing
substantially all of its assets in the Portfolio, a separate registered
investment company with the same investment objective as the Fund. Therefore, an
investor's interest in the Portfolio's securities is indirect. In addition to
selling a beneficial interest to the Fund, the Portfolio may sell beneficial
interests to other mutual funds or institutional investors. Such investors will
invest in the Portfolio under the same terms and conditions as the Fund, and
will also pay a proportionate share of the Portfolio's expenses. However, the
other investors investing in the Portfolio are not required to sell their shares
at the same public offering price as the Fund due to variations in and possible
assessment of sales commissions. Therefore, investors in the Fund should be
aware that these differences may result in differences in returns experienced by
investors in the different funds that invest in the Portfolio. Information
regarding other investors in the Portfolio is available from Bankers Trust at
1-800-368-4031.
Smaller funds or investors investing in the Portfolio may be materially affected
by the actions of larger funds or investors investing in the Portfolio. For
example, if a large fund withdraws from the Portfolio, the remaining funds may
experience higher pro-rata operating expenses, thereby producing lower returns
(however, this possibility exists as well for traditionally-structured funds
which have large institutional investors). Additionally, the Portfolio may
become less diverse, resulting in increased portfolio risk. Also, funds or
investors with a greater pro-rata ownership in the Portfolio could have
effective voting control over the operation of the Portfolio.
Except as permitted by the SEC, whenever the Fund is requested to vote on
matters pertaining to the Portfolio, the Fund will hold a meeting of its
shareholders and will cast all of its votes in the same proportion as the votes
of its shareholders. The percentage of the Trust's votes representing the Fund's
shareholders not voting will be voted by the Trustees or officers of the Trust
in the same proportion as the Fund's shareholders who do, in fact, vote.
Certain changes in the Portfolio's investment objective, policies or
restrictions may require the Fund to withdraw its interest in the Portfolio. Any
such withdrawal could result in a distribution "in kind" of portfolio securities
(as opposed to a cash distribution). If securities are distributed, the Fund
generally would incur brokerage, tax or other charges in converting the
securities to cash. In addition, the distribution in kind may result in a less
diversified portfolio of investments or adversely affect the liquidity of the
Fund.
The Fund may withdraw its investment from the Portfolio at any time, if the
Board of Trustees of the Trust determines that it is in the best interest of the
shareholders of the Fund to do so. Upon any such withdrawal, Scudder would
become responsible for directly managing the assets of the Fund. In addition,
the Board of Trustees of the Trust may consider other actions that might be
taken, including the investment of all of the assets of the Fund in another
pooled investment entity having the same investment objective as the Fund.
Operating expenses
The Fund bears its own expenses. Operating expenses for the Fund generally
consist of all costs not specifically borne by Scudder or the Adviser, including
fees for necessary professional services, fees for administrative services
performed by the Manager, and costs associated with regulatory compliance and
maintaining legal existence and shareholder relations.
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The Portfolio bears its own expenses. Operating expenses for the Portfolio
generally consist of all costs not specifically borne by the Adviser, including
investment advisory and administrative and service fees, fees for necessary
professional services, the costs associated with regulatory compliance and
maintaining legal existence and investor relations.
Distribution and performance information
Dividends and capital gains distributions
The Fund intends to distribute any dividends from its net investment income
quarterly in April, July, October and December. The Fund intends to distribute
net realized capital gains after utilization of capital loss carryforwards, if
any, in November or December to prevent application of a federal excise tax. An
additional distribution may be made at a later date, if necessary. Any dividends
or capital gains distributions declared in October, November or December with a
record date in such 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.
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
shares. Short-term capital gains and any other taxable income distributions are
taxable as ordinary income. A portion of dividends from ordinary income may
qualify for the dividends-received deduction for corporations.
The Fund sends detailed tax information to its shareholders about the amount and
type of its distributions by January 31 of the following year.
Performance information
From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature or shareholder reports. All performance figures
are historical, show the performance of a hypothetical investment and are not
intended to indicate future performance. "Total return" is the change in value
of an investment in the Fund for a specified period. The "average annual total
return" of the Fund is the average annual compound rate of return of an
investment in the Fund assuming the investment has been held for one year, 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. "Capital change" measures return from capital, including
reinvestment of any capital gains distributions but does not include the
reinvestment of dividends. Performance will vary based upon, among other things,
changes in market conditions and the level of the Fund's expenses.
Fund and Portfolio organization
Scudder S&P 500 Index Fund is a diversified series of Scudder Investment Trust,
an open-end management investment company registered under the 1940 Act. The
Trust, formerly known as Scudder Growth and Income Fund, was organized as a
Massachusetts business trust in September, 1984, and on December 31, 1984,
assumed the business of its predecessor, which was organized as a Massachusetts
corporation in May, 1929.
The Portfolio, in which substantially all the assets of the Fund will be
invested, is organized as a trust under the laws of the State of New York. The
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Portfolio's Declaration of Trust provides that the Fund and other entities
investing in the Portfolio (other investment companies, insurance company
separate accounts, and common and commingled trust funds) will each be liable
for all obligations of the Portfolio. However, the risk of the Fund's incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance exists and the Portfolio itself was unable to meet its
obligations. Accordingly, the Trust's Trustees believe that neither the Fund nor
its shareholders will in the ordinary course be adversely affected by reason of
the Fund's investing in the Portfolio.
The Fund's activities are supervised by the Trust's Board of Trustees, while the
activities of the Portfolio are subject to the supervision of its Board of
Trustees. No Trustee of the Trust also serves as a Trustee of the Portfolio.
Shareholders of the Fund have one vote for each share held on matters on which
they are entitled to vote. The Trust is not required to and has no current
intention of holding annual shareholder meetings, although special meetings may
be called for purposes such as electing or removing Trustees, changing
fundamental investment policies or approving an investment advisory 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 Manager and Administrator
for the Fund
The Fund retains the investment management firm of Scudder, Stevens & Clark,
Inc., a Delaware corporation, as investment manager to the Fund pursuant to an
investment management agreement dated August 29, 1997, to monitor the Fund's
investments in the Portfolio subject to the authority of and supervision by the
Trust's Board of Trustees. Under an Administrative Services Agreement, the
Manager provides shareholder services, administration and distribution
assistance. The Manager receives a fee of 0.10% of the Fund's average daily net
assets, accrued daily and paid monthly. Until May 1, 1998, the Manager has
agreed to reimburse expenses to the extent necessary so that total annualized
expenses of the Fund do not exceed 0.40% of average daily net assets.
Currently, Scudder monitors the Fund's investments in the Portfolio but does not
actively participate in the investment process for the Fund. However, in the
event the Board of Trustees determines it is in the best interests of the Fund's
shareholders to withdraw its investment in the Portfolio, Scudder would become
responsible for directly managing the assets of the Fund. In such event, the
Fund would pay Scudder an annual fee of 0.15% of the Fund's average daily net
assets, accrued daily and paid monthly.
Scudder, Stevens & Clark, Inc. is located at Two International Place, Boston,
Massachusetts.
Scudder has entered into an agreement with Zurich Insurance Company ("Zurich"),
an international insurance and financial services organization, pursuant to
which Scudder will form a new global investment organization by combining with
Zurich's subsidiary, Zurich Kemper Investments, Inc., and change its name to
Scudder Kemper Investments, Inc. After the transaction is completed, Zurich will
own approximately 70% of the new organization with the balance owned by the new
organization's officers and employees.
Consummation of the transaction is subject to a number of contingencies,
including regulatory approvals. The transaction is expected to close in the
fourth quarter of 1997. Upon consummation of the transaction the investment
management agreement with Scudder, Stevens & Clark, Inc., will terminate. The
Trustees have approved an investment management agreement with Scudder Kemper
Investments, Inc. which is substantially identical to the current investment
management agreement to become effective upon the termination of the current
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investment management agreement.
Investment Adviser and Administrator
for the Portfolio
The Portfolio has retained the services of Bankers Trust Company as investment
adviser.
Bankers Trust Company, a New York banking corporation with principal offices at
130 Liberty Avenue, New York, New York 10016, is a wholly owned subsidiary of
Bankers Trust New York Corporation. The Adviser is a worldwide merchant bank
that conducts a variety of general banking and trust activities and is a major
wholesale supplier of financial services to the international and domestic
institutional markets.
The Adviser is dedicated to servicing the needs of corporations, governments,
financial institutions and private clients. Investment management is a core
business of the Adviser, built on a tradition of excellence from its roots as a
trust bank founded in 1903. The Adviser is one of the nation's largest and most
experienced investment managers, with approximately $227 billion in assets under
management globally. Of that total, approximately $92 billion are in U.S. equity
index assets. This makes the Adviser one of the nation's leading managers of
index funds.
The Adviser has been advised by its counsel that, in counsel's opinion, the
Adviser currently may perform the services for the Portfolio described in this
Prospectus and the Statement of Additional Information without violation of the
Glass-Steagall Act or other applicable banking laws or regulations. State laws
on this issue may differ from the interpretations of relevant federal law and
banks and financial institutions may be required to register as dealers pursuant
to state securities laws.
The Adviser, subject to the supervision and direction of the Board of Trustees
of the Portfolio, manages the Portfolio in accordance with the Portfolio's
investment objective and stated investment policies, makes investment decisions
for the Portfolio, places orders to purchase and sell securities and other
financial instruments on behalf of the Portfolio, and employs professional
investment managers and securities analysts who provide research services to the
Portfolio. The Adviser may utilize the expertise of any of its worldwide
subsidiaries and affiliates to assist in its role as investment adviser. All
orders for investment transactions on behalf of the Portfolio are placed by the
Adviser with broker-dealers and other financial intermediaries that it selects,
including those affiliated with the Adviser. A Bankers Trust Company affiliate
will be used in connection with a purchase or sale of an investment for the
Portfolio only if the Adviser believes that the affiliate's charge for the
transaction does not exceed usual and customary levels. The Portfolio will not
invest in obligations for which the Adviser or any of its affiliates is the
ultimate obligor or accepting bank. The Portfolio may, however, invest in the
obligations of correspondents and customers of the Adviser.
Under its Investment Advisory Agreement, the Adviser receives a fee from the
Portfolio, computed daily and paid monthly, at the annual rate of 0.10% of the
average daily net assets of the Portfolio.
Under an Administration and Services Agreement with the Portfolio, Bankers Trust
generally assists the Board of Trustees in all aspects of the administration and
operation of the Portfolio. The Administration and Services Agreement provides
for the Portfolio to pay Bankers Trust a fee, computed daily and paid monthly,
at the rate of 0.05% of the average daily net assets of the Portfolio. Under the
Administration and Services Agreement, Bankers Trust may delegate one or more of
its responsibilities to others, including affiliates of Edgewood Services, Inc.,
at Bankers Trust's expense.
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The Adviser has agreed to waive and reimburse expenses of the Portfolio, to the
extent necessary, to limit expenses to 0.08% of the average daily net assets of
the Portfolio.
Transfer agent
Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts 02107-2291, a
subsidiary of Scudder, is the transfer, shareholder servicing and
dividend-paying agent for the Fund.
Underwriter
Scudder Investor Services, Inc., a subsidiary of Scudder, 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.
Accounting agent
Under an Investment Accounting Agreement with the Fund, Bankers Trust (or its
agent), is responsible for determining the daily net asset value per share and
maintaining the general accounting records of the Fund. Under the Administration
and Services Agreement with the Portfolio described above, Bankers Trust
calculates the value of the assets of the Portfolio.
Custodian
Bankers Trust Company serves as custodian of the Portfolio's assets and State
Street Bank and Trust Company serves as custodian of the Fund's assets.
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
15
<PAGE>
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 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.
16
<PAGE>
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 SEC. 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.
Bankers Trust 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 (i.e., the value of its investment in the Portfolio
and other 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.
17
<PAGE>
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 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 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 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 share balance requirements. A
shareholder may open an account with at least $1,000, if an automatic investment
plan of $100/month is established.
Shareholders who maintain a non-fiduciary account balance of less than $2,500 in
the Fund, without establishing an automatic investment plan, will be assessed an
annual $10.00 per fund charge with the fee to be paid to the Fund. The $10.00
charge will not apply to shareholders with a combined household account balance
in any of the Scudder Funds of $25,000 or more. The Fund reserves the right,
following 60 days' written notice to shareholders, to redeem all shares in
accounts below $250, including accounts of new investors, where a reduction in
value has occurred due to a redemption or exchange out of the account. The Fund
will mail the proceeds of the redeemed account to the shareholder. Reductions in
value that result solely from market activity will not trigger an involuntary
redemption. Retirement accounts and certain other accounts will not be assessed
the $10.00 charge or be subject to automatic liquidation. Please refer to
"Exchanges and Redemptions--Other Information" in the Fund's Statement of
Additional Information for more information.
Third party transactions
If purchases and redemptions of Fund shares are arranged and settlement is made
at an investor's election through a member of the National Association of
Securities Dealers, Inc., other than Scudder Investor Services, Inc., that
member may, at its discretion, charge a fee for that service.
Redemption-in-kind
The Fund reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase order by making
18
<PAGE>
payment in whole or in part in readily marketable securities chosen by the Fund
and valued as they are for purposes of computing the Fund's net asset value (a
redemption-in-kind). If payment is made in securities, a shareholder may incur
transaction expenses in converting these securities to cash.
Shareholder benefits
Experienced professional management
Professional management is an important advantage for investors who do not have
the time or expertise to invest directly in individual securities.
Mr. Frank Salerno, Managing Director of the Adviser, is responsible for the
day-to-day management of the Portfolio. Mr. Salerno has been employed at Bankers
Trust Company since 1981 and has managed the Portfolio's assets since the
Portfolio commenced operations in December 1992.
SAIL(TM)--Scudder Automated Information Line
For personalized account information including fund prices, yields and account
balances, to perform transactions in existing Scudder fund accounts, or to
obtain information on any Scudder fund, shareholders can call Scudder's
Automated Information Line (SAIL) at 1-800-343-2890, 24 hours a day. During
periods of extreme economic or market changes, or other conditions, it may be
difficult for you to effect telephone transactions in your account. In such an
event you should write to the Fund; please see "How to contact Scudder" for the
address.
Investment flexibility
Scudder offers toll-free telephone exchange between funds at current net asset
value. You can move your investments among money market, income, growth,
tax-free and growth and income funds with a simple toll-free call or, if you
prefer, by sending your instructions through the mail or by fax. 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.
19
<PAGE>
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.
20
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Purchases
Opening
an account Minimum initial investment: $2,500; IRAs $1,000
Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums.
See appropriate plan literature.
o By Mail Send your completed and signed application and check
Make checks
payable to "The
Scudder Funds."
by regular mail to: or by express, registered,
or certified mail to:
The Scudder Funds Scudder Shareholder Service
P.O. Box 2291 Center
Boston, MA 42 Longwater Drive
02107-2291 Norwell, MA
02061-1612
o By Wire Please see Transaction information--Purchasing shares-- By
wire for details, including the ABA wire transfer number. Then call
1-800-225-5163 for instructions.
o In Person Visit one of our Investor Centers to complete your application with the
help of a Scudder representative. Investor Center locations are listed
under Shareholder benefits.
-----------------------------------------------------------------------------------------------------------------------
Purchasing 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
($50 minimum) 1-800-225-5163 for more information and an enrollment form.
21
<PAGE>
Exchanges and redemptions
Exchanging Minimum investments: $2,500 to establish a new account;
shares $100 to exchange among existing accounts
o By Telephone To speak with a service representative, call 1-800-225-5163 from
8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day).
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 shares o By Telephone To speak with a service representative, call 1-800-225-5163 from 8 a.m. to 8 p.m.
eastern time or to access SAIL(TM), Scudder's Automated Information Line, call
1-800-343-2890 (24 hours a day). You may have redemption proceeds sent to your
predesignated bank account, or redemption proceeds of up to $100,000 sent to your
address of record.
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 1-800-225-5163
Withdrawal for more information and an enrollment form.
Plan
</TABLE>
22
<PAGE>
Scudder tax-advantaged retirement plans
Scudder offers a variety of tax-advantaged retirement plans for individuals,
businesses and non-profit organizations. These flexible plans are designed for
use with the Scudder Family of Funds (except Scudder tax-free funds, which are
inappropriate for such plans). Scudder Funds offer a broad range of investment
objectives and can be used to seek almost any investment goal. Using Scudder's
retirement plans can help shareholders save on current taxes while building
their retirement savings.
o Scudder No-Fee IRAs. These retirement plans allow a maximum annual
contribution of up to $2,000 per person for anyone with earned income (up
to $2,000 per individual for married couples if only one spouse has earned
income). Many people can deduct all or part of their contributions from
their taxable income, and all investment earnings accrue on a tax-deferred
basis. The Scudder No-Fee IRA charges you no annual custodial fee.
o 401(k) Plans. 401(k) plans allow employers and employees to make
tax-deductible retirement contributions. Scudder offers a full service
program that includes recordkeeping, prototype plan, employee
communications and trustee services, as well as investment options.
o Profit Sharing and Money Purchase Pension Plans. These plans allow
corporations, partnerships and people who are self-employed to make annual,
tax-deductible contributions of up to $30,000 for each person covered by
the plans. Plans may be adopted individually or paired to maximize
contributions. These are sometimes known as Keogh plans. The Scudder Keogh
charges you no annual custodial fee.
o 403(b) Plans. Retirement plans for tax-exempt organizations and school
systems to which employers and employees may both contribute.
o SEP-IRAs. Easily administered retirement plans for small businesses and
self-employed individuals. The maximum annual contribution to SEP-IRA
accounts is adjusted each year for inflation. The Scudder SEP-IRA charges
you no annual custodial fee.
o Scudder Horizon Plan. A no-load variable annuity that lets you build assets
by deferring taxes on your investment earnings. You can start with $2,500
or more.
Scudder Trust Company (an affiliate of Scudder) 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.
23
<PAGE>
Trustees and Officers of the Fund
Daniel Pierce*
President and Trustee
Henry P. Becton, Jr.
Trustee; President and General Manager, WGBH Educational Foundation
George M. Lovejoy, Jr.
Trustee; President and Director, Fifty Associates
Wesley W. Marple, Jr.
Trustee; Professor of Business Administration, Northeastern University
Kathryn L. Quirk*
Trustee
Jean C. Tempel
Trustee; General Partner, TL Ventures
Bruce F. Beaty*
Vice President
William F. Gadsden
Vice President
Jerard K. Hartman*
Vice President
Robert T. Hoffman*
Vice President
Thomas W. Joseph*
Vice President
David S. Lee*
Vice President
Valerie F. Malter*
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.
24
<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.
25
<PAGE>
<TABLE>
<CAPTION>
How to contact Scudder
Account Service and Information:
<S> <C>
For existing account service and transactions
Scudder Investor Relations -- 1-800-225-5163
For 24 hour account information, fund information, exchanges, and an
overview of all the services available to you
Scudder Electronic Account Services -- http://funds.scudder.com
For personalized information about your Scudder accounts, exchanges and redemptions
Scudder Automated Information Line (SAIL) -- 1-800-343-2890
Investment Information:
For information about the Scudder funds, including additional
applications and prospectuses, or for answers to investment questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services -- 1-800-323-6105
Scudder Brokerage Services:
To receive information about this discount brokerage service and to obtain an application
Scudder Brokerage Services* -- 1-800-700-0820
Personal Counsel(SM) -- A Managed Fund Portfolio Program:
To receive information about this mutual fund portfolio guidance and management program
Personal Counsel from Scudder -- 1-800-700-0183
Please address all correspondence to:
The Scudder Funds
P.O. Box 2291
Boston, Massachusetts
02107-2291
Or Stop by a Scudder Investor Center:
Many shareholders enjoy the personal, one-on-one service of the Scudder
Investor Centers. Check for an Investor Center near you--they can be
found in the following cities:
Boca Raton Chicago San Francisco
Boston New York
Scudder Investor Relations and Scudder Investor Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA
02061--Member NASD/SIPC.
</TABLE>
26
<PAGE>
SCUDDER S&P 500 INDEX FUND
A Pure No-Load(TM) (No Sales Charges) Mutual Fund
seeking 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
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
August 29, 1997
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Prospectus of Scudder S&P 500 Index Fund dated
August 29, 1997, as amended from time to time, a copy of which may be obtained
without charge by writing to Scudder Investor Services, Inc., Two International
Place, Boston, Massachusetts 02110-4103.
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TABLE OF CONTENTS
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THE FUND'S INVESTMENT OBJECTIVE AND POLICIES..........................................................................1
General Investment Objective and Policies....................................................................1
Investments and Investment Techniques........................................................................1
Rating Services..............................................................................................4
Investment Restrictions......................................................................................4
Other Investment Policies....................................................................................5
PURCHASES.............................................................................................................8
Additional Information About Opening An Account..............................................................8
Additional Information About Making Subsequent Investments...................................................8
Additional Information About Making Subsequent Investments by QuickBuy.......................................8
Checks.......................................................................................................9
Wire Transfer of Federal Funds...............................................................................9
Share Price..................................................................................................9
Share Certificates..........................................................................................10
Other Information...........................................................................................10
EXCHANGES AND REDEMPTIONS............................................................................................10
Exchanges...................................................................................................10
Redemption by Telephone.....................................................................................11
Redemption by QuickSell.....................................................................................12
Redemption by Mail or Fax...................................................................................12
Other Information...........................................................................................12
FEATURES AND SERVICES OFFERED BY THE FUND............................................................................13
The Pure No-Load(TM) Concept...................................................................................13
Internet access.............................................................................................14
Dividends and Capital Gain Distribution Options.............................................................15
Diversification.............................................................................................15
Scudder Investor Centers....................................................................................15
Reports to Shareholders.....................................................................................15
Transaction Summaries.......................................................................................16
THE SCUDDER FAMILY OF FUNDS..........................................................................................16
SPECIAL PLAN ACCOUNTS................................................................................................20
Scudder Retirement Plans: Profit-Sharing and Money Purchase Pension Plans
for Corporations and Self-Employed Individuals.........................................................20
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for Corporations and
Self-Employed Individuals..............................................................................21
Scudder IRA: Individual Retirement Account.................................................................21
Scudder 403(b) Plan.........................................................................................22
Automatic Withdrawal Plan...................................................................................22
Group or Salary Deduction Plan..............................................................................22
Automatic Investment Plan...................................................................................23
Uniform Transfers/Gifts to Minors Act.......................................................................23
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS............................................................................23
PERFORMANCE INFORMATION..............................................................................................23
Average Annual Total Return.................................................................................24
Cumulative Total Return.....................................................................................24
Total Return................................................................................................24
Capital Change..............................................................................................24
Comparison of Fund Performance..............................................................................24
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TABLE OF CONTENTS (continued)
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FUND ORGANIZATION....................................................................................................28
INVESTMENT MANAGER AND ADMINISTRATOR OF THE FUND.....................................................................29
Personal Investments by Employees of Scudder................................................................30
INVESTMENT ADVISER AND ADMINISTRATOR OF THE PORTFOLIO................................................................30
Banking Regulatory Matters..................................................................................31
Administrator...............................................................................................31
Personal Investments by Employees of Bankers Trust..........................................................32
TRUSTEES AND OFFICERS OF THE FUND....................................................................................32
REMUNERATION.........................................................................................................34
Responsibilities of the Board--Board and Committee Meetings..................................................34
Compensation of Officers and Trustees of the Fund...........................................................34
TRUSTEES AND OFFICERS OF THE PORTFOLIO...............................................................................35
REMUNERATION.........................................................................................................36
Control Persons and Principal Holders of Securities.........................................................36
Compensation of Officers and Trustees of the Portfolio......................................................37
DISTRIBUTOR..........................................................................................................37
TAXES................................................................................................................38
PORTFOLIO TRANSACTIONS...............................................................................................41
Brokerage Allocation And Other Practices....................................................................41
Portfolio Turnover..........................................................................................42
NET ASSET VALUE......................................................................................................42
ADDITIONAL INFORMATION...............................................................................................44
Experts.....................................................................................................44
Shareholder Indemnification.................................................................................44
Other Information...........................................................................................44
FINANCIAL STATEMENTS.................................................................................................45
APPENDIX A
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THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
(See "Investment objective and policies" and "Additional
information about policies and investments" in the Fund's prospectus.)
