-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SVv3dk+YKTVs6TiLk0uMVQ7XtFGhlUUuwXcb/OFJ++LsnaWQ7QRtSrqwuIpPMdE5 yqmBWM5Jh9uxHWDPat2DQw== 0000088053-02-001332.txt : 20021227 0000088053-02-001332.hdr.sgml : 20021227 20021227135837 ACCESSION NUMBER: 0000088053-02-001332 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 20021227 EFFECTIVENESS DATE: 20021227 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCUDDER INVESTORS TRUST CENTRAL INDEX KEY: 0001072010 STATE OF INCORPORATION: MA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 333-65661 FILM NUMBER: 02869959 BUSINESS ADDRESS: STREET 1: 222 SOUTH RIVERSIDE PLAZA CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 2123266200 MAIL ADDRESS: STREET 1: 222 SOUTH RIVERSIDE PLAZA CITY: CHICAGO STATE: IL ZIP: 60606 FORMER COMPANY: FORMER CONFORMED NAME: KEMPER FUNDS TRUST DATE OF NAME CHANGE: 19981013 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCUDDER INVESTORS TRUST CENTRAL INDEX KEY: 0001072010 STATE OF INCORPORATION: MA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-09057 FILM NUMBER: 02869960 BUSINESS ADDRESS: STREET 1: 222 SOUTH RIVERSIDE PLAZA CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 2123266200 MAIL ADDRESS: STREET 1: 222 SOUTH RIVERSIDE PLAZA CITY: CHICAGO STATE: IL ZIP: 60606 FORMER COMPANY: FORMER CONFORMED NAME: KEMPER FUNDS TRUST DATE OF NAME CHANGE: 19981013 485BPOS 1 ptc-sin.txt Filed electronically with the Securities and Exchange Commission on December 27, 2002 File No. 333-65661 File No. 811-09057 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. 13 /X/ And -- REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /_/ Amendment No. 14 /X/ -- SCUDDER INVESTORS TRUST ----------------------- (Exact Name of Registrant as Specified in Charter) 222 South Riverside Plaza, Chicago, Illinois 60606 -------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code: (312) 537-7000 John Millette, Secretary ------------------------ Deutsche Investment Management Americas Inc. -------------------------------------------- Two International Place ----------------------- Boston, Massachusetts 02110 --------------------------- (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) /_/ 75 days after filing pursuant to paragraph (a)(2) /_/ On (date) pursuant to paragraph (a)(1) /_/ 60 days after filing pursuant to paragraph (a)(1) /X/ On January 1, 2003 pursuant to paragraph (b) /_/ On (date) pursuant to paragraph (a)(3) of Rule 485 /_/ If the following is appropriate, check the preceding box: This post-effective amendment designates a new effective date for a previously filed post-effective amendment. SCUDDER INVESTMENTS Index Funds I Classes A, B and C Prospectus - -------------------------------------------------------------------------------- January 1, 2003 - -------------------------------------------------------------------------------- Scudder S&P 500 Stock Fund 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. Contents How the Fund Works How to Invest in the Fund 4 The Fund's Main Investment 16 Choosing a Share Class Strategy 21 How to Buy Shares 5 The Main Risks of Investing in the Fund 22 How to Exchange or Sell Shares 6 The Fund's Performance 23 Policies You Should Know History About 8 How Much Investors Pay 30 Understanding Distributions and Taxes 9 Other Policies and Secondary Risks 10 Who Manages and Oversees the Fund 12 Financial Highlights "Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and "500" are trademarks of the McGraw-Hill Companies, Inc. and have been licensed for use by Scudder Investments, Inc. The Scudder S&P 500 Stock Fund is not sponsored, endorsed, sold or promoted by Standard & Poor's and Standard & Poor's makes no representation regarding the advisability of investing in the fund. Additional information may be found in the fund's Statement of Additional Information. How the Fund Works On the next few pages, you'll find information about this fund's investment goal, the main strategies it uses to pursue that goal and the main risks that could affect performance. Whether you are considering investing in the 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. - -------------------------------------------------------------------------------- Class A Class B Class C ticker symbol KSAAX KSABX KSACX fund number 155 255 355 Scudder S&P 500 Stock Fund - -------------------------------------------------------------------------------- The Fund's Main Investment Strategy The fund seeks returns that, before expenses, correspond to the total return of US common stocks as represented by the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500 Index"). The fund seeks to match, as closely as possible before expenses, the performance of the S&P 500 Index, which emphasizes stocks of large US companies. It does this by investing, under normal circumstances, at least 80% of total assets, plus the amount of any borrowings for investment purposes, in common stocks and securities included in the S&P 500 Index. In choosing stocks, the fund uses an indexing strategy. The fund buys the largest stocks of the S&P 500 Index in roughly the same proportion to the S&P 500 Index. With the smaller stocks of the S&P 500 Index, the portfolio managers use a statistical process known as sampling to select stocks whose overall performance is expected to be similar to that of the smaller companies in the S&P 500 Index. The fund seeks to keep the composition of its portfolio similar to the S&P 500 Index in industry distribution, market capitalization and significant fundamental characteristics (such as price-to-book ratios and dividend yields). Over the long term, the portfolio managers seek a correlation between the performance of the fund, before expenses, and the S&P 500 Index of 98% or better. A figure of 100% would indicate perfect correlation. The fund will normally sell a stock when it is removed from the S&P 500 Index or as a result of the fund's statistical process. - -------------------------------------------------------------------------------- OTHER INVESTMENTS The fund may invest up to 20% of total assets in stock index futures and options, as well as short-term debt securities. The fund typically invests new flows of money in index futures in order to gain immediate exposure to the S&P 500 Index. Part C - Page 4 The Main Risks of Investing in the Fund There are several risk factors that could hurt the fund's performance, cause you to lose money or cause the fund's performance to trail that of other investments. Stock Market Risk. 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 US market. When large company stock prices fall, you should expect the value of your investment to fall as well. Large company stocks at times may not perform as well as stocks of smaller or mid-size companies. 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 addition, movements in financial markets may adversely affect a stock's price, regardless of how well the company performs. The market as a whole may not favor the type of investments the fund makes and the fund may not be able to get an attractive price for them. Index Investing Risk. The fund's index strategy involves several risks. The fund could underperform the S&P 500 Index during short periods or over the long term, either because its selection of stocks failed to track the S&P 500 Index or because of the effects of fund expenses or shareholder transactions. The fund's index strategy also means that it does not have the option of using defensive investments or other management actions to reduce the fund's exposure to a declining market. Derivatives Risk. The fund may invest, to a limited extent, in stock index futures or options, which are types of derivatives. The fund will not use these derivatives for speculative purposes or as leveraged instruments that magnify the gains or losses of an investment. The fund invests in derivatives to keep cash on hand to meet shareholder redemptions or other needs while maintaining exposure to the stock market. Risks associated with derivatives include: the risk that the derivative is not well correlated with the security for which it is acting as a substitute; the risk that derivatives used for risk management may not have the intended effects and may result in losses or missed opportunities; and the risk that the fund cannot sell the derivative because of an illiquid secondary market. THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS. This fund is designed for long-term investors interested in a fund that is designed to avoid substantially underperforming the overall large-cap stock market. Part C - Page 5 The Fund's Performance History While a fund's past performance (before and after taxes) isn't necessarily a sign of how it will do in the future, it can be valuable for an investor to know. The bar chart shows the fund's Class A shares performance during its first complete calendar year, which may give some idea of risk. The bar chart does not reflect sales loads; if it did, total returns would be lower. The table, following the bar chart, shows how fund performance compares with a broad-based market index (which, unlike the fund, does not have any fees or expenses). The table includes the effects of maximum sales loads. The performance of both the fund and the index varies over time. All figures assume reinvestment of dividends and distributions (in the case of after-tax returns, reinvested net of assumed tax rates). The table shows returns on a before-tax and after-tax basis. After-tax returns are shown for Class A only and will vary for Class B and C. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown in the table. After-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. Scudder S&P 500 Stock Fund - -------------------------------------------------------------------------------- Annual Total Return (%) as of 12/31 Class A - -------------------------------------------------------------------------------- THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE BAR CHART DATA: 2001 -13.56 2002 Total Return as of September 30: -28.59% For the period included in the bar chart: Best Quarter: 10.00%, Q4 2001 Worst Quarter: -14.97%, Q3 2001 Part C - Page 6 - -------------------------------------------------------------------------------- Average Annual Total Returns (%) as of 12/31/2001 - -------------------------------------------------------------------------------- 1 Year Since Inception* - -------------------------------------------------------------------------------- Class A - -------------------------------------------------------------------------------- Return before Taxes -17.45 -16.71 - -------------------------------------------------------------------------------- Return after Taxes on Distributions -17.51 -16.86 - -------------------------------------------------------------------------------- Return after Taxes on Distributions and Sale of Fund Shares -10.63 -13.24 - -------------------------------------------------------------------------------- Class B (Return before Taxes) -16.79 -16.59 - -------------------------------------------------------------------------------- Class C (Return before Taxes) -14.22 -15.12 - -------------------------------------------------------------------------------- Index (reflects no deductions for fees, expenses or taxes) -11.87 -13.05 - -------------------------------------------------------------------------------- Index: The S&P 500 Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. * Since 4/3/2000. Index comparisons begin on 3/31/2000. Total returns for 2000 and 2001 would have been lower if operating expenses hadn't been reduced. For more recent information, call your financial representative at (800) 621-1048 or visit our Web site at www.scudder.com. THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS. The Return after Taxes on Distributions assumes that an investor holds fund shares at the end of the period. The number only represents the fund's taxable distributions, not a shareholder's gain or loss from selling fund shares. The Return after Taxes on Distributions and Sale of Fund Shares assumes that an investor sold his or her fund shares at the end of the period. The number reflects both the fund's taxable distributions and a shareholder's gain or loss from selling fund shares. Part C - Page 7 How Much Investors Pay This table describes the fees and expenses that you may pay if you buy and hold fund shares. - -------------------------------------------------------------------------------- Fee Table Class A Class B Class C - -------------------------------------------------------------------------------- Shareholder Fees, paid directly from your investment - -------------------------------------------------------------------------------- Maximum Sales Charge (Load) Imposed on Purchases (as % of offering price) 4.50% None None - -------------------------------------------------------------------------------- Maximum Deferred Sales Charge (Load) (as a % of redemption proceeds) None* 4.00% 1.00% - -------------------------------------------------------------------------------- Annual Operating Expenses, deducted from fund assets - -------------------------------------------------------------------------------- Management Fee** 0.33% 0.33% 0.33% - -------------------------------------------------------------------------------- Distribution/Service (12b-1) Fees 0.25 1.00 1.00 - -------------------------------------------------------------------------------- Other Expenses*** 0.38 0.43 0.40 - -------------------------------------------------------------------------------- Total Annual Operating Expenses+ 0.96 1.76 1.73 - -------------------------------------------------------------------------------- * The redemption of shares purchased at net asset value under the Large Order NAV Purchase Privilege (see "Policies You Should Know About -- Policies about transactions") may be subject to a contingent deferred sales charge of 1.00% if redeemed within one year of purchase and 0.50% if redeemed during the second year following purchase. ** Information in the table has been restated to reflect a new investment management fee. The fee became effective on April 5, 2002. *** Includes a fixed rate administrative fee of 0.350%, 0.400% and 0.375% for Class A, Class B and Class C shares, respectively, paid pursuant to an Administrative Services Agreement ("Agreement") between the fund and the Advisor. Under this Agreement, in exchange for the payment of the administrative fee, the Advisor provides or pays others to provide substantially all of the administrative services required by each class of shares (other than those provided by the Advisor under its investment management agreement with the fund). Effective September 30, 2003, this Agreement will be terminated. However, the Advisor has contractually agreed to waive all or a portion of its management fee and reimburse or pay operating expenses of the fund as described below. + Effective October 1, 2003 through September 30, 2005, the Advisor has contractually agreed to waive all or a portion of its management fee and reimburse or pay operating expenses of the fund to the extent necessary to maintain the fund's total administrative and management expenses at 0.75%, 0.80% and 0.80% for Class A, Class B and Class C shares, respectively, excluding certain expenses such as extraordinary expenses, taxes, brokerage, interest, Rule 12b-1 and/or service fees, and trustee and trustee counsel fees. Under this arrangement, estimated net operating expenses are expected to be 1.03%, 1.83% and 1.82% for Class A, Class B and Class C shares, respectively. Based on the costs above, this example helps you compare the expenses of each share class to those of other mutual funds. This example assumes the expenses above remain the same. It also assumes that you invested $10,000, earned 5% annual returns and reinvested all dividends and distributions. This is only an example; actual expenses will be different. - -------------------------------------------------------------------------------- Example 1 Year 3 Years 5 Years 10 Years - -------------------------------------------------------------------------------- Expenses, assuming you sold your shares at the end of each period - -------------------------------------------------------------------------------- Class A shares $544 $742 $957 $1,575 - -------------------------------------------------------------------------------- Class B shares 579 854 1,154 1,668 - -------------------------------------------------------------------------------- Class C shares 276 545 939 2,041 - -------------------------------------------------------------------------------- Expenses, assuming you kept your shares - -------------------------------------------------------------------------------- Class A shares $544 $742 $957 $1,575 - -------------------------------------------------------------------------------- Class B shares 179 554 954 1,668 - -------------------------------------------------------------------------------- Class C shares 176 545 939 2,041 - -------------------------------------------------------------------------------- Part C - Page 8 Other Policies and Secondary Risks While the previous pages describe the main points of the fund's strategy and risks, there are a few other issues to know about: Other Policies o Although major changes tend to be infrequent, the fund's Board of Trustees could change the fund's investment goal without seeking shareholder approval. The Board will provide shareholders with at least 60 days' notice prior to making any changes to the 80% investment policy, as described herein. Secondary Risks Pricing Risk. At times, market conditions might make it hard to value some investments. For example, if the fund has valued its securities too highly, you may end up paying too much for fund shares when you buy into the fund. If the fund underestimates their price, you may not receive the full market value for your fund shares when you sell. For more information This prospectus doesn't tell you about every policy or risk of investing in the fund. If you want more information on the fund's 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 last page tells you how to do this). Keep in mind that there is no assurance that any mutual fund will achieve its goal. Part C - Page 9 Who Manages and Oversees the Fund The investment advisor Deutsche Investment Management Americas Inc. ("DeIM"), which is part of Deutsche Asset Management, is the investment advisor for the fund. Under the supervision of the Board of Trustees, DeIM, with headquarters at 345 Park Avenue, New York, NY, makes the fund's investment decisions, buys and sells securities for the fund and conducts research that leads to these purchase and sale decisions. DeIM and its predecessors have more than 80 years of experience managing mutual funds. DeIM provides a full range of investment advisory services to institutional and retail clients. The fund's investment advisor is also responsible for selecting brokers and dealers and for negotiating brokerage commissions and dealer charges. Deutsche Asset Management is the marketing name in the US for the asset management activities of Deutsche Bank AG, DeIM, Deutsche Asset Management, Inc., Deutsche Bank Securities, Inc., Deutsche Asset Management Investment Services Ltd., Deutsche Bank Trust Company Americas and Scudder Trust Company. Deutsche Asset Management is a global asset management organization that offers a wide range of investing expertise and resources, including hundreds of portfolio managers and analysts and an office network that reaches the world's major investment centers. This well-resourced global investment platform brings together a wide variety of experience and investment insight across industries, regions, asset classes and investing styles. DeIM is an indirect, wholly-owned subsidiary of Deutsche Bank AG. Deutsche Bank AG is a major global banking institution that is engaged in a wide range of financial services, including investment management, mutual fund, retail, private and commercial banking, investment banking and insurance. The advisor receives a management fee from the fund. For the most recent fiscal year, the actual amount paid in management fees was 0.37% of the fund's average daily net assets. Part C - Page 10 Effective April 5, 2002, Scudder S&P 500 Stock Fund entered into a new investment management agreement with the advisor. The table below describes the new fee rates. - --------------------------------------------------------------------- Average Daily Net Assets Fee Rate - --------------------------------------------------------------------- New Investment Management Fee - --------------------------------------------------------------------- first $100 million 0.33% - --------------------------------------------------------------------- next $100 million 0.29% - --------------------------------------------------------------------- more than $200 million 0.27% - --------------------------------------------------------------------- On September 27, 2002, Deutsche Bank AG agreed to the sale of its global passive equity, enhanced equity and passive fixed income business to Northern Trust Corporation. Under this agreement, DeIM will remain as investment advisor to the fund and Northern Trust Investments, Inc., a subsidiary of Northern Trust Corporation, will become a subadvisor to the fund, subject to shareholder approval and satisfaction of certain other conditions, within three to six months. Part C - Page 11 Financial Highlights This table is designed to help you understand the fund's financial performance. 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 the fund would have earned (or lost), assuming all dividends and distributions were reinvested. This information has been audited by Ernst & Young LLP, independent auditors, whose report, along with the fund's financial statements, is included in the annual report (see "Shareholder reports" on the last page). Scudder S&P 500 Stock Fund -- Class A - -------------------------------------------------------------------------------- Years Ended August 31, 2002 2001 2000^a - -------------------------------------------------------------------------------- Selected Per Share Data - -------------------------------------------------------------------------------- Net asset value, beginning of period $ 7.10 $ 9.59 $ 9.50 - -------------------------------------------------------------------------------- Income from investment operations: Net investment income^b .03 .03 .03 - -------------------------------------------------------------------------------- Net realized and unrealized gain (loss) (1.37) (2.46) .06 - -------------------------------------------------------------------------------- Total from investment operations (1.34) (2.43) .09 - -------------------------------------------------------------------------------- Less distribution from: Net investment income (.01) (.04) -- - -------------------------------------------------------------------------------- Net realized gains on investment transactions -- (.02) -- - -------------------------------------------------------------------------------- Total distributions (.01) (.06) -- - -------------------------------------------------------------------------------- Net asset value, end of period $ 5.75 $ 7.10 $ 9.59 - -------------------------------------------------------------------------------- Total Return (%)^c (18.87) (25.46)^d .95^d** - -------------------------------------------------------------------------------- Ratios to Average Net Assets and Supplemental Data - -------------------------------------------------------------------------------- Net assets, end of period ($ in millions) 51 45 22 - -------------------------------------------------------------------------------- Ratio of expenses before expense reductions (%) 1.00 1.62^e 3.19* - -------------------------------------------------------------------------------- Ratio of expenses after expense reductions (%) 1.00 1.03^e 1.00* - -------------------------------------------------------------------------------- Ratio of net investment income (loss) (%) .48 .41 .90* - -------------------------------------------------------------------------------- Portfolio turnover rate (%) 12 8 43* - -------------------------------------------------------------------------------- ^a For the period from April 3, 2000 (commencement of operations) to August 31, 2000. ^b Based on average shares outstanding during the period. ^c Total return does not reflect the effect of any sales charges. ^d Total return would have been lower had certain expenses not been reduced. ^e The ratios of operating expenses excluding costs incurred in connection with a fund complex reorganization before and after expense reductions were 1.61% and 1.02%, respectively. * Annualized ** Not annualized Part C - Page 12 Scudder S&P 500 Stock Fund -- Class B - -------------------------------------------------------------------------------- Years Ended August 31, 2002 2001 2000^a - -------------------------------------------------------------------------------- Selected Per Share Data - -------------------------------------------------------------------------------- Net asset value, beginning of period $ 7.06 $ 9.57 $ 9.50 - -------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss)^b (.02) (.03) .00 - -------------------------------------------------------------------------------- Net realized and unrealized gain (loss) (1.36) (2.46) .07 - -------------------------------------------------------------------------------- Total from investment operations (1.38) (2.49) .07 - -------------------------------------------------------------------------------- Less distribution from: Net realized gains on investment transactions -- (.02) -- - -------------------------------------------------------------------------------- Net asset value, end of period $ 5.68 $ 7.06 $ 9.57 - -------------------------------------------------------------------------------- Total Return (%)^c (19.55) (26.04)^d .74^d** - -------------------------------------------------------------------------------- Ratios to Average Net Assets and Supplemental Data - -------------------------------------------------------------------------------- Net assets, end of period ($ in millions) 13 14 3 - -------------------------------------------------------------------------------- Ratio of expenses before expense reductions (%) 1.80 2.64^e 4.18* - -------------------------------------------------------------------------------- Ratio of expenses after expense reductions (%) 1.80 1.81^e 1.75* - -------------------------------------------------------------------------------- Ratio of net investment income (loss) (%) (.32) (.38) .09* - -------------------------------------------------------------------------------- Portfolio turnover rate (%) 12 8 43* - -------------------------------------------------------------------------------- ^a For the period from April 3, 2000 (commencement of operations) to August 31, 2000. ^b Based on average shares outstanding during the period. ^c Total return does not reflect the effect of any sales charges. ^d Total return would have been lower had certain expenses not been reduced. ^e The ratios of operating expenses excluding costs incurred in connection with a fund complex reorganization before and after expense reductions were 2.64% and 1.80%, respectively. * Annualized ** Not annualized Part C - Page 13 Scudder S&P 500 Stock Fund -- Class C - -------------------------------------------------------------------------------- Years Ended August 31, 2002 2001 2000^a - -------------------------------------------------------------------------------- Selected Per Share Data - -------------------------------------------------------------------------------- Net asset value, beginning of period $ 7.06 $ 9.57 $ 9.50 - -------------------------------------------------------------------------------- Income from investment operations: Net investment income (loss)^b (.02) (.03) .00 - -------------------------------------------------------------------------------- Net realized and unrealized gain (loss) (1.36) (2.46) .07 - -------------------------------------------------------------------------------- Total from investment operations (1.38) (2.49) .07 - -------------------------------------------------------------------------------- Less distribution from: Net realized gains on investment transactions -- (.02) -- - -------------------------------------------------------------------------------- Net asset value, end of period $ 5.68 $ 7.06 $ 9.57 - -------------------------------------------------------------------------------- Total Return (%)^c (19.55) (26.04)^d .74^d** - -------------------------------------------------------------------------------- Ratios to Average Net Assets and Supplemental Data - -------------------------------------------------------------------------------- Net assets, end of period ($ in millions) 8 5 2 - -------------------------------------------------------------------------------- Ratio of expenses before expense reductions (%) 1.77 2.67^e 4.13* - -------------------------------------------------------------------------------- Ratio of expenses after expense reductions (%) 1.77 1.80^e 1.75* - -------------------------------------------------------------------------------- Ratio of net investment income (loss) (%) (.29) (.36) .09* - -------------------------------------------------------------------------------- Portfolio turnover rate (%) 12 8 43* - -------------------------------------------------------------------------------- ^a For the period from April 3, 2000 (commencement of operations) to August 31, 2000. ^b Based on average shares outstanding during the period. ^c Total return does not reflect the effect of any sales charges. ^d Total return would have been lower had certain expenses not been reduced. ^e The ratios of operating expenses excluding costs incurred in connection with a fund complex reorganization before and after expense reductions were 2.66% and 1.79%, respectively. * Annualized ** Not annualized Part C - Page 14 How to Invest in the Fund The following pages tell you about many of the services, choices and benefits of being a shareholder. You'll also find information on how to check the status of your account using the method that's most convenient for you. You can find out more about the topics covered here by speaking with your financial representative or a representative of your workplace retirement plan or other investment provider. Choosing a Share Class In this prospectus, there are three share classes for the fund. Each class has its own fees and expenses, offering you a choice of cost structures. Class A, Class B and Class C shares are intended for investors seeking the advice and assistance of a financial representative, who may receive compensation for those services through sales commissions, service fees and/or distribution fees. Before you invest, take a moment to look over the characteristics of each share class, so that you can be sure to choose the class that's right for you. You may want to ask your financial representative to help you with this decision. We describe each share class in detail on the following pages. But first, you may want to look at the table below, which gives you a brief comparison of the main features of each class. - -------------------------------------------------------------------------------- Classes and features Points to help you compare - -------------------------------------------------------------------------------- Class A o Sales charges of up to 4.50%, charged o Some investors may be able to reduce when you buy shares or eliminate their sales charges; see next page o In most cases, no charges when you sell shares o Total annual operating expenses are lower than those for Class B or o Up to 0.25% annual service fee Class C - -------------------------------------------------------------------------------- Class B o No charges when you buy shares o The deferred sales charge rate falls to zero after six years o Deferred sales charge declining from 4.00%, charged when you sell shares o Shares automatically convert to you bought within the last six years Class A six years after purchase, which means lower annual expenses o 1.00% annual distribution/service fee going forward - -------------------------------------------------------------------------------- Class C o No charges when you buy shares o The deferred sales charge rate is lower, but your shares never convert o Deferred sales charge of 1.00%, to Class A, so annual expenses charged when you sell shares you remain higher bought within the last year o 1.00% annual distribution/service fee - -------------------------------------------------------------------------------- Your financial representative may be paid a fee when you buy shares and may receive different levels of compensation depending upon which class of shares you buy. In addition to these payments, the fund's advisor may provide compensation to financial representatives for distribution, administrative and promotional services. Part C - Page 16 Class A shares Class A shares have a 12b-1 plan, under which a service fee of up to 0.25% is deducted from class assets each year. Class A shares have a sales charge that varies with the amount you invest: Sales charge as a % Sales charge as a % of Your investment of offering price your net investment - --------------------------------------------------------------------- Up to $100,000 4.50% 4.71% - --------------------------------------------------------------------- $100,000-$249,999 3.50 3.63 - --------------------------------------------------------------------- $250,000-$499,999 2.60 2.67 - --------------------------------------------------------------------- $500,000-$999,999 2.00 2.04 - --------------------------------------------------------------------- $1 million or more See below and next page - --------------------------------------------------------------------- You may be able to lower your Class A sales charges if: o you plan to invest at least $100,000 over the next 24 months ("letter of intent") o the amount of shares you already own (including shares in certain other funds) plus the amount you're investing now is at least $100,000 ("cumulative discount") o you are investing a total of $100,000 or more in several funds at once ("combined purchases") The point of these three features is to let you count investments made at other times for purposes of calculating your present sales charge. Any time you can use the privileges to "move" your investment into a lower sales charge category in the table above, it's generally beneficial for you to do so. You can take advantage of these methods by filling in the appropriate sections of your application or by speaking with your financial representative. THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS. Class A shares may make sense for long-term investors, especially those who are eligible for reduced or eliminated sales charges. Part C - Page 17 You may be able to buy Class A shares without sales charges when you are: o reinvesting dividends or distributions o investing through certain workplace retirement plans o participating in an investment advisory program under which you pay a fee to an investment advisor or other firm for portfolio management services o exchanging an investment in Class A shares of another fund for an investment in the fund unless the fund in which you are investing has a higher sales load, in which case you would be required to pay the difference o a current or former director or trustee of the Deutsche or Scudder mutual funds, an employee, the employee's spouse or life partner and children or step-children age 21 or younger of Deutsche Bank or its affiliates or a sub-advisor to any fund in the Scudder family of funds or a broker-dealer authorized to sell shares of the funds There are a number of additional provisions that apply in order to be eligible for a sales charge waiver. Each fund may waive the sales charges for investors in other situations as well. Your financial representative or Shareholder Services can answer your questions and