Filed with the Securities and Exchange Commission on July 31, 2000.
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.
------------
Post-Effective Amendment No. 120
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and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 71
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INVESTMENT TRUST
------------------------
(Exact Name of Registrant as Specified in Charter)
Two International Place, Boston, MA 02110-4103
---------------------------------------- ------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (6l7) 295-1000
--------------
John Millette
Scudder Kemper Investments, Inc.
Two International Place, Boston, MA 02110
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
/___/ Immediately upon filing pursuant to paragraph (b)
/___/ 60 days after filing pursuant to paragraph (a) (1)
/___/ 75 days after filing pursuant to paragraph (a) (2)
/___/ On ______________ pursuant to paragraph (b)
/ X / On October 1, 2000 pursuant to paragraph (a) (1)
/___/ On ______________ pursuant to paragraph (a) (3) of Rule 485.
If Appropriate, check the following box:
/___/ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
INVESTMENT TRUST
Scudder Large Company Growth Fund
<PAGE>
SCUDDER
INVESTMENTS(SM)
[LOGO]
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U.S./EQUITY
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Class AARP and Class S Shares
Scudder 21st Century
Growth Fund
Scudder Large Company
Growth Fund
Prospectus
October 1, 2000
As with all mutual funds, the Securities and Exchange Commission (SEC) does not
approve or disapprove these shares or determine whether the information in this
prospectus is truthful or complete. It is a criminal offense for anyone to
inform you otherwise.
<PAGE>
How the funds work
2 Scudder 21st Century Growth Fund
6 Scudder Large Company Growth Fund
10 Other Policies and Risks
11 Who Manages and Oversees the Funds
15 Financial Highlights
How to invest in the funds
18 How to Buy, Sell and Exchange
Class AARP Shares
20 How to Buy, Sell and Exchange
Class S Shares
22 Policies You Should Know About
27 Understanding Distributions and Taxes
<PAGE>
How the funds work
On the next few pages, you'll find information about each fund's investment
goal, the main strategies it uses to pursue that goal, and the main risks that
could affect its performance.
Whether you are considering investing in a fund or are already a shareholder,
you'll probably want to look this information over carefully. You may want to
keep it on hand for reference as well.
Remember that mutual funds are investments, not bank deposits. They're not
insured or guaranteed by the FDIC or any other government agency. Their share
prices will go up and down, and you could lose money by investing in them.
This prospectus offers two classes of shares for each of the funds described.
Class AARP shares have been created especially for AARP members. Class S shares
are available to all investors. Unless otherwise noted, all information in this
prospectus applies to both classes.
You can find Scudder prospectuses on the Internet for Class AARP shares at
aarp.scudder.com and for Class S shares at www.scudder.com.
<PAGE>
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ticker symbol | Class S 00000 fund number | Class AARP 000
Class S 000
Scudder 21st Century Growth Fund
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Investment Approach
The fund seeks long-term growth of capital by investing in common stocks of
emerging growth companies that the Adviser believes are poised to be leaders in
the new century. The fund typically invests at least 80% of total assets in
common stocks of companies that are similar in size to those in the Russell 2000
Index (typically less than $2 billion in total market value).
Using extensive fundamental and field research, managers look for small
companies, such as those in the Russell 2000 Index, that have low debt,
exceptional management teams that hold a significant stake in the company,
strong current or potential competitive positioning and potential annual
earnings growth of at least 15%, among other factors. The managers expect to
find these companies in many rapidly-changing sectors of the economy, such as
telecommunications, biotechnology and high tech.
Growth orientation. The managers primarily invest in companies that they believe
offer the potential for sustainable above-average earnings growth and whose
market values appear reasonable in light of their business prospects.
The managers may favor securities from different industries and companies at
different times while still maintaining variety in terms of the industries and
companies represented.
As companies in the portfolio exceed the market value of those in the Russell
2000 Index, the fund may continue to hold their stocks, but will generally not
add to these holdings. The fund will normally sell a stock when it reaches a
target price, when the managers believe other investments offer better
opportunities or in the course of adjusting its exposure to a given industry.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
--------------------------------------------------------------------------------
OTHER INVESTMENTS
Although the managers are permitted to use various types of derivatives
(contracts whose value is based on, for example, indices, currencies or
securities), the managers don't intend to use them as principal investments, and
may not use them at all.
2 | Scudder 21st Century Growth Fund
<PAGE>
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[ICON] This fund may appeal to investors who are looking for a fund that seeks
out tomorrow's leaders and who can accept the risks of small-company
investing.
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Main Risks to Investors
There are several risk factors that could hurt the fund's performance, cause you
to lose money or make the fund perform less well than other investments.
As with most stock funds, the most important factor with this fund is how stock
markets perform -- in this case, the small company portion of the U.S. market.
When small company stock prices fall, you should expect the value of your
investment to fall as well. Small company stocks tend to be more volatile than
stocks of larger companies, in part because small companies tend to be less
established than larger companies and more vulnerable to competitive challenges
and bad economic news. Because a stock represents ownership in its issuer, stock
prices can be hurt by poor management, shrinking product demand and other
business risks. These may affect single companies as well as groups of companies
in which the fund invests.
To the extent that the fund focuses on a given industry, any factors affecting
that industry could affect the value of portfolio securities. For example, a
rise in unemployment could hurt manufacturers of consumer goods.
Other factors that could affect performance include:
o derivatives could produce disproportionate losses
o growth stocks may be out of favor for certain periods
o at times, market conditions might make it hard to value some
investments or to get an attractive price for them
o the managers could be wrong in their analysis of companies, industries,
economic trends or other matters
3 | Scudder 21st Century Growth Fund
<PAGE>
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[ICON] While a fund's past performance isn't necessarily a sign of how it will
do in the future, it can be valuable for an investor to know. This page
looks at fund performance two different ways: year by year and over
time.
--------------------------------------------------------------------------------
The Fund's Track Record
The bar chart shows how the returns of the fund's Class S shares have varied
from year to year, which may give some idea of risk. The table shows average
annual total returns of the fund's Class S shares and a broad-based market index
(which, unlike the fund, does not have any fees or expenses). The performance of
both the fund and the index varies over time. All figures on this page assume
reinvestment of dividends and distributions.
------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class S
------------------------------------------------------------------------
.......................................................................
.......................................................................
.......................................................................
.......................................................................
.......................................................................
------------------------------------------------------------------------
------------------------------------------------------------------------
2000 Total Return as of June 30: ___%
Best Quarter: Worst Quarter:
------------------------------------------------------------------------
Average Annual Total Returns (%) as of 12/31/1999
------------------------------------------------------------------------
1 Year Since Inception
------------------------------------------------------------------------
Fund -- Class S* **
------------------------------------------------------------------------
Index ***
------------------------------------------------------------------------
Index: The Russell 2000 Growth Index, which consists of those stocks in the
Russell 2000 Index that have a greater-than-average growth orientation.
* Performance for Class AARP shares is not provided because this class
does not have a full calendar year of performance.
** Fund inception: 9/9/1996
*** Since 9/30/1996
Total returns from the date of inception through 1998 would have been lower if
operating expenses hadn't been reduced.
4 | Scudder 21st Century Growth Fund
<PAGE>
How Much Investors Pay
This fund has no shareholder fees other than the redemption/
exchange fee, charged directly to your account. The fund does have
annual operating expenses, and as a shareholder of either Class
AARP or Class S shares, you pay them indirectly.
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Fee Table
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Shareholder Fees (paid directly from your investment) None
------------------------------------------------------------------------
Redemption/Exchange fee, on shares owned less than a year 1.00% (as
a % of amount redeemed, if applicable)
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Annual Operating Expenses (deducted from fund assets)
------------------------------------------------------------------------
Management Fee __%
------------------------------------------------------------------------
Distribution (12b-1) Fee None
------------------------------------------------------------------------
Other Expenses* __%
------------
------------------------------------------------------------------------
Total Annual Operating Expenses __%
------------------------------------------------------------------------
* Includes a fixed rate administrative fee of 0.45%.
Information in the table has been restated to reflect a new fixed rate
administrative fee and a new investment management fee rate.
------------------------------------------------------------------------
Expense Example
------------------------------------------------------------------------
This example helps you compare this fund's expenses to those of
other funds. The example assumes the expenses above remain the
same. It also assumes that you invested $10,000, earned 5% annual
returns, reinvested all dividends and distributions and sold your
shares at the end of each period. This is only an example; actual
expenses will be different.
1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------------
$xx $xxx $xxx $xxxx
------------------------------------------------------------------------
5 | Scudder 21st Century Growth Fund
<PAGE>
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ticker symbol | Class S 00000 fund number | Class AARP 000
Class S 000
Scudder Large Company Growth Fund
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Investment Approach
The fund seeks long-term growth of capital by investing at least 65% of its net
assets in large U.S. companies (those with a market value of $1 billion or
more). These investments are in equities, mainly common stocks.
In choosing stocks, the portfolio managers use a combination of three analytical
disciplines:
Bottom-up research. The managers look for individual companies with a history of
above-average growth, strong competitive positioning, attractive prices relative
to potential growth, sound financial strength and effective management, among
other factors.
Growth orientation. The managers generally look for companies with above-average
growth of revenue or earnings relative to the overall market.
Top-down analysis. The managers consider the economic outlooks for various
sectors and industries.
The managers may favor securities from different industries and companies at
different times while still maintaining variety in terms of the industries and
companies represented.
The fund will normally sell a stock when its earnings growth appears less
promising, when the company no longer qualifies as a large company, when the
managers believe other investments offer better opportunities or in the course
of adjusting its exposure to a given industry.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS.
--------------------------------------------------------------------------------
OTHER INVESTMENTS
Although the managers are permitted to use various types of derivatives
(contracts whose value is based on, for example, indices, currencies or
securities), the managers don't intend to use them as principal investments, and
may not use them at all.
6 | Scudder Large Company Growth Fund
<PAGE>
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[ICON] Investors with long-term goals who are looking for a fund with a
growth-style approach to large-cap investing may want to consider this
fund.
--------------------------------------------------------------------------------
Main Risks to Investors
There are several risk factors that could hurt the fund's performance, cause you
to lose money or make the fund perform less well than other investments.
As with most stock funds, the most important factor with this fund is how stock
markets perform -- in this case, the large company portion of the U.S. market.
When large company stock prices fall, you should expect the value of your
investment to fall as well. Large company stocks may be less risky than shares
of smaller companies, but at times may not perform as well. Because a stock
represents ownership in its issuer, stock prices can be hurt by poor management,
shrinking product demand and other business risks. These may affect single
companies as well as groups of companies.
To the extent that the fund invests in a given industry, any factors affecting
that industry could affect portfolio securities. For example, a rise in
unemployment could hurt manufacturers of consumer goods.
Other factors that could affect performance include:
o derivatives could produce disproportionate losses
o growth stocks may be out of favor for certain periods
o at times, market conditions might make it hard to value some
investments or to get an attractive price for them
o the managers could be wrong in their analysis of companies, industries,
economic trends or other matters
7 | Scudder Large Company Growth Fund
<PAGE>
--------------------------------------------------------------------------------
[ICON] While a fund's past performance isn't necessarily a sign of how it will
do in the future, it can be valuable for an investor to know. This page
looks at fund performance two different ways: year by year and over
time.
--------------------------------------------------------------------------------
The Fund's Track Record
The bar chart shows how the returns of the fund's Class S shares have varied
from year to year, which may give some idea of risk. The table shows average
annual total returns of the fund's Class S shares and a broad-based market index
(which, unlike the fund, does not have any fees or expenses). The performance of
both the fund and the index varies over time. All figures on this page assume
reinvestment of dividends and distributions.
------------------------------------------------------------------------
Annual Total Returns (%) as of 12/31 each year Class S
------------------------------------------------------------------------
------------------------------------------------------------------------
.......................................................................
.......................................................................
.......................................................................
.......................................................................
.......................................................................
------------------------------------------------------------------------
2000 Total Return as of June 30: ___%
Best Quarter: Worst Quarter:
------------------------------------------------------------------------
Average Annual Total Returns (%) as of 12/31/1999
------------------------------------------------------------------------
1 Year 5 Years Since Inception**
------------------------------------------------------------------------
Fund -- Class S*
------------------------------------------------------------------------
Index
------------------------------------------------------------------------
Index: The Russell 1000 Growth Index, which consists of those stocks in the
Russell 1000 Index that have a greater-than-average growth orientation.
* Performance for Class AARP shares is not provided because this class
does not have a full calendar year of performance.
** Since 5/15/1991. Index comparisons begin 5/31/1991.
Total returns from the date of inception to 1992 would have been lower if
operating expenses hadn't been reduced.
8 | Scudder Large Company Growth Fund
<PAGE>
How Much Investors Pay
This fund has no shareholder fees other than the redemption/
exchange fee, charged directly to your account. The fund does have
annual operating expenses, and as a shareholder of either Class
AARP or Class S shares, you pay them indirectly.
------------------------------------------------------------------------
Fee Table
------------------------------------------------------------------------
Shareholder Fees (paid directly from your investment) None
------------------------------------------------------------------------
Annual Operating Expenses (deducted from fund assets)
------------------------------------------------------------------------
Management Fee __%
------------------------------------------------------------------------
Distribution (12b-1) Fee None
------------------------------------------------------------------------
Other Expenses* __%
------------
------------------------------------------------------------------------
Total Annual Operating Expenses __%
------------------------------------------------------------------------
* Includes a fixed rate administrative fee of 0.30%.
Information in the table has been restated to reflect a new fixed rate
administrative fee and a new investment management fee rate.
------------------------------------------------------------------------
Expense Example
------------------------------------------------------------------------
This example helps you compare this fund's expenses to those of
other mutual funds. The example assumes the expenses above remain
the same. It also assumes that you invested $10,000, earned 5%
annual returns, reinvested all dividends and distributions and sold
your shares at the end of each period. This is only an example;
your actual expenses will be different.
1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------------
$xx $xxx $xxx $xxxx
------------------------------------------------------------------------
9 | Scudder Large Company Growth Fund
<PAGE>
Other Policies and Risks
While the fund-by-fund sections on the previous pages describe the main points
of each fund's strategy and risks, there are a few other issues to know about:
o Although major changes tend to be infrequent, each fund's Board could
change that fund's investment goal without seeking shareholder
approval.
o As a temporary defensive measure, each fund could shift up to 100% of
its assets into investments such as money market securities. This could
prevent losses, but would mean that the fund was not pursuing its goal.
o These funds may trade securities more actively than many funds, which
could mean higher expenses (thus lowering return) and higher taxable
distributions.
For more information
This prospectus doesn't tell you about every policy or risk of investing in the
funds.
If you want more information on the funds' allowable securities and investment
practices and the characteristics and risks of each one, you may want to request
a copy of the Statement of Additional Information (the back cover tells you how
to do this).
Keep in mind that there is no assurance that any mutual fund will achieve its
goal.
10 | Other Policies and Risks
<PAGE>
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[ICON] Scudder Kemper, the company with overall responsibility for managing
the funds, takes a team approach to asset management.
--------------------------------------------------------------------------------
Who Manages and Oversees the Funds
The investment adviser
The funds' investment adviser is Scudder Kemper Investments, Inc., 345 Park
Avenue, New York, NY. Scudder Kemper has more than 80 years of experience
managing mutual funds, and currently has more than $290 billion in assets under
management.
Scudder Kemper's asset management teams include investment professionals,
economists, research analysts, traders and other investment specialists, located
in offices across the United States and around the world.
As payment for serving as investment adviser, Scudder Kemper receives a
management fee from each fund. Below are the actual rates paid by each fund for
the 12 months through the most recent fiscal year end, as a percentage of each
fund's average daily net assets.
Fund Name Fee Paid
------------------------------------------------------------------------
Scudder 21st Century Growth Fund 0.00%
------------------------------------------------------------------------
Scudder Large Company Growth Fund 0.00%
------------------------------------------------------------------------
11 | Who Manages and Oversees the Funds
<PAGE>
Each fund has entered into a new investment management agreement with Scudder
Kemper. This table describes the new fee rates for each fund and the effective
date of these agreements.
------------------------------------------------------------------------
Investment Management Fee
------------------------------------------------------------------------
Average Daily Net Assets Fee Rate
------------------------------------------------------------------------
Scudder 21st Century Growth (effective ______)
------------------------------------------------------------------------
first $500 million 0.75%
------------------------------------------------------------------------
next $500 million 0.70%
------------------------------------------------------------------------
more than $1 billion 0.65%
------------------------------------------------------------------------
Scudder Large Company Growth (effective ______)
------------------------------------------------------------------------
all assets 0.70%
------------------------------------------------------------------------
Scudder Kemper has agreed to pay a fee to AARP and/or its affiliates in return
for services relating to investments by AARP members in AARP Class shares of
each fund. This fee is calculated on a daily basis as a percentage of the
combined net assets of the AARP Classes of all funds managed by Scudder Kemper.
The fee rates, which decrease as the aggregate net assets of the AARP Classes
become larger, are as follows: 0.07% for the first $6 billion in net assets,
0.06% for the next $10 billion and 0.05% thereafter.
12 | Who Manages and Oversees the Funds
<PAGE>
The portfolio managers
The following people handle the day-to-day management of each fund in this
prospectus.
[INSERT CHART]
13 | Who Manages and Oversees the Funds
<PAGE>
The Board
A mutual fund's Board is responsible for the general oversight of the fund's
business. A majority of the Board is not affiliated with Scudder Kemper. The
individuals below serve concurrently as the trustees of all funds in this
prospectus. These independent members have primary responsibility for assuring
that each fund is managed in the best interests of its shareholders. The
following people comprise each fund's Board.
Linda C. Coughlin Joan E. Spero
o Managing Director, Scudder o President, Doris Duke
Kemper Investments, Inc. Charitable Foundation
o President of each fund
Jean Gleason Stromberg
Henry P. Becton, Jr. o Consultant
o President, WGBH Educational
Foundation Jean C. Tempel
o Managing Director, First
Dawn-Marie Driscoll Light Capital (venture
o Executive Fellow, Center for capital firm)
Business Ethics, Bentley College
o President, Driscoll Associates Steven Zaleznick
(consulting firm) o President and Chief
Executive Officer, AARP
Edgar Fiedler Services, Inc.
o Senior Fellow and Economic
Counsellor, The Conference
Board, Inc.
Keith R. Fox
o Private equity investor
o President, Exeter Capital
Management Corporation
14 | Who Manages and Oversees the Funds
<PAGE>
Financial Highlights
These tables are designed to help you understand each fund's financial
performance [in recent years]. The figures in the first part of each table are
for a single share. The total return figures represent the percentage that an
investor in a particular fund would have earned (or lost), assuming all
dividends and distributions were reinvested. This information has been audited
by PricewaterhouseCoopers LLP, whose report, along with each fund's financial
statements, is included in that fund's annual report (see "Shareholder reports"
on the back cover).
Because Class AARP shares were not available until October 2, 2000, there is no
financial data for these shares as of the date of this prospectus.
Scudder 21st Century Growth Fund
[TABLE TO BE INSERTED]
15 | Financial Highlights
<PAGE>
Scudder Large Company Growth Fund
[TABLE TO BE INSERTED]
16 | Financial Highlights
<PAGE>
How to invest in the funds
The following pages tell you how to invest in these funds and what to expect as
a shareholder. If you're investing directly with Scudder, all of this
information applies to you.
If you're investing through a "third party provider" -- for example, a workplace
retirement plan, financial supermarket or financial adviser -- your provider may
have its own policies or instructions, and you should follow those.
As noted earlier, there are two classes of shares of each fund available through
this prospectus. The instructions for buying and selling each class are slightly
different.
Instructions for buying and selling Class AARP shares, which have been created
especially for AARP members, are found on the next two pages. These are followed
by instructions for buying and selling Class S shares. Be sure to use the
appropriate table when placing any orders to buy, exchange or sell shares in
your account.
<PAGE>
<TABLE>
<CAPTION>
How to Buy, Sell and Exchange Class AARP Shares
Buying Shares Use these instructions to invest directly. Make out your check to
"The AARP Investment Program."
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Class AARP First investment Additional investments
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<S> <C> <C>
$1,000 or more for regular $50 or more with an Automatic
accounts Investment Plan
$500 or more for IRAs
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By mail o For enrollment forms, call Send a personalized investment
1-800-253-2277 slip or short note that
o Fill out and sign an includes:
enrollment form o fund and class name
o Send it to us at the o account number
appropriate address, along o check payable to "The AARP
with an investment check Investment Program"
-------------------------------------------------------------------------------------
By wire o Call 1-800-253-2277 for o Call 1-800-253-2277 for
instructions instructions
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By phone -- o Call 1-800-253-2277 for
instructions
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With an automatic o Fill in the information o To set up regular investments
investment plan required on your enrollment from a bank checking account,
form and include a voided call 1-800-253-2277
check
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Payroll Deduction o Select either of these o Once you specify a dollar
or Direct options on your enrollment amount (minimum $50),
Deposit form and submit it. You will investments are automatic.
receive further instructions
by mail.
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Using QuickBuy -- o Call 1-800-253-2277
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On the Internet o Go to "services and forms - o Call 1-800-253-2277 to ensure
How to Open an Account" at you have electronic services
aarp.scudder.com o Register at aarp.scudder.com
o Print out a prospectus and an o Follow the instructions for
enrollment form buying shares with money from
o Complete and return the your bank account
enrollment form with your
check
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</TABLE>
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[ICON] Regular mail:
AARP Investment Program, PO Box 2540, Boston, MA 02208-2540
Express, registered or certified mail:
AARP Investment Program, 66 Brooks Drive, Braintree, 02184-3839
Fax number: 1-800-821-6234 (for exchanging and selling only)
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18 | How to Buy, Sell and Exchange Class AARP Shares
<PAGE>
<TABLE>
<CAPTION>
Exchanging or Selling Shares Use these instructions to exchange or sell shares
in an account opened directly with Scudder.
----------------------------------------------------------------------------------------
Class AARP Exchanging into another fund Selling shares
----------------------------------------------------------------------------------------
<S> <C> <C>
$1,000 or more to open a new Some transactions, including
account ($500 or more for IRAs) most for over $100,000, can
only be ordered in writing; if
you're in doubt, see page 24
----------------------------------------------------------------------------------------
By phone o Call 1-800-253-2277 for o Call 1-800-253-2277 for
instructions instructions
----------------------------------------------------------------------------------------
Using Easy-Access o Call 1-800- 631-4636 and o Call 1-800-631-4636 and
Line follow the instructions follow the instructions
----------------------------------------------------------------------------------------
By mail or fax Your instructions should Your instructions should
(see previous include: include:
page) o your account number o your account number
o names of the funds, class and o names of the funds, class
number of shares or dollar and number of shares or dollar
amount you want to exchange amount you want to redeem
----------------------------------------------------------------------------------------
With an automatic -- o To set up regular cash
withdrawal plan payments from an account,
call 1-800-253-2277
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Using QuickSell -- o Call 1-800-253-2277
----------------------------------------------------------------------------------------
On the Internet o Register at aarp.scudder.com --
o Go to "services and forms"
o Follow the instructions for
making on-line exchanges
----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
Services For Class AARP Investors
----------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
<S> <C>
To reach us: o Web site aarp.scudder.com
o Program representatives 1-800-253-2277, M-F, 8 a.m. - 8 p.m. EST
o Confidential fax line 1-800-821-6234, always open
o TDD line 1-800-634-9454, M-F, 9 a.m. - 5 p.m. EST
Services for o AARP Lump Sum Service For planning and setting up a lump
participants: sum distribution.
o AARP Legacy Service For organizing financial documents and
planning the orderly transfer of assets to heirs.
o AARP Goal Setting and Asset Allocation Service For
allocating assets and measuring investment progress.
o For more information, please call 1-800-253-2277.
---------------------------------------------------------------------------------------
</TABLE>
19 | How to Buy, Sell and Exchange Class AARP Shares
<PAGE>
<TABLE>
<CAPTION>
How to Buy, Sell and Exchange Class S Shares
Buying Shares Use these instructions to invest directly. Make out your check to
"The Scudder Funds."
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Class S First investment Additional investments
---------------------------------------------------------------------------------------
<S> <C> <C>
$2,500 or more for regular $100 or more for regular
accounts accounts
$1,000 or more for IRAs $50 or more for IRAs
$50 or more with an Automatic
Investment Plan
---------------------------------------------------------------------------------------
By mail or o Fill out and sign an Send a Scudder investment slip
express application or short note that includes:
(see below) o Send it to us at the o fund and class name
appropriate address, along o account number
with an investment check o check payable to "The Scudder
Funds"
---------------------------------------------------------------------------------------
By wire o Call 1-800-SCUDDER for o Call 1-800-SCUDDER for
instructions instructions
---------------------------------------------------------------------------------------
By phone -- o Call 1-800-SCUDDER for
instructions
---------------------------------------------------------------------------------------
With an automatic o Fill in the information on o To set up regular investments
investment plan your application and include from a bank checking account,
a voided check call 1-800-SCUDDER
---------------------------------------------------------------------------------------
Using QuickBuy -- o Call 1-800-SCUDDER
---------------------------------------------------------------------------------------
On the Internet o Go to "funds and prices" at o Call 1-800-SCUDDER to ensure
www.scudder.com you have electronic services
o Print out a prospectus and a o Register at www.scudder.com
new account application o Follow the instructions for
o Complete and return the buying shares with money from
application with your check your bank account
---------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
[ICON] Regular mail:
The Scudder Funds, PO Box 2291, Boston, MA 02107-2291
Express, registered or certified mail:
The Scudder Funds, 66 Brooks Drive, Braintree, MA 02184-3839
Fax number: 1-800-821-6234 (for exchanging and selling only)
--------------------------------------------------------------------------------
20 | How to Buy, Sell and Exchange Class S Shares
<PAGE>
<TABLE>
<CAPTION>
Exchanging or Selling Shares Use these instructions to exchange or sell shares
in an account opened directly with Scudder.
-------------------------------------------------------------------------------------
Class S Exchanging into another fund Selling shares
-------------------------------------------------------------------------------------
<S> <C> <C>
$2,500 or more to open a new Some transactions, including
account ($1,000 or more for most for over $100,000, can
IRAs) only be ordered in writing; if
$100 or more for exchanges you're in doubt, see page 24
between existing accounts
-------------------------------------------------------------------------------------
By phone or wire o Call 1-800-SCUDDER for o Call 1-800-SCUDDER for
instructions instructions
-------------------------------------------------------------------------------------
Using SAIL(TM) o Call 1-800-343-2890 and o Call 1-800-343-2890 and
follow the instructions follow the instructions
-------------------------------------------------------------------------------------
By mail, Your instructions should Your instructions should
express or fax include: include:
(see previous o the fund, class, and account o the fund, class and account
page) number you're exchanging number from which you want to
out of sell shares
o the dollar amount or number o the dollar amount or number
of shares you want to exchange of shares you want to sell
o the name and class of the o your name(s), signature(s)
fund you want to exchange into and address, as they appear
o your name(s), signature(s), on your account
and address, as they appear o a daytime telephone number
on your account
o a daytime telephone number
-------------------------------------------------------------------------------------
With an automatic -- o To set up regular cash
withdrawal plan payments from a Scudder
account, call 1-800-SCUDDER
-------------------------------------------------------------------------------------
Using QuickSell -- o Call 1-800-SCUDDER
-------------------------------------------------------------------------------------
On the Internet o Register at www.scudder.com --
o Follow the instructions for
making on-line exchanges
-------------------------------------------------------------------------------------
</TABLE>
21 | How to Buy, Sell and Exchange Class S Shares
<PAGE>
--------------------------------------------------------------------------------
[ICON] Questions? You can speak to a Scudder representative between 8 a.m. and
8 p.m. Eastern time on any fund business day by calling 1-800-253-2277
(Class AARP) or 1-800-SCUDDER (Class S).
--------------------------------------------------------------------------------
Policies You Should Know About
Along with the instructions on the previous pages, the policies below may affect
you as a shareholder. Some of this information, such as the section on dividends
and taxes, applies to all investors, including those investing through
investment providers.
If you are investing through an investment provider, check the materials you got
from them. As a general rule, you should follow the information in those
materials wherever it contradicts the information given here. Please note that
an investment provider may charge its own fees.
In either case, keep in mind that the information in this prospectus applies
only to the funds' Class AARP and Class S Shares. Each fund has other share
classes, which are described in separate prospectuses and which have different
fees, requirements and services.
Policies about transactions
The funds are open for business each day the New York Stock Exchange is open.
Each fund calculates its share price every business day, as of the close of
regular trading on the Exchange (typically 4 p.m. eastern time, but sometimes
earlier, as in the case of scheduled half-day trading or unscheduled suspensions
of trading).
You can place an order to buy or sell shares at any time. Once your order is
received by Scudder Service Corporation, and they have determined that it is a
"good order," it will be processed at the next share price calculated.
Because orders placed through investment providers must be forwarded to Scudder
Service Corporation before they can be processed, you'll need to allow extra
time. A representative of your investment provider should be able to tell you
when your order will be processed.
22 | Policies You Should Know About
<PAGE>
--------------------------------------------------------------------------------
[ICON] The Scudder Web site can be a valuable resource for shareholders with
Internet access. To get up-to-date information, review balances or even
place orders for exchanges, go to aarp.scudder.com (Class AARP) or
www.scudder.com (Class S).