Scudder S&P 500 Index Fund (the "Fund"), a series of Scudder Investment
Trust (the "Trust"), is a pure no-load(TM), diversified, open-end management
investment company which continuously offers and redeems its shares. It is a
company of the type commonly known as a mutual fund.
General Investment Objective and Policies
The Fund's investment objective is to seek 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 ("S&P 500" or "Index"). As described in the
Prospectus, the Trust seeks to achieve the investment objective of the Fund by
investing substantially all of the investable assets of the Fund in an open-end
management investment company having the same investment objective as the Fund.
The investment company in which the Fund invests is the Equity 500 Index
Portfolio (the "Portfolio") advised by Bankers Trust Company ("Bankers Trust" or
the "Adviser"). The Fund retains the investment management firm of Scudder,
Stevens & Clark, Inc., a Delaware corporation ("Scudder" or the "Manager") as
investment manager to the Fund pursuant to an investment management agreement
dated August 29, 1997, to monitor the Fund's investments in the Portfolio
subject to the authority of and supervision by the Trust's Board of Trustees.
Since the investment characteristics of the Fund will correspond
directly with those of the Portfolio in which the Fund invests all of its
investable assets, the following includes a discussion of the various
investments of and techniques employed by the Portfolio.
Investments and Investment Techniques
Certificates Of Deposit And Bankers' Acceptances. Certificates of deposit are
receipts issued by a depository institution in exchange for the deposit of
funds. The issuer agrees to pay the amount deposited plus interest to the bearer
of the receipt on the date specified on the certificate. The certificate usually
can be traded in the secondary market prior to maturity. Bankers' acceptances
typically arise from short-term credit arrangements designed to enable
businesses to obtain funds to finance commercial transactions. Generally, an
acceptance is a time draft drawn on a bank by an exporter or an importer to
obtain a stated amount of funds to pay for specific merchandise. The draft is
then "accepted" by a bank that, in effect, unconditionally guarantees to pay the
face value of the instrument on its maturity date. The acceptance may then be
held by the accepting bank as an earning asset or it may be sold in the
secondary market at the going rate of discount for a specific maturity. Although
maturities for acceptances can be as long as 270 days, most acceptances have
maturities of six months or less.
Commercial Paper. Commercial paper consists of short-term (usually from 1 to 270
days) unsecured promissory notes issued by corporations in order to finance
their current operations. A variable amount master demand note (which is a type
of commercial paper) represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under a letter agreement between a
commercial paper issuer and an institutional lender pursuant to which the lender
may determine to invest varying amounts.
For a description of commercial paper ratings, see Appendix A.
Illiquid Securities. Historically, illiquid securities have included securities
subject to contractual or legal restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "1933 Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a remaining maturity of longer than seven calendar days. Securities which
have not been registered under the 1933 Act are referred to as private
placements or restricted securities and are purchased directly from the issuer
or in the secondary market. Mutual funds do not typically hold a significant
amount of these restricted or other illiquid securities because of the potential
for delays on resale and uncertainty in valuation. Limitations on resale may
have an adverse effect on the marketability of portfolio securities and a mutual
fund might be unable to dispose of restricted or other illiquid securities
promptly or at reasonable prices and might thereby experience difficulty
satisfying redemptions within seven days. A mutual fund might also have to
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register such restricted securities in order to dispose of them resulting in
additional expense and delay. Adverse market conditions could impede such a
public offering of securities.
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the 1933 Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale of such investments to the
general public or to certain institutions may not be indicative of their
liquidity.
Lending Of Portfolio Securities. The Portfolio has the authority to lend
portfolio securities to brokers, dealers and other financial organizations. The
Portfolio will not lend securities to Bankers Trust, as the Portfolio's
investment adviser, Edgewood Services, Inc. ("Edgewood") or their affiliates. By
lending its securities, the Portfolio can increase its income by continuing to
receive interest on the loaned securities as well as by either investing the
cash collateral in short-term securities or obtaining yield in the form of
interest paid by the borrower when U.S. Government obligations are used as
collateral. There may be risks of delay in receiving additional collateral or
risks of delay in recovery of the securities or even loss of rights in the
collateral should the borrower of the securities fail financially. The Portfolio
will adhere to the following conditions whenever its securities are loaned: (i)
the Portfolio must receive at least 100% cash collateral or equivalent
securities from the borrower; (ii) the borrower must increase this collateral
whenever the market value of the securities including accrued interest rises
above the level of the collateral; (iii) the Portfolio must be able to terminate
the loan at any time; (iv) the Portfolio must receive reasonable interest on the
loan, as well as any dividends, interest or other distributions on the loaned
securities, and any increase in market value; (v) the Portfolio may pay only
reasonable custodian fees in connection with the loan; and (vi) voting rights on
the loaned securities may pass to the borrower; provided, however, that if a
material event adversely affecting the investment occurs, the Board of Trustees
must terminate the loan and regain the voting rights of the securities.
Futures Contracts. The Portfolio may enter into contracts for the purchase or
sale for future delivery of securities. U.S. futures contracts have been
designed by exchanges which have been designated "contracts markets" by the
Commodity Futures Trading Commission ("CFTC"), and must be executed through a
futures commission merchant, or brokerage firm, which is a member of the
relevant contract market. Futures contracts trade on a number of exchange
markets, and, through their clearing corporations, the exchanges guarantee
performance of the contracts between the clearing members of the exchange.
At the same time a futures contract is purchased or sold, the Portfolio
must allocate cash or securities as a deposit payment ("initial deposit"). It is
expected that the initial deposit would be approximately 1 1/2% to 5% of a
contract's face value. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the Portfolio
would provide or receive cash that reflects any decline or increase in the
contract's value.
Although futures contracts by their terms call for the actual delivery
or acquisition of securities, in most cases the contractual obligation is
fulfilled before the date of the contract without having to make or take
delivery of the securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a commodities
exchange an identical futures contract calling for delivery in the same month.
Such a transaction, which is effected through a member of an exchange, cancels
the obligation to make or take delivery of the securities. Since all
transactions in the futures market are made, offset or fulfilled through a
clearinghouse associated with the exchange on which the contracts are traded,
the Portfolio will incur brokerage fees when it purchases or sells futures
contracts.
The ordinary spreads between prices in the cash and futures market, due
to differences in the nature of those markets, are subject to distortions.
First, all participants in the futures market are subject to initial deposit and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
cause temporary price distortions. Due to the possibility of distortion, a
correct forecast of general interest rate trends by the Adviser may still not
result in a successful transaction.
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In addition, futures contracts entail risks. Although the Adviser
believes that use of such contracts will benefit the Portfolio, if the Adviser's
investment judgment about the general direction of the Index is incorrect, the
Portfolio's overall performance would be poorer than if it had not entered into
any such contract. For example, if the Portfolio has hedged against the
possibility of a decrease in the Index which would adversely affect the value of
the securities held in its portfolio and securities prices increase instead, the
Portfolio will lose part or all of the benefit of the increased value of its
securities which it has hedged because it will have offsetting losses in its
futures positions. In addition, in such situations, if the Portfolio has
insufficient cash, it may have to sell securities from its portfolio to meet
daily variation margin requirements. Such sales of securities may be, but will
not necessarily be, at increased prices which reflect the rising market. The
Portfolio may have to sell securities at a time when it may be disadvantageous
to do so.
Options On Index Futures Contracts. The Portfolio may purchase and write options
on futures contracts with respect to the Index. The purchase of a call option on
an index futures contract is similar in some respects to the purchase of a call
option on such an index. Depending on the price of the option compared to either
the price of the futures contract upon which it is based or the price of the
underlying debt securities, it may or may not be less risky than ownership of
the futures contract or underlying securities. As with the purchase of futures
contracts, when the Portfolio is not fully invested it may purchase a call
option on an index futures contract to hedge against a market advance with
respect to the Index.
The writing of a call option on a futures contract with respect to the
Index constitutes a partial hedge against declining prices of the underlying
securities in the Index. If the futures price at expiration of the option is
below the exercise price, the Portfolio will retain the full amount of the
option premium which provides a partial hedge against any decline that may have
occurred in the Portfolio's holdings. The writing of a put option on an index
futures contract constitutes a partial hedge against increasing prices of the
underlying securities in the Index. If the futures price at expiration of the
option is higher than the exercise price, the Portfolio will retain the full
amount of the option premium which provides a partial hedge against any increase
in the price of securities which the Portfolio intends to purchase. If a put or
call option the Portfolio has written is exercised, the Portfolio will incur a
loss which will be reduced by the amount of the premium it receives. Depending
on the degree of correlation between changes in the value of its portfolio
securities and changes in the value of its futures positions, the Portfolio's
losses from existing options on futures may to some extent be reduced or
increased by changes in the value of portfolio securities.
The purchase of a put option on a futures contract with respect to the
Index is similar in some respects to the purchase of protective put options on
the Index. For example, the Portfolio may purchase a put option on an index
futures contract to hedge against the risk of lower securities values.
The amount of risk the Portfolio assumes when it purchases an option on
a futures contract with respect to the Index is the premium paid for the option
plus related transaction costs. In addition to the correlation risks discussed
above, the purchase of an option also entails the risk that changes in the value
of the underlying futures contract will not be fully reflected in the value of
the option purchased.
The Board of Trustees of the Portfolio has adopted the requirement that
index futures contracts and options on index futures contracts be used only for
cash management purposes. The Portfolio will not enter into any futures
contracts or options on futures contracts if immediately thereafter the amount
of margin deposits on all the futures contracts of the Portfolio and premiums
paid on outstanding options on futures contracts owned by the Portfolio would
exceed 5% of the market value of the total assets of the Portfolio.
Options On Securities Indexes. The Portfolio may write (sell) covered call and
put options to a limited extent on the Index ("covered options") in an attempt
to increase income. Such options give the holder the right to receive a cash
settlement during the term of the option based upon the difference between the
exercise price and the value of the Index. The Portfolio may forgo the benefits
of appreciation on the Index or may pay more than the market price of the Index
pursuant to call and put options written by the Portfolio.
By writing a covered call option, the Portfolio forgoes, in exchange
for the premium less the commission ("net premium"), the opportunity to profit
during the option period from an increase in the market value of the Index above
the exercise price. By writing a covered put option, the Portfolio, in exchange
for the net premium received, accepts the risk of a decline in the market value
of the Index below the exercise price.
The Portfolio may terminate its obligation as the writer of a call or
put option by purchasing an option with the same exercise price and expiration
date as the option previously written.
When the Portfolio writes an option, an amount equal to the net premium
received by the Portfolio is included in the liability section of the
Portfolio's Statement of Assets and Liabilities as a deferred credit. The amount
of the deferred credit will be subsequently marked to market to reflect the
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current market value of the option written. The current market value of a traded
option is the last sale price or, in the absence of a sale, the mean between the
closing bid and asked prices. If an option expires on its stipulated expiration
date or if the Portfolio enters into a closing purchase transaction, the
Portfolio will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the premium received when the option was sold), and the
deferred credit related to such option will be eliminated. If a call option is
exercised, the Portfolio will realize a gain or loss from the sale of the
underlying security and the proceeds of the sale will be increased by the
premium originally received. The writing of covered call options may be deemed
to involve the pledge of the securities against which the option is being
written. Securities against which call options are written will be segregated on
the books of the custodian for the Portfolio.
The Portfolio may purchase call and put options on the Index. The
Portfolio would normally purchase a call option in anticipation of an increase
in the market value of the Index. The purchase of a call option would entitle
the Portfolio, in exchange for the premium paid, to purchase the underlying
securities at a specified price during the option period. The Portfolio would
ordinarily have a gain if the value of the securities increased above the
exercise price sufficiently to cover the premium and would have a loss if the
value of the securities remained at or below the exercise price during the
option period.
The Portfolio would normally purchase put options in anticipation of a
decline in the market value of the Index ("protective puts"). The purchase of a
put option would entitle the Portfolio, in exchange for the premium paid, to
sell the underlying securities at a specified price during the option period.
The purchase of protective puts is designed merely to offset or hedge against a
decline in the market value of the Index. The Portfolio would ordinarily
recognize a gain if the value of the Index decreased below the exercise price
sufficiently to cover the premium and would recognize a loss if the value of the
Index remained at or above the exercise price. Gains and losses on the purchase
of protective put options would tend to be offset by countervailing changes in
the value of the Index.
The Portfolio has adopted certain other nonfundamental policies
concerning index option transactions which are discussed below. The Portfolio's
activities in index options may also be restricted by the requirements of the
Internal Revenue Code of 1986, as amended (the "Code"), for qualification as a
regulated investment company.
The hours of trading for options on the Index may not conform to the
hours during which the underlying securities are traded. To the extent that the
option markets close before the markets for the underlying securities,
significant price and rate movements can take place in the underlying securities
markets that cannot be reflected in the option markets. It is impossible to
predict the volume of trading that may exist in such options, and there can be
no assurance that viable exchange markets will develop or continue.
Because options on securities indices require settlement in cash, the
Adviser may be forced to liquidate portfolio securities to meet settlement
obligations.
Rating Services
The ratings of rating services represent their opinions as to the
quality of the securities that they undertake to rate. It should be emphasized,
however, that ratings are relative and subjective and are not absolute standards
of quality. Although these ratings are an initial criterion for selection of
portfolio investments, the Adviser also makes its own evaluation of these
securities, subject to review by the Board of Trustees. After purchase by the
Portfolio, an obligation may cease to be rated or its rating may be reduced
below the minimum required for purchase by the Portfolio. Neither event would
require the Portfolio to eliminate the obligation from its portfolio, but
Bankers Trust will consider such an event in its determination of whether the
Portfolio should continue to hold the obligation. A description of the ratings
used herein and in the Fund's prospectus is set forth in Appendix A.
Investment Restrictions
Certain investment restrictions of the Fund and the Portfolio have been
adopted as fundamental policies of the Fund or Portfolio, as the case may be. A
fundamental policy may not be changed without the approval of a majority of the
outstanding voting securities of the Fund or Portfolio, as the case may be. A
majority of the outstanding voting securities of the Fund or Portfolio 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.
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As a matter of fundamental policy, the Fund and the Portfolio may not
(except that no investment restriction of the Fund shall prevent the Fund from
investing all of its investable assets in an open-end investment company with
substantially the same investment objective):
1. borrow money or mortgage or hypothecate assets of the Fund
(Portfolio), except that in an amount not to exceed 1/3 of the
current value of the Fund's (Portfolio's) assets, it may
borrow money as a temporary measure for extraordinary or
emergency purposes and enter into reverse repurchase
agreements or dollar roll transactions, and except that it may
pledge, mortgage or hypothecate not more than 1/3 of such
assets to secure such borrowings (it is intended that money
would be borrowed only from banks and only either to
accommodate requests for the withdrawal of beneficial
interests while effecting an orderly liquidation of portfolio
securities or to maintain liquidity in the event of an
unanticipated failure to complete a portfolio security
transaction or other similar situations) or reverse repurchase
agreements, provided that collateral arrangements with respect
to options and futures, including deposits of initial deposit
and variation margin, are not considered a pledge of assets
for purposes of this restriction and except that assets may be
pledged to secure letters of credit solely for the purpose of
participating in a captive insurance company sponsored by the
Investment Company Institute; for additional related
restrictions, see clause (i) under the caption "Additional
Restrictions" below. (As an operating policy, the Fund
(Portfolio) may not engage in dollar roll transactions);
2. underwrite securities issued by other persons except insofar
as the Fund (Portfolio) may technically be deemed an
underwriter under the 1933 Act, in selling a portfolio
security;
3. make loans to other persons except: (a) through the lending of
the Fund's (Portfolio's) portfolio securities and provided
that any such loans not exceed 30% of the Fund's (Portfolio's)
total assets (taken at market value); (b) through the use of
repurchase agreements or the purchase of short-term
obligations; or (c) by purchasing a portion of an issue of
debt securities of types distributed publicly or privately;
4. purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or
interests therein), interests in oil, gas or mineral leases,
commodities or commodity contracts (except futures and option
contracts) in the ordinary course of business (except that the
Fund (Portfolio) may hold and sell, for the Fund's
(Portfolio's) portfolio, real estate acquired as a result of
the Fund's (Portfolio's) ownership of securities);
5. concentrate its investments in any particular industry
(excluding U.S. Government securities), but if it is deemed
appropriate for the achievement of the Fund's (Portfolio's)
investment objective, up to 25% of its total assets may be
invested in any one industry;
6. issue any senior security (as that term is defined in the 1940
Act) if such issuance is specifically prohibited by the 1940
Act or the rules and regulations promulgated thereunder,
provided that collateral arrangements with respect to options
and futures, including deposits of initial deposit and
variation margin, are not considered to be the issuance of a
senior security for purposes of this restriction; and
7. with respect to 75% of its assets, invest more than 5% of its
total assets in the securities (excluding U.S. Government
Securities) of any one issuer.
Other Investment Policies
The Trustees of the Trust have voluntarily adopted certain policies and
restrictions which are observed in the conduct of the 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, the Fund and the Portfolio may
not:
5
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1. borrow money (including through dollar roll transactions) for
any purpose in excess of 10% of the Fund's (Portfolio's)
assets (taken at cost) except that the Fund (Portfolio) may
borrow for temporary or emergency purposes up to 1/3 of its
total assets;
2. pledge, mortgage or hypothecate for any purpose in excess of
10% of the Fund's (Portfolio's) total assets (taken at market
value), provided that collateral arrangements with respect to
options and futures, including deposits of initial deposit and
variation margin, and reverse repurchase agreements are not
considered a pledge of assets for purposes of this
restriction;
3. purchase any security or evidence of interest therein on
margin, except that such short-term credit as may be necessary
for the clearance of purchases and sales of securities may be
obtained and except that deposits of initial deposit and
variation margin may be made in connection with the purchase,
ownership, holding or sale of futures;
4. sell any security which it does not own unless by virtue of
its ownership of other securities it has at the time of sale a
right to obtain securities, without payment of further
consideration, equivalent in kind and amount to the securities
sold and provided that if such right is conditional the sale
is made upon the same conditions;
5. invest for the purpose of exercising control or management;
6. purchase securities issued by any investment company except by
purchase in the open market where no commission or profit to a
sponsor or dealer results from such purchase other than the
customary broker's commission, or except when such purchase,
though not made in the open market, is part of a plan of
merger or consolidation; provided, however, that securities of
any investment company will not be purchased for the Fund
(Portfolio) if such purchase at the time thereof would cause
(a) more than 10% of the Fund's (Portfolio's) total assets
(taken at the greater of cost or market value) to be invested
in the securities of such issuers; (b) more than 5% of the
Fund's (Portfolio's) total assets (taken at the greater of
cost or market value) to be invested in any one investment
company; or (c) more than 3% of the outstanding voting
securities of any such issuer to be held for the Fund
(Portfolio), unless permitted to exceed these limitations by
an exemptive order of the SEC; provided further that, except
in the case of merger or consolidation, the Fund (Portfolio)
shall not invest in any other open-end investment company
unless the Fund (Portfolio) (1) waives the investment advisory
fee with respect to assets invested in other open-end
investment companies and (2) incurs no sales charge in
connection with the investment (as an operating policy the
Fund (Portfolio) will not invest in another open-end
registered investment company);
7. invest more than 15% of the Fund's (Portfolio's) net assets
(taken at the greater of cost or market value) in securities
that are illiquid or not readily marketable, not including (a)
Rule 144A securities that have been determined to be liquid by
the Board of Trustees; and (b) commercial paper that is sold
under section 4(2) of the 1933 Act which: (i) is not traded
flat or in default as to interest or principal; and (ii) is
rated in one of the two highest categories by at least two
nationally recognized statistical rating organizations and the
Fund's (Portfolio's) Board of Trustees have determined the
commercial paper to be liquid; or (iii) is rated in one of the
two highest categories by one nationally recognized
statistical rating agency and the Fund's (Portfolio's) Board
of Trustees have determined that the commercial paper is
equivalent quality and is liquid;
8. invest more than 10% of the Fund's (Portfolio's) total assets
(taken at the greater of cost or market value) in securities
that are restricted as to resale under the 1933 Act (other
than Rule 144A securities deemed liquid by the Fund's
(Portfolio's) Board of Trustees);
9. no more than 5% of the Fund's (Portfolio's) total assets are
invested in securities issued by issuers which (including
predecessors) have been in operation less than three years;
10. with respect to 75% of the Fund's (Portfolio's) total assets,
purchase securities of any issuer if such purchase at the time
thereof would cause the Fund (Portfolio) to hold more than 10%
of any class of securities of such issuer, for which purposes
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all indebtedness of an issuer shall be deemed a single class
and all preferred stock of an issuer shall be deemed a single
class, except that futures or option contracts shall not be
subject to this restriction;
11. purchase or retain in the Fund's (Portfolio's) portfolio
securities any securities issued by an issuer any of whose
officers, directors, trustees or security holders is an
officer or Trustee of the Fund (Portfolio), or is an officer
or partner of the Adviser, if after the purchase of the
securities of such issuer for the Fund (Portfolio) one or more
of such persons owns beneficially more than 1/2 of 1% of the
shares or securities, or both, all taken at market value, of
such issuer, and such persons owning more than 1/2 of 1% of
such shares or securities together own beneficially more than
5% of such shares or securities, or both, all taken at market
value;
12. invest more than 5% of the Fund's (Portfolio's) net assets in
warrants (valued at the lower of cost or market) (other than
warrants acquired by the Fund (Portfolio) as part of a unit or
attached to securities at the time of purchase), but not more
than 2% of the Fund's (Portfolio's) net assets may be invested
in warrants not listed on the NYSE or the American Stock
Exchange;
13. make short sales of securities or maintain a short position,
unless at all times when a short position is open it owns an
equal amount of such securities or securities convertible into
or exchangeable, without payment of any further consideration,
for securities of the same issue and equal in amount to, the
securities sold short, and unless not more than 10% of the
Fund's (Portfolio's) net assets (taken at market value) is
represented by such securities, or securities convertible into
or exchangeable for such securities, at any one time (the Fund
(Portfolio) has no current intention to engage in short
selling);
14. write puts and calls on securities unless each of the
following conditions are met: (a) the security underlying the
put or call is within the investment policies of the Fund
(Portfolio) and the option is issued by the Options Clearing
Corporation, except for put and call options issued by
non-U.S. entities or listed on non-U.S. securities or
commodities exchanges; (b) the aggregate value of the
obligations underlying the puts determined as of the date the
options are sold shall not exceed 50% of the Fund's
(Portfolio's) net assets; (c) the securities subject to the
exercise of the call written by the Fund (Portfolio) must be
owned by the Fund (Portfolio) at the time the call is sold and
must continue to be owned by the Fund (Portfolio) until the
call has been exercised, has lapsed, or the Fund (Portfolio)
has purchased a closing call, and such purchase has been
confirmed, thereby extinguishing the Fund's (Portfolio's)
obligation to deliver securities pursuant to the call it has
sold; and (d) at the time a put is written, the Fund
(Portfolio) establishes a segregated account with its
custodian consisting of cash or short-term U.S. Government
securities equal in value to the amount the Fund (Portfolio)
will be obligated to pay upon exercise of the put (this
account must be maintained until the put is exercised, has
expired, or the Fund (Portfolio) has purchased a closing put,
which is a put of the same series as the one previously
written); and
15. buy and sell puts and calls on securities, stock index futures
or options on stock index futures, or financial futures or
options on financial futures unless such options are written
by other persons and: (a) the options or futures are offered
through the facilities of a national securities association or
are listed on a national securities or commodities exchange,
except for put and call options issued by non-U.S. entities or
listed on non-U.S. securities or commodities exchanges; (b)
the aggregate premiums paid on all such options which are held
at any time do not exceed 20% of the Fund's (Portfolio's)
total net assets; and (c) the aggregate margin deposits
required on all such futures or options thereon held at any
time do not exceed 5% of the Fund's (Portfolio's) total
assets.