help you determine if you are eligible. If you're investing $1 million or more, either as a lump sum or through one of the sales charge reduction features described on the previous page, you may be eligible to buy Class A shares without sales charges. However, you may be charged a contingent deferred sales charge (CDSC) of 1.00% on any shares you sell within the first year of owning them and a similar charge of 0.50% on shares you sell within the second year of owning them ("Large Order NAV Purchase Privilege"). This CDSC is waived under certain circumstances (see "Policies You Should Know About"). Your financial representative or Shareholder Services can answer your questions and help you determine if you're eligible. Part C - Page 18 Class B shares With Class B shares, you pay no up-front sales charges to the fund. Class B shares have a 12b-1 plan, under which a distribution fee of 0.75% and a service fee of up to 0.25% are deducted from class assets each year. This means the annual expenses for Class B shares are somewhat higher (and their performance correspondingly lower) compared to Class A shares. After six years, Class B shares automatically convert to Class A shares, which has the net effect of lowering the annual expenses from the seventh year on. However, unlike Class A shares, your entire investment goes to work immediately. Class B shares have a CDSC. This charge declines over the years you own shares and disappears completely after six years of ownership. But for any shares you sell within those six years, you may be charged as follows: Year after you bought shares CDSC on shares you sell - --------------------------------------------------------------------- First year 4.00% - --------------------------------------------------------------------- Second or third year 3.00 - --------------------------------------------------------------------- Fourth or fifth year 2.00 - --------------------------------------------------------------------- Sixth year 1.00 - --------------------------------------------------------------------- Seventh year and later None (automatic conversion to Class A) - --------------------------------------------------------------------- This CDSC is waived under certain circumstances (see "Policies You Should Know About"). Your financial representative or Shareholder Services can answer your questions and help you determine if you're eligible. While Class B shares don't have any front-end sales charges, their higher annual expenses mean that over the years you could end up paying more than the equivalent of the maximum allowable front-end sales charge. THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS. Class B shares may make sense for long-term investors who prefer to see all of their investment go to work right away and can accept somewhat higher annual expenses. Part C - Page 19 Class C shares Like Class B shares, Class C shares have no up-front sales charges and have a 12b-1 plan under which a distribution fee of 0.75% and a service fee of up to 0.25% are deducted from class assets each year. Because of these fees, the annual expenses for Class C shares are similar to those of Class B shares, but higher than those for Class A shares (and the performance of Class C shares is correspondingly lower than that of Class A shares). However, unlike Class A shares, your entire investment goes to work immediately. Unlike Class B shares, Class C shares do NOT automatically convert to Class A shares after six years, so they continue to have higher annual expenses. Class C shares have a CDSC, but only on shares you sell within one year of buying them: Year after you bought shares CDSC on shares you sell - --------------------------------------------------------------------- First year 1.00% - --------------------------------------------------------------------- Second year and later None - --------------------------------------------------------------------- This CDSC is waived under certain circumstances (see "Policies You Should Know About"). Your financial representative or Shareholder Services can answer your questions and help you determine if you're eligible. While Class C shares don't have any front-end sales charges, their higher annual expenses mean that over the years you could end up paying more than the equivalent of the maximum allowable front-end sales charge. THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS. Class C shares may appeal to investors who plan to sell some or all shares within six years of buying them or who aren't certain of their investment time horizon. Part C - Page 20 How to Buy Shares Once you've chosen a share class, use these instructions to make investments. - -------------------------------------------------------------------------------- First investment Additional investments - -------------------------------------------------------------------------------- $1,000 or more for regular accounts $50 or more for regular accounts and IRA accounts $500 or more for IRAs $50 or more with an Automatic Investment Plan - -------------------------------------------------------------------------------- Through a financial representative o Contact your representative using the o Contact your representative using method that's most convenient for you the method that's most convenient for you - -------------------------------------------------------------------------------- By mail or express mail (see below) o Fill out and sign an application o Send a check made out to "Scudder Funds" and a Scudder investment slip o Send it to us at the appropriate to us at the appropriate address address, along with an investment check below o If you don't have an investment slip, simply include a letter with your name, account number, the full name of the fund and the share class and your investment instructions - -------------------------------------------------------------------------------- By wire o Call (800) 621-1048 for instructions o Call (800) 621-1048 for instructions - -------------------------------------------------------------------------------- By phone - -- o Call (800) 621-1048 for instructions - -------------------------------------------------------------------------------- With an automatic investment plan - -- o To set up regular investments from a bank checking account, call (800) 621-1048 - -------------------------------------------------------------------------------- On the Internet - -- o Go to www.scudder.com and register o Follow the instructions for buying shares with money from your bank account - -------------------------------------------------------------------------------- Regular mail: First Investment: Scudder Investments, PO Box 219356, Kansas City, MO 64121-9356 Additional Investments: Scudder Investments, PO Box 219154, Kansas City, MO 64121-9154 Express, registered or certified mail: Scudder Investments, 811 Main Street, Kansas City, MO 64105-2005 Fax number: (800) 821-6234 (for exchanging and selling only) Part C - Page 21 How to Exchange or Sell Shares Use these instructions to exchange or sell shares in your account. - -------------------------------------------------------------------------------- Exchanging into another fund Selling shares - -------------------------------------------------------------------------------- $1,000 or more to open a new account Some transactions, including most for ($500 for IRAs) over $100,000, can only be ordered in writing with a signature guarantee; if $50 or more for exchanges between you're in doubt, see page 25 existing accounts - -------------------------------------------------------------------------------- Through a financial representative o Contact your representative by the method that's most convenient for o Contact your representative by the you method that's most convenient for you - -------------------------------------------------------------------------------- By phone or wire o Call (800) 621-1048 for instructions o Call (800) 621-1048 for instructions - -------------------------------------------------------------------------------- By mail, express mail or fax (see previous page) Write a letter that includes: Write a letter that includes: o the fund, class and account number o the fund, class and account number you're exchanging out of from which you want to sell shares o the dollar amount or number of shares o the dollar amount or number of you want to exchange shares you want to sell o the name and class of the fund you o your name(s), signature(s) and want to exchange into address, as they appear on your account o your name(s), signature(s) and address, as they appear on your account o a daytime telephone number o a daytime telephone number - -------------------------------------------------------------------------------- With an automatic exchange plan o To set up regular exchanges from a -- fund account, call (800) 621-1048 - -------------------------------------------------------------------------------- With an automatic withdrawal plan - -- o To set up regular cash payments from a fund account, call (800) 621-1048 - -------------------------------------------------------------------------------- On the Internet o Go to www.scudder.com and register o Follow the instructions for making on-line exchanges - -------------------------------------------------------------------------------- Part C - Page 21 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 received 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 fees separate from those charged by the fund. In order to reduce the amount of mail you receive and to help reduce expenses, we generally send a single copy of any shareholder report and prospectus to each household. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact your financial institution or call (800) 621-1048. Policies about transactions The fund is open for business each day the New York Stock Exchange is open. The fund calculates its share price for each class 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 Investments Service Company and it has been determined that it is in "good order," it will be processed at the next share price calculated. Because orders placed through investment providers must be forwarded to Scudder Investments Service Company 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. It is the responsibility of your financial representative to forward your order to the transfer agent in a timely manner. Part C - Page 23 ScudderACCESS, the Scudder Automated Information Line, is available 24 hours a day by calling (800) 972-3060. You can use ScudderACCESS to get information on Scudder funds generally and on accounts held directly at Scudder. You can also use it to make exchanges and sell shares. 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. Transactions take two to three days to be completed and there is a $50 minimum and a $250,000 maximum. To set up QuickBuy or QuickSell on a new account, see the account application; to add it to an existing account, call (800) 621-1048. Telephone and Electronic Transactions. You are automatically entitled to telephone transaction privileges but you may elect not to have them when you open your account or by contacting Shareholder Services at a later date. Since many transactions may be initiated by telephone or electronically, it's important to understand that as long as we take reasonable steps to ensure that an order to purchase or redeem shares is genuine, such as recording calls or requesting personalized security codes or other information, we are not responsible for any losses that may occur. For transactions conducted over the Internet, we recommend the use of a secure Internet browser. In addition, you should verify the accuracy of your confirmation statements immediately after you receive them. Exchanges are a shareholder privilege, not a right: we may reject any exchange order or require a shareholder to own shares of a fund for 15 days before we process the purchase order for the other fund, particularly when there appears to be a pattern of "market timing" or other frequent purchases and sales. We may also reject or limit purchase orders, for these or other reasons. The fund accepts payment for shares only in US dollars by check, by bank or Federal Funds wire transfer, or by electronic bank transfer. Please note that the fund cannot accept cash, starter checks, third party checks, or checks issued by credit card companies or Internet-based companies. THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS. The Scudder Web site can be a valuable resource for shareholders with Internet access. Go to www.scudder.com to get up-to-date information, review balances or even place orders for exchanges. Part C - Page 24 When you ask us to send or receive a wire, please note that while we don't charge a fee to send or receive wires, it's possible that your bank may do so. Wire transactions are generally completed within 24 hours. The fund can only send wires of $1,000 or more and accept wires of $50 or more. We do not issue share certificates. However, if you currently have shares in certificated form, you must include the share certificates properly endorsed or accompanied by a duly executed stock power. You may not exchange or redeem shares in certificate form by telephone or via the Internet. When you want to sell more than $100,000 worth of shares or send proceeds to a third party or to a new address, 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 and we must be provided with the original guarantee. Selling shares of trust accounts and business or organization accounts may require additional documentation. Please contact your financial representative for more information. When you sell shares that have a CDSC, we calculate the CDSC as a percentage of what you paid for the shares or what you are selling them for -- whichever results in the lower charge to you. In processing orders to sell shares, we turn to the shares with the lowest CDSC first. Exchanges from one fund into another fund don't affect CDSCs: For each investment you make, the date you first bought shares is the date we use to calculate a CDSC on that particular investment. Part C - Page 25 There are certain cases in which you may be exempt from a CDSC. Among others, these include: o the death or disability of an account owner (including a joint owner) o withdrawals made through an automatic withdrawal plan. Such withdrawals may be made at a maximum of 12% per year of the net asset value of the account o withdrawals related to certain retirement or benefit plans o redemptions for certain loan advances, hardship provisions or returns of excess contributions from retirement plans o for Class A shares purchased through the Large Order NAV Purchase Privilege, redemption of shares whose dealer of record at the time of the investment notifies Scudder Distributors that the dealer waives the applicable commission o for Class C shares, redemption of shares purchased through a dealer-sponsored asset allocation program maintained on an omnibus record-keeping system, provided the dealer of record has waived the advance of the first year distribution and service fees applicable to such shares and has agreed to receive such fees quarterly Part C - Page 26 In each of these cases, there are a number of additional provisions that apply in order to be eligible for a CDSC waiver. Your financial representative or Shareholder Services can answer your questions and help you determine if you are eligible. If you sell shares in a Scudder fund and then decide to invest with Scudder again within six months, you can take advantage of the "reinstatement feature." With this feature, you can put your money back into the same class of a Scudder fund at its current NAV and for purposes of sales charges it will be treated as if it had never left Scudder. You'll be reimbursed (in the form of fund shares) for any CDSC you paid when you sold. Future CDSC calculations will be based on your original investment date, rather than your reinstatement date. There is also an option that lets investors who sold Class B shares buy Class A shares with no sales charge, although they won't be reimbursed for any CDSC they paid. You can only use the reinstatement feature once for any given group of shares. To take advantage of this feature, contact Shareholder Services or your financial representative. 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: 10 days) or when unusual circumstances prompt the SEC to allow further delays. Certain expedited redemption processes may also be delayed when you are selling recently purchased shares. THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS. If you ever have difficulty placing an order by phone or fax, you can always send us your order in writing. Part C - Page 27 How the fund calculates share price The price at which you buy shares is as follows: Class A shares -- net asset value per share or NAV, adjusted to allow for any applicable sales charges (see "Choosing a Share Class") Class B and Class C shares-- net asset value per share or NAV To calculate NAV, each share class uses the following equation: TOTAL ASSETS - TOTAL LIABILITIES --------------------------------- = NAV TOTAL NUMBER OF SHARES OUTSTANDING The price at which you sell shares is also the NAV, although for Class B and Class C investors a CDSC may be taken out of the proceeds (see "Choosing a Share Class"). We typically value securities using market quotations or information furnished by a pricing service. However, we may use methods approved by the fund's Board which are intended to reflect fair value when a market quotation or pricing service information is not readily available or when a security's value is believed to have been materially affected by a significant event, such as a natural disaster, an economic event like a bankruptcy filing, or a substantial fluctuation in domestic or foreign markets, that has occurred after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market). In such a case, the fund's value for a security is likely to be different from the last quoted market price or pricing service information. Part C - Page 28 Other rights we reserve You should be aware that we may do any of the following: o withdraw or suspend the offering of shares at any time o withhold 30% of your distributions as federal income tax if we 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 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 close your account and send you the proceeds if your balance falls below $1,000; we will give you 60 days' notice (90 days for retirement accounts) so you can either increase your balance or close your account (this policy doesn't apply to most retirement accounts, or if you have an automatic investment plan or 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 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 o change, add or withdraw various services, fees and account policies (for example, we may change or terminate the exchange privilege or adjust the fund's investment minimums at any time) o suspend or postpone redemptions during periods when the New York Stock Exchange is closed (other than customary closings), trading is restricted or when an emergency exists that prevents the fund from disposing of its portfolio securities or pricing its shares o reject or limit purchases of shares for any reason Part C - Page 29 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. The fund intends to pay dividends and distributions to its shareholders in November and December and if necessary 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 (at NAV), all deposited directly to your bank account or all sent to you by check, have one type reinvested and the other sent to you by check or have them invested in a different fund. 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. THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS. Because each shareholder's tax situation is unique, ask your tax professional about the tax consequences of your investments, including any state and local tax consequences. Part C - Page 30 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 the fund - --------------------------------------------------------------------- o short-term capital gains distributions you receive from the 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 the 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 the 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. Part C - Page 31 To Get More Information Shareholder reports -- These include commentary from the fund's management team about recent market conditions and the effects of the fund's strategies on its performance. They also have detailed performance figures, a list of everything the fund owns, and the fund's financial statements. Shareholders get these reports automatically. Statement of Additional Information (SAI) -- This tells you more about the 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). For a free copy of any of these documents or to request other information about the fund, call (800) 621-1048, or contact Scudder Investments at the address listed below. These documents and other information about the fund are available from the EDGAR Database on the SEC's Internet site at www.sec.gov. If you like, you may obtain copies of this information, after paying a copying fee, by e-mailing a request to publicinfo@sec.gov or by writing the SEC at the address listed below. You can also review and copy these documents and other information about the fund, including the fund's SAI, at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the SEC's Public Reference Room may be obtained by calling (202) 942-8090. Scudder Investments SEC - -------------------------------------------------------------------------------- 222 South Riverside Plaza Public Reference Section Chicago, IL 60606-5808 Washington, D.C. 20549-0102 www.scudder.com www.sec.gov (800) 621-1048 (202) 942-8090 Distributor Scudder Distributors, Inc. 222 South Riverside Plaza Chicago, IL 60606-5808 www.scudder.com e-mail info@scudder.com Tel (800) 621-1048 SCUDDER INVESTMENTS SEC File Number: A Member of Deutsche Asset Management [LOGO] Scudder S&P 500 Stock Fund 811-09057 SCUDDER S&P 500 STOCK FUND A series of Scudder Investors Trust (the "Trust") STATEMENT OF ADDITIONAL INFORMATION Class A, B and C January 1, 2003 This Statement of Additional Information is not a prospectus and should be read in conjunction with the prospectus for the Scudder S&P 500(R) Stock Fund (the "Fund") dated January 1, 2003, as amended from time to time, a copy of which may be obtained without charge by contacting Scudder Distributors, Inc., 222 South Riverside Plaza, Chicago, Illinois 60606, 1-800-621-1048, or from the firm from which this Statement of Additional Information was obtained and is available along with other related materials on the Securities and Exchange Commission's internet web site (http://www.sec.gov). The Annual Report to Shareholders of the Fund, dated August 31, 2002 accompanies this Statement of Additional Information. It is incorporated by reference and deemed to be part of this Statement of Additional Information. This Statement of Additional Information is incorporated by reference into the prospectus. TABLE OF CONTENTS Page INVESTMENT RESTRICTIONS.....................................................1 INVESTMENT POLICIES AND TECHNIQUES..........................................3 MANAGEMENT OF THE FUND.....................................................14 Investment Advisor......................................................14 Brokerage Commissions...................................................25 SERVICE PROVIDERS..........................................................26 Independent Auditors And Reports To Shareholders........................26 Legal Counsel...........................................................26 Fund Accounting Agent...................................................26 Custodian, Transfer Agent And Shareholder Service Agent.................26 PERFORMANCE................................................................27 PURCHASE AND REDEMPTION OF SHARES..........................................30 TAXES......................................................................39 NET ASSET VALUE............................................................41 OFFICERS AND TRUSTEES......................................................42 TRUST ORGANIZATION.........................................................49 FINANCIAL STATEMENTS.......................................................52 APPENDIX...................................................................53 i INVESTMENT RESTRICTIONS Except as otherwise indicated, the Fund's investment objective and policies are not fundamental and may be changed without a vote of shareholders. There can be no assurance the Fund's objective will be met. The Fund has elected to be classified as a diversified series of an open-end management investment company. A diversified fund may not, with respect to 75% of total assets, invest more than 5% of total assets in the securities of a single issuer or invest in more than 10% of the outstanding voting securities of such issuer. As a matter of fundamental policy, the Fund may not: (1) borrow money, except as permitted under the Investment company Act of 1940, as amended (the "1940 Act") 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 and as interpreted or modified by regulatory authority having jurisdiction, from time to time; (3) purchase physical commodities or contracts relating to physical commodities; (4) concentrate its investments in a particular industry, as that term is used in the 1940 Act, and as interpreted or modified by regulatory authority having jurisdiction, from time to time; (5) 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; (6) 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; or (7) make loans except as permitted under the 1940 Act and as interpreted or modified by regulatory authority having jurisdiction, from time to time. With regard to Item (6) above, to the extent the Fund holds real estate acquired as a result of the Fund's ownership of securities such holdings would be subject to the Fund's non-fundamental investment restriction on illiquid securities. A fundamental policy may not be changed without the approval of a majority of the outstanding voting securities of the Fund which, 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 the Fund are present or represented by proxy, or (2) more than 50% of the outstanding voting securities of the Fund. The Board of Trustees of the Trust ("Board" or "Trustees") have voluntarily adopted certain policies and restrictions, which are observed in the conduct of the Fund's affairs. Nonfundamental policies may be changed by the Trustees of the Trust without requiring prior notice to or approval of shareholders. As a matter of nonfundamental policy, the Fund currently may not: (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); (7) lend portfolio securities in an amount greater than 5% of its total assets; and (8) invest more than 15% of net assets in illiquid securities. If a percentage restriction is adhered to at the time of investment, a later increase or decrease beyond the specified limit resulting from a change in values or net assets will not be considered a violation. Additional Information Regarding the S&P 500 Index "Standard & Poor's," "S&P," "S&P 500," "Standard & Poor's 500," and "500" are trademarks of the McGraw-Hill Companies, Inc., and have been licensed for use by Scudder Investments, Inc. The Scudder S&P 500 Stock Fund is not sponsored, endorsed, sold or promoted by Standard & Poor's, and Standard & Poor's makes no representation regarding the advisability of investing in the fund. Additional information may be found in the fund's Statement of Additional Information. The Fund is not sponsored, endorsed, sold or promoted by Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"). S&P makes no representation or warranty, express or implied, to the shareholders of the Fund or any member of the public regarding the advisability of investing in securities generally, or in the Fund particularly, or the ability of the S&P 500 Index to track general stock market performance. S&P's only relationship to the Fund is the licensing of certain trademarks and trade names of S&P and of the S&P 500 Index, which is determined, composed and calculated by S&P without regard to the Fund. S&P has no obligation to take the needs of the shareholders of the Fund into consideration in determining, composing or calculating the S&P 500 Index. S&P is not responsible for and has not participated in the determination of the prices and amount of the Fund, or the timing of the issuance or sale of shares of the Fund, or in the determination or calculation of the equation by which the Fund is to be converted into cash. S&P has no obligation or liability in connection with the administration, marketing or trading of the Fund. S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN, AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE ADVISOR, THE FUND, SHAREHOLDERS OF THE FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED 2 THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. INVESTMENT POLICIES AND TECHNIQUES The Fund seeks to match, as closely as possible before expenses, the performance of the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500 Index"), which emphasizes stocks of large U.S. companies. It does this by investing, under normal circumstances, at least 80% of total assets, plus the amount of any borrowings for investment purposes, in common stocks and securities included in the S&P 500 Index. General Investment Objectives and Policies Descriptions in this Statement of Additional Information of a particular investment practice or technique in which the Fund may engage (such as hedging, etc.) or a financial instrument which the Fund may purchase (such as options, forward foreign currency contracts, etc.) are meant to describe the spectrum of investments that Deutsche Investment Management Americas Inc. ("DeIM" or the "Advisor") in its discretion, might, but is not required to, use in managing the Fund's assets. The Advisor, may in its discretion, employ such practice, technique or instrument for one or more funds but not 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. Certificates Of Deposit and Bankers' Acceptances. Certificates of deposit are receipts issued by a depository institution in exchange for the deposit of funds. The issuer agrees to pay the amount deposited plus interest to the bearer of the receipt on the date specified on the certificate. The certificate usually can be traded in the secondary market prior to maturity. Bankers' acceptances typically arise from short-term credit arrangements designed to enable businesses to obtain funds to finance commercial transactions. Generally, an acceptance is a time draft drawn on a bank by an exporter or an importer to obtain a stated amount of funds to pay for specific merchandise. The draft is then "accepted" by a bank that, in effect, unconditionally guarantees to pay the face value of the instrument on its maturity date. The acceptance may then be held by the accepting bank as an earning asset or it may be sold in the secondary market at the going rate of discount for a specific maturity. Although maturities for acceptances can be as long as 270 days, most acceptances have maturities of six months or less. Commercial Paper. Commercial paper consists of short-term (usually from 1 to 270 days) unsecured promissory notes issued by corporations in order to finance their current operations. A variable amount master demand note (which is a type of commercial paper) represents a direct borrowing arrangement involving periodically fluctuating rates of interest under a letter agreement between a commercial paper issuer and an institutional lender pursuant to which the lender may determine to invest varying amounts. For a description of commercial paper ratings, see the "Appendix -- Ratings of Investments." Equity Securities. The Fund may invest in equity securities listed on any domestic securities exchange or traded in the over-the-counter market. Common stocks, the most familiar type of equity security, represent an equity (ownership) interest in a corporation. They may or may not pay dividends or carry voting rights. Common stock occupies the most junior position in a company's capital structure. Although equity securities have a history of long-term growth in value, their prices fluctuate based on changes in a company's financial condition and on overall market and economic conditions. Smaller companies are especially sensitive to these factors. Illiquid Securities. Iliquid securities include securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "1933 Act"), securities which are otherwise not readily marketable and repurchase agreements having a maturity of longer than seven days. Securities 3 which have not been registered under the 1933 Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Mutual funds do not typically hold a significant amount of these restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities and a mutual fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. A mutual fund might also have to register such restricted securities in order to dispose of them resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities. A large institutional market has developed for certain securities that are not registered under the 1933 Act, including repurchase agreements, commercial paper, foreign securities, municipal securities and corporate bonds and notes. Institutional investors depend on an efficient institutional market in which the unregistered security can be readily resold or on an issuer's ability to honor a demand for repayment. The fact that there are contractual or legal restrictions on resale of such investments to the general public or to certain institutions may not be indicative of their liquidity. The SEC has adopted Rule 144A, which allows a broader institutional trading market for securities otherwise subject to restriction on their resale to the general public. Rule 144A establishes a "safe harbor" from the registration requirements of the 1933 Act of resales of certain securities to qualified institutional buyers. The Advisor anticipates that the market for certain restricted securities such as institutional commercial paper will expand further as a result of this regulation and the development of automated systems for the trading, clearance and settlement of unregistered securities of domestic and foreign issuers, such as the PORTAL System sponsored by the National Association of Securities Dealers, Inc. Rule 144A Securities are securities in the United States that are not registered for sale under federal securities laws but which can be resold to institutions under SEC Rule 144A. Provided that a dealer or institutional trading market in such securities exists, these restricted securities are treated as exempt from the 15% limit on illiquid securities. Under the supervision of the Board of Trustees of the Fund, the Advisor determines the liquidity of restricted securities and, through reports from the Advisor, the Board will monitor trading activity in restricted securities. If institutional trading in restricted securities were to decline, the liquidity of the Fund could be adversely affected. In reaching liquidity decisions, the Advisor will consider, among other things, the following factors: (i) the frequency of trades and quotes for the security; (ii) the number of dealers and other potential purchasers wishing to purchase or sell the security; (iii) dealer undertakings to make a market in the security and (iv) the nature of the security and of the marketplace trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of the transfer). Interfund Borrowing and Lending Program. The Trust has received exemptive relief from the Securities and Exchange Commission ("SEC") which permits the Fund to participate in an interfund lending program among certain investment companies advised by the Advisor. 