--------------------------------------------------------------------------------
Automated phone information is available 24 hours a day. You can use your
automated phone services to get information on Scudder funds generally and on
accounts held directly at Scudder. If you signed up for telephone services, you
can also use this service to make exchanges and sell shares.
For Class AARP shares
--------------------------------------------------------------------------
Call Easy-Access Line, the AARP Investment Program Automated Information
Line, at 1-800-631-4636
--------------------------------------------------------------------------
For Class S shares
--------------------------------------------------------------------------
Call SAIL(TM), the Scudder Automated Information Line, at 1-800-343-2890
--------------------------------------------------------------------------
QuickBuy and QuickSell let you set up a link between a Scudder account and a
bank account. Once this link is in place, you can move money between the two
with a phone call. You'll need to make sure your bank has Automated Clearing
House (ACH) services. To set up QuickBuy or QuickSell on a new account, see the
account application; to add it to an existing account, call 1-800-253-2277
(Class AARP) or 1-800-SCUDDER (Class S).
When you call us to sell shares, we may record the call, ask you for certain
information, or take other steps designed to prevent fraudulent orders. It's
important to understand that as long as we take reasonable steps to ensure that
an order appears genuine, we are not responsible for any losses that may occur.
When you ask us to send or receive a wire, please note that while we don't
charge a fee to receive wires, we will deduct a $5 fee from all wires sent from
us to your bank. Your bank may charge its own fees for handling wires. The funds
can only accept wires of $100 or more.
23 | Policies You Should Know About
<PAGE>
Exchanges are a shareholder privilege, not a right: we may reject any exchange
order, particularly when there appears to be a pattern of "market timing" or
other frequent purchases and sales. We may also reject purchase orders, for
these or other reasons.
When you want to sell more than $100,000 worth of shares, you'll usually need to
place your order in writing and include a signature guarantee. The only
exception is if you want money wired to a bank account that is already on file
with us; in that case, you don't need a signature guarantee. Also, you don't
need a signature guarantee for an exchange, although we may require one in
certain other circumstances.
A signature guarantee is simply a certification of your signature -- a valuable
safeguard against fraud. You can get a signature guarantee from most brokers,
banks, savings institutions and credit unions. Note that you can't get a
signature guarantee from a notary public.
Money from shares you sell is normally sent out within one business day of when
your order is processed (not when it is received), although it could be delayed
for up to seven days. There are also two circumstances when it could be longer:
when you are selling shares you bought recently by check and that check hasn't
cleared yet (maximum delay: 15 days) or when unusual circumstances prompt the
SEC to allow further delays.
24 | Policies You Should Know About
<PAGE>
--------------------------------------------------------------------------------
[ICON] If you ever have difficulty placing an order by phone or fax, you can
always send us your order in writing.
--------------------------------------------------------------------------------
How the funds calculate share prices
The price at which you buy shares is its net asset value per share, or NAV. To
calculate NAV, each share class of each fund uses the following equation:
TOTAL ASSETS - TOTAL LIABILITIES
---------------------------------- = NAV
TOTAL NUMBER OF SHARES OUTSTANDING
We typically use market prices to value securities. However, when a market price
isn't available, or when we have reason to believe it doesn't represent market
realities, we may use fair value methods approved by a fund's Board. In such a
case, the fund's value for a security is likely to be different from quoted
market prices.
The price at which you sell shares of Scudder 21st Century Growth Fund is also
the fund's NAV, minus a 1.00% redemption/exchange fee on shares owned less than
one year. You won't be charged this fee if you're investing in an
employer-sponsored retirement plan that is set up directly with Scudder. If your
employer-sponsored retirement plan is through a third-party investment provider,
or if you are investing through an IRA or other individual retirement account,
the fee will apply. Certain other types of accounts, as discussed in the
Statement of Additional Information, may be eligible for this waiver.
25 | Policies You Should Know About
<PAGE>
Other rights we reserve
For each fund in this prospectus, you should be aware that we may do any of the
following:
o withhold 31% of your distributions as federal income tax if you have
been notified by the IRS that you are subject to backup withholding, or
if you fail to provide us with a correct taxpayer ID number or
certification that you are exempt from backup withholding
o for Class AARP and Class S shareholders, close your account and send
you the proceeds if your balance falls below $1,000; for Class S
shareholders, charge you $10 a year if your account balance falls below
$2,500; in either case, we will give you 60 days' notice so you can
either increase your balance or close your account (these policies
don't apply to retirement accounts, to investors with $100,000 or more
in Scudder fund shares or in any case where a fall in share price
created the low balance)
o reject a new account application if you don't provide a correct Social
Security or other tax ID number; if the account has already been
opened, we may give you 30 days' notice to provide the correct number
o pay you for shares you sell by "redeeming in kind," that is, by giving
you marketable securities (which typically will involve brokerage costs
for you to liquidate) rather than cash; the fund generally won't make a
redemption in kind unless your requests over a 90-day period total more
than $250,000 or 1% of the value of the fund's net assets, whichever is
less
o change, add or withdraw various services, fees and account policies
(for example, we may change or terminate the exchange privilege at any
time)
26 | Policies You Should Know About
<PAGE>
--------------------------------------------------------------------------------
[ICON] Because each shareholder's tax situation is unique, it's always a good
idea to ask your tax professional about the tax consequences of your
investments, including any state and local tax consequences.
--------------------------------------------------------------------------------
Understanding Distributions and Taxes
By law, a mutual fund is required to pass through to its shareholders virtually
all of its net earnings. A fund can earn money in two ways: by receiving
interest, dividends or other income from securities it holds, and by selling
securities for more than it paid for them. (A fund's earnings are separate from
any gains or losses stemming from your own purchase of shares.) A fund may not
always pay a distribution for a given period.
Scudder 21st Century Growth Fund intends to pay dividends and distributions to
their shareholders in November or December and Scudder Large Company Growth Fund
in December, and if necessary each may do so at other times as well.
You can choose how to receive your dividends and distributions. You can have
them all automatically reinvested in fund shares or all sent to you by check.
Tell us your preference on your application. If you don't indicate a preference,
your dividends and distributions will all be reinvested. For retirement plans,
reinvestment is the only option.
Buying and selling fund shares will usually have tax consequences for you
(except in an IRA or other tax-advantaged account). Your sales of shares may
result in a capital gain or loss for you; whether long-term or short-term
depends on how long you owned the shares. For tax purposes, an exchange is the
same as a sale.
27 | Understanding Distributions and Taxes
<PAGE>
The tax status of the fund earnings you receive, and your own fund transactions,
generally depends on their type:
Generally taxed at ordinary income rates
--------------------------------------------------------------------------
o short-term capital gains from selling fund shares
--------------------------------------------------------------------------
o taxable income dividends you receive from a fund
--------------------------------------------------------------------------
o short-term capital gains distributions you receive from a fund
Generally taxed at capital gains rates
--------------------------------------------------------------------------
o long-term capital gains from selling fund shares
--------------------------------------------------------------------------
o long-term capital gains distributions you receive from a fund
--------------------------------------------------------------------------
Your fund will send you detailed tax information every January. These statements
tell you the amount and the tax category of any dividends or distributions you
received. They also have certain details on your purchases and sales of shares.
The tax status of dividends and distributions is the same whether you reinvest
them or not. Dividends or distributions declared in the last quarter of a given
year are taxed in that year, even though you may not receive the money until the
following January.
If you invest right before a fund pays a dividend, you'll be getting some of
your investment back as a taxable dividend. You can avoid this, if you want, by
investing after the fund declares a dividend. In tax-advantaged retirement
accounts you don't need to worry about this.
Corporations may be able to take a dividends-received deduction for a portion of
income dividends they receive.
28 | Understanding Distributions and Taxes
<PAGE>
To Get More Information
Shareholder reports -- These include commentary from each fund's management team
about recent market conditions and the effects of a fund's strategies on its
performance. For each fund, they also have detailed performance figures, a list
of everything the fund owns, and the fund's financial statements. Shareholders
get these reports automatically. To reduce costs, we mail one copy per
household. For more copies, call 1-800-253-2277 (Class AARP) or 1-800-SCUDDER
(Class S).
Statement of Additional Information (SAI) -- This tells you more about each
fund's features and policies, including additional risk information. The SAI is
incorporated by reference into this document (meaning that it's legally part of
this prospectus).
If you'd like to ask for copies of these documents, please contact Scudder or
the SEC. If you're a shareholder and have questions, please contact Scudder (see
below). Materials you get from Scudder are free; those from the SEC involve a
copying fee. If you like, you can look over these materials at the SEC's Public
Reference Room in Washington, DC or request them electronically at
[email protected].
AARP Investment
Program from Scudder Scudder Funds SEC
PO Box 2540 PO Box 2291 450 Fifth Street, N.W.
Boston, MA Boston, MA Washington, D.C.
02208-2540 02107-2291 20549-6009
1-800-253-2277 1-800-SCUDDER 1-202-942-8090
aarp.scudder.com www.scudder.com www.sec.gov
Fund SEC File Number
------------------------------------------------------------------------
Scudder 21st Century Growth Fund 811-2021
------------------------------------------------------------------------
Scudder Large Company Growth Fund 811-43
------------------------------------------------------------------------
<PAGE>
SCUDDER 21st CENTURY GROWTH FUND
A series of Scudder Securities Trust
A Mutual Fund Seeking
Long-Term Capital Appreciation Through Investment
Primarily in Securities of Emerging Growth Companies
Poised to be Leaders in the 21st Century
SCUDDER LARGE COMPANY GROWTH FUND
A series of Investment Trust
A Diversified Mutual Fund Seeking Long-Term
Growth of Capital through Investment Primarily in Equities
of Large U.S. Companies
--------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
October 1, 2000
--------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus, and should be read
in conjunction with the combined prospectus of Scudder 21st Century Growth Fund
and Scudder Large Company Growth Fund dated October 1, 2000, 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.
The Annual Report to Shareholders of the each Fund dated July 31, 2000 is
incorporated by reference and is hereby deemed to be part of this Statement of
Additional Information. This may also be obtained without charge by calling
1-800-SCUDDER.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES.......................................................................1
General Investment Objective and Policies of Scudder 21st Century Growth Fund..............................1
Special Considerations.....................................................................................2
Investment Policies and Techniques Common to each Fund.....................................................5
Investment Restrictions...................................................................................16
PURCHASES..........................................................................................................18
Additional Information About Opening an Account...........................................................18
Additional Information About Making Subsequent Investments................................................18
Minimum Balances..........................................................................................19
Additional Information About Making Subsequent Investments By Quickbuy....................................19
Checks....................................................................................................20
Wire Transfer of Federal Funds............................................................................20
Share Price...............................................................................................20
Share Certificates........................................................................................20
Other Information.........................................................................................20
EXCHANGES AND REDEMPTIONS..........................................................................................21
Exchanges.................................................................................................21
Redemption By Telephone...................................................................................22
Redemption By Quicksell...................................................................................22
Redemption By Mail Or Fax.................................................................................23
Redemption-in-Kind........................................................................................23
Other Information.........................................................................................23
FEATURES AND SERVICES OFFERED BY THE FUND..........................................................................24
The No-Load Concept.......................................................................................24
Internet Access...........................................................................................24
Dividends and Capital Gains Distribution Options..........................................................25
Transaction Summaries.....................................................................................25
THE SCUDDER FAMILY OF FUNDS........................................................................................25
SPECIAL PLAN ACCOUNTS..............................................................................................28
Scudder Retirement Plans: Profit-Sharing and Money Purchase...............................................28
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for Corporations and Self-Employed Individuals.......29
Scudder IRA: Individual Retirement Account................................................................29
Scudder Roth IRA: Individual Retirement Account...........................................................29
Scudder 403(b) Plan.......................................................................................30
Automatic Withdrawal Plan.................................................................................30
Group or Salary Deduction Plan............................................................................30
Automatic Investment Plan.................................................................................30
Uniform Transfers/Gifts to Minors Act.....................................................................31
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS..........................................................................33
PERFORMANCE INFORMATION............................................................................................33
Average Annual Total Return...............................................................................33
Cumulative Total Return...................................................................................34
Total Return..............................................................................................34
Comparison of Fund Performance............................................................................35
FUND ORGANIZATION..................................................................................................35
INVESTMENT ADVISER.................................................................................................37
AMA InvestmentLink(SM) Program............................................................................40
Code of Ethics............................................................................................40
i
<PAGE>
TABLE OF CONTENTS (continued)
Page
TRUSTEES AND OFFICERS FOR EACH TRUST...............................................................................41
REMUNERATION.......................................................................................................42
Responsibilities of the Board -- Board and Committee Meetings.............................................42
Compensation of Officers and Trustees.....................................................................43
DISTRIBUTOR........................................................................................................43
Administrative Fee........................................................................................44
TAXES..............................................................................................................45
PORTFOLIO TRANSACTIONS.............................................................................................49
Brokerage Commissions.....................................................................................49
Portfolio Turnover........................................................................................50
NET ASSET VALUE....................................................................................................50
ADDITIONAL INFORMATION.............................................................................................51
Experts...................................................................................................51
Shareholder Indemnification...............................................................................51
Other Information.........................................................................................52
ADDITIONAL INFORMATION FOR LARGE COMPANY GROWTH FUND...............................................................53
FINANCIAL STATEMENTS...............................................................................................54
</TABLE>
ii
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES
Except as otherwise indicated, each Fund's investment objective and
policies are not fundamental and may be changed without a vote of shareholders.
If there is a change in investment objective, shareholders should consider
whether a Fund remains an appropriate investment in light of their then current
financial position and needs. The net asset value of a Fund's shares will
increase or decrease with changes in the market price of the Fund's investments,
and there can be no assurance that a Fund's objective will be met.
Each Fund is an open-end management investment company which
continuously offers and redeems shares at net asset value. Each Fund is a
company of the type commonly known as a mutual fund. The combined prospectus and
this Statement of Additional Information for Scudder 21st Century Growth Fund
and Scudder Large Company Growth Fund each offer two classes of shares to
provide investors with different purchase options. The two classes are: the
Class S and the Class AARP. Each class has its own important features and
policies. On October 2, 2000, shares of Scudder 21st Century Growth Fund and
Scudder Large Company Growth Fund were redesignated Class S shares of their
respective funds. Shares of the AARP class are especially designed for members
of the American Association of Retired Persons ("AARP").
Descriptions in this Statement of Additional Information of a
particular investment practice or technique in which a Fund may engage (such as
hedging, etc.) or a financial instrument which a Fund may purchase (such as
options, forward foreign currency contracts, etc.) are meant to describe the
spectrum of investments that Scudder Kemper Investments, Inc. (the "Adviser"),
in its discretion, might, but is not required to, use in managing a Fund's
portfolio assets. The Adviser may, in its discretion, at any time employ such
practice, technique or instrument for the Fund, but not for all funds advised by
it. Furthermore, it is possible that certain types of financial instruments or
investment techniques described herein may not be available, permissible,
economically feasible or effective for their intended purposes in all markets.
Certain practices, techniques, or instruments may not be principal activities of
the Fund, but, to the extent employed, could from time to time have a material
impact on the Fund's performance.
General Investment Objective and Policies of Scudder 21st Century Growth Fund
Scudder 21st Century Growth Fund (the "21st Century Growth Fund") is a
diversified series of Scudder Securities Trust.
21st Century Growth Fund pursues long-term growth of capital by
investing in emerging growth companies that are poised to be leaders in the new
century. The Fund is designed for investors in search of substantial long-term
growth who can accept above-average stock market risk and little or no current
income.
Due to the business characteristics and risks of emerging growth
companies, the Fund's share price can experience periods of volatility. As a
result, the Fund should be considered a long-term investment and only one part
of a well-diversified personal investment portfolio. To encourage a long-term
holding period and to facilitate portfolio management, a 1% redemption and
exchange fee, described in greater detail below, is payable to the Fund for the
benefit of remaining shareholders on shares held less than one year.
21st Century Growth Fund normally invests at least 80% of its total
assets in common stocks. Companies in which the fund invests generally are
similar in size to those included in the Russell 2000(R) Index -- a widely used
benchmark of small stock performance. The Adviser believes these companies are
well-positioned for above-average earnings growth and greater market
recognition. Such favorable prospects may be a result of new or innovative
products or services a given company is developing or provides, products or
services that have the potential to impact significantly the industry in which
the company competes or to change dramatically customer behavior into the 21st
century. The above-average earnings growth potential and greater market
recognition expected are factors believed to offer significant opportunity for
capital appreciation, and the Adviser will attempt to identify these
opportunities before their potential is recognized by investors in general.
To help reduce risk in its search for emerging growth companies, the
Adviser allocates the Fund's investments among many companies and different
industries in the U. S. and, where opportunity warrants, abroad as well. The
Adviser seeks companies that, in the Adviser's opinion, have excellent
management which own a significant stake in the
<PAGE>
company, clean balance sheets, conservative accounting, and either a commanding
position in a growing market or the real possibility of building a commanding
position as the 21st century approaches. Emerging growth companies are those
with the ability, in the Adviser's opinion, to expand earnings per share by at
least 15% per annum over the next three to five years at a minimum. In selecting
specific industries and companies for investment, the Adviser will make full use
of its extensive fundamental and field research capabilities in taking into
account such other factors as overall growth prospects and financial condition,
competitive situation, technology, research and development activities,
productivity, labor costs, raw material costs and sources, profit margins,
return on investment, structural changes in local economies, capital resources,
the degree of governmental regulation or deregulation facing a company, and
quality and experience of management.
For temporary defensive purposes the Fund may vary from its investment
policy during periods in which conditions in securities markets or other
economic or political conditions warrant. It is impossible to accurately predict
how long such alternate strategies may be utilized. In such cases, the Fund may
hold without limit, cash, high grade debt securities, without equity features,
which are rated Aaa, Aa or A by Moody's Investors Service, Inc. ("Moody's") or
AAA, AA or A by Standard & Poor's Ratings Service, a division of the McGraw-Hill
Companies, Inc. ("S&P"), or, if unrated, are deemed by the Adviser to be of
equivalent quality, U.S. Government securities and invest in money market
instruments which are rated in the two highest categories by Moody's or S&P, or,
if unrated, are deemed by the Adviser to be of equivalent quality. The Fund may
borrow money for temporary, emergency or other purposes, including investment
leverage purposes, as determined by the Trustees. The Fund may also borrow under
reverse repurchase agreements. The Investment Company Act of 1940, as amended
(the "1940 Act") requires borrowings to have 300% asset coverage.
In addition, the Fund may invest in preferred stocks when management
anticipates that the capital appreciation on such stocks is likely to equal or
exceed that of common stocks over a selected time.
The Fund may enter into repurchase agreements and may engage in
strategic transactions. More information about these investment techniques is
provided under "Specialized Investment Techniques."
21st Century Growth Fund offers participation in the potential growth
of emerging growth companies that may be destined to become leading companies in
the new century. The Fund offers the benefit of professional management to
identify investments in emerging growth companies with the greatest potential,
in the Adviser's opinion, to have a profound and positive impact on the lives of
consumers and businesses as we enter the new century. The Adviser anticipates
finding these companies in many rapidly changing sectors of the economy.
Examples include innovative retailing concepts, the on-going U.S. transition to
an increasingly service-based economy, advances in health care in areas such as
biotechnology, and the tremendous, rapid advances occurring in communications,
computing, software and technology generally. In return for accepting
above-average market risk, investors gain access to a broadly diversified
portfolio designed for above-average capital appreciation compared to that
available from larger companies such as those in the S&P 500 Stock Index.
Special Considerations
Historical small stock performance. While, historically, small company stocks
have outperformed the stocks of large companies, the former have customarily
involved more investment risk as well. Small companies may have limited product
lines, markets or financial resources; may lack management depth or experience;
and may be more vulnerable to adverse general market or economic developments
than large companies. The prices of small company securities are often more
volatile than prices associated with large company issues, and can display
abrupt or erratic movements at times, due to limited trading volumes and less
publicly available information.
Also, because small companies normally have fewer shares outstanding
and these shares trade less frequently than large companies, it may be more
difficult for the Fund to buy and sell significant amounts of such shares
without an unfavorable impact on prevailing market prices. Some of the companies
in which the Fund may invest may distribute, sell or produce products which have
recently been brought to market and may be dependent on key personnel. The
securities of small companies are often traded over-the-counter and may not be
traded in the volumes typical on a national securities exchange. Consequently,
in order to sell this type of holding, the Fund may need to discount the
securities from recent prices or dispose of the securities over a long period of
time.
2
<PAGE>
Defining "emerging growth" companies. The Advisor's model of the corporate life
cycle begins with investment of venture capital, and proceeds to an `emerging
growth' stage. An `emerging growth' company is publicly traded, with a market
value of at least $50 million. Emerging growth companies are part of the `small
stock universe' as described above. Emerging growth companies grow into
`established growth' companies with market values exceeding $500 million.
Companies become mature over time as growth slows and market capitalizations
grow beyond $1 billion.
IPO risk: Securities issued through an initial public offering (IPO) can
experience an immediate drop in value if the demand for the securities does not
continue to support the offering price. Information about the issuers of IPO
securities is also difficult to acquire since they are new to the market and may
not have lengthy operating histories. The Fund may engage in short-term trading
in connection with its IPO investments, which could produce higher trading costs
and adverse tax consequences. The number of securities issued in an IPO is
limited, so it is likely that IPO securities will represent a smaller component
of the Fund's portfolio as the Fund's assets increase (and thus have a more
limited effect on the Fund's performance).
Depositary Receipts. The Fund may invest indirectly in securities of emerging
country issuers through sponsored or unsponsored American Depositary Receipts
("ADRs"), Global Depositary Receipts ("GDRs"), International Depositary Receipts
("IDRs") and other types of Depositary Receipts (which, together with ADRs, GDRs
and IDRs are hereinafter referred to as "Depositary Receipts"). Depositary
Receipts may not necessarily be denominated in the same currency as the
underlying securities into which they may be converted. In addition, the issuers
of the stock of unsponsored Depositary Receipts are not obligated to disclose
material information in the United States and, therefore, there may not be a
correlation between such information and the market value of the Depositary
Receipts. ADRs are Depositary Receipts typically issued by a U.S. bank or trust
company which evidence ownership of underlying securities issued by a foreign
corporation. GDRs, IDRs and other types of Depositary Receipts are typically
issued by foreign banks or trust companies, although they also may be issued by
United States banks or trust companies, and evidence ownership of underlying
securities issued by either a foreign or a United States corporation. Generally,
Depositary Receipts in registered form are designed for use in the United States
securities markets and Depositary Receipts in bearer form are designed for use
in securities markets outside the United States. For purposes of the Fund's
investment policies, the Fund's investments in ADRs, GDRs and other types of
Depositary Receipts will be deemed to be investments in the underlying
securities. Depositary Receipts other than those denominated in U.S. dollars
will be subject to foreign currency exchange rate risk. Certain Depositary
Receipts may not be listed on an exchange and therefore may be illiquid
securities.
Debt Securities. When the Adviser believes that it is appropriate to do so in
order to achieve the Fund's objective of long-term capital appreciation, the
Fund may invest in debt securities including bonds of private issuers, bonds of
foreign governments and supranational organizations. Portfolio debt investments
will be selected on the basis of, among other things, credit quality, and the
fundamental outlooks for currency, economic and interest rate trends, taking
into account the ability to hedge a degree of currency or local bond price risk.
The Fund may purchase high quality bonds, rated Aaa, Aa or A by Moody's or AAA,
AA or A by S&P or, if unrated, judged to be of equivalent quality as determined
by the Adviser.
The principal risks involved with investments in bonds include interest
rate risk, credit risk and pre-payment risk. Interest rate risk refers to the
likely decline in the value of bonds as interest rates rise. Generally,
longer-term securities are more susceptible to changes in value as a result of
interest-rate changes than are shorter-term securities. Credit risk refers to
the risk that an issuer of a bond may default with respect to the payment of
principal and interest. The lower a bond is rated, the more it is considered to
be a speculative or risky investment. Pre-payment risk is commonly associated
with pooled debt securities, such as mortgage-backed securities and asset backed
securities, but may affect other debt securities as well. When the underlying
debt obligations are prepaid ahead of schedule, the return on the security will
be lower than expected. Pre-payment rates usually increase when interest rates
are falling.
Lending of Portfolio Securities. The Fund may seek to increase its income by
lending portfolio securities. Such loans may be made to registered
broker/dealers and are required to be secured continuously by collateral in
cash, U.S. Government Securities and liquid high grade debt obligations
maintained on a current basis at an amount at least equal to the market value
and accrued interest of the securities loaned. The Fund has the right to call a
loan and obtain the securities loaned on no more than five days' notice. During
the existence of a loan, the Fund will continue to receive the equivalent of any
distributions paid by the issuer on the securities loaned and will also receive
compensation based on investment of the collateral. As with other extensions of
credit there are risks of delay in recovery or even loss of rights in the
collateral should the borrower of the securities fail financially. However, the
loans will be made only to firms
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deemed by the Adviser to be in good standing. The value of the securities loaned
will not exceed 5% of the value of the Fund's total assets at the time any loan
is made.
Borrowing. As a matter of fundamental policy, the Fund will not borrow money,
except as permitted under the 1940 Act, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time. While
the Trustees do not currently intend to borrow for investment leverage purposes,
if such a strategy were implemented in the future it would increase the Fund's
volatility and the risk of loss in a declining market. Borrowing by the Fund
will involve special risk considerations. Although the principal of the Fund's
borrowings will be fixed, the Fund's assets may change in value during the time
a borrowing is outstanding, thus increasing exposure to capital risk.
When-Issued Securities. The Fund may from time to time purchase equity and debt
securities on a "when-issued" or "forward delivery" basis. The price of such
securities, which may be expressed in yield terms, is fixed at the time the
commitment to purchase is made, but delivery and payment for the when-issued or
forward delivery securities takes place at a later date. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. To the extent that assets of the Fund are
held in cash pending the settlement of a purchase of securities, the Fund would
earn no income; however, it is the Fund's intention to be fully invested to the
extent practicable and subject to the policies stated above. While when-issued
or forward delivery securities may be sold prior to the settlement date, the
Fund intends to purchase such securities with the purpose of actually acquiring
them unless a sale appears desirable for investment reasons. At the time the
Fund makes the commitment to purchase a security on a when-issued or forward
delivery basis, it will record the transaction and reflect the value of the
security in determining its net asset value. The market value of the when-issued
or forward delivery securities may be more or less than the purchase price. The
Fund does not believe that its net asset value or income will be adversely
affected by its purchase of securities on a when-issued or forward delivery
basis.
General Investment Objectives and Policies of Scudder Large Company Growth Fund
Scudder Large Company Growth Fund (the "Large Company Growth Fund"), a
diversified series of Investment Trust, seeks to provide long-term growth of
capital. It does this by investing primarily in equities of large U.S. companies
(those with a market value of $1 billion or more). Although current income is an
incidental consideration, many of the Fund's securities should provide regular
dividends which are expected to grow over time. The Fund offers an additional
class of Shares: Class R shares. This Statement of Additional Information
applies only to the Class S and Class AARP shares.
The Fund's equity investments consist of common stocks, preferred
stocks and securities convertible into common stocks, rights and warrants of
companies which offer, the Fund's management believes, the prospect for
above-average growth in earnings, cash flow or assets relative to the overall
market. The prospect for above-average growth in assets is evaluated in terms of
the potential future earnings such growth in assets can produce.
The Fund allocates its investments among different industries and
companies, and adjusts its portfolio securities based on long-term investment
considerations as opposed to short-term trading. While the Fund emphasizes U.S.
investments, it can commit a portion of assets to the equity securities of
foreign growth companies which meet the criteria applicable to domestic
investments.
Investments. Large Company Growth Fund invests primarily in equity securities
issued by large-sized domestic companies that offer, the Fund's management
believes, above-average appreciation potential. In seeking such investments, the
Adviser invests in companies with the following characteristics:
o companies that have exhibited above-average growth rates over
an extended period with prospects for maintaining greater than
average rates of growth in earnings, cash flow or assets in
the future;
o companies that are in a strong financial position with high
credit standings and profitability;
o companies with important business franchises, leading products
or dominant marketing and distribution systems;
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o companies guided by experienced, motivated management; or
o companies selling at attractive prices relative to potential
growth in earnings, cash flow or assets.
The Adviser uses qualitative research techniques to identify companies
that have above-average quality and growth characteristics and that are deemed
to be selling at attractive market valuations. In-depth fundamental research is
used to evaluate various aspects of corporate performance, with a particular
focus on consistency of results, long-term growth prospects and financial
strength. From time to time, for temporary defensive or emergency purposes, the
Fund may invest a portion of its assets in cash and cash equivalents when the
Adviser deems such a position advisable in light of economic or market
conditions. It is impossible to predict for how long such alternate strategies
may be utilized. The Fund also may invest in foreign securities, repurchase
agreements, and may engage in strategic transactions.