7
<PAGE>
PURCHASES
(See "Purchases" and "Transaction information"
in the Fund's prospectus.)
Additional Information About Opening An Account
Clients having a regular investment counsel account with Scudder or its
affiliates and members of their immediate families, officers and employees of
Scudder or of any affiliated organization and their immediate families, members
of the National Association of Securities Dealers, Inc. ("NASD") and banks may,
if they prefer, subscribe initially for at least $2,500 of Fund shares through
Scudder Investor Services, Inc. (the "Distributor") by letter, fax, TWX, or
telephone.
Shareholders of other Scudder funds who have submitted an account
application and have a certified Taxpayer Identification Number, clients having
a regular investment counsel account with Scudder or its affiliates and members
of their immediate families, officers and employees of Scudder or of any
affiliated organization and their immediate families, members of the NASD, and
banks may open an account by wire. These investors must call 1-800-225-5163 to
get an account number. During the call, the investor will be asked to indicate
the Fund name, amount to be wired ($2,500 minimum), name of bank or trust
company from which the wire will be sent, the exact registration of the new
account, the taxpayer identification or Social Security number, address and
telephone number. The investor must then call the bank to arrange a wire
transfer to The Scudder Funds, State Street Bank and Trust Company, Boston, MA
02110, ABA Number 011000028, DDA Account Number: 9903-5552. The investor must
give the Scudder fund name, account name and the new account number. Finally,
the investor must send the completed and signed application to the Fund
promptly.
The minimum initial purchase amount is less than $2,500 under certain
special plan accounts.
Additional Information About Making Subsequent Investments
Subsequent purchase orders for $10,000 or more and for an amount not
greater than four times the value of the shareholder's account may be placed by
telephone, fax, etc. by members of the NASD, by banks, and by established
shareholders (except by Scudder Individual Retirement Account (IRA), Scudder
Horizon Plan, Scudder Profit Sharing and Money Purchase Pension Plans, and
Scudder 401(k) and Scudder 403(b) Plan holders). Orders placed in this manner
may be directed to any office of the Distributor listed in the Fund's
prospectus. A confirmation of the purchase will be mailed out promptly following
receipt of a request to buy. Federal regulations require that payment be
received within three business days. If payment is not received within that
time, the order is subject to cancellation. In the event of such cancellation or
cancellation at the purchaser's request, the purchaser will be responsible for
any loss incurred by a Fund or the principal underwriter by reason of such
cancellation. If the purchaser is a shareholder, the Trust shall have the
authority, as agent of the shareholder, to redeem shares in the account in order
to reimburse the Fund or the principal underwriter for the loss incurred. Net
losses on such transactions which are not recovered from the purchaser will be
absorbed by the principal underwriter. Any net profit on the liquidation of
unpaid shares will accrue to the Fund.
Additional Information About Making Subsequent Investments by QuickBuy
Shareholders, whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and who have elected to participate
in the QuickBuy program, may purchase shares of the Fund by telephone. Through
this service shareholders may purchase up to $250,000. 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.
8
<PAGE>
In order to request purchases by QuickBuy, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account from which the purchase payment will be debited.
New investors wishing to establish QuickBuy may so indicate on the application.
Existing shareholders who wish to add QuickBuy to their account may do so by
completing an QuickBuy Enrollment Form. After sending in an enrollment form
shareholders should allow for 15 days for this service to be available.
The Fund employs procedures, including recording telephone calls,
testing a caller's identity, and sending written confirmation of telephone
transactions, designed to give reasonable assurance that instructions
communicated by telephone are genuine. and to discourage fraud. To the extent
that the Fund does not follow such procedures, it may be liable for losses due
to unauthorized or fraudulent telephone instructions. The Fund will not be
liable for acting upon instructions communicated by telephone that it reasonably
believes to be genuine.
Checks
A certified check is not necessary, but checks are only accepted
subject to collection at full face value in U.S. funds and must be drawn on, or
payable through, a U.S. bank.
If shares of the Fund are purchased by a check which proves to be
uncollectible, the Trust reserves the right to cancel the purchase immediately
and the purchaser will be responsible for any loss incurred by the Trust or the
principal underwriter by reason of such cancellation. If the purchaser is a
shareholder, the Trust will have the authority, as agent of the shareholder, to
redeem shares in the account in order to reimburse the Fund or the principal
underwriter for the loss incurred. Investors whose orders have been canceled may
be prohibited from, or restricted in, placing future orders in any of the
Scudder funds.
Wire Transfer of Federal Funds
To obtain the net asset value determined as of the close of regular
trading on the Exchange on a selected day, your bank must forward federal funds
by wire transfer and provide the required account information so as to be
available to the Fund prior to the close of regular trading on the Exchange
(normally 4 p.m. eastern time).
The bank sending an investor's federal funds by bank wire may charge
for the service. Presently, the Distributor pays a fee for receipt by the
custodian, Banker's Trust, of "wired funds," but the right to charge investors
for this service is reserved.
Boston banks are closed on certain holidays although the Exchange may
be open. These holidays include Martin Luther King, Jr. Day (the 3rd Monday in
January), Columbus Day (the 2nd Monday in October) and Veterans Day (November
11). Investors are not able to purchase shares by wiring federal funds on such
holidays because the Custodian is not open to receive such federal funds on
behalf of the Fund.
Share Price
Purchases will be filled without sales charge at the net asset value
next computed after receipt of the application in good order. Net asset value
normally will be computed as of the close of regular trading on each day during
which the Exchange is open for trading. Orders received after the close of
regular trading on the Exchange will receive the next business day's net asset
value. If the order has been placed by a member of the NASD, other than the
Distributor, it is the responsibility of that member broker, rather than the
Fund, to forward the purchase order to Scudder Service Corporation (the
"Transfer Agent") by the close of regular trading on the Exchange.
The offering price for shares of the Fund is equal to the current net
asset value ("NAV") per share. The NAV per share of the Fund is calculated by
adding the value of the Fund's assets (i.e., the value of its investments in the
Portfolio and other assets), deducting liabilities, and dividing by the number
of shares outstanding.
The Portfolio values its equity and debt securities (other than
short-term debt obligations maturing in 60 days or less), including listed
securities and securities for which price quotations are available, on the basis
of market valuations furnished by a pricing service. Short-term debt obligations
and money market securities maturing in 60 days or less are valued at amortized
9
<PAGE>
cost, which approximates market value. Other assets are valued at fair value
using methods determined in good faith by the Portfolio's Board of Trustees.
Each investor in the Portfolio, including the Fund, may add to or
reduce its investment in the Portfolio on each day that the NYSE is open for
business and New York charter banks are not closed owing to customary or local
holidays. As of the close of the NYSE, currently 4:00 p.m. (New York time or
earlier if the NYSE closes earlier) on each such day, the value of each
investor's interest in the Portfolio will be determined by multiplying the net
asset value of the Portfolio by the percentage representing that investor's
share of the aggregate beneficial interests in the Portfolio. Any additions or
reductions which are to be effected on that day will then be effected.
Share Certificates
Due to the desire of the Trust's management to afford ease of
redemption, certificates will not be issued to indicate ownership in the Fund.
Other Information
If purchases or redemptions of Fund shares are arranged and settlement
is made at 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 Board of Trustees of the Trust and the Distributor of the Fund each
has the right to limit the amount of purchases by and to refuse to sell to any
person, and each may suspend or terminate the offering of shares of the Fund at
any time.
The Tax Identification Number section of the application must be
completed when opening an account. Applications and purchase orders without a
certified tax identification number and certain other certified information
(e.g. from exempt organizations, certification of exempt status) will be
returned to the investor.
The Trust may issue shares at net asset value in connection with any
merger or consolidation with, or acquisition of the assets of, any investment
company or personal holding company, subject to the requirements of the 1940
Act.
EXCHANGES AND REDEMPTIONS
(See "Exchanges and redemptions" and "Transaction
information" in the Fund's prospectus.)
Exchanges
Exchanges are comprised of a redemption from one Scudder fund and a
purchase into another Scudder fund. The purchase side of the exchange may be
either an additional investment into an existing account or may involve opening
a new account in the other fund. When an exchange involves a new account, the
new account will be established with the same registration, tax identification
number, address, telephone redemption option, "Scudder Automated Information
Line" (SAIL) transaction authorization and dividend option as the existing
account. Other features will not carry over automatically to the new account.
Exchanges to a new fund account must be for a minimum of $2,500. When an
exchange represents an additional investment into an existing account, the
account receiving the exchange proceeds must have identical registration, tax
identification number, address, and account options/features as the account of
origin. Exchanges into an existing account must be for $100 or more. If the
account receiving the exchange proceeds is to be different in any respect, the
exchange request must be in writing and must contain an original signature
guarantee as described under "Transaction information--Exchanging and redeeming
shares--Signature guarantees" in the Fund's prospectus.
Exchange orders received before the close of regular trading on the
Exchange on any business day ordinarily will be executed at the respective net
asset values determined on that day. Exchange orders received after the close of
regular trading on the Exchange will be executed on the following business day.
10
<PAGE>
Investors may also request, at no extra charge, to have exchanges
automatically executed on a predetermined schedule from one Scudder Fund to an
existing account in another Scudder Fund, at current net asset value, through
Scudder's Automatic Exchange Program. Exchanges must be for a minimum of $50.
Shareholders may add this free feature over the telephone or in writing.
Automatic Exchanges will continue until the shareholder requests by telephone or
in writing to have the feature removed, or until the originating account is
depleted. The Trust and the Transfer Agent each reserves the right to suspend or
terminate the privilege of the Automatic Exchange Program at any time.
There is no charge to the shareholder for any exchange described above.
(See "Special Redemption and Exchange Information." An exchange into another
Scudder fund is a redemption of shares, and therefore may result in tax
consequences (gain or loss) to the shareholder, and the proceeds of such an
exchange may be subject to backup withholding. (See "TAXES.")
Investors currently receive the exchange privilege, including exchange
by telephone, automatically without having to elect it. The Trust employs
procedures, including recording telephone calls, testing a caller's identity,
and sending written confirmation of telephone transactions, designed to give
reasonable assurance that instructions communicated by telephone are genuine,
and to discourage fraud. To the extent that the Trust does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Trust will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine. The Trust, the Fund and the Transfer Agent each reserves the right to
suspend or terminate the privilege of exchanging by telephone or fax at any
time.
The Scudder funds into which investors may make an exchange are listed
under "THE SCUDDER FAMILY OF FUNDS" herein. Before making an exchange,
shareholders should obtain from the Distributor a prospectus of the Scudder fund
into which the exchange is being contemplated.
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 $50,000 and have the proceeds mailed
to their address of record. Shareholders may also request to have the proceeds
mailed or wired to their predesignated bank account. In order to request wire
redemptions by telephone, shareholders must have completed and returned to the
Transfer Agent the application, including the designation of a bank account to
which the redemption proceeds are to be sent.
(a) NEW INVESTORS wishing to establish telephone redemption to a
predesignated bank account must complete the appropriate
section on the application.
(b) EXISTING SHAREHOLDERS (except those who are Scudder IRA,
Scudder Pension and Profit-Sharing, Scudder 401(k) and Scudder
403(b) Planholders) who wish to establish telephone redemption
to a predesignated bank account or who want to change the bank
account previously designated to receive redemption payments
should either return a Telephone Redemption Option Form
(available upon request) or send a letter identifying the
account and specifying the exact information to be changed.
The letter must be signed exactly as the shareholder's name(s)
appears on the account. An original signature and an original
signature guarantee are required for each person in whose name
the account is registered.
If a request for redemption to a shareholder's bank account is made by
telephone or fax, payment will be made by Federal Reserve bank wire to the bank
account designated on the application, unless a request is made that the
redemption check be mailed to the designated bank account. There will be a $5
charge for all wire redemptions.
Note: Investors designating a savings bank to receive their telephone
redemption proceeds are advised that if the savings bank is not a participant in
the Federal Reserve System, redemption proceeds must be wired through a
commercial bank which is a correspondent of the savings bank. As this may delay
receipt by the shareholder's account, it is suggested that investors wishing to
11
<PAGE>
use a savings bank discuss wire procedures with their bank and submit any
special wire transfer information with the telephone redemption authorization.
If appropriate wire information is not supplied, redemption proceeds will be
mailed to the designated bank.
The Fund employs procedures, including recording telephone calls,
testing a caller's identity, and sending written confirmation of telephone
transactions, designed to give reasonable assurance that instructions
communicated by telephone are genuine, and to discourage fraud. To the extent
that the Fund does not follow such procedures, it may be liable for losses due
to unauthorized or fraudulent telephone instructions. The Fund will not be
liable for acting upon instructions communicated by telephone that it reasonably
believes to be genuine.
Redemption by QuickSell
Shareholders, whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and have elected to participate in
the QuickSell program may sell shares of the Fund by telephone. To sell shares
by QuickSell, shareholders should call before 4 p.m. eastern time. Redemptions
must be for at least $250. Proceeds in the amount of your redemption will be
transferred to your bank checking account in two or three business days
following your call. 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
after 4 p.m. eastern time will begin their processing the following business
day. QuickSell transactions are not available for Scudder IRA accounts and most
other retirement plan accounts.
In order to request redemptions by QuickSell, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account to which redemption proceeds will be credited. New
investors wishing to establish QuickSell may so indicate on the application.
Existing shareholders who wish to add QuickSell to their account may do so by
completing an QuickSell Enrollment Form. After sending in an enrollment form,
shareholders should allow for 15 days for this service to be available.
The Fund employs procedures, including recording telephone calls,
testing a caller's identity, and sending written confirmation of telephone
transactions, designed to give reasonable assurance that instructions
communicated by telephone are genuine, and to discourage fraud. To the extent
that the Fund does not follow such procedures, it may be liable for losses due
to unauthorized or fraudulent telephone instructions. The Fund will not be
liable for acting upon instructions communicated by telephone that it reasonably
believes to be genuine.
Redemption by Mail or Fax
In order to ensure proper authorization before redeeming shares, the
Transfer Agent may request additional documents such as, but not restricted to,
stock powers, trust instruments, certificates of death, appointments as
executor, certificates of corporate authority and waivers of tax (required in
some states when settling estates).
It is suggested that shareholders holding shares registered in other
than individual names contact the Transfer Agent prior to any redemptions to
ensure that all necessary documents accompany the request. When shares are held
in the name of a corporation, trust, fiduciary, agent, attorney or partnership,
the Transfer Agent requires, in addition to the stock power, certified evidence
of authority to sign. These procedures are for the protection of shareholders
and should be followed to ensure prompt payment. Redemption requests must not be
conditional as to date or price of the redemption. Proceeds of a redemption will
be sent within five business days after receipt by the Transfer Agent of a
request for redemption that complies with the above requirements. Delays in
payment of more than seven days for shares tendered for repurchase or redemption
may result, but only until the purchase check has cleared.
The requirements for IRA redemptions are different from those for
regular accounts. For more information please call 1-800-225-5163.
Other Information
If a shareholder redeems all shares in the account after the record
date of a dividend, the shareholder will receive, in addition to the net asset
value thereof, all declared but unpaid dividends thereon. The value of shares
redeemed or repurchased may be more or less than the shareholder's cost
depending on the net asset value at the time of redemption or repurchase. A wire
charge may be applicable for redemption proceeds wired to an investor's bank
account. Redemptions of shares, including an exchange into another Scudder fund,
may result in tax consequences (gain or loss) to the shareholder and the
12
<PAGE>
proceeds of such redemptions may be subject to backup withholding. (see
"TAXES.")
Shareholders who wish to redeem shares from Special Plan Accounts
should contact the employer, trustee or custodian of the Plan for the
requirements.
The determination of net asset value and a shareholder's right to
redeem shares and to receive payment may be suspended at times and a
shareholder's right to redeem shares and to receive payment may be suspended at
times during which (a) the Exchange is closed, other than customary weekend and
holiday closings, (b) trading on the Exchange is restricted for any reason, (c)
an emergency exists as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable or it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, or (d) a
governmental body having jurisdiction over the Fund may by order permit such a
suspension for the protection of the Trust's shareholders; provided that
applicable rules and regulations of the SEC (or any succeeding governmental
authority) shall govern as to whether the conditions prescribed in (b), (c) or
(d) exist.
Shareholders should maintain a share balance worth at least $2,500,
which amount may be changed by the Board of Trustees. Scudder retirement plans
have similar or lower minimum share balance requirements. A shareholder may open
an account with at least $1,000, if an automatic investment plan of $100/month
is established. Shareholders who maintain a non-fiduciary account balance of
less than $2,500 in the Fund, without establishing an automatic investment plan,
will be assessed an annual $10.00 per account charge with the fee to be paid to
the Fund. The $10.00 charge will not apply to shareholders with a combined
household account balance in any of the Scudder Funds of $25,000 or more. The
Fund reserves the right, following 60 days' written notice to shareholders, to
redeem all shares in accounts below $250, including accounts of new investors,
where a reduction in value has occurred due to a redemption or exchange out of
the account. The Fund will mail the proceeds of the redeemed account to the
shareholder. Reductions in value that result solely from market activity will
not trigger an involuntary redemption. Retirement accounts and certain other
accounts will not be assessed the $10.00 charge or be subject to automatic
liquidation.
FEATURES AND SERVICES OFFERED BY THE FUND
(See "Shareholder benefits" in the Fund's prospectus.)
The Pure No-Load(TM) Concept
Investors are encouraged to be aware of the full ramifications of
mutual fund fee structures, and of how Scudder distinguishes its funds from the
vast majority of mutual funds available today. The primary distinction is
between load and no-load funds.
Load funds generally are defined as mutual funds that charge a fee for
the sale and distribution of fund shares. There are three types of loads:
front-end loads, back-end loads, and asset-based 12b-1 fees. 12b-1 fees are
distribution-related fees charged against fund assets and are distinct from
service fees, which are charged for personal services and/or maintenance of
shareholder accounts. Asset-based sales charges and service fees are typically
paid pursuant to distribution plans adopted under Rule 12b-1 under the
Investment Company Act of 1940 (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
National Association of Securities Dealers Conduct Rules, a mutual fund can call
itself a "no-load" fund only if the 12b-1 fee and/or service fee does not exceed
0.25% of a fund's average annual net assets.
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<PAGE>
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.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Scudder No-Load Fund with
YEARS Pure No-Load(TM) 8.50% Load Fund Load Fund with 0.75% 0.25% 12b-1
Fund 12b-1 Fee Fee
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Investors are encouraged to review the fee tables on page 2 of the
Fund's prospectus for more specific information about the rates at which
management fees and other expenses are assessed.
Internet access
World Wide Web Site -- The address of the Scudder Funds site is
http://funds.scudder.com. The site offers guidance on global investing and
developing strategies to help meet financial goals and provides access to the
Scudder investor relations department via e-mail. The site also enables users to
access or view fund prospectuses and profiles with links between summary
information in Profiles and details in the Prospectus. Users can fill out new
account forms on-line, order free software, and request literature on funds.
The site is designed for interactivity, simplicity and maneuverability.
A section entitled "Planning Resources" provides information on asset
allocation, tuition, and retirement planning to users who fill out interactive
"worksheets." Investors can easily establish a "Personal Page," that presents
price information, updated daily, on funds they're interested in following. The
"Personal Page" also offers easy navigation to other parts of the site. Fund
performance data from both Scudder and Lipper Analytical Services, Inc. are
available on the site. Also offered on the site is a news feature, which
provides timely and topical material on the Scudder Funds.
Scudder has communicated with shareholders and other interested parties
on Prodigy since 1988 and has participated since 1994 in GALT's Networth
"financial marketplace" site on the Internet. The firm made Scudder Funds
information available on America Online in early 1996.
Account Access -- Scudder is among the first mutual fund families to allow
shareholders to manage their fund accounts through the World Wide Web. Scudder
Fund shareholders can view a snapshot of current holdings, review account
activity and move assets between Scudder Fund accounts.
Scudder's personal portfolio capabilities -- known as SEAS (Scudder
Electronic Account Services) -- are accessible only by current Scudder Fund
shareholders who have set up a Personal Page on Scudder's Web site. Using a
secure Web browser, shareholders sign on to their account with their Social
Security number and their SAIL password. As an additional security measure,
users can change their current password or disable access to their portfolio
through the World Wide Web.
14
<PAGE>
An Account Activity option reveals a financial history of transactions
for an account, with trade dates, type and amount of transaction, share price
and number of shares traded. For users who wish to trade shares between Scudder
Funds, the Fund Exchange option provides a step-by-step procedure to exchange
shares among existing fund accounts or to new Scudder Fund accounts.
A Call MeTM feature enables users to speak with a Scudder Investor
Relations telephone representative while viewing their account on the Web site.
In order to use the Call MeTM feature, an individual must have two phone lines
and enter on the screen the phone number that is not being used to connect to
the Internet. They are connected to the next available Scudder Investor
Relations representative from 8 a.m. to 8 p.m. eastern time.
Dividends and Capital Gain Distribution Options
Investors have freedom to choose whether to receive cash or to reinvest
any dividends from net investment income or distributions from realized capital
gains in additional shares of the Fund. A change of instructions for the method
of payment must be received by the Transfer Agent at least five days prior to a
dividend record date. Shareholders may change their dividend option either by
calling 1-800-225-5163 or by sending written instructions to the Transfer Agent.
Please include your account number with your written request. See "How to
contact Scudder" in the Prospectus for the address.
Reinvestment is usually made at the closing net asset value determined
on the business day following the record date. Investors may leave standing
instructions with the Transfer Agent designating their option for either
reinvestment or cash distribution of any income dividends or capital gains
distributions. If no election is made, dividends and distributions will be
invested in additional shares of the Fund.
Investors may also have dividends and distributions automatically
deposited in their predesignated bank account through Scudder's
DistributionsDirect Program. Shareholders who elect to participate in the
DistributionsDirect Program, and whose predesignated checking account of record
is with a member bank of the Automated Clearing House Network (ACH) can have
income and capital gain distributions automatically deposited to their personal
bank account usually within three business days after the Fund pays its
distribution. A DistributionsDirect request form can be obtained by calling
1-800-225-5163. Confirmation statements will be mailed to shareholders as
notification that distributions have been deposited.
Investors choosing to participate in Scudder's Automatic Withdrawal
Plan must reinvest any dividends or capital gains. For most retirement plan
accounts, the reinvestment of dividends and capital gains is also required.
Diversification
Your investment represents an interest in a large, diversified
portfolio of securities. Diversification may protect you against the possible
risks of concentrating in fewer securities or in a specific market sector.