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 would be 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, the Fund would 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 would extend overnight, but could have a maximum duration of seven days. Loans could be called on one day's notice. The 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. The Fund may borrow only for temporary or emergency purposes (and not for leveraging) through the program. 4 Investment Company Securities. The 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. The Fund will indirectly bear its proportionate share of any management fees and other expenses paid by such other investment companies. For example, the 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 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 Index 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 S&P 500 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. 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. Investment of Uninvested Cash Balances. The Fund may have cash balances that have not been invested in portfolio securities ("Uninvested Cash"). Uninvested Cash may result from a variety of sources, including dividends or interest received from portfolio securities, unsettled securities transactions, reserves held for investment strategy purposes, scheduled maturity of investments, liquidation of investment securities to meet anticipated redemptions and dividend payments, and new cash received from investors. Uninvested Cash may be invested directly in money market instruments or other short-term debt obligations. Pursuant to an Exemptive Order issued by the SEC, the Fund may use Uninvested Cash to purchase shares of affiliated funds including money market funds, short-term bond funds and Scudder Cash Management QP Trust, or one or more future entities for which Scudder Trust Company acts as trustee or investment advisor that operate as cash management investment vehicles and that are 5 excluded from the definition of investment company pursuant to section 3(c)(1) or 3(c)(7) of the Investment Company Act of 1940 (collectively, the "Central Funds") in excess of the limitations of Section 12(d)(1) of the Investment Company Act. Investment by the Fund in shares of the Central Funds will be in accordance with the Fund's investment policies and restrictions as set forth in its registration statement. Certain of the Central Funds comply with rule 2a-7 under the Act. The other Central Funds are or will be short-term bond funds that invest in fixed-income securities and maintain a dollar weighted average maturity of three years or less. Each of the Central Funds will be managed specifically to maintain a highly liquid portfolio, and access to them will enhance the Fund's ability to manage Uninvested Cash. The Fund will invest Uninvested Cash in Central Funds only to the extent that the Fund's aggregate investment in the Central Funds does not exceed 25% of its total assets. Purchase and sales of shares of Central Funds are made at net asset value. Real Estate Investment Trusts ("REITs"). The Fund may invest in REITs. REITs are sometimes informally characterized as equity REITs, mortgage REITs and hybrid REITs. Investment in REITs may subject a Fund to risks associated with the direct ownership of real estate, such as decreases in real estate values, overbuilding, increased competition and other risks related to local or general economic conditions, increases in operating costs and property taxes, changes in zoning laws, casualty or condemnation losses, possible environmental liabilities, regulatory limitations on rent and fluctuations in rental income. Equity REITs generally experience these risks directly through fee or leasehold interests, whereas mortgage REITs generally experience these risks indirectly through mortgage interests, unless the mortgage REIT forecloses on the underlying real estate. Changes in interest rates may also affect the value of a Fund's investment in REITs. For instance, during periods of declining interest rates, certain mortgage REITs may hold mortgages that the mortgagors elect to prepay, which prepayment may diminish the yield on securities issued by those REITs. Certain REITs have relatively small market capitalizations, which may tend to increase the volatility of the market price of their securities. Furthermore, REITs are dependent upon specialized management skills, have limited diversification and are, therefore, subject to risks inherent in operating and financing a limited number of projects. REITs are also subject to heavy cash flow dependency, defaults by borrowers and the possibility of failing to qualify for tax-free pass-through of income under the Internal Revenue Code of 1986, as amended, and to maintain exemption from the registration requirements of the 1940 Act. By investing in REITs indirectly through a Fund, a shareholder will bear not only his or her proportionate share of the expenses of a Fund's, but also, indirectly, similar expenses of the REITs. In addition, REITs depend generally on their ability to generate cash flow to make distributions to shareholders. 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 or other financial institutions, and are required to be secured continuously by collateral in cash or liquid assets, 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 five days' notice or, in connection with securities trading on foreign markets, within such longer period of time which coincides with the normal settlement period for purchases and sales of such securities in such foreign markets. During the existence of a loan, the Fund continues to receive the equivalent of any distributions paid by the issuer on the securities loaned and also receives compensation based on investment of the collateral. The risks in lending securities, as with other extensions of secured credit, consist of a possible delay in recovery and a loss of rights in the collateral should the borrower of the securities fail financially. Loans may be made only to firms deemed by the Advisor to be of good standing and will not be made unless, in the judgment of the Advisor, the consideration to be earned from such loans would justify the risk. Repurchase Agreements. In a repurchase agreement, the Fund buys a security at one price and simultaneously agrees to sell it back at a higher price at a future date. In the event of the bankruptcy of the other party to a repurchase agreement, the Fund could experience delays in recovering either its cash or selling securities subject to the repurchase agreement. To the extent that, in the meantime, the value of the securities repurchased had decreased or the value of the securities had increased, the Fund could experience a loss. In all cases, the Advisor must find the creditworthiness of the other party to the transaction satisfactory. 6 Short-Term Instruments. When the Fund experiences large cash inflows through the sale of securities or desirable equity securities that are consistent with the Fund's investment objective are unavailable in sufficient quantities or at attractive prices, the Fund may hold short-term investments (or shares of money market mutual funds) for a limited time pending availability of such equity securities. Short-term instruments consist of foreign and domestic: (i) short-term obligations of sovereign governments, their agencies, instrumentalities, authorities or political subdivisions; (ii) other short-term debt securities rated AA or higher by S&P or Aa or higher by Moody's Investors Service, Inc. ("Moody's") or, if unrated, of comparable quality in the opinion of the Advisor; (iii) commercial paper; (iv) bank obligations, including negotiable certificates of deposit, time deposits and bankers' acceptances; and (v) repurchase agreements. At the time the Fund invests in commercial paper, bank obligations or repurchase agreements, the issuer or the issuer's parent must have outstanding debt rated AA or higher by S&P or Aa or higher by Moody's or outstanding commercial paper or bank obligations rated A-1 by S&P or Prime-1 by Moody's; or, if no such ratings are available, the instrument must be of comparable quality in the opinion of the Advisor or Subadvisor. Strategic Transactions and Derivatives. The 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 the 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, the Fund may purchase and sell exchange-listed and over-the-counter put and call options on securities, equity and fixed-income indices and other 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 the Fund's portfolio resulting from securities markets or currency exchange rate fluctuations, to protect the Fund's unrealized gains in the value of its portfolio securities, to facilitate the sale of such securities for investment purposes, to manage the effective maturity or duration of fixed-income securities in the Fund's portfolio, or to establish a position in the derivatives markets as a substitute for purchasing or selling particular securities. Some Strategic Transactions may also be used to enhance potential gain although no more than 5% of the Fund's assets will be committed to Strategic Transactions entered into for non-hedging purposes. Any or all of these investment techniques may be used at any time and in any combination, and there is no particular strategy that dictates the use of one technique rather than another, as use of any Strategic Transaction is a function of numerous variables including market conditions. The ability of the Fund to utilize these Strategic Transactions successfully will depend on the Advisor's ability to predict pertinent market movements, which cannot be assured. The Fund will comply with applicable regulatory requirements when implementing these strategies, techniques and instruments. Strategic Transactions will not be used to alter fundamental investment purposes and characteristics of the Fund, and the 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 the 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 Advisor's view as to certain market movements is incorrect, the risk that the use of such Strategic Transactions could result in losses greater than if they had not been used. Use of put and call options may result in losses to the Fund, force the sale or purchase of portfolio securities at inopportune times or for prices higher than (in the case of put options) or lower than (in the case of call options) current market values, limit the amount of appreciation the Fund can realize on its investments or cause the Fund to hold a security it might otherwise sell. The use of currency transactions can result in the Fund incurring losses as a result of a number of factors including the imposition of exchange controls, suspension of settlements, or the inability to deliver or receive a specified currency. The use of options and futures transactions entails certain other risks. In particular, the variable degree of correlation between price movements of futures contracts and price movements in the related portfolio position of the Fund creates the possibility that losses on the hedging instrument may be greater than gains in the value of the Fund's position. In addition, futures and options markets may not be liquid in all circumstances and certain over-the-counter options may have no markets. As a result, in certain markets, the Fund might not be able to close out a transaction without incurring substantial losses, if at all. 7 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, the 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 the 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. The Fund's purchase of a call option on a security, financial future, index, currency or other instrument might be intended to protect the 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. The 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. The Fund's ability to close out its position as a purchaser or seller of an OCC or exchange listed put or call option is dependent, in part, upon the liquidity of the option market. Among the possible reasons for the absence of a liquid option market on an exchange are: (i) insufficient trading interest in certain options; (ii) restrictions on transactions imposed by an exchange; (iii) trading halts, suspensions or other restrictions imposed with respect to particular classes or series of options or underlying securities including reaching daily price limits; (iv) interruption of the normal operations of the OCC or an exchange; (v) inadequacy of the facilities of an exchange or OCC to handle current trading volume; or (vi) a decision by one or more exchanges to discontinue the trading of options (or a particular class or series of options), in which event the relevant market for that option on that exchange would cease to exist, although outstanding options on that exchange would generally continue to be exercisable in accordance with their terms. The hours of trading for listed options may not coincide with the hours during which the underlying financial instruments are traded. To the extent that the option markets close before the markets for the underlying financial instruments, significant price and rate movements can take place in the underlying markets that cannot be reflected in the option markets. 8 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. The Fund will only sell OTC options (other than OTC currency options) that are subject to a buy-back provision permitting the Fund to require the Counterparty to sell the option back to the Fund at a formula price within seven days. The Fund expects generally to enter into OTC options that have cash settlement provisions, although it is not required to do so. Unless the parties provide for it, there is no central clearing or guaranty function in an OTC option. As a result, if the Counterparty fails to make or take delivery of the security, currency or other instrument underlying an OTC option it has entered into with the Fund or fails to make a cash settlement payment due in accordance with the terms of that option, the Fund will lose any premium it paid for the option as well as any anticipated benefit of the transaction. Accordingly, the Advisor 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. The 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 Advisor. The staff of the SEC currently takes the position that OTC options purchased by the Fund, and portfolio securities "covering" the amount of the 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 the Fund's limitation on investing no more than 15% of its net assets in illiquid securities. If the 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 the Fund's income. The sale of put options can also provide income. The 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. All calls sold by the Fund must be "covered" (i.e., the Fund must own the securities or futures contract subject to the call) or must meet the asset segregation requirements described below as long as the call is outstanding. Even though the Fund will receive the option premium to help protect it against loss, a call sold by the Fund exposes the 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 the Fund to hold a security or instrument which it might otherwise have sold. The 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. The Fund will not sell put options if, as a result, more than 50% of the Fund's total 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 the Fund may be required to buy the underlying security at a disadvantageous price above the market price. General Characteristics of Futures. The 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 of a futures contract creates a firm obligation by the 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 9 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. The 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 the 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 the Fund. If the 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. The 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 the 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. The 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. Risks of Currency Transactions. Currency transactions are subject to risks different from those of other portfolio transactions. Because currency control is of great importance to the issuing governments and influences economic planning and policy, purchases and sales of currency and related instruments can be negatively affected by government exchange controls, blockages, and manipulations or exchange restrictions imposed by governments. These can result in losses to a Fund if it is unable to deliver or receive currency or funds in settlement of obligations and could also cause hedges it has entered into to be rendered useless, resulting in full currency exposure as well as incurring transaction costs. Buyers and sellers of currency futures are subject to the same risks that apply to the use of futures generally. Further, settlement of a currency futures contract for the purchase of most currencies must occur at a bank based in the issuing nation. Trading options on currency futures is relatively new, and the ability to establish and close out positions on such options is subject to the maintenance of a liquid market which may not always be available. Currency exchange rates may fluctuate based on factors extrinsic to that country's economy. Currency Transactions. The 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 10 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. The 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 Advisor. The 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 a Fund, which will generally arise in connection with the purchase or sale of its portfolio securities or the receipt of income therefrom. Position hedging is entering into a currency transaction with respect to portfolio security positions denominated or generally quoted in that currency. The 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. The 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 the Fund has or in which a Fund expects to have portfolio exposure. To reduce the effect of currency fluctuations on the value of existing or anticipated holdings of portfolio securities, the Fund may also engage in proxy hedging. Proxy hedging is often used when the currency to which the 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 the 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 the Fund's securities denominated in correlated currencies. Currency hedging involves some of the same risks and considerations as other transactions with similar instruments. Currency transactions can result in losses to the 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 the Fund is engaging in proxy hedging. If a Fund enters into a currency hedging transaction, a Fund will comply with the asset segregation requirements described below. Combined Transactions. The 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 Advisor, it is in the best interests of the Fund to do so. A combined transaction will usually contain elements of risk that are present in each of its component transactions. Although combined transactions are normally entered into based on the Advisor'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 the Fund may enter are interest rate, currency, index and other swaps and the purchase or sale of related caps, floors and collars. The 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 the Fund anticipates purchasing at a later date. The Fund will not sell interest rate caps or floors where it does not own securities or other instruments providing the income stream the Fund may be obligated to pay. Interest rate swaps involve the exchange by the Fund with another party of their respective commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments with 11 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. The Fund will usually enter into swaps on a net basis, i.e., the two payment streams are netted out in a cash settlement on the payment date or dates specified in the instrument, with the Fund receiving or paying, as the case may be, only the net amount of the two payments. Inasmuch as the Fund will segregate assets (or enter into offsetting positions) to cover its obligations under swaps, the Advisor and the 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. The Fund will not enter into any swap, cap, floor or collar transaction unless, at the time of entering into such transaction, the unsecured long-term debt of the Counterparty, combined with any credit enhancements, is rated at least A by S&P or Moody's or has an equivalent rating from a NRSRO or is determined to be of equivalent credit quality by the Advisor. If there is a default by the Counterparty, the Fund may have contractual remedies pursuant to the agreements related to the transaction. The swap market has grown substantially in recent years with a large number of banks and investment banking firms acting both as principals and as agents utilizing standardized swap documentation. As a result, the swap market has become relatively liquid. Caps, floors and collars are more recent innovations for which standardized documentation has not yet been fully developed and, accordingly, they are less liquid than swaps. When-Issued Securities. The Fund may from time to time purchase equity and debt securities on a "when-issued," "delayed delivery" 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 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. When the Fund purchases such securities, it immediately assumes the risks of ownership, including the risk of price fluctuation. Failure to deliver a security purchased on this basis may result in a loss or missed opportunity to make an alternative investment. 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. While such securities may be sold prior to the settlement date, the Fund intends to purchase them 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 this basis, it will record the transaction and reflect the value of the security in determining its net asset value. The market value of the securities may be more or less than the purchase price. The Fund will establish a segregated account in which it will maintain cash and liquid securities equal in value to commitments for such securities. Eurodollar Instruments. The 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. A 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 a Fund's ability to act upon economic events occurring in foreign markets during non- 12 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 a 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 the 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 a Fund will require the 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 the Fund on an index will require the Fund to own portfolio securities which correlate with the index or to segregate cash or liquid assets equal to the excess of the index value over the exercise price on a current basis. A put option written by the 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 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 13 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. Master/feeder Fund Structure The Board has the discretion to retain the current distribution arrangement for the Fund while investing in a master fund in a master/feeder structure as described below. A master/feeder fund structure is one in which the 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. MANAGEMENT OF THE FUND Investment Advisor On April 5, 2002, Zurich Scudder Investments, Inc. ("Scudder"), the investment advisor for the Fund, was acquired by Deutsche Bank AG. Upon the closing of this transaction, Scudder became part of Deutsche Asset Management ("DeAM") and changed its name to Deutsche Investment Management Americas Inc. ("DeIM" or the "Advisor"). Under the supervision of the Board of Trustees of the Fund, DeIM, with headquarters at 345 Park Avenue, New York, New York, makes the Fund's investment decisions, buys and sells securities for the Fund and conducts research that leads to these purchase and sale decisions. DeIM has more than 80 years of experience managing mutual funds and provides a full range of investment advisory services to institutional and retail clients. The Fund's investment advisor is also responsible for selecting brokers and dealers and for negotiating brokerage commissions and dealer charges. Deutsche Asset Management is the marketing name in the US for the asset management activities of Deutsche Bank AG, DeIM, Deutsche Asset Management Inc., Deutsche Bank Securities Inc., Deutsche Asset Management Investment Services Ltd., Deutsche Bank Trust Company Americas and Scudder Trust Company. Deutsche Asset Management is a global asset management organization that offers a wide range of investing expertise and resources, including more than 500 portfolio managers and analysts and an office network that reaches the world's major investment centers. This well-resourced global investment platform brings together a wide variety of experience and investment insight, across industries, regions, asset classes and investing styles. DeIM is an indirect, wholly owned subsidiary of Deutsche Bank AG. Deutsche Bank AG is a major global banking institution that is engaged in a wide range of financial services, including investment management, mutual fund, retail, private and commercial banking, investment banking and insurance. DeIM is one of the most experienced investment counsel firms in the U.S. It was established as a partnership in 1919 and pioneered the practice of providing investment counsel to individual clients on a fee basis. In 1928 it introduced the first no-load mutual fund to the public. In 1953 Scudder introduced Scudder International Fund, Inc., the first mutual fund available in the U.S. investing internationally in securities of issuers in several foreign countries. The 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 Scudder, and Zurich Kemper Investments, Inc., a Zurich subsidiary, became part of Scudder. Scudder's name was changed to Scudder Kemper Investments, Inc. On January 1, 2001, Scudder changed its name from Scudder Kemper Investments, Inc. to Zurich Scudder Investments, Inc. On April 5, 2002, 100% of Scudder, not including certain U.K. operations (known as Threadneedle Investments), was acquired by Deutsche Bank AG. 14 The Advisor manages the Fund's daily investment and business affairs subject to the policies established by the Trust's Board of Trustees. The Trustees of the Fund have overall responsibility for the management of the Fund under Massachusetts law. Pursuant to an investment management agreement with the Fund, the Advisor acts as the Fund's investment advisor, manages its investments, administers its business affairs, furnishes office facilities and equipment, provides clerical and administrative services and permits its officers and employees to serve without compensation as trustees or officers of one or more Funds if elected to such positions. To the extent permissable by law, the Advisor may appoint certain of its affiliates as sub-advisors to perform certain of the Advisor's duties. The principal source of the Advisor's income is professional fees received from providing continuous investment advice, and the firm derives no income from brokerage or underwriting of securities. Today it provides investment counsel for many individuals and institutions, including insurance companies, industrial corporations, and financial and banking organizations, as well as providing investment advice to open- and closed-end SEC registered funds. The Advisor maintains a large research department, which conducts continuous studies of the factors that affect the position of various industries, companies and individual securities. The Advisor 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 Advisor's clients. However, the Advisor regards this information and material as an adjunct to its own research activities. In selecting securities in which the Fund may invest, the conclusions and investment decisions of the Advisor with respect to the Fund are based primarily on the analyses of its own research department. 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 Advisor, that have similar names, objectives and investment styles. 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 a fund can be expected to vary from those of these other mutual funds. Certain investments may be appropriate for the Fund and also for other clients advised by the Advisor. 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 Advisor 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 Advisor in the interest of achieving the most favorable net results to the Fund. The present investment management agreement (the "Agreement") for the Fund dated April 5, 2002 was last approved by the Trustees of the Trust on September 26, 2002. The Agreement had an initial term ending September 30, 2002 and continues 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 Advisor or the Trust, cast in person at a meeting called for the purpose of voting on such approval, and either by a vote of the Trust's Trustees 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 terminate in the event of their assignment. Under the Agreement, the Advisor regularly provides the 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 Trust's Declaration of Trust, By-Laws, the 1940 Act, the Code, and subject, further, to such policies and 15 instructions as the Board of Trustees of the Trust may from time to time establish. The Advisor also advises and assists the officers of the Trust in taking such steps as are necessary or appropriate to carry out the decisions of its Trustees and the appropriate committees of the Trustees regarding the conduct of the business of the Fund. Under the Agreement, the Advisor may appoint certain of its affiliates as subadvisors to perform certain of its duties. Under the Fund's Agreement, the Advisor also renders 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. The Advisor pays the compensation and expenses of all Trustees, officers and executive employees of the Fund affiliated with the Advisor and makes available, without expense to the Trust, the services of such Trustees, officers and employees of the Advisor as may duly be elected officers or Trustees 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. Scudder S&P 500 Stock Fund pays the Advisor an advisory fee at the annual rate of 0.33% for the first $100 million of average daily net assets, 0.29% on the next $100 million of average daily net assets and 0.27% of average daily net assets over $200 million. The fee is payable monthly, provided that the Fund will make such interim payments as may be requested by the Advisor not to exceed 75% of the amount of the fee then accrued on the books of the Fund and unpaid. The advisory fees paid by the Fund for its last three fiscal years are shown in the table below: Fund 2002 2001* 2000** - ---- ---- ----- ------ Scudder S&P Stock Fund $280,019 $197,548 $91,710 * The Advisor agreed to temporarily waive expenses of $31,713. ** The Advisor agreed to temporarily waive expenses of $71,364. Prior to April 5, 2002, Scudder S&P 500 Stock Fund paid the Advisor an advisory fee at the annual rate of 0.40% for the first $100 million of average daily net assets, 0.36% on the next $100 million of average daily net assets, and 0.34% of average daily net assets over $200 million. All of the Fund's expenses were paid out of gross investment income. The fee was payable monthly, provided that the Fund made such interim payments as requested by the Advisor not to exceed 75% of the amount of the fee then accrued on the books of the Fund and unpaid. Subadvisor On September 27, 2002, Deutsche Bank AG agreed to the sale of its global passive equity, enhanced equity and passive fixed income business to Northern Trust Corporation. Under this agreement, DeIM will remain as investment advisor to the Fund and Northern Trust Investments, Inc., a subsidiary of Northern Trust Corporation, will become a subadvisor to the Fund, subject to shareholder approval and satisfaction of certain other conditions, within three to six months. 16 Board's Approval of Modification to the Investment Management Agreement for Scudder S&P 500 Stock Fund The Board of Scudder S&P 500 Stock Fund approved a modified investment management agreement with the Advisor for the Fund at a meeting on November 20, 2002, subject to approval by shareholders. The terms of the modified investment management agreement are substantially identical to the terms of the former investment management agreement which the Board had approved on September 26, 2002, except that the modified management agreement permits the Advisor to appoint certain of its affiliates as Subadvisors to perform certain of its duties. Board Considerations in Connection with Annual Renewal of Investment Management Agreement for Scudder S&P 500 Stock Fund The Board of Trustees approved the renewal of the Fund's advisory contract on September 26, 2002. As part of the annual contract review process, commencing in July, 2002, the Board, as a whole, the Independent Trustees, separately, and the Fund's Oversight Committee met on several occasions to consider the renewal of the Fund's investment management agreement. The Oversight Committee initially analyzed and reviewed extensive materials, received responses from the Advisor and received advice from counsel. The Committee presented their findings and recommendations to the Independent Trustees as a group. The Independent Trustees then reviewed the Committee's findings and recommendations and presented their recommendations to the full Board. At a meeting on September 26, 2002, the Board concluded that the terms of the investment management agreement for the Fund are fair and reasonable and the continuance of the agreement is in the best interest of the Fund. In connection with their meetings, the Oversight Committee and the Board received comprehensive materials from the Advisor and from independent sources relating to the management fees charged and services provided, including information about (i) the nature and quality of services provided by the Advisor; (ii) the management fees, expense ratios and asset sizes of the Fund relative to peer groups; (iii) the level of the Advisor's profits with respect to the management of the Fund, including the methodology used to allocate costs among funds advised by the Advisor; (iv) the short-term and long-term performance of the Fund relative to appropriate peer groups and one or a combination of market indices; (v) fall-out benefits to the Advisor from its relationship to the Fund, including revenues derived from services provided to the Fund by affiliates of the Advisor; and (vi) the potential benefits to the Advisor, the Fund and its shareholders of receiving research services from broker/dealer firms in connection with the allocation of portfolio transactions to such firms. Investment Performance. The Board reviewed the Fund's investment performance as well as the performance of a peer group of funds, and the performance of an appropriate index or combination of indices. The Board considered short-term and long-term performance, as well as the factors contributing to underperformance of certain funds advised by the Advisor and steps taken by the Advisor to improve such underperformance. In particular, the Board has requested the Advisor to identify Scudder funds who performance rank in the lowest quartile of their peer group ("Focus Funds") and to provide more frequent reports of steps to monitor and improve performance of the Focus Funds. Fees and Expenses. The Board considered the Fund's management fee rates, expense ratios and asset sizes relative to an appropriate peer group of funds, including information about the effect of the unitary fee structure under the administrative agreement and expense limitation commitments from the Advisor. Profitability. The Board considered the level of the Advisor's profits with respect to the management of the Fund, including a review of the Advisor's methodology in allocating its costs to the management of the Fund. The Board considered the profits realized by the Advisor in connection with the operation of the Fund and whether the amount of profit is a fair entrepreneurial profit for the management of the Fund. The Board also considered the Advisor's profit margins in comparison with available industry data. 17 Economies of Scale. The Board considered whether there have been economies of scale with respect to the management of the Fund and whether the Fund have appropriately benefited from any economies of scale. The Board considered whether the management fee rate is reasonable in relation to the asset size of the Fund. Advisor Personnel and Methods. The Board considered the size, education and experience of the Advisor's staff, its use of technology and its approach to recruiting, training and retaining portfolio managers and other research and management personnel. Nature and Quality of Other Services. The Board considered the nature, quality, cost and extent of administrative and shareholder services performed by the Advisor and its affiliated companies. Other Benefits to the Advisor. The Board also considered the character and amount of other incidental benefits received by the Advisor and its affiliates, including the receipt of research through the use of soft dollars. Board Consideration of Approval of New Subadvisory Agreement for Scudder S&P 500 Stock Fund On November 20, 2002, the Board approved a subadvisory agreement for Scudder S&P 500 Stock Fund. Subject to shareholder approval, the agreement provides that Northern Trust Investments, Inc. ("NTI"), an affiliate of Northern Trust, will serve as the Fund's subadvisor beginning in early 2003. A shareholder vote is expected to be completed by the end of February, 2003. In determining whether to approve the subadvisory agreement for the Fund, the Independent Trustees and the Board considered various factors and reviewed various materials furnished by the Advisor and NTI, including: (i) the prior investment performance of comparable accounts managed by NTI relative to broad-based indices and to comparably managed mutual funds, (ii) the investment approach of NTI, and (iii) the knowledge and experience of the investment professionals who would be responsible for the day-to-day management of the Fund. The Independent Trustees and the Board also considered the following factors: the financial strength and resources of NTI; the favorable history, reputation, qualifications and background of NTI; the Advisor's relationship with NTI; the proposed subadvisory fees; and the proposed nature and quality of services to be provided by NTI. The Board also considered that the Advisor would be responsible for any payment of fees to NTI as subadvisor and that the Fund would not have any responsibility for paying such fees. The subadvisory agreement provides that the sub-advisor 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 subadvisory agreement relates, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the sub-advisor in the performance of its duties or from reckless disregard by the sub-advisor of its obligations and duties under the subadvisory agreement Administrative Agreement Effective June 18, 2001, the Fund has entered into an administrative services agreement with the Advisor ("Administrative Agreement") pursuant to which the Advisor provides or pays others to provide substantially all of the administrative services required by the Fund (other than those provided by the Advisor under its investment management agreement with the Fund, as described above) in exchange for the payment by the Fund of an annual administrative services fee (the "Administrative Fee") at the annual rate of 0.350% for Class A shares, 0.400% for Class B share and 0.375% for Class C shares, of the average daily net assets of the applicable class. One effect of this arrangement is to make the Fund's future expense ratio more predictable. However, the Fund will not benefit from economies of scale derived from increases in assets. For Scudder S&P 500 Stock Fund, for the fiscal year ended August 31, 2001, the Administrative Fees charged to Class A, Class B and Class C were as follows:
Unpaid at Unpaid at Unpaid at August 31, 2001 August 31, 2001 August 31, 2001 Class A Class B Class C Class A Class B Class C ------- ------- ------- ------- ------- ------- $33,217 $11,995 $3,996 $9,232 $3,291 $1,172
18 For Scudder S&P 500 Stock Fund, for the year ended August 31, 2002, the Administrative Fees charged to Class A, Class B, and Class C were as follows:
Unpaid at Unpaid at Unpaid at August 31, 2002 August 31, 2002 August 31, 2002 Class A Class B Class C Class A Class B Class C ------- ------- ------- ------- ------- ------- $187,773 $57,889 $27,073 $17,290 $4,905 $2,474
Various third-party service providers (the "Service Providers"), some of which are affiliated with the Advisor, provide certain services to the Fund pursuant to separate agreements with the Fund. The Advisor will pay the Service Providers for the provision of their services to the Fund and will pay other fund expenses, including insurance, registration, printing and postage fees. In return, the Fund will pay the Advisor the Administrative Fee. The Administrative Agreement has an initial term of three years, ending September 30, 2003, subject to earlier termination by the Fund's Board. The Administrative Agreement shall continue in effect on an annual basis after September 30, 2003, provided that such continuance is approved at least annually by a majority of the Trustees, including the independent Trustees. The fee payable by the Fund to the Advisor pursuant to the Administrative Agreement is reduced by the amount of any credit received from the Fund's custodian for cash balances. The Administrative Agreement will terminate effective September 30, 2003. Without the Administrative Agreement, fees paid by each class of shares for administrative services currently paid and provided pursuant to the Administrative Agreement may be higher. However, effective October 1, 2003 though September 30, 2005, , the Advisor has contractually agreed to waive all or a portion of its management fee and reimburse or pay operating expenses of the fund to the extent necessary to maintain each fund's total administrative and management expense at .80% for each class of shares excluding certain expenses such as taxes, brokerage, interest, 12b-1 and/or service fees and trustee and trustee counsel expenses. Certain expenses of the Fund will not be borne by the Advisor under the Administrative Agreement, 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, the Fund will continue to pay the fees required by its investment management agreement with the Advisor. In reviewing the terms of the Agreement and in discussions with the Advisor concerning such Agreement, the Trustees of the Trust who are not "interested persons" of the Advisor are represented by independent counsel at the Fund's expense. The Agreement provides that the Advisor 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 Advisor in the performance of its duties or from reckless disregard by the Advisor of its obligations and duties under the Agreement. Officers and employees of the Advisor from time to time may have transactions with various banks, including the Fund's custodian bank. It is the Advisor'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 Advisor may serve as advisor to other funds with investment objectives and policies similar to those of the Fund 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. 19 The term Scudder Investments is the designation given to the services provided by the Advisor and its affiliates to the Scudder Family of Funds. Code of Ethics The Fund, the Advisor, the subadvisor and the Fund's principal underwriter have each adopted codes of ethics (each a "Code of Ethics") under Rule 17j-1 of the 1940 Act. Board members, officers of the Trust and employees of the Advisor, subadvisor and the principal underwriter are permitted to make personal securities transactions, including transactions in securities that may be purchased or held by the Fund, subject to requirements and restrictions set forth in the applicable Code of Ethics. The Advisor'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 Fund. Among other things, the Advisor'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 Advisor's Code of Ethics may be granted in particular circumstances after review by appropriate personnel. Principal Underwriter and Administrator. Pursuant to an Underwriting and Distribution Services Agreement ("Distribution Agreement") and a Shareholder Services Agreement ("Services Agreement"), Scudder Distributors, Inc. ("SDI"), 222 South Riverside Plaza, Chicago, Illinois 60606, an affiliate of the Advisor, is the principal underwriter, distributor and administrator for the Class A, Class B, and Class C shares of the Fund and acts as agent of the Fund in the continuous offering of its Shares. The Distribution Agreement for Scudder S&P 500 Stock Fund, dated April 5, 2002 was last approved by the Trustees on September 26, 2002. The Distribution Agreement had an initial term ending September 30, 2002 and continues from year to year thereafter only if its continuance is approved for each class at least annually by a vote of the Board members of the Fund, including the Trustees who are not interested persons of the Fund and who have no direct or indirect financial interest in the Distribution Agreement. The Distribution Agreement continues in effect from year to year so long as such continuance is approved for each class at least annually by a vote of the Board including the Trustees who are not interested persons of the Fund and who have no direct or indirect financial interest in the Agreement. The Distribution Agreement automatically terminates in the event of its assignment and may be terminated for a class at any time without penalty by the Fund or by SDI upon 60 days' notice. Termination by the Fund with respect to a class may be by vote of (i) a majority of the Board members who are not interested persons of the Fund and who have no direct or indirect financial interest in the Distribution Agreement, or (ii) a "majority of the outstanding voting securities" of the class of the Fund, as defined under the 1940 Act. All material amendments must be approved by the Board of Trustees in the manner described above with respect to the continuation of the Agreement. The provisions concerning continuation, amendment and termination of a Distribution Agreement are on a series by series and class by class basis. SDI bears all of its expenses of providing services pursuant to the Distribution Agreement, including the payment of any commissions. The Fund pays the cost for the prospectus and shareholder reports to be typeset and printed for existing shareholders, and SDI, as principal underwriter, pays for the printing and distribution of copies thereof used in connection with the offering of shares to prospective investors. SDI also pays for supplementary sales literature and advertising costs. As indicated under "Purchase of Shares," SDI retains the sales charge upon the purchase of shares and pays or allows concessions or discounts to firms for the sale of the Fund's shares. SDI receives compensation from the Funds as principal underwriter for Class A, Class B and Class C shares. Shareholder and administrative services are provided to the Fund on behalf of Class A, Class B and Class C shareholders under a Shareholder Services Agreement (the "Services Agreement") with SDI. The Services Agreement continues in effect from year to year so long as such continuance is approved for the Fund at least annually by a vote of the Board of the Fund, including the Board members who are not interested persons of the Fund and who have no direct or indirect financial interest in the Services Agreement. The Services Agreement automatically terminates in the event of its assignment and may be terminated at any time without penalty by the Fund or by SDI upon 60 days' notice. Termination with respect to the Class A, B or C shares of the Fund may be by a vote of (i) the majority of the Board members of the Fund who are not interested persons of the Fund and who 20 have no direct or indirect financial interest in the Services Agreement, or (ii) a "majority of the outstanding voting securities" of the Class A, B or C shares, as defined under the 1940 Act. The Services Agreement may not be amended for a class to increase materially the fee to be paid by the Fund without approval of a majority of the outstanding voting securities of such class of the Fund, and all material amendments must in any event be approved by the Board of Trustees in the manner described above with respect to the continuation of the Services Agreement. Under the Services Agreement, SDI may provide or appoint various broker-dealer firms and other service or administrative firms ("firms") to provide information and services to investors in the Fund. Typically, SDI appoints firms that provide services and facilities for their customers or clients who are investors in the Fund. Firms appointed by SDI provide such office space and equipment, telephone facilities and personnel as is necessary or beneficial for providing information and services to their clients. Such services and assistance may include, but are not limited to, establishing and maintaining accounts and records, processing purchase and redemption transactions, answering routine inquiries regarding the Fund, providing assistance to clients in changing dividend and investment options, account designations and addresses and such other administrative services as may be agreed upon from time to time and permitted by applicable statute, rule or regulation. SDI bears all of its expenses of providing those services pursuant to the Services Agreement, including the payment of a service fee to firms (as defined below). As indicated under the Rule 12b-1 Plan, SDI receives compensation from the Funds for its services under the Services Agreement. Rule 12b-1 Plans The Fund has adopted a plan pursuant to Rule 12b-1 under the 1940 Act (the "Rule 12b-1 Plan") that provides for fees payable as an expense of the Class B shares and Class C shares that are used by SDI to pay for distribution services for those classes. Pursuant to the Rule 12b-1 Plan, shareholder and administrative services are provided to the Fund on behalf of its Class A, B and C shareholders under the Fund's Services Agreement with SDI. Because 12b-1 fees are paid out of Fund assets on an ongoing basis, they will, over time, increase the cost of an investment and may cost more than other types of sales charges. The Rule 12b-1 distribution plans for Class B and Class C shares provide alternative methods for paying sales charges and may help funds grow or maintain asset levels to provide operational efficiencies and economies of scale. Rule 12b-1 service plans provide compensation to SDI or intermediaries for post-sales servicing. Since each Distribution Agreement provides for fees payable as an expense of the Class B shares and the Class C shares that are used by SDI to pay for distribution and services for those classes, the agreement is approved and reviewed separately for the Class B shares and the Class C shares in accordance with Rule 12b-1 under the 1940 Act, which regulates the manner in which an investment company may, directly or indirectly, bear the expenses of distributing its shares. The Distribution Agreement and Rule 12b-1 plans may not be amended to increase the fee to be paid by the Fund with respect to a class without approval by a majority of the outstanding voting securities of such class of the Fund, and all material amendments must in any event be approved by the Board in the manner described above. Similarly, the Services Agreement is approved and reviewed separately for the Class A shares, Class B shares and in Class C shares in accordance with Rule 12b-1. If a Rule 12b-1 Plan is terminated in accordance with its terms, the obligation of the Fund to make payments to SDI pursuant to the Rule 12b-1 Plan will cease and the Fund will not be required to make any payments past the termination date. Thus, there is no legal obligation for a Fund to pay any expenses incurred by SDI other than fees payable under a Rule 12b-1 Plan, if for any reason the Rule 12b-1 Plan is terminated in accordance with its terms. Future fees under the Plan may or may not be sufficient to reimburse SDI for its expenses incurred. The Rule 12b-1 plan will continue year to year so long as such continuance is approved for each class at least annually by a vote of the Board who are not interested persons of the Fund and who have no direct or indirect financial interest in the Rule 12b-1 Plan. Distribution Services. For its services under the Distribution Agreement, SDI receives a fee from the Fund under its Rule 12b-1 Plan, payable monthly, at the annual rate of 0.75% of average daily net assets of the Fund attributable to its Class B shares. This fee is accrued daily as an expense of Class B shares. SDI also receives any contingent 21 deferred sales charges paid with respect to Class B shares. SDI currently compensates firms for sales of Class B shares at a commission rate of 3.75%. For its services under the Distribution Agreement, SDI receives a fee from the Fund under its Rule 12b-1 Plan, payable monthly, at the annual rate of 0.75% of average daily net assets of the Fund attributable to Class C shares. This fee is accrued daily as an expense of Class C shares. SDI currently advances to firms the first year distribution fee at a rate of 0.75% of the purchase price of Class C shares. For periods after the first year, SDI currently pays firms for sales of Class C shares a distribution fee, payable quarterly, at an annual rate of 0.75% of net assets attributable to Class C shares maintained and serviced by the firm. This fee continues until terminated by SDI or the applicable Fund. SDI also receives any contingent deferred sales charges paid with respect to Class C shares. Shareholder Services. For its services under the Services Agreement, SDI receives a shareholder services fee from the Fund under a Rule 12b-1 Plan, payable monthly, at an annual rate of up to 0.25% of the average daily net assets of Class A, B and C shares of the Fund. With respect to Class A Shares of the Fund, SDI pays each firm a service fee, payable quarterly, at an annual rate of up to 0.25% of the net assets in Fund accounts that it maintains and services attributable to Class A Shares of the Fund, commencing with the month after investment. With respect to Class B and Class C Shares of the Fund, SDI currently advances to firms the first-year service fee at a rate of up to 0.25% of the purchase price of such shares. For periods after the first year, SDI currently intends to pay firms a service fee at a rate of up to 0.25% (calculated monthly and paid quarterly) of the net assets attributable to Class B and Class C shares of the Fund maintained and serviced by the firm. Firms to which service fees may be paid include affiliates of SDI. In addition SDI may, from time to time, pay certain firms from it own resources additional amounts for ongoing administrative services and assistance provided to their customers and clients who are shareholders of the Fund. SDI also may provide some of the above services and may retain any portion of the fee under the Services Agreement not paid to firms to compensate itself for shareholder or administrative functions performed for the Fund. Currently, the shareholder services fee payable to SDI is payable at an annual rate of up to 0.25% of net assets based upon Fund assets in accounts for which a firm provides administrative services and at the annual rate of 0.15% of net assets based upon Fund assets in accounts for which there is no firm of record (other than SDI) listed on a Fund's records. The effective shareholder services fee rate to be charged against all assets of the Fund while this procedure is in effect will depend upon the proportion of Fund assets that is held in accounts for which a firm of record provides shareholder services. The Board of the Fund, in its discretion, may approve basing the fee to SDI at the annual rate of 0.25% on all Fund assets in the future. Prior to June 18, 2001, the administrative service fees paid by the Fund were as set forth below:
Fund Fiscal Year Class A Class B Class C - ---- ----------- ------- ------- ------- Scudder S&P 500 Stock Fund 2000 $8,855 $ 1,890 $1,871 Scudder S&P 500 Stock Fund 2001 $33,217 $11,995 $3,996
Expenses of the Funds paid in connection with the Rule 12b-1 Plans for each class of shares are set forth below. A portion of the marketing and sales and operating expenses shown below could be considered overhead expenses. 22
Shareholder Services Fees under Rule 12b-1 for Fiscal Year 2002 ------------------------------- Shareholder Shareholder Shareholder Services Shareholder Service Fees Paid Service Fees Fees Paid by Service Fees by SDI to Retained Fund Fund to SDI* Paid by SDI to Firms** Affiliated Firms by SDI - ----- ----------- -------------------- ---------------- ------ Scudder S&P 500 Stock Fund Class A $133,051 $120,870 $19,956 $0
* Prior to June 18, 2001, fees paid under the Services Agreements were paid at the same rate described above; however, such fees were not paid pursuant to the Fund's Rule 12b-1 Plan. ** Including affiliated firms. 23 Compensation to Underwriter and Firms for 2002 ------------------------------------- -------- Contingent Compensation Deferred Sales Compensation 12b-1 Fees Retained Charge Paid to Paid by SDI to Fund Paid to SDI by SDI SDI Firms - ---- ------ --- ----- Scudder S&P 500 Stock Fund Class B $144,330 $118,251 $70,093 $24,287 Class C $72,049 $51,434 $1,024 $18,806 Other Distribution Expenses Paid by Underwriter for 2002 -------------------------------------------------------- Compensation Advertising Marketing Misc. Paid by SDI to and Prospectus and Sales Operating Interest Affiliated Firms Literature Printing Expenses Expenses Expense - ---------------- ---------- -------- -------- -------- ------- $1,792 $10,703 $2,404 $12,228 $5,535 $15,873 $1,809 $23,383 $2,625 $13,496 $5,5046 $0 24 The following table shows the aggregate amount of underwriting commissions paid to SDI, the amount in commissions it paid out to brokers and the amount of underwriting commissions retained by SDI.
Aggregate Aggregate Aggregate Sales Commissions Aggregate Commissions Commissions Fund Fiscal Year Commissions Paid to Firms Paid to Affiliated Firms Retained by SDI - ---- ----------- ----------- ------------- ------------------------ --------------- Scudder S&P 500 Stock Fund Class A 2002 $30,000 $24,000 $1,000 $5,000 2001 $26,000 $14,000 $3,000 $9,000 2000 $0 $0 $0 $2,000
Certain trustees or officers of the Fund are also trustees or officers of the Advisor or SDI, as indicated under "Officers and Trustees." Brokerage Commissions Allocation of brokerage may be placed by the Advisor. The primary objective of the Advisor 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 Advisor seeks to evaluate the overall reasonableness of brokerage commissions paid (to the extent applicable) with commissions charged on comparable transactions, as well as by comparing commissions paid by the Fund to reported commissions paid by others. The Advisor 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 Advisor 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 Advisor's practice to place such orders with broker/dealers who supply research, market and statistical information to 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 Advisor is authorized when placing portfolio transactions 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 Advisor may 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. Although certain research services information from broker/dealers may be useful to the Fund and to the Advisor, it is the opinion of the Advisor that such information only supplements its own research effort since the information must still be analyzed, weighed and reviewed by the Advisor's staff. Such information may be useful to the Advisor in providing services to clients other than the Fund and not all such information is used by the Advisor in connection with the Fund. Conversely, such information provided to the Advisor by broker/dealers through whom other clients of the Advisor effect securities transactions may be useful to the Advisor in providing services to the Fund. For the fiscal years ended August 31, 2000, August 31, 2001 and August 31, 2002, the Fund paid aggregate brokerage commissions of $9,984.36, $37,996.44 and $24,865.00 25 For the fiscal year ended August 31, 2002:
Percentage of Percentage of Dollar Amount of Dollar Amount of Commissions Paid Transactions Involving Commissions Paid to Transactions to Affiliated Commissions Paid to Brokers for Allocated for Name of Fund Brokers Affiliated Brokers Research Services Research Services - ------------ ------- ------------------ ----------------- ----------------- S&P 500 Stock Fund 0% 0% $23,849.69 $39,451,503.43 Portfolio Turnover
Portfolio turnover rate is 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. Portfolio turnover rates for the two most recent fiscal years for Scudder S&P 500 Stock Fund are as follows: 12% and 8% for the fiscal years ended August 31, 2002 and 2001. 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 a Fund's portfolio whenever necessary, in management's opinion, to meet the Fund's objective. SERVICE PROVIDERS Independent Auditors And Reports To Shareholders The financial highlights of Scudder S&P 500 Stock Fund included in the Fund's 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 Ernst & Young LLP, independent auditors, 200 Clarendon Street, Boston, MA 02116, given on the authority of said firm as experts in auditing and accounting. Ernst & Young LLP audits the financial statements of the Fund and provides other audit, tax and related services. Shareholders will receive annual audited financial statements and semi-annual unaudited financial statements. Legal Counsel Dechert, Ten Post Office Square, South, Boston, Massachusetts 02109, serves as legal counsel to the Fund. Fund Accounting Agent Scudder Fund Accounting Corporation ("SFAC"), Two International Place, Boston, Massachusetts, 02110, a subsidiary of the Advisor, is responsible for determining net asset value per share and maintaining the portfolio and general accounting records for the Fund. Prior to the implementation of the Administrative Agreement, the Fund paid SFAC an annual fee equal to 0.025% of the first $150 million of average daily net assets, 0.0075% on the next $850 million, and 0.0045% over $1 billion pursuant to the fund accounting agreement. Effective June 18, 2001, the fund accounting fees are paid by the Advisor pursuant to the Administrative Agreement. Custodian, Transfer Agent And Shareholder Service Agent The Fund employs State Street Bank and Trust Company ("SSB"), 225 Franklin Street, Boston, Massachusetts 02110, as custodian. SSB has custody of all securities and cash of the Fund. SSB attends to the collection of principal and income, and payment for and collection of proceeds of securities bought and sold by the Fund. SSB is also the Fund's transfer agent and dividend paying agent. Pursuant to an agreement with SSB, Scudder Investments Service Company ("SISC"), 811 Main Street, Kansas City, Missouri 64105-2005, an affiliate of the Advisor, serves as the Fund's transfer, dividend-paying agent and shareholder service agent for the Fund's Class A, 26 B, and C shares. SISC receives as transfer agent an annual account fee of $10.00 per account ($18.00 for retirement accounts) plus account set up charges, annual fees associated with the contingent deferred sales charges (Class B shares only), an asset-based fee of 0.08% and out-of-pocket expense reimbursement. Effective June 18, 2001, these fees are paid by the Advisor pursuant to the Administrative Agreement. PERFORMANCE Performance information is based on historical earnings and is not intended to indicate future performance. Performance will vary based on factors such as changes in market conditions and the level of expenses. Unless otherwise indicated, Class A performance information includes the effect of the maximum initial sales charge and Class B performance information includes the effect of the maximum contingent deferred sales charge. The returns in the chart below assume reinvestment of distributions at net asset value and represent actual performance figures of the Class A, B and C shares of the Fund as described above (as applicable); they do not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Average Annual Total Return Average annual total return is the average annual compound rate of return for the periods of one year, five years and ten years (or such shorter periods as may be applicable dating from the commencement of the Fund's operations), all ended on the last day of a recent calendar quarter. Average annual total return quotations reflect changes in the price of the Fund's shares, sales charges and assume that all dividends and capital gains distributions during the respective periods were reinvested in Fund shares. Average annual total return is calculated by computing the average annual compound rates of return of a hypothetical investment over such periods, according to the following formula (average annual total return is then expressed as a percentage): T = (ERV/P)^1/n - 1 Where: T = Average Annual Total Return P = a hypothetical initial investment of $1,000 n = number of years ERV = ending redeemable value: ERV is the value, at the end of the applicable period, of a hypothetical $1,000 investment made at the beginning of the applicable period Average Annual Total Returns for the Period Ended August 31, 2002 1 Year Life of Class* ------ ------------- Scudder S&P 500 Stock Fund -- Class A -22.52% -20.08% Scudder S&P 500 Stock Fund -- Class B -21.96% -20.17% Scudder S&P 500 Stock Fund -- Class C -19.55% -19.16% * The Fund commenced operations on April 3, 2000. 27 Average Annual Total Returns (After Taxes on Distributions) P(1+T)n = ATVD Where: P = a hypothetical initial investment of $1,000 T = average annual total return (after taxes on distributions) n = number of years ATVD = ending value of a hypothetical $1,000 payment made at the beginning of the 1-, 5-, or 10-year periods at the end of the 1-, 5-, or 10-year periods (or fractional portion), after taxes on fund distributions but not after taxes on redemptions Average Annual Total Returns (After Taxes on Distributions and Redemption) P(1+T)n = ATVDR Where: P = a hypothetical initial investment of $1,000 T = average annual total return (after taxes on distributions and redemption) n = number of years ATVDR = ending value of a hypothetical $1,000 payment made at the beginning of the 1-, 5-, or 10-year periods at the end of the 1-, 5-, or 10-year periods (or fractional portion), after taxes on fund distributions and redemptions Average annual total returns (after taxes on distributions and redemption) are based on historical earnings, calculated as described above, and are not intended to indicate future performance. Average annual total returns (after taxes on distributions and redemption) for the Fund or class will vary based on changes in market conditions and the level of the Fund's and class' expenses. Aggregate Total Returns (Before Taxes) The Fund, when advertising aggregate total return before taxes for a class of its shares, computes such returns by determining the aggregate compounded rates of return during specified periods that likewise equate the initial amount invested to the ending redeemable value of such investment. The formula for calculating aggregate total return is as follows: Aggregate Return = (ERV) - 1 ---- P Where: P = a hypothetical initial investment of $1,000 ERV = ending redeemable value of a hypothetical $1,000 payment made at the beginning of the 1-, 5- or 10-year (or other) periods at the end of the applicable period (or fractional portion). The calculation for aggregate total returns before taxes is made assuming that (1) the maximum sales load (or other charges deducted from payments) is deducted from the initial $1,000 investment; (2) all dividends and capital gain distributions are reinvested on the reinvestment dates at the price per share existing on the reinvestment date, (3) all recurring fees charged to all shareholder accounts are included (except those that are paid by redemption of the Fund's shares), and (4) for any account fees that vary with the size of the account, a mean (or median) account size in the Fund during the periods is reflected. The ending redeemable value (variable "ERV" in the formula) is determined by assuming complete redemption of the hypothetical investment after deduction of all nonrecurring charges and the applicable deferred sales charge at the end of the measuring period. 