Quality. Large Company Growth Fund invests at least 65% of its total assets in
the equity securities of large U.S. growth companies, i.e., those with total
market capitalization of $1 billion or more. The Fund looks for companies with
above-average financial quality. When assessing financial quality, the Adviser
weighs four elements of business risk. These factors are the Adviser's
assessment of the strength of a company's balance sheet, the accounting
practices a company follows, the volatility of a company's earnings over time
and the vulnerability of earnings to changes in external factors, such as the
general economy, the competitive environment, governmental action and
technological change.
Investment Policies and Techniques Common to each Fund
Master/feeder structure. The Board of Trustees for each Fund has the discretion
to retain the current distribution arrangement for the Fund while investing in a
master fund in a master/feeder fund structure as described below.
A master/feeder fund structure is one in which a fund (a "feeder
fund"), instead of investing directly in a portfolio of securities, invests most
or all of its investment assets in a separate registered investment company (the
"master fund") with substantially the same investment objective and policies as
the feeder fund. Such a structure permits the pooling of assets of two or more
feeder funds, preserving separate identities or distribution channels at the
feeder fund level. Based on the premise that certain of the expenses of
operating an investment portfolio are relatively fixed, a larger investment
portfolio may eventually achieve a lower ratio of operating expenses to average
net assets. An existing investment company is able to convert to a feeder fund
by selling all of its investments, which involves brokerage and other
transaction costs and realization of a taxable gain or loss, or by contributing
its assets to the master fund and avoiding transaction costs and, if proper
procedures are followed, the realization of taxable gain or loss.
Foreign Securities. While the Funds generally emphasize investments in companies
domiciled in the U.S., they may invest in listed and unlisted foreign securities
of the same types as the domestic securities in which the Fund may invest when
the anticipated performance of foreign securities is believed by the Adviser to
offer more potential than domestic alternatives in keeping with the investment
objective of the Funds. However, 21st Century Growth Fund has no current
intention of investing more than 20% of its net assets in foreign securities.
Investors should recognize that investing in foreign securities
involves certain special considerations, including those set forth below, which
are not typically associated with investing in U.S. securities and which may
favorably or unfavorably affect the Fund's performance. As foreign companies are
not generally subject to uniform accounting and auditing and financial reporting
standards, practices and requirements comparable to those applicable to domestic
companies, there may be less publicly available information about a foreign
company than about a domestic company. Many foreign stock markets, while growing
in volume of trading activity, have substantially less volume than the New York
Stock Exchange, Inc. (the "Exchange"), and securities of some foreign companies
are less liquid and more volatile than securities of domestic companies.
Further, foreign markets have different clearance and settlement procedures and
in certain markets there have been times when settlements have been unable to
keep pace with the volume of securities transactions, making it difficult to
conduct such transactions. Delays in settlement could result in temporary
periods when assets of the Fund are uninvested and no return is earned thereon.
The inability of the Fund to make intended security purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of portfolio securities due to settlement problems either
could result in losses to the Fund due to subsequent declines in value of the
portfolio security or, if the Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser. Fixed commissions
on some foreign stock exchanges are generally higher than negotiated commissions
on U.S. exchanges, although the Fund will endeavor to achieve the most favorable
net results on its portfolio transactions. Further, the Fund may encounter
difficulties or be unable to pursue legal remedies and obtain
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judgments in foreign courts. There is generally less government supervision and
regulation of business and industry practices, stock exchanges, brokers and
listed companies than in the U.S. It may be more difficult for the Fund's agents
to keep currently informed about corporate actions such as stock dividends or
other matters which may affect the prices of portfolio securities.
Communications between the U.S. and foreign countries may be less reliable than
within the U.S., thus increasing the risk of delayed settlements of portfolio
transactions or loss of certificates for portfolio securities. Payment for
securities without delivery may be required in certain foreign markets. In
addition, with respect to certain foreign countries, there is the possibility of
expropriation or confiscatory taxation, political or social instability, or
diplomatic developments which could affect U.S. investments in those countries.
Investments in foreign securities may also entail certain risks, such as
possible currency blockages or transfer restrictions, and the difficulty of
enforcing rights in other countries. Moreover, individual foreign economies may
differ favorably or unfavorably from the U.S. economy in such respects as growth
of gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position.
These considerations generally are more of a concern in developing
countries. For example, the possibility of revolution and the dependence on
foreign economic assistance may be greater in these countries than in developed
countries. The management of the Fund seeks to mitigate the risks associated
with these considerations through diversification and active professional
management. Investments in companies domiciled in developing countries may be
subject to potentially greater risks than investments in developed countries.
Investments in foreign securities usually are denominated currencies of
foreign countries. Moreover, the Fund temporarily may hold funds in bank
deposits in foreign currencies during the completion of investment programs.
Accordingly, the value of the assets for the Fund as measured in U.S. dollars
may be affected favorably or unfavorably by changes in foreign currency exchange
rates and exchange control regulations, and the Fund may incur costs and
experience conversion difficulties and uncertainties in connection with
conversions between various currencies. Although the Fund values its assets
daily in terms of U.S. dollars, it does not intend to convert its holdings of
foreign currencies, if any, into U.S. dollars on a daily basis. It may do so
from time to time, and investors should be aware of the costs of currency
conversion. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference (the "spread")
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Fund at one rate,
while offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer. The Fund will conduct its foreign currency exchange
transactions, if any, either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market or through strategic
transactions involving currencies.
To the extent that the Fund invests in foreign securities, the Fund's
share price could reflect the movements of the stock markets in which it is
invested and the currencies in which the investments are denominated; the
strength or weakness of the U.S. dollar against foreign currencies could account
for part of the Fund's investment performance.
Common stocks. Under normal circumstances, each Fund invests primarily in common
stocks. Common stock is issued by companies to raise cash for business purposes
and represents a proportionate interest in the issuing companies. Therefore, a
Fund participates in the success or failure of any company in which it holds
stock. The market values of common stock can fluctuate significantly, reflecting
the business performance of the issuing company, investor perception and general
economic or financial market movements. Smaller companies are especially
sensitive to these factors and may even become valueless. Despite the risk of
price volatility, however, common stocks also offer the greatest potential for
gain on investment, compared to other classes of financial assets such as bonds
or cash equivalents.
Foreign Currencies. Because investments in foreign securities usually will
involve currencies of foreign countries, and because the Fund may hold foreign
currencies and forward contracts, futures contracts and options on futures
contracts on foreign currencies, the value of the assets of the Fund as measured
in U.S. dollars may be affected favorably or unfavorably by changes in foreign
currency exchange rates and exchange control regulations, and the Fund may incur
costs in connection with conversions between various currencies. Although the
Fund values its assets daily in terms of U.S. dollars, it does not intend to
convert its holdings of foreign currencies into U.S. dollars on a daily basis.
It will do so from time to time, and investors should be aware of the costs of
currency conversion. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference (the "spread")
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Fund at one rate,
while offering a lesser rate of exchange should that Fund desire to resell that
currency to the dealer. The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate prevailing in
the
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foreign currency exchange market, or through entering into forward or futures
contracts to purchase or sell foreign currencies.
Interfund Borrowing and Lending Program. Each Fund has received exemptive relief
from the SEC which permits the Fund to participate in an interfund lending
program among certain investment companies advised by the Adviser. The interfund
lending program allows the participating funds to borrow money from and loan
money to each other for temporary or emergency purposes. The program is subject
to a number of conditions designed to ensure fair and equitable treatment of all
participating funds, including the following: (1) no fund may borrow money
through the program unless it receives a more favorable interest rate than a
rate approximating the lowest interest rate at which bank loans would be
available to any of the participating funds under a loan agreement; and (2) no
fund may lend money through the program unless it receives a more favorable
return than that available from an investment in repurchase agreements and, to
the extent applicable, money market cash sweep arrangements. In addition, a fund
may participate in the program only if and to the extent that such participation
is consistent with the fund's investment objectives and policies (for instance,
money market funds would normally participate only as lenders and tax exempt
funds only as borrowers). Interfund loans and borrowings may extend overnight,
but could have a maximum duration of seven days. Loans may be called on one
day's notice. A fund may have to borrow from a bank at a higher interest rate if
an interfund loan is called or not renewed. Any delay in repayment to a lending
fund could result in a lost investment opportunity or additional costs. The
program is subject to the oversight and periodic review of the Boards of the
participating funds. To the extent a Fund is actually engaged in borrowing
through the interfund lending program, the Fund, as a matter of non-fundamental
policy, may not borrow for other than temporary or emergency purposes (and not
for leveraging), except that the Fund may engage in reverse repurchase
agreements and dollar rolls for any purpose.
Investment Company Securities. Each Fund may acquire securities of other
investment companies to the extent consistent with its investment objective and
subject to the limitations of the 1940 Act. Each Fund will indirectly bear its
proportionate share of any management fees and other expenses paid by such other
investment companies.
For example, a Fund may invest in a variety of investment companies which seek
to track the composition and performance of specific indexes or a specific
portion of an index. These index-based investments hold substantially all of
their assets in securities representing their specific index. Accordingly, the
main risk of investing in index-based investments is the same as investing in a
portfolio of equity securities comprising the index. The market prices of
index-based investments will fluctuate in accordance with both changes in the
market value of their underlying portfolio securities and due to supply and
demand for the instruments on the exchanges on which they are traded (which may
result in their trading at a discount or premium to their NAVs). Index-based
investments may not replicate exactly the performance of their specified index
because of transaction costs and because of the temporary unavailability of
certain component securities of the index.
Examples of index-based investments include:
SPDRs(R): SPDRs, an acronym for "Standard & Poor's Depositary Receipts," are
based on the S&P 500 Composite Stock Price Index. They are issued by the SPDR
Trust, a unit investment trust that holds shares of substantially all the
companies in the S&P 500 in substantially the same weighting and seeks to
closely track the price performance and dividend yield of the Index.
MidCap SPDRs(R): MidCap SPDRs are based on the S&P MidCap 400 Index. They are
issued by the MidCap SPDR Trust, a unit investment trust that holds a portfolio
of securities consisting of substantially all of the common stocks in the S&P
MidCap 400 Index in substantially the same weighting and seeks to closely track
the price performance and dividend yield of the Index.
Select Sector SPDRs(R): Select Sector SPDRs are based on a particular sector or
group of industries that are represented by a specified Select Sector Index
within the Standard & Poor's Composite Stock Price Index. They are issued by The
Select Sector SPDR Trust, an open-end management investment company with nine
portfolios that each seeks to closely track the price performance and dividend
yield of a particular Select Sector Index.
DIAMONDS(SM): DIAMONDS are based on the Dow Jones Industrial Average(SM). They
are issued by the DIAMONDS Trust, a unit investment trust that holds a portfolio
of all the component common stocks of the Dow Jones Industrial Average and seeks
to closely track the price performance and dividend yield of the Dow.
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Nasdaq-100 Shares: Nasdaq-100 Shares are based on the Nasdaq 100 Index. They are
issued by the Nasdaq-100 Trust, a unit investment trust that holds a portfolio
consisting of substantially all of the securities, in substantially the same
weighting, as the component stocks of the Nasdaq-100 Index and seeks to closely
track the price performance and dividend yield of the Index.
WEBs(SM): WEBs, an acronym for "World Equity Benchmark Shares," are based on 17
country-specific Morgan Stanley Capital International Indexes. They are issued
by the WEBs Index Fund, Inc., an open-end management investment company that
seeks to generally correspond to the price and yield performance of a specific
Morgan Stanley Capital International Index.
Convertible Securities. Each Fund may invest in convertible securities; that is,
bonds, notes, debentures, preferred stocks and other securities which are
convertible into common stocks. Investments in convertible securities may
provide income through interest and dividend payments and/or an opportunity for
capital appreciation by virtue of their conversion or exchange features.
The convertible securities in which a Fund may invest include
fixed-income or zero coupon debt securities which may be converted or exchanged
at a stated or determinable exchange ratio into underlying shares of common
stock. The exchange ratio for any particular convertible security may be
adjusted from time to time due to stock splits, dividends, spin-offs, other
corporate distributions or scheduled changes in the exchange ratio. Convertible
debt securities and convertible preferred stocks, until converted, have general
characteristics similar to both debt and equity securities. Although to a lesser
extent than with debt securities generally, the market value of convertible
securities tends to decline as interest rates increase and, conversely, tends to
increase as interest rates decline. In addition, because of the conversion or
exchange feature, the market value of convertible securities typically changes
as the market value of the underlying common stocks changes, and, therefore,
also tends to follow movements in the general market for equity securities. A
unique feature of convertible securities is that as the market price of the
underlying common stock declines, convertible securities tend to trade
increasingly on a yield basis, and so may not experience market value declines
to the same extent as the underlying common stock. When the market price of the
underlying common stock increases, the prices of the convertible securities tend
to rise as a reflection of the value of the underlying common stock, although
typically not as much as the underlying common stock. While no securities
investments are without risk, investments in convertible securities generally
entail less risk than investments in common stock of the same issuer.
As debt securities, convertible securities are investments which
provide for a stream of income (or in the case of zero coupon securities,
accretion of income) with generally higher yields than common stocks. Of course,
like all debt securities, there can be no assurance of income or principal
payments because the issuers of the convertible securities may default on their
obligations. Convertible securities generally offer lower yields than
nonconvertible securities of similar quality because of their conversion or
exchange features.
Convertible securities are generally subordinated to other similar but
non-convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock, of the
same issuer. However, because of the subordination feature, convertible bonds
and convertible preferred stock typically have lower ratings than similar
nonconvertible securities.
Convertible securities may be issued as fixed income obligations that
pay current income or as zero coupon notes and bonds, including Liquid Yield
Option Notes (LYONs). Zero coupon securities pay no cash income and are sold at
substantial discounts from their value at maturity. When held to maturity, their
entire income, which consists of accretion of discount, comes from the
difference between the issue price and their value at maturity. Zero coupon
convertible securities offer the opportunity for capital appreciation as
increases (or decreases) in market value of such securities closely follows the
movements in the market value of the underlying common stock. Zero coupon
convertible securities are generally expected to be less volatile than the
underlying common stocks as they are usually issued with short to medium length
maturities (15 years or less) and are issued with options and/or redemption
features exercisable by the holder of the obligation entitling the holder to
redeem the obligation and receive a defined cash payment.
Repurchase Agreements. Each Fund may enter into repurchase agreements with
member banks of the Federal Reserve System, any foreign bank or with any
domestic or foreign broker-dealer which is recognized as a reporting government
securities dealer if the creditworthiness of the bank or broker-dealer has been
determined by the Adviser to be at least as
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high as that of other obligations the Fund may purchase. Some repurchase
commitment transactions may not provide the Fund with collateral
marked-to-market during the term of the commitment.
A repurchase agreement provides a means for the Fund to earn income on
funds for periods as short as overnight. It is an arrangement under which the
purchaser (i.e., the Fund) acquires a security ("Obligation") and the seller
agrees, at the time of sale, to repurchase the Obligation at a specified time
and price. Securities subject to a repurchase agreement are held in a segregated
account and the value of such securities kept at least equal to the repurchase
price on a daily basis. The repurchase price may be higher than the purchase
price, the difference being income to the Fund, or the purchase and repurchase
prices may be the same, with interest at a stated rate due to the Fund together
with the repurchase price upon repurchase. In either case, the income to the
Fund is unrelated to the interest rate on the Obligation itself. Obligations
will be held by the Custodian or in the Federal Reserve Book Entry system. Some
repurchase commitment transactions may not provide the Fund with collateral
marked-to-market during the term of the commitment.
For purposes of the 1940 Act a repurchase agreement is deemed to be a
loan from the Fund to the seller of the Obligation subject to the repurchase
agreement and is therefore subject to the Fund's investment restriction
applicable to loans. It is not clear whether a court would consider the
Obligation purchased by the Fund subject to a repurchase agreement as being
owned by the Fund or as being collateral for a loan by the Fund to the seller.
In the event of the commencement of bankruptcy or insolvency proceedings with
respect to the seller of the Obligation before repurchase of the Obligation
under a repurchase agreement, the Fund may encounter delay and incur costs
before being able to sell the security. Delays may involve loss of interest or
decline in price of the Obligation. If the court characterizes the transaction
as a loan and the Fund has not perfected a security interest in the Obligation,
the Fund may be required to return the Obligation to the seller's estate and be
treated as an unsecured creditor of the seller. As an unsecured creditor, the
Fund would be at risk of losing some or all of the principal and income involved
in the transaction. As with any unsecured debt instrument purchased for the
Fund, the Adviser seeks to minimize the risk of loss through repurchase
agreements by analyzing the creditworthiness of the obligor, in this case the
seller of the Obligation. Apart from the risk of bankruptcy or insolvency
proceedings, there is also the risk that the seller may fail to repurchase the
Obligation, in which case the Fund may incur a loss if the proceeds to the Fund
of the sale to a third party are less than the repurchase price. However, if the
market value of the Obligation subject to the repurchase agreement becomes less
than the repurchase price (including interest), the Fund will direct the seller
of the Obligation to deliver additional securities so that the market value of
all securities subject to the repurchase agreement will equal or exceed the
repurchase price. It is possible that the Fund will be unsuccessful in seeking
to enforce the seller's contractual obligation to deliver additional securities.
A repurchase agreement with foreign banks may be available with respect to
government securities of the particular foreign jurisdiction, and such
repurchase agreements involve risks similar to repurchase agreements with U.S.
entities.
Illiquid Securities. Each Fund may purchase securities other than in the open
market. While such purchases may often offer attractive opportunities for
investment not otherwise available on the open market, the securities so
purchased are often "restricted securities" or "not readily marketable," i.e.,
securities which cannot be sold to the public without registration under the
Securities Act of 1933, as amended (the "1933 Act"), or the availability of an
exemption from registration (such as Rule 144A) or because they are subject to
other legal or contractual delays in or restrictions on resale. The absence of a
trading market can make it difficult to ascertain a market value for these
investments. This investment practice, therefore, could have the effect of
increasing the level of illiquidity of a Fund. It is a Fund's policy that
illiquid securities (including repurchase agreements of more than seven days
duration, certain restricted securities, and other securities which are not
readily marketable) may not constitute, at the time of purchase, more than 15%
of the value of the Fund's net assets. The Trust's Board of Trustees has
approved guidelines for use by the Adviser in determining whether a security is
illiquid.
Generally speaking, restricted securities may be sold (i) only to
qualified institutional buyers; (ii) in a privately negotiated transaction to a
limited number of purchasers; (iii) in limited quantities after they have been
held for a specified period of time and other conditions are met pursuant to an
exemption from registration; or (iv) in a public offering for which a
registration statement is in effect under the 1933 Act. Issuers of restricted
securities may not be subject to the disclosure and other investor protection
requirements that would be applicable if their securities were publicly traded.
If adverse market conditions were to develop during the period between a Fund's
decision to sell a restricted or illiquid security and the point at which the
Fund is permitted or able to sell such security, the Fund might obtain a price
less favorable than the price that prevailed when it decided to sell. Where a
registration statement is required for the resale of restricted securities, a
Fund may be required to bear all or part of the registration expenses. A Fund
may be deemed to be an "underwriter" for purposes of the 1933 Act when selling
restricted securities to the public
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and, in such event, the Fund may be liable to purchasers of such securities if
the registration statement prepared by the issuer is materially inaccurate or
misleading.
Since it is not possible to predict with assurance that the market for
securities eligible for resale under Rule 144A will continue to be liquid, the
Adviser will monitor such restricted securities subject to the supervision of
the Board of Trustees. Among the factors the Adviser may consider in reaching
liquidity decisions relating to Rule 144A securities are: (1) the frequency of
trades and quotes for the security; (2) the number of dealers wishing to
purchase or sell the security and the number of other potential purchasers; (3)
dealer undertakings to make a market in the security; and (4) the nature of the
security and the nature of the market for the security (i.e., the time needed to
dispose of the security, the method of soliciting offers, and the mechanics of
the transfer).
Warrants. Each Fund may invest in warrants up to 5% of the value of its total
assets. The holder of a warrant has the right, until the warrant expires, to
purchase a given number of shares of a particular issuer at a specified price.
Such investments can provide a greater potential for profit or loss than an
equivalent investment in the underlying security. Prices of warrants do not
necessarily move, however, in tandem with the prices of the underlying
securities and are, therefore, considered speculative investments. Warrants pay
no dividends and confer no rights other than a purchase option. Thus, if a
warrant held by the Fund were not exercised by the date of its expiration, the
Fund would lose the entire purchase price of the warrant.
Reverse Repurchase Agreements. Each Fund may enter into "reverse repurchase
agreements," which are repurchase agreements in which the Fund, as the seller of
the securities, agrees to repurchase them at an agreed time and price. The Fund
maintains a segregated account in connection with outstanding reverse repurchase
agreements. The Fund will enter into reverse repurchase agreements only when the
Adviser believes that the interest income to be earned from the investment of
the proceeds of the transaction will be greater than the interest expense of the
transaction.
Strategic Transactions and Derivatives. Each Fund may, but is not required to,
utilize various other investment strategies as described below for a variety of
purposes, such as hedging various market risks, managing the effective maturity
or duration of fixed-income securities in each Fund's portfolio, or enhancing
potential gain. These strategies may be executed through the use of derivative
contracts.
In the course of pursuing these investment strategies, each Fund may
purchase and sell exchange-listed and over-the-counter put and call options on
securities, equity and fixed-income indices and other instruments, purchase and
sell futures contracts and options thereon, enter into various transactions such
as swaps, caps, floors, collars, currency forward contracts, currency futures
contracts, currency swaps or options on currencies, or currency futures and
various other currency transactions (collectively, all the above are called
"Strategic Transactions"). In addition, strategic transactions may also include
new techniques, instruments or strategies that are permitted as regulatory
changes occur. Strategic Transactions may be used without limit (subject to
certain limitations imposed by the 1940 Act) to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for each Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect each Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of fixed-income
securities in each Fund's portfolio, or to establish a position in the
derivatives markets as a substitute for purchasing or selling particular
securities. Some Strategic Transactions may also be used to enhance potential
gain although no more than 5% of each Fund's assets will be committed to
Strategic Transactions entered into for non-hedging purposes. Any or all of
these investment techniques may be used at any time and in any combination, and
there is no particular strategy that dictates the use of one technique rather
than another, as use of any Strategic Transaction is a function of numerous
variables including market conditions. The ability of each Fund to utilize these
Strategic Transactions successfully will depend on the Adviser's ability to
predict pertinent market movements, which cannot be assured. Each Fund will
comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. Strategic Transactions will not be used
to alter fundamental investment purposes and characteristics of each Fund, and
each Fund will segregate assets (or as provided by applicable regulations, enter
into certain offsetting positions) to cover its obligations under options,
futures and swaps to limit leveraging of each Fund.
Strategic Transactions, including derivative contracts, have risks
associated with them including possible default by the other party to the
transaction, illiquidity and, to the extent the Adviser's view as to certain
market movements is incorrect, the risk that the use of such Strategic
Transactions could result in losses greater than if they had not been used. Use
of put and call options may result in losses to each Fund, force the sale or
purchase of portfolio securities at inopportune times or for prices higher than
(in the case of put options) or lower than (in the case of call options) current
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market values, limit the amount of appreciation each Fund can realize on its
investments or cause each Fund to hold a security it might otherwise sell. The
use of currency transactions can result in each Fund incurring losses as a
result of a number of factors including the imposition of exchange controls,
suspension of settlements, or the inability to deliver or receive a specified
currency. The use of options and futures transactions entails certain other
risks. In particular, the variable degree of correlation between price movements
of futures contracts and price movements in the related portfolio position of
each Fund creates the possibility that losses on the hedging instrument may be
greater than gains in the value of each Fund's position. In addition, futures
and options markets may not be liquid in all circumstances and certain
over-the-counter options may have no markets. As a result, in certain markets,
each Fund might not be able to close out a transaction without incurring
substantial losses, if at all. Although the use of futures and options
transactions for hedging should tend to minimize the risk of loss due to a
decline in the value of the hedged position, at the same time they tend to limit
any potential gain which might result from an increase in value of such
position. Finally, the daily variation margin requirements for futures contracts
would create a greater ongoing potential financial risk than would purchases of
options, where the exposure is limited to the cost of the initial premium.
Losses resulting from the use of Strategic Transactions would reduce net asset
value, and possibly income, and such losses can be greater than if the Strategic
Transactions had not been utilized.
General Characteristics of Options. Put options and call options typically have
similar structural characteristics and operational mechanics regardless of the
underlying instrument on which they are purchased or sold. Thus, the following
general discussion relates to each of the particular types of options discussed
in greater detail below. In addition, many Strategic Transactions involving
options require segregation of Fund assets in special accounts, as described
below under "Use of Segregated and Other Special Accounts."
A put option gives the purchaser of the option, upon payment of a
premium, the right to sell, and the writer the obligation to buy, the underlying
security, commodity, index, currency or other instrument at the exercise price.
For instance, each Fund's purchase of a put option on a security might be
designed to protect its holdings in the underlying instrument (or, in some
cases, a similar instrument) against a substantial decline in the market value
by giving each Fund the right to sell such instrument at the option exercise
price. A call option, upon payment of a premium, gives the purchaser of the
option the right to buy, and the seller the obligation to sell, the underlying
instrument at the exercise price. Each Fund's purchase of a call option on a
security, financial future, index, currency or other instrument might be
intended to protect each Fund against an increase in the price of the underlying
instrument that it intends to purchase in the future by fixing the price at
which it may purchase such instrument. An American style put or call option may
be exercised at any time during the option period while a European style put or
call option may be exercised only upon expiration or during a fixed period prior
thereto. Each Fund is authorized to purchase and sell exchange listed options
and over-the-counter options ("OTC options"). Exchange listed options are issued
by a regulated intermediary such as the Options Clearing Corporation ("OCC"),
which guarantees the performance of the obligations of the parties to such
options. The discussion below uses the OCC as an example, but is also applicable
to other financial intermediaries.
With certain exceptions, OCC issued and exchange listed options
generally settle by physical delivery of the underlying security or currency,
although in the future cash settlement may become available. Index options and
Eurodollar instruments are cash settled for the net amount, if any, by which the
option is "in-the-money" (i.e., where the value of the underlying instrument
exceeds, in the case of a call option, or is less than, in the case of a put
option, the exercise price of the option) at the time the option is exercised.
Frequently, rather than taking or making delivery of the underlying instrument
through the process of exercising the option, listed options are closed by
entering into offsetting purchase or sale transactions that do not result in
ownership of the new option.
Each Fund's ability to close out its position as a purchaser or seller
of an OCC or exchange listed put or call option is dependent, in part, upon the
liquidity of the option market. Among the possible reasons for the absence of a
liquid option market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange; (iii)
trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities including
reaching daily price limits; (iv) interruption of the normal operations of the
OCC or an exchange; (v) inadequacy of the facilities of an exchange or OCC to
handle current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
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instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. Each
Fund will only sell OTC options (other than OTC currency options) that are
subject to a buy-back provision permitting each Fund to require the Counterparty
to sell the option back to each Fund at a formula price within seven days. Each
Fund expects generally to enter into OTC options that have cash settlement
provisions, although it is not required to do so.
Unless the parties provide for it, there is no central clearing or
guaranty function in an OTC option. As a result, if the Counterparty fails to
make or take delivery of the security, currency or other instrument underlying
an OTC option it has entered into with each Fund or fails to make a cash
settlement payment due in accordance with the terms of that option, each Fund
will lose any premium it paid for the option as well as any anticipated benefit
of the transaction. Accordingly, the Adviser must assess the creditworthiness of
each such Counterparty or any guarantor or credit enhancement of the
Counterparty's credit to determine the likelihood that the terms of the OTC
option will be satisfied. Each Fund will engage in OTC option transactions only
with U.S. government securities dealers recognized by the Federal Reserve Bank
of New York as "primary dealers" or broker/dealers, domestic or foreign banks or
other financial institutions which have received (or the guarantors of the
obligation of which have received) a short-term credit rating of A-1 from S&P or
P-1 from Moody's or an equivalent rating from any nationally recognized
statistical rating organization ("NRSRO") or, in the case of OTC currency
transactions, are determined to be of equivalent credit quality by the Adviser.
The staff of the SEC currently takes the position that OTC options purchased by
each Fund, and portfolio securities "covering" the amount of each Fund's
obligation pursuant to an OTC option sold by it (the cost of the sell-back plus
the in-the-money amount, if any) are illiquid, and are subject to each Fund's
limitation on investing no more than 15% of its net assets in illiquid
securities.
If each Fund sells a call option, the premium that it receives may
serve as a partial hedge, to the extent of the option premium, against a
decrease in the value of the underlying securities or instruments in its
portfolio or will increase each Fund's income. The sale of put options can also
provide income.
Each Fund may purchase and sell call options on securities including
U.S. Treasury and agency securities, mortgage-backed securities, foreign
sovereign debt, corporate debt securities, equity securities (including
convertible securities) and Eurodollar instruments that are traded on U.S. and
foreign securities exchanges and in the over-the-counter markets, and on
securities indices, currencies and futures contracts. . Each Fund will not
purchase call options unless the aggregate premiums paid on all options held by
each Fund at any time do not exceed 20% of its total assets. All calls sold by
each Fund must be "covered" (i.e., each Fund must own the securities or futures
contract subject to the call) or must meet the asset segregation requirements
described below as long as the call is outstanding. Even though each Fund will
receive the option premium to help protect it against loss, a call sold by each
Fund exposes each Fund during the term of the option to possible loss of
opportunity to realize appreciation in the market price of the underlying
security or instrument and may require each Fund to hold a security or
instrument which it might otherwise have sold.