Scudder Investor Centers
Investors may visit any of the Investor Centers maintained by the
Distributor. The Centers are designed to provide individuals with services
during any business day. Investors may pick up literature or obtain assistance
with opening an account, adding monies or special options to existing accounts,
making exchanges within the Scudder Family of Funds, redeeming shares or opening
retirement plans. Checks should not be mailed to the Centers but to "The Scudder
Funds" at the address listed under "How to contact Scudder" in the Prospectus.
Reports to Shareholders
The Fund issues shareholders unaudited semiannual financial statements
and annual financial statements audited by independent accountants, including a
list of investments held and statements of assets and liabilities, operations,
changes in net assets and financial highlights.
15
<PAGE>
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
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 while providing New York taxpayers income exempt from
New York State and New York City personal income taxes and regular
- -----------------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
16
<PAGE>
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 principle stability by investing
primarily in high quality short-term bonds.
Scudder Zero Coupon 2000 Fund seeks to provide as high an investment
return over a selected period as is consistent with investment in U.S.
Government securities and the minimization of reinvestment risk.
Scudder GNMA Fund seeks to provide high current income primarily from
U.S. Government guaranteed mortgage-backed (Ginnie Mae) securities.
- -----------------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
17
<PAGE>
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.
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.
18
<PAGE>
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 emerging 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.
Regional
Scudder Greater Europe Growth Fund seeks long-term growth of capital
through investments primarily in the equity securities of European
companies.
19
<PAGE>
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.
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 individual retirement accounts ("IRAs") 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.
20
<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.)
<TABLE>
<CAPTION>
Value of IRA at Age 65
Assuming $2,000 Deductible Annual Contribution
- -----------------------------------------------------------------------------------------------------------
Starting Annual Rate of Return
Age of ------------------------------------------------------------------------------
Contributions 5% 10% 15%
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
</TABLE>
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.)
21
<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
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Starting Annual Rate of Return
Age of ------------------------------------------------------------------------------
Contributions 5% 10% 15%
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
</TABLE>
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 or its agent on written notice, and will be terminated
when all shares of the Fund under the Plan have been liquidated or upon receipt
by the Trust of notice of death of the shareholder.
An Automatic Withdrawal Plan request form can be obtained by calling
1-800-225-5163.
Group or Salary Deduction Plan
An investor may join a Group or Salary Deduction Plan where
satisfactory arrangements have been made with Scudder Investor Services, Inc.
for forwarding regular investments through a single source. The minimum annual
investment is $240 per investor which may be made in monthly, quarterly,
semiannual or annual payments. The minimum monthly deposit per investor is $20.
Except for trustees or custodian fees for certain retirement plans, at present
there is no separate charge for maintaining group or salary deduction plans;
however, the Trust and its agents reserve the right to establish a maintenance
charge in the future depending on the services required by the investor.
The Trust reserves the right, after notice has been given to the
shareholder, to redeem and close a shareholder's account in the event that the
shareholder ceases participating in the group plan prior to investment of $1,000
per individual or in the event of a redemption which occurs prior to the
accumulation of that amount or which reduces the account value to less than
$1,000 and the account value is not increased to $1,000 within a reasonable time
after notification. An investor in a plan who has not purchased shares for six
months shall be presumed to have stopped making payments under the plan.
22
<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 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 Fund's prospectus.)
The Fund intends to follow the practice of distributing substantially
all of its investment company taxable income, which includes any excess of net
realized short-term capital gains over net realized long-term capital losses.
The Fund may follow the practice of distributing the entire excess of net
realized long-term capital gains over net realized short-term capital losses.
However, the Fund may retain all or part of such gain for reinvestment, after
paying the related federal income taxes for which the shareholders may claim a
credit against their federal income tax liability. If the Fund does not
distribute the amount of capital gains and/or ordinary income required to be
distributed by an excise tax provision of the Code, the Fund may be subject to
that excise tax. In certain circumstances, the Fund may determine that it is in
the interest of shareholders to distribute less than the required amount. (See
"TAXES.")
The Fund intends to distribute investment company taxable income,
exclusive of net short-term capital gains in excess of net long-term capital
losses quarterly each year. Distributions of net capital gains realized during
each fiscal year will be made annually before the end of the Fund's fiscal year
on December 31. Additional distributions, including distributions of net
short-term capital gains in excess of net long-term capital losses, may be made,
if necessary.
Both types of distributions will be made in shares of the Fund and
confirmations will be mailed to each shareholder unless a shareholder has
elected to receive cash, in which case a check will be sent.
PERFORMANCE INFORMATION
(See "Distribution and performance
information--Performance information" in the Fund's
prospectus.)
From time to time, quotations of the Fund's performance may be included
in advertisements, sales literature or reports to shareholders or prospective
investors. These performance figures will be calculated in the following manner:
23
<PAGE>
Average Annual Total Return
Average Annual Total Return is the average annual compound rate of
return for the periods of one year and the life of the Fund, all ended on the
last day of a recent calendar quarter. Average annual total return quotations
reflect changes in the price of the Fund's shares and assume that all dividends
and capital gains distributions during the respective periods were reinvested in
Fund shares. Average annual total return is calculated by finding the average
annual compound rates of return of a hypothetical investment over such periods,
according to the following formula (average annual total return is then
expressed as a percentage):
T = (ERV/P)1/n - 1
Where:
P = a hypothetical initial investment of $1,000
T = Average Annual Total Return
n = number of years
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
Cumulative Total Return
Cumulative Total Return is the cumulative rate of return on a
hypothetical initial investment of $1,000 for a specified period. Cumulative
Total Return quotations reflect changes in the price of the Fund's shares and
assume that all dividends and capital gains distributions during the period were
reinvested in Fund shares. Cumulative Total Return is calculated by finding the
cumulative rates of return of a hypothetical investment over such periods,
according to the following formula (Cumulative Total Return is then expressed as
a percentage):
C = (ERV/P) -1
Where:
C = Cumulative Total Return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
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.
Quotations of the Fund's performance are historical and are not
intended to indicate future performance. An investor's shares when redeemed may
be worth more or less than their original cost. Performance of the Fund will
vary based on changes in market conditions and the level of the Fund's expenses.
Comparison of Fund Performance
A comparison of the quoted non-standard performance offered for various
investments is valid only if performance is calculated in the same manner. Since
there are different methods of calculating performance, investors should
consider the effects of the methods used to calculate performance when comparing
performance of the Fund with performance quoted with respect to other investment
companies or types of investments.
24
<PAGE>
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 and
officers of the Fund, the Fund's portfolio manager, or members of the portfolio
management team may be depicted and quoted to give prospective and current
shareholders a better sense of the outlook and approach of those who manage the
Fund. In addition, the amount of assets that the Adviser has under management in
various geographical areas may be quoted in advertising and marketing materials.
The Fund may be advertised as an investment choice in Scudder's college
planning program. The description may contain illustrations of projected future
college costs based on assumed rates of inflation and examples of hypothetical
fund performance, calculated as described above.
Statistical and other information, as provided by the Social Security
Administration, may be used in marketing materials pertaining to retirement
planning in order to estimate future payouts of social security benefits.
Estimates may be used on demographic and economic data.
Marketing and other Fund literature may include a description of the
potential risks and rewards associated with an investment in the Fund. The
description may include a "risk/return spectrum" which compares the Fund to
other Scudder funds or broad categories of funds, such as money market, bond or
equity funds, in terms of potential risks and returns. Money market funds are
designed to maintain a constant $1.00 share price and have a fluctuating yield.
Share price, yield and total return of a bond fund will fluctuate. The share
price and return of an equity fund also will fluctuate. The description may also
compare the Fund to bank products, such as certificates of deposit. 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
25
<PAGE>
funds. In addition, international equity funds usually are considered more risky
than domestic equity funds but generally offer the potential for greater return.
Risk/return spectrums also may depict funds that invest in both
domestic and foreign securities or a combination of bond and equity securities.
Evaluation of Fund performance or other relevant statistical
information made by independent sources may also be used in advertisements
concerning the Fund, including reprints of, or selections from, editorials or
articles about this Fund. Sources for Fund performance information and articles
about the Fund include the following:
American Association of Individual Investors' Journal, a monthly publication of
the AAII that includes articles on investment analysis techniques.
Asian Wall Street Journal, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.
Banxquote, an on-line source of national averages for leading money market and
bank CD interest rates, published on a weekly basis by Masterfund, Inc. of
Wilmington, Delaware.
Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.
Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing abroad.
CDA Investment Technologies, Inc., an organization which provides performance
and ranking information through examining the dollar results of hypothetical
mutual fund investments and comparing these results against appropriate market
indices.
Consumer Digest, a monthly business/financial magazine that includes a "Money
Watch" section featuring financial news.
Financial Times, Europe's business newspaper, which features from time to time
articles on international or country-specific funds.
Financial World, a general business/financial magazine that includes a "Market
Watch" department reporting on activities in the mutual fund industry.
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.
26
<PAGE>
Investor's Business Daily, a daily newspaper that features financial, economic,
and business news.
Kiplinger's Personal Finance Magazine, a monthly investment advisory publication
that periodically features the performance of a variety of securities.
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a weekly
publication of industry-wide mutual fund averages by type of fund.
Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.
Morgan Stanley International, an integrated investment banking firm that
compiles statistical information.
Mutual Fund Values, a biweekly Morningstar, Inc. publication that provides
ratings of mutual funds based on fund performance, risk and portfolio
characteristics.
The New York Times, a nationally distributed newspaper which regularly covers
financial news.
The No-Load Fund Investor, a monthly newsletter, published by Sheldon Jacobs,
that includes mutual fund performance data and recommendations for the mutual
fund investor.
No-Load Fund*X, a monthly newsletter, published by DAL Investment Company, Inc.,
that reports on mutual fund performance, rates funds and discusses investment
strategies for the mutual fund investor.
Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.
Personal Investor, a monthly investment advisory publication that includes a
"Mutual Funds Outlook" section reporting on mutual fund performance measures,
yields, indices and portfolio holdings.
SmartMoney, a national personal finance magazine published monthly by Dow Jones
and Company, Inc. and The Hearst Corporation. Focus is placed on ideas for
investing, spending and saving.
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.
27
<PAGE>
Worth, a national publication issued 10 times per year by Capital Publishing
Company, a subsidiary of Fidelity Investments. Focus is placed on personal
financial journalism.
FUND ORGANIZATION
(See "Fund and Portfolio organization" in the Fund's prospectus.)
The Fund is a series of Scudder Investment Trust, a Massachusetts
business trust established under a Declaration of Trust dated September 20,
1984, as amended. The name of the Trust was changed on May 15, 1991 from Scudder
Growth and Income Fund.
On November 4, 1987, the par value of the shares of beneficial interest
of the Trust was changed from no par value to $0.01 par value per share. The
Trust's authorized capital consists of an unlimited number of shares of
beneficial interest of $0.01 par value, all of which are of one class and have
equal rights as to voting, dividends and liquidation. The Trustees have the
authority to issue two or more series of shares and to designate the relative
rights and preferences as between the different series. All shares issued and
outstanding will be fully paid and non-assessable by the Trust and redeemable as
described in this Statement of Additional Information and in the Fund's
prospectus.
The assets of the Trust received for the issue or sale of the shares of
each series and all income, earnings, profits and proceeds thereof, subject only
to the rights of creditors, are specifically allocated to such series and
constitute the underlying assets of such series. The underlying assets of each
series are segregated on the books of account and are to be charged with the
liabilities in respect to such series and with a proportionate share of the
general liabilities of the Trust. If a series were unable to meet its
obligations, the assets of all other series may in some circumstances be
available to creditors for that purpose, in which case the assets of such other
series could be used to meet liabilities which are not otherwise properly
chargeable to them. Expenses with respect to any two or more series are to be
allocated in proportion to the asset value of the respective series except where
allocations of direct expenses can otherwise be fairly made. The officers of the
Trust, subject to the general supervision of the Trustees, have the power to
determine which liabilities are allocable to a given series, or which are
general or allocable to two or more series. In the event of the dissolution or
liquidation of the Trust or any series, the holders of the shares of any series
are entitled to receive as a class the underlying assets of such shares
available for distribution to shareholders.
Shares of the 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 other series.
The Trustees, in their discretion, may authorize the division of shares
of the Fund (or shares of a series) into different classes, permitting shares of
different classes to be distributed by different methods. Although shareholders
of different classes of a series would have an interest in the same portfolio of
assets, shareholders of different classes may bear different expenses in
connection with different methods of distribution. The Trustees have no present
intention of taking the action necessary to effect the division of shares into
separate classes nor of changing the method of distribution of shares of the
Fund.
The Declaration of Trust provides that obligations of the Trust are not
binding upon the Trustees individually but only upon the property of the Trust,
that the Trustees and officers will not be liable for errors of judgment or
mistakes of fact or law and that the Trust will indemnify its Trustees and
officers against liabilities and expenses incurred in connection with litigation
in which they may be involved because of their offices with the 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 Trust. However, nothing in the Declaration of Trust
protects or indemnifies a Trustee or officer against any liability to which 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 his
office.
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<PAGE>
INVESTMENT MANAGER AND ADMINISTRATOR OF THE FUND
(See "Fund and Portfolio organization" in the Fund's prospectus.)
Scudder, Stevens & Clark, Inc., an investment counsel firm, monitors
the Fund's investments in the Portfolio. Scudder is one of the most experienced
investment counsel firms in the U.S. It was established as a partnership in 1919
and pioneered the practice of providing investment counsel to individual clients
on a fee basis. In 1928 it introduced the first no-load mutual fund to the
public. In 1953 Scudder introduced Scudder International Fund, Inc., the first
mutual fund available in the U.S. investing internationally in securities of
issuers in several foreign countries. The firm reorganized from a partnership to
a corporation on June 28, 1985.
Scudder has entered into an agreement with The Zurich Group ("Zurich"),
an international insurance and financial services organization, pursuant to
which Scudder will form a new global investment organization by combining with
Zurich's subsidiary, Zurich Kemper Investments, Inc., and change its name to
Scudder Kemper Investments, Inc. After the transaction is completed, Zurich will
own approximately 70% of the new organization with the balance owned by the new
organization's officers and employees.
Consummation of the transaction is subject to a number of
contingencies, including regulatory approvals. The transaction is expected to
close in the fourth quarter of 1997. Upon consummation of the transaction the
investment management agreement with Scudder, Stevens & Clark, Inc. (described
below), will terminate. The Trustees have approved an investment management
agreement with Scudder Kemper Investments, Inc. which is substantially identical
to the current investment management agreement to become effective upon the
termination of the current investment management agreement.
The principal source of Scudder'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.
Scudder also provides investment advisory services to the mutual funds
which comprise the AARP Investment Program from Scudder. The AARP Investment
Program from Scudder has assets over $13 billion and includes the AARP Growth
Trust, AARP Income Trust, AARP Tax Free Income Trust, AARP Managed Investment
Portfolios Trust and AARP Cash Investment Funds.
Pursuant to an Agreement between Scudder, Stevens & Clark, Inc. and
AMA Solutions, Inc., a subsidiary of the American Medical Association (the
"AMA"), dated May 9, 1997, Scudder has agreed, subject to applicable state
regulations, to pay AMA Solutions, Inc. royalties in an amount equal to 5% of
the management fee received by Scudder with respect to assets invested by AMA
members in Scudder funds in connection with the AMA InvestmentLinkSM Program.
Scudder will also pay AMA Solutions, Inc. a general monthly fee, currently in
the amount of $833. The AMA and AMA Solutions, Inc. are not engaged in the
business of providing investment advice and neither is registered as an
investment adviser or broker/dealer under federal securities laws. Any person
who participates in the AMA InvestmentLinkSM Program will be a customer of
Scudder (or of a subsidiary thereof) and not the AMA or AMA Solutions, Inc. AMA
InvestmentLinkSM is a service mark of AMA Solutions, Inc.
Scudder maintains a large research department, which conducts
continuous studies of the factors that affect the position of various
industries, companies and individual securities. In this work, Scudder 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
29
<PAGE>
clients of Scudder, but conclusions are based primarily on investigations and
critical analyses by Scudder's own research specialists.
As described above, the Fund retains the investment management firm of
Scudder as investment manager to the Fund, pursuant to an investment management
agreement (the "Agreement") dated August 29, 1997, to monitor the Fund's
investments in the Portfolio, subject to the authority of and supervision by the
Trust's Board of Trustees. The Agreement was approved by the Board of Trustees
on August 12, 1997 and by the initial shareholder meeting August 27, 1997. The
Agreement will remain in force and effect until September 30, 1998, and continue
in force from year to year thereafter, but only so long as such continuance is
specifically approved at least annually (a) by the vote of a majority of the
Trustees who are not parties to this Agreement or interested persons of any
party to the Agreement, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by the Trustees of the Trust, or by the vote of
a majority of the outstanding voting securities of the Fund. The aforesaid
requirement that continuance of this Agreement be "specifically approved at
least annually" shall be construed in a manner consistent with the 1940 Act and
the rules and regulations thereunder and any applicable SEC exemptive order
therefrom.
The Agreement may be terminated with respect to the Fund at any time,
without the payment of any penalty, by the vote of a majority of the outstanding
voting securities of the Fund or by the Trust's Board of Trustees on 60 days'
written notice to you, or by you on 60 days' written notice to the Trust. The
Agreement shall terminate automatically in the event of its assignment.
Scudder receives no fee for providing these monitoring services. In the
event the Board of Trustees determines it is in the best interests of the Fund's
shareholders to withdraw its investment in the Portfolio, Scudder would become
responsible for directly managing the assets of the Fund. In such event, the
Fund would pay Scudder an annual fee of 0.15% of the Fund's average daily net
assets, accrued daily and paid monthly.
Under an Administrative Services Agreement dated August 29, 1997,
Scudder provides shareholder and administration services to the Fund. Scudder
receives a fee of 0.10% of the Fund's average daily net assets, accrued daily
and paid monthly.
Personal Investments by Employees of Scudder
Employees of Scudder, the Manager, are permitted to make personal
securities transactions, subject to requirements and restrictions set forth in
the Manager'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.
INVESTMENT ADVISER AND ADMINISTRATOR OF THE PORTFOLIO
(See "Fund and Portfolio organization" in the Fund's prospectus.)
Under the terms of the Portfolio's investment advisory agreement with
the Adviser (the "Advisory Agreement"), the Adviser manages the Portfolio
subject to the supervision and direction of the Board of Trustees of the
Portfolio. The Adviser will: (i) act in strict conformity with the Portfolio's
Declaration of Trust, the 1940 Act and the Investment Advisers Act of 1940, as
the same may from time to time be amended; (ii) manage the Portfolio in
accordance with the Portfolio's investment objective, restrictions and policies;
(iii) make investment decisions for the Portfolio; and (iv) place purchase and
sale orders for securities and other financial instruments on behalf of the
Portfolio.
The Adviser is a wholly-owned subsidiary of Bankers Trust New York
Corporation.
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<PAGE>
The Adviser bears all expenses in connection with the performance of
services under the Advisory Agreement. The BT Investment Trust (the "BT Trust")
and the Portfolio each bear certain other expenses incurred in its operation,
including: taxes, interest, brokerage fees and commissions, if any; fees of
Trustees of the BT Trust or the Portfolio who are not officers, directors or
employees of the Adviser, Edgewood or any of their affiliates; SEC fees and
state Blue Sky qualification fees; charges of custodians and transfer and
dividend disbursing agents; certain insurance premiums; outside auditing and
legal expenses; costs of maintenance of corporate existence; costs attributable
to investor services, including, without limitation, telephone and personnel
expenses; costs of preparing and printing prospectuses and statements of
additional information for regulatory purposes and for distribution to existing
shareholders; costs of shareholders' reports and meetings of shareholders,
officers and Trustees of the BT Trust or the Portfolio; and any extraordinary
expenses.
The Adviser may have deposit, loan and other commercial banking
relationships with the issuers of obligations which may be purchased on behalf
of the Portfolio, including outstanding loans to such issuers which could be
repaid in whole or in part with the proceeds of securities so purchased. Such
affiliates deal, trade and invest for their own accounts in such obligations and
are among the leading dealers of various types of such obligations. The Adviser
has informed the Portfolio that, in making its investment decisions, it does not
obtain or use material inside information in its possession or in the possession
of any of its affiliates. In making investment recommendations for the
Portfolio, the Adviser will not inquire or take into consideration whether an
issuer of securities proposed for purchase or sale by the Portfolio is a
customer of the Adviser, its parent or its subsidiaries or affiliates and, in
dealing with its customers, the Adviser, its parent, subsidiaries and affiliates
will not inquire or take into consideration whether securities of such customers
are held by any fund managed by the Adviser or any such affiliate.
Under its Investment Advisory Agreement, Bankers Trust receives a fee
from the Portfolio, computed daily and paid monthly, at the annual rate of 0.10%
of the average daily net assets of the Portfolio. The Adviser has agreed to
waive and reimburse expenses of the Portfolio to the extent necessary to limit
all expenses to 0.08% of the average daily net assets of the Portfolio.
For the fiscal years ended December 31, 1996, 1995 and 1994, the
Adviser accrued $1,505,963, $770,530 and $428,346, respectively, in compensation
for investment advisory services provided to the Portfolio. During the same
period, Bankers Trust reimbursed $870,024, $418,814 and $249,230, respectively,
to the Portfolio to cover expenses.
Banking Regulatory Matters
Bankers Trust has been advised by its counsel that, in counsel's
opinion, Bankers Trust currently may perform the services for the Trust and the
Portfolio contemplated by the investment advisory agreement and other activities
for the Fund and the Portfolio described in the Prospectus and this Statement of
Additional Information without violation of the Glass-Steagall Act or other
applicable banking laws or regulations. However, counsel has pointed out that
future changes in either Federal or state statutes and regulations concerning
the permissible activities of banks or trust companies, as well as future
judicial or administrative decisions or interpretations of present and future
statutes and regulations, might prevent Bankers Trust from continuing to perform
those services for the Trust and the Portfolio. State laws on this issue may
differ from the interpretations of relevant Federal law and banks and financial
institutions may be required to register as dealers pursuant to state securities
law. If the circumstances described above should change, the Boards of Trustees
of the Trust and the Portfolio would review the relationships with Bankers Trust
and consider taking all actions necessary in the circumstances.
Administrator
Under administration and services agreements, the Adviser is obligated
on a continuous basis to provide such administrative services as the Board of
Trustees of the Trust and the Portfolio reasonably deem necessary for the proper
administration of the Trust or the Portfolio. The Adviser will generally assist
in all aspects of the Fund's and Portfolio's operations; supply and maintain
office facilities (which may be in The Adviser's own offices), statistical and
research data, data processing services, clerical, accounting, bookkeeping and
recordkeeping services (including without limitation the maintenance of such
books and records as are required under the 1940 Act and the rules thereunder,
except as maintained by other agents), internal auditing, executive and
administrative services, and stationery and office supplies; prepare reports to
shareholders or investors; prepare and file tax returns; supply financial
information and supporting data for reports to and filings with the SEC and
various state Blue Sky authorities; supply supporting documentation for meetings
31
<PAGE>
of the Board of Trustees; provide monitoring reports and assistance regarding
compliance with Declarations of Trust, by-laws, investment objectives and
policies and with Federal and state securities laws; arrange for appropriate
insurance coverage; calculate NAVs of the Portfolio, net income and realized
capital gains or losses; and negotiate arrangements with, and supervise and
coordinate the activities of, agents and others to supply services.