28 Total Return Total return is the rate of return on an investment for a specified period of time calculated by computing the cumulative rate of return of a hypothetical investment over such periods, according to the following formula (total return is then expressed as a percentage): T = (ERV/P) - 1 Where: T = 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. Figures relating to the growth in the total net assets of the Fund apart from capital appreciation may also be cited, including, but not limited to: net cash flow, net subscriptions, gross subscriptions, net asset growth, net account growth, and subscription rates. Capital appreciation generally will be included as part of the Fund's and classes' performance data. Comparison of Fund Performance Performance may be compared to the performance of other mutual funds tracked by mutual fund rating services or to unmanaged indices which may assume reinvestment of dividends but generally do not reflect deductions for administrative and management costs. A comparison of the quoted non-standard performance offered for various investments is valid only if performance is calculated in the same manner. Since there are different methods of calculating performance, investors should consider the effects of the methods used to calculate performance when comparing performance of the Fund with performance quoted with respect to other investment companies or types of investments. From time to time, in marketing and other Fund literature, members of the Board 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 Advisor has under management in various geographical areas may be quoted in advertising and marketing materials. The Fund may depict the historical performance of the securities in which the Fund may invest over periods reflecting a variety of market or economic conditions either alone or in comparison with alternative investments, performance indexes of those investments or economic indicators. The Fund may also describe its portfolio holdings and depict its size or relative size compared to other mutual funds, the number and make-up of its shareholder base and other descriptive factors concerning the Fund. The Fund may be advertised as an investment choice in Scudder's college planning program. The Fund and its performance may be compared to other types of mutual funds and to other investment products with different features and risks, such as bank products that insure principal. Evaluation of Fund performance or other relevant statistical information made by independent sources may also be used in advertisements concerning the Fund, including reprints of, or selections from, editorials or articles about the Fund. Additional information about the Fund's performance also appears in its Annual Report to Shareholders, which is available without charge from the Fund. 29 PURCHASE AND REDEMPTION OF SHARES General Information Policies and procedures affecting transactions in Fund shares can be changed at any time without notice, subject to applicable law. Transactions may be contingent upon proper completion of application forms and other documents by shareholders and their receipt by the Fund's agents. Transaction delays in processing (and changing account features) due to circumstances within or beyond the control of the Fund and its agents may occur. Shareholders (or their financial service firms) are responsible for all losses and fees resulting from bad checks, cancelled orders or the failure to consummate transactions effected pursuant to instructions reasonably believed to genuine. A distribution will be reinvested in shares of the same Fund and class if the distribution check is returned as undeliverable. Orders will be confirmed at a price based on the net asset value of the Fund next determined after receipt in good order by SDI of the order accompanied by payment. However, orders received by dealers or other financial services firms prior to the determination of net asset value and received in good order by SDI prior to the close of its business day will be confirmed at a price based on the net asset value effective on that day ("trade date"). Reductions in value that result solely from market activity will not trigger industry redemption. Shareholders with a combined household account balance in any of the Scudder Funds of $120,000 or more, as well as, group retirement and certain other accounts will not be subject to automatic redemption. Certificates. Share certificates will not be issued. Share certificates now in a shareholder's possession may be sent to the Transfer Agent for cancellation and book-entry credit to such shareholder's account. Certain telephone and other procedures require book-entry holdings. Shareholders with outstanding certificates bear the risk of loss. Use of Financial Services Firms. Investment dealers and other firms provide varying arrangements for their clients to purchase and redeem the Fund's shares, including higher minimum investments, and may assess transaction or other fees. Firms may arrange with their clients for other investment or administrative services. Such firms may independently establish and charge additional amounts to their clients for such services. Firms also may hold the Fund's shares in nominee or street name as agent for and on behalf of their customers. In such instances, the Fund's transfer agent, Scudder Investments Service Company (the "Transfer Agent") will have no information with respect to or control over the accounts of specific shareholders. Such shareholders may obtain access to their accounts and information about their accounts only from their firm. Certain of these firms may receive compensation from the Fund through the Shareholder Service Agent for record-keeping and other expenses relating to these nominee accounts. In addition, certain privileges with respect to the purchase and redemption of shares or the reinvestment of dividends may not be available through such firms. Some firms may participate in a program allowing them access to their clients' accounts for servicing including, without limitation, transfers of registration and dividend payee changes; and may perform functions such as generation of confirmation statements and disbursement of cash dividends. Such firms, including affiliates of SDI, may receive compensation from a Fund through the Shareholder Service Agent for these services. Telephone and Electronic Transaction Procedures. Shareholders have various telephone, Internet, wire and other electronic privileges available. The Fund or its agents may be liable for any losses, expenses or costs arising out of fraudulent or unauthorized instructions pursuant to these privileges unless the Fund or its agents reasonably believe, based upon reasonable verification procedures, that the instructions were genuine. Verification procedures include recording instructions, requiring certain identifying information before acting upon instructions and sending written confirmations. During periods when it is difficult to contact the Shareholder Service Agent, it may be difficult to use telephone, wire and other privileges. QuickBuy and QuickSell. QuickBuy and QuickSell permits the transfer of money via the Automated Clearing House System (minimum $50, maximum $250,000) from or to a shareholder's bank, savings and loan, or credit union account in connection with the purchase or redemption of Fund shares. Shares purchased by check or through QuickBuy and QuickSell or Direct Deposit may not be redeemed under this privilege until such Shares have been owned for at least 10 days. QuickBuy and QuickSell cannot be used with passbook savings accounts or for certain tax-deferred plans such as IRAs. 30 Tax-Sheltered Retirement Plans. The Shareholder Service Agent provides retirement plan services and documents and SDI can establish investor accounts in any of the following types of retirement plans: o Traditional, Roth and Education IRAs. This includes Savings Incentive Match Plan for Employees of Small Employers ("SIMPLE"), Simplified Employee Pension Plan ("SEP") IRA accounts and prototype documents. o 403(b)(7) Custodial Accounts. This type of plan is available to employees of most non-profit organizations. o Prototype money purchase pension and profit-sharing plans may be adopted by employers. o Brochures describing these plans as well as model defined benefit plans, target benefit plans, 457 plans, 401(k) plans, simple 401(k) plans and materials for establishing them are available from the Shareholder Service Agent upon request. Additional fees and transaction policies and procedures may apply to such plans. Investors should consult with their own tax advisors before establishing a retirement plan. Purchases The Fund reserves the right to withdraw all or any part of the offering made by its prospectus and to reject purchase orders for any reason. Also, from time to time, the Fund may temporarily suspend the offering of any class of its shares to new investors. During the period of such suspension, persons who are already shareholders of such class of such Fund may be permitted to continue to purchase additional shares of such class and to have dividends reinvested. The Fund reserves the right to reject new account applications without a correct certified Social Security or tax identification number. The Fund also reserves the right, following 30 days' notice, to redeem all shares in accounts without a correct certified Social Security or tax identification number. Financial Services Firms' Compensation. Banks and other financial services firms may provide administrative services related to order placement and payment to facilitate transactions in shares of the Fund for their clients, and SDI may pay them a transaction fee up to the level of the discount or commission allowable or payable to dealers. SDI may, from time to time, pay or allow to firms a 1% commission on the amount of shares of the Fund sold under the following conditions: (i) the purchased shares are held in a Scudder IRA account, (ii) the shares are purchased as a direct "roll over" of a distribution from a qualified retirement plan account maintained on a participant subaccount record keeping system provided by Scudder Investments Service Company, (iii) the registered representative placing the trade is a member of Executive Council, a group of persons designated by SDI in acknowledgment of their dedication to the employee benefit plan area; and (iv) the purchase is not otherwise subject to a commission. In addition to the discounts or commissions described herein and the prospectus, SDI may pay or allow additional discounts, commissions or promotional incentives, in the form of cash, to firms that sell shares of the Fund. In some instances, such amounts may be offered only to certain firms that sell or are expected to sell during specified time periods certain minimum amounts of shares of the Fund, or other Funds underwritten by SDI. SDI may re-allow to dealers up to the full applicable Class A sales charge during periods and for transactions specified in such notice and such re-allowances may be based upon attainment of minimum sales levels. During periods when 90% or more of the sales charge is re-allowed, such dealers may be deemed to be underwriters as that term is defined in the 1933 Act. SDI may in its discretion compensate investment dealers or other financial services firms in connection with the sale of Class A shares of a Fund at net asset value in accordance with the Large Order NAV Purchase Privilege and one of the three following compensation schedules up to the following amounts: 31
Compensation Schedule #1^(1) Compensation Schedule #2^(2) Compensation Schedule #3^(2)^(3) As a As a Percentage of As a Amount of Percentage of Amount of Net Asset Amount of Percentage of Shares Sold Net Asset Value Shares Sold Value Shares Sold Net Asset Value - ----------- --------------- ----------- ----- ----------- --------------- $1 million to $5 million 1.00% Under $15 million 0.75% Over $15 million 0.25% - 0.50% Over $5 million to $50 million 0.50% -- -- -- -- Over $50 million 0.25% -- -- -- --
^(1) The commission schedule will be reset on a calendar year basis for sales of shares pursuant to the Large Order NAV Purchase Privilege to employer-sponsored employee benefit plans using the proprietary subaccount record keeping system, made available through Scudder Investments Service Company. For purposes of determining the appropriate commission percentage to be applied to a particular sale under the foregoing schedule, SDI will consider the cumulative amount invested by the purchaser in a Fund and other Funds listed under "Combined Purchases," including purchases pursuant to the "Combined Purchases," "Letter of Intent" and "Cumulative Discount" features referred to above. ^(2) Compensation Schedules 2 and 3 apply to employer sponsored employee benefit plans using the OmniPlus subaccount record keeping system. The Compensation Schedule will be determined based on the value of the conversion assets. Conversion from "Compensation Schedule #2" to "Compensation Schedule #3" is not an automatic process. When a plan's assets grow to exceed $15 million, the Plan Sponsor must contact their client relationship manager to discuss a conversion to Compensation Schedule #3. ^(3) Compensation Schedule 3 is based on individual plan underwriting criteria. In most cases, the investment dealers are compensated at a rate of 0.25%. However, certain underwriting factors, such as the number of enrollment and education meetings conducted by Scudder staff the number of non-Scudder funds the plan chooses and the per participant record keeping fee, can increase the fee paid up to 0.50%. The privilege of purchasing Class A shares of the Fund at net asset value under the Large Order NAV Purchase Privilege is not available if another net asset value purchase privilege also applies. SDI compensates firms for sales of Class B shares at the time of sale at a commission rate of up to 3.75% of the amount of Class B shares purchased. SDI is compensated by the Fund for services as distributor and principal underwriter for Class B shares. SDI advances to firms the first year distribution fee at a rate of 0.75% of the purchase price of such shares. For periods after the first year, SDI currently pays firms for sales of Class C shares of distribution fee, payable quarterly, at an annual rate of 0.75% of net assets attributable to Class C shares maintained and serviced by the firm. SDI is compensated by the Fund for services as distributor and principal underwriter for Class C shares. Class A Purchases. The sales charge scale is applicable to purchases made at one time by any "purchaser" which includes: an individual; or an individual, his or her spouse and children under the age of 21; or a trustee or other fiduciary of a single trust estate or single fiduciary account; or an organization exempt from federal income tax under Section 501(c)(3) or (13) of the Code; or a pension, profit-sharing or other employee benefit plan whether or not qualified under Section 401 of the Code; or other organized group of persons whether incorporated or not, provided the organization has been in existence for at least six months and has some purpose other than the purchase of redeemable securities of a registered investment company at a discount. In order to qualify for a lower sales charge, all orders from an organized group will have to be placed through a single investment dealer or other firm and identified as originating from a qualifying purchaser. The public offering price of Class A shares for purchasers choosing the initial sales charge alternative is the net asset value plus a sales charge, as set forth below. 32
Sales Charge ------------ Allowed to Dealers As a Percentage of As a Percentage of as a Percentage of Amount of Purchase Offering Price Net Asset Value* Offering Price - ------------------ -------------- ---------------- -------------- Up to $100,000 4.50% 4.71% 4.00% $100,000 but less than $250,000 3.50 3.63 3.00 $250,000 but less than $500,000 2.60 2.67 2.25 $500,000 but less than $1 million 2.00 2.04 1.75 $1 million and over .00** .00** ***
* Rounded to the nearest one-hundredth percent. ** Redemption of shares may be subject to a contingent deferred sales charge as discussed below. *** Commission is payable by SDI as discussed below. Class A NAV Sales. Class A shares may be sold at net asset value to: (a) a current or former director or trustee of Deutsche or Scudder mutual funds, employees, their spouses or life partner and children or step-children age 21 or younger of Deutsche Bank or its affiliates or a subadvisor to any fund in the Scudder family of funds or a broker-dealer authorized to sell shares of the Fund; (b) registered representatives and employees of broker-dealers having selling group agreements with SDI and officers, directors and employees of service agents of the Fund, for themselves or their spouses or dependent children; (c) certain professionals who assist in the promotion of Scudder Funds pursuant to personal services contracts with SDI, for themselves or members of their families. SDI in its discretion may compensate financial services firms for sales of Class A shares under this privilege at a commission rate of 0.50% of the amount of Class A shares purchased; (d) any trust, pension, profit-sharing or other benefit plan for only such persons listed under the preceding section (a); (e) persons who purchase such shares through bank trust departments that process such trades through an automated, integrated mutual fund clearing program provided by a third party clearing firm; (f) persons who purchase shares of the Fund through SDI as part of an automated billing and wage deduction program administered by RewardsPlus of America for the benefit of employees of participating employer groups; (g) selected employees (including their spouses and dependent children) of banks and other financial services firms that provide administrative services related to order placement and payment to facilitate transactions in shares of the Fund for their clients pursuant to an agreement with SDI or one of its affiliates. Only those employees of such banks and other firms who as part of their usual duties provide services related to transactions in Fund shares qualify; (h) unit investment trusts sponsored by Ranson & Associates, Inc. and unitholders of unit investment trusts sponsored by Ranson & Associates, Inc. or its predecessors through reinvestment programs described in the prospectuses of such trusts that have such programs; (i) through certain investment advisors registered under the Investment Advisors Act and other financial services firms acting solely as agent for their clients, that adhere to certain standards established by SDI, including a requirement that such shares be sold for the benefit of their clients participating in an investment advisory program or agency commission program under which such clients pay a fee to the investment advisor or other firm for portfolio management or agency brokerage services. Such shares are sold for investment purposes and on the condition that they will not be resold except through redemption or repurchase by the Fund; 33 (j) a participant-directed qualified retirement plan described in Code Section 401(a), a participant-directed non-qualified deferred compensation plan described in Code Section 457 or a participant-directed qualified retirement plan described in Code Section 403(b)(7) which is not sponsored by a K-12 school district, provided in each case that such plan has not less than 200 eligible employees; (k) in connection with the acquisition of the assets of or merger or consolidation with another investment company, or to shareholders in connection with the investment or reinvestment of income and capital gain dividends, and under other circumstances deemed appropriate by SDI and consistent with regulatory requirements; (l) pursuant to the Large Order NAV Privilege (if no other net asset value purchase privilege applies). Class A shares also may be purchased at net asset value in any amount by members of the plaintiff class in the proceeding known as Howard and Audrey Tabankin, et al. v. Kemper Short-Term Global Income Fund, et al., Case No. 93 C 5231 (N.D. IL). This privilege is generally non-transferable and continues for the lifetime of individual class members and for a ten-year period for non-individual class members. To make a purchase at net asset value under this privilege, the investor must, at the time of purchase, submit a written request that the purchase be processed at net asset value pursuant to this privilege specifically identifying the purchaser as a member of the "Tabankin Class." Shares purchased under this privilege will be maintained in a separate account that includes only shares purchased under this privilege. For more details concerning this privilege, class members should refer to the Notice of (1) Proposed Settlement with Defendants; and (2) Hearing to Determine Fairness of Proposed Settlement, dated August 31, 1995, issued in connection with the aforementioned court proceeding. For sales of Fund shares at net asset value pursuant to this privilege, SDI may in its discretion pay investment dealers and other financial services firms a concession, payable quarterly, at an annual rate of up to 0.25% of net assets attributable to such shares maintained and serviced by the firm. A firm becomes eligible for the concession based upon assets in accounts attributable to shares purchased under this privilege in the month after the month of purchase and the concession continues until terminated by SDI. The privilege of purchasing Class A shares of the Fund at net asset value under this privilege is not available if another net asset value purchase privilege also applies. Class A Quantity Discounts. An investor or the investor's dealer or other financial services firm must notify the Shareholder Service Agent or SDI whenever a quantity discount or reduced sales charge is applicable to a purchase. Letter of Intent. The same reduced sales charges for Class A shares, as shown in the applicable prospectus, also apply to the aggregate amount of purchases of Class A shares of Scudder Funds that bear a sales charge made by any purchaser within a 24-month period under a written Letter of Intent ("Letter") provided by SDI. The Letter, which imposes no obligation to purchase or sell additional Class A shares, provides for a price adjustment depending upon the actual amount purchased within such period. The Letter provides that the first purchase following execution of the Letter must be at least 5% of the amount of the intended purchase, and that 5% of the amount of the intended purchase normally will be held in escrow in the form of shares pending completion of the intended purchase. If the total investments under the Letter are less than the intended amount and thereby qualify only for a higher sales charge than actually paid, the appropriate number of escrowed shares are redeemed and the proceeds used toward satisfaction of the obligation to pay the increased sales charge. The Letter for an employer-sponsored employee benefit plan maintained on the subaccount record keeping system available through the Shareholder Service Agent may have special provisions regarding payment of any increased sales charge resulting from a failure to complete the intended purchase under the Letter. A shareholder may include the value (at the maximum offering price) of all shares of such Scudder Funds held of record as of the initial purchase date under the Letter as an "accumulation credit" toward the completion of the Letter, but no price adjustment will be made on such shares. Class A Cumulative Discount. Class A shares of the Fund may also be purchased at the rate applicable to the discount bracket attained by adding to the cost of shares being purchased, the value of all Class A shares of Scudder Funds that bear a sales charge (computed at the maximum offering price at the time of the purchase for which the discount is applicable) already owned by the investor. Combined Purchases. The Fund's Class A shares (or the equivalent) may be purchased at the rate applicable to the sales charge discount bracket attained by combining concurrent investments in Class A shares of any Scudder Funds that bear a sales charge. 34 For purposes of the Combined Purchases, Letter of Intent and Cumulative Discount features described above, employer sponsored employee benefit plans using the subaccount record keeping system made available through the Shareholder Service Agent may include: (a) money market Funds as "Scudder Funds", (b) all classes of shares of any Scudder Fund and (c) the value of any other plan investments, such as guaranteed investment contracts and employer stock, maintained on such subaccount record keeping system. Multi-Class Suitability. SDI has established the following procedures regarding the purchase of Class A, Class B and Class C shares. These procedures do not reflect in any way the suitability of a particular class of shares for a particular investor. That determination must be made by investors with the assistance of their financial representative. Orders for Class B shares or Class C shares for $500,000 or more will be declined. Orders for Class B shares or Class C shares by employer sponsored employee benefit plans (not including plans under Code Section 403 (b)(7) sponsored by a K-12 school district) using the subaccount record keeping system made available through the Shareholder Service Agent ("Flex Plans") will be invested instead in Class A shares at net asset value where the combined subaccount value in a Fund or other Scudder Funds is in excess of $1 million for Class B shares or $5 million for Class C shares including purchases pursuant to the "Combined Purchases," "Letter of Intent" and "Cumulative Discount." Flex Plans set-up on the Flex recordkeeping system after October 1, 2002 will automatically begin purchasing Class A shares at net asset value once the plan's assets reach $1 million. Flex Plans established prior to October 1, 2002 with eligible assets of less than $5 million may continue to purchase Class B or C shares until October 1, 2005. After October 1, 2005, all Flex Plans with assets over $1 million must begin purchasing Class A shares. Automatic Investment Plan. A shareholder may purchase additional shares of the Fund through an automatic investment program. With the Direct Deposit Purchase Plan ("Direct Deposit"), investments are made automatically (minimum $50 and maximum $250,000) from the shareholder's account at a bank, savings and loan or credit union into the shareholder's Fund account. Termination by a shareholder will become effective within thirty days after the Shareholder Service Agent has received the request. The Fund may immediately terminate a shareholder's Plan in the event that any item is unpaid by the shareholder's financial institution. Payroll Investment Plans. A shareholder may purchase shares through Payroll Direct Deposit or Government Direct Deposit. Under these programs, all or a portion of a shareholder's net pay or government check is invested each payment period. A shareholder may terminate participation in these programs by giving written notice to the shareholder's employer or government agency, as appropriate. (A reasonable time to act is required.) The Fund is not responsible for the efficiency of the employer or government agency making the payment or any financial institutions transmitting payments. Redemptions The Fund may suspend the right of redemption or delay payment more than seven days (a) during any period when the Exchange is closed other than customary weekend and holiday closings or during any period in which trading on the Exchange is restricted, (b) during any period when an emergency exists as a result of which (i) disposal of the Fund's investments is not reasonably practicable, or (ii) it is not reasonably practicable for the Fund to determine the value of its net assets, or (c) for such other periods as the SEC may by order permit for the protection of the Fund's shareholders. The amount received by a shareholder upon redemption or repurchase may be more or less than the amount paid for such shares depending on the market value of the Fund's portfolio securities at that time. A request for repurchase (confirmed redemption) may be communicated by a shareholder through a financial services firm to SDI, which firms must promptly submit orders to be effective. Redemption requests must be unconditional. Redemption requests (and a stock power for certificated shares) must be duly endorsed by the account holder. As specified in the prospectus, signatures may need to be guaranteed by a commercial bank, trust company, savings and loan association, federal savings bank, member firm of a national securities exchange or other financial institution permitted by SEC rule. Additional documentation may be required, particularly from institutional and fiduciary account holders, such as corporations, custodians (e.g., under the Uniform Transfers to Minors Act), executors, administrators, trustees or guardians. 35 If the proceeds of the redemption (prior to the imposition of any contingent deferred sales charge) are $100,000 or less and the proceeds are payable to the shareholder of record at the address of record, normally a telephone request or a written request by any one account holder without a signature guarantee is sufficient for redemptions by individual or joint account holders, and trust, executor and guardian account holders (excluding custodial accounts for gifts and transfers to minors), provided the trustee, executor or guardian is named in the account registration. Other institutional account holders and guardian account holders of custodial accounts for gifts and transfers to minors may exercise this special privilege of redeeming shares by telephone request or written request without signature guarantee subject to the same conditions as individual account holders, provided that this privilege has been pre-authorized by the institutional account holder or guardian account holder by written instruction to the Shareholder Service Agent with signatures guaranteed. This privilege may not be used to redeem shares held in certificated form and may not be used if the shareholder's account has had an address change within 15 days of the redemption request. Wires. Delivery of the proceeds of a wire redemption of $250,000 or more may be delayed by the Fund for up to seven days if a Fund or the Shareholder Service Agent deems it appropriate under then-current market conditions. The ability to send wires is limited by the business hours and holidays of the firms involved. The Fund is not responsible for the efficiency of the federal wire system or the account holder's financial services firm or bank. The account holder is responsible for any charges imposed by the account holder's firm or bank. To change the designated account to receive wire redemption proceeds, send a written request to the Fund Shareholder Service Agent with signatures guaranteed as described above or contact the firm through which Fund shares were purchased. Automatic Withdrawal Plan. The owner of $5,000 or more of a class of the Fund's shares at the offering price (net asset value plus, in the case of Class A shares, the initial sales charge) may provide for the payment from the owner's account of any requested dollar amount to be paid to the owner or a designated payee monthly, quarterly, semiannually or annually. The $5,000 minimum account size is not applicable to IRAs. The minimum periodic payment is $50. The maximum annual rate at which shares, subject to CDSC may be redeemed is 12% of the net asset value of the account. Shares are redeemed so that the payee should receive payment approximately the first of the month. Investors using this Plan must reinvest Fund distributions. The purchase of Class A shares while participating in a systematic withdrawal plan will ordinarily be disadvantageous to the investor because the investor will be paying a sales charge on the purchase of shares at the same time that the investor is redeeming shares upon which a sales charge may have already been paid. Therefore, the Fund will not knowingly permit additional investments of less than $2,000 if the investor is at the same time making systematic withdrawals. Contingent Deferred Sales Charge (CDSC). The following example will illustrate the operation of the CDSC. Assume that an investor makes a single purchase of $10,000 of the Fund's Class B shares and that 16 months later the value of the shares has grown by $1,000 through reinvested dividends and by an additional $1,000 of share appreciation to a total of $12,000. If the investor were then to redeem the entire $12,000 in share value, the CDSC would be payable only with respect to $10,000 because neither the $1,000 of reinvested dividends nor the $1,000 of share appreciation is subject to the charge. The charge would be at the rate of 3.00% ($300) because it was in the second year after the purchase was made. The rate of the CDSC is determined by the length of the period of ownership. Investments are tracked on a monthly basis. The period of ownership for this purpose begins the first day of the month in which the order for the investment is received. For example, an investment made in March 2002 will be eligible for the second year's charge if redeemed on or after March 1, 2003. In the event no specific order is requested when redeeming shares subject to a CDSC, the redemption will be made first from shares representing reinvested dividends and then from the earliest purchase of shares. SDI receives any CDSC directly. The charge will not be imposed upon redemption of reinvested dividends or share appreciation. The Class A CDSC will be waived in the event of: (a) redemptions by a participant-directed qualified retirement plan described in Code Section 401(a), a participant-directed non-qualified deferred compensation plan described in Code Section 457 or a participant-directed qualified retirement plan described in Code Section 403(b)(7) which is not sponsored by a K-12 school district; 36 (b) redemptions by employer-sponsored employee benefit plans using the subaccount record keeping system made available through the Shareholder Service Agent; (c) redemption of shares of a shareholder (including a registered joint owner) who has died; (d) redemption of shares of a shareholder (including a registered joint owner) who after purchase of the shares being redeemed becomes totally disabled (as evidenced by a determination by the federal Social Security Administration); (e) redemptions under the Fund's Automatic Withdrawal Plan at a maximum of 12% per year of the net asset value of the account; and (f) redemptions of shares whose dealer of record at the time of the investment notifies SDI that the dealer waives the discretionary commission applicable to such Large Order NAV Purchase. The Class B CDSC will be waived for the circumstances set forth in items (c), (d) and (e) for Class A shares. In addition, this CDSC will be waived: (a) for redemptions made pursuant to any IRA systematic withdrawal based on the shareholder's life expectancy including, but not limited to, substantially equal periodic payments described in Internal Revenue Code Section 72(t)(2)(A)(iv) prior to age 59 1/2; (b) for redemptions to satisfy required minimum distributions after age 70 1/2 from an IRA account (with the maximum amount subject to this waiver being based only upon the shareholder's Scudder IRA accounts); and (c) in connection with the following redemptions of shares held by employer sponsored employee benefit plans maintained on the subaccount record keeping system made available by the Shareholder Service Agent: (1) to satisfy participant loan advances (note that loan repayments constitute new purchases for purposes of the CDSC and the conversion privilege), (2) in connection with retirement distributions (limited at any one time to 12% of the total value of plan assets invested in the Fund), (3) in connection with distributions qualifying under the hardship provisions of the Internal Revenue Code and (4) representing returns of excess contributions to such plans. The Class C CDSC will be waived for the circumstances set forth in items (b), (c), (d) and (e) for Class A shares and for the circumstances set forth in items (g) and (h) for Class B shares. In addition, this CDSC will be waived for: (a) redemption of shares by an employer sponsored employee benefit plan that offers funds in addition to Scudder Funds and whose dealer of record has waived the advance of the first year administrative service and distribution fees applicable to such shares and agrees to receive such fees quarterly, and (b) redemption of shares purchased through a dealer-sponsored asset allocation program maintained on an omnibus record-keeping system provided the dealer of record had waived the advance of the first year administrative services and distribution fees applicable to such shares and has agreed to receive such fees quarterly. In-kind Redemptions. The Fund reserves the right to honor any request for redemption or repurchase by making payment in whole or in part in readily marketable securities. These securities will be chosen by the fund and valued as they are for purposes of computing the fund's net asset value. A shareholder may incur transaction expenses in converting these securities to cash. Exchanges Shareholders may request a taxable exchange of their shares for shares of the corresponding class of other Scudder Funds without imposition of a sales charge, subject to the provisions below. For purposes of calculating any CDSC, amounts exchanged retain their original cost and purchase date. 37 Shares of Scudder money market funds that were acquired by purchase (not including shares acquired by dividend reinvestment) are subject to the applicable sales charge on exchange. Series of Scudder Target Fund are available on exchange only during the Offering Period for such series as described in the applicable prospectus. Cash Equivalent Fund, Tax-Exempt California Money Market Fund, Cash Account Trust, Investors Municipal Cash Fund and Investors Cash Trust are available on exchange but only through a financial services firm having a services agreement with SDI. Shares of a Scudder Fund with a value in excess of $1,000,000 (except Scudder Cash Reserves Fund) acquired by exchange through another Scudder Fund, or from a Scudder money market fund, may not be exchanged thereafter until they have been owned for 15 days (the "15-Day Hold Policy"). In addition, shares of a Scudder Fund with a value of $1,000,000 or less (except Scudder Cash Reserves Fund) acquired by exchange from another Scudder Fund, or from a money market fund, may not be exchanged thereafter until they have been owned for 15 days, if, in the Advisor's judgment, the exchange activity may have an adverse effect on the fund. In particular, a pattern of exchanges that coincides with a "market timing" strategy may be disruptive to the Scudder Fund and therefore may be subject to the 15-Day Hold Policy. For purposes of determining whether the 15-Day Hold Policy applies to a particular exchange, the value of the shares to be exchanged shall be computed by aggregating the value of shares being exchanged for all accounts under common control, discretion or advice, including, without limitation, accounts administered by a financial services firm offering market