Each Fund may purchase and sell put options on securities including
U.S. Treasury and agency securities, mortgage-backed securities, foreign
sovereign debt, corporate debt securities, equity securities (including
convertible securities) and Eurodollar instruments (whether or not it holds the
above securities in its portfolio), and on securities indices, currencies and
futures contracts other than futures on individual corporate debt and individual
equity securities. Each Fund will not purchase put options unless the aggregate
premiums paid on all options held by each Fund at any time do not exceed 20% of
its total assets. Each Fund will not sell put options if, as a result, more than
50% of each Fund's assets would be required to be segregated to cover its
potential obligations under such put options other than those with respect to
futures and options thereon. In selling put options, there is a risk that each
Fund may be required to buy the underlying security at a disadvantageous price
above the market price.
General Characteristics of Futures. Each Fund may enter into futures contracts
or purchase or sell put and call options on such futures as a hedge against
anticipated interest rate, currency or equity market changes, and for duration
management, risk management and return enhancement purposes. Futures are
generally bought and sold on the commodities exchanges where they are listed
with payment of initial and variation margin as described below. The sale
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of a futures contract creates a firm obligation by each Fund, as seller, to
deliver to the buyer the specific type of financial instrument called for in the
contract at a specific future time for a specified price (or, with respect to
index futures and Eurodollar instruments, the net cash amount). Options on
futures contracts are similar to options on securities except that an option on
a futures contract gives the purchaser the right in return for the premium paid
to assume a position in a futures contract and obligates the seller to deliver
such position.
Each Fund's use of futures and options thereon will in all cases be
consistent with applicable regulatory requirements and in particular the rules
and regulations of the Commodity Futures Trading Commission and will be entered
into for bona fide hedging, risk management (including duration management) or
other portfolio and return enhancement management purposes. Typically,
maintaining a futures contract or selling an option thereon requires each Fund
to deposit with a financial intermediary as security for its obligations an
amount of cash or other specified assets (initial margin) which initially is
typically 1% to 10% of the face amount of the contract (but may be higher in
some circumstances). Additional cash or assets (variation margin) may be
required to be deposited thereafter on a daily basis as the mark to market value
of the contract fluctuates. The purchase of an option on financial futures
involves payment of a premium for the option without any further obligation on
the part of each Fund. If each Fund exercises an option on a futures contract it
will be obligated to post initial margin (and potential subsequent variation
margin) for the resulting futures position just as it would for any position.
Futures contracts and options thereon are generally settled by entering into an
offsetting transaction but there can be no assurance that the position can be
offset prior to settlement at an advantageous price, nor that delivery will
occur.
Each Fund will not enter into a futures contract or related option
(except for closing transactions) if, immediately thereafter, the sum of the
amount of its initial margin and premiums on open futures contracts and options
thereon would exceed 5% of each Fund's total assets (taken at current value);
however, in the case of an option that is in-the-money at the time of the
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation. The segregation requirements with respect to futures contracts and
options thereon are described below.
Options on Securities Indices and Other Financial Indices. Each Fund also may
purchase and sell call and put options on securities indices and other financial
indices and in so doing can achieve many of the same objectives it would achieve
through the sale or purchase of options on individual securities or other
instruments. Options on securities indices and other financial indices are
similar to options on a security or other instrument except that, rather than
settling by physical delivery of the underlying instrument, they settle by cash
settlement, i.e., an option on an index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the index
upon which the option is based exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option (except if, in the case
of an OTC option, physical delivery is specified). This amount of cash is equal
to the excess of the closing price of the index over the exercise price of the
option, which also may be multiplied by a formula value. The seller of the
option is obligated, in return for the premium received, to make delivery of
this amount. The gain or loss on an option on an index depends on price
movements in the instruments making up the market, market segment, industry or
other composite on which the underlying index is based, rather than price
movements in individual securities, as is the case with respect to options on
securities.
Currency Transactions. Each Fund may engage in currency transactions with
Counterparties primarily in order to hedge, or manage the risk of the value of
portfolio holdings denominated in particular currencies against fluctuations in
relative value. Currency transactions include forward currency contracts,
exchange listed currency futures, exchange listed and OTC options on currencies,
and currency swaps. A forward currency contract involves a privately negotiated
obligation to purchase or sell (with delivery generally required) a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. A currency swap is an agreement to exchange cash flows based on the
notional difference among two or more currencies and operates similarly to an
interest rate swap, which is described below. Each Fund may enter into currency
transactions with Counterparties which have received (or the guarantors of the
obligations which have received) a credit rating of A-1 or P-1 by S&P or
Moody's, respectively, or that have an equivalent rating from a NRSRO or (except
for OTC currency options) are determined to be of equivalent credit quality by
the Adviser.
Each Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps generally
will be limited to hedging involving either specific transactions or portfolio
positions except as described below. Transaction hedging is entering into a
currency transaction with respect to specific assets or liabilities of each
Fund, which will generally arise in connection with the purchase or sale of its
portfolio
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securities or the receipt of income therefrom. Position hedging is entering into
a currency transaction with respect to portfolio security positions denominated
or generally quoted in that currency.
Each Fund generally will not enter into a transaction to hedge currency
exposure to an extent greater, after netting all transactions intended wholly or
partially to offset other transactions, than the aggregate market value (at the
time of entering into the transaction) of the securities held in its portfolio
that are denominated or generally quoted in or currently convertible into such
currency, other than with respect to proxy hedging or cross hedging as described
below.
Each Fund may also cross-hedge currencies by entering into transactions
to purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which each Fund has or in which each Fund
expects to have portfolio exposure.
To reduce the effect of currency fluctuations on the value of existing
or anticipated holdings of portfolio securities, each Fund may also engage in
proxy hedging. Proxy hedging is often used when the currency to which each
Fund's portfolio is exposed is difficult to hedge or to hedge against the
dollar. Proxy hedging entails entering into a commitment or option to sell a
currency whose changes in value are generally considered to be correlated to a
currency or currencies in which some or all of each Fund's portfolio securities
are or are expected to be denominated, in exchange for U.S. dollars. The amount
of the commitment or option would not exceed the value of each Fund's securities
denominated in correlated currencies. For example, if the Adviser considers that
the Austrian schilling is correlated to the German deutschemark (the "D-mark"),
each Fund holds securities denominated in schillings and the Adviser believes
that the value of schillings will decline against the U.S. dollar, the Adviser
may enter into a commitment or option to sell D-marks and buy dollars. Currency
hedging involves some of the same risks and considerations as other transactions
with similar instruments. Currency transactions can result in losses to each
Fund if the currency being hedged fluctuates in value to a degree or in a
direction that is not anticipated. Further, there is the risk that the perceived
correlation between various currencies may not be present or may not be present
during the particular time that each Fund is engaging in proxy hedging. If each
Fund enters into a currency hedging transaction, each Fund will comply with the
asset segregation requirements described below.
Risks of Currency Transactions. Currency transactions are subject to risks
different from those of other portfolio transactions. Because currency control
is of great importance to the issuing governments and influences economic
planning and policy, purchases and sales of currency and related instruments can
be negatively affected by government exchange controls, blockages, and
manipulations or exchange restrictions imposed by governments. These can result
in losses to each Fund if it is unable to deliver or receive currency or funds
in settlement of obligations and could also cause hedges it has entered into to
be rendered useless, resulting in full currency exposure as well as incurring
transaction costs. Buyers and sellers of currency futures are subject to the
same risks that apply to the use of futures generally. Further, settlement of a
currency futures contract for the purchase of most currencies must occur at a
bank based in the issuing nation. Trading options on currency futures is
relatively new, and the ability to establish and close out positions on such
options is subject to the maintenance of a liquid market which may not always be
available. Currency exchange rates may fluctuate based on factors extrinsic to
that country's economy.
Combined Transactions. Each Fund may enter into multiple transactions, including
multiple options transactions, multiple futures transactions, multiple currency
transactions (including forward currency contracts) and multiple interest rate
transactions and any combination of futures, options, currency and interest rate
transactions ("component" transactions), instead of a single Strategic
Transaction, as part of a single or combined strategy when, in the opinion of
the Adviser, it is in the best interests of each Fund to do so. A combined
transaction will usually contain elements of risk that are present in each of
its component transactions. Although combined transactions are normally entered
into based on the Adviser's judgment that the combined strategies will reduce
risk or otherwise more effectively achieve the desired portfolio management
goal, it is possible that the combination will instead increase such risks or
hinder achievement of the portfolio management objective.
Swaps, Caps, Floors and Collars. Among the Strategic Transactions into which
each Fund may enter are interest rate, currency, index and other swaps and the
purchase or sale of related caps, floors and collars. Each Fund expects to enter
into these transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities each Fund anticipates purchasing at a later
date. Each Fund will not sell interest rate caps or floors where it does not own
securities or other instruments providing the income stream each Fund may be
obligated to pay. Interest rate swaps involve the exchange by each Fund with
another party of their respective commitments to pay or receive
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interest, e.g., an exchange of floating rate payments for fixed rate payments
with respect to a notional amount of principal. A currency swap is an agreement
to exchange cash flows on a notional amount of two or more currencies based on
the relative value differential among them and an index swap is an agreement to
swap cash flows on a notional amount based on changes in the values of the
reference indices. The purchase of a cap entitles the purchaser to receive
payments on a notional principal amount from the party selling such cap to the
extent that a specified index exceeds a predetermined interest rate or amount.
The purchase of a floor entitles the purchaser to receive payments on a notional
principal amount from the party selling such floor to the extent that a
specified index falls below a predetermined interest rate or amount. A collar is
a combination of a cap and a floor that preserves a certain return within a
predetermined range of interest rates or values.
Each Fund will usually enter into swaps on a net basis, i.e., the two payment
streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with each Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as each Fund will
segregate assets (or enter into offsetting positions) to cover its obligations
under swaps, the Adviser and each Fund believe such obligations do not
constitute senior securities under the 1940 Act and, accordingly, will not treat
them as being subject to its borrowing restrictions. Each Fund will not enter
into any swap, cap, floor or collar transaction unless, at the time of entering
into such transaction, the unsecured long-term debt of the Counterparty,
combined with any credit enhancements, is rated at least A by S&P or Moody's or
has an equivalent rating from a NRSRO or is determined to be of equivalent
credit quality by the Adviser. If there is a default by the Counterparty, each
Fund may have contractual remedies pursuant to the agreements related to the
transaction. The swap market has grown substantially in recent years with a
large number of banks and investment banking firms acting both as principals and
as agents utilizing standardized swap documentation. As a result, the swap
market has become relatively liquid. Caps, floors and collars are more recent
innovations for which standardized documentation has not yet been fully
developed and, accordingly, they are less liquid than swaps.
Eurodollar Instruments. Each Fund may make investments in Eurodollar
instruments. Eurodollar instruments are U.S. dollar-denominated futures
contracts or options thereon which are linked to the London Interbank Offered
Rate ("LIBOR"), although foreign currency-denominated instruments are available
from time to time. Eurodollar futures contracts enable purchasers to obtain a
fixed rate for the lending of funds and sellers to obtain a fixed rate for
borrowings. Each Fund might use Eurodollar futures contracts and options thereon
to hedge against changes in LIBOR, to which many interest rate swaps and fixed
income instruments are linked.
Risks of Strategic Transactions Outside the U.S. When conducted outside the
U.S., Strategic Transactions may not be regulated as rigorously as in the U.S.,
may not involve a clearing mechanism and related guarantees, and are subject to
the risk of governmental actions affecting trading in, or the prices of, foreign
securities, currencies and other instruments. The value of such positions also
could be adversely affected by: (i) other complex foreign political, legal and
economic factors, (ii) lesser availability than in the U.S. of data on which to
make trading decisions, (iii) delays in each Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the U.S., (iv)
the imposition of different exercise and settlement terms and procedures and
margin requirements than in the U.S., and (v) lower trading volume and
liquidity.
Use of Segregated and Other Special Accounts. Many Strategic Transactions, in
addition to other requirements, require that each Fund segregate cash or liquid
assets with its custodian to the extent Fund obligations are not otherwise
"covered" through ownership of the underlying security, financial instrument or
currency. In general, either the full amount of any obligation by each Fund to
pay or deliver securities or assets must be covered at all times by the
securities, instruments or currency required to be delivered, or, subject to any
regulatory restrictions, an amount of cash or liquid assets at least equal to
the current amount of the obligation must be segregated with the custodian. The
segregated assets cannot be sold or transferred unless equivalent assets are
substituted in their place or it is no longer necessary to segregate them. For
example, a call option written by each Fund will require each Fund to hold the
securities subject to the call (or securities convertible into the needed
securities without additional consideration) or to segregate cash or liquid
assets sufficient to purchase and deliver the securities if the call is
exercised. A call option sold by each Fund on an index will require each Fund to
own portfolio securities which correlate with the index or to segregate cash or
liquid assets equal to the excess of the index value over the exercise price on
a current basis. A put option written by each Fund requires the Fund to
segregate cash or liquid assets equal to the exercise price.
Except when the Fund enters into a forward contract for the purchase or
sale of a security denominated in a particular currency, which requires no
segregation, a currency contract which obligates the Fund to buy or sell
currency will
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generally require the Fund to hold an amount of that currency or liquid assets
denominated in that currency equal to the Fund's obligations or to segregate
cash or liquid assets equal to the amount of the Fund's obligation.
OTC options entered into by the Fund, including those on securities,
currency, financial instruments or indices and OCC issued and exchange listed
index options, will generally provide for cash settlement. As a result, when the
Fund sells these instruments it will only segregate an amount of cash or liquid
assets equal to its accrued net obligations, as there is no requirement for
payment or delivery of amounts in excess of the net amount. These amounts will
equal 100% of the exercise price in the case of a non cash-settled put, the same
as an OCC guaranteed listed option sold by the Fund, or the in-the-money amount
plus any sell-back formula amount in the case of a cash-settled put or call. In
addition, when the Fund sells a call option on an index at a time when the
in-the-money amount exceeds the exercise price, the Fund will segregate, until
the option expires or is closed out, cash or cash equivalents equal in value to
such excess. OCC issued and exchange listed options sold by the Fund other than
those above generally settle with physical delivery, or with an election of
either physical delivery or cash settlement and the Fund will segregate an
amount of cash or liquid assets equal to the full value of the option. OTC
options settling with physical delivery, or with an election of either physical
delivery or cash settlement will be treated the same as other options settling
with physical delivery.
In the case of a futures contract or an option thereon, the Fund must
deposit initial margin and possible daily variation margin in addition to
segregating cash or liquid assets sufficient to meet its obligation to purchase
or provide securities or currencies, or to pay the amount owed at the expiration
of an index-based futures contract. Such liquid assets may consist of cash, cash
equivalents, liquid debt or equity securities or other acceptable assets.
With respect to swaps, the Fund will accrue the net amount of the
excess, if any, of its obligations over its entitlements with respect to each
swap on a daily basis and will segregate an amount of cash or liquid assets
having a value equal to the accrued excess. Caps, floors and collars require
segregation of assets with a value equal to the Fund's net obligation, if any.
Strategic Transactions may be covered by other means when consistent
with applicable regulatory policies. The Fund may also enter into offsetting
transactions so that its combined position, coupled with any segregated assets,
equals its net outstanding obligation in related options and Strategic
Transactions. For example, the Fund could purchase a put option if the strike
price of that option is the same or higher than the strike price of a put option
sold by the Fund. Moreover, instead of segregating cash or liquid assets if the
Fund held a futures or forward contract, it could purchase a put option on the
same futures or forward contract with a strike price as high or higher than the
price of the contract held. Other Strategic Transactions may also be offset in
combinations. If the offsetting transaction terminates at the time of or after
the primary transaction no segregation is required, but if it terminates prior
to such time, cash or liquid assets equal to any remaining obligation would need
to be segregated.
Investment Restrictions
Unless specified to the contrary, the following fundamental
restrictions may not be changed without the approval of a majority of the
outstanding voting securities of each Fund involved which, under the 1940 Act
and the rules thereunder and as used in this Statement of Additional
Information, means the lesser of (1) 67% or more of the voting securities
present at such meeting, if the holders of more than 50% of the outstanding
voting securities of a Fund are present or represented by proxy, or (2) more
than 50% of the outstanding voting securities of a Fund.
Any investment restrictions herein which involve a maximum percentage
of securities or assets shall not be considered to be violated unless an excess
over the percentage occurs immediately after and is caused by an acquisition or
encumbrance of securities or assets of, or borrowings by, a Fund.
Each Fund has elected to be classified as a diversified series of an
open-end investment company. In addition, as a matter of fundamental policy, the
Fund will not:
(1) borrow money, except as permitted under the 1940 Act, as
amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time;
(2) issue senior securities, except as permitted under the 1940
Act, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time;
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(3) concentrate its investments in a particular industry, as that
term is used in the 1940 Act, as amended, and as interpreted
or modified by regulatory authority having jurisdiction, from
time to time;
(4) engage in the business of underwriting securities issued by
others, except to the extent that the Fund may be deemed to be
an underwriter in connection with the disposition of portfolio
securities;
(5) purchase or sell real estate, which term does not include
securities of companies which deal in real estate or mortgages
or investments secured by real estate or interests therein,
except that the Fund reserves freedom of action to hold and to
sell real estate acquired as a result of the Fund's ownership
of securities;
(6) purchase physical commodities or contracts related to physical
commodities; or
(7) make loans except as permitted under the 1940 Act, as amended,
and as interpreted or modified by regulatory authority having
jurisdiction, from time to time.
Nonfundamental policies may be changed by the Trustees of the Trusts
and without shareholder approval. As a matter of nonfundamental policy, each
Fund does not currently intend to:
(1) borrow money in an amount greater than 5% of its total assets,
except (i) for temporary or emergency purposes and (ii) by
engaging in reverse repurchase agreements, dollar rolls, or
other investments or transactions described in the Fund's
registration statement which may be deemed to be borrowings;
(2) enter into either of reverse repurchase agreements or dollar
rolls in an amount greater than 5% of its total assets;
(3) purchase securities on margin or make short sales, except (i)
short sales against the box, (ii) in connection with arbitrage
transactions, (iii) for margin deposits in connection with
futures contracts, options or other permitted investments,
(iv) that transactions in futures contracts and options shall
not be deemed to constitute selling securities short, and (v)
that the Fund may obtain such short-term credits as may be
necessary for the clearance of securities transactions;
(4) purchase options, unless the aggregate premiums paid on all
such options held by the Fund at any time do not exceed 20% of
its total assets; or sell put options, if as a result, the
aggregate value of the obligations underlying such put options
would exceed 50% of its total assets;
(5) enter into futures contracts or purchase options thereon
unless immediately after the purchase, the value of the
aggregate initial margin with respect to such futures
contracts entered into on behalf of the Fund and the premiums
paid for such options on futures contracts does not exceed 5%
of the fair market value of the Fund's total assets; provided
that in the case of an option that is in-the-money at the time
of purchase, the in-the-money amount may be excluded in
computing the 5% limit;
(6) purchase warrants if as a result, such securities, taken at
the lower of cost or market value, would represent more than
5% of the value of the Fund's total assets (for this purpose,
warrants acquired in units or attached to securities will be
deemed to have no value); and
(7) lend portfolio securities in an amount greater than 5% of its
total assets.
Other Investment Policies. The Trustees of each Trust have voluntarily adopted
policies and restrictions which are observed in the conduct of the Funds'
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 prior notice to or
approval of shareholders.
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PURCHASES
Additional Information About Opening an Account
Clients having a regular investment counsel account with the Adviser or
its affiliates and members of their immediate families, officers and employees
of the Adviser or of any affiliated organization and their immediate families,
members of the National Association of Securities Dealers, Inc. ("NASD") and
banks may, if they prefer, subscribe initially for at least $2,500 of Class S
and $1,000 for Class AARP through Scudder Investor Services, Inc. by letter,
fax, or telephone.
Shareholders of other Scudder funds who have submitted an account
application and have certified a tax identification number, clients having a
regular investment counsel account with the Adviser or its affiliates and
members of their immediate families, officers and employees of the Adviser or of
any affiliated organization and their immediate families, members of the NASD,
and banks may open an account by wire. Investors interested in investing in
Class S must call 1-800-SCUDDER to get an account number. During the call the
investor will be asked to indicate the Fund name, class name, amount to be wired
($2,500 minimum for Class S and $1,000 for Class AARP), name of bank or trust
company from which the wire will be sent, the exact registration of the new
account, the tax identification number or Social Security number, address and
telephone number. The investor must then call the bank to arrange a wire
transfer to The Scudder Funds, Boston, MA 02101, ABA Number 011000028, DDA
Account 9903-5552. The investor must give the Scudder fund name, class name,
account name and the new account number. Finally, the investor must send a
completed and signed application to the Fund promptly. Investors interested in
investing in Class AARP should call 800-253-2277 for further instructions.
The minimum initial purchase amount is less than $2,500 for Class S
under certain plan accounts and is $1,000 for Class AARP.
Additional Information About Making Subsequent Investments
Subsequent purchase orders for $10,000 or more and for an amount not
greater than four times the value of the shareholder's account may be placed by
telephone, fax, etc. by established shareholders (except by Scudder Individual
Retirement Account (IRA), Scudder Horizon Plan, Scudder Profit Sharing and Money
Purchase Pension Plans, Scudder 401(k) and Scudder 403(b) Plan holders), members
of the NASD, and banks. Contact the Distributor at 1-800-SCUDDER for additional
information. 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 the 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.
Minimum Balances
Shareholders should maintain a share balance worth at least $2,500 for
Class S and $1,000 for Class AARP. For fiduciary accounts such as IRAs, and
custodial accounts such as Uniform Gift to Minor Act, and Uniform Trust to Minor
Act accounts, the minimum balance is $1,000 for Class S and $500 for Class AARP.
These amounts may be changed by the Board of Trustees. A shareholder may open an
account with at least $1,000 ($500 for fiduciary/custodial accounts), if an
automatic investment plan (AIP) of $100/month ($50/month for Class AARP and
fiduciary/custodial accounts) is established. Scudder group retirement plans and
certain other accounts have similar or lower minimum share balance requirements.
The Funds reserve the right, following 60 days' written notice to
applicable shareholders, to:
o for Class S assess an annual $10 per Fund charge (with the Fee
to be paid to the Fund) for any non-fiduciary/non-custodial
account without an automatic investment plan (AIP) in place
and a balance of less than $2,500 for Class S shareholders;
and
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o redeem all shares in Fund accounts below $1,000 where a
reduction in value has occurred due to a redemption, exchange
or transfer 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. Shareholders with a combined household
account balance in any of the Scudder Funds of $100,000 or more, as well as
group retirement and certain other accounts will not be subject to a fee or
automatic redemption.
Fiduciary (e.g., IRA or Roth IRA) and custodial accounts (e.g., UGMA or
UTMA) with balances below $100 are subject to automatic redemption following 60
days written notice to applicable shareholders.
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 a Fund by telephone. Through
this service shareholders may purchase up to $250,000. To purchase shares by
QuickBuy, shareholders should call before the close of regular trading on the
New York Stock Exchange, Inc. (the "Exchange"), normally 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, a Fund may hold the
redemption proceeds for a period of up to seven business days. If you purchase
shares and there are insufficient funds in your bank account the purchase will
be canceled and you will be subject to any losses or fees incurred in the
transaction. QuickBuy transactions are not available for most retirement plan
accounts. However, QuickBuy transactions are available for Scudder IRA accounts.
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 15 days for this service to be available.
Each Fund employs procedures, including recording telephone calls,
testing a caller's identity, and sending written confirmation of telephone
transactions, designed to give reasonable assurance that instructions
communicated by telephone are genuine and to discourage fraud. To the extent
that the Funds do not follow such procedures, it may be liable for losses due to
unauthorized or fraudulent telephone instructions. The Funds will not be liable
for acting upon instructions communicated by telephone that they reasonably
believe to be genuine.
Investors interested in making subsequent investments in Class AARP
should call 800-253-2277 or 1-800-SCUDDER for Class S for further instruction.
Checks
A certified check is not necessary, but checks are only accepted
subject to collection at full face value in U.S. funds and must be drawn on, or
payable through, a U.S. bank.
If shares of a Fund are purchased by a check which proves to be
uncollectible, the Trust reserves the right to cancel the purchase immediately
and the purchaser may 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.
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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 State
Street Bank and Trust Company (the "Custodian") of "wired funds," but the right
to charge investors for this service is reserved.
Boston banks are closed on certain holidays although the Exchange may
be open. These holidays include Columbus Day (the 2nd Monday in October) and
Veterans Day (November 11). Investors are not able to purchase shares by wiring
federal funds on such holidays because the Custodian is not open to receive such
federal funds on behalf of a Fund.
Share Price
Purchases will be filled without sales charge at the net asset value
per share next computed after receipt of the application in good order. Net
asset value normally will be computed for each class as of the close of regular
trading on each day during which the Exchange is open for trading. Orders
received after the close of regular trading on the Exchange will be executed at
the next business day's net asset value. If the order has been placed by a
member of the NASD, other than the Distributor, it is the responsibility of that
member broker, rather than a Fund, to forward the purchase order to Scudder
Service Corporation (the "Transfer Agent") in Boston by the close of regular
trading on the Exchange.
There is no sales charge in connection with the purchase of shares of
any class of the Funds.
Share Certificates
Due to the desire of the Trustee's management to afford ease of
redemption, certificates will not be issued to indicate ownership in a Fund.
Other Information
Each Fund has authorized certain members of the NASD other than the
Distributor to accept purchase and redemption orders for its shares. Those
brokers may also designate other parties to accept purchase and redemption
orders on a Fund's behalf. Orders for purchase or redemption will be deemed to
have been received by a Fund when such brokers or their authorized designees
accept the orders. Subject to the terms of the contract between a Fund and the
broker, ordinarily orders will be priced at a Fund's net asset value next
computed after acceptance by such brokers or their authorized designees.
Further, if purchases or redemptions of a Fund's shares are arranged and
settlement is made at an investor's election through any other authorized NASD
member, that member may, at its discretion, charge a fee for that service. The
Board of Trustees and the Distributor, also a Fund's principal underwriter, each
has the right to limit the amount of purchases by, and to refuse to sell to, any
person. The Trustees and the Distributor may suspend or terminate the offering
of shares of a Fund at any time for any reason.
The "Tax Identification Number" section of the Application must be
completed when opening an account. Applications and purchase orders without a
certified tax identification number and certain other certified information
(e.g., from exempt organizations a certification of exempt status), will be
returned to the investor. The Funds reserve the right, following 30 days'
notice, to redeem all shares in accounts without a correct certified Social
Security or tax identification number. A shareholder may avoid involuntary
redemption by providing the Fund with a tax identification number during the
30-day notice period.
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.
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EXCHANGES AND REDEMPTIONS
Exchanges
Exchanges are comprised of a redemption from one Scudder fund and a
purchase into another Scudder Fund. The purchase side of the exchange either may
be an additional investment into an existing account or may involve opening a
new account in the other fund. When an exchange involves a new account, the new
account will be established with the same registration, tax identification
number, address, telephone redemption option, "Scudder Automated Information
Line" (SAIL) transaction authorization and dividend option as the existing
account. Other features will not carry over automatically to the new account.
Exchanges to a new fund account must be for a minimum of $2,500 for Class S and
$1,000 for Class AARP. When an exchange represents an additional investment into
an existing account, the account receiving the exchange proceeds must have
identical registration, address, and account options/features as the account of
origin. Exchanges into an existing account must be for $100 or more for Class S.
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.
Exchange orders received before the close of regular trading on the
Exchange on any business day ordinarily will be executed at respective net asset
values determined on that day. Exchange orders received after the close of
regular trading on the Exchange will be executed on the following business day.
Investors may also request, at no extra charge, to have exchanges
automatically executed on a predetermined schedule from one Scudder fund to an
existing account in another Scudder fund, at current net asset value, through
Scudder's Automatic Exchange Program. Exchanges must be for a minimum of $50.
Shareholders may add this free feature over the 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.
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 Funds employ
procedures, including recording telephone calls, testing a caller's identity,
and sending written confirmation of telephone transactions, designed to give
reasonable assurance that instructions communicated by telephone are genuine,
and to discourage fraud. To the extent that a Fund does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. A Fund will not be liable for acting upon instructions
communicated by telephone that it reasonably believes to be genuine. The Funds
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 Scudder Investor Services, Inc. a prospectus of
the Scudder fund into which the exchange is being contemplated. The exchange
privilege may not be available for certain Scudder Funds or classes of Scudder
Funds. For more information, please call 1-800-SCUDDER (for Class S) or
1-800-253-2277 (Class AARP).
Scudder retirement plans may have different exchange requirements.
Please refer to appropriate plan literature.
Redemption By Telephone
Shareholders currently receive the right, automatically without having
to elect it, to redeem by telephone up to $100,000 and have the proceeds mailed
to their address of record. Shareholders may also request by telephone 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.
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(a) NEW INVESTORS wishing to establish the telephone redemption
privilege must complete the appropriate section on the
application.