Pursuant to a Sub-Administration Agreement (the "Sub-Administration
Agreement"), Federated Service Company ("FSC") performs such sub-administration
duties for the Portfolio as from time to time may be agreed upon by Bankers
Trust and FSC. The Sub-Administration Agreement provides that FSC will receive
such compensation as from time to time may be agreed upon by FSC and Bankers
Trust. All such compensation will be paid by Bankers Trust.
For the years ended December 31, 1996, 1995 and 1994, the Adviser
accrued $752,981, $385,265 and $214,173, respectively, in compensation for
administrative and other services provided to the Portfolio.
Personal Investments by Employees of Bankers Trust
Both the Trust and the Adviser have adopted strict codes of ethics
governing the conduct of all employees who manage the Portfolio and its
portfolio securities. These codes recognize that such persons owe a fiduciary
duty to the Portfolio's shareholders and must place the interests of
shareholders ahead of the employees' own interests. Among other things, the
codes: require preclearance and periodic reporting of personal securities
transactions; prohibit personal transactions in securities being purchased or
sold, or being considered for purchase or sale, by the Portfolio; prohibit
purchasing securities in initial public offerings; and prohibit taking profits
on securities held for less than sixty days. Violations of the codes are subject
to review by the Trustees of the Portfolio and could result in severe penalties.
TRUSTEES AND OFFICERS OF THE FUND
<TABLE>
<CAPTION>
Position with Underwriter, Scudder
Name, Age and Address Position with Fund Principal Occupation** Investor Services, Inc.
- --------------------- ------------------ ---------------------- -----------------------
<S> <C> <C> <C>
Daniel Pierce+*= (63) President and Trustee Chairman of the Board and Director, Vice President and
Managing Director Assistant Treasurer
of Scudder, Stevens &
Clark, Inc.
Henry P. Becton, Jr. (53) Trustee President and General --
125 Western Avenue Manager, WGBH Educational
Allston, MA 02134 Foundation
George M. Lovejoy, Jr.= (67) Trustee President and Former --
160 Federal Street Director, Fifty Associates
Boston, MA 02110 (real estate corporation)
Wesley W. Marple, Jr.= (65) Trustee Professor of Business --
413 Hayden Hall Administration
360 Huntington Ave. Boston, MA Northeastern University,
02115 College of Business
Administration
Kathryn L. Quirk*# (44) Trustee Managing Director of Director, Senior Vice President
Scudder, Stevens & and Clerk
Clark, Inc.
32
<PAGE>
Position with Underwriter, Scudder
Name, Age and Address Position with Fund Principal Occupation** Investor Services, Inc.
- --------------------- ------------------ ---------------------- -----------------------
Jean C. Tempel (54) Trustee General Partner, TL --
Ten Post Office Square Ventures (venture capital
Suite 1325 funds)
Boston, MA 02109
Bruce F. Beaty# (38) Vice President Principal of Scudder, --
Stevens & Clark, Inc.
William F. Gadsden*# (42) Vice President Managing Director of --
Scudder, Stevens &
Clark, Inc.
Jerard K. Hartman# (64) Vice President Managing Director of --
Scudder, Stevens &
Clark, Inc.
Robert T. Hoffman# (38) Vice President Managing Director of --
Scudder, Stevens &
Clark, Inc.
Thomas W. Joseph+ (58) Vice President Principal of Scudder, Director, Vice President,
Stevens & Clark, Inc. Treasurer and Assistant Clerk
David S. Lee+ (63) Vice President Managing Director of Director, President and Assistant
Scudder, Stevens & Treasurer
Clark, Inc.
Valerie F. Malter# (38) Vice President Principal of Scudder, __
Stevens & Clark, Inc.
Thomas F. McDonough+ (50) Vice President, Principal of Scudder, Assistant Clerk
Secretary and Stevens & Clark, Inc.
Assistant Treasurer
Pamela A. McGrath+ (43) Vice President Managing Director of --
and Treasurer Scudder, Stevens & Clark,
Inc.
Edward J. O'Connell# (52) Vice President Principal of Scudder, Assistant Treasurer
and Assistant Stevens & Clark, Inc.
Treasurer
</TABLE>
* Messrs. Gadsden, Pierce and Ms. Quirk are considered by the Fund and
its counsel to be persons who are "interested persons" of Scudder or of
the Fund (within the meaning of the 1940 Act).
** Unless otherwise stated, all the officers and directors have been
associated with their respective companies for more than five years,
but not necessarily in the same capacity.
= Messrs. Lovejoy and Pierce and Marple are members of the Executive
Committee, which has the power to declare dividends from ordinary
income and distributions of realized capital gains to the same extent
as the Board is so empowered.
+ Address: Two International Place, Boston, Massachusetts
# Address: 345 Park Avenue, New York, New York
The Trustees and officers of the Fund also serve in similar capacities
with other Scudder funds.
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<PAGE>
All Trustees and Officers as a group owned less than 1% of the Fund's
outstanding shares as of the commencement of operations.
REMUNERATION
Responsibilities of the Board--Board and Committee Meetings
The Board of Trustees of the Trust is responsible for the general
oversight of the Fund's business. A majority of the Board's members are not
affiliated with Scudder. These "Independent Trustees" have primary
responsibility for assuring that the Fund is managed in the best interests of
its shareholders.
The Board of Trustees meets at least quarterly to review the investment
performance of each Fund of the Trust and other operational matters, including
policies and procedures designated to assure compliance with various regulatory
requirements. At least annually, the Independent Trustees review the fees paid
to Scudder and its affiliates for investment advisory services and other
administrative and shareholder services. In this regard, they evaluate, among
other things, the quality and efficiency of the various other services provided,
costs incurred by Scudder and its affiliates, and comparative information
regarding fees and expenses of competitive funds. They are assisted in this
process by the Fund's independent public accountants and by independent legal
counsel selected by the Independent Trustees.
All of the Independent Trustees serve on the Committee of Independent
Trustees, which nominates Independent Trustees and considers other related
matters, and the Audit Committee, which selects the Fund's independent public
accountants and reviews accounting policies and controls. In addition,
Independent Trustees from time to time have established and served on task
forces and subcommittees focusing on particular matters such as investment,
accounting and shareholder service issues.
The Independent Trustees met fourteen times during 1996, including
Board and Committee meetings and meetings to review the Trust's contractual
arrangements as described above. The Scudder Growth and Income Fund, a series of
the Trust, also held two Special Meetings in 1996.
All of the Independent Trustees attended 100% of all such meetings.
Compensation of Officers and Trustees of the Fund
The Independent Trustees receive the following compensation from the
Funds of Scudder Investment Trust: an annual trustee's fee of $2,400 for a Fund
in which assets do not exceed $100 million, $4,800 for assets which exceed $100
million, but not exceeding $1 billion, and $7,200 if assets exceed $1 billion; a
fee of $200 for attendance at each board meeting, audit committee meeting, or
other meeting held for the purposes of considering arrangements between the
Trust for the Fund and Scudder or any affiliate of Scudder; $100 for any other
committee meeting (although in some cases the Independent Trustees have waived
committee meeting fees); and reimbursement of expenses incurred for travel to
and from Board Meetings. No additional compensation is paid to any Independent
Trustee for travel time to meetings, attendance at directors' educational
seminars or conferences, service on industry or association committees,
participation as speakers at directors' conferences, service on special trustee
task forces or subcommittees or service as lead or liaison trustee. Independent
Trustees do not receive any employee benefits such as pension, retirement or
health insurance.
The Independent Trustees also serve in the same capacity for other
funds managed by Scudder. These funds differ broadly in type an complexity and
in some cases have substantially different Trustee fee schedules. The following
table shows the aggregate compensation received by each Independent Trustee
during 1996 from the Trust and from all of Scudder funds as a group.
34
<PAGE>
Scudder
Name Investment Trust* All Scudder Funds
---- ----------------- -----------------
Henry P. Becton, Jr. $ 17,800 $ 91,012 (16 funds)
Trustee
George M. Lovejoy, Jr. $ 19,300 $124,512 (13 funds)
Trustee
Wesley W. Marple, Jr. $ 19,300 $106,812 (16 funds)
Trustee
Jean C. Tempel $ 18,400 $102,895 (16 funds)
Trustee
* In 1996, Scudder Investment Trust consisted of three funds: Scudder
Growth and Income Fund, Scudder Large Company Growth Fund and Scudder
Classic Growth Fund. Scudder S&P 500 Index Fund commenced operations on
August 29, 1997.
TRUSTEES AND OFFICERS OF THE PORTFOLIO
<TABLE>
<CAPTION>
Position with
Position with Underwriter
Name, Age and Address Portfolio Principal Occupation Edgewood Services, Inc.
- --------- ----------- --------- -------------------- -----------------------
<S> <C> <C> <C>
Charles P. Biggar (66) Trustee Director of Chase/NBW Bank -
12 Hitching Post Lane Advisory Board; Director,
Chappaqua, NY 10514 Batemen, Eichler, Hill
Richards Inc.; formerly
Vice President of
International Business
Machines and President of
the National Services and
the Field Engineering
Divisions of IBM
S. Leland Dill (67) Trustee Director, Coutts Group; -
5070 North Ocean Drive Coutts (U.S.A.)
Singer Island, FL 33404 International; Coutts Trust
Holdings, Ltd;
Director, Zweig Series
Trust; formerly
Partner of KPMG Peat
Marwick; Director,
Vinters International
Company Inc.; General
Partner of Pemco (an
investment company
registered under the
1940 Act)
35
<PAGE>
Position with
Position with Underwriter
Name, Age and Address Portfolio Principal Occupation Edgewood Services, Inc.
- --------- ----------- --------- -------------------- -----------------------
Philip Saunders, Jr. (61) Trustee Principal, Philip Saunders -
445 Glen Road Associates (Consulting);
Weston, MA 02193 former Director of
Financial Industry
Consulting, Wolf &
Company; President,
John Hancock Home
Mortgage Corporation;
and Senior Vice
President of Treasury
and Financial
Services, John Hancock
Mutual Life Insurance
Company, Inc.
Ronald M. Petnuch (37) President and Senior Vice President; -
Clearing Operations Treasurer Federated Services Company
P.O. Box 897 ("FSC"); formerly, Director
Pittsburgh, PA 15230-0897 of Proprietary Client
Services, Federated
Administrative Services
("FAS"), and Associate
Corporate Counsel,
Federated Investors ("FI")
Charles L. Davis, Jr. (37) Vice President and Vice President, FAS. -
Clearing Operations Assistant Treasurer
P.O. Box 897
Pittsburgh, PA 15230-0897
Jay S. Neuman (47) Secretary Corporate Counsel, FI. -
Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230-0897
</TABLE>
*Indicates an "interested person" (as defined in the 1940 Act) of the BT
Institutional Funds.
Unless otherwise specified, each officer listed holds the same position with the
BT Institutional Funds and the Portfolio.
Messrs. Petnuch, Davis, and Neuman also hold similar positions for other
investment companies for which Edgewood or an affiliate serves as the principal
underwriter.
REMUNERATION
Control Persons and Principal Holders of Securities
Each Bankers Trust Fund has informed the Portfolio that whenever it is
requested to vote on matters pertaining to the fundamental policies of the
Portfolio, the Bankers Trust Fund will hold a meeting of shareholders and will
cast its votes as instructed by the Bankers Trust Fund's shareholders. It is
anticipated that other registered investment companies investing in the
Portfolio will follow the same or a similar practice.
36
<PAGE>
Compensation of Officers and Trustees of the Portfolio
The following table reflects fees paid to the Trustees of the Portfolio for the
year ended December 31, 1996:
TRUSTEE COMPENSATION TABLE
<TABLE>
<CAPTION>
EQUITY 500 INDEX PORTFOLIO Total Compensation
NAME from Fund Complex*
---- ------------------
<S> <C> <C>
Charles P. Biggar, $1,955 $28,750
Trustee of Portfolio
S. Leland Dill, $2,015 $28,750
Trustee of Portfolio
Philip Saunders, Jr., $1,955 $28,750
Trustee of Portfolio
Philip W. Coolidge,** $23 $1,250
Trustee of Portfolio
</TABLE>
* Aggregated information is furnished for the BT Family of Funds which consists
of the following: BT Investment Funds, BT Institutional Funds, BT Pyramid Funds,
BT Advisor Funds, BT Investment Portfolios, Cash Management Portfolio, Treasury
Money Portfolio, Tax Free Money Portfolio, NY Tax Free Money Portfolio,
International Equity Portfolio, Utility Portfolio, Short Intermediate U.S.
Government Securities Portfolio, Intermediate Tax Free Portfolio, Asset
Management Portfolio, Equity 500 Index Portfolio, and Capital Appreciation
Portfolio.
** Effective August 11, 1997, Philip W. Coolidge has resigned as Trustee
of the Portfolio.
Bankers Trust reimbursed the Portfolio for a portion of their Trustee fees for
the period above.
DISTRIBUTOR
The Trust has an underwriting agreement with Scudder Investor Services,
Inc., a Massachusetts corporation, which is a subsidiary of Scudder, a Delaware
corporation. The Trust's underwriting agreement dated September 30, 1995 will
remain in effect until September 30, 1998 and from year to year thereafter only
if its continuance is approved annually by a majority of the Trustees who are
not parties to such agreement or interested persons of any such party and either
by a vote of a majority of the Trustees or a majority of the outstanding voting
securities of the Fund. The underwriting agreement was last approved by the
Trustees on August 12, 1997.
Under the underwriting agreement, the Fund is responsible for: the
payment of all fees and expenses in connection with the preparation and filing
with the SEC of its registration statement and prospectus and any amendments and
supplements thereto; the registration and qualification of shares for sale in
the various states, including registering the Fund as a broker or dealer in the
various states as required; the fees and expenses of preparing, printing and
mailing prospectuses annually to existing shareholders (see below for expenses
relating to prospectuses paid by the Distributor), notices, proxy statements,
reports or other communications to shareholders of the Fund; the cost of
printing and mailing confirmations of purchases of shares and any prospectuses
accompanying such confirmations; any issuance taxes and/or any initial transfer
taxes; a portion of shareholder toll-free telephone charges and expenses of
shareholder service representatives; the cost of wiring funds for share
purchases and redemptions (unless paid by the shareholder who initiates the
transaction); the cost of printing and postage of business reply envelopes; and
a portion of the cost of computer terminals used by both the Fund and the
Distributor.
The Distributor will pay for printing and distributing prospectuses or
reports prepared for its use in connection with the offering of the Fund's
shares to the public and preparing, printing and mailing any other literature or
advertising in connection with the offering of the shares of the Fund to the
public. The Distributor will pay all fees and expenses in connection with its
qualification and registration as a broker or dealer under federal and state
laws, a portion of the cost of toll-free telephone service and expenses of
shareholder service representatives, a portion of the cost of computer
terminals, and expenses of any activity which is primarily intended to result in
the sale of shares issued by the Fund, unless a 12b-1 Plan is in effect which
37
<PAGE>
provides that the Fund shall bear some or all of such expenses.
NOTE: Although the Fund does not currently have a 12b-1 Plan, and the
Trustees have no current intention of adopting one, the Fund would also
pay those fees and expenses permitted to be paid or assumed by the Fund
pursuant to a 12b-1 Plan, if any, were adopted by the Fund,
notwithstanding any other provision to the contrary in the underwriting
agreement.
As agent, the Distributor currently offers the Fund's shares on a
continuous basis to investors in all states in which shares of the Fund may from
time to time be registered or where permitted by applicable law. The
underwriting agreement provides that the Distributor accepts orders for shares
at net asset value as no sales commission or load is charged to the investor.
The Distributor has made no firm commitment to acquire shares of the Fund.
TAXES
(See "Distribution and performance information--Dividends and
capital gain distributions" and "Transaction information--
Tax information, Tax identification number" in the Fund's
prospectus.)
The Fund has elected to be treated as a regulated investment company
under Subchapter M of the Code or a predecessor statute, and has qualified as
such since its inception. It intends to continue to qualify for such treatment.
Such qualification does not involve governmental supervision or management of
investment practices or policy.
A regulated investment company qualifying under Subchapter M of the
Code is required to distribute to its shareholders at least 90 percent of its
investment company taxable income (including net short-term capital gain) and
generally is not subject to federal income tax to the extent that it distributes
annually its investment company taxable income and net realized capital gains in
the manner required under the Code.
The Fund is subject to a 4% nondeductible excise tax on amounts
required to be but not distributed under a prescribed formula. The formula
requires payment to shareholders during a calendar year of distributions
representing at least 98% of the Fund's ordinary income for the calendar year,
at least 98% of the excess of its capital gains over capital losses (adjusted
for certain ordinary losses) realized during the one-year period ending October
31 during such year, and all ordinary income and capital gains for prior years
that were not previously distributed.
Investment company taxable income includes dividends, interest and net
short-term capital gains in excess of net long-term capital losses, less
expenses. Net realized capital gains for a fiscal year are computed by taking
into account any capital loss carryforward of the Fund. Presently, the Fund has
no capital loss carryforwards.
If any net realized long-term capital gains in excess of net realized
short-term capital losses are retained by the Fund for reinvestment, requiring
federal income taxes to be paid thereon by the Fund, the Fund intends to elect
to treat such capital gains as having been distributed to shareholders. As a
result, each shareholder will report such capital gains as long-term capital
gains, will be able to claim a relative share of federal income taxes paid by
the Fund on such gains as a credit against personal federal income tax
liability, and will be entitled to increase the adjusted tax basis on Fund
shares by the difference between a pro rata share of such gains owned and the
individual tax credit.
Distributions of investment company taxable income are taxable to
shareholders as ordinary income.
To the extent that dividends from domestic corporations constitute a
portion of the Fund's gross income, a portion of the income distributions of the
Fund may be eligible for the deduction for dividends received by corporations.
Shareholders will be informed of the portion of dividends which so qualify. The
dividends-received deduction is reduced to the extent the shares of the Fund
with respect to which the dividends are received are treated as debt-financed
under federal income tax law, and is eliminated if either those shares or the
shares of the Fund are deemed to have been held by the Fund or the shareholder,
as the case may be, for less than 46 days.
Properly designated distributions of the excess of net long-term
capital gain over net short-term capital loss are taxable to shareholders as
long-term capital gain, regardless of the length of time the shares of the Fund
have been held by such shareholders. Such distributions are not eligible for the
38
<PAGE>
dividends-received deduction. Any loss realized upon the redemption of shares
held at the time of redemption for six months or less will be treated as a
long-term capital loss to the extent of any amounts treated as distributions of
long-term capital gain during such six-month period.
Distributions of investment company taxable income and net realized
capital gains will be taxable as described above, whether received in shares or
in cash. Shareholders electing to receive distributions in the form of
additional shares will have a cost basis for federal income tax purposes in each
share so received equal to the net asset value of a share on the reinvestment
date.
All distributions of investment company taxable income and net realized
capital gain, whether received in shares or in cash, must be reported by each
shareholder on his or her federal income tax return. Dividends and capital gains
distributions declared in October, November or December and payable to
shareholders of record in such a month will be deemed to have been received by
shareholders on December 31 if paid during January of the following year.
Redemptions of shares, including exchanges for shares of another Scudder fund,
may result in tax consequences (gain or loss) to the shareholder and are also
subject to these reporting requirements.
A qualifying individual may make a deductible IRA contribution 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 $2,000 per individual for married couples if only one spouse
has earned income) for that year. There are special rules for determining how
withdrawals are to be taxed if an IRA contains both deductible and nondeductible
amounts. In general, a proportionate amount of each withdrawal will be deemed to
be made from nondeductible contributions; amounts treated as a return of
nondeductible contributions will not be taxable. Also, annual contributions may
be made to a spousal IRA even if the spouse has earnings in a given year if the
spouse elects to be treated as having no earnings (for IRA contribution
purposes) for the year.
Distributions by the Fund result in a reduction in the net asset value
of the Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should consider the tax implications of buying shares just
prior to a distribution. The price of shares purchased at that time includes the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will then receive a partial return of capital upon the
distribution, which will nevertheless be taxable to them.
Equity options (including covered call options on portfolio stock) and
over-the-counter options on debt securities written or purchased by the
Portfolio will be subject to tax under Section 1234 of the Code. In general, no
loss is recognized by the Portfolio upon payment of a premium in connection with
the purchase of a put or call option. The character of any gain or loss
recognized (i.e., long-term or short-term) will generally depend, in the case of
a lapse or sale of the option, on the Portfolio's holding period for the option,
and in the case of an exercise of a put option, on the Portfolio's holding
period for the underlying stock. The purchase of a put option may constitute a
short sale for federal income tax purposes, causing an adjustment in the holding
period of the underlying stock or substantially identical stock in the
Portfolio's portfolio. If the Portfolio writes a put or call option, no gain is
recognized upon its receipt of a premium. If the option lapses or is closed out,
any gain or loss is treated as a short-term capital gain or loss. If a call
option is exercised, any resulting gain or loss is a short-term or long-term
capital gain or loss depending on the holding period of the underlying stock.
The exercise of a put option written by the Portfolio is not a taxable
transaction for the Portfolio.
Many futures and forward contracts entered into by the Portfolio and
all listed non-equity options written or purchased by the Portfolio (including
options on futures contracts and options on broad-based stock indices) will be
governed by Section 1256 of the Code. Absent a tax election to the contrary,
gain or loss attributable to the lapse, exercise or closing out of any such
position generally will be treated as 60% long-term and 40% short-term capital
gain or loss, and on the last trading day of the Portfolio's fiscal year, all
outstanding Section 1256 positions will be marked to market (i.e. treated as if
39
<PAGE>
such positions were closed out at their closing price on such day), with any
resulting gain or loss recognized as 60% long-term and 40% short-term capital
gain or loss. Under certain circumstances, entry into a futures contract to sell
a security may constitute a short sale for federal income tax purposes, causing
an adjustment in the holding period of the underlying security or a
substantially identical security in the Portfolio's portfolio.
Positions of the Portfolio which consist of at least one stock and at
least one other position with respect to a related security which substantially
diminishes the Portfolio's risk of loss with respect to such stock could be
treated as a "straddle" which is governed by Section 1092 of the Code, the
operation of which may cause deferral of losses, adjustments in the holding
periods of stock or securities and conversion of short-term capital losses into
long-term capital losses. An exception to these straddle rules exists for
certain "qualified covered call options" on stock written by the Portfolio.
Positions of the Portfolio which consist of at least one position not
governed by Section 1256 and at least one futures or forward contract or
nonequity option governed by Section 1256 which substantially diminishes the
Portfolio's risk of loss with respect to such other position will be treated as
a "mixed straddle." Although mixed straddles are subject to the straddle rules
of Section 1092 of the Code, certain tax elections exist for them which reduce
or eliminate the operation of these rules. The Portfolio intends to monitor its
transactions in options and futures and may make certain tax elections in
connection with these investments.
The Fund will be required to report to the Internal Revenue Service all
distributions of taxable income and capital gains as well as gross proceeds from
the redemption or exchange of Fund shares, except in the case of certain exempt
shareholders. Under the backup withholding provisions of Section 3406 of the
Code, distributions of taxable income and capital gains and proceeds from the
redemption or exchange of the shares of a regulated investment company may be
subject to withholding of federal income tax at the rate of 31% in the case of
non-exempt shareholders who fail to furnish the investment company with their
taxpayer identification numbers and with required certifications regarding their
status under the federal income tax law. Withholding may also be required if the
Fund is notified by the IRS or a broker that the taxpayer identification number
furnished by the shareholder is incorrect or that the shareholder has previously
failed to report interest or dividend income. If the withholding provisions are
applicable, any such distributions and proceeds, whether taken in cash or
reinvested in additional shares, will be reduced by the amounts required to be
withheld.