timing, asset allocation or similar services. Shareholders must obtain prospectuses of the Funds they are exchanging into from dealers, other firms or SDI. Automatic Exchange Plan. The owner of $1,000 or more of any class of shares of a Scudder Fund may authorize the automatic exchange of a specified amount ($50 minimum) of such shares for shares of the same class of another such Scudder Fund. Exchanges will be made automatically until the shareholder or the Fund terminates the privilege. Exchanges are subject to the terms and conditions described above. Multi-Class Conversions. For purposes of conversion to Class A shares, shares purchased through the reinvestment of dividends and other distributions paid with respect to Class B shares in a shareholder's Fund account will be converted to Class A shares on a pro rata basis. Dividends The Fund intends to follow the practice of distributing substantially all of its investment company taxable income, which includes any excess of net realized short-term capital gains over net realized long-term capital losses. The Fund may follow the practice of distributing the entire excess of net realized long-term capital gains over net realized short-term capital losses. However, the Fund may retain all or part of such gain for reinvestment, after paying the related federal taxes for which shareholders may then be able to claim a credit against their federal tax liability. If the Fund does not distribute the amount of capital gain and/or ordinary income required to be distributed by an excise tax provision of the Code, the Fund may be subject to that excise tax. In certain circumstances, the Fund may determine that it is in the interest of shareholders to distribute less than the required amount. The Fund intends to distribute dividends from its net investment income excluding short-term capital gains annually in December. The Fund intends to distribute net realized capital gains after utilization of capital loss carryforwards, if any, in December to prevent application of a federal excise tax. An additional distribution may be made, if necessary. Any dividends or capital gains distributions declared in October, November or December with a record date in such 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. The level of income dividends per share (as a percentage of net asset value) will be lower for Class B and Class C Shares than for Class A Shares primarily as a result of the distribution services fee applicable to Class B and Class C Shares. Distributions of capital gains, if any, will be paid in the same amount for each class. Income and capital gain dividends, if any, of the Fund will be credited to shareholder accounts in full and fractional shares of the same class of the Fund at net asset value on the reinvestment date, except that, upon written request to the Shareholder Service Agent, a shareholder may select one of the following options: 38 1. To receive income and short-term capital gain dividends in cash and long-term capital gain dividends in shares of the same class at net asset value; or 2. To receive income and capital gain dividends in cash. Dividends will be reinvested in Shares of the same class of the Fund unless shareholders indicate in writing that they wish to receive them in cash or in shares of other Scudder Funds with multiple classes of shares or Scudder Funds as provided in the prospectus. See "Combined Purchases" for a list of such other Funds. To use this privilege of investing dividends of the Fund in shares of another Scudder or Scudder Fund, shareholders must maintain a minimum account value of $1,000 in the Fund distributing the dividends. The Fund will reinvest dividend checks (and future dividends) in shares of that same Fund and class if checks are returned as undeliverable. Dividends and other distributions of the Fund in the aggregate amount of $10 or less are automatically reinvested in shares of the same Fund and class unless the shareholder requests in writing that a check be issued for that particular distribution. If an investment is in the form of a retirement plan, all dividends and capital gains distributions must be reinvested into the shareholder's account. If a shareholder has elected to reinvest any dividends and/or other distributions, such distributions will be made in shares of that Fund and confirmations will be mailed to each shareholder. If a shareholder has chosen to receive cash, a check will be sent. Distributions of investment company taxable income and net realized capital gains are taxable, whether made in shares or cash. The 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. The Fund may at any time vary its foregoing dividend practices and, therefore, reserves the right from time to time to either distribute or retain for reinvestment such of its net investment income and its net short-term and long-term capital gains as its Board determines appropriate under the then current circumstances. In particular, and without limiting the foregoing, the Fund may make additional distributions of net investment income or capital gain net income in order to satisfy the minimum distribution requirements contained in the Internal Revenue Code. TAXES The following is intended to be a general summary of certain federal income tax consequences of investing in the Fund. It is not intended as a complete discussion of all such consequences, nor does it purport to deal with all categories of investors. Investors are therefore advised to consult with their tax advisors before making an investment in the Fund. The Fund has elected to be treated as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), and has qualified as such since its inception. The Fund intends to continue to so qualify in each taxable year as required under the Code in order to avoid payment of federal income tax at the Fund level. In order to qualify as a regulated investment company, the Fund must meet certain requirements regarding the source of its income and the diversification of its assets. The Fund is required to distribute to its shareholders at least 90 percent of its taxable and tax-exempt net investment income (including net short-term capital gain) and generally is not subject to federal income tax to the extent that it distributes annually such net investment income and net realized capital gains in the manner required under the Code. Distributions of investment company taxable income are generally taxable to shareholders as ordinary income. If for any taxable year the 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). The Fund is subject to a 4% nondeductible excise tax on amounts required to be but not distributed under a prescribed formula. The formula requires payment to shareholders during a calendar year of distributions representing at least 98% of the Fund's taxable ordinary income for the calendar year and at least 98% of the excess 39 of its capital gains over capital losses realized during the one-year period ending October 31 (in most cases) of such year as well as amounts that were neither distributed nor taxed to the Fund during the prior calendar year. Although the Fund's distribution policies should enable it to avoid excise tax liability, the Fund may retain (and be subject to income or excise tax on) a portion of its capital gain or other income if it appears to be in the interest of such Fund. Dividends from domestic corporations may comprise a substantial part of the Fund's gross income. If any such dividends constitute a portion of the fund's gross income, a portion of the income distributions of a fund may be eligible for the 70% deduction for dividends received by corporations. Shareholders will be informed of the portion of dividends which so qualify. The dividends-received deduction is reduced to the extent the shares of the fund with respect to which the dividends are received are treated as debt-financed under federal income tax law and is eliminated if either those shares or the shares of the fund are deemed to have been held by the Fund or the shareholder, as the case may be, for less than 46 days during the 90-day period beginning 45 days before the shares become ex-dividend. Any loss realized upon the redemption of shares held for six months or less at the time of redemption 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. Furthermore, any loss from the sale or redemption of shares held six months or less generally will be disallowed to the extent that tax-exempt interest dividends were paid on such shares. In some cases, shareholders will not be permitted to take all or a portion of their sales loads into account for purposes of determining the amount of gain or loss realized on the disposition of their shares. This prohibition generally applies where (1) the shareholder incurs a sales load in acquiring the shares of the Fund, (2) the shares are disposed of before the 91st day after the date on which they were acquired, and (3) the shareholder subsequently acquires shares in the Fund or another regulated investment company and the otherwise applicable sales charge is reduced under a "reinvestment right" received upon the initial purchase of Fund shares. The term " reinvestment right" means any right to acquire shares of one or more regulated investment companies without the payment of a sales load or with the payment of a reduced sales charge. Sales charges affected by this rule are treated as if they were incurred with respect to the shares acquired under the reinvestment right. This provision may be applied to successive acquisitions of fund shares. 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 the 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. In addition, if the Fund invests in certain high yield original issue discount obligations issued by corporations (including tax-exempt obligations), a portion of the original issue discount accruing on the obligation may be treated as taxable dividend income. In such event, dividends of investment company taxable income received from the Fund by its shareholders, to the extent attributable to such portion of accrued original issue discount, would be taxable. Any such dividends received by the Fund's corporate shareholders may be eligible for the deduction for dividends received by corporations. Any market discount recognized on a bond is taxable as ordinary income. A market discount bond is a bond acquired in the secondary market at a price below its redemption value (or its adjusted issue price if issued with original issue discount). Absent an election to include the market discount in income as it accrues, gain on the disposition of such an obligation will be treated as ordinary income (instead of capital gain) to the extent of accrued market discount. Investments in "passive foreign investment companies" could result in Fund-level U.S. federal income tax or other charges on the proceeds from distributions received from such company and from the sales of the investment in such company; however, this Fund-level tax can be avoided if the fund makes an election to mark such investment to market annually or treats the passive foreign investment company as a "qualified electing fund." The Fund's use of options, futures contracts, forward contracts (to the extent permitted) and certain other Strategic Transactions will be subject to special tax rules (including mark-to-market, constructive sale, straddle, wash sale, short sale and other rules), the effect of which may be to accelerate the Fund's income, defer losses, cause 40 adjustments in the holding periods of portfolio securities, convert capital gains into ordinary income and convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to investors. Transactions in foreign currencies, foreign investment currency-denominated debt securities and certain foreign currency options, futures contracts, forward contracts and similar instruments (to the extent permitted) may give rise to ordinary income or loss to the extent such income or loss results from fluctuations in the value of the foreign currency concerned. Under the backup withholding provisions of the Code, redemption proceeds as well as distributions may be subject to federal income tax withholding for certain shareholders, including those who fail to furnish the Fund with their taxpayer identification numbers and certifications as to their tax status. 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. Any shareholder who is not a U.S. Person (as such term is defined in the Code) 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 flat U.S. withholding tax rate of 30% (or a potentially 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. Capital gains distributions may be reduced if Fund capital loss carryforwards are available. Any capital loss carryforwards to which the Fund is entitled is disclosed in the Fund's annual and semi-annual reports to shareholders. All distributions by the Fund result in a reduction in the net asset value of the Fund's shares. Should a distribution reduce the net asset value below a shareholder's cost basis, such distribution would nevertheless be taxable to the shareholder as ordinary income or capital gain as described above, even though, from an investment standpoint, it may constitute a partial return of capital. In particular, investors should be careful to consider the tax implications of buying shares just prior to a distribution. The price of shares purchased at that time includes the amount of the forthcoming distribution. Those purchasing just prior to a distribution will receive a partial return of capital upon the distribution, which will nevertheless be taxable to them. NET ASSET VALUE The net asset value of shares of the Fund is computed as of the close of regular trading on the New York Stock Exchange (the "Exchange") on each day the Exchange is open for trading (the "Value Time"). 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 separately for each class of shares by dividing the value of the total assets of the Fund attributable to the shares of that class, less all liabilities attributable to that class, by the total number of shares of that class outstanding. The per share net asset value may be lower for certain classes of the Fund because of higher expenses borne by these classes. An exchange-traded option contract on securities, currencies and other financial instruments is valued at its most recent sale price on such the relevant exchange. Lacking any sales, the option contract is valued at the Calculated Mean. If it is not possible to determine the Calculated Mean, the option contract is valued at the most recent bid quotation in the case of a purchased option contract or the most recent asked quotation in the case of a written option contract, in each case as of the Value Time. An option contract on securities, currencies and other financial instruments traded in the OTC market with less than 180 days remaining until expiration is valued at the evaluated price provided by the broker-dealer with which it was traded. An option contract on securities, currencies and other financial instruments traded in the OTC market with 180 days or more remaining until expiration is valued at the average of the evaluated prices provided by two broker-dealers. Futures contracts (and options thereon) are valued at the most recent settlement price, if applicable, as of the Value Time on such exchange. If no settlement price is available, the last traded price will be used. The closing settlement time for valuing certain futures contracts (and options thereon), such as S&P 500 and Nasdaq 100 contracts, is normally the close of trading on the futures exchange for those contracts, which is shortly after 4:00 p.m. Foreign currency forward contracts are valued at the 41 value of the underlying currency at the prevailing currency exchange rate, which shall be determined not more than one hour before the Value Time based on information obtained from sources determined by the Advisor to be appropriate. Debt securities are valued as follows. Money market instruments purchased with an original or remaining maturity of 60 days or less, maturing at par, are valued at amortized cost. Other money market instruments are valued based on information obtained from an approved pricing agent or, if such information is not readily available, by using matrix pricing techniques (formula driven calculations based primarily on current market yields). Bank loans are valued at prices supplied by an approved pricing agent (which are intended to reflect the mean between the bid and asked prices), if available, and otherwise at the mean of the most recent bid and asked quotations or evaluated prices, as applicable, based on quotations or evaluated prices obtained from one or more broker-dealers. Privately placed debt securities, other than Rule 144A debt securities, initially are valued at cost and thereafter based on all relevant factors including type of security, size of holding and restrictions on disposition. Municipal debt securities are valued at prices supplied by an approved pricing agent (which are intended to reflect the mean between the bid and asked prices), if available, and otherwise at the average of the means based on the most recent bid and asked quotations or evaluated prices obtained from two broker-dealers. Other debt securities are valued at prices supplied by an approved pricing agent, if available, and otherwise at the most recent bid quotation or evaluated price, as applicable, obtained from one or more broker-dealers. If it is not possible to value a particular debt security pursuant to the above methods, the security is valued on the basis of factors including (but not limited to) maturity, coupon, creditworthiness, currency denomination, and the movement of the market in which the security is normally traded. 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 as of the close of the New York Stock Exchange. If no settlement price is available as of the close of the Exchange, the last traded price will be used. Foreign currency exchange forward contracts are valued at the value of the underlying currency at the prevailing exchange rate 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. If market quotations for portfolio assets are not readily available or the value of a portfolio asset as determined in accordance with Board approved 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 Board's Pricing Committee (or, in some cases, the Board's Valuation Committee), represents fair market value. The value of other portfolio holdings owned by the Fund is determined in a manner which is intended to fairly reflect the fair market value of the asset on the valuation date, based on valuation procedures adopted by the Fund's Board and overseen primarily by the Board's Pricing Committee. OFFICERS AND TRUSTEES SCUDDER INVESTORS TRUST Scudder S&P 500 Stock Fund The following table presents certain information regarding the Trustees and Officers of the fund as of January 1, 2003. Each individual's age is set forth in parentheses after his or her name. Unless otherwise noted, (i) each individual has engaged in the principal occupation(s) noted in the table for at least the most recent five years, although not necessarily in the same capacity, and (ii) the address of each individual is c/o Deutsche Asset Management, 222 South Riverside Plaza, Chicago, Illinois 60606. Each Trustee's term of office extends until the next shareholder's meeting called for the purpose of electing such trustee and until the election and qualification of a successor, or until such Trustee sooner dies, resigns or is removed as provided in the Declaration of Trust or Bylaws. 42
Non-Interested Trustees - -------------------------------------------------------------------------------------------------------------------- Name, Age, Position(s) Number of Funds Held with the Trust and Principal Occupation(s) During Past 5 Years and in Fund Complex Length of Time Served^1 Other Directorships Held Overseen - -------------------------------------------------------------------------------------------------------------------- John W. Ballantine (56) Retired; formerly, Executive Vice President and Chief Risk 83 Trustee, 1999-present Management Officer, First Chicago NBD Corporation/The First National Bank of Chicago (1996-1998); formerly, Executive Vice President and Head of International Banking (1995-1996); Directorships: Enron Corporation (energy trading firm) (effective May 30, 2002); First Oak Brook Bancshares, Inc.; Oak Brook Bank; Tokheim Corporation (designer, manufacturer and servicer of electronic and mechanical petroleum marketing systems) - -------------------------------------------------------------------------------------------------------------------- Lewis A. Burnham (69) Retired; formerly, Director of Management Consulting, McNulty & 83 Trustee, 1977-present Company; (1990-1998) formerly, Executive Vice President, Anchor Glass Container Corporation - -------------------------------------------------------------------------------------------------------------------- Donald L. Dunaway (65) Retired; formerly, Executive Vice President, A. O. Smith 83 Trustee, 1980-present Corporation (diversified manufacturer) (1963-1994) - -------------------------------------------------------------------------------------------------------------------- James R. Edgar (56) Distinguished Fellow, University of Illinois, Institute of 83 Trustee, 1999-present Government and Public Affairs (1999-present); formerly, Governor, State of Illinois (1991-1999); Directorships: Kemper Insurance Companies; John B. Sanfilippo & Son, Inc. (processor/packager/marketer of nuts, snacks and candy products); Horizon Group Properties, Inc.; Youbet.com (online wagering platform); Alberto-Culver Company (manufactures, distributes and markets health and beauty-care products). - -------------------------------------------------------------------------------------------------------------------- Paul K. Freeman (52) President, Cook Street Holdings (consulting); Adjunct Professor, 83 Trustee, 2002-present University of Denver; Consultant, World Bank/Inter-American Development Bank; formerly Project Leader, International Institute for Applied Systems Analysis (1998-2001); formerly, Chief Executive Officer, The Eric Group, Inc. (environmental insurance) (1986-1998) - -------------------------------------------------------------------------------------------------------------------- Robert B. Hoffman (66) Retired; formerly, Chairman, Harnischfeger Industries, Inc. 83 Trustee, 1981-present (machinery for the mining and paper industries); formerly, Vice Chairman and Chief Financial Officer, Monsanto Company (agricultural, pharmaceutical and nutritional/food products); formerly, Vice President and Head of International Operations, FMC Corporation (manufacturer of machinery and chemicals) - -------------------------------------------------------------------------------------------------------------------- Shirley D. Peterson (61) Retired; formerly, President, Hood College (1995-2000); 83 Trustee, 1995-present formerly, Partner, Steptoe & Johnson (law firm); formerly, Commissioner, Internal Revenue Service; formerly, Assistant Attorney General (Tax), U.S. Department of Justice; Directorships: Bethlehem Steel Corp. - -------------------------------------------------------------------------------------------------------------------- 43 - -------------------------------------------------------------------------------------------------------------------- Name, Age, Position(s) Number of Funds Held with the Trust and Principal Occupation(s) During Past 5 Years and in Fund Complex Length of Time Served^1 Other Directorships Held Overseen - -------------------------------------------------------------------------------------------------------------------- Fred B. Renwick (72) Retired; Professor Emeritus of Finance, New York University, 83 Trustee, 1988-present Stern School of Business (2001-present); formerly, Professor, New York University Stern School of Business (1965-2001). Directorships: The Wartburg Foundation; The Investment Fund for Foundations; Chairman, Finance Committee of Morehouse College Board of Trustees; American Bible Society Investment Committee; formerly, Director of Board of Pensions, Evangelical Lutheran Church in America; formerly, member of the Investment Committee of Atlanta University Board of Trustees - -------------------------------------------------------------------------------------------------------------------- William P. Sommers (69) Retired; formerly, President and Chief Executive Officer, SRI 83 Trustee, 1979-present International (research and development) (1994-1998); formerly, Executive Vice President, Iameter (medical information and educational service provider); formerly, Senior Vice President and Director, Booz, Allen & Hamilton Inc. (management consulting firm); Directorships: PSI Inc. (engineering and testing firm); Evergreen Solar, Inc. (develop/manufacture solar electric system engines); H2 Gen (manufacture hydrogen generators); Zassi Medical Evolutions, Inc. (specialists in intellectual property opportunities in medical device arena) - -------------------------------------------------------------------------------------------------------------------- John G. Weithers (69) Retired; formerly, Chairman of the Board and Chief Executive 83 Trustee, 1993-present Officer, Chicago Stock Exchange; Directorships: Federal Life Insurance Company; Chairman of the Members of the Corporation and Trustee, DePaul University; formerly, International Federation of Stock Exchanges; formerly, Records Management Systems - -------------------------------------------------------------------------------------------------------------------- Interested Trustees^2 and Officers - -------------------------------------------------------------------------------------------------------------------- Name, Age, Position(s) Number of Funds Held with the Trust and Principal Occupation(s) During Past 5 Years and in Fund Complex Length of Time Served Other Directorships Held Overseen - -------------------------------------------------------------------------------------------------------------------- Richard T. Hale ^1,.^3 (57) Managing Director, Deutsche Bank Securities Inc. (formerly 200 Chairman, Trustee and Vice Deutsche Banc Alex. Brown Inc.) and Deutsche Asset Management President, 2002-present (1999 to present); Director and President, Investment Company Capital Corp. (registered investment advisor) (1996 to present); Director, Deutsche Global Funds, Ltd. (2000 to present), CABEI Fund (2000 to present), North American Income Fund (2000 to present); President, DB Hedge Strategies Fund LLC (June 2002 to present), Montgomery Street Securities, Inc. (2002 to present) (registered investment companies); Vice President, Deutsche Asset Management, Inc. (2000 to present); formerly, Director, ISI Family of Funds (registered investment companies; 4 funds overseen) (1992-1999) - -------------------------------------------------------------------------------------------------------------------- 44 - -------------------------------------------------------------------------------------------------------------------- Name, Age, Position(s) Number of Funds Held with the Trust and Principal Occupation(s) During Past 5 Years and in Fund Complex Length of Time Served Other Directorships Held Overseen - -------------------------------------------------------------------------------------------------------------------- William F. Glavin, Jr.^1 (44) Managing Director of Deutsche Asset Management; President of 83 Trustee and President, Scudder Investor Services Corp. (1999-present); President of 2001-present Scudder Service Corp. (2000-present); President of Scudder Financial Services, Inc. (1999-present); Vice President of Scudder Distributors, Inc. (2000-present); formerly, Executive Vice President of Dreyfus Service Corp. (1995-1997), Senior Vice President of The Boston Company Advisors (1991-1995), Directorships: Trustee, Crossroads for Kids, Inc. (serves at-risk children) - -------------------------------------------------------------------------------------------------------------------- Philip J. Collora (57) Director of Deutsche Asset Management n/a Vice President and Assistant Secretary, 1986-present - -------------------------------------------------------------------------------------------------------------------- Daniel O. Hirsch^3 (48) Managing Director, Deutsche Asset Management (2002-present) and n/a Vice President and Assistant Director, Deutsche Global Funds Ltd. (2002-present); formerly, Secretary, 2002-present Director, Deutsche Asset Management (1999-2002), Principal, BT Alex. Brown Incorporated (now Deutsche Bank Securities Inc.), (1998-1999); Assistant General Counsel, United States Securities and Exchange Commission (1993-1998) - -------------------------------------------------------------------------------------------------------------------- Kenneth Murphy^4 (39) Vice President of Deutsche Asset Management (2001-present); n/a Vice President, 2002-present formerly, Director, John Hancock Signature Services (1992-2001); Senior Manager, Prudential Mutual Fund Services (1987-1992) - -------------------------------------------------------------------------------------------------------------------- Charles A. Rizzo^4 (45) Director, Deutsche Asset Management (April 2000 to present); n/a Treasurer, 2002-present Certified Public Accountant; Certified Management Accountant. Formerly, Vice President and Department Head, BT Alex. Brown Incorporated (now Deutsche Bank Securities Inc.) (1998-1999); Senior Manager, Coopers & Lybrand L.L.P. (now PricewaterhouseCoopers LLP) (1993-1998) - -------------------------------------------------------------------------------------------------------------------- Brenda Lyons^4 (40) Director of Deutsche Asset Management n/a Assistant Treasurer, 1998-present - -------------------------------------------------------------------------------------------------------------------- John Millette^4 (40) Vice President of Deutsche Asset Management n/a Secretary, 2001-present - -------------------------------------------------------------------------------------------------------------------- Caroline Pearson^4 (40) Managing Director of Deutsche Asset Management) n/a Assistant Secretary, 1998-present - -------------------------------------------------------------------------------------------------------------------- James Creighton, Jr.6 (51) Managing Director of Deutsche Asset Management n/a Vice President, 1999-present - -------------------------------------------------------------------------------------------------------------------- Patrick Cannon ^4 (33) Managing Director of Deutsche Asset Management n/a Vice President, 2000-present - --------------------------------------------------------------------------------------------------------------------
45 ^1 Length of time served represents the date that each Trustee was first elected to the common board of trustees which oversees a number of investment companies, including the fund, managed by the Advisor. ^2 As a result of their respective positions held with the Advisor, these individuals are considered "interested persons" of the Advisor within the meaning of the 1940 Act, as amended. Interested persons receive no compensation from the Fund. ^3 Address: One South Street, Baltimore, Maryland ^4 Address: Two International Place, Boston, Massachusetts ^5 Address: 345 Park Avenue, New York, New York ^6 Address: One Market Street, San Francisco, California Trustee's and Officer's Role with Principal Underwriter: Scudder Distributors, Inc. William F. Glavin: Vice President and Director Caroline Pearson: Secretary Philip J. Collora: Assistant Secretary Trustees' Responsibilities. The officers of the Trust manage the Fund's day-to-day operations under the direction of the Trust's Board of Trustees. The primary responsibility of the Board is to represent the interests of the shareholders of the Fund and to provide oversight of the management of the Fund. A majority of the Trust's Board members are not affiliated with the Advisor. The Board has adopted its own Governance Procedures and Guidelines and has established a number of committees, as described below. For each of the following Committees, the Board has adopted a written charter setting forth the Committees' responsibilities. Board Committees: The Fund's Board has the following committees: Audit Committee: The Audit Committee makes recommendations regarding the selection of independent auditors for the Fund, confers with the independent auditors regarding the Fund's financial statements, the results of audits and related matters, and performs such other tasks as the full Board deems necessary or appropriate. The Trust's Audit Committee receives annual representations from the auditors as to their independence. The members of the Audit Committee are Donald L. Dunaway (Chairman), Robert B. Hoffman and William P. Sommers. The Audit Committee held four meetings during calendar year 2001. Nominating and Governance Committee: The Nominating and Governance Committee seeks and reviews candidates for consideration as nominees for membership on the Board and oversees the administration of the Fund's Governance Procedures and Guidelines. The members of the Nominating and Governance Committee are Lewis A. Burnham (Chairman), James R. Edgar and Shirley D. Peterson. The Trust's Nominating and Governance Committee held three meetings during calendar year 2001. Shareholders wishing to submit the name of a candidate for consideration as a Board member by the Committee should submit their recommendation(s) to the Secretary of the Trust. Valuation Committee: The Valuation Committee reviews Valuation Procedures adopted by the Board, determines fair value of the Fund's securities as needed in accordance with the Valuation Procedures and performs such other tasks as the full Board deems necessary. The members of the Valuation Committee are John W. Ballantine and Richard T. Hale. Alternative members are Lewis A. Burnham, Donald L. Dunaway, John G. Weithers and William F. Glavin. The Trust's Valuation Committee did not hold any meetings during calendar year 2001. Operations Committee: The Operations Committee oversees the operations of the Fund, such as reviewing the Fund's administrative fees and expenses, distribution arrangements, portfolio transaction policies, custody and 46 transfer agency arrangements, shareholder services and proxy voting policies. Currently, the members of the Operations Committee are John W. Ballantine (Chairman), Paul K. Freeman, Fred B. Renwick and John G. Weithers. The Trust's Operations Committee held four meetings during calendar year 2001. Equity Oversight Committee: The Equity Oversight Committee oversees investment activities of the Fund, such as investment performance and risk, expenses and services provided under the investment management agreement. The members of the Equity Oversight Committee are Robert B. Hoffman (Chairman), Lewis A. Burnham and John G. Weithers. The Trust's Equity Oversight Committee held three meetings during calendar year 2001. Trustee Fund Ownership Under the Trust's Governance Procedures and Guidelines, the Non-Interested Trustees have established the expectation that within three years the Non-Interested Trustee will have invested an amount in those funds he or she oversees (which shall include amounts held under a deferred fee agreement that are valued based on "shadow investments" in such funds) in the aggregate equal to at least one times the amount of the annual retainer received from such funds, with investments allocated to at least one money market, fixed-income and equity fund portfolio, where such an investment is suitable for the particular Non-Interested Trustee's personal investment needs. Each interested Trustee is also encouraged to own an amount of shares (based upon their own individual judgment) of those funds that he or she oversees that is suitable for his or her own appropriate investment needs. The following table sets forth each Trustee's share ownership of the Fund and all funds in the fund complex overseen by the Trustee as of December 31, 2001.