(b) EXISTING SHAREHOLDERS (except those who are Scudder IRA,
Scudder pension and profit-sharing, Scudder 401(k) and Scudder
403(b) Planholders) who wish to establish telephone redemption
to a predesignated bank account or who want to change the bank
account previously designated to receive redemption proceeds
should either return a Telephone Redemption Option Form
(available upon request), or send a letter identifying the
account and specifying the exact information to be changed.
The letter must be signed exactly as the shareholder's name(s)
appears on the account. An original signature and an original
signature guarantee are required for each person in whose name
the account is registered.
If a request for a redemption to a shareholder's bank account is made
by telephone or fax, payment will be by Federal Reserve bank wire to the bank
account designated on the application, unless a request is made that the
redemption check be mailed to the designated bank account. There will be a $5
charge for all wire redemptions.
Note: Investors designating a savings bank to receive their telephone
redemption proceeds are advised that if the savings bank is not a
participant in the Federal Reserve System, redemption proceeds must be
wired through a commercial bank which is a correspondent of the savings
bank. As this may delay receipt by the shareholder's account, it is
suggested that investors wishing to use a savings bank discuss wire
procedures with their bank and submit any special wire transfer
information with the telephone redemption authorization. If appropriate
wire information is not supplied, redemption proceeds will be mailed to
the designated bank.
The Funds employs procedure, including recording telephone calls,
testing a caller's identity, and sending written confirmation of telephone
transactions, designed to give reasonable assurance that instructions
communicated by telephone are genuine, and to discourage fraud. To the extent
that a Fund does not follow such procedures, it may be liable for losses due to
unauthorized or fraudulent telephone instructions. A Fund will not be liable for
acting upon instructions communicated by telephone that it reasonably believes
to be genuine.
Redemption requests by telephone (technically a repurchase agreement
between the Fund and the shareholder) of shares purchased by check will not be
accepted until the purchase check has cleared which may take up to seven
business days.
Redemption By 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 a Fund by telephone. 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, normally 4 p.m. Eastern time, 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 the following business day. QuickSell
transactions are not available for Scudder IRA accounts and most other
retirement plan accounts.
In order to request redemptions by QuickSell, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account to which redemption proceeds will be credited. New
investors wishing to establish QuickSell may so indicate on the application.
Existing shareholders who wish to add QuickSell to their account may do so by
completing a QuickSell Enrollment Form. After sending in an enrollment form,
shareholders should allow for 15 days for this service to be available.
The Funds employ procedures, including recording telephone calls,
testing a caller's identity, and sending written confirmation of telephone
transactions, designed to give reasonable assurance that instructions
communicated by telephone are genuine, and to discourage fraud. To the extent
that a Fund does not follow such procedures, it may be liable for losses due to
unauthorized or fraudulent telephone instructions. A Fund will not be liable for
acting upon instructions communicated by telephone that it reasonably believes
to be genuine.
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Redemption By Mail Or Fax
Any existing share certificates representing shares being redeemed must
accompany a request for redemption and be duly endorsed or accompanied by a
proper stock assignment form with signature(s) guaranteed.
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 seven (7) business days after receipt by the Transfer Agent of a
request for redemption that complies with the above requirements. Delays of more
than seven (7) days of payment for shares tendered for repurchase or redemption
may result, but only until the purchase check has cleared.
The requirements for IRA redemptions are different from those for
regular accounts. For more information call 1-800-SCUDDER.
Redemption-in-Kind
The Funds reserve the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption or repurchase order by
making payment in whole or in part in readily marketable securities chosen by
each Fund and valued as they are for purposes of computing each Fund's net asset
value (a redemption-in-kind). If payment is made in securities, a shareholder
may incur transaction expenses in converting these securities into cash. The
Trust has elected, however, to be governed by Rule 18f-1 under the 1940 Act as a
result of which the Funds are obligated to redeem shares, with respect to any
one shareholder during any 90 day period, solely in cash up to the lesser of
$250,000 or 1% of the net asset value of that Fund at the beginning of the
period.
Other Information
If a shareholder redeems all shares in the account after the record
date of a dividend, the shareholder receives in addition to the net asset value
thereof, all declared but unpaid dividends thereon. The value of shares redeemed
or repurchased may be more or less than the shareholder's cost depending on the
net asset value at the time of redemption or repurchase. A wire charge may be
applicable for redemption proceeds wired to an investor's bank account.
Redemption of shares, including redemptions undertaken to effect an exchange for
shares of another Scudder fund, may result in tax consequences (gain or loss) to
the shareholder and the proceeds of such redemptions may be subject to backup
withholding. (See "TAXES.")
Shareholders who wish to redeem shares from Special Plan Accounts
should contact the employer, trustee or custodian of the Plan for the
requirements.
The determination of net asset value may be suspended at times and a
shareholder's right to redeem shares and to receive payment therefore 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 a 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)
the SEC has by order permitted 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) or (c) exist.
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FEATURES AND SERVICES OFFERED BY THE FUND
The No-Load Concept
Investors are encouraged to be aware of the full ramifications of
mutual fund fee structures, and of how Scudder distinguishes its Scudder Family
of Funds from the vast majority of mutual funds available today. The primary
distinction is between load and no-load funds.
Load funds generally are defined as mutual funds that charge a fee for
the sale and distribution of fund shares. There are three types of loads:
front-end loads, back-end loads, and asset-based 12b-1 fees. 12b-1 fees are
distribution-related fees charged against fund assets and are distinct from
service fees, which are charged for personal services and/or maintenance of
shareholder accounts. Asset-based sales charges and service fees are typically
paid pursuant to distribution plans adopted under 12b-1 under the 1940 Act.
A front-end load is a sales charge, which can be as high as 8.50% of
the amount invested. A back-end load is a contingent deferred sales charge,
which can be as high as 8.50% of either the amount invested or redeemed. The
maximum front-end or back-end load varies, and depends upon whether or not a
fund also charges a 12b-1 fee and/or a service fee or offers investors various
sales-related services such as dividend reinvestment. The maximum charge for a
12b-1 fee is 0.75% of a fund's average annual net assets, and the maximum charge
for a service fee is 0.25% of a fund's average annual net assets.
A no-load fund does not charge a front-end or back-end load, but can
charge a small 12b-1 fee and/or service fee against fund assets. Under the
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.
Because funds and classes in the Scudder Family of Funds do not pay any
asset-based sales charges or service fees, Scudder uses the phrase no-load to
distinguish Scudder funds and classes from other no-load 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.
Internet Access
World Wide Web Site -- The address of the Scudder Funds site is www.scudder.com.
The address for Class AARP of shares is aarp.scudder.com. These sites offer
guidance on global investing and developing strategies to help meet financial
goals and provide access to the Scudder investor relations department via
e-mail. The sites also enable 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.
Account Access -- The Adviser 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.
The Adviser'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 sites. Using a
secure Web browser, shareholders sign on to their account with their Social
Security number and their SAIL password. As an additional security measure,
users can change their current password or disable access to their portfolio
through the World Wide Web.
An Account Activity option reveals a financial history of transactions
for an account, with trade dates, type and amount of transaction, share price
and number of shares traded. For users who wish to trade shares between Scudder
Funds, the Fund Exchange option provides a step-by-step procedure to exchange
shares among existing fund accounts or to new Scudder Fund accounts.
Dividends and Capital Gains Distribution Options
Investors have freedom to choose whether to receive cash or to reinvest
any dividends from net investment income or distributions from realized capital
gains in additional Shares of a Fund. A change of instructions for the
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method of payment may be given to the Transfer Agent in writing at least five
days prior to a dividend record date. Shareholders may change their dividend
option by calling 1-800-SCUDDER for Class S and 1-800-253-2277 for Class AARP or
by sending written instructions to the Transfer Agent. Please include your
account number with your written request.
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 same class of the Fund.
Investors may also have dividends and distributions automatically
deposited to their predesignated bank account through Scudder's Direct
Distributions Program. Shareholders who elect to participate in the Direct
Distributions Program, and whose predesignated checking account of record is
with a member bank of Automated Clearing House Network (ACH) can have income and
capital gain distributions automatically deposited to their personal bank
account usually within three business days after a Fund pays its distribution. A
Direct Distributions request form can be obtained by calling 1-800-SCUDDER for
Class S and 1-800-253-2277 for Class AARP. 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.
Transaction Summaries
Annual summaries of all transactions in each Fund account are available
to shareholders. The summaries may be obtained by calling 1-800-SCUDDER for
Class S and 1-800-253-2277 for Class AARP.
THE SCUDDER FAMILY OF FUNDS
The Scudder Family of Funds is America's first family of mutual funds
and the nation's oldest family of no-load mutual funds; a list of Scudder's
family of funds follows.
MONEY MARKET
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series+
TAX FREE MONEY MARKET
Scudder 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*
--------
+ The institutional class of shares is not part of the Scudder Family of
Funds.
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
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Scudder Massachusetts Limited Term Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
U.S. INCOME
Scudder Short Term Bond Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder Corporate Bond Fund
Scudder High Yield Bond Fund
GLOBAL INCOME
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
ASSET ALLOCATION
Scudder Pathway Series: Conservative Portfolio
Scudder Pathway Series: Balanced Portfolio
Scudder Pathway Series: Growth Portfolio
U.S. GROWTH AND INCOME
Scudder Balanced Fund
Scudder Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder Select 500 Fund
Scudder S&P 500 Index Fund
U.S. GROWTH
Value
Scudder Large Company Value Fund
Scudder Value Fund**
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* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
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Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund**
Scudder Large Company Growth Fund
Scudder Select 1000 Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
GLOBAL EQUITY
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.
INDUSTRY SECTOR FUNDS
Choice Series
Scudder Health Care Fund
Scudder Technology Fund
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
--------
** Only the Scudder Shares are part of the Scudder Family of Funds.
*** Only the International Shares are part of the Scudder Family of Funds.
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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 for Class S shares or 1-800-253-2277 for Class
AARP shares.
Certain Scudder funds or classes thereof may not be available for
purchase or exchange. For more information, please call 1-800-SCUDDER.
SPECIAL PLAN ACCOUNTS
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. The
discussions of the plans below describe only certain aspects of the federal
income tax treatment of the plan. The state tax treatment may be different and
may vary from state to state. 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 a Fund may also be a permitted investment under profit
sharing and pension plans and IRAs other than those offered by a 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
Shares of a 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 as to form.
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for Corporations and
Self-Employed Individuals
Shares of a 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 a 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, even if only one spouse
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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.
Scudder Roth IRA: Individual Retirement Account
Shares of a Fund may be purchased as the underlying investment for a
Roth Individual Retirement Account which meets the requirements of Section 408A
of the Internal Revenue Code.
A single individual earning below $95,000 can contribute up to $2,000
per year to a Roth IRA. The maximum contribution amount diminishes and gradually
falls to zero for single filers with adjusted gross incomes ranging from $95,000
to $110,000. Married couples earning less than $150,000 combined, and filing
jointly, can contribute a full $4,000 per year ($2,000 per IRA). The maximum
contribution amount for married couples filing jointly phases out from $150,000
to $160,000.
An eligible individual can contribute money to a traditional IRA and a
Roth IRA as long as the total contribution to all IRAs does not exceed $2,000.
No tax deduction is allowed under Section 219 of the Internal Revenue Code for
contributions to a Roth IRA. Contributions to a Roth IRA may be made even after
the individual for whom the account is maintained has attained age 70 1/2.
All income and capital gains derived from Roth IRA investments are
reinvested and compounded tax-free. Such tax-free compounding can lead to
substantial retirement savings. No distributions are required to be taken prior
to the death of the original account holder. If a Roth IRA has been established
for a minimum of five years, distributions can be taken tax-free after reaching
age 59 1/2, for a first-time home purchase ($10,000 maximum, one-time use) or
upon death or disability. All other distributions of earnings from a Roth IRA
are taxable and subject to a 10% tax penalty unless an exception applies.
Exceptions to the 10% penalty include: disability, certain medical expenses, the
purchase of health insurance for an unemployed individual and qualified higher
education expenses.
An individual with an income of $100,000 or less (who is not married
filing separately) can roll his or her existing IRA into a Roth IRA. However,
the individual must pay taxes on the taxable amount in his or her traditional
IRA. Individuals who complete the rollover in 1998 will be allowed to spread the
tax payments over a four-year period. After 1998, all taxes on such a rollover
will have to be paid in the tax year in which the rollover is made.
Scudder 403(b) Plan
Shares of a 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). Any
such requests must be received by a 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 a 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-SCUDDER for Class S and 1-800-253-2277 for Class AARP.
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Group or Salary Deduction Plan
An investor may join a Group or Salary Deduction Plan where
satisfactory arrangements have been made with Scudder Investor Services, Inc.
for forwarding regular investments through a single source. The minimum annual
investment is $240 per investor which may be made in monthly, quarterly,
semiannual or annual payments. The minimum monthly deposit per investor is $20.
Except for trustees or custodian fees for certain retirement plans, at present
there is no separate charge for maintaining group or salary deduction plans;
however, the Trust and its agents reserve the right to establish a maintenance
charge in the future depending on the services required by the investor.
The Trust reserves the right, after notice has been given to the
shareholder, to redeem and close a shareholder's account in the event that the
shareholder ceases participating in the group plan prior to investment of $1,000
per individual or in the event of a redemption which occurs prior to the
accumulation of that amount or which reduces the account value to less than
$1,000 and the account value is not increased to $1,000 within a reasonable time
after notification. An investor in a plan who has not purchased shares for six
months shall be presumed to have stopped making payments under the plan.
Automatic Investment Plan
Shareholders may arrange to make periodic investments in all classes
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 for Class R and Class S shares.
Shareholders may arrange to make periodic investments in Class AARP of
each Fund through automatic deductions from checking accounts. The minimum
pre-authorized investment amount is $50. New shareholders who open a Gift to
Minors Account pursuant to the Uniform Gift to Minors Act (UGMA) and the Uniform
Transfer to Minors Act (UTMA) and who sign up for the Automatic Investment Plan
will be able to open a Fund account for less than $500 if they agree to increase
their investment to $500 within a 10 month period. Investors may also invest in
any Class AARP for $500 a month if they establish a plan with a minimum
automatic investment of at least $100 per month. This feature is only available
to Gifts to Minors Account investors. The Automatic Investment Plan may be
discontinued at any time without prior notice to a shareholder if any debit from
their bank is not paid, or by written notice to the shareholder at least thirty
days prior to the next scheduled payment to the Automatic Investment Plan.
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.
FEATURES AND SERVICES OFFERED BY THE AARP INVESTMENT PROGRAM
o Experienced Professional Management: The Adviser provides investment
advice to the Funds.
o AARP's Commitment: the Program was designed with AARP's active
participation to provide strong, ongoing representation of the members'
interests and to help ensure a high level of service.
o Diversification: you may benefit from investing in one or more large
portfolios of carefully selected securities.
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o No Sales Commissions: the AARP Funds are no-load funds, so you pay no
sales charges to purchase, transfer or redeem shares, nor do you pay
Rule 12b-1 (i.e., distribution) fees.
o Automatic Dividend Reinvestment: you may receive dividends by check or
arrange to have them automatically reinvested.
o Readily Available Account, Price, Yield and Total Return Information:
You may dial our automated Easy-Access Line, toll-free, 1-800-631-4636
for recorded account information, share price, yield and total return
information, 7 days a week.
o Convenience and Efficiency: simplified investment procedures save you
time and help your money work harder for you.
o Direct Deposit Program: you may have your Social Security or other
checks received from the U.S. Government or any other regular income
checks, such as pension, dividend, interest, and even payroll checks
automatically deposited directly to your account.
o Direct Payment of Regular Fixed Bills: with a minimum qualifying
balance of $10,000 in one Fund, you may arrange to have your regular
bills that are of fixed amounts, such as rent, mortgage, or other
obligations of $50 or more sent directly from your account at the end
of the month.
o Personal Service and Information: professionally trained service
representatives are available to help you whenever you have questions
through our toll-free number, 1-800-253-2277.
o Consolidated Statements: in addition to receiving a confirmation
statement of each transaction in your account, you receive, without
extra charge, a convenient monthly consolidated statement. (Retirement
Plan statements are mailed quarterly.) This statement contains the
market value of all your holdings in the Funds and a complete listing
of your transactions for the statement period.
o Shareholder Handbook: the Shareholder Handbook was created to help
answer many of the questions you may have about investing in the
Program.
o IRA Shareholder Handbook: the IRA Shareholder Handbook was created to
help answer many of the questions you may have about investing in the
no-fee AARP IRA.
o A Glossary of Investment Terms: the Glossary of Investment Terms
defines commonly used financial and investment terms.
o Newsletter: every month, shareholders receive our newsletter, Financial
Focus (retirement plan shareholders receive a special edition of
Financial Focus on a quarterly basis) which is designed to help keep
you up-to-date on economic and investment developments, and any new
financial services and features of the Program.
Distributions Direct
Investors may also have dividends and distributions automatically
deposited to their predesignated bank account through the AARP Funds'
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
1-800-253-2277. Confirmation statements will be mailed to shareholders as
notification that distributions have been deposited.
Reports to Shareholders
The AARP Funds send to shareholders semiannually financial statements,
which are examined annually by independent accountants, including a list of
investments held and statements of assets and liabilities, operations, changes
in net assets, and financial highlights.
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Investors receive a brochure entitled Your Guide to Simplified
Investment Decisions when they order an investment kit for the Funds which also
contains a prospectus. The Shareholder's Handbook is sent to all new
shareholders to help answer any questions they may have about investing.
Similarly, an IRA Handbook is sent to all new IRA shareholders. Every month,
shareholders will be sent the newsletter, Financial Focus. Retirement plan
shareholders will be sent a special edition of Financial Focus on a quarterly
basis. The newsletters are designed to help you keep up to date on economic and
investment developments, and any new financial services and features of the
Program.
Direct Payment of Regular Fixed Bills
Shareholders who own or purchase $10,000 or more of shares of an AARP
Fund may arrange to have regular fixed bills such as rent, mortgage or other
payments of more than $50 made directly from their account. The arrangements are
virtually the same as for an Automatic Withdrawal Plan (see above). For more
information concerning this plan, write to the AARP Investment Program from
Scudder, P.O. Box 2540, Boston, MA 02208-2540 or call, toll-free,
1-800-253-2277.
Direct Deposit Program
Investors can have Social Security or other checks from the U.S.
Government or any other regular income checks such as pension, dividends, and
even payroll checks automatically deposited directly to their accounts.
Investors may allocate a minimum of 25% of their income checks into any AARP
Fund. Information may be obtained by contacting the AARP Investment Program from
Scudder, P.O. Box 2540, Boston, Massachusetts 02208-2540, or by calling toll
free, 1-800-253-2277.
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Each Fund intends to follow the practice of distributing all of its
investment company taxable income, which includes any excess of net realized
short-term capital gains over net realized long-term capital losses. Each Fund
may follow the practice of distributing the entire excess of net realized
long-term capital gains over net realized short-term capital losses. However, a
Fund may retain all or part of such gain for reinvestment after paying the
related federal income taxes for which the shareholders may then be asked to
claim a credit against their federal income tax liability. (See "TAXES.")
If a Fund does not distribute an amount of capital gain and/or ordinary
income required to be distributed by an excise tax provision of the Code, it may
be subject to such tax. In certain circumstances, the Fund may determine that it
is in the interest of shareholders to distribute less than such an amount.
Distributions of investment company taxable income and net realized capital
gains are taxable (See "TAXES"), whether made in shares or cash.
Earnings and profits distributed to shareholders on redemptions of Fund
shares may be utilized by the Fund, to the extent permissible, as part of a
Fund's dividend paid deduction on its federal tax return.
Each distribution is accompanied by a brief explanation of the form and
character of the distribution. The characterization of distributions on such
correspondence may differ from the characterization for federal tax purposes. In
January of each year the Fund issues to each shareholder a statement of the
federal income tax status of all distributions in the prior calendar year.
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. Additional
distributions for each Fund may be made if necessary. Both types of
distributions will be made in shares of a Fund and confirmations will be mailed
to each shareholder unless a shareholder has elected to receive cash, in which
case a check will be sent.
21st Century Growth Fund intends to distribute it's investment company
taxable income and any net realized capital gains in December to avoid federal
excise tax, although an additional distribution may be made if necessary.
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Large Company Growth Fund intends to distribute investment company
taxable income in December each year. The Fund intends to declare in December
any net realized capital gains resulting from its investment activity. The Fund
intends to distribute the December dividends and capital gains either in
December or in the following January.
PERFORMANCE INFORMATION
From time to time, quotations of a Fund's performance may be included
in advertisements, sales literature or reports to shareholders or prospective
investors. These performance figures will be calculated in the following manner:
Average Annual Total Return
Average annual total return is the average annual compound rate of
return for the periods of one year and the life of the Fund, 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:
T = Average Annual Total Return
P = a hypothetical initial payment of $1,000
n = number of years
ERV = ending redeemable value: ERV is the
value, at the end of the applicable
period, of a hypothetical $1,000
investment made at the beginning of the
applicable period.
Average Annual Total Return for the periods ended July 31, 1999*
One Year Five Years Life of Fund
Scudder 21st Century Fund(1)
Scudder Large Company Growth Fund
(1) The Fund commenced operations on September 9, 1996.
* Performance information provided is for the Funds' Class S shares.
Cumulative Total Return
Cumulative total return is the compound rate of return on a
hypothetical initial investment of $1,000 for a specified period. Cumulative
total return quotations reflect changes in the price of 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 rate of return of a hypothetical investment over such periods,
according to the following formula (cumulative total return is then expressed as
a percentage):
C = (ERV/P) -1
Where:
C = Cumulative Total Return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value: ERV is the
value, at the end of the applicable
period, of a hypothetical $1,000
investment made at the beginning of the
applicable period.
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Cumulative Total Return for the periods ended July 31, 1999*
One Year Five Years Life of Fund
Scudder 21st Century Fund(1)
Scudder Large Company Growth Fund
(1) The Fund commenced operations on September 9, 1996.
* Performance information provided is for the Funds' Class S shares.
Total Return
Total return is the rate of return on an investment for a specified
period of time calculated in the same manner as cumulative total return.
Quotations of a 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.
There may be quarterly periods following the periods reflected in the
performance bar chart in the Funds' prospectus which may be higher or lower than
those included in the bar chart.
Comparison of Fund Performance
In connection with communicating its performance to current or
prospective shareholders, each 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. 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.
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.
Each Fund may be advertised as an investment choice in Scudder's
college planning program.
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
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risks/returns associated with an investment in international bond or equity
funds also will depend upon currency exchange rate fluctuation.
A risk/return spectrum generally will position the various investment
categories in the following order: bank products, money market funds, bond funds
and equity funds. Shorter-term bond funds generally are considered less risky
and offer the potential for less return than longer-term bond funds. The same is
true of domestic bond funds relative to international bond funds, and bond funds
that purchase higher quality securities relative to bond funds that purchase
lower quality securities. Growth and income equity funds are generally
considered to be less risky and offer the potential for less return than growth
funds. In addition, international equity funds usually are considered more risky
than domestic equity funds but generally offer the potential for greater return.
Evaluation of Fund performance or other relevant statistical
information made by independent sources may also be used in advertisements
concerning the Funds, including reprints of, or selections from, editorials or
articles about the Fund.
FUND ORGANIZATION
The Trustees for each Trust 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 each series of each Fund has equal rights
with each other share of that series as to voting, dividends and liquidations.
All shares issued and outstanding will be fully paid and nonassessable by the
Trusts, and redeemable as described in this Statement of Additional Information
and in each series' prospectus.
The assets of each 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 each 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
each 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 each 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 Trusts entitle their holders to one vote per share;
however, separate votes are taken by each series on matters affecting that
individual series. For example, a change in investment policy for a series would
be voted upon only by shareholders of the series involved. Additionally,
approval of the investment advisory agreement is a matter to be determined
separately by each series of each Fund.
Each Trust's Declaration of Trust provides that obligations of the
Funds are not binding upon the Trustees individually but only upon the property
of the Funds, that the Trustees and officers will not be liable for errors of
judgment or mistakes of fact or law and that the Funds 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
Fund except if it is determined in the manner provided in the Declaration of
Trust that they have not acted in good faith in the reasonable belief that their
actions were in the best interests of the Funds. Nothing in the Declaration of
Trust, however, protects or indemnifies a Trustee or officer against any
liability to which that person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of that person's office.
Scudder 21st Century Growth Fund
35
<PAGE>
The Fund is a series of Scudder Securities Trust, formerly Scudder
Development Fund, a Massachusetts business trust established under a Declaration
of Trust dated October 16, 1985. The Trust's predecessor was organized as a
Delaware corporation in 1970. The Trust's authorized capital consists of an
unlimited number of shares of beneficial interest of $0.01 par value,
consisteing of two classes and each have equal rights as to voting, dividends
and liquidation. The Trust's shares are currently divided into five series,
Scudder Development Fund, Fund, Scudder Health Care Fund, , Scudder Small
Company Value Fund, Scudder Techonology Fund and Scudder 21st Century Growth
Fund.
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.
Large Company Growth Fund
The Fund is a series of 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, effective May 15, 1991, from Scudder
Growth and Income Fund, and on June 10, 1998 from Scudder Investment Trust. The
Fund changed its name from Scudder Quality Growth Fund on March 1, 1997.
The Trust's authorized capital consists of an unlimited number of
shares of beneficial interest, par value $0.01 per share. The Trust's shares are
currently divided into five series, Scudder Large Company Growth Fund, Scudder
Growth and Income Fund, Scudder S&P 500 Index Fund, Classic Growth Fund, and
Scudder Dividend & Growth Fund. The Fund's shares are currently divided into
three classes: Class AARP, Class S and R shares.
The Fund's activities are supervised by the Trust's Board of Trustees.
The Trust adopted a plan on May 3, 1999 pursuant to Rule 18f-3 under the 1940
Act ((the "Plan") to permit the Trust to establish a multiple class distribution
system for the Fund.
Under the Plan, shares of each class represent an equal pro rata
interest in the Fund and, generally, shall have identical voting, dividend,
liquidation, and other rights, preferences, powers, restrictions, limitations,
qualifications and terms and conditions, except that: (1) each class shall have
a different designation; (2) each class of shares shall bear its own "class
expenses;" (3) Class R Shares may be subject to a distribution services fee and
an administrative services fee, which shall be paid pursuant to a Rule 12b-1 and
Administrative Services Plan adopted for that class, (4) each class shall have
exclusive voting rights on any matter submitted to shareholders that relates to
its administrative services, shareholder services or distribution arrangements;
(5) each class shall have separate voting rights on any matter submitted to
shareholders in which the interests of one class differ from the interests of
any other class; (6) each class may have separate and distinct exchange
privileges; (7) each class may have different conversion features; and (8) each
class may have separate account size requirements. Expenses currently designated
as "Class Expenses" by the Trust's Board of Trustees under the Plan include, for
example, transfer agency fees attributable to a specific class, and certain
securities registration fees.
Each share of each class of the Fund shall be entitled to one vote (or
fraction thereof in respect of a fractional share) on matters that such shares
(or class of shares) shall be entitled to vote. Shareholders of the Fund shall
vote together on any matter, except to the extent otherwise required by the 1940
Act, or when the Board of Trustees has determined that the matter affects only
the interest of shareholders of one or more classes of the Fund, in which case
only the shareholders of such class or classes of the Fund shall be entitled to
vote thereon. Any matter shall be deemed to have been effectively acted upon
with respect to the Fund if acted upon as provided in Rule 18f-2 under the 1940
Act, or any successor rule, and in the Trust's Declaration of Trust. As used in
the Prospectus and in this Statement of Additional Information, the term
"majority", when referring to the approvals to be obtained from shareholders in
connection with general matters affecting the Trust and all additional
portfolios (e.g., election of directors), means the vote of the lesser of (i)
67% of the Trust's shares represented at a meeting if the holders of more than
50% of the outstanding shares are present in person or by proxy, or (ii) more
than 50% of the Fund's outstanding shares. The term "majority", when referring
to the approvals to be obtained from shareholders in connection with matters
affecting a single Fund or any other single portfolio (e.g., annual approval of
investment management contracts), means the vote of the lesser of (i) 67% of the
shares of the portfolio represented at a meeting if the holders of more than 50%
of the outstanding shares of the portfolio are present in person or by proxy, or
(ii) more than 50% of the outstanding shares of the portfolio. Shareholders are
entitled to one vote for each full share held and fractional votes for
fractional shares held.
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<PAGE>
INVESTMENT ADVISER
Scudder Kemper Investments, Inc., an investment counsel firm, acts as
investment adviser to each Fund. This organization, the predecessor of which is
Scudder, Stevens & Clark, Inc., is one of the most experienced investment
counsel firms in the U. S. It was established as a partnership in 1919 and
pioneered the practice of providing investment counsel to individual clients on
a fee basis. In 1928 it introduced the first no-load mutual fund to the public.
In 1953 the Adviser introduced Scudder International Fund, Inc., the first
mutual fund available in the U.S. investing internationally in securities of
issuers in several foreign countries. The predecessor firm reorganized from a
partnership to a corporation on June 28, 1985. On December 31, 1997, Zurich
Insurance Company ("Zurich") acquired a majority interest in the Adviser, and
Zurich Kemper Investments, Inc., a Zurich subsidiary, became part of the
Adviser. The Adviser's name changed to Scudder Kemper Investments, Inc. On
September 7, 1998, the businesses of Zurich (including Zurich's 70% interest in
Scudder Kemper) and the financial services businesses of B.A.T Industries p.l.c.