Shareholders of the Fund may be subject to state and local taxes on
distributions received from the Fund and on redemptions of the Fund's shares.
Each distribution is accompanied by a brief explanation of the form and
character of the distribution. In January of each year the Fund issues to each
shareholder a statement of the federal income tax status of all distributions.
The Fund is organized as a series of a Massachusetts business trust and
is not liable for any income or franchise tax in the Commonwealth of
Massachusetts, provided that it qualifies as a regulated investment company for
federal income tax purposes.
The foregoing discussion of U.S. federal income tax law relates solely
to the application of that law to U.S. persons, i.e., U.S. citizens and
residents and U.S. corporations, partnerships, trusts and estates. Each
shareholder who is not a U.S. person should consider the U.S. and foreign tax
consequences of ownership of shares of the Fund, including the possibility that
such a shareholder may be subject to a U.S. withholding tax at a rate of 30% (or
at a lower rate under an applicable income tax treaty) on amounts constituting
ordinary income received by him or her, where such amounts are treated as income
from U.S. sources under the Code.
Shareholders should consult their tax advisers about the application of
the provisions of tax law described in this Statement of Additional Information
in light of their particular tax situations.
Tax Status. The Portfolio is organized as a trust under New York law. Under the
anticipated method of operation of the Portfolio, the Portfolio will not be
subject to any income tax. However each investor in the Portfolio, including the
Fund, will be taxable on its share (as determined in accordance with the
governing instruments of the Portfolio) of the Portfolio's income, gain, loss,
deductions, credits and tax preference items, without regard to whether the
investor has received any distributions from the Portfolio. The determination of
such share will be made in accordance with the Internal Revenue Code of 1986, as
amended (the "Code"), and regulations promulgated thereunder.
40
<PAGE>
Distributions received by the Fund from the Portfolio generally will
not result in the Fund recognizing any gain or loss for federal income tax
purposes, except that (1) gain will be recognized to the extent that any cash
distributed exceeds the Fund's basis in its interest in the Portfolio prior to
the distribution, (2) income or gain may be realized if the distribution is made
in liquidation of the Fund's entire interest in the Portfolio and includes a
disproportionate share of any unrealized receivables held by the Portfolio, and
(3) loss may be recognized if the distribution is made in liquidation of the
Fund's entire interest in the Portfolio and consists solely of cash and/or
unrealized receivables. The Fund's basis in its interest in the Portfolio
generally will equal the amount of cash and the basis of any property which the
Fund invests in the Portfolio, increased by the Fund's share of income from the
Portfolio, and decreased by the amount of any cash distributions and the basis
of any property distributed from the Portfolio.
The Portfolio's taxable year end is December 31. Although, as described
above, the Portfolio will not be subject to Federal income tax, it will file
appropriate income tax returns.
It is intended that the Portfolio's assets, income and distributions
will be managed in such a way that an investor in the Portfolio will be able to
satisfy the requirements of Subchapter M of the Code, assuming that the investor
invested all of its assets in the Portfolio.
There are certain tax issues that will be relevant to only certain of
the investors, specifically investors that are segregated asset accounts and
investors who contribute assets rather than cash to the Portfolio. It is
intended that such segregated asset accounts will be able to satisfy
diversification requirements applicable to them and that such contributions of
assets will not be taxable provided certain requirements are met. Such investors
are advised to consult their own tax advisors as to the tax consequences of an
investment in the Portfolio.
PORTFOLIO TRANSACTIONS
Brokerage Allocation And Other Practices
The Adviser is responsible for decisions to buy and sell securities,
futures contracts and options on such securities and futures for the Portfolio,
the selection of brokers, dealers and futures commission merchants to effect
transactions and the negotiation of brokerage commissions, if any.
Broker-dealers may receive brokerage commissions on portfolio transactions,
including options, futures and options on futures transactions and the purchase
and sale of underlying securities upon the exercise of options. Orders may be
directed to any broker-dealer or futures commission merchant, including to the
extent and in the manner permitted by applicable law, Bankers Trust or its
subsidiaries or affiliates. Purchases and sales of certain portfolio securities
on behalf of the Portfolio are frequently placed by Bankers Trust with the
issuer or a primary or secondary market-maker for these securities on a net
basis, without any brokerage commission being paid by the Portfolio. Trading
does, however, involve transaction costs. Transactions with dealers serving as
market-makers reflect the spread between the bid and asked prices. Transaction
costs may also include fees paid to third parties for information as to
potential purchasers or sellers of securities. Purchases of underwritten issues
may be made which will include an underwriting fee paid to the underwriter.
The Adviser seeks to evaluate the overall reasonableness of the
brokerage commissions paid (to the extent applicable) in placing orders for the
purchase and sale of securities for the Portfolio taking into account such
factors as price, commission (negotiable in the case of national securities
exchange transactions), if any, size of order, difficulty of execution and skill
required of the executing broker-dealer through familiarity with commissions
charged on comparable transactions, as well as by comparing commissions paid by
the Portfolio 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 Adviser is authorized, consistent with Section 28(e) of the
Securities Exchange Act of 1934, as amended, when placing portfolio transactions
for the Portfolio with a broker to pay a brokerage commission (to the extent
applicable) in excess of that which another broker might have charged for
effecting the same transaction on account of the receipt of research, market or
statistical information. The term "research, market or statistical information"
includes advice as to the value of securities; the advisability of investing in,
purchasing or selling securities; 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.
41
<PAGE>
Consistent with the policy stated above, the Conduct Rules of the
National Association of Securities Dealers, Inc. and such other policies as the
Portfolio's Trustees may determine, the Adviser may consider sales of securities
of shares of the Portfolio's investors as a factor in the selection of
broker-dealers to execute portfolio transactions. The Adviser will make such
allocations if commissions are comparable to those charged by nonaffiliated,
qualified broker-dealers for similar services.
Higher commissions may be paid to firms that provide research services
to the extent permitted by law. The Adviser may use this research information in
managing the Portfolio's assets, as well as the assets of other clients.
Except for implementing the policies stated above, there is no
intention to place portfolio transactions with particular brokers or dealers or
groups thereof. In effecting transactions in over-the-counter securities, orders
are placed with the principal market-makers for the security being traded
unless, after exercising care, it appears that more favorable results are
available otherwise.
Although certain research, market and statistical information from
brokers and dealers can be useful to the Portfolio and to the Adviser, it is the
opinion of the management of the Portfolio that such information is only
supplementary to Bankers Trust's own research effort, since the information must
still be analyzed, weighed and reviewed by the Adviser's staff. Such information
may be useful to the Adviser in providing services to clients other than the
Portfolio, and not all such information is used by the Adviser in connection
with the Portfolio. Conversely, such information provided to Bankers Trust by
brokers and dealers through whom other clients of the Adviser effect securities
transactions may be useful to Bankers Trust in providing services to the
Portfolio.
In certain instances there may be securities which are suitable for the
Portfolio as well as for one or more of the Adviser's other clients. Investment
decisions for the Portfolio and for the Adviser's other clients are made with a
view to achieving their respective investment objectives. It may develop that a
particular security is bought or sold for only one client even though it might
be held by, or bought or sold for, other clients. Likewise, a particular
security may be bought for one or more clients when one or more clients are
selling that same security. Some simultaneous transactions are inevitable when
several clients receive investment advice from the same investment adviser,
particularly when the same security is suitable for the investment objectives of
more than one client. When two or more clients are simultaneously engaged in the
purchase or sale of the same security, the securities are allocated among
clients in a manner believed to be equitable to each. It is recognized that in
some cases this system could have a detrimental effect on the price or volume of
the security as far as the Portfolio in concerned. However, it is believed that
the ability of the Portfolio to participate in volume transactions will produce
better executions for the Portfolio.
For the fiscal years ended December 31, 1996, 1995 and 1994, the
Portfolio paid brokerage commissions in the amount of $289,791, $172,924, and
$97,069 respectively.
Portfolio Turnover
The frequency of portfolio transactions, the Portfolio's turnover rate,
will vary from year to year depending on market conditions and the Portfolio's
cash flows. The Portfolio's annual turnover rate is not expected to exceed 100%.
The Portfolio's turnover rates for the years ended December 31, 1996 and 1995
were 15% and 6%, respectively.
NET ASSET VALUE
The net asset value of shares of the Fund is computed as of the close
of regular trading on the New York Stock Exchange on each day the Exchange is
open for trading. The Exchange is scheduled to be closed on the following
holidays: New Year's Day, Martin Luther King Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas. Net asset
value per share is determined by dividing the value of the total assets of the
Fund, (i.e., the value of investments in the Portfolio and other assets) less
all liabilities, by the total number of shares outstanding.
The Portfolio values its equity and debt securities (other than
short-term debt obligations maturing in 60 days or less), including listed
securities and securities for which price quotations are available, on the basis
of market valuations furnished by a pricing service. Short-term debt obligations
and money market securities maturing in 60 days or less are valued at amortized
42
<PAGE>
cost, which approximates market value. Other assets are valued at fair value
using methods determined in good faith by the Portfolio's Board of Trustees.
Each investor in the Portfolio, including the Fund, may add to or
reduce its investment in the Portfolio on each day that the NYSE is open for
business and New York charter banks are not closed owing to customary or local
holidays. As of the close of the NYSE, currently 4:00 p.m. (New York time or
earlier if the NYSE closes earlier) on each such day, the value of each
investor's interest in the Portfolio will be determined by multiplying the net
asset value of the Portfolio by the percentage representing that investor's
share of the aggregate beneficial interests in the Portfolio. Any additions or
reductions which are to be effected on that day will then be effected. The
investor's percentage of the aggregate beneficial interests in the Portfolio
will then be recomputed as the percentage equal to the fraction (1) the
numerator of which is the value of such investor's investment in the Portfolio
as of the close of the NYSE on such day plus or minus, as the case may be, the
amount of net additions to or reductions in the investor's investment in the
Portfolio effected on such day and (2) the denominator of which is the aggregate
net asset value of the Portfolio as of 4:00 p.m. or the close of the NYSE on
such day plus or minus, as the case may be, the amount of net additions to or
reductions in the aggregate investments in the Portfolio by all investors in the
Portfolio. The percentage so determined will then be applied to determine the
value of the investor's interest in the Portfolio as of 4:00 p.m. or the close
of the NYSE on the following day the NYSE is open for trading.
An exchange-traded equity security is valued by the Portfolio at its
most recent sale price. Lacking any sales, the security is valued at the
calculated mean between the most recent bid quotation and the most recent asked
quotation (the "Calculated Mean"). Lacking a Calculated Mean, the security is
valued at the most recent bid quotation. An equity security which is traded on
The Nasdaq Stock Market ("Nasdaq") system is valued at its most recent sale
price. Lacking any sales, the security is valued at the most recent bid
quotation. The value of an equity security not quoted on the Nasdaq 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 Portfolio's pricing agent(s) which reflect broker/dealer
supplied valuations and electronic data processing techniques. Short-term
securities purchased with remaining maturities of sixty days or less shall be
valued by the amortized cost method, which the Board believes approximates
market value. If it is not possible to value a particular debt security pursuant
to these valuation methods, the value of such security is the most recent bid
quotation supplied by a bona fide marketmaker. If it is not possible to value a
particular debt security pursuant to the above methods, the Adviser may
calculate the price of that debt security, subject to limitations established by
the Board.
An exchange traded options contract on securities, currencies, futures
and other financial instruments is valued at its most recent sale price on such
exchange. Lacking any sales, the options contract is valued at the Calculated
Mean. Lacking any Calculated Mean, the options contract is valued at the most
recent bid quotation in the case of a purchased options contract, or the most
recent asked quotation in the case of a written options contract. An options
contract on securities, currencies and other financial instruments traded
over-the-counter is valued at the most recent bid quotation in the case of a
purchased options contract and at the most recent asked quotation in the case of
a written options contract. Futures contracts are valued at the most recent
settlement price. Foreign currency exchange forward contracts are valued at the
value of the underlying currency at the prevailing exchange rate.
If a security is traded on more than one exchange, or upon one or more
exchanges and in the over-the-counter market, quotations are taken from the
market in which the security is traded most extensively.
If, in the opinion of the Portfolio's Valuation Committee, the value of
a portfolio asset as determined in accordance with these procedures does not
represent the fair market value of the portfolio asset, the value of the
portfolio asset is taken to be an amount which, in the opinion of the Valuation
Committee, represents fair market value on the basis of all available
information. The value of other portfolio holdings owned by the Portfolio 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.
43
<PAGE>
Following the valuations of securities or other portfolio assets in
terms of the currency in which the market quotation used is expressed ("Local
Currency"), the value of these portfolio assets in terms of U.S. dollars is
calculated by converting the Local Currency into U.S. dollars at the prevailing
currency exchange rate on the valuation date.
ADDITIONAL INFORMATION
Experts
The Financial Statements of the Portfolio 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., 1100 Main
Street, Suite 900, Kansas City , Missouri 64105, independent accountants, and
given on the authority of that firm as experts in accounting and auditing.
Shareholder Indemnification
The Trust is an organization of the type commonly known as a
Massachusetts business trust. Under Massachusetts law, shareholders of such a
trust may, under certain circumstances, be held personally liable as partners
for the obligations of the Trust. The Declaration of Trust contains an express
disclaimer of shareholder liability in connection with the Fund's property or
the acts, obligations or affairs of the Trust. The Declaration of Trust also
provides for indemnification out of the Fund's property of any shareholder held
personally liable for the claims and liabilities which a shareholder may become
subject by reason of being or having been a shareholder. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations.
Other Information
The name "Scudder Investment Trust" is a designation of the Trustees
for the time being under a Declaration of Trust dated September 20, 1984, as
amended from time to time, and all persons dealing with the Fund must look
solely to the property of the Fund for the enforcement of any claims against the
Fund as neither the Trustees, officers, agents or shareholders assume any
personal liability for obligations entered into on behalf of the Fund. No series
of the Trust shall be liable for the obligations of any other series. Upon the
initial purchase of shares of the Fund, the shareholder agrees to be bound by
the Trust's Declaration of Trust, as amended from time to time. The Declaration
of Trust is on file at the Massachusetts Secretary of State's Office in Boston,
Massachusetts.
Estimated costs of __________ incurred by the Fund in conjunction with
its organization are amortized over a five year period beginning at the
commencement of operations of the Fund.
The Fund has a fiscal year end of December 31.
The CUSIP number of the Fund is 811167402.
Coopers & Lybrand L.L.P., 1100 Main Street, Suite 900, Kansas City,
Missouri 64105, has been selected as the Independent Accountants for the Fund
and the Portfolio.
State Street Bank and Trust Company serves as custodian to the Fund and
Bankers Trust serves as Custodian for the Portfolio.
The firm of Dechert Price & Rhoads is counsel to the Fund. The firm of
Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York,
New York 10022-4669, is counsel to the Portfolio.
Bankers Trust (or its agent) computes net asset value for the Fund. The
Fund pays Bankers Trust an annual fee of $10,000.
Scudder Service Corporation ("SSC"), P.O. Box 2291, Boston,
Massachusetts 02107-2291, a subsidiary of Scudder, is the transfer and dividend
paying agent for the Fund. The Fund pays SSC an annual fee for each account
maintained for a participant.
44
<PAGE>
Scudder Trust Company ("STC"), a subsidiary of Scudder, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund.
The Fund's prospectus and this Statement of Additional Information omit
certain information contained in the Registration Statement which the Fund has
filed with the SEC under the Securities Act of 1933 and reference is hereby made
to the Registration Statement for further information with respect to the Fund
and the securities offered hereby. This Registration Statement and its
amendments are available for inspection by the public at the SEC in Washington,
D.C.
FINANCIAL STATEMENTS
The financial statements, including the investment portfolio of the
Portfolio, together with the Report of Independent Accountants, Financial
Highlights and notes to financial statements in the Annual Report of the
Portfolio dated December 31, 1996 and are incorporated by reference in its
entirety and are hereby deemed to be a part of this Statement of Additional
Information.
The Statement of Assets and Liabilities as of August 26, 1997, and the
report of Independent Accountants for the Fund is included herein.
45
<PAGE>
<PAGE>
APPENDIX A
Set forth below are descriptions of the ratings of Moody's Investors Service,
Inc. ("Moody's") and Standard & Poor's Ratings Group ("S&P"), which represent
their opinions as to the quality of the securities which they undertake to rate.
It should be emphasized, however, that ratings are relative and subjective and
are not absolute standards of quality.
S&P'S COMMERCIAL PAPER RATINGS
A is the highest commercial paper rating category utilized by S&P, which uses
the numbers 1+, 1, 2 and 3 to denote relative strength within its A
classification. Commercial paper issues rated A by S&P have the following
characteristics: Liquidity ratios are better than industry average. Long-term
debt rating is A or better. The issuer has access to at least two additional
channels of borrowing. Basic earnings and cash flow are in an upward trend.
Typically, the issuer is a strong company in a well-established industry and has
superior management.
MOODY'S COMMERCIAL PAPER RATINGS
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leading
market positions in well-established industries; high rates of return on funds
employed; conservative capitalization structures with moderate reliance on debt
and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; well-established access to
a range of financial markets and assured sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or related supporting institutions) have an acceptable
capacity for repayment of short-term promissory obligations. The effect of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.
46
<PAGE>
SCUDDER S&P 500 INDEX FUND
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
August 26, 1997
Assets
Cash........................................................ $1,200
Deferred organization expense (Note)........................ 13,000
---------------
Total assets................................................ 14,200
---------------
Liabilities
Accrued liabilities (Note).................................. 13,000
---------------
Total liabilities........................................... 13,000
---------------
Net Assets.................................................... $1,200
===============
Net Assets consist of:
Shares of beneficial interest............................... 1
Additional paid-in capital.................................. 1,199
---------------
Net Assets.................................................... $1,200
===============
Net asset value, offering and redemption price per share
($1,200/100 outstanding shares of beneficial interest,
$.01 par value, unlimited number of shares authorized)........ $12.00
===============
The accompanying note is an integral part of the financial statement.
Scudder S&P 500 Index Fund (the "Fund") is a diversified series of Scudder
Investment Trust (the "Trust"), formerly known as Scudder Growth and Income
Fund, an open-end management investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"). The Trust was organized as a
Massachusetts business trust under a Declaration of Trust dated September 20,
1984, as amended. The Trust assumed the business of its predecessor on May 15,
1991. The Trust's authorized capital consists of an unlimited number of shares
of beneficial interest of $0.01 par value. The Trust's shares are currently
divided into four series, Scudder Growth and Income Fund, Scudder Large Company
Growth Fund, Scudder Classic Growth Fund and Scudder S&P 500 Index Fund. The
Trustees have the authority to issue additional series of shares and to
designate the relative rights and preferences as between the different series.
Each share of the Fund has equal rights with each other share of the Fund as to
voting, dividends and liquidation. The Fund has had no operations to date other
than matters relating to its organization and registration as a diversified
series.
The Fund intends to invest substantially all of its assets in the Equity
500 Index Portfolio (the "Portfolio"), which has the same investment objectives
as the Fund. Bankers Trust Company acts as investment adviser to the Portfolio.
Scudder, Stevens and Clark, Inc. is the investment manager to the Fund and, as
such, will monitor the Fund's investments in the Portfolio.
Costs incurred by the Fund in connection with its organization, estimated at
$13,000, will be amortized on a straight-line basis over a five-year period
beginning at the commencement of operations of the Fund. In the event that any
of the initial shares of the Fund are redeemed during the amortization period,
the redemption proceeds will be reduced by any unamortized organization expenses
in the same proportion as the number of shares being redeemed bears to the
number of initial shares outstanding at the time of such redemption. Offering
costs, including initial registration costs, will be charged to expense during
the Fund's first year of operations.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of Scudder Investment Trust and the Shareholder of Scudder S&P
500 Index Fund:
We have audited the accompanying statement of assets and liabilities of Scudder
S&P 500 Index Fund as of August 26, 1997. This financial statement is the
responsibility of the Fund's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We have conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit of the financial statement provides a reasonable basis
for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of Scudder S&P 500 Index Fund as
of August 26, 1997 in conformity with generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
August 27, 1997
<PAGE>
SCUDDER INVESTMENT TRUST
PART C. OTHER INFORMATION
<TABLE>
<S> <C>
<CAPTION>
Item 24. Financial Statements and Exhibits
- -------- ---------------------------------
a. Financial Statements
Included in Part A:
-------------------
For Scudder Growth and Income Fund:
Financial highlights for the ten fiscal years ended December 31, 1995
(Incorporated by reference to Post-Effective Amendment No. 75 to the Registration
Statement.)
For Scudder Large Company Growth Fund:
Financial Highlights for the period May 15, 1991 (commencement of operations) to
October 31, 1991 and for the five fiscal years ended October 31, 1996
(Incorporated by reference to Post-Effective Amendment No. 79 to the Registration
Statement.)
For Scudder Classic Growth Fund:
Financial Highlights for the period September 9, 1996 (commencement of
operations) to February 28, 1997.
(Incorporated by reference to Post-Effective Amendment No. 80 to the Registration
Statement.)
Included in the Part B:
-----------------------
For Scudder Growth and Income Fund:
Investment Portfolio as of December 31, 1995
Statement of Assets and Liabilities as of December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statements of Changes in Net Assets for the two fiscal years
ended December 31, 1995
Financial Highlights for the ten fiscal years ended December 31, 1995
Notes to Financial Statements
Report of Independent Accountants
(Incorporated by reference to Post-Effective Amendment No. 75 to the Registration
Statement.)
For Scudder Large Company Growth Fund:
Investment Portfolio as of October 31, 1996
Statement of Assets and Liabilities as of October 31, 1996
Statement of Operations for the fiscal year ended October 31, 1996
Statements of Changes in Net Assets for the three fiscal years
ended October 31, 1996
Financial Highlights for the period May 15, 1991 (commencement of operations) to
October 31, 1991 and for the five fiscal years ended October 31, 1996
Notes to Financial Statements
Report of Independent Accountants
(Incorporated by reference to Post-Effective Amendment No. 79 to the Registration
Statement.)
Part C - Page 1
<PAGE>
For Scudder Classic Growth Fund:
Investment Portfolio as of February 28, 1997
Statement of Assets and Liabilities as of February 28, 1997
Statement of Operations for the period September 9, 1996 (commencement of
operations) to February 28, 1997
Statement of Changes in Net Assets for the period September 9, 1996 (commencement
of operations) to February 28, 1997
Financial Highlights for the period September 9, 1996 (commencement of
operations) to February 28, 1997
Notes to Financial Statements
Report of Independent Accountants
(Incorporated by reference to Post-Effective Amendment No. 80 to the Registration
Statement.)
For Scudder S&P 500 Index Fund:
Audited Financial Statements for the Equity 500 Index Portfolio
Investment Portfolio as of December 31, 1996
Statement of Assets and Liabilities for the fiscal year ended December 31, 1996
Statement of Operations for the fiscal year ended December 31, 1996
Statement of Changes in Net Assets for the fiscal year ended December 31, 1996
Financial Highlights for the fiscal year ended December 31, 1996
Notes to Financial Statements
Report of Independent Accountants
(Incorporated by reference to Post-Effective Amendment No. 82 to the Registration
Statement.)
Statement of Assets and Liabilities as of August 26, 1997 is filed herein.
Statements, schedules and historical information other than those listed above have been
omitted since they are either not applicable or are not required.
b. Exhibits:
All references are to the Registrant's Registration Statement on
Form N-1A filed with the Securities and Exchange Commission. File
Nos. 2-13628 and 811-43. ("Registration Statement").