Dollar Range of Aggregate Dollar Range of Securities Fund Shares Owned in Scudder Owned in All Funds in the Fund S&P 500 Complex Name of Trustee Stock Fund Overseen by Trustee - --------------- ---------- ------------------- John W. Ballantine None Over $100,000 Lewis A. Burnham None Over $100,000 Donald L. Dunaway* $1 - $10,000 Over $100,000 James R. Edgar* None $50,001-$100,000 Paul K. Freeman None $10,000 - $50,000 William F. Glavin, Jr. None Over $100,000 Richard T. Hale None Over $100,000 Robert B. Hoffman None Over $100,000 Shirley D. Peterson None Over $100,000 Fred B. Renwick None Over $100,000 William P. Sommers None Over $100,000 John G. Weithers $10,001 - $50,000 Over $100,000
* The dollar range of shares shown includes share equivalents of certain Scudder funds in which Governor Edgar and Mr. Dunaway are deemed to be invested pursuant to the Trust's Deferred Compensation Plan as more fully described below under "Remuneration." Remuneration. Each Non-Interested Trustee receives from the Fund a monthly retainer, paid on a quarterly basis, and an attendance fee, plus expenses, for each Board meeting and Committee meeting attended. The Trustees serve as board members of various other funds advised by the Advisor which may have different fee schedules. The Advisor supervises the Fund's investments, pays the compensation and expenses of its personnel who serve as Trustees and officers on behalf of the Fund and receives a management fee for its services. The Board of Trustees of the Trust established a deferred compensation plan for the Non-Interested Trustees ("Deferred Compensation Plan"). Under the Deferred Compensation Plan, the Non-Interested Trustees may defer receipt of all, or a portion, of the compensation they earn for their services to the Trust, in lieu of receiving current payments of such compensation. Any deferred amount is treated as though an equivalent dollar amount has been invested in shares of one or more funds advised by the Advisor ("Shadow Shares"). Governor Edgar currently has elected to defer at least a portion of his fees. In addition, previously, Mr. Dunaway elected to defer fees that were 47 payable, which are now included under the Deferred Compensation Plan. The equivalent Shadow Shares are reflected above in the table describing the Trustee's share ownership. Members of the Board of Trustees who are officers, directors, employees or stockholders of the Advisor or its affiliates receive no direct compensation from the Fund, although they are compensated as employees of the Advisor, or its affiliates, and as a result may be deemed to participate in fees paid by the Fund. The Non-interested Trustees are not entitled to benefits under any fund pension or retirement plan. The following table shows compensation received by each Trustee from the Trust and aggregate compensation from the fund complex during calendar year 2001.
Pension or Retirement Compensation from Benefits Accrued Total Compensation Paid to Scudder as Part of Trustees from Name of Trustee Investors Trust* Fund Expenses Fund Complex^(1)^(5) - --------------- ---------------- ------------- -------------------- John W. Ballantine** $740 $0 $183,980 Lewis A. Burnham** $660 $0 $169,290 Donald L. Dunaway^(2)** $670 $0 $181,430 James R. Edgar^(3) $3,791 $0 $200,660 Paul K. Freeman*** $0 $0 $23,500 Robert B. Hoffman** $620 $0 $159,880 Shirley D. Peterson^(4) $720 $0 $189,830 Fred B. Renwick** $3,874 $0 $214,990 William P. Sommers** $710 $0 $183,300 John G. Weithers $3,809 $0 $206,000
* Scudder Investors Trust consists of 1 fund: Scudder S&P 500 Stock Fund. For the period ended December 31, 2001, Scudder Investors Trust consisted of 3 funds: Scudder Focus Growth Fund, Scudder Research Fund and Scudder S&P 500 Stock Fund. ** Newly elected Trustee effective July 18, 2001. *** Newly elected Trustee effective May 15, 2002. ^(1) Aggregate compensation reflects amounts paid to the Trustees for numerous special meetings in connection with the sale of the Advisor to Deutsche Bank. Such amounts totaled $10,340 for each Trustee, excluding Mr. Freeman who was not a Trustee of the Funds or the Chicago Board at the time of the sale. These meeting fees were borne by the Advisor. ^(2) Pursuant to a Deferred Compensation Plan, as discussed above, Mr. Dunaway previously elected, in prior years, to defer fees. Deferred amounts are treated as though an equivalent dollar amount has been invested in Shadow Shares (as defined above) of funds managed by the Advisor. ^(3) Includes deferred fees. Pursuant to a Deferred Compensation Plan, as discussed above, deferred amounts are treated as though an equivalent dollar amount has been invested in Shadow Shares (as defined above) of funds managed by the Advisor in which compensation may be deferred by Governor Edgar. Total deferred fees (including interest thereon and the return from the assumed investment in the funds managed by the Advisor) payable from the Fund to Governor Edgar are $840.30. ^(4) Includes $18,960 in annual retainer fees received by Ms. Peterson's in her role as lead Trustee. ^(5) For each Trustee, except Mr. Freeman, total compensation includes compensation for service on the boards of 33 trusts/corporations comprised of 85 funds/portfolios. Each Trustee, except Mr. Freeman, currently serves on the boards of 33 DeAM trusts/corporations comprised of 83 funds/portfolios. For Mr. Freeman, the total includes compensation for service on the board of 1 Trust comprised of 11 funds. Mr. Freeman currently serves on the boards of 34 DeAM trusts/corporations comprised of 97 funds/portfolios. 48 As of December 2, 2002, all Trustees and Officers of the Fund as a group owned beneficially (as that term is defined is section 13(d) of the Securities Exchange Act of 1934) less than 1% of the outstanding securities of the Fund. To the best of the Fund's knowledge, as of December 2, 2002, no person owned beneficially more than 5% of each class of the Fund's outstanding shares (except as noted below). As of December 2, 2002, 559,255 shares in the aggregate, or 5.7% of the outstanding shares of Scudder S&P 500 Stock Fund, Class A were held in the name of Scudder Trust Company, for the benefit of Credence Systems Inc. Retirement Plan, P.O. Box 1757, Salem, NH 03079 who may be deemed to be the beneficial owner of certain of these shares. As of December 2, 2002, 691,613 shares in the aggregate, or 7.06% of the outstanding shares of Scudder S&P 500 Stock Fund, Class A were held in the name of Scudder Trust Company, for the benefit of IBEW Local Union #252 Contribution and 401(k) Plan, P.O. Box 1757, Salem, NH 03079 who may be deemed to be the beneficial owner of certain of these shares. As of December 2, 2002, 175,876 shares in the aggregate, or 7.14% of the outstanding shares of Scudder S&P 500 Stock Fund, Class B were held in the name of SSC Investment Corp., 345 Park Avenue, New York, NY 10154 who may be deemed to be the beneficial owner of certain of these shares. As of December 2, 2002, 175,876 shares in the aggregate, or 11.99% of the outstanding shares of Scudder S&P 500 Stock Fund, Class C were held in the name of SSC Investment Corp., 345 Park Avenue, New York, NY 10154 who may be deemed to be the beneficial owner of certain of these shares. TRUST ORGANIZATION The Fund is a series of Scudder Investors Trust, formerly Kemper Funds Trust which was renamed on January 1, 2001 and is an open-end Massachusetts business trust established under an Agreement and Declaration of Trust of the Trust (the "Declaration of Trust") dated October 14, 1998. The Trust offers one Fund, Scudder S&P 500 Stock Fund. The Trust may issue an unlimited number of shares of beneficial interest in one or more series or "Portfolios," all having a par value of $.01, which may be divided by the Board of Trustees into classes of shares. The Board of Trustees may authorize the issuance of additional classes and additional funds if deemed desirable, each with its own investment objective, policies and restrictions. Since the Trust may offer multiple funds, it is known as a "series company." Currently, the Fund offers three classes of shares. These are Class A, Class B, and Class C. Shares of the Fund have equal noncumulative voting rights except that each class has separate and exclusive voting rights with respect to each such class' Rule 12b-1 Plan. Shares of each class also have equal rights with respect to dividends, assets and liquidation of the Fund subject to any preferences (such as resulting from different Rule 12b-1 distribution and/or service fees), rights or privileges of any classes of shares of the Fund. Shares are fully paid and nonassessable when issued, are transferable without restriction and have no preemptive or conversion rights. If shares of more than one Fund are outstanding, shareholders will vote by Fund and not in the aggregate or by class except when voting in the aggregate is required under the 1940 Act, such as for the election of trustees, or when voting by class is appropriate. The Trust generally is not required to hold meetings of its shareholders. Under the Declaration of Trust, however, shareholder meetings will be held in connection with the following matters: (a) the election or removal of trustees if a meeting is called for such purpose; (b) the adoption of any contract for which approval by shareholders is required by the 1940 Act; (c) any reorganization or termination of the Fund or a class to the extent and as provided in the Declaration of Trust; (d) any amendment of the Declaration of Trust to the extent and as provided in the Declaration of Trust (other than amendments changing the name of the Fund, supplying any omission, curing any ambiguity or curing, correcting or supplementing any defective or inconsistent provision thereof); and (e) such additional matters as may be required by law, the Declaration of Trust, the By-laws of the Trust, or any registration of the Fund with the SEC or any state, or as the trustees may consider necessary or desirable. The shareholders also would vote upon changes in fundamental policies or restrictions. 49 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 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 Fund and all additional portfolios (e.g., election of trustees), 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 Trust's outstanding shares. The term "majority," when referring to the approvals to be obtained from shareholders in connection with matters affecting only the 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. Each Trustee serves until the next meeting of shareholders, if any, called for the purpose of electing trustees and until the election and qualification of a successor or until such trustee sooner dies, resigns, retires or is removed by a majority vote of the shares entitled to vote (as described below) or a majority of the trustees. In accordance with the 1940 Act (a) the Fund will hold a shareholder meeting for the election of trustees at such time as less than a majority of the trustees have been elected by shareholders, and (b) if, as a result of a vacancy in the Board of Trustees, less than two-thirds of the trustees have been elected by the shareholders, that vacancy will be filled only by a vote of the shareholders. Any of the Trustees may be removed (provided the aggregate number of Trustees after such removal shall not be less than one) with cause, by the action of two-thirds of the remaining Trustees. Any Trustee may be removed at any meeting of shareholders by vote of two-thirds of the outstanding shares. The Trustees shall promptly call a meeting of the shareholders for the purpose of voting upon the question of removal of any such Trustee or Trustees when requested in writing to do so by the holders of not less than ten percent of the outstanding shares, and in that connection, the Trustees will assist shareholder communications to the extent provided for in Section 16(c) under the 1940 Act. A majority of the Trustees shall be present in person at any regular or special meeting of the Trustees in order to constitute a quorum for the transaction of business at such meeting and, except as otherwise required by law, the act of a majority of the Trustees present at any such meetings, at which a quorum is present, shall be the act of the Trustees. The Trust's Declaration of Trust specifically authorizes the Board of Trustees to terminate the Fund or any class by notice to the shareholders without shareholder approval. Under Massachusetts law, shareholders of a Massachusetts business trust could, under certain circumstances, be held personally liable for obligations of the Fund. The Declaration of Trust, however, disclaims shareholder liability for acts or obligations of the Fund and requires that notice of such disclaimer be given in each agreement, obligation, or instrument entered into or executed by the Fund or the Fund's trustees. Moreover, the Declaration of Trust provides for indemnification out of Fund property for all losses and expenses of any shareholder held personally liable for the obligations of the Fund and the Fund will be covered by insurance which the trustees consider adequate to cover foreseeable tort claims. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is considered by the Manager remote and not material, since it is limited to circumstances in which a disclaimer is inoperative and the Fund itself is unable to meet its obligations. The assets of the Trust received for the issue or sale of the shares of each series and all income, earnings, profits and proceeds thereof, subject only to the rights of creditors, are specifically allocated to such series and constitute the underlying assets of such series. The underlying assets of each series are segregated on the books of account and are to be charged with the liabilities in respect to such series and with a proportionate share of the general liabilities of the Trust. If a series were unable to meet its obligations, the assets of all other series may in some circumstances be available to creditors for that purpose, in which case the assets of such other series could be used to meet liabilities which are not otherwise properly chargeable to them. Expenses with respect to any two or more series are to be allocated in proportion to the asset value of the respective series except where allocations of direct expenses can otherwise be fairly made. The officers of the Trust, subject to the general supervision of the Trustees, have the power to determine which liabilities are allocable to a given series, or which are general or allocable to two or more series. In the event of the dissolution or liquidation of the Trust or any series, the holders of the shares of any series are entitled to receive as a class the underlying assets of such shares available for distribution to shareholders. 50 The Fund's activities are supervised by the Trust's Board of Trustees. The Trust has adopted a plan pursuant to Rule 18f-3 (the "Plan") under the 1940 Act to permit the Trust to establish a multiple class distribution system. 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) each class shall have exclusive voting rights on any matter submitted to shareholders that relates to its administrative services, shareholder services or distribution arrangements; (4) 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; (5) each class may have separate and distinct exchange privileges; (6) each class may have different conversion features, and (7) 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. Additional Information Internet Access World Wide Web Site -- The address of the Scudder Funds site is www.scudder.com. This site offers guidance on global investing and developing strategies to help meet financial goals and provides access to the Scudder investor relations department via e-mail. The site also enables users to access or view Fund prospectuses and profiles with links between summary information in Fund Summaries and details in the Prospectus. Users can fill out new account forms on-line, order free software, and request literature on the Funds. Account Access -- The Advisor 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 Advisor's personal portfolio capabilities -- known as SEAS (Scudder Electronic Account Services) -- are accessible only by current Scudder Fund shareholders who have set up a Personal Page on Scudder's Web site. Using a secure Web browser, shareholders sign on to their account with their Social Security number and their SAIL password. As an additional security measure, users can change their current password or disable access to their portfolio through the World Wide Web. An Account Activity option reveals a financial history of transactions for an account, with trade dates, type and amount of transaction, share price and number of shares traded. For users who wish to trade shares between Scudder Funds, the Fund Exchange option provides a step-by-step procedure to exchange shares among existing fund accounts or to new Scudder Fund accounts. Other Information The CUSIP numbers for each class of S&P 500 Stock Fund are: Class A: 811166-701 Class B: 811166-800 Class C: 811166-883 S&P 500 Stock Fund has a fiscal year ending August 31. Many of the investment changes in the 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 Advisor in light of the Fund's investment objectives and policies, its other portfolio holdings and tax considerations, and should not be construed as recommendations for similar action by other investors. The Fund's prospectus and this Statement of Additional Information omit certain information contained in the Registration Statement and its amendments which the Fund has filed with the SEC under the Securities Act of 1933 51 and reference is hereby made to the Registration Statement for further information with respect to the Fund and the securities offered hereby. The Registration Statement and its amendments are available for inspection by the public at the SEC in Washington, D.C. FINANCIAL STATEMENTS The financial statements, including the investment portfolios of the Fund, together with the Report of Independent Auditors, Financial Highlights and notes to financial statements in the Annual Report to the Shareholders of the Fund, dated August 31, 2002, are incorporated herein by reference and are hereby deemed to be a part of this Statement of Additional Information. 52 APPENDIX S&P Bond Ratings AAA. Debt rated AAA had the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. AA. Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the higher rated issues only in small degree. A. Debt rated A has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB. Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories. BB, B, CCC, CC and C. Debt rated BB, B, CCC, CC and C is regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. BB indicates the lowest degree of speculation and C the highest degree of speculation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. CI. The rating CI is reserved for income bonds on which no interest is being paid. D. Debt rated D is in default, and payment of interest and/or repayment of principal is in arrears. Moody's Bond Ratings AAA. Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt-edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa. Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long term risks appear somewhat larger than in Aaa securities. A. Bonds which are rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa. Bonds which are rated Baa are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba. Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. 53 B. Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa. Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca. Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C. Bonds which are rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Fitch Long-Term Debt Ratings AAA. Highest credit quality. "AAA" ratings denote the lowest expectation of credit risk. They are assigned only in case of exceptionally strong capacity for timely payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events. AA. Very high credit quality. "AA" ratings denote a very low expectation of credit risk. They indicate very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. A. High credit quality. "A" ratings denote a low expectation of credit risk. The capacity for timely payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings. BBB. Good credit quality. "BBB" ratings indicate that there is currently a low expectation of credit risk. The capacity for timely payment of financial commitments is considered adequate, but adverse changes in circumstances and in economic conditions are more likely to impair this capacity. This is the lowest investment-grade category. BB. Speculative. "BB" ratings indicate that there is a possibility of credit risk developing, particularly as the result of adverse economic change over time; however, business or financial alternatives may be available to allow financial commitments to be met. Securities rated in this category are not investment grade. B. Highly speculative. "B" ratings indicate that significant credit risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is contingent upon a sustained, favorable business and economic environment. CCC, CC, C. High default risk. Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic developments. A "CC" rating indicates that default of some kind appears probable. "C" ratings signal imminent default. DDD, DD, D. Default. The ratings of obligations in this category are based on their prospects for achieving partial or full recovery in a reorganization or liquidation of the obligor. While expected recovery values are highly speculative and cannot be estimated with any precision, the following serve as general guidelines. "DDD" obligations have the highest potential for recovery, around 90%-100% of outstanding amounts and accrued interest. "DD" indicates potential recoveries in the range of 50%-90%, and "D" the lowest recovery potential, i.e., below 50%. Entities rated in this category have defaulted on some or all of their obligations. Entities rated "DDD" have the highest prospect for resumption of performance or continued operation with or without a formal reorganization process. Entities rated "DD" and "D" are generally undergoing a formal reorganization or liquidation process; those rated "DD" are likely to satisfy a higher portion of their outstanding obligations, while entities rated "D" have a poor prospect for repaying all obligations. 54 Fitch Short-Term Debt Ratings F1. Highest credit quality. Indicates the Best capacity for timely payment of financial commitments; may have an added "+" to denote any exceptionally strong credit feature. F2. Good credit quality. A satisfactory capacity for timely payment of financial commitments, but the margin of safety is not as great as in the case of the higher ratings. F3. Fair credit quality. The capacity for timely payment of financial commitments is adequate; however, near-term adverse changes could result in a reduction to non-investment grade. B. Speculative. Minimal capacity for timely payment of financial commitments, plus vulnerability to near-term adverse changes in financial and economic conditions. C. High default risk. Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon a sustained, favorable business and economic environment. D. Default. Denotes actual or imminent payment default. Commercial Paper Ratings Commercial paper rated by Standard & Poor's Ratings Services ("S&P") has the following characteristics: Liquidity ratios are adequate to meet cash requirements. Long-term senior debt is rated "A" or better. The issuer has access to at least two additional channels of borrowing. Basic earnings and cash flow have an upward trend with allowance made for unusual circumstances. Typically, the issuer's industry is well established and the issuer has a strong position within the industry. The reliability and quality of management are unquestioned. Relative strength or weakness of the above factors determine whether the issuer's commercial paper is rated A-1 or A-2. The ratings Prime-1 and Prime-2 are the two highest commercial paper ratings assigned by Moody's Investors Service, Inc. ("Moody's"). Among the factors considered by it in assigning ratings are the following: (1) evaluation of the management of the issuer; (2) economic evaluation of the issuer's industry or industries and an appraisal of speculative-type risks which may be inherent in certain areas; (3) evaluation of the issuer's products in relation to competition and customer acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over a period of ten years; (7) financial strength of a parent company and the relationships which exist with the issuer; and (8) recognition by the management of obligations which may be present or may arise as a result of public interest questions and preparations to meet such obligations. Relative strength or weakness of the above factors determines whether the issuer's commercial paper is rated Prime-1 or 2. Municipal Notes Moody's: The highest ratings for state and municipal short-term obligations are "MIG 1," "MIG 2," and "MIG 3" (or "VMIG 1," "VMIG 2" and "VMIG 3" in the case of an issue having a variable rate demand feature). Notes rated "MIG 1" or "VMIG 1" are judged to be of the "best quality". Notes rated "MIG 2" or "VMIG 2" are of "high quality," with margins or protection "ample although not as large as in the preceding group". Notes rated "MIG 3" or "VMIG 3" are of "favorable quality," with all security elements accounted for but lacking the strength of the preceding grades. S&P: The "SP-1" rating reflects a "very strong or strong capacity to pay principal and interest". Notes issued with "overwhelming safety characteristics" will be rated "SP-1+". The "SP-2" rating reflects a "satisfactory capacity" to pay principal and interest. Fitch: The highest ratings for state and municipal short-term obligations are "F-1+," "F-1" and "F-2." 55 SCUDDER INVESTORS TRUST PART C ------ OTHER INFORMATION -----------------
Item 23 Exhibits - ------- -------- (a) (1) Declaration of Trust, dated October 14, 1998, is incorporated by reference to Pre-Effective Amendment No. 1 to the Registration Statement. (2) Certificate of Amendment of Declaration of Trust, dated November 29, 2000. (Incorporated by reference to Post-Effective Amendment No. 10 to the Registration Statement, as filed on December 29, 2000.) (b) (1) By-Laws, dated October 14, 1998, is incorporated by reference to Pre-Effective Amendment No. 1 to the Registration Statement. (2) By-Laws, dated November 20, 2002. (Filed herein.) (c) (1) Establishment and Designation of Series of Beneficial Interest, dated October 14, 1998, is incorporated by reference to Pre-Effective Amendment No. 1 to the Registration Statement. (1)(a) Redesignation of Series, dated December 14, 2000. (Incorporated by reference to Post-Effective Amendment No. 10 to the Registration Statement, as filed on December 29, 2000.) (2) Establishment and Designation of Classes of Shares of Beneficial Interest, $.01 Par Value dated March 22, 2000, is incorporated by reference to Post-Effective Amendment No. 8 to the Registration Statement. (3) Amended and Restated Establishment and Designation of Series of Beneficial Interest, dated January 19, 2000. (Incorporated by reference to Post-Effective Amendment No. 8 to the Registration Statement.) (4) Redesignation of Classes of Shares of Beneficial Interest, dated November 29, 2000 for Kemper S&P 500 Fund. (Incorporated by reference to Post-Effective Amendment No. 10 to the Registration Statement, as filed on December 29, 2000.) (5) Redesignation of Classes of Shares of Beneficial Interest, dated November 29, 2000 for Kemper Research Fund. (Incorporated by reference to Post-Effective Amendment No. 10 to the Registration Statement, as filed on December 29, 2000.) (6) Redesignation of Classes of Shares of Beneficial Interest, dated November 29, 2000 for Kemper Large Company Growth Fund. (Incorporated by reference to Post-Effective Amendment No. 10 to the Registration Statement, as filed on December 29, 2000.) Part C - Page 1 (7) Amended and Restated Establishment and Designation of Series of Shares of Beneficial Interest dated February 23, 2001. (Incorporated by reference to Post-Effective Amendment No. 12 to the Registration Statement, as filed on December 28, 2001.) (8) Redesignation of Series dated December 14, 2000. (Incorporated by reference to Post-Effective Amendment No. 12 to the Registration Statement, as filed on December 28, 2001.) (9) Corrected Redesignation of Series dated March 28, 2001. (Incorporated by reference to Post-Effective Amendment No. 12 to the Registration Statement, as filed on December 28, 2001.) (10) Amended and Restated Establishment and Designation of Series of Shares of Beneficial Interest dated May 17, 2002. (Filed herein). (d) (1) Investment Management Agreement between the Registrant, on behalf of Kemper Large Company Growth Fund, and Scudder Kemper Investments, dated December 28, 1998. (Incorporated by reference to Pre-Effective Amendment No. 1 to the Registration Statement.) (2) Investment Management Agreement between the Registrant, on behalf of Kemper Research Fund, and Scudder Kemper Investments, dated December 28, 1998. Incorporated by reference to Pre-Effective Amendment No. 1 to the Registration Statement.) (3) Investment Management Agreement between the Registrant, on behalf of Kemper Small Cap Value+Growth Fund, and Scudder Kemper Investments, dated December 28, 1998. (Incorporated by reference to Pre-Effective Amendment No. 1 to the Registration Statement.) (4) Investment Management Agreement between the Registrant, on behalf of Kemper S&P 500 Index Fund, and Scudder Kemper Investments, dated March 31, 2000. (Incorporated by reference to Post-Effective Amendment No. 8 to the Registration Statement.) (5) Subadvisory Agreement between Scudder Kemper Investments, Inc. and Bankers Trust Company dated March 31, 2000. (Incorporated by reference to Post-Effective Amendment No. 8 to the Registration Statement.) (6) Subadvisory Agreement between Zurich Scudder Investments, Inc. and Deustche Asset Management, Inc. dated May 1, 2001. (Incorporated by reference to Post-Effective Amendment No. 12 to the Registration Statement, as filed on December 28, 2001.) (7) Investment Management Agreement between the Registrant, on behalf of Scudder S&P 500 Stock Fund, and Deutsche Investment Management Americas Inc., dated April 5, 2002. (Filed herein). Part C - Page 2 (e) (1) Underwriting and Distribution Services Agreement between the Registrant and Kemper Distributors, Inc., dated December 28, 1998. (Incorporated by reference to Pre-Effective Amendment No. 1 to the Registration Statement.) (2) Underwriting and Distribution Services Agreement between the Registrant and Kemper Distributors, Inc., dated October 1, 1999. (Incorporated by reference to Post-Effective Amendment No. 8 to the Registration Statement.) (3) Underwriting and Distribution Services Agreement between the Registrant and Scudder Distributors, Inc., dated April 5, 2002. (Filed herein). (f) Inapplicable. (g) (1) Custody Agreement between the Registrant and State Street Bank and Trust Company. (Incorporated by reference to Post-Effective Amendment No. 5 to the Registration Statement, as filed on October 15, 1999.) (2) Amendment, dated April 3, 2000, to Custody Agreement between the Registrant and State Street Bank and Trust Company (Incorporated by reference to Post-Effective Amendment No. 8 to the Registration Statement.) (3) Amendment dated January 5, 2001, to Custody Agreement between the Registrant and State Street Bank and Trust Company. (Incorporated by reference to Post-Effective No. 11 to the Registration Statement.) (4) Amendment dated July 2, 2001, to Custody Agreement between the Registrant and State Street Bank and Trust Company. (Incorporated by reference to Post-Effective No. 11 to the Registration Statement.) (h) (1) Agency Agreement dated December 28, 1998. (Incorporated by reference to Pre-Effective Amendment No. 1 to the Registration Statement.) (1)(a) Amendment No. 1 the Agency Agreement dated July 15, 1999. (Incorporated by reference to Post-Effective Amendment No. 5 to the Registration Statement, as filed on October 15, 1999.) (2) Administrative Services Agreement, dated December 28, 1998. (Incorporated by reference to Pre-Effective Amendment No. 1 to the Registration Statement.) (3) Fund Accounting Services Agreement between the Registrant, on behalf of Kemper Large Company Growth Fund, and Scudder Fund Accounting Corp., dated December 28, 1998. (Incorporated by reference to Pre-Effective Amendment No. 1 to the Registration Statement.) Part C - Page 3 (4) Fund Accounting Services Agreement between the Registrant, on behalf of Kemper Research Fund, and Scudder Fund Accounting Corp., dated December 28, 1998. (Incorporated by reference to Pre-Effective Amendment No. 1 to the Registration Statement.) (5) Fund Accounting Services Agreement between the Registrant, on behalf of Kemper Small Cap Value+Growth Fund, and Scudder Fund Accounting Corp., dated December 28, 1998. (Incorporated by reference to Pre-Effective Amendment No. 1 to the Registration Statement.) (6) Fund Accounting Services Agreement between the Registrant, on behalf of Kemper S&P 500 Index Fund, and Scudder Fund Accounting Corp., dated March 31, 2000. (Incorporated by reference to Post-Effective Amendment No. 8 to the Registration Statement.) (7) Administrative Services Agreement dated July 1, 2001 between Scudder Investors Trust and Zurich Scudder Investments, Inc. (Incorporated by reference to Post-Effective Amendment No. 11 to the Registration Statement.) (8) Shareholder Services Agreement dated July 1, 2001 between Scudder Investors Trust and Zurich Scudder Investments, Inc.. (Incorporated by reference to Post-Effective Amendment No. 11 to the Registration Statement.) (9) Shareholder Services Agreement dated April 5, 2002, between Scudder Investors Trust and Scudder Distributors, Inc. (Filed herein). (i) Opinion and Consent (Filed herein.) (j) Consent of Independent Auditors (Filed herein.) (k) Inapplicable. (l) Inapplicable. (m) (1) 12b-1 Plan between Kemper Large Company Growth Fund (Class B shares) and Kemper Distributors, Inc., dated December 28, 1998. (Incorporated by reference to Pre-Effective Amendment No. 1 to the Registration Statement.) (2) 12b-1 Plan between Kemper Large Company Growth Fund (Class C shares) and Kemper Distributors, Inc., dated December 28, 1998. (Incorporated by reference to Pre-Effective Amendment No. 1 to the Registration Statement.) (3) 12b-1 Plan between Kemper Research Fund (Class B shares)and Kemper Distributors, Inc., dated December 28, 1998. (Incorporated by reference to Pre-Effective Amendment No. 1 to the Registration Statement.) Part C - Page 4 (4) 12b-1 Plan between Kemper Research Fund (Class C shares) and Kemper Distributors, Inc., dated December 28, 1998. (Incorporated by reference to Pre-Effective Amendment No. 1 to the Registration Statement.) (5) 12b-1 Plan between Kemper Small Cap Value+Growth Fund (Class B shares) and Kemper Distributors, Inc., dated December 28, 1998. (Incorporated by reference to Pre-Effective Amendment No. 1 to the Registration Statement.) (6) 12b-1 Plan between Kemper Small Cap Value+Growth Fund (Class C shares) and Kemper Distributors, Inc., dated December 28, 1998. (Incorporated by reference to Pre-Effective Amendment No. 1 to he Registration Statement.) (7) 12b-1 Plan between Kemper S&P 500 Index Fund (Class B shares) and Kemper Distributors, Inc., dated March 31, 2000. (Incorporated by reference to Post-Effective Amendment No. 10 to the Registration Statement, as filed on December 29, 2000.) (8) 12b-1 Plan between Kemper S&P 500 Index Fund (Class C shares) and Kemper Distributors, Inc., dated March 31, 2000. (Incorporated by reference to Post-Effective Amendment No. 8 to the Registration Statement.) (9) Rule 12b-1 Plan between Scudder Focus Growth Fund (Class A shares) and Scudder Distributors, Inc. dated July 1, 2001. (Incorporated by reference to Post-Effective Amendment No. 11 to the Registration Statement.) (10) Amended Rule 12b-1 Plan between Scudder Focus Growth Fund (Class B shares) and Scudder Distributors, Inc. dated July 1, 2001. (Incorporated by reference to Post-Effective Amendment No. 11 to the Registration Statement.) (11) Amended Rule 12b-1 Plan between Scudder Focus Growth Fund (Class C shares) and Scudder Distributors, Inc. dated July 1, 2001. (Incorporated by reference to Post-Effective Amendment No. 11 to the Registration Statement.) (12) Rule 12b-1 Plan between Scudder S&P 500 Stock Fund (Class A shares) and Scudder Distributors, Inc. dated July 1, 2001. (Incorporated by reference to Post-Effective Amendment No. 12 to the Registration Statement, as filed on December 28, 2001.) (13) Amended and Restated Rule 12b-1 Plan between Scudder S&P 500 Stock Fund (Class B shares) and Scudder Distributors, Inc. dated July 1, 2001. (Incorporated by reference to Post-Effective Amendment No. 12 to the Registration Statement, as filed on December 28, 2001.) Part C - Page 5 (14) Amended and Restated Rule 12b-1 Plan between Scudder S&P 500 Stock Fund (Class C shares) and Scudder Distributors, Inc. dated July 1, 2001. (Incorporated by reference to Post-Effective Amendment No. 12 to the Registration Statement, as filed on December 28, 2001.) (15) Rule 12b-1 Plan between Scudder Research Fund (Class A shares) and Scudder Distributors, Inc. dated July 1, 2001. (Incorporated by reference to Post-Effective Amendment No. 12 to the Registration Statement, as filed on December 28, 2001.) (16) Amended and Restated Rule 12b-1 Plan between Scudder Research Fund (Class B shares) and Scudder Distributors, Inc. dated July 1, 2001. (Incorporated by reference to Post-Effective Amendment No. 12 to the Registration Statement, as filed on December 28, 2001.) (17) Amended and Restated Rule 12b-1 Plan between Scudder Research Fund (Class C shares) and Scudder Distributors, Inc. dated July 1, 2001. (Incorporated by reference to Post-Effective Amendment No. 12 to the Registration Statement, as filed on December 28, 2001.) (n) (1) Multi-Distribution System Plan, dated December 28, 1998. (Incorporated by reference to Pre-Effective Amendment No. 1 to the Registration Statement.) (2) Multi-Distribution System Plan, dated November 20, 2002 (Filed herein.) (o) Inapplicable (p) Code of Ethics of Kemper Funds Trust. (Incorporated by reference to Post-Effective Amendment No. 8 to the Registration Statement.) (p) (1) Code of Ethics for Scudder Kemper Investments, Inc. and certain of its subsidiaries, including Kemper Distributors, Inc. and Scudder Investor Services, Inc. (Incorporated by reference to Post-Effective Amendment No. 10 to the Registration Statement.) (1)(a) Revised Code of Ethics dated January 1, 2002. (Incorporated by reference to Post-Effective Amendment No. 12 to the Registration Statement, as filed on December 28, 2001.) (2) Code of Ethics for Bankers Trust Company. (Incorporated by reference to Post-Effective Amendment No. 10 to the Registration Statement.) (3) Code of Ethics of Zurich Scudder Investments, Inc., Scudder Investor Services, Inc. and Scudder Distributors, Inc. (Incorporated by reference to Post-Effective Amendment No. 11 to the Registration Statement.) Part C - Page 6 (4) Code of Ethics of Scudder Investors Trust. (Incorporated by reference to Post-Effective Amendment No. 11 to the Registration Statement.) (5) Code of Ethics of Deustche Asset Management, Inc. dated July 1, 2001. (Incorporated by reference to Post-Effective Amendment No. 12 to the Registration Statement, as filed on December 28, 2001.) (6) Code of Ethics of Scudder Funds, dated April 5, 2002. (Filed herein) (7) Code of Ethics for Deutsche Asset Management dated September 3, 2002. (Filed herein.)