("B.A.T") were combined to form a new global insurance and financial services
company known as Zurich Financial Services Group. By way of a dual holding
company structure, former Zurich shareholders initially owned approximately 57%
of Zurich Financial Services Group, with the balance initially owned by former
B.A.T shareholders.
Founded in 1872, Zurich is a multinational, public corporation
organized under the laws of Switzerland. Its home office is located at
Mythenquai 2, 8002 Zurich, Switzerland. Historically, Zurich's earnings have
resulted from its operations as an insurer as well as from its ownership of its
subsidiaries and affiliated companies (the "Zurich Insurance Group"). Zurich and
the Zurich Insurance Group provide an extensive range of insurance products and
services and have branch offices and subsidiaries in more than 40 countries
throughout the world.
The principal source of the Adviser's income is professional fees
received from providing continuous investment advice. Today, it provides
investment counsel for many individuals and institutions, including insurance
companies, colleges, industrial corporations, and financial and banking
organizations, as well as providing investment advice to over 280 open and
closed-end mutual funds.
The Adviser maintains a large research department, which conducts
continuous studies of the factors that affect the position of various
industries, companies and individual securities. The Adviser receives published
reports and statistical compilations from issuers and other sources, as well as
analyses from brokers and dealers who may execute portfolio transactions for the
Adviser's clients. However, the Adviser regards this information and material as
an adjunct to its own research activities. Scudder's international investment
management team travels the world, researching hundreds of companies. In
selecting the securities in which the Fund may invest, the conclusions and
investment decisions of the Adviser with respect to the Fund are based primarily
on the analyses of its own research department.
Certain investments may be appropriate for the Fund and also for other
clients advised by the Adviser. Investment decisions for the Fund and other
clients are made with a view to achieving their respective investment objectives
and after consideration of such factors as their current holdings, availability
of cash for investment and the size of their investments generally. Frequently,
a particular security may be bought or sold for only one client or in different
amounts and at different times for more than one but less than all clients.
Likewise, a particular security may be bought for one or more clients when one
or more other clients are selling the security. In addition, purchases or sales
of the same security may be made for two or more clients on the same day. In
such event, such transactions will be allocated among the clients in a manner
believed by the Adviser to be equitable to each. In some cases, this procedure
could have an adverse effect on the price or amount of the securities purchased
or sold by the Fund. Purchase and sale orders for the Fund may be combined with
those of other clients of the Adviser in the interest of achieving the most
favorable net results to the Fund.
In certain cases the investments for the Fund are managed by the same
individuals who manage one or more other mutual funds advised by the Adviser
that have similar names, objectives and investment styles as the Fund. You
should be aware that the Fund is likely to differ from these other mutual funds
in size, cash flow pattern and tax matters. Accordingly, the holdings and
performance of the Fund can be expected to vary from those of the other mutual
funds.
Under the investment management agreement (the "Agreement"), the
Adviser regularly provides each Fund with continuing investment management for
the Fund's portfolio consistent with the Fund's investment objective, policies
and restrictions and determines what securities shall be purchased, held or sold
and what portion of the Fund's assets shall be held uninvested, subject to the
Fund's Declaration of Trust, By-Laws, the 1940 Act, the Code and to the Fund's
investment objective, policies and restrictions, and subject, further, to such
policies and instructions as the Board of
37
<PAGE>
Trustees of the Fund may from time to time establish. The Adviser also advises
and assists the officers of the Fund in taking such steps as are necessary or
appropriate to carry out the decisions of its Trustees and the appropriate
committees of the Trustees regarding the conduct of the business of the Fund.
Under the Agreement, the Adviser also renders significant
administrative services (not otherwise provided by third parties) necessary for
the Fund's operations as an open-end investment company including, but not
limited to, preparing reports and notices to the Trustees and shareholders;
supervising, negotiating contractual arrangements with, and monitoring various
third-party service providers to the Fund (such as the Fund's transfer agent,
pricing agents, Custodian, accountants and others); preparing and making filings
with the SEC and other regulatory agencies; assisting in the preparation and
filing of the Fund's federal, state and local tax returns; preparing and filing
the Fund's federal excise tax returns; assisting with investor and public
relations matters; monitoring the valuation of securities and the calculation of
net asset value; monitoring the registration of shares of the Fund under
applicable federal and state securities laws; maintaining the Fund's books and
records to the extent not otherwise maintained by a third party; assisting in
establishing accounting policies of the Fund; assisting in the resolution of
accounting and legal issues; establishing and monitoring the Fund's operating
budget; processing the payment of the Fund's bills; assisting the Fund in, and
otherwise arranging for, the payment of distributions and dividends and
otherwise assisting the Fund in the conduct of its business, subject to the
direction and control of the Trustees.
21st Century Growth Fund. The Agreement was approved by the Trustees on
______________, became effective ___________, and was approved at a shareholder
meeting held on _______________. The Agreement will continue in effect until
_____________ and from year to year thereafter only if its continuance is
approved annually by the vote of a majority of those Trustees who are not
parties to such Agreement or interested persons of the Adviser or the Fund, cast
in person at a meeting called for the purpose of voting on such approval, and
either by a vote of the Trust's Trustees or of a majority of the outstanding
voting securities of the Fund. The Agreement may be terminated at any time
without payment of penalty by either party on sixty days' written notice, and
automatically terminates in the event of its assignment.
Large Company Growth Fund. The Agreement was approved by the Trustees on
______________, became effective ___________, and was approved at a shareholder
meeting held on _______________. The Agreement will continue in effect until
_____________ and from year to year thereafter only if its continuance is
approved annually by the vote of a majority of those Trustees who are not
parties to such Agreement or interested persons of the Adviser or the Fund, cast
in person at a meeting called for the purpose of voting on such approval, and
either by a vote of the Trust's Trustees or of a majority of the outstanding
voting securities of the Fund. The Agreement may be terminated at any time
without payment of penalty by either party on sixty days' written notice, and
automatically terminates in the event of its assignment.
The Adviser pays the compensation and expenses of all Trustees,
officers and executive employees (except expenses incurred attending Board and
committee meetings outside New York, New York or Boston, Massachusetts) of the
Trusts affiliated with the Adviser and makes available, without expense to the
Fund, the services of such Trustees, officers and employees of the Adviser as
may duly be elected officers of the Trust, subject to their individual consent
to serve and to any limitations imposed by law, and provides the Fund's office
space and facilities.
For these services, the 21st Century Growth Fund will pay the Adviser a
fee equal to 1.00% of the Fund's average daily net assets, payable monthly,
provided the Fund will make such interim payments as may be requested by the
Adviser not to exceed 75% of the amount of the fee then accrued on the books of
the Fund and unpaid. Since inception, the Adviser has agreed until November 30,
2000 to maintain the total annualized expenses of the Fund at no more than 1.75%
of the average daily net assets of the Fund. For the eleven months ended July
31, 1999, the Adviser did not impose a portion of its management fee amounting
to $195,129 and the amount imposed amounted to $221,549. For the fiscal year
ended August 31, 1998, the Adviser did not impose a portion of its management
fee amounting to $136,802 and the amount paid to the Adviser amounted to
$187,185. For the period September 9, 1996 (commencement of operations) to
August 31, 1997, the Adviser waived its management fee amounting to $129,231. TO
BE UPDATED TO INCLUDE 2000 INFORMATION
The Large Company Growth Fund is charged by the Adviser a fee equal to
approximately 0.70 of 1% of the Fund's average daily net assets. The fee is
payable monthly, provided the Fund will make such interim payments as may be
requested by Scudder not to exceed 75% of the amount of the fee then accrued on
the books of the Fund and unpaid. The Agreement provides that if the Fund's
expenses, exclusive of taxes, interest, and extraordinary expenses, exceed
specified limits, such excess, up to the amount of the management fee, will be
paid by the Adviser. The Adviser retains the ability to be repaid by the Fund if
expenses fall below the specified limit prior to the end of the fiscal year.
These
38
<PAGE>
expense limitation arrangements can decrease the Fund's expenses and improve its
performance. During the fiscal years ended October 31, 1996, 1997, and 1998, the
Adviser imposed a portion of its management fee amounting to $1,447,537,
$1,790,426, and $2,478,112 respectively. For the 9 months ended July 31, 1999,
the Adviser imposed a portion of its management fee amounting to $3,855,969, of
which $488,848 was unpaid at July 31, 1999. TO BE UPDATED TO INCLUDE 2000
INFORMATION
Under the Agreement the Fund is responsible for all of its other
expenses including: organizational costs, fees and expenses incurred in
connection with membership in investment company organizations; brokers'
commissions; legal, auditing and accounting expenses; taxes and governmental
fees; the fees and expenses of the Transfer Agent; any other expenses of issue,
sale, underwriting, distribution, redemption or repurchase of shares; the
expenses of and the fees for registering or qualifying securities for sale; the
fees and expenses of Trustees, officers and employees of the Fund who are not
affiliated with the Adviser; the cost of printing and distributing reports and
notices to stockholders; and the fees and disbursements of custodians. The Fund
may arrange to have third parties assume all or part of the expenses of sale,
underwriting and distribution of shares of the Fund. The Fund is also
responsible for its expenses of shareholders' meetings, the cost of responding
to shareholders' inquiries, and its expenses incurred in connection with
litigation, proceedings and claims and the legal obligation it may have to
indemnify its officers and Trustees of the Fund with respect thereto.
The Agreement identifies the Adviser as the exclusive licensee of the
rights to use and sublicense the names "Scudder," "Scudder Kemper Investments,
Inc." and "Scudder Stevens and Clark, Inc." (together, the "Scudder Marks").
Under this license, the Trust, with respect to the Fund, has the non-exclusive
right to use and sublicense the Scudder name and marks as part of its name, and
to use the Scudder Marks in the Trust's investment products and services.
In reviewing the terms of the Agreement and in discussions with the
Adviser concerning such Agreement, the Trustees who are not "interested persons"
of the Adviser are represented by independent counsel at the Fund's expense.
The Agreement provide that the Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with matters to which the Agreement relates, except a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of the
Adviser in the performance of its duties or from reckless disregard by the
Adviser of its obligations and duties under the Agreement.
Officers and employees of the Adviser from time to time may have
transactions with various banks, including the Fund's custodian bank. It is the
Adviser's opinion that the terms and conditions of those transactions which have
occurred were not influenced by existing or potential custodial or other Fund
relationships.
The Adviser may serve as adviser to other funds with investment
objectives and policies similar to those of the Funds that may have different
distribution arrangements or expenses, which may affect performance.
None of the officers or Trustees of the Trust may have dealings with
the Fund as principals in the purchase or sale of securities, except as
individual subscribers to or holders of shares of the Fund.
The term Scudder Investments is the designation given to the services
provided by Scudder Kemper Investments, Inc. and its affiliates to the Scudder
Family of Funds.
AMA InvestmentLink(SM) Program
Pursuant to an Agreement between the Adviser and AMA Solutions, Inc., a
subsidiary of the American Medical Association (the "AMA"), dated May 9, 1997,
the Adviser 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 the Adviser with respect to assets invested by AMA members in
Scudder funds in connection with the AMA InvestmentLinkSM Program. The Adviser
will also pay AMA Solutions, Inc. a general monthly fee, currently in the amount
of $833. The AMA and AMA Solutions, Inc. are not engaged in the business of
providing investment advice and neither is registered as an investment adviser
or broker/dealer under federal securities laws. Any person who participates in
the AMA InvestmentLink(SM) Program will be a customer of the Adviser (or of a
subsidiary thereof) and not the AMA or AMA Solutions, Inc. AMA
InvestmentLink(SM) is a service mark of AMA Solutions, Inc.
39
<PAGE>
Code of Ethics
The Funds, the Adviser and principal underwriter have each adopted codes of
ethics under rule 17j-1 of the Investment Company Act. Board members, officers
of the Funds and employees of the Adviser and principal underwriter are
permitted to make personal securities transactions, including transactions in
securities that may be purchased or held by the Funds, subject to requirements
and restrictions set forth in the applicable Code of Ethics. The Adviser's Code
of Ethics contains provisions and requirements designed to identify and address
certain conflicts of interest between personal investment activities and the
interests of the Funds. Among other things, the Adviser's Code of Ethics
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
quarterly 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
Adviser's Code of Ethics may be granted in particular circumstances after review
by appropriate personnel.
TRUSTEES AND OFFICERS FOR EACH TRUST
<TABLE>
<CAPTION>
Position with
Underwriter,
Scudder Investor
Name, Age, and Address Position with Fund Principal Occupation** Services, Inc.
---------------------- ------------------ -------------------- --------------
<S> <C> <C> <C>
Henry P. Becton, Jr. (56) Trustee President, WGBH Educational Foundation --
WGBH
125 Western Avenue
Allston, MA 02134
Linda C. Coughlin (48)+* Trustee Managing Director of Scudder Kemper Senior Vice President
Investments, Inc.
Dawn-Marie Driscoll (53) Trustee Executive Fellow, Center for Business --
4909 SW 9th Place Ethics, Bentley College; President,
Cape Coral, FL 33914 Driscoll Associates
Edgar R. Fiedler (70) Trustee Senior Fellow and Economic Counselor, --
50023 Brogden The Conference Board, Inc.
Chapel Hill, NC
Keith R. Fox (45) Trustee Private Equity Investor, President, --
10 East 53rd Street Exeter Capital Management Corporation
New York, NY 10022
Joan E. Spero (55) Trustee President, Doris Duke Charitable --
Doris Duke Charitable Foundation Foundation; Department of State -
650 Fifth Avenue Undersecretary of State for Economic,
New York, NY 10128 Business and Agricultural Affairs
(March 1993 to January 1997)
Jean Gleason Stromberg (56) Trustee Consultant; Director, Financial --
3816 Military Road, NW Institutions Issues, U.S. General
Washington, D.C. Accounting Office (1996-1997);
Partner, Fulbright & Jaworski Law
Firm (1978-1996)
Jean C. Tempel (56) Trustee Managing Director, First Light --
One Boston Place 23rd Floor Capital
Boston, MA 02108
40
<PAGE>
Position with
Underwriter,
Scudder Investor
Name, Age, and Address Position with Fund Principal Occupation** Services, Inc.
---------------------- ------------------ -------------------- --------------
Steven Zaleznick (45)* Trustee President and CEO, AARP Services, Inc. --
601 E Street
Washington, D.C. 20004
Ann M. McCreary (43) ++ Vice President Managing Director of Scudder Kemper --
Investments, Inc.
John R. Hebble (42)+ Treasurer Senior Vice President of Scudder Assistant Treasurer
Kemper Investments, Inc.
Caroline Pearson (38)+ Assistant Secretary Senior Vice President of Scudder Clerk
Kemper Investments, Inc.; Associate,
Dechert Price & Rhoads (law firm)
1989 - 1997
John Millette (37)+ Vice President and Vice President of Scudder Kemper --
Secretary Investments, Inc.
</TABLE>
* Ms. Coughlin and Mr. Zaleznick are considered by the Funds and
their counsel to be persons who are "interested persons" of the
Adviser or of the Trust, within the meaning of the Investment
Company Act of 1940, as amended.
** Unless otherwise stated, all of the Trustees and officers have
been associated with their respective companies for more than five
years, but not necessarily in the same capacity.
+ Address: Two International Place, Boston, Massachusetts
++ Address: 345 Park Avenue, New York, New York
The Trustees and Scudder Securities Investment Trust** All Scudder
Funds Officers of the Trusts also Trust* serve in similar capacities with other
Scudder Funds.
To the knowledge of the Trust, as of ____________, all Trustees and
Officers of the 21ST Century Growth Fund as a group owned beneficially (as that
term is defined under Section 13(d) of the Securities and Exchange Act of 1934)
less than 1% of the outstanding shares of the Fund.
To the knowledge of the Trust, as of ______________, all Trustees and
Officers of the Large Company Growth Fund as a group owned beneficially (as that
term is defined under Section 13(d) of the Securities and Exchange Act of 1934)
less than 1% of the outstanding shares of the Fund.
To the knowledge of each Trust, as of _________________, no person
owned beneficially more than 5% of the Large Company Growth Fund's outstanding
Class S shares except as stated above.
To the best of the Trust's knowledge, as of ______________, no person
owned beneficially more than 5% of the Large Company Growth Fund's Class R
Shares.
REMUNERATION
Responsibilities of the Board -- Board and Committee Meetings
The Board of Trustees is responsible for the general oversight of the
Fund's business. A majority of the Board's members are not affiliated with
Scudder Kemper Investments, Inc. These "Independent Trustees" have primary
responsibility for assuring that the Fund is managed in the best interests of
its shareholders.
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<PAGE>
The Board of Trustees meets at least quarterly to review the investment
performance of the Fund and other operational matters, including policies and
procedures designed to ensure compliance with various regulatory requirements.
At least annually, the Independent Trustees review the fees paid to the Adviser
and its affiliates for investment advisory services and other administrative and
shareholder services. In this regard, they evaluate, among other things, the
Fund's investment performance, the quality and efficiency of the various other
services provided, costs incurred by the Adviser and its affiliates and
comparative information regarding fees and expenses of competitive funds. They
are assisted in this process by the Fund's independent public accountants and by
independent legal counsel selected by the Independent Trustees.
All the Independent Trustees serve on the Committee on Independent
Trustees, which nominates Independent Trustees and considers other related
matters, and the Audit Committee, which selects 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.
Compensation of Officers and Trustees
The Independent Trustees receive the following compensation from the
Funds of each Trust: : an annual trustee's fee of $_____; a fee of $___ for
attendance at each board meeting, audit committee meeting or other meeting held
for the purposes of considering arrangements between the Trust on behalf of the
Fund and the Adviser or any affiliate of the Adviser; $___ for all other
committee meetings; 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 or service on special
trustee task forces or subcommittees. Independent Trustees do not receive any
employee benefits such as pension or retirement benefits or health insurance.
Notwithstanding the schedule of fees, the Independent Trustees have in the past
and may in the future waive a portion of their compensation.
The Independent Trustees also serve in the same capacity for other
funds managed by the Adviser. These funds differ broadly in type and complexity
and in some cases have substantially different Trustee fee schedules. The
following table shows the aggregate compensation received by each Independent
Trustee during 1999 from the Trust and from all of the Scudder funds as a group.
<TABLE>
<CAPTION>
Name Scudder Securities Trust* Investment Trust** All Scudder Funds
---- ------------------------- ------------------ -----------------
<S> <C> <C> <C>
Paul Bancroft III ***
Sheryle J. Bolton ***
William T. Burgin ***
Thomas J. Devine ***
Keith R. Fox
William H. Luers ***
Wilson Nolen***
Joan E. Spero
</TABLE>
* Scudder Securities Trust consists of five funds: Scudder Development
Fund, Scudder Health Care Fund, Scudder Technology Fund, Scudder Small
Company Value Fund and Scudder 21st Century Growth Fund.
** Investment Trust consists of five funds:. Scudder Large Company Growth
Fund, Scudder Growth and Income Fund, Scudder S&P 500 Index Fund,
Classic Growth Fund, and Scudder Dividend & Growth Fund
*** No longer a current Trustee. On July , 2000, shareholders of each Fund
elected a new Board of Trustees. See the "Trustees and Officers"
section for the newly-constituted Board of Trustees.
Members of the Board of Trustees who are employees of the Adviser or
its affiliates receive no direct compensation from the Trust, although they are
compensated as employees of the Adviser, or its affiliates, as a result of which
they may be deemed to participate in fees paid by the Fund.
DISTRIBUTOR
Securities Trust has an underwriting agreement with Scudder Investor
Services, Inc., Two International Place, Boston, MA 02110 (the "Distributor"), a
Massachusetts corporation, which is a subsidiary of the Adviser, a Delaware
42
<PAGE>
corporation. The Trust's underwriting agreement dated September 7, 1998 will
remain in effect until September 30, 2000 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 6, 1998.
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
provides that the Fund shall bear some or all of such expenses.
Note: Although the Fund does not currently have a 12b-1 Plan, 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.
Administrative Fee
Each Fund has entered into administrative services agreements with
Scudder Kemper (the "Administration Agreements"), pursuant to which Scudder
Kemper will provide or pay others to provide substantially all of the
administrative services required by the Funds (other than those provided by
Scudder Kemper under its investment management agreements with the Funds, as
described above) in exchange for the payment by each Fund of an administrative
services fee (the "Administrative Fee") of 0.30% of average daily net assets for
Scudder Large Company Growth Fund and 0.45% of average daily net assets for
Scudder 21st Century Growth Fund. One effect of these arrangements is to make
each Fund's future expense ratio more predictable. The details of the proposal
(including expenses that are not covered) are set out below.
Various third-party service providers (the "Service Providers"), some
of which are affiliated with Scudder Kemper, provide certain services to the
Funds pursuant to separate agreements with the Funds. Scudder Fund Accounting
Corporation, a subsidiary of Scudder Kemper, computes net asset value for the
Funds and maintains their accounting records. Scudder Service Corporation, also
a subsidiary of Scudder Kemper, is the transfer, shareholder servicing and
dividend-paying agent for the shares of the Funds. Scudder Trust Company, an
affiliate of Scudder Kemper, provides subaccounting and recordkeeping services
for shareholders in certain retirement and employee benefit plans. As custodian,
State Street Bank and Trust Company holds the portfolio securities of the Funds,
pursuant to a custodian agreement. PricewaterhouseCoopers LLP audits the
financial statements of the Funds and provides other audit, tax, and related
services. Dechert Price & Rhoads acts as general counsel for each Fund. In
addition to the fees they pay
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under the investment management agreements with Scudder Kemper, the Funds pay
the fees and expenses associated with these service arrangements, as well as
each Fund's insurance, registration, printing, postage and other costs.
Scudder Kemper will pay the Service Providers for the provision of
their services to the Funds and will pay other Funds' expenses, including
insurance, registration, printing and postage fees. In return, each Fund will
pay Scudder Kemper an Administrative Fee.
The Administration Agreement has an initial term of three years,
subject to earlier termination by the Funds' Board. The fee payable by the Funds
to Scudder Kemper pursuant to the Administration Agreements is reduced by the
amount of any credit received from the Funds' custodian for cash balances.
Certain expenses of the Funds will not be borne by Scudder Kemper under
the Administration Agreements, such as taxes, brokerage, interest and
extraordinary expenses; and the fees and expenses of the Independent Trustees
(including the fees and expenses of their independent counsel). In addition,
each Fund will continue to pay the fees required by its investment management
agreement with Scudder Kemper.
TAXES
Each Fund has elected to be treated as a regulated investment company
under Subchapter M of the Code or a predecessor statute, and has qualified as
such since its inception. 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% 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.
If for any taxable year a Fund does not qualify for the special federal
income tax treatment afforded regulated investment companies, all of its taxable
income will be subject to federal income tax at regular corporate rates (without
any deduction for distributions to its shareholders). In such event, dividend
distributions would be taxable to shareholders to the extent of the Fund's
earnings and profits, and would be eligible for the dividends received deduction
in the case of corporate shareholders.
Each Fund is subject to a 4% nondeductible excise tax on amounts
required to be but not distributed under a prescribed formula. The formula
requires payment to shareholders during a calendar year of distributions
representing at least 98% of 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 such reported gains and the individual tax
credit..
Distributions of investment company taxable income are taxable to
shareholders as ordinary income.
Dividends from domestic corporations are expected to comprise a
substantial part of the Fund's gross income. To the extent that such dividends
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
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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 during the 90-day period beginning 45 days before the shares become
ex-dividend.
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
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 ($52,000 for married individuals
filing a joint return, with a phase-out of the deduction for adjusted gross
income between $52,000 and $62,000; $32,000 for a single individual, with a
phase-out for adjusted gross income between $32,000 and $42,000). 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 a Fund result in a reduction in the net asset value of
the Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should consider the tax implications of buying shares just
prior to a distribution. The price of shares purchased at that time includes the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will then receive a partial return of capital upon the
distribution, which will nevertheless be taxable to them.
Each Fund may invest in shares of certain foreign corporations which
may be classified under the Code as passive foreign investment companies
("PFICs"). If the Fund receives a so-called "excess distribution" with respect
to PFIC stock, the Fund itself may be subject to a tax on a portion of the
excess distribution. Certain distributions from a PFIC as well as gains from the
sale of the PFIC shares are treated as "excess distributions." In general, under
the PFIC rules, an excess distribution is treated as having been realized
ratably over the period during which the Fund held the PFIC shares. The Fund
will be subject to tax on the portion, if any, of an excess distribution that is
allocated to prior Fund taxable years and an interest factor will be added to
the tax, as if the tax had been payable in such prior taxable years. Excess
distributions allocated to the current taxable year are characterized as
ordinary income even though, absent application of the PFIC rules, certain
excess distributions might have been classified as capital gain.
Each Fund may make an election to mark to market its shares of these
foreign investment companies in lieu of being subject to U.S. federal income
taxation. At the end of each taxable year to which the election applies, the
Fund would report as ordinary income the amount by which the fair market value
of the foreign company's stock exceeds
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the Fund's adjusted basis in these shares; any mark to market losses and any
loss from an actual disposition of shares would be deductible as ordinary loss
to the extent of any net mark to market gains included in income in prior years.
The effect of the election would be to treat excess distributions and gain on
dispositions as ordinary income which is not subject to a fund level tax when
distributed to shareholders as a dividend. Alternatively, the Fund may elect to
include as income and gain its share of the ordinary earnings and net capital
gain of certain foreign investment companies in lieu of being taxed in the
manner described above.
Equity options (including covered call options on portfolio stock) and
over-the-counter options on debt securities written or purchased by the Fund
will be subject to tax under Section 1234 of the Code. In general, no loss is
recognized by the Fund upon payment of a premium in connection with the purchase
of a put or call option. The character of any gain or loss recognized (i.e.,
long-term or short-term) will generally depend, in the case of a lapse or sale
of the option, on the Fund's holding period for the option, and in the case of
an exercise of a put option, on the Fund'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 Fund's portfolio. If
the Fund 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 Fund is not a taxable transaction for the Fund.
Many futures contracts and certain foreign currency forward contracts
entered into by the Fund and all listed non-equity options written or purchased
by the Fund (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 Fund's
fiscal year, all outstanding Section 1256 positions will be marked to market
(i.e. treated as if such positions were closed out at their closing price on
such day), with any resulting gain or loss recognized as 60% long-term and 40%
short-term. Under Section 988 of the Code, discussed below, foreign currency
gain or loss from foreign currency-related forward contracts and similar
financial instruments entered into or acquired by the Fund will be treated as
ordinary income 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 Fund's portfolio.
If a Fund writes a covered call option on portfolio stock, no gain is
recognized upon its receipt of a premium. If the option lapses or is closed out,
any gain or loss is treated as short-term capital gain or loss. If the option is
exercised, the character of the gain or loss depends on the holding period of
the underlying stock.
Positions of a Fund which consist of at least one stock and at least
one other position with respect to a related security which substantially
diminishes the Fund's risk of loss with respect to such stock could be treated
as a "straddle" which is governed by Section 1092 of the Code, the operation of
which may cause deferral of losses, adjustments in the holding periods of 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 Fund.
Positions of a Fund which consist of at least one position not governed
by Section 1256 and at least one futures or forward contract or non-equity
option governed by Section 1256 which substantially diminishes the Fund's risk
of loss with respect to such other position will be treated as a "mixed
straddle." Although mixed straddles are subject to the straddle rules of Section
1092 of the Code, certain tax elections exist for them which reduce or eliminate
the operation of these rules. The Fund intends to monitor its transactions in
options and futures and may make certain tax elections in connection with these
investments.
Notwithstanding any of the foregoing, recent tax law changes may
require the Fund to recognize gain (but not loss) from a constructive sale of
certain "appreciated financial positions" if the Fund enters into a short sale,
offsetting notional principal contract, futures or forward contract transaction
with respect to the appreciated position or substantially identical property.
Appreciated financial positions subject to this constructive sale treatment are
interests (including options, futures and forward contracts and short sales) in
stock, partnership interests, certain actively traded trust instruments and
certain debt instruments. Constructive sale treatment of appreciated financial
positions does not apply to certain transactions closed in the 90-day period
ending with the 30th day after the close of the Fund's taxable year, if certain
conditions are met.
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Similarly, if a Fund enters into a short sale of property that becomes
substantially worthless, the Fund will be required to recognize gain at that
time as though it had closed the short sale. Future regulations may apply
similar treatment to other strategic transactions with respect to property that
becomes substantially worthless.
A portion of the difference between the issue price of zero coupon
securities and their face value ("original issue discount") is considered to be
income to a Fund each year, even though the Fund will not receive cash interest
payments from these securities. This original issue discount imputed income will
comprise a part of the investment company taxable income of the Fund, which must
be distributed to shareholders in order to maintain the qualification of the
Fund as a regulated investment company and to avoid federal income tax at the
Fund's level.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time a Fund accrues receivables or
liabilities denominated in a foreign currency and the time the Fund actually
collects such receivables, or pays such liabilities, generally are treated as
ordinary income or ordinary loss. Similarly, on disposition of debt securities
denominated in a foreign currency, and on disposition of certain options,
futures contracts and forward contracts, gains or losses attributable to
fluctuations in the value of foreign currency between the date of acquisition of
the security or contract and the date of disposition are also treated as
ordinary gain or loss. These gains or losses, referred to under the Code as
"Section 988" gains or losses, may increase or decrease the amount of the Fund's
investment company taxable income to be distributed to its shareholders as
ordinary income.