1. (a)(1) Amended and Restated Declaration of Trust dated November 4,
1987 is incorporated by reference to Post-Effective Amendment No.
78 to the Registration Statement ("Post-Effective Amendment No.
78").
(a)(2) Amendment to Amended and Restated Declaration of Trust dated
November 14, 1990 is incorporated by reference to Post-Effective
Amendment No. 78 to the Registration Statement ("Post-Effective
Amendment No. 78").
(a)(3) Certificate of Amendment of Declaration of Trust dated February
12, 1991 is incorporated by reference to Post-Effective Amendment
No. 78 to the Registration Statement ("Post-Effective Amendment
No. 78").
Part C - Page 2
<PAGE>
(b)(1) Establishment and Designation of Series of Shares of Beneficial
Interest, $0.01 par value, with respect to Scudder Growth and
Income Fund and Scudder Quality Growth Fund is incorporated by
reference to Post-Effective Amendment No. 78 to the Registration
Statement ("Post-Effective Amendment No. 78").
(b)(2) Establishment and Designation of Series of Shares of Beneficial
Interest, $0.01 par value, with respect to Scudder Classic Growth
Fund is incorporated by reference to Post-Effective Amendment No.
76 to the Registration Statement ("Post-Effective Amendment No.
76").
(b)(3) Establishment and Designation of Series of Shares of Beneficial
Interest, $0.01 par value, with respect to Scudder Growth and
Income Fund, Scudder Large Company Growth Fund, and Scudder
Classic Growth Fund is incorporated by reference to Post-Effective
Amendment No. 81 to the Registration Statement ("Post-Effective
Amendment No. 81").
2. (a) By-Laws of the Registrant dated September 20, 1984 are
incorporated by reference to Post-Effective Amendment No. 78 to
the Registration Statement ("Post-Effective Amendment No. 78").
(b) Amendment to By-Laws of the Registrant dated August 13, 1991 is
incorporated by reference to Post-Effective Amendment No. 78 to
the Registration Statement ("Post-Effective Amendment No. 78").
(c) Amendment to By-Laws of the Registrant dated November 12, 1991
is incorporated by reference to Post-Effective Amendment No. 78 to
the Registration Statement ("Post-Effective Amendment No. 78").
3. Inapplicable.
4. Specimen certificate representing shares of beneficial interest with
$0.01 par value of Scudder Growth and Income Fund is
incorporated by reference to Post-Effective Amendment No. 59 to
the Registration Statement ("Post-Effective Amendment No. 59").
5. (a) Investment Management Agreement between the Registrant (on
behalf of Scudder Growth and Income Fund) and Scudder, Stevens
& Clark, Inc. ("Scudder") dated November 14, 1990 is incorporated
by reference to Post-Effective Amendment No. 78 to the
Registration Statement ("Post-Effective Amendment No. 78").
(b) Investment Management Agreement between the Registrant (on
behalf of Scudder Quality Growth Fund) and Scudder dated May 9,
1991 is incorporated by reference to Post-Effective Amendment No.
78 to the Registration Statement ("Post-Effective Amendment No.
78").
(c) Investment Management Agreement between the Registrant (on
behalf of Scudder Growth and Income Fund) and Scudder dated
August 10, 1993 is incorporated by reference to Post-Effective
Amendment No. 78 to the Registration Statement ("Post-Effective
Amendment No. 78").
Part C - Page 3
<PAGE>
(d) Investment Management Agreement between the Registrant (on
behalf of Scudder Growth and Income Fund) and Scudder dated
August 8, 1995 is incorporated by reference to Post-Effective
Amendment No. 75 to the Registration Statement ("Post-Effective
Amendment No. 75").
(e) Investment Management Agreement between the Registrant, on
behalf of Scudder Classic Growth Fund, and Scudder, Stevens &
Clark, Inc. dated August 13, 1996 is incorporated by reference to
Post-Effective Amendment No. 81 to the Registration Statement
("Post-Effective Amendment No. 81")
(f) Investment Management Agreement between the Registrant, on
behalf of Scudder Growth and Income Fund, and Scudder, Stevens
& Clark, Inc. dated May 1, 1997 is filed herein.
6. (a) Underwriting Agreement between the Registrant and Scudder
Investor Services, Inc., formerly Scudder Fund Distributors, Inc.,
dated September 10, 1985 is incorporated by reference to Post-
Effective Amendment No. 78 to the Registration Statement ("Post-
Effective Amendment No. 78").
7. Inapplicable.
8. (a)(1) Custodian Agreement between the Registrant (on behalf of Scudder
Growth and Income Fund) and State Street Bank and Trust
Company ("State Street Bank") dated December 31, 1984 is
incorporated by reference to Post-Effective Amendment No. 78 to
the Registration Statement ("Post-Effective Amendment No. 78").
(a)(2) Amendment dated April 1, 1985 to the Custodian Agreement
between the Registrant and State Street Bank is incorporated by
reference to Post-Effective Amendment No. 78 to the Registration
Statement ("Post-Effective Amendment No. 78").
(a)(3) Amendment dated August 8, 1987 to the Custodian Agreement
between the Registrant and State Street Bank is incorporated by
reference to Post-Effective Amendment No. 78 to the Registration
Statement ("Post-Effective Amendment No. 78").
(a)(4) Amendment dated August 9, 1988 to the Custodian Agreement between
the Registrant and State Street Bank is incorporated by reference to
Post-Effective Amendment No. 78 to the Registration Statement
("Post-Effective Amendment No. 78").
(a)(5) Amendment dated July 29, 1991 to the Custodian Agreement between the
Registrant and State Street Bank is incorporated by reference to
Post-Effective Amendment No. 78 to the Registration Statement
("Post-Effective Amendment No. 78").
(a)(6) Custodian fee schedule for Scudder Growth and Income Fund is
incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement ("Post-Effective Amendment No. 78").
Part C - Page 4
<PAGE>
(a)(7) Custodian fee schedule for Scudder Quality Growth Fund is
incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement ("Post-Effective Amendment No. 78").
(a)(8) Custodian fee schedule for Scudder S&P 500 Index Fund is filed
herein.
(b)(1) Subcustodian Agreement with fee schedule between State Street Bank
and The Bank of New York, London office, dated December 31, 1978 is
incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement ("Post-Effective Amendment No. 78").
(c)(1) Subcustodian Agreement between State Street Bank and The Chase
Manhattan Bank, N.A. dated September 1, 1986 is incorporated by
reference to Post-Effective Amendment No. 78 to the Registration
Statement ("Post-Effective Amendment No. 78").
(d) Custodian fee schedule for Scudder Quality Growth Fund and Scudder
Growth and Income Fund is incorporated by reference to
Post-Effective Amendment No. 72 to the Registration Statement
("Post-Effective Amendment No. 72").
(e) Form of Custodian fee schedule for Scudder Classic Growth Fund is
incorporated by reference to Post-Effective Amendment No. 77 to the
Registration Statement ("Post-Effective Amendment No. 77").
9. (a)(1) Transfer Agency and Service Agreement with fee schedule between the
Registrant and Scudder Service Corporation dated October 2, 1989 is
incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement ("Post-Effective Amendment No. 78").
(a)(2) Revised fee schedule dated October 6, 1995 for Exhibit 9(a)(1) is
incorporated by reference to Post-Effective Amendment No. 76
("Post-Effective Amendment No. 76").
(a)(3) Form of revised fee schedule for Exhibit 9(a)(1) dated October 1,
1996 is incorporated by reference to Post-Effective Amendment No. 78
to the Registration Statement ("Post-Effective Amendment No. 78").
(b)(1) COMPASS Service Agreement and fee schedule with Scudder Trust
Company dated January 1, 1990 is incorporated by reference to
Post-Effective Amendment No. 78 to the Registration Statement
("Post-Effective Amendment No. 78").
(b)(2) COMPASS and TRAK 2000 Service Agreement between Scudder Trust
Company and the Registrant dated October 1, 1995 is incorporated by
reference to Post-Effective Amendment No. 74 ("Post-Effective
Amendment No. 74").
Part C - Page 5
<PAGE>
(b)(3) Form of revised fee schedule for Exhibit 9(b)(1) dated October 1,
1996 is incorporated by reference to Post-Effective Amendment No. 78
to the Registration Statement ("Post-Effective Amendment No. 78").
(c) Fund Accounting Services Agreement between the Registrant, on behalf
of Scudder Quality Growth Fund and Scudder Fund Accounting
Corporation dated November 1, 1994 is incorporated by reference to
Post-Effective Amendment No. 72.
(d) Fund Accounting Services Agreement between the Registrant, on behalf
of Scudder Growth and Income Fund and Scudder Fund Accounting
Corporation dated October 17, 1994 is incorporated by reference to
Post-Effective Amendment No. 73.
(e) Form of Fund Accounting Services Agreement between the Registrant,
on behalf of Scudder Classic Growth Fund, and Scudder Fund
Accounting Corporation is incorporated by reference to
Post-Effective Amendment No. 77 to the Registration Statement
("Post-Effective Amendment No. 77").
(f)(1) Shareholder Services Agreement between the Registrant and Charles
Schwab & Co., Inc. dated June 1, 1990 is incorporated by reference
to Post-Effective Amendment No. 78 to the Registration Statement
("Post-Effective Amendment No. 78").
(f)(2) Service Agreement between Copeland Associates, Inc. and Scudder
Service Corporation (on behalf of Scudder Quality Growth Fund and
Scudder Growth and Income Fund) dated June 8, 1995 is incorporated
by reference to Post-Effective Amendment No. 74 ("Post-Effective
Amendment No. 74").
10. Inapplicable.
11. Consent of Independent Accountants is filed herein.
12. Inapplicable.
13. Inapplicable.
14. (a) Scudder Flexi-Plan for Corporations and Self-Employed Individuals is
incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement ("Post-Effective Amendment No. 78").
(b) Scudder Individual Retirement Plan is incorporated by reference to
Post-Effective Amendment No. 78 to the Registration Statement
("Post-Effective Amendment No. 78").
(c) SEP-IRA is incorporated by reference to Post-Effective Amendment No.
78 to the Registration Statement ("Post-Effective Amendment No. 78").
(d) Scudder Funds 403(b) Plan is incorporated by reference to
Post-Effective Amendment No. 78 to the Registration Statement
("Post-Effective Amendment No. 78").
Part C - Page 6
<PAGE>
(e) Scudder Cash or Deferred Profit Sharing Plan under Section 401(k) is
incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement ("Post-Effective Amendment No. 78").
15. Inapplicable.
16. Schedule for Computation of Performance Quotation is filed herein.
Power of Attorney is incorporated by reference to Post-Effective
Amendment No. 78 to the Registration Statement ("Post-Effective
Amendment No. 78").
17. Inapplicable.
</TABLE>
Item 25. Persons Controlled by or under Common Control with Registrant.
- -------- --------------------------------------------------------------
None
Item 26. Number of Holders of Securities (as of July 31, 1997).
- -------- ------------------------------------------------------
<TABLE>
<S> <C> <C>
<CAPTION>
(1) (2)
Title of Class Number of Record Shareholders
-------------- -----------------------------
Shares of beneficial interest
($0.01 par value):
Scudder Growth and Income Fund 198,969
Scudder Large Company Growth Fund 16,106
Scudder Classic Growth Fund 1,729
Scudder S&P 500 Index Fund n/a
</TABLE>
Item 27. Indemnification.
- -------- ----------------
A policy of insurance covering Scudder, Stevens & Clark, Inc.
its subsidiaries including Scudder Investor Services, Inc.,
and all of the registered investment companies advised by
Scudder, Stevens & Clark, Inc. insures the Registrant's
Trustees and officers and others against liability arising by
reason of an alleged breach of duty caused by any negligent
act, error or accidental omission in the scope of their
duties.
Article IV, Sections 4.1-4.3 of Registrant's Declaration of
Trust provide as follows:
Section 4.1. No Personal Liability of Shareholders, Trustees,
etc. No Shareholder shall be subject to any personal liability
whatsoever to any Person in connection with Trust Property or
the acts, obligations or affairs of the Trust. No Trustee,
officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever to any Person, other than to
the Trust or its Shareholders, in connection with Trust
Property or the affairs of the Trust, save only that arising
from bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties with respect to such Person;
and all such Persons shall look solely to the Trust Property
for satisfaction of claims of any nature arising in connection
with the affairs of the Trust. If any Shareholder, Trustee,
officer, employee, or agent, as such, of the Trust, is made a
party to any suit or proceeding to enforce any such liability
of the Trust, he shall not, on account thereof, be held to any
personal liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims and
liabilities, to which such Shareholder may become subject by
reason of his being or having been a Shareholder, and shall
reimburse such Shareholder for all legal and other expenses
reasonably incurred by him
Part C - Page 7
<PAGE>
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:
(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.
Part C - Page 8
<PAGE>
(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 inure 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.
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.
<TABLE>
<S> <C>
<CAPTION>
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
---- ------------------------------------
Stephen R. Beckwith Director, Vice President, Treasurer, Chief Operating Officer & Chief Financial Officer,
Scudder, Stevens & Clark, Inc. (investment adviser)**
Lynn S. Birdsong Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
President & Director, The Latin America Dollar Income Fund, Inc. (investment company)**
President & Director, Scudder World Income Opportunities Fund, Inc. (investment
company)**
President, The Japan Fund, Inc. (investment company)**
Supervisory Director, The Latin America Income and Appreciation Fund N.V. (investment
company) +
Supervisory Director, The Venezuela High Income Fund N.V. (investment company) xx
Supervisory Director, Scudder Mortgage Fund (investment company)+
Part C - Page 9
<PAGE>
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 Corporatio oo
E. Michael Brown Director, Chief Administrative Officer, Scudder, Stevens & Clark, Inc. (investment
adviser)**
Trustee, Scudder GNMA Fund (investment company)*
Trustee, Scudder Portfolio Trust (investment company)*
Trustee, Scudder U.S. Treasury Fund (investment company)*
Trustee, Scudder Tax Free Money Fund (investment company)*
Trustee, Scudder State Tax Free Trust (investment company)*
Trustee, Scudder Cash Investment Trust (investment company)*
Assistant Treasurer, Scudder Investor Services, Inc. (broker/dealer)*
Director & President, Scudder Realty Holding Corporation (a real estate holding
company)*
Director & President, Scudder Trust Company (a trust company)+++
Director, Scudder Trust (Cayman) Ltd.
Mark S. Casady Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Director & Vice President, Scudder Investor Services, Inc. (broker/dealer)*
Director & Vice President, Scudder Service Corporation (in-house transfer agent)*
Director, SFA, Inc. (advertising agency)*
Linda C. Coughlin Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Chairman & Trustee, AARP Cash Investment Funds (investment company)**
Chairman & Trustee, AARP Growth Trust (investment company)**
Chairman & Trustee, AARP Income Trust (investment company)**
Chairman & Trustee, AARP Tax Free Income Trust (investment company)**
Chairman & Trustee, AARP Managed Investment Portfolios Trust (investment company)**
Director & Senior Vice President, Scudder Investor Services, Inc. (broker/dealer)*
Director, SFA, Inc. (advertising agency)*
Part C - Page 10
<PAGE>
Margaret D. Hadzima Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Assistant Treasurer, Scudder Investor Services, Inc. (broker/dealer)*
Jerard K. Hartman Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President, Scudder California Tax Free Trust (investment company)*
Vice President, Scudder Equity Trust (investment company)**
Vice President, Scudder Cash Investment Trust (investment company)*
Vice President, Scudder Fund, Inc. (investment company)**
Vice President, Scudder Global Fund, Inc. (investment company)**
Vice President, Scudder GNMA Fund (investment company)*
Vice President, Scudder Portfolio Trust (investment company)*
Vice President, Scudder Institutional Fund, Inc. (investment company)**
Vice President, Scudder International Fund, Inc. (investment company)**
Vice President, Scudder Investment Trust (investment company)*
Vice President, Scudder Municipal Trust (investment company)*
Vice President, Scudder Mutual Funds, Inc. (investment company)**
Vice President, Scudder New Asia Fund, Inc. (investment company)**
Vice President, Scudder New Europe Fund, Inc. (investment company)**
Vice President, Scudder Securities Trust (investment company)*
Vice President, Scudder State Tax Free Trust (investment company)*
Vice President, Scudder Funds Trust (investment company)**
Vice President, Scudder Tax Free Money Fund (investment company)*
Vice President, Scudder Tax Free Trust (investment company)*
Vice President, Scudder U.S. Treasury Money Fund (investment company)*
Vice President, Scudder Pathway Series (investment company)*
Vice President, Scudder Variable Life Investment Fund (investment company)*
Vice President, The Brazil Fund, Inc. (investment company)**
Vice President, The Korea Fund, Inc. (investment company)**
Vice President, The Argentina Fund, Inc. (investment company)**
Vice President & Director, Scudder, Stevens & Clark of Canada, Ltd. (Canadian
investment adviser) Toronto, Ontario, Canada
Vice President, The First Iberian Fund, Inc. (investment company)**
Vice President, The Latin America Dollar Income Fund, Inc. (investment company)**
Vice President, Scudder World Income Opportunities Fund, Inc. (investment company)**
Richard A. Holt Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President, Scudder Variable Life Investment Fund (investment company)*
John T. Packard Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
President, Montgomery Street Income Securities, Inc. (investment company) o
Chairman, Scudder Realty Advisors, Inc. (realty investment adviser) x
Daniel Pierce Chairman & Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Chairman, Vice President & Director, Scudder Global Fund, Inc. (investment company)**
Chairman & Director, Scudder New Europe Fund, Inc. (investment company)**
Chairman & Director, The First Iberian Fund, Inc. (investment company)**
Chairman & Director, Scudder International Fund, Inc. (investment company)**
Chairman & Director, Scudder New Asia Fund, Inc. (investment company)**
President & Trustee, Scudder Equity Trust (investment company)**
President & Trustee, Scudder GNMA Fund (investment company)*
President & Trustee, Scudder Portfolio Trust (investment company)*
President & Trustee, Scudder Funds Trust (investment company)**
President & Trustee, Scudder Securities Trust (investment company)*
Part C - Page 11
<PAGE>
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. Quirk Director, Chief Legal Officer, Chief Compliance Officer and Secretary, Scudder, Stevens
& Clark, Inc. (investment adviser)**
Director, Vice President & Assistant Secretary, The Argentina Fund, Inc. (investment
company)**
Director, Vice President & Assistant Secretary, Scudder International Fund, Inc.
(investment company)**
Director, Vice President & Assistant Secretary, Scudder New Asia Fund (investment
company)**
Director, Vice President & Assistant Secretary, Scudder Global Fund, Inc. (investment
company)**
Trustee, Vice President & Assistant Secretary, Scudder Equity Trust (investment
company)**
Trustee, Vice President & Assistant Secretary, Scudder Securities Trust (investment
company)*
Trustee, Vice President & Assistant Secretary, Scudder Funds Trust (investment
company)**
Trustee, Scudder Investment Trust (investment company)*
Trustee, Scudder Municipal Trust (investment company)*
Vice President & Trustee, Scudder Cash Investment Trust (investment company)*
Vice President & Trustee, Scudder Tax Free Money Fund (investment company)*
Vice President & Trustee, Scudder Tax Free Trust (investment company)*
Vice President & Secretary, AARP Growth Trust (investment company)**
Vice President & Secretary, AARP Income Trust (investment company)**
Vice President & Secretary, AARP Tax Free Income Trust (investment company)**
Vice President & Secretary, AARP Cash Investment Funds (investment company)**
Vice President & Secretary, AARP Managed Investment Portfolios Trust (investment
company)**
Vice President & Secretary, The Japan Fund, Inc. (investment company)**
Part C - Page 12
<PAGE>
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. Small Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
President, AARP Cash Investment Funds (investment company)**
President, AARP Growth Trust (investment company)**
President, AARP Income Trust (investment company)**
President, AARP Tax Free Income Trust (investment company)**
President, AARP Managed Investment Portfolio Trust (investment company)**
Edmond D. Villani Director, President & Chief Executive Officer, Scudder, Stevens & Clark, Inc.
(investment adviser)**
Chairman & Director, The Argentina Fund, Inc. (investment company)**
Chairman & Director, The Latin America Dollar Income Fund, Inc. (investment company)**
Chairman & Director, Scudder World Income Opportunities Fund, Inc. (investment
company)**
Supervisory Director, Scudder Mortgage Fund (investment company) +
Supervisory Director, Scudder Floating Rate Funds for Fannie Mae Mortgage Securities I
& II (investment company)+
Director, Scudder, Stevens & Clark Japan, Inc. (investment adviser)###
Director, The Brazil Fund, Inc. (investment company)**
Director, Indosuez High Yield Bond Fund (investment company) Luxembourg
President & Director, Scudder, Stevens & Clark Overseas Corporation oo
President & Director, Scudder, Stevens & Clark Corporation (Delaware) (investment
adviser)**
Director, Scudder Realty Advisors, Inc. (realty investment adviser) x
Part C - Page 13
<PAGE>
Director, IBJ Global Investment Management S.A., (Luxembourg investment management
company) Luxembourg, Grand-Duchy of Luxembourg
Stephen A. Wohler Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President, Montgomery Street Income Securities, Inc. (investment company)o
* 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.
</TABLE>
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.
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.
Part C - Page 14
<PAGE>
(b)
<TABLE>
<S> <C> <C> <C>
<CAPTION>
(1) (2) (3)
Name and Principal Position and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
---------------- ------------------------------- -----------------------
Lynn S. Birdsong Senior Vice President None
345 Park Avenue
New York, NY 10154
E. Michael Brown Assistant Treasurer Trustee
Two International Place
Boston, MA 02110
Mark S. Casady Director and Vice President None
Two International Place
Boston, MA 02110
Linda Coughlin Director and Senior Vice President None
Two International Place
Boston, MA 02110
Richard W. Desmond Vice President None
345 Park Avenue
New York, NY 10154
Paul J. Elmlinger Senior Vice President and Assistant None
345 Park Avenue Clerk
New York, NY 10154
Margaret D. Hadzima Assistant Treasurer None
Two International Place
Boston, MA 02110
Thomas W. Joseph Director, Vice President, Vice President
Two International Place Treasurer and Assistant Clerk
Boston, MA 02110
David S. Lee Director, President and Assistant President and Trustee
Two International Place Treasurer
Boston, MA 02110
Thomas F. McDonough Clerk Vice President and
Two International Place Secretary
Boston, MA 02110
Thomas H. O'Brien Assistant Treasurer None
345 Park Avenue
New York, NY 10154
Edward J. O'Connell Assistant Treasurer Vice President and
345 Park Avenue Assistant Treasurer
New York, NY 10154
Part C - Page 15
<PAGE>
Name and Principal Position and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
---------------- ------------------------------- -----------------------
Daniel Pierce Director, Vice President None
Two International Place and Assistant Treasurer
Boston, MA 02110
Kathryn L. Quirk Director, Senior Vice President and Trustee and Vice President
345 Park Avenue Assistant Clerk
New York, NY 10154
Robert A. Rudell Vice President None
Two International Place
Boston, MA 02110
Edmund J. Thimme Vice President None
345 Park Avenue
New York, NY 10154
Benjamin Thorndike Vice President None
Two International Place
Boston, MA 02110
Sydney S. Tucker Vice President None
Two International Place
Boston, MA 02110
David B. Watts Assistant Treasurer None
Two International Place
Boston, MA 02110
Linda J. Wondrack Vice President None
Two International Place
Boston, MA 02110
</TABLE>
The Underwriter has employees who are denominated officers of an
operational area. Such persons do not have corporation-wide
responsibilities and are not considered officers for the purpose of this
Item 29.