Each 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.
Each 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.
Dividend and interest income received by the Fund from sources outside
the U.S. may be subject to withholding and other taxes imposed by such foreign
jurisdictions. Tax conventions between certain countries and the U.S. may reduce
or eliminate these foreign taxes, however, and foreign countries generally do
not impose taxes on capital gains respecting investments by foreign investors.
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.
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PORTFOLIO TRANSACTIONS
Brokerage Commissions
Allocation of brokerage is supervised by the Adviser.
The primary objective of the Adviser in placing orders for the purchase
and sale of securities for the Fund is to obtain the most favorable net results,
taking into account such factors as price, commission where applicable, size of
order, difficulty of execution and skill required of the executing
broker/dealer. The Adviser seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) through the familiarity of
the Distributor with commissions charged on comparable transactions, as well as
by comparing commissions paid by the Fund to reported commissions paid by
others. The Adviser routinely reviews commission rates, execution and settlement
services performed and makes internal and external comparisons.
The Fund's purchases and sales of fixed-income securities are generally
placed by the Adviser with primary market makers for these securities on a net
basis, without any brokerage commission being paid by the Fund. Trading does,
however, involve transaction costs. Transactions with dealers serving as primary
market makers reflect the spread between the bid and asked prices. Purchases of
underwritten issues may be made, which will include an underwriting fee paid to
the underwriter.
When it can be done consistently with the policy of obtaining the most
favorable net results, it is the Adviser's practice to place such orders with
broker/dealers who supply brokerage and research services to the Adviser or the
Fund. The term "research services" 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
analyses and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy and the performance of accounts. The
Adviser is authorized when placing portfolio transactions, if applicable, for
the Fund to pay a brokerage commission in excess of that which another broker
might charge for executing the same transaction on account of execution services
and the receipt of research services. The Adviser has negotiated arrangements,
which are not applicable to most fixed-income transactions, with certain
broker/dealers pursuant to which a broker/dealer will provide research services,
to the Adviser or the Fund in exchange for the direction by the Adviser of
brokerage transactions to the broker/dealer. These arrangements regarding
receipt of research services generally apply to equity security transactions.
The Adviser will not place orders with a broker/dealer on the basis that the
broker/dealer has or has not sold shares of the Fund. In effecting transactions
in over-the-counter securities, orders are placed with the principal market
makers for the security being traded unless, after exercising care, it appears
that more favorable results are available elsewhere.
To the maximum extent feasible, it is expected that the Adviser will
place orders for portfolio transactions through the Distributor, which is a
corporation registered as a broker/dealer and a subsidiary of the Adviser; the
Distributor will place orders on behalf of the Fund with issuers, underwriters
or other brokers and dealers. The Distributor will not receive any commission,
fee or other remuneration from the Fund for this service.
Although certain research services from broker/dealers may be useful to
the Fund and to the Adviser, it is the opinion of the Adviser that such
information only supplements the Adviser's own research effort since the
information must still be analyzed, weighed, and reviewed by the Adviser's
staff. Such information may be useful to the Adviser in providing services to
clients other than the Fund, and not all such information is used by the Adviser
in connection with the Fund. Conversely, such information provided to the
Adviser by broker/dealers through whom other clients of the Adviser effect
securities transactions may be useful to the Adviser in providing services to
the Fund.
The Trustees review, from time to time, whether the recapture for the
benefit of the Fund of some portion of the brokerage commissions or similar fees
paid by the Fund on portfolio transactions is legally permissible and advisable.
21st Century Growth Fund. For the fiscal period from September 9, 1996
(commencement of operations) to August 31, 1997, the fiscal year ended August
31, 1998, and the eleven month period ended July 31, 1999, the Fund paid
brokerage commissions of $150,026, $32,583, and $58,549, respectively. For the
fiscal year ended August 31, 1998, $23,987 (74% of the total brokerage
commissions paid) resulted from orders placed, consistent with the policy of
obtaining the most favorable net results, with brokers and dealers who provided
supplementary research market and statistical information to the Fund or the
Adviser. The total amount of brokerage transactions aggregated $53,769,054, of
which $10,797,522 (20% of all brokerage transactions) were transactions which
included research commissions. TO BE UPDATED TO INCLUDE 2000 INFORMATION
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For the eleven month period ended July 31, 1999, $48,860 (83% of the
total brokerage commissions paid) resulted from orders placed, consistent with
the policy of obtaining the most favorable net results, with brokers and dealers
who provided supplementary research market and statistical information to the
Fund or the Adviser. The total amount of brokerage transactions aggregated
$135,702,793, of which $103,124,642 (76% of all brokerage transactions) were
transactions which included research commissions. TO BE UPDATED TO INCLUDE 2000
INFORMATION
Large Company Growth Fund. For the fiscal years ended October 31, 1998,
1997, and 1996, the Fund paid brokerage commissions of $828,829, $317,984, and
$294,302 respectively. For the nine months ended July 31, 1999, the Fund paid
brokerage commissions of $551,527. For the fiscal year ended October 31, 1998,
$793,177 (95.7% of the total brokerage commissions paid) resulted from orders
placed, consistent with the policy of seeking to obtain the most favorable net
results, with brokers and dealers who provided supplementary research services
to the Trust or Adviser. For the nine months ended July 31, 1999, $446,773 (81%
of the total brokerage commissions paid) resulted from orders placed, consistent
with the policy of seeking to obtain the most favorable net results, with
brokers and dealers who provided supplementary research services to the Trust or
Adviser. The total amount of brokerage transactions aggregated, for the fiscal
year ended October 31, 1998 was $504,513,801, of which 79.86% were transactions
which included research commissions. The total amount of brokerage transactions
aggregated for the nine months ended July 31, 1999 was $808,965,832, of which
$664,562,646 (82.15% of all brokerage transactions) were transactions which
included research commissions. TO BE UPDATED TO INCLUDE 2000 INFORMATION
Portfolio Turnover
21st Century Growth Fund The portfolio turnover rates (defined by the
SEC as the ratio of the lesser of sales or purchases to the monthly average
value of such securities owned during the year, excluding all securities whose
remaining maturities at the time of acquisition were one year or less) for the
eleven month period ended July 31, 1999 was 147.6%, for the fiscal year ended
August 30, 1998, was 119.8%, and for the period September 9, 1996 to August 31,
1997, was 92.0%. For the eleven-month period ended July 31, 1999, the figure was
annualized. TO BE UPDATED TO INCLUDE 2000 INFORMATION
Large Company Growth Fund The Fund's average annual portfolio turnover
rate for the fiscal years ended October 31, 1998 and 1997 was 54.1% and 67.9%.
For the nine month period ended July 31, 1999, the Fund's average annualized
portfolio rate was 62.6%. A higher rate involves greater brokerage and
transaction expenses to the Fund and may result in the realization of net
capital gains, which would be taxable to shareholders when distributed.
Purchases and sales are made for the Fund's portfolio whenever necessary, in
management's opinion, to meet the Fund's objective. TO BE UPDATED TO INCLUDE
2000 INFORMATION
NET ASSET VALUE
The net asset value of shares of the Fund is computed as of the close
of regular trading on the Exchange on each day the Exchange is open for trading.
The Exchange is scheduled to be closed on the following holidays: New Year's
Day, Dr. Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas, and on the
preceding Friday or subsequent Monday when one of these holidays falls on a
Saturday or Sunday, respectively. Net asset value per share is determined by
dividing the value of the total assets of the Fund, less all liabilities, by the
total number of shares outstanding.
An exchange-traded equity security is valued at its most recent sale
price on the exchange it is traded as of the Value Time. 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") on such exchange as
of the Value Time. Lacking a Calculated Mean quotation, the security is valued
at the most recent bid quotation on such exchange as of the Value Time. An
equity security which is traded on the National Association of Securities
Dealers Automated Quotation ("Nasdaq") system will be valued at its most recent
sale price on such system as of the Value Time. Lacking any sales, the security
will be valued at the most recent bid quotation as of the Value Time. 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, if there are any sales
of such security on such market as of the Value Time. Lacking any sales, the
security is valued at the Calculated Mean. Lacking a Calculated Mean quotation,
the security is valued at the most recent bid quotation as of the Value Time.
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Debt securities, other than short-term securities, are valued at prices
supplied by the Fund's pricing agent(s) which reflect broker/dealer supplied
valuations and electronic data processing techniques. Short-term securities with
remaining maturities of sixty days or less are valued by the amortized cost
method, which the Board believes approximates market value. If it is not
possible to value a particular debt security pursuant to these valuation
methods, the value of such security is the most recent bid quotation supplied by
a bona fide marketmaker. If it is not possible to value a particular debt
security pursuant to the above methods, the Adviser may calculate the price of
that debt security, subject to limitations established by the Board.
An exchange traded options contract on securities, currencies, futures
and other financial instruments is valued at its most recent sale price on such
exchange. Lacking any sales, the options contract is valued at the Calculated
Mean. Lacking any Calculated Mean, the options contract is valued at the most
recent bid quotation in the case of a purchased options contract, or the most
recent asked quotation in the case of a written options contract. An options
contract on securities, currencies and other financial instruments traded
over-the-counter is valued at the most recent bid quotation in the case of a
purchased options contract and at the most recent asked quotation in the case of
a written options contract. Futures contracts are valued at the most recent
settlement price. Foreign currency exchange forward contracts are valued at the
value of the underlying currency at the prevailing exchange rate.
If a security is traded on more than one exchange, or upon one or more
exchanges and in the over-the-counter market, quotations are taken from the
market in which the security is traded most extensively.
If, in the opinion of the Fund'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 Fund is
determined in a manner which, in the discretion of the Valuation Committee most
fairly reflects fair market value of the property on the valuation date.
Following the valuations of securities or other portfolio assets in
terms of the currency in which the market quotation used is expressed ("Local
Currency"), the value of these portfolio assets in terms of U.S. dollars is
calculated by converting the Local Currency into U.S. dollars at the prevailing
currency exchange rate on the valuation date.
ADDITIONAL INFORMATION
Experts
The financial highlights of each Fund included in the Funds' prospectus
and the Financial Statements incorporated by reference in this Statement of
Additional Information have been so included or incorporated by reference in
reliance on the report of PricewaterhouseCoopers LLP, 160 Federal Street,
Boston, MA 02110, independent accountants, given on the authority of said firm
as experts in accounting and auditing. PricewaterhouseCoopers LLP audits the
financial statements of each Fund and provides other audit, tax, and related
services.
Shareholder Indemnification
Each 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
Many of the investment changes in a Fund will be made at prices
different from those prevailing at the time they may be reflected in a regular
report to shareholders of the Fund. These transactions will reflect investment
decisions made by the Adviser in light of the objective and policies of the
Funds, and other factors such as its other portfolio holdings and tax
considerations, and should not be construed as recommendations for similar
action by other investors.
50
<PAGE>
The CUSIP number of Class S shares of 21st Century Growth Fund is
811196 40 1.
The CUSIP number of Class AARP shares of 21st Century Growth Fund is
The CUSIP number for the Class S shares of Large Company Growth Fund is
811167-20-4.
The CUSIP number for the Class R shares of Large Company Growth Fund is
490965-84-1.
The CUSIP number for the Class AARP shares of Large Company Growth Fund
is
On September 16, 1998, the Board changed 21st Century Growth Fund's
fiscal year end to July 31 from August 31.
On August 10, 1998, the Board changed Large Company Growth Fund's
fiscal year end to July 31 from October 31.
Dechert Price & Rhoads acts as general counsel for each Fund.
Each Fund employs State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110 as Custodian.
Costs of $23,340 incurred by 21st Century Growth Fund, in conjunction
with its organization are amortized over the five year period beginning
September 9, 1996.
ADDITIONAL INFORMATION FOR 21st Century Growth Fund
The name "Scudder Securities Trust" is the designation of the Trustees
for the time being under a Declaration of Trust dated October 16, 1985, 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, 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.TO BE UPDATED TO INCLUDE 2000 INFORMATION
Scudder Fund Accounting Corporation ("SFAC"), Two International Place,
Boston, Massachusetts, a subsidiary of the Adviser, computes net asset value for
the Fund. The Fund pays SFAC an annual fee equal to 0.025% of the first $150
million of average daily net assets, 0.0075% of such assets in excess of $150
million and 0.0045% of such assets in excess of $1 billion, plus holding and
transaction charges for this service. For the eleven month period ended July 31,
1999, SFAC imposed fees amounting to $35,359, of which $7,091 was unpaid at July
31, 1999. For the fiscal year ended August 31, 1998, SFAC imposed fees amounting
to $37,500, of which $3,125 was unpaid at August 31, 1998. For the period
September 9, 1996 (commencement of operations) to August 31, 1997, SFAC imposed
fees amounting to $6,942, of which $6,942 was unpaid at August 31, 1997, and did
not impose fees amounting to $31,183. TO BE UPDATED TO INCLUDE 2000 INFORMATION
Scudder Service Corporation ("SSC"), P.O. Box 2291, Boston,
Massachusetts, 02107-2291, is the transfer and dividend paying agent for the
Fund. The pays SSC an annual fee for each account maintained for a participant.
For the eleven month period ended July 31, 1999, SSC imposed fees amounting to
$140,376, of which $16,387 was unpaid at July 31, 1999. For the fiscal year
ended August 31, 1998, SSC imposed fees amounting to $109,029, of which $9,660
was unpaid at August 31, 1998. For the period September 9, 1996 (commencement of
operations) to August 31, 1997, SSC imposed fees amounting to $14,592, of which
$14,592 was unpaid at August 31, 1997, and did not impose fees amounting to
$65,550. The Fund, or the Adviser (including any affiliate of the Adviser), or
both, may pay unaffiliated third parties for providing recordkeeping and other
administrative services with respect to accounts of participants in retirement
plans or other beneficial owners of Fund shares whose interests are held in an
omnibus account. TO BE UPDATED TO INCLUDE 2000 INFORMATION
51
<PAGE>
Scudder Trust Company ("STC"), an affiliate of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the eleven month period ended
July 31, 1999, STC imposed fees amounting to $34,388, of which $8,169 was unpaid
at July 31, 1999. For the fiscal year ended August 31, 1998, STC imposed fees
amounting to $10,812, of which $3,299 was unpaid at August 31, 1998. For the
period September 9, 1996 (commencement of operations) to August 31, 1997, STC
imposed fees amounting to $586, of which $586 was unpaid at August 31, 1997, and
did not impose fees amounting to $2,635.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. TO BE UPDATED TO INCLUDE 2000 INFORMATION
ADDITIONAL INFORMATION FOR LARGE COMPANY GROWTH FUND
Portfolio securities of the Fund are held separately pursuant to a
custodian agreement, by the Trust's custodian, State Street Bank and Trust
Company, 225 Franklin Street, Boston, Massachusetts 02110.
Scudder Fund Accounting Corporation (SFAC), Two International Place,
Boston, Massachusetts, 02110-4103, a subsidiary of the Adviser, computes net
asset value for the Fund. The Fund pays SFAC an annual fee equal to 0.025% of
the first $150 million of average daily net assets, 0.0075% on the next 85
million of such assets, 0.0045% of such assets in excess of $1 billion, plus
holding and transaction charges for this service. For the fiscal year ended
October 31, 1996, SFAC's fee amounted to $56,114, for the fiscal year ended
October 31, 1997, SFAC's fee amounted to $57,787, and for the fiscal year ended
October 31, 1998, SFAC's fee was $62,799. For the nine months ended July 31,
1999, SFAC's fee was $76,061, of which $18,026 was unpaid at July 31, 1999. TO
BE UPDATED TO INCLUDE 2000 INFORMATION
Scudder Service Corporation ("Service Corporation"), P.O. Box 2291,
Boston, Massachusetts 02107-2291, a subsidiary of the Adviser, is the transfer,
dividend-paying and shareholder service agent for the Fund and also provides
subaccounting and recordkeeping services for shareholder accounts in certain
retirement and employee benefit plans. The Fund pays Service Corporation an
annual fee of $26.00 for each account maintained for a participant. For the
fiscal years ended October 31, 1996, 1997 and 1998, Service Corporation's fee
amounted to $275,078, $525,877 and $626,382. For the nine months ended July 31,
Service Corporation's fee amounted to $830,924, of which $93,939 was unpaid at
July 31, 1999. Please call 1-800-SCUDDER for specific mailing instructions
regarding your investment. TO BE UPDATED TO INCLUDE 2000 INFORMATION
The Fund(s), or the Adviser (including any affiliate of the Adviser),
or both, may pay unaffiliated third parties for providing recordkeeping and
other administrative services with respect to accounts of participants in
retirement plans or other beneficial owners of Fund shares whose interests are
generally held in an omnibus account.
Scudder Trust Company, Two International Place, Boston, MA 02110-4103,
an affiliate of the Adviser provides services for certain retirement plan
accounts. The Fund pays Scudder Trust Company an annual fee of $29.00 for each
account maintained for a participant. For the fiscal year ended October 31,
1996, Scudder Trust Company's fee amounted to $128,483. For the fiscal year
ended October 31, 1997, Scudder Trust Company's fee amounted to $320,268, and
for the fiscal year ended October 31, 1998, Scudder Trust Company's fee amounted
to $411,592. For the nine months ended July 31, Scudder Trust Company's fee
amounted to $777,528, of which $256,667 was unpaid at July 31, 1999. TO BE
UPDATED TO INCLUDE 2000 INFORMATION
The Fund's prospectus and this Statement of Additional Information omit
certain information contained in the Registration Statement which the Trust has
filed with the Commission 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 is
available for inspection by the public at the SEC in Washington, D.C.
FINANCIAL STATEMENTS
The financial statements, including the Investment Portfolio of 21st
Century Growth Fund, and Large Company Growth Fund together with the Report of
Independent Accountants, Financial Highlights and notes to financial statements
52
<PAGE>
in the Annual Report to the Shareholders of each Fund dated July 31, 2000, are
incorporated herein by reference, and are hereby deemed to be a part of this
Statement of Additional Information.
53
<PAGE>
Standard & Poor's Earnings and Dividend Rankings for Common Stocks
The investment process involves assessment of various factors -- such
as product and industry position, corporate resources and financial policy --
with results that make some common stocks more highly esteemed than others. In
this assessment, Standard & Poor believes that earnings and dividend performance
is the end result of the interplay of these factors and that, over the long run,
the record of this performance has a considerable bearing on relative quality.
The rankings, however, do not pretend to reflect all of the factors, tangible or
intangible, that bear on stock quality.
Relative quality of bonds or other debt, that is, degrees of protection
for principal and interest, called creditworthiness, cannot be applied to common
stocks, and therefore rankings are not to be confused with bond quality ratings
which are arrived at by a necessarily different approach.
Growth and stability of earnings and dividends are deemed key elements
in establishing Standard & Poor's earnings and dividend rankings for common
stocks, which are designed to capsulize the nature of this record in a single
symbol. It should be noted, however, that the process also takes into
consideration certain adjustments and modifications deemed desirable in
establishing such rankings.
The point of departure in arriving at these rankings is a computerized
scoring system based on per-share earnings and dividend records of the most
recent ten years -- a period deemed long enough to measure significant time
segments of secular growth, to capture indications of basic change in trend as
they develop, and to encompass the full peak-to-peak range of the business
cycle. Basic scores are computed for earnings and dividends, then adjusted as
indicated by a set of predetermined modifiers for growth, stability within
long-term trend, and cyclicality. Adjusted scores for earnings and dividends are
then combined to yield a final score.
Further, the ranking system makes allowance for the fact that, in
general, corporate size imparts certain recognized advantages from an investment
standpoint. Conversely, minimum size limits (in terms of corporate sales volume)
are set for the various rankings, but the system provides for making exceptions
where the score reflects an outstanding earnings-dividend record.
The final score for each stock is measured against a scoring matrix
determined by analysis of the scores of a large and representative sample of
stocks. The range of scores in the array of this sample has been aligned with
the following ladder of rankings:
A+ Highest B+ Average C Lowest
A High B Below Average D In Reorganization
A- Above Average B- Lower
NR signifies no ranking because of insufficient data or because the
stock is not amenable to the ranking process.
The positions as determined above may be modified in some instances by
special considerations, such as natural disasters, massive strikes, and
non-recurring accounting adjustments. A ranking is not a forecast of future
market price performance, but is basically an appraisal of past performance of
earnings and dividends, and relative current standing. These rankings must not
be used as market recommendations; a high-score stock may at times be so
overpriced as to justify its sale, while a low-score stock may be attractively
priced for purchase. Rankings based upon earnings and dividend records are no
substitute for complete analysis. They cannot take into account potential
effects of management changes, internal company policies not yet fully reflected
in the earnings and dividend record, public relations standing, recent
competitive shifts, and a host of other factors that may be relevant to
investment status and decision.
54
<PAGE>
PART C. OTHER INFORMATION
INVESTMENT TRUST
<TABLE>
<CAPTION>
Item 23 Exhibits.
------- ---------
<S> <C> <C> <C>
(a) (1) Amended and Restated Declaration of Trust dated November 3, 1987.
(Incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement.)
(2) Certificate of Amendment of Declaration of Trust dated November 13,
1990.
(Incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement.)
(3) Certificate of Amendment of Declaration of Trust dated February 12,
1991.
(Incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement.)
(4) Certificate of Amendment of Declaration of Trust dated May 28, 1998.
(Incorporated by reference to Post-Effective Amendment No. 105 to
the Registration Statement, as filed on May 28, 1999.)
(5) 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.
(Incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement.)
(6) Establishment and Designation of Series of Shares of Beneficial
Interest, $0.01 par value, with respect to Scudder Classic Growth
Fund.
(Incorporated by reference to Post-Effective Amendment No. 76 to the
Registration Statement.)
(7) 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, Scudder Classic Growth
Fund, and Scudder S&P 500 Index Fund.
(Incorporated by reference to Post-Effective Amendment No. 105 to
the Registration Statement, as filed on May 28, 1999.)
(8) Establishment and Designation of Series of Shares of Beneficial
Interest, $0.01 par value, with respect to Scudder Real Estate
Investment Fund.
(Incorporated by reference to Post-Effective Amendment No. 105 to
the Registration Statement, as filed on May 28, 1999.)
Part C - Page 2
<PAGE>
(9) Establishment and Designation of Series of Shares of Beneficial
Interest, $0.01 par value, with respect to Dividend + Growth Fund.
(Incorporated by reference to Post-Effective Amendment No. 105 to
the Registration Statement, as filed on May 28, 1999.)
(10) Establishment and Designation of Series of Shares of Beneficial
Interest, $0.01 par value, with respect to Scudder Tax Managed
Growth Fund and Scudder Tax Managed Small Company Fund.
(Incorporated by reference to Post-Effective Amendment No. 105 to
the Registration Statement, as filed on May 28, 1999.)
(11) Establishment and Designation of Classes of Shares of Beneficial
Interest, $0.01 par value, Kemper A, B & C Shares, and Scudder S
Shares, with respect to Classic Growth Fund.
(Incorporated by reference to Post-Effective Amendment No. 94 to the
Registration Statement.)
(12) Establishment and Designation of Classes of Shares of Beneficial
Interest, $0.01 par value, Class R Shares, with respect to Scudder
Growth and Income Fund.
(Incorporated by reference to Post-Effective Amendment No. 105 to
the Registration Statement, as filed on May 28, 1999.)
(13) Establishment and Designation of Classes of Shares of Beneficial
Interest, $0.01 par value, Class R Shares, with respect to Scudder
Large Company Growth Fund.
(Incorporated by reference to Post-Effective Amendment No. 105 to
the Registration Statement, as filed on May 28, 1999.)
(14) Redesignation of Series, Scudder Classic Growth Fund to Classic
Growth Fund.
(Incorporated by reference to Post-Effective Amendment No. 94 to the
Registration Statement.)
(15) Redesignation of Series, Scudder Quality Growth Fund to Scudder
Large Company Growth Fund.
(Incorporated by reference to Post-Effective Amendment No. 105 to
the Registration Statement, as filed on May 28, 1999.)
(16) Redesignation of Series, Scudder Dividend + Growth Fund to Scudder
Dividend & Growth Fund.
(Incorporated by reference to Post-Effective Amendment No. 105 to
the Registration Statement, as filed on May 28, 1999.)
(17) Establishment and Designation of Classes of Shares of Beneficial
Interest, $0.01 par value, Class S and Class AARP, with respect to
Scudder Dividend and Growth Fund. (Incorporated by reference to
Post-Effective Amendment No. 117 to the Registration Statement, as
filed on May 12, 2000.)
(18) Amended and Restated Establishment and Designation of Classes of
Shares of Beneficial Interest, $0.01 par value, Class R, Class S and
Class AARP with respect to Scudder Growth and Income Fund.
(Incorporated by reference to Post-Effective Amendment No. 117 to
the Registration Statement, as filed on May 12, 2000.)
Part C - Page 3
<PAGE>
(19) Establishment and Designation of Classes of Shares of Beneficial
Interest, $0.01 par value, Class S and Class AARP, with respect to
Scudder S&P 500 Index Fund. (Incorporated by reference to
Post-Effective Amendment No. 117 to the Registration Statement, as
filed on May 12, 2000.)
(20) Establishment and Designation of Classes of Shares of Beneficial
Interest, $0.01 par value, Class S and Class AARP, with respect to
Scudder Small Company Stock Fund. (Incorporated by reference to
Post-Effective Amendment No. 117 to the Registration Statement, as
filed on May 12, 2000.)
(21) Establishment and Designation of Classes of Shares of Beneficial
Interest, $0.01 par value, Class S and Class AARP, with respect to
Scudder Capital Growth Fund. (Incorporated by reference to
Post-Effective Amendment No. 117 to the Registration Statement, as
filed on May 12, 2000.)
(22) Amended and Restated Establishment and Designation of Classes of
Shares of Beneficial Interest, $.01 Par Value, Class R, Class S and
Class AARP, with respect to Scudder Large Company Growth Fund.
(Incorporated by reference to Post-Effective Amendment No. 118 to
the Registration Statement, as filed on July 14, 2000.)
(23) Amended and Restated Establishment and Designation of Series of
Shares of Beneficial Interest, $.01 Par Value, Class S and Class
AARP, with respect to Scudder Capital Growth Fund and Scudder Small
Company Stock Fund. (Incorporated by reference to Post-Effective
Amendment No. 118 to the Registration Statement, as filed on July
14, 2000.)
(24) Establishment and Designation of Classes of Shares of Beneficial
Interest, $.01 Par Value, Class S and Class AARP, with respect to
Scudder Capital Growth Fund. (Incorporated by reference to
Post-Effective Amendment No. 118 to the Registration Statement, as
filed on July 14, 2000.)
(25) Establishment and Designation of Classes of Shares of Beneficial
Interest, $.01 par Value, Class S and Class AARP, with respect to
Scudder Small Company Stock Fund. (Incorporated by reference to
Post-Effective Amendment No. 118 to the Registration Statement, as
filed on July 14, 2000.)
(b) Amendment to By-Laws of the Registrant dated November 12, 1991.
(Incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement.)
(1) Amendment to By-Laws of the Registrant, dated February 7, 2000, is
filed herein.
(c) Inapplicable.
Part C - Page 4
<PAGE>
(d) (1) Investment Management Agreement between the Registrant (on behalf of
Scudder Growth and Income Fund) and Scudder Kemper Investments, Inc.
dated September 7, 1998.
(Incorporated by reference to Post-Effective Amendment No. 100 to
the Registration Statement.)
(2) Investment Management Agreement between the Registrant (on behalf of
Scudder Large Company Growth Fund) and Scudder Kemper Investments,
Inc. dated September 7, 1998.
(Incorporated by reference to Post-Effective Amendment No. 100 to
the Registration Statement.)
(3) Investment Management Agreement between the Registrant (on behalf of
Classic Growth Fund) and Scudder Kemper Investments, Inc. dated
September 7, 1998.
(Incorporated by reference to Post-Effective Amendment No. 100 to
the Registration Statement.)
(4) Investment Management Agreement between the Registrant (on behalf of
Scudder Real Estate Investment Fund) and Scudder Kemper Investments,
Inc. dated September 7, 1998.
(Incorporated by reference to Post-Effective Amendment No. 100 to
the Registration Statement.)
(5) Investment Management Agreement between the Registrant (on behalf of
Scudder S&P 500 Index Fund) and Scudder Kemper Investments, Inc.
dated September 7, 1998.
(Incorporated by reference to Post-Effective Amendment No. 100 to
the Registration Statement.)
(6) Investment Management Agreement between the Registrant (on behalf of
Scudder Dividend & Growth Fund) and Scudder Kemper Investments, Inc.
dated September 7, 1998.
(Incorporated by reference to Post-Effective Amendment No. 100 to
the Registration Statement.)
(7) Investment Management Agreement between the Registrant (on behalf of
Scudder Tax Managed Growth Fund) and Scudder Kemper Investments,
Inc. dated September 7, 1998.
(Incorporated by reference to Post-Effective Amendment No. 100 to
the Registration Statement.)
(8) Investment Management Agreement between the Registrant (on behalf of
Scudder Tax Managed Small Company Fund) and Scudder Kemper
Investments, Inc. dated September 7, 1998.
(Incorporated by reference to Post-Effective Amendment No. 100 to
the Registration Statement.)
(9) Investment Advisory Agreement between the Registrant (on behalf of
Scudder S&P 500 Index Fund) and Bankers Trust Company dated
September 9, 1999.
(Incorporated by reference to Post-Effective Amendment No. 109 to
the Registration Statement.)
Part C - Page 5
<PAGE>
(10) Investment Management Agreement between the Registrant (on
behalf of Scudder Capital Growth Fund) and Scudder Kemper
Investments, Inc., dated July 17, 2000, is filed herein.
(11) Investment Management Agreement between the Registrant (on
behalf of Scudder Small Company Stock Fund) and Scudder Kemper
Investments, Inc., dated July 17, 2000, is filed herein.
(12) Form of Investment Management Agreement between the Registrant (on
behalf of Scudder Growth and Income Fund) and Scudder Kemper
Investments, Inc., dated August 14, 2000 (Incorporated by
reference to Post Effective Amendment No. 118 to the Registration
Statement, filed on July 14, 2000).
(e) (1) Underwriting Agreement and Distribution Services Agreement between
the Registrant on behalf of Classic Growth Fund and Kemper
Distributors, Inc. dated September 7, 1998.
(Incorporated by reference to Post-Effective Amendment No. 100 to
the Registration Statement.)
(2) Underwriting Agreement between the Registrant and Scudder Investor
Services, Inc. dated September 7, 1998.
(Incorporated by reference to Post-Effective Amendment No. 100 to
the Registration Statement.)
(3) Amendment No. 1 dated August 31, 1999 to the Underwriting and
Distribution Services Agreement between the Registrant, on behalf of
Classic Growth Fund, and Kemper Distributors, Inc.
(Incorporated by reference to Post-Effective Amendment No. 109 to
the Registration Statement.)
(4) Amendment dated November 2, 1999 to the Underwriting and
Distribution Services Agreement between the Registrant, on behalf of
Classic Growth Fund, and Kemper Distributors, Inc.
(Incorporated by reference to Post-Effective Amendment No. 109 to
the Registration Statement.)
(5) Underwriting Agreement between the Registrant and Scudder Investor
Services dated May 8, 2000. (Incorporated by reference to
Post-Effective Amendment No. 118 to the Registration Statement, as
filed on July 14, 2000.)
(f) Inapplicable.
(g) (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.
(Incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement.)
Part C - Page 6
<PAGE>
(2) Amendment dated April 1, 1985 to the Custodian Agreement between the
Registrant and State Street Bank.
(Incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement.)
(3) Amendment dated August 8, 1987 to the Custodian Agreement between
the Registrant and State Street Bank.
(Incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement.)
(4) Amendment dated August 9, 1988 to the Custodian Agreement between
the Registrant and State Street Bank.
(Incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement.)
(5) Amendment dated July 29, 1991 to the Custodian Agreement between the
Registrant and State Street Bank.
(Incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement.)
(6) Amendment dated February 8, 1999 to the Custodian Agreement between
the Registrant and State Street Bank.
(Incorporated by reference to Post-Effective Amendment No. 109 to
the Registration Statement.)
(7) Custodian fee schedule for Scudder S&P 500 Index Fund.
(Incorporated by reference to Post-Effective Amendment No. 84 to the
Registration Statement.)
(8) Subcustodian Agreement with fee schedule between State Street Bank
and The Bank of New York, London office, dated December 31, 1978.
(Incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement.)
(9) Subcustodian Agreement between State Street Bank and The Chase
Manhattan Bank, N.A. dated September 1, 1986.
(Incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement.)
(10) Custodian fee schedule for Scudder Quality Growth Fund and Scudder
Growth and Income Fund.
(Incorporated by reference to Post-Effective Amendment No. 72 to the
Registration Statement.)
(11) Custodian fee schedule for Scudder Classic Growth Fund dated August
1, 1994.
(Incorporated by reference to Post-Effective Amendment No. 77 to the
Registration Statement.)
(h) (1) Transfer Agency and Service Agreement with fee schedule between the
Registrant and Scudder Service Corporation dated October 2, 1989.
(Incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement.)
Part C - Page 7
<PAGE>
(1)(a) Revised fee schedule dated October 6, 1995.
(Incorporated by reference to Post-Effective Amendment No. 76 to the
Registration Statement.)
(1)(b) Form of revised fee schedule dated October 1, 1996.
(Incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement.)
(2) Transfer Agency Fee Schedule between the Registrant, on behalf of
Scudder Classic Growth Fund, and Kemper Service Company dated
January 1, 1999.
(Incorporated by reference to Post-Effective Amendment No. 109 to
the Registration Statement.)
(3) Agency Agreement between the Registrant on behalf of Classic Growth
Fund and Kemper Service Company dated April 1998. (Incorporated by
reference to Post-Effective Amendment No. 100 to the Registration
Statement.)
(4) Agency Agreement between the Registrant on behalf of Scudder Growth
and Income Fund Class R shares and Scudder Large Company Growth Fund
Class R shares, and Kemper Service Company dated May 3, 1999.
(Incorporated by reference to Post-Effective Amendment No. 106 to
the Registration Statement.)
(5) COMPASS Service Agreement and fee schedule between the Registrant
and Scudder Trust Company dated January 1, 1990.
(Incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement.)
(6) COMPASS and TRAK 2000 Service Agreement between Scudder Trust
Company and the Registrant dated October 1, 1995.
(Incorporated by reference to Post-Effective Amendment No. 74 to the
Registration Statement.)
(6)(a) Fee Schedule for Services Provided Under Compass and TRAK 2000
Service Agreement between Scudder Trust Company and the Registrant
dated October 1, 1996.
(Incorporated by reference to Post-Effective Amendment No. 109 to
the Registration Statement.)
(7) Fund Accounting Services Agreement between the Registrant, on behalf
of Scudder Quality Growth Fund and Scudder Fund Accounting
Corporation dated November 1, 1994.
(Incorporated by reference to Post-Effective Amendment No. 72 to the
Registration Statement.)
(8) Fund Accounting Services Agreement between the Registrant, on behalf
of Scudder Growth and Income Fund and Scudder Fund Accounting
Corporation dated October 17, 1994.
(Incorporated by reference to Post-Effective Amendment No. 73 to the
Registration Statement.)
Part C - Page 8
<PAGE>
(9) Fund Accounting Services Agreement between the Registrant, on behalf
of Scudder Classic Growth Fund, and Scudder Fund Accounting
Corporation dated September 9, 1996.
(Incorporated by reference to Post-Effective Amendment No. 99 to the
Registration Statement.)
(10) Amendment No. 1 dated August 31, 1999 to the Fund Accounting
Services Agreement between the Registrant, on behalf of Classic
Growth Fund, and Scudder Fund Accounting Corporation.
(Incorporated by reference to Post-Effective Amendment No. 109 to
the Registration Statement.)
(11) Fund Accounting Services Agreement between the Registrant, on behalf
of Scudder Tax Managed Small Company and Scudder Fund Accounting
Corporation dated July 30, 1998.
(Incorporated by reference to Post-Effective Amendment No. 99 to the
Registration Statement.)
(12) Fund Accounting Services Agreement between the Registrant, on behalf
of Scudder Tax Managed Growth Fund and Scudder Fund Accounting
Corporation dated July 30, 1998.
(Incorporated by reference to Post-Effective Amendment No. 99 to the
Registration Statement.)
(13) Fund Accounting Services Agreement between the Registrant, on behalf
of Scudder Dividend & Growth Fund and Scudder Fund Accounting
Corporation dated June 1, 1998.
(Incorporated by reference to Post-Effective Amendment No. 99 to the
Registration Statement.)
(14) Scudder Accounting Fee Schedule between the Registrant, on behalf of
Scudder Large Company Growth Fund - Class R Shares, and Scudder Fund
Accounting Corporation dated September 14, 1999.
(Incorporated by reference to Post-Effective Amendment No. 109 to
the Registration Statement.)
(15) Fund Accounting Services Agreement between the Registrant, on behalf
of Scudder Real Estate Investment Fund and Scudder Fund Accounting
Corporation dated March 2, 1998.
(Incorporated by reference to Post-Effective Amendment No. 99 to the
Registration Statement.)
(16) Investment Accounting Agreement between the Registrant, on behalf of
Scudder S&P 500 Index Fund and Scudder Fund Accounting Corporation
dated August 28, 1997.
(Incorporated by reference to Post-Effective Amendment No. 99 to the
Registration Statement.)
(17) Shareholder Services Agreement between the Registrant and Charles
Schwab & Co., Inc. dated June 1, 1990.
(Incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement.)
Part C - Page 9
<PAGE>
(18) 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.
(Incorporated by reference to Post-Effective Amendment No. 74 to the
Registration Statement.)
(19) Administrative Services Agreement between the Registrant on behalf
of Classic Growth Fund, and Kemper Distributors, Inc., dated April
1998.
(Incorporated by reference to Post-Effective Amendment No. 100 to
the Registration Statement.)
(19)(a) Amendment No. 1 to the Administrative Services Agreement between the
Registrant on behalf of Classic Growth Fund, and Kemper
Distributors, Inc., dated August 31, 1999.
(Incorporated by reference to Post-Effective Amendment No. 109 to
the Registration Statement.)
(20) Administrative Services Agreement between the Registrant on behalf
of Scudder Growth and Income Fund, and Scudder Investor Services,
Inc., dated May 3, 1999.
(Incorporated by reference to Post-Effective Amendment No. 105 to
the Registration Statement, as filed on May 28, 1999.)
(21) Administrative Services Agreement between the Registrant on behalf
of Scudder Large Company Growth Fund, and Scudder Investor Services,
Inc., dated May 3, 1999.
(Incorporated by reference to Post-Effective Amendment No. 105 to
the Registration Statement, as filed on May 28, 1999.)
(22) Form of Administrative Services Agreement between the Registrant
(on behalf of Classic Growth Fund, Scudder Capital Growth Fund,
Scudder Dividend and Growth Fund, Scudder Growth and Income Fund,
Scudder Large Company Growth Fund, Scudder S&P 500 Index Fund,
Scudder Small Company Stock Fund and Scudder Kemper Investments,
Inc.) dated July 17, 2000 (Incorporated by reference to
Post-Effective Amendment No. 118 to the Registration Statement,
filed on July 14, 2000).
(i) Opinion and Consent of Legal Counsel is to be filed by amendment.
(j) Consent of Independent Accountants is to be filed by amendment.
(k) Inapplicable.
(l) Inapplicable
(m) (1) 12b-1 Plan between the Registrant, on behalf of Scudder Growth and
Income Fund (Class R shares) and Scudder Large Company Growth Fund
(Class R shares), and Scudder Investor Services, Inc. (Incorporated
by reference to Post-Effective Amendment No. 105 to the Registration
Statement, as filed on May 28, 1999.)
Part C - Page 10
<PAGE>
(n) (1) Mutual Funds Multi-Distribution System Plan, Rule 18f-3 Plan.
(Incorporated by reference to Post-Effective Amendment No. 94 to the
Registration Statement.)
(2) Plan with respect to Scudder Growth and Income Fund pursuant to Rule
18f-3.
(Incorporated by reference to Post-Effective Amendment No. 105 to
the Registration Statement, as filed on May 28, 1999.)
(3) Plan with respect to Scudder Large Company Growth Fund pursuant to
Rule 18f-3.
(Incorporated by reference to Post-Effective Amendment No. 105 to
the Registration Statement, as filed on May 28, 1999.)
(4) Plan with respect to Scudder Dividend and Growth Fund pursuant to
Rule 18f-3. (Incorporated by reference to Post-Effective Amendment
No. 118 to the Registration Statement, as filed on July 14, 2000.)
(5) Plan with respect to Scudder Capital Growth Fund pursuant to Rule
18f-3. (Incorporated by reference to Post-Effective Amendment No.
118 to the Registration Statement, as filed on July 14, 2000.)
(6) Plan with respect to Scudder Growth and Income Fund pursuant to Rule
18f-3. (Incorporated by reference to Post-Effective Amendment No.
118 to the Registration Statement, as filed on July 14, 2000.)
(7) Plan with respect to Scudder S&P 500 Index Fund pursuant to Rule
18f-3. (Incorporated by reference to Post-Effective Amendment No.
118 to the Registration Statement, as filed on July 14, 2000.)
(8) Plan with respect to Scudder Small Company Stock Fund pursuant to
Rule 18f-3. (Incorporated by reference to Post-Effective Amendment
No. 118 to the Registration Statement, as filed on July 14, 2000.)
(9) Amended and Restated Plan with respect to Scudder Dividend and
Growth Fund pursuant to Rule 18f-3. (Incorporated by reference to
Post-Effective Amendment No. 118 to the Registration Statement, as
filed on July 14, 2000.)
(10) Amended and Restated Plan with respect to Scudder Capital Growth
Fund pursuant to Rule 18f-3. (Incorporated by reference to
Post-Effective Amendment No. 118 to the Registration Statement, as
filed on July 14, 2000.)
(11) Amended and Restated Plan with respect to Scudder Growth and Income
Fund pursuant to Rule 18f-3. (Incorporated by reference to
Post-Effective Amendment No. 118 to the Registration Statement, as
filed on July 14, 2000.)
Part C - Page 11
<PAGE>
(12) Amended and Restated Plan with respect to Scudder S&P 500 Index Fund
pursuant to Rule 18f-3. (Incorporated by reference to Post-Effective
Amendment No. 118 to the Registration Statement, as filed on July
14, 2000.)
(13) Amended and Restated Plan with respect to Scudder Small Company
Stock Fund pursuant to Rule 18f-3. (Incorporated by reference to
Post-Effective Amendment No. 118 to the Registration Statement, as
filed on July 14, 2000.)
(p) (1) Scudder Kemper Investments, Inc., Scudder Investor Services, Inc.
and Kemper Distributors, Inc. Code of Ethics.
(Incorporated by reference to Post-Effective Amendment No. 114 to
the Registration Statement, as filed on April 12, 2000.)
(2) Bankers Trust Company Code of Ethics.
(Incorporated by reference to Post-Effective Amendment No. 114 to
the Registration Statement, as filed on April 12, 2000.)
</TABLE>
Item 24. Persons Controlled by or under Common Control with Fund.
-------- --------------------------------------------------------
None
Item 25. Indemnification.
-------- ----------------
As permitted by Sections 17(h) and 17(i) of the Investment
Company Act of 1940, as amended (the "1940 Act"), pursuant to
Article IV of the Registrant's By-Laws (filed as Exhibit No. 2
to the Registration Statement), officers, directors, employees
and representatives of the Funds may be indemnified against
certain liabilities in connection with the Funds, and pursuant
to Section 12 of the Underwriting Agreement dated May 6, 1998
(filed as Exhibit No. 6(c) to the Registration Statement),
Scudder Investor Services, Inc. (formerly "Scudder Fund
Distributors, Inc."), as principal underwriter of the
Registrant, may be indemnified against certain liabilities
that it may incur. Said Article IV of the By-Laws and Section
12 of the Underwriting Agreement are hereby incorporated by
reference in their entirety.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Act"), may be
permitted to directors, officers and controlling persons of
the Registrant and the principal underwriter 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 director, officer, or
controlling person of the Registrant and the principal
underwriter in connection with the successful defense of any
action, suit or proceeding) is asserted against the Registrant
by such director, officer or controlling person or the
principal underwriter in connection with the shares 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.
Item 26. Business or Other Connections of Investment Adviser
-------- ---------------------------------------------------
Scudder Kemper Investments, Inc. 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 26.
Part C - Page 12
<PAGE>
<TABLE>
<CAPTION>
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
---- ------------------------------------
<S> <C>
Stephen R. Beckwith Treasurer, Scudder Kemper Investments, Inc.**
Director, Kemper Service Company
Director, Vice President and Treasurer, Scudder Fund Accounting Corporation*
Director and Treasurer, Scudder Stevens & Clark Corporation**
Director and Chairman, Scudder Defined Contribution Services, Inc.**
Director and President, Scudder Capital Asset Corporation**
Director and President, Scudder Capital Stock Corporation**
Director and President, Scudder Capital Planning Corporation**
Director and President, SS&C Investment Corporation**
Director and President, SIS Investment Corporation**
Director and President, SRV Investment Corporation**
Director and Chairman, Scudder Threadneedle International Ltd.
Director, Scudder Kemper Holdings (UK) Ltd. oo
Director and President, Scudder Realty Holdings Corporation *
Director, Scudder, Stevens & Clark Overseas Corporation o
Director and Treasurer, Zurich Investment Management, Inc. xx
Director and Treasurer, Zurich Kemper Investments, Inc.
Director, Kemper Distributors, Inc.
Lynn S. Birdsong Director, Vice President and Chief Investment Officer, Scudder Kemper Investments,
Inc.**
Director and Chairman, Scudder Investments (Luxembourg) S.A.#
Director, Scudder Investments (U.K.) Ltd. oo
Director and Chairman of the Board, Scudder Investments Asia, Ltd. ooo
Director and Chairman, Scudder Investments Japan, Inc. +
Senior Vice President, Scudder Investor Services, Inc.
Director and Chairman, Scudder Trust (Cayman) Ltd. +++
Director, Scudder, Stevens & Clark Australia x
Director and Vice President, Zurich Investment Management, Inc. xx
Director and President, Scudder, Stevens & Clark Corporation **
Director and President, Scudder , Stevens & Clark Overseas Corporation o
Director, Scudder Threadneedle International Ltd.
Director, Korea Bond Fund Management Co., Ltd. @
William H. Bolinder Director, Scudder Kemper Investments, Inc.**
Member Group Executive Board, Zurich Financial Services, Inc. ##
Chairman, Zurich-American Insurance Company xxx
Nicholas Bratt Director, Scudder Kemper Investments, Inc.**
Vice President, Scudder, Stevens & Clark Corporation **
Vice President, Scudder, Stevens & Clark Overseas Corporation o
Laurence W. Cheng Director, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland ##
Director, ZKI Holding Corporation xx
Gunther Gose Director, Scudder Kemper Investments, Inc.**
CFO, Member Group Executive Board, Zurich Financial Services, Inc. ##
CEO/Branch Offices, Zurich Life Insurance Company ##
Rolf Huppi Director, Chairman of the Board, Scudder Kemper Investments, Inc.**
Part C - Page 13
<PAGE>
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland ##
Director, Chairman of the Board, Zurich Holding Company of America xxx
Director, ZKI Holding Corporation xx
Harold D. Kahn Chief Financial Officer, Scudder Kemper Investments, Inc.**
Kathryn L. Quirk Chief Legal Officer, Chief Compliance Officer and Secretary, Scudder Kemper
Investments, Inc.**
Director, Vice President, Chief Legal Officer and Secretary, Kemper Distributors, Inc.
Director and Secretary, Kemper Service Company
Director, Senior Vice President, Chief Legal Officer & Assistant Clerk, Scudder
Investor Services, Inc.
Director, Vice President & Secretary, Scudder Fund Accounting Corporation*
Director, Vice President & Secretary, Scudder Realty Holdings Corporation*
Director & Assistant Clerk, Scudder Service Corporation*
Director and Secretary, SFA, Inc.*
Vice President, Director & Assistant Secretary, Scudder Precious Metals, Inc.***
Director, Scudder, Stevens & Clark Japan, Inc. ###
Director, Vice President and Secretary, Scudder, Stevens & Clark of Canada, Ltd.***
Director, Vice President and Secretary, Scudder Canada Investor Services Limited***
Director, Vice President and Secretary, Scudder Realty Advisers, Inc. @@
Director and Secretary, Scudder, Stevens & Clark Corporation**
Director and Secretary, Scudder, Stevens & Clark Overseas Corporation o
Director, Vice President and Secretary, Scudder Defined Contribution Services, Inc.**
Director, Vice President and Secretary, Scudder Capital Asset Corporation**
Director, Vice President and Secretary, Scudder Capital Stock Corporation**
Director, Vice President and Secretary, Scudder Capital Planning Corporation**
Director, Vice President and Secretary, SS&C Investment Corporation**
Director, Vice President and Secretary, SIS Investment Corporation**
Director, Vice President and Secretary, SRV Investment Corporation**
Director, Vice President, Chief Legal Officer and Secretary, Scudder Financial
Services, Inc.*
Director, Korea Bond Fund Management Co., Ltd. @
Director, Scudder Threadneedle International Ltd.
Director, Chairman of the Board and Secretary, Scudder Investments Canada, Ltd.
Director, Scudder Investments Japan, Inc. +
Director and Secretary, Scudder Kemper Holdings (UK) Ltd. oo
Director and Secretary, Zurich Investment Management, Inc. xx
Edmond D. Villani Director, President and Chief Executive Officer, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark Japan, Inc. ###
President and Director, Scudder, Stevens & Clark Overseas Corporation o
President and Director, Scudder, Stevens & Clark Corporation**
Director, Scudder Realty Advisors, Inc. @@
Director, IBJ Global Investment Management S.A. Luxembourg, Grand-Duchy of Luxembourg
Director, Scudder Threadneedle International Ltd.
Director, Scudder Investments Japan, Inc. +
Director, Scudder Kemper Holdings (UK) Ltd. oo
President and Director, Zurich Investment Management, Inc. xx
Director and Deputy Chairman, Scudder Investment Holdings Ltd.
* Two International Place, Boston, MA
@@ 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
Part C - Page 14
<PAGE>
# Societe Anonyme, 47, Boulevard Royal, L-2449 Luxembourg, R.C. Luxembourg B 34.564
*** Toronto, Ontario, Canada
+++ Grand Cayman, Cayman Islands, British West Indies
o 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
xx 222 S. Riverside, Chicago, IL
xxx Zurich Towers, 1400 American Ln., Schaumburg, IL
@ P.O. Box 309, Upland House, S. Church St., Grand Cayman, British West Indies
## Mythenquai-2, P.O. Box CH-8022, Zurich, Switzerland
oo One South Place, 5th Floor, London EC2M 2ZS England
ooo One Exchange Square, 29th Floor, Hong Kong
+ Kamiyachyo Mori Building, 12F1, 4-3-20, Toranomon, Minato-ku, Tokyo 105-0001
x Level 3, Five Blue Street, North Sydney, NSW 2060
</TABLE>
Item 27. Principal Underwriters.
-------- ----------------------
(a)
Scudder Investor Services, Inc. acts as principal underwriter of the
Registrant's shares and also acts as principal underwriter for other
funds managed by Scudder Kemper Investments, Inc.
(b)
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 27.
<TABLE>
<CAPTION>
(1) (2) (3)
Scudder Investor Services, Inc. Position and Offices with Positions and
Name and Principal Scudder Investor Services, Inc. Offices with Registrant
Business Address ------------------------------- -----------------------
----------------
<S> <C> <C> <C>
Lynn S. Birdsong Senior Vice President None
345 Park Avenue
New York, NY 10154
Mark S. Casady President, Director and Assistant None
Two International Place Treasurer
Boston, MA 02110
Linda Coughlin Director and Senior Vice President Trustee and President
Two International Place
Boston, MA 02110
Richard W. Desmond Vice President None
345 Park Avenue
New York, NY 10154
Part C - Page 15
<PAGE>
Scudder Investor Services, Inc. Position and Offices with Positions and
Name and Principal Scudder Investor Services, Inc. Offices with Registrant
Business Address ------------------------------- -----------------------
----------------
Paul J. Elmlinger Senior Vice President and Assistant None
345 Park Avenue Clerk
New York, NY 10154
Philip S. Fortuna Vice President None
101 California Street
San Francisco, CA 94111
William F. Glavin Vice President None
Two International Place
Boston, MA 02110
Margaret D. Hadzima Assistant Treasurer None
Two International Place
Boston, MA 02110
John R. Hebble Assistant Treasurer Treasurer
Two International Place
Boston, MA 02110
James J. McGovern Chief Financial Officer and Treasurer None
345 Park Avenue
New York, NY 10154
Lorie C. O'Malley Vice President None
Two International Place
Boston, MA 02110
Caroline Pearson Clerk Assistant Secretary
Two International Place
Boston, MA 02110
Kathryn L. Quirk Director, Senior Vice President, Chief Trustee, Vice President
345 Park Avenue Legal Officer and Assistant Clerk and Assistant Secretary
New York, NY 10154
Robert A. Rudell Director and Vice President None
Two International Place
Boston, MA 02110
Linda J. Wondrack Vice President and Chief Compliance None
Two International Place Officer
Boston, MA 02110
</TABLE>
(c)
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Net Underwriting Compensation on
Name of Principal Discounts and Redemptions Brokerage Other
Underwriter Commissions And Repurchases Commissions Compensation
----------- ----------- --------------- ----------- ------------
Part C - Page 16
<PAGE>
<S> <C> <C> <C> <C> <C>
Scudder Investor None None None None
Services, Inc.
</TABLE>
(d)
Kemper Distributors, Inc. acts as principal underwriter of the
Registrant's shares and acts as principal underwriter of the Kemper Funds.
(e)
Information on the officers and directors of Kemper Distributors, Inc.,
principal underwriter for the Registrant is set forth below. The principal
business address is 222 South Riverside Plaza, Chicago, Illinois 60606.
<TABLE>
<CAPTION>
(1) (2) (3)
Positions and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
<S> <C> <C> <C>
James L. Greenawalt President None
Linda C. Coughlin Director and Vice Chairman Trustee and President
Kathryn L. Quirk Director, Secretary, Chief Legal Trustee, Vice President and Assistant
Officer and Vice President Secretary
James J. McGovern Chief Financial Officer and Treasurer None
Linda J. Wondrack Vice President and Chief Compliance None
Officer
Paula Gaccione Vice President None
Michael E. Harrington Managing Director None
Robert A. Rudell Vice President None
Todd N. Gierke Assistant Treasurer None
Philip J. Collora Assistant Secretary None
Thomas V. Bruns Managing Director None
Paul J. Elmlinger Assistant Secretary None
Diane E. Ratekin Assistant Secretary None
Mark S. Casady Director and Chairman None
Herbert A. Christiansen Vice President None
Robert Froelich Managing Director None
C. Perry Moore Senior Vice President and Managing None
Director
Part C - Page 17
<PAGE>
Positions and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
Lorie O'Malley Managing Director None
William Glavin Managing Director None
Gary Kocher Managing Director None
Howard Schneider Managing Director None
Johnston Allan Norris Managing Director and Senior Vice None
President
John H. Robinson, Jr. Managing Director and Senior Vice None
President
</TABLE>
(f) Not applicable
Item 28. 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 Kemper
Investments Inc., Two International Place, Boston, MA
02110-4103. Records relating to the duties of the Registrant's
custodian are maintained by State Street Bank and Trust
Company, Heritage Drive, North Quincy, Massachusetts. Records
relating to the duties of the Registrant's transfer agent are
maintained by Scudder Service Corporation, Two International
Place, Boston, Massachusetts.
Item 29. Management Services.
-------- --------------------
Inapplicable.
Item 30. Undertakings.
-------- -------------
Inapplicable.
Part C - Page 18
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Boston and the Commonwealth of
Massachusetts on the 26th day of July, 2000.
INVESTMENT TRUST
By /s/ John Millette
---------------------
John Millette
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
amendment to its Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Henry P. Becton, Jr.
--------------------------------------
Henry P. Becton, Jr.* Trustee July 26, 2000
/s/ Linda C. Coughlin
--------------------------------------
Linda C. Coughlin* Trustee and President (Chief Executive July 26, 2000
Officer)
/s/Dawn-Marie Driscoll
--------------------------------------
Dawn-Marie Driscoll* Trustee July 26, 2000
/s/ Edgar R. Fiedler
--------------------------------------
Edgar R. Fiedler * Trustee July 26, 2000
/s/ Keith R. Fox
--------------------------------------
Keith R. Fox* Trustee July 26, 2000
/s/ Joan E. Spero
--------------------------------------
Joan E. Spero* Trustee July 26, 2000
/s/ Jean Gleason Stromberg
--------------------------------------
Jean Gleason Stromberg * Trustee July 26, 2000
/s/ Jean C. Tempel
--------------------------------------
Jean C. Tempel* Trustee July 26, 2000
/s/ Steven Zaleznick
--------------------------------------
Steven Zaleznick* Trustee July 26, 2000
/s/ John R. Hebble
--------------------------------------
John R. Hebble Treasurer (Chief Financial Officer) July 26, 2000
</TABLE>
<PAGE>
*By: /s/ John Millette
---------------------------
John Millette**
Secretary
** Attorney-in-fact pursuant to the powers of attorney
contained in and incorporated by reference to
Post-Effective Amendment No. 118 to the Registration
Statement, as filed on July 14, 2000.
<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. 120
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 71
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
INVESTMENT TRUST
<PAGE>
INVESTMENT TRUST
Exhibit (b)(1)
Exhibit (d)(10)
Exhibit (d)(11)
2