(c)
<TABLE>
<S> <C> <C> <C> <C> <C>
<CAPTION>
(1) (2) (3) (4) (5)
Net Underwriting Compensation on
Name of Principal Discounts and Redemptions Brokerage Other
Underwriter Commissions and Repurchases Commissions Compensation
----------- ----------- --------------- ----------- ------------
Scudder Investor None None None None
Services, Inc.
</TABLE>
Item 30. Location of Accounts and Records.
- -------- ---------------------------------
Certain accounts, books and other documents required to be
maintained by Section 31(a) of the 1940 Act and the Rules
promulgated thereunder are maintained by Scudder, Stevens &
Clark, Two International Place, Boston, MA 02110. Records
relating to the duties of the Registrant's custodian are
maintained by State Street Bank and Trust Company, Heritage
Drive, North Quincy,
Part C - Page 16
<PAGE>
Massachusetts. Records relating to the duties of the
Registrant's transfer agent are maintained by Scudder Service
Corporation, Two International Place, Boston, Massachusetts.
Item 31. Management Services.
- -------- --------------------
Inapplicable.
Item 32. Undertakings.
- -------- -------------
The Registrant hereby undertakes to file a post-effective
amendment, using reasonably current financial statements of
Scudder S&P 500 Index Fund, within four to six months from the
effectiveness date of the Registrant's Registration Statement
under the 1933 Act.
The Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of a Fund's latest
annual report to shareholders upon request and without change.
The Registrant hereby undertakes to call a meeting of
shareholders for the purpose of voting on the question of
removal of a Trustee or Trustees when requested to do so by
the holders of at least 10% of the Registrant's outstanding
shares and in connection with such meeting to comply with the
provisions of Section 16(c) of the Investment Company Act of
1940 relating to shareholder communications.
The Registrant hereby undertakes, insofar as indemnification
for liability arising under the Securities Act of 1933 may be
permitted to trustees, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a
trustee, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in
connection with the securities being registered, the
registrant will unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Part C - Page 17
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this 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 21st day of August, 1997.
SCUDDER INVESTMENT 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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/Daniel Pierce
- --------------------------------------
Daniel Pierce* President (Principal Executive August 21, 1997
Officer) and Trustee
/s/Henry P. Becton, Jr.
- --------------------------------------
Henry P. Becton, Jr.* Trustee August 21, 1997
/s/George M. Lovejoy, Jr.
- --------------------------------------
George M. Lovejoy, Jr.* Trustee August 21, 1997
/s/Wesley W. Marple, Jr.
- --------------------------------------
Wesley W. Marple, Jr.* Trustee August 21, 1997
/s/Kathryn L. Quirk
- --------------------------------------
Kathryn L. Quirk* Trustee August 21, 1997
/s/Jean C. Tempel
- --------------------------------------
Jean C. Tempel* Trustee August 21, 1997
<PAGE>
SIGNATURE TITLE DATE
- --------- ----- ----
/s/Pamela A. McGrath
- --------------------------------------
Pamela A. McGrath Treasurer (Principal Financial and August 21, 1997
Accounting Officer) and Vice President
</TABLE>
*By: /s/Thomas F. McDonough
--------------------------------------
Thomas F. McDonough**
** Attorney-in-fact pursuant to a power of
attorney contained in the signature page
of Post-Effective Amendment No. 61 to
the Registration Statement filed April
22, 1991 and pursuant to a power of
attorney contained in the signature page
of Post-Effective Amendment No. 72 to
the Registration Statement filed April
28, 1995 and pursuant to a power of
attorney contained in the signature page
of Post-Effective Amendment No. 79 filed
February 26, 1997.
2
<PAGE>
SIGNATURES
Equity 500 Index Portfolio has duly caused this Post-Effective
Amendment No. 84 to the Registration Statement on Form N-1A of Scudder
Investment Trust to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Pittsburgh and the Commonwealth of Pennsylvania on
the 25th day of August, 1997.
EQUITY 500 INDEX PORTFOLIO
By: /s/Ronald M. Petnuch*
--------------------
Ronald M. Petnuch
President
This Post-Effective Amendment No. 84 to the Registration Statement on
Form N-1A of Scudder Investment Trust has been signed below by the following
persons in the capacities indicated with respect to Equity 500 Index Portfolio
on August 25, 1997.
SIGNATURE TITLE
/s/Charles P. Biggar *
- --------------------------------------
Charles P. Biggar Trustee
/s/Philip Saunders, Jr. *
- --------------------------------------
Philip Saunders, Jr. Trustee
/s/S. Leland Dill *
- --------------------------------------
S. Leland Dill Trustee
/s/Ronald M. Petnuch *
- --------------------------------------
Ronald M. Petnuch President and Treasurer (Chief
Executive Officer, Principal
Financial and Accounting Officer)
*By: /s/Jay S. Neuman
----------------
Jay S. Neuman, Secretary of Equity 500 Index Portfolio,
as Attorney-in-Fact pursuant to a Power of Attorney filed herewith.
<PAGE>
File No. 2-13628
File No. 811-43
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 84
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 36
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
SCUDDER INVESTMENT TRUST
<PAGE>
SCUDDER INVESTMENT TRUST
EXHIBIT INDEX
5(f)
8(a)(8)
11
Exhibit 5(f)
Scudder Investment Trust
Two International Place
Boston, Massachusetts 02110
May 1, 1997
Scudder, Stevens & Clark, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Scudder Growth and Income Fund
Ladies and Gentlemen:
Scudder Investment Trust (the "Trust") has been established as a
Massachusetts business Trust to engage in the business of an investment company.
Pursuant to the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees has divided the Trust's shares of
beneficial interest, par value $.01 per share, (the "Shares") into separate
series, or funds, including Scudder Growth and Income Fund (the "Fund"). Series
may be abolished and dissolved, and additional series established, from time to
time by action of the Trustees.
The Trust, on behalf of the Fund, has selected you to act as the sole
investment manager of the Fund and to provide certain other services, as more
fully set forth below, and you have indicated that you are willing to act as
such investment manager and to perform such services under the terms and
conditions hereinafter set forth. Accordingly, the Trust on behalf of the Fund
agrees with you as follows:
1. Delivery of Documents. The Trust engages in the business of
investing and reinvesting the assets of the Fund in the manner and in accordance
with the investment objectives, policies and restrictions specified in the
currently effective Prospectus (the "Prospectus") and Statement of Additional
Information (the "SAI") relating to the Fund included in the Trust's
Registration Statement on Form N-1A, as amended from time to time, (the
"Registration Statement") filed by the Trust under the Investment Company Act of
1940, as amended, (the "1940 Act") and the Securities Act of 1933, as amended.
Copies of the documents referred to in the preceding sentence have been
furnished to you by the Trust. The Trust has also furnished you with copies
properly certified or authenticated of each of the following additional
<PAGE>
documents related to the Trust and the Fund:
(a) The Declaration dated November 3, 1987, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof
(the "By-Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders
of the Fund selecting you as investment manager and approving
the form of this Agreement.
(d) Establishment and Designation of Series of Shares of
Beneficial Interest dated February 12, 1991 relating to the
Fund.
The Trust will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements, if any, to the
foregoing, including the Prospectus, the SAI and the Registration Statement.
2. Name of Trust and Fund. The Trust and the Fund may use any name
derived from the name "Scudder, Stevens & Clark", if the Trust elects to do so,
only for so long as this Agreement, any other investment management agreement
between you and the Trust with respect to the Fund or any extension, renewal or
amendment hereof or thereof remains in effect, including any similar agreement
with any organization which shall have succeeded to your business as investment
manager. At such time as such an agreement shall no longer be in effect, the
Trust and the Fund shall each (to the extent the Trust has the legal power to
cause it to be done) cease to use such a name or any other name indicating that
it is managed by or otherwise connected with you or any organization which shall
have so succeeded to your business.
3. Portfolio Management Services. As manager of the assets of the Fund,
you shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
2
<PAGE>
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Trust's Board of
Trustees. In connection therewith, you shall use reasonable efforts to manage
the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 3, you shall
be entitled to receive and act upon advice of counsel to the Trust or counsel to
you. You shall also make available to the Trust promptly upon request all of the
Fund's investment records and ledgers as are necessary to assist the Trust to
comply with the requirements of the 1940 Act and other applicable laws. To the
extent required by law, you shall furnish to regulatory authorities having the
requisite authority any information or reports in connection with the services
provided pursuant to this Agreement which may be requested in order to ascertain
whether the operations of the Trust are being conducted in a manner consistent
with applicable laws and regulations.
You shall determine the securities, instruments, investments,
currencies, repurchase agreements, futures, options and other contracts relating
to investments to be purchased, sold or entered into by the Fund and place
orders with broker-dealers, foreign currency dealers, futures commission
merchants or others pursuant to your determinations and all in accordance with
Fund policies as expressed in the Registration Statement. You shall determine
what portion of the Fund's portfolio shall be invested in securities and other
assets and what portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on
the investment performance of the Fund and on the performance of your
obligations pursuant to this Agreement, and you shall supply such additional
reports and information as the Trust's officers or Board of Trustees shall
reasonably request.
3
<PAGE>
4. Administrative Services. In addition to the portfolio management
services specified above in section 3, you shall furnish at your expense for the
use of the Fund such office space and facilities in the United States as the
Fund may require for its reasonable needs, and you (or one or more of your
affiliates designated by you) shall render to the Trust administrative services
on behalf of the Fund necessary for operating as an open-end investment company
and not provided by persons not parties to this Agreement including, but not
limited to, preparing reports to and meeting materials for the Trust's Board of
Trustees and reports and notices to Fund shareholders; supervising, negotiating
contractual arrangements with, to the extent appropriate, and monitoring the
performance of, accounting agents, custodians, depositories, transfer agents and
pricing agents, accountants, attorneys, printers, underwriters, brokers and
dealers, insurers and other persons in any capacity deemed to be necessary or
desirable to Fund operations; preparing and making filings with the Securities
and Exchange Commission (the "SEC") and other regulatory and self-regulatory
organizations, including, but not limited to, preliminary and definitive proxy
materials, post-effective amendments to the Registration Statement, semi-annual
reports on Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act;
overseeing the tabulation of proxies by the Fund's transfer agent; assisting in
the preparation and filing of the Fund's federal, state and local tax returns;
preparing and filing the Fund's federal excise tax return pursuant to Section
4982 of the Code; providing assistance with investor and public relations
matters; monitoring the valuation of portfolio securities, the calculation of
net asset value; monitoring the registration of Shares of the Fund under
applicable federal and state securities laws; maintaining or causing to be
maintained for the Fund all books, records and reports and any other information
required under the 1940 Act, to the extent that such books, records and reports
and other information are not maintained by the Fund's custodian or other agents
of the Fund; assisting in establishing the accounting policies of the Fund;
assisting in the resolution of accounting issues that may arise with respect to
the Fund's operations and consulting with the Fund's independent accountants,
legal counsel and the Fund's other agents as necessary in connection therewith;
establishing and monitoring the Fund's operating expense budgets; reviewing the
Fund's bills; processing the payment of bills that have been approved by an
authorized person; assisting the Fund in determining the amount of dividends and
4
<PAGE>
distributions available to be paid by the Fund to its shareholders, preparing
and arranging for the printing of dividend notices to shareholders, and
providing the transfer and dividend paying agent, the custodian, and the
accounting agent with such information as is required for such parties to effect
the payment of dividends and distributions; and otherwise assisting the Trust as
it may reasonably request in the conduct of the Fund's business, subject to the
direction and control of the Trust's Board of Trustees. Nothing in this
Agreement shall be deemed to shift to you or to diminish the obligations of any
agent of the Fund or any other person not a party to this Agreement which is
obligated to provide services to the Fund.
5. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this section 5, you shall pay the compensation and expenses of all
Trustees, officers and executive employees of the Trust (including the Fund's
share of payroll taxes) who are affiliated persons of you, and you shall make
available, without expense to the Fund, the services of such of your directors,
officers and employees as may duly be elected officers of the Trust, subject to
their individual consent to serve and to any limitations imposed by law. You
shall provide at your expense the portfolio management services described in
section 3 hereof and the administrative services described in section 4 hereof.
You shall not be required to pay any expenses of the Fund other than
those specifically allocated to you in this section 5. In particular, but
without limiting the generality of the foregoing, you shall not be responsible,
except to the extent of the reasonable compensation of such of the Fund's
Trustees and officers as are directors, officers or employees of you whose
services may be involved, for the following expenses of the Fund: organization
expenses of the Fund (including out-of-pocket expenses, but not including your
overhead or employee costs); fees payable to you and to any other Fund advisors
or consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent, custodians,
5
<PAGE>
subcustodians, transfer agents, dividend disbursing agents and registrars;
payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; expenses of preparing share
certificates and, except as provided below in this section 5, other expenses in
connection with the issuance, offering, distribution, sale, redemption or
repurchase of securities issued by the Fund; expenses relating to investor and
public relations; expenses and fees of registering or qualifying Shares of the
Fund for sale; interest charges, bond premiums and other insurance expense;
freight, insurance and other charges in connection with the shipment of the
Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Trust business) of Trustees, officers and
employees of the Trust who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; costs of
shareholders' and other meetings; and travel expenses (or an appropriate portion
thereof) of Trustees and officers of the Trust who are directors, officers or
employees of you to the extent that such expenses relate to attendance at
meetings of the Board of Trustees of the Trust or any committees thereof or
advisors thereto held outside of Boston, Massachusetts or New York, New York.
You shall not be required to pay expenses of any activity which is
primarily intended to result in sales of Shares of the Fund if and to the extent
that (i) such expenses are required to be borne by a principal underwriter which
acts as the distributor of the Fund's Shares pursuant to an underwriting
agreement which provides that the underwriter shall assume some or all of such
expenses, or (ii) the Trust on behalf of the Fund shall have adopted a plan in
conformity with Rule 12b-1 under the 1940 Act providing that the Fund (or some
other party) shall assume some or all of such expenses. You shall be required to
pay such of the foregoing sales expenses as are not required to be paid by the
principal underwriter pursuant to the underwriting agreement or are not
permitted to be paid by the Fund (or some other party) pursuant to such a plan.
6
<PAGE>
6. Management Fee. For all services to be rendered, payments to be made
and costs to be assumed by you as provided in sections 3, 4 and 5 hereof, the
Trust on behalf of the Fund shall pay you on the last day of each month the
unpaid balance of a fee equal to the excess of (a) 1/12 of 0.60 of 1 percent of
the average daily net assets as defined below of the Fund for such month;
provided that, for any calendar month during which the average of such values
exceeds $500 million, the fee payable for that month based on the portion of the
average of such values in excess of $500 million up to and including $1 billion
shall be 1/12 of 0.55 of 1 percent of such portion; provided that, for any
calendar month during which the average of such values exceeds $1 billion, the
fee payable for that month based on the portion of the average of such values in
excess of $1 billion up to and including $1.5 billion shall be 1/12 of 0.50 of 1
percent of such portion; provided that, for any calendar month during which the
average of such values exceeds $1.5 billion, the fee payable for that month
based on the portion of the average of such values in excess of $1.5 billion up
to and including $2 billion shall be 1/12 of 0.475 of 1 percent of such portion;
provided that, for any calendar month during which the average of such values
exceeds $2.0 billion, the fee payable for that month based on the portion of the
average of such values in excess of $2.0 billion up to and including $3.0
billion shall be 1/12 of 0.45 percent of such portion; and provided that, for
any calendar month which the average of such values exceeds $3.0 billion, the
fee payable for that month based on the portion of the average of such values in
excess of $3.0 billion up to and including $4.5 billion shall be 1/12 of 0.42 of
1 percent of such portion; and provided that, for any calendar month during
which the average of such values exceeds $4.5 billion, shall be 1/12 of 0.405 of
1 percent of such portion over (b) the greater of (i) the amount by which the
Fund's expenses exceed the lowest applicable expense limitation (as more fully
described below) or (ii) any compensation waived by you from time to time (as
more fully described below). You shall be entitled to receive during any month
such interim payments of your fee hereunder as you shall request, provided that
no such payment shall exceed 75 percent of the amount of your fee then accrued
on the books of the Fund and unpaid.
The "average daily net assets" of the Fund shall mean the average of
the values placed on the Fund's net assets as of 4:00 p.m. (New York time) on
each day on which the net asset value of the Fund is determined consistent with
7
<PAGE>
the provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully
determines the value of its net assets as of some other time on each business
day, as of such time. The value of the net assets of the Fund shall always be
determined pursuant to the applicable provisions of the Declaration and the
Registration Statement. If the determination of net asset value does not take
place for any particular day, then for the purposes of this section 6, the value
of the net assets of the Fund as last determined shall be deemed to be the value
of its net assets as of 4:00 p.m. (New York time), or as of such other time as
the value of the net assets of the Fund's portfolio may be lawfully determined
on that day. If the Fund determines the value of the net assets of its portfolio
more than once on any day, then the last such determination thereof on that day
shall be deemed to be the sole determination thereof on that day for the
purposes of this section 6.
You agree that your gross compensation for any fiscal year shall not be
greater than an amount which, when added to the other expenses of the Fund,
shall cause the aggregate expenses of the Fund to equal the maximum expenses
under the lowest applicable expense limitation established pursuant to the
statutes or regulations of any jurisdiction in which the Shares of the Fund may
be qualified for offer and sale. Except to the extent that such amount has been
reflected in reduced payments to you, you shall refund to the Fund the amount of
any payment received in excess of the limitation pursuant to this section 6 as
promptly as practicable after the end of such fiscal year, provided that you
shall not be required to pay the Fund an amount greater than the fee paid to you
in respect of such year pursuant to this Agreement. As used in this section 6,
"expenses" shall mean those expenses included in the applicable expense
limitation having the broadest specifications thereof, and "expense limitation"
means a limit on the maximum annual expenses which may be incurred by an
investment company determined (i) by multiplying a fixed percentage by the
average, or by multiplying more than one such percentage by different specified
amounts of the average, of the values of an investment company's net assets for
a fiscal year or (ii) by multiplying a fixed percentage by an investment
company's net investment income for a fiscal year. The words "lowest applicable
expense limitation" shall be construed to result in the largest reduction of
your compensation for any fiscal year of the Fund; provided, however, that
nothing in this Agreement shall limit your fees if not required by an applicable
8
<PAGE>
statute or regulation referred to above in this section 6.
You may waive all or a portion of your fees provided for hereunder and
such waiver shall be treated as a reduction in purchase price of your services.
You shall be contractually bound hereunder by the terms of any publicly
announced waiver of your fee, or any limitation of the Fund's expenses, as if
such waiver or limitation were fully set forth herein.
7. Avoidance of Inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other investments
for the account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be
deemed to be exclusive and it is understood that you may render investment
advice, management and services to others. In acting under this Agreement, you
shall be an independent contractor and not an agent of the Trust.
8. Limitation of Liability of Manager. As an inducement to your
undertaking to render services pursuant to this Agreement, the Trust agrees that
you shall not be liable under this Agreement for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, provided that nothing in this Agreement
shall be deemed to protect or purport to protect you against any liability to
the Trust, the Fund or its shareholders to which you would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence in the
performance of your duties, or by reason of your reckless disregard of your
obligations and duties hereunder. Any person, even though also employed by you,
9
<PAGE>
who may be or become an employee of and paid by the Fund shall be deemed, when
acting within the scope of his or her employment by the Fund, to be acting in
such employment solely for the Fund and not as your employee or agent.
9. Duration and Termination of This Agreement. This Agreement shall
remain in force until September 30, 1998, and continue in force from year to
year thereafter, but only so long as such continuance is specifically approved
at least annually (a) by the vote of a majority of the Trustees who are not
parties to this Agreement or interested persons of any party to this Agreement,
cast in person at a meeting called for the purpose of voting on such approval,
and (b) by the Trustees of the Trust, or by the vote of a majority of the
outstanding voting securities of the Fund. The aforesaid requirement that
continuance of this Agreement be "specifically approved at least annually" shall
be construed in a manner consistent with the 1940 Act and the rules and
regulations thereunder.
This Agreement may be terminated with respect to the Fund at any time,
without the payment of any penalty, by the vote of a majority of the outstanding
voting securities of the Fund or by the Trust's Board of Trustees on 60 days'
written notice to you, or by you on 60 days' written notice to the Trust. This
Agreement shall terminate automatically in the event of its assignment.
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved by the vote of a majority of the outstanding voting
securities of the Fund and by the Trust's Board of Trustees, including a
majority of the Trustees who are not parties to this Agreement or interested
persons of any party to this Agreement, cast in person at a meeting called for
the purpose of voting on such approval.
11. Limitation of Liability for Claims. The Declaration, a copy of
which, together with all amendments thereto, is on file in the Office of the
Secretary of the Commonwealth of Massachusetts, provides that the name "Scudder
Investment Trust" refers to the Trustees under the Declaration collectively as
Trustees and not as individuals or personally, and that no shareholder of the
10
<PAGE>
Fund, or Trustee, officer, employee or agent of the Trust, shall be subject to
claims against or obligations of the Trust or of the Fund to any extent
whatsoever, but that the Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability
as set forth in the Declaration and you agree that the obligations assumed by
the Trust on behalf of the Fund pursuant to this Agreement shall be limited in
all cases to the Fund and its assets, and you shall not seek satisfaction of any
such obligation from the shareholders or any shareholder of the Fund or any
other series of the Trust, or from any Trustee, officer, employee or agent of
the Trust. You understand that the rights and obligations of each Fund, or
series, under the Declaration are separate and distinct from those of any and
all other series.
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
In interpreting the provisions of this Agreement, the definitions
contained in Section 2(a) of the 1940 Act (particularly the definitions of
"affiliated person," "assignment" and "majority of the outstanding voting
securities"), as from time to time amended, shall be applied, subject, however,
to such exemptions as may be granted by the SEC by any rule, regulation or
order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or
management agreements entered into between you and the Trust on behalf of the
Fund.
11
<PAGE>
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
SCUDDER INVESTMENT TRUST
on behalf of Scudder Growth and
Income Fund
By: /s/Daniel Pierce
----------------------
President
The foregoing Agreement is hereby accepted as of the date thereof.
SCUDDER, STEVENS & CLARK, INC.
By: /s/David S. Lee
---------------------
Managing Director
12
Exhibit 8(a)(8)
STATE STREET BANK AND TRUST COMPANY
CUSTODIAN FEE SCHEDULE
SCUDDER S & P 500 INDEX FUND
CUSTODY SERVICE $5,000 per annum
- ---------------
Maintain custody of fund's investment in the master portfolio. Settle
portfolio purchases and sales. Determine and collect portfolio income. Make
cash disbursements and report cash transactions. Report portfolio positions.
COOPERS Coopers & Lybrand L.L.P.
& LYBRAND
a professional services firm
Consent of Independent Accountants
To the Trustees of Scudder Investment Trust:
We consent to the inclusion in Post-Effective Amendment No. 84 to the
Registration Statement of Scudder S&P 500 Index Fund on Form N-1A, of our
report dated August 27, 1997 on our audit of the Statement of Assets and
Liabilities of the Scudder S&P 500 Index Fund as of August 26, 1997.
We also consent to the reference to our Firm under the caption, "Experts."
/s/Coopers & Lybrand L.L.P.
Boston, Massachusetts Coopers & Lybrand L.L.P.
August 27, 1997
Coopers & Lybrand L.L.P. is a member of Coopers & Lybrand International, a
limited liability association incorporated in Switzerland.