Item 24. Persons Controlled or under Common Control with Fund - -------- ---------------------------------------------------- None Item 25. Indemnification - -------- --------------- Article VIII of the Registrant's Agreement and Declaration of Trust (Exhibit (a)(1) hereto, which is incorporated herein by reference) provides in effect that the Registrant will indemnify its officers and trustees under certain circumstances. However, in accordance with Section 17(h) and 17(i) of the Investment Company Act of 1940 and its own terms, said Article of the Agreement and Declaration of Trust does not protect any person against any liability to the Registrant or its shareholders to which such Trustee would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office. Each of the trustees who is not an "interested person" (as defined under the Investment Company Act of 1940) of Registrant (a "Non-interested Trustee") has entered into an indemnification agreement with Registrant, which agreement provides that the Registrant shall indemnify the Non-interested Trustee against certain liabilities which such Trustee may incur while acting in the capacity as a trustee, officer or employee of the Registrant to the fullest extent permitted by law, now or in the future, and requires indemnification and advancement of expenses unless prohibited by law. The indemnification agreement cannot be altered without the consent of the Non-interested Trustee and is not affected by amendment of the Agreement and Declaration of Trust. In addition, the indemnification agreement adopts certain presumptions and procedures which may make the process of indemnification and advancement of expenses, more timely, efficient and certain. In accordance with Section 17(h) of the Investment Company Act of 1940, the indemnification agreement does not protect a Non-interested Trustee against any liability to the Registrant or its shareholders to which such Trustee would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office. The Registrant has purchased insurance policies insuring its officers and trustees against certain liabilities which such officers and trustees may incur while acting in such capacities and providing reimbursement to the Registrant for sums which it may be permitted or required to pay to its officers and trustees by way of indemnification against such liabilities, subject to certain deductibles. Part C - Page 7 On April 5, 2002, Zurich Scudder Investments, Inc. ("Scudder"), the investment adviser, now known as Deutsche Investment Management Americas Inc., was acquired by Deutsche Bank AG, not including certain U.K. Operations (the "Transaction"). In connection with the Trustees' evaluation of the Transaction, Deutsche Bank agreed to indemnify, defend and hold harmless Registrant and the trustees who were not "interested persons" of Scudder, Deutsche Bank or Registrant (the "Independent Trustees") for and against any liability and claims and expenses based upon or arising from, whether in whole or in part, or directly or indirectly, any untrue statement or alleged untrue statement of a material fact made to the Independent Trustees by Deutsche Bank in connection with the Independent Trustees' consideration of the Transaction, or any omission or alleged omission of a material fact necessary in order to make statements made, in light of the circumstances under which they were made, not misleading. Item 26. Business and Other Connections of Investment Advisor - -------- ---------------------------------------------------- Deutsche Investment Management Americas 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.
Business and Other Connections Name of Board of Directors of Registrant's Advisor - ---- --------------------------------------------- Thomas F. Eggers* Deutsche Investment Management Americas Inc., President and CEO Deborah Flickinger** Deutsche Investment Management Americas Inc., Director Thomas Hughes** Deutsche Investment Management Americas Inc., Chairman and Director Scudder Investor Services, Inc., Director and Vice President William Schiebler** Deutsche Investment Management Americas Inc., Director Philip von Girsewald*** Deutsche Investment Management Americas Inc., Director
* 345 Park Avenue, New York, NY ** 280 Park Avenue, New York, NY *** Taunusanlage 12, Frankfurt, Germany Item 27. Principal Underwriters - -------- ---------------------- (a) Scudder Distributors, Inc. acts as principal underwriter of the Registrant's shares and acts as principal underwriter for other funds managed by Deutsche Investment Management Americas Inc. (b) Information on the officers and directors of Scudder Distributors, Inc., principal underwriter for the Registrant, is set forth below. The principal business address is 222 South Riverside Plaza, Chicago, Illinois 60606.
(1) (2) (3) Scudder Distributors, Inc. Name and Principal Positions and Offices with Positions and Business Address Scudder Distributors, Inc. Offices with Registrant ---------------- -------------------------- ----------------------- Thomas F. Eggers Chairman and Director None 345 Park Avenue New York, NY 10154 Part C - Page 8 (1) (2) (3) Scudder Distributors, Inc. Name and Principal Positions and Offices with Positions and Business Address Scudder Distributors, Inc. Offices with Registrant ---------------- -------------------------- ----------------------- Jonathan R. Baum Chief Executive Officer, President and None 345 Park Avenue Director New York, NY 10154 William F. Glavin Vice President and Director President, Trustee Two International Place Boston, MA 02110-4103 James J. McGovern Chief Financial Officer and Treasurer None 345 Park Avenue New York, NY 10054 Caroline Pearson Secretary Assistant Secretary Two International Place Boston, MA 02110-4103 Linda J. Wondrack Vice President and Chief Compliance None Two International Place Officer Boston, MA 02110-4103 Susan K. Crawshaw Vice President None 222 South Riverside Plaza Chicago, IL 60606 Scott B. David Vice President None Two International Place Boston, MA 02110-4103 Robert Froelich Vice President None 222 South Riverside Plaza Chicago, IL 60606 Michael L. Gallagher Vice President None 222 South Riverside Plaza Chicago, IL 60606 M. Patrick Donovan Vice President None Two International Place Boston, MA 02110-4103 Michael E. Harrington Vice President None 222 South Riverside Plaza Chicago, IL 60606 Dean Jackson Vice President None 222 South Riverside Plaza Chicago, IL 60606 Part C - Page 9 (1) (2) (3) Scudder Distributors, Inc. Name and Principal Positions and Offices with Positions and Business Address Scudder Distributors, Inc. Offices with Registrant ---------------- -------------------------- ----------------------- Terrance S. McBride Vice President None 222 South Riverside Plaza Chicago, IL 60606 C. Perry Moore Vice President None 222 South Riverside Plaza Chicago, IL 60606 Johnston A. Norris Vice President None 222 South Riverside Plaza Chicago, IL 60606 Todd N. Gierke Assistant Treasurer None 222 South Riverside Plaza Chicago, IL 60606 James E. Keating Assistant Treasurer None 345 Park Avenue New York, NY 10054 Philip J. Collora Assistant Secretary Vice President and Assistant 222 South Riverside Plaza Secretary Chicago, IL 60606 Diane E. Ratekin Assistant Secretary None 222 South Riverside Plaza Chicago, IL 60606
(c) Not applicable Item 28. Location of Accounts and Records - -------- -------------------------------- Accounts, books and other documents are maintained at the offices of the Registrant, the offices of Registrant's investment adviser, Deutsche Investment Management Americas Inc., 222 South Riverside Plaza, Chicago, Illinois 60606, at the offices of the Registrant's principal underwriter, Scudder Distributors, Inc., 222 South Riverside Plaza, Chicago, Illinois 60606 or, in the case of records concerning custodial functions, at the offices of the custodian, State Street Bank and Trust Company ("State Street"), 225 Franklin Street, Boston, MA 02110 or, in the case of records concerning transfer agency functions, at the offices of State Street and of the shareholder service agent, Scudder Investments Service Company, 811 Main Street, Kansas City, Missouri 64105. Item 29. Management Services - -------- ------------------- Inapplicable. Item 30. Undertakings - -------- ------------ Inapplicable. Part C - Page 10 SIGNATURES ---------- Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this amendment to its Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this amendment to its Registration Statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of Boston and the Commonwealth of Massachusetts on the 27th day of December 2002. SCUDDER INVESTORS TRUST By: /s/William F. Glavin, Jr. -------------------------- William F. Glavin, Jr. President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below on December 27, 2002 by the following persons in the capacities indicated.
SIGNATURE TITLE DATE - --------- ----- ---- /s/William F. Glavin, Jr. - -------------------------------------- William F. Glavin, Jr. President (Chief Executive Officer), December 27, 2002 Trustee /s/Charles A. Rizzo - -------------------------------------- Charles A. Rizzo Treasurer (Chief Financial Officer) December 27, 2002 /s/ John W. Ballantine - -------------------------------------- John W. Ballantine* Trustee December 27, 2002 /s/ Lewis A. Burnham - -------------------------------------- Lewis A. Burnham* Trustee December 27, 2002 /s/ Donald L. Dunaway - -------------------------------------- Donald L. Dunaway* Trustee December 27, 2002 /s/ James R. Edgar - -------------------------------------- James R. Edgar* Trustee December 27, 2002 /s/ Paul K. Freeman - -------------------------------------- Paul K. Freeman* Trustee December 27, 2002 /s/ Richard T. Hale - -------------------------------------- Richard T. Hale * Trustee, Chairman December 27, 2002 /s/ Robert B. Hoffman - -------------------------------------- Robert B. Hoffman* Trustee December 27, 2002 /s/ Shirley D. Peterson - -------------------------------------- Shirley D. Peterson* Trustee December 27, 2002 /s/ Fred B. Renwick - -------------------------------------- Fred B. Renwick* Trustee December 27, 2002 /s/ William P. Sommers - -------------------------------------- William P. Sommers* Trustee December 27, 2002 /s/ John G. Weithers - -------------------------------------- John G. Weithers* Trustee December 27, 2002
*By: /s/Caroline Pearson ------------------------------- Caroline Pearson** Assistant Secretary ** Attorney-in-fact pursuant to the powers of attorney contained in and incorporated by reference to Post-Effective Amendment No. 12 to the Registration Statement, as filed on December 28, 2001 and as filed herein. 2 POWER OF ATTORNEY ----------------- Scudder Aggressive Growth Fund Scudder Target Fund Scudder Blue Chip Fund Scudder Technology Fund Scudder Dynamic Growth Fund Scudder Total Return Fund Scudder Equity Trust Scudder U.S. Government Securities Fund Scudder Floating Rate Fund Scudder Value Series, Inc Scudder Focus Value Plus Growth Fund Scudder Variable Series II Scudder Growth Fund Cash Account Trust Scudder High Yield Series Cash Equivalent Fund Scudder Investors Trust Investors Cash Trust Scudder New Europe Fund, Inc. Investors Municipal Cash Fund Scudder Portfolios Scudder Money Funds Scudder State Tax-Free Income Series Scudder Yieldwise Funds Scudder Strategic Income Fund Tax-Exempt CA Money Market Fund Pursuant to the requirements of the Securities Act of 1933, this amendment to its Registration Statement has been signed below by the following persons in the capacities and on the dates indicated. By so signing, the undersigned in their capacity as a director, trustee or officer, or both, as the case may be of the Registrant, does hereby appoint Daniel O. Hirsch, John Millette and Caroline Pearson, and each of them, severally, or if more than one acts, a majority of them, their true and lawful attorney and agent to execute in their name, place and stead (in such capacity) any and all amendments to the Registration Statement and any post-effective amendments thereto and all instruments necessary or desirable in connection therewith, to attest the seal of the Registrant thereon and to file the same with the Securities and Exchange Commission. Each of said attorneys and agents shall have power to act with or without the other and have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or advisable to be done in the premises as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and approving the act of said attorneys and agents and each of them. SIGNATURE TITLE DATE - --------- ----- ---- /s/ Richard T. Hale Director/Trustee May 30, 2002 - ------------------- Richard T. Hale Director/Trustee May 30, 2002 - ------------------- Paul K. Freeman POWER OF ATTORNEY ----------------- Scudder Aggressive Growth Fund Scudder Target Fund Scudder Blue Chip Fund Scudder Technology Fund Scudder Dynamic Growth Fund Scudder Total Return Fund Scudder Equity Trust Scudder U.S. Government Securities Fund Scudder Floating Rate Fund Scudder Value Series, Inc Scudder Focus Value Plus Growth Fund Scudder Variable Series II Scudder Growth Fund Cash Account Trust Scudder High Yield Series Cash Equivalent Fund Scudder Investors Trust Investors Cash Trust Scudder New Europe Fund, Inc. Investors Municipal Cash Fund Scudder Portfolios Scudder Money Funds Scudder State Tax-Free Income Series Scudder Yieldwise Funds Scudder Strategic Income Fund Tax-Exempt CA Money Market Fund Pursuant to the requirements of the Securities Act of 1933, this amendment to its Registration Statement has been signed below by the following persons in the capacities and on the dates indicated. By so signing, the undersigned in their capacity as a director, trustee or officer, or both, as the case may be of the Registrant, does hereby appoint Daniel O. Hirsch, John Millette and Caroline Pearson, and each of them, severally, or if more than one acts, a majority of them, their true and lawful attorney and agent to execute in their name, place and stead (in such capacity) any and all amendments to the Registration Statement and any post-effective amendments thereto and all instruments necessary or desirable in connection therewith, to attest the seal of the Registrant thereon and to file the same with the Securities and Exchange Commission. Each of said attorneys and agents shall have power to act with or without the other and have full power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act whatsoever necessary or advisable to be done in the premises as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and approving the act of said attorneys and agents and each of them. SIGNATURE TITLE DATE - --------- ----- ---- /s/ Paul K. Freeman Director/Trustee June 18, 2002 - ------------------- Paul K. Freeman File No. 333-65661 File No. 811-09057 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 EXHIBITS TO FORM N-1A POST-EFFECTIVE AMENDMENT NO. 14 TO REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 AND AMENDMENT NO. 15 TO REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 SCUDDER INVESTORS TRUST Part C - Page 11 Scudder Investors Trust EXHIBIT INDEX Exhibit (b)(2) Exhibit (c)(10) Exhibit (d)(7) Exhibit (e)(3) Exhibit (h)(9) Exhibit (i) Exhibit (j) Exhibit (n)(2) Exhibit (p)(6) Exhibit (p)(7) Part C - Page 12 EX-99.B 3 exb2-sin.txt Exhibit (b)(2) AMENDMENT TO BY-LAWS SCUDDER INVESTORS TRUST November 20, 2002 ----------------- RESOLVED, that Article VI, Section 6 of the Fund's By-Laws shall be amended to read as follows (additions are underlined, and deletions are struckout): Section 6. Powers and Duties of the President. The President shall be the chief executive officer of the Trust. The President, in the absence of the Chairperson and Vice Chairperson, if any, may call meetings of the Trustees and of any Committee thereof when he/she deems it necessary and, in the absence of the Chairperson and Vice-Chairperson, if any, may preside at all meetings of the Shareholders and at all meetings of the Trustees. Subject to the control of the Trustees and to the control of any Committees of the Trustees, within their respective spheres, as provided by the Trustees, he/she shall at all times exercise a general supervision and direction over the affairs of the Trust. He/She shall have the power to employ attorneys and counsel for the Trust and to employ such subordinate officers, agents, clerks and employees as he/she may find necessary to transact the business of the Trust. He/She shall also have the power to grant, issue, execute or sign such powers of attorney, proxies or other documents as may be deemed advisable or necessary in furtherance of the interests of the Trust. The President shall have such other powers and duties, as from time to time may be conferred upon or assigned to him/her by the Trustees. EX-99.C 4 exc10-sin.txt Exhibit (c)(10) SCUDDER INVESTORS TRUST Amended and Restated Establishment and Designation of Series of Shares of Beneficial Interest The undersigned, being a majority of the Trustees of Scudder Investors Trust, a Massachusetts business trust (the "Trust"), acting pursuant to Section 5.11 of the Trust's Declaration of Trust dated October 14, 1998 (the "Declaration of Trust"), having heretofore established and designated the shares of beneficial interest of the Trust into three separate series (each individually a "Fund" and collectively the "Funds"), hereby terminate two such Funds, effective May 17, 2002, as set forth below in paragraph 2: 1. The Funds heretofore designated are as follows: Scudder Focus Growth Fund Scudder Research Fund Scudder S&P 500 Stock Fund 2. The following Funds are hereby terminated, effective May 17, 2002: Scudder Focus Growth Fund Scudder Research Fund All other terms and conditions of the Amended and Restated Establishment and Designation of Series of Shares of Beneficial Interest dated February 23, 2001 shall remain in effect. /s/John W. Ballantine /s/Lewis A. Burnham - ------------------------------- ------------------------------- John W. Ballantine, Trustee Lewis A. Burnham, Trustee /s/Donald L. Dunaway /s/James R. Edgar - ------------------------------- ------------------------------- Donald L. Dunaway, Trustee James R. Edgar, Trustee /s/Paul K. Freeman /s/William F. Glavin Jr., - ------------------------------- ------------------------------- Paul K. Freeman, Trustee William F. Glavin, Jr., Trustee /s/Richard T. Hale /s/Robert B. Hoffman - ------------------------------- ------------------------------- Richard T. Hale, Trustee Robert B. Hoffman, Trustee /s/Shirley D. Peterson /s/Fred B. Renwick - ------------------------------- ------------------------------- Shirley D. Peterson, Trustee Fred B. Renwick, Trustee /s/William P. Sommers /s/John G. Weithers - ------------------------------- ------------------------------- William P. Sommers, Trustee John G. Weithers, Trustee Dated: May 17, 2002 2 EX-99.D 5 exd7-sin.txt Exhibit (d)(7) INVESTMENT MANAGEMENT AGREEMENT Scudder Investors Trust Two International Place Boston, Massachusetts 02110 April 5, 2002 Deutsche Investment Management Americas Inc. 345 Park Avenue New York, New York 10154 Investment Management Agreement Scudder S&P 500 Stock Fund Ladies and Gentlemen: Scudder Investors Trust (the "Trust") has been established as a Massachusetts business Trust to engage in the business of an investment company. Pursuant to the Trust's Declaration of Trust, as amended from time-to-time (the "Declaration"), the Board of Trustees is authorized to issue the Trust's shares of beneficial interest, par value $0.01 per share, (the "Shares") in separate series, or funds. The Board of Trustees has authorized Scudder S&P 500 Stock Fund (the "Fund"). Series may be abolished and dissolved, and additional series established, from time to time by action of the Trustees. The Trust, on behalf of the Fund, has selected you to act as the investment manager of the Fund and to provide certain other services, as more fully set forth below, and you have indicated that you are willing to act as such investment manager and to perform such services under the terms and conditions hereinafter set forth. Accordingly, the Trust on behalf of the Fund agrees with you as follows: 1. Delivery of Documents. The Trust engages in the business of investing and reinvesting the assets of the Fund in the manner and in accordance with the investment objectives, policies and restrictions specified in the currently effective Prospectus (the "Prospectus") and Statement of Additional Information (the "SAI") relating to the Fund included in the Trust's Registration Statement on Form N-1A, as amended from time to time (the "Registration Statement"), filed by the Trust under the Investment Company Act of 1940, as amended (the "1940 Act"), and the Securities Act of 1933, as amended. Copies of the documents referred to in the preceding sentence have been furnished to you by the Trust. The Trust has also furnished you with copies properly certified or authenticated of each of the following additional documents related to the Trust and the Fund: (a) The Declaration, as amended to date. (b) By-Laws of the Trust as in effect on the date hereof (the "By-Laws"). (c) Resolutions of the Trustees of the Trust and the shareholders of the Fund selecting you as investment manager and approving the form of this Agreement. (d) Establishment and Designation of Series of Shares of Beneficial Interest dated March 22, 2000 relating to the Fund. The Trust will furnish you from time to time with copies, properly certified or authenticated, of all amendments of or supplements, if any, to the foregoing, including the Prospectus, the SAI and the Registration Statement. 2. Portfolio Management Services. As manager of the assets of the Fund, you shall provide continuing investment management of the assets of the Fund in accordance with the investment objectives, policies and restrictions set forth in the Prospectus and SAI; the applicable provisions of the 1940 Act and the Internal Revenue Code of 1986, as amended (the "Code"), relating to regulated investment companies and all rules and regulations thereunder; and all other applicable federal and state laws and regulations of which you have knowledge; subject always to policies and instructions adopted by the Trust's Board of Trustees. In connection therewith, you shall use reasonable efforts to manage the Fund so that it will qualify as a regulated investment company under Subchapter M of the Code and regulations issued thereunder. The Fund shall have the benefit of the investment analysis and research, the review of current economic conditions and trends and the consideration of long-range investment policy generally available to your investment advisory clients. In managing the Fund in accordance with the requirements set forth in this section 2, you shall be entitled to receive and act upon advice of counsel to the Trust. You shall also make available to the Trust promptly upon request all of the Fund's investment records and ledgers as are necessary to assist the Trust in complying with the requirements of the 1940 Act and other applicable laws. To the extent required by law, you shall furnish to regulatory authorities having the requisite authority any information or reports in connection with the services provided pursuant to this Agreement which may be requested in order to ascertain whether the operations of the Trust are being conducted in a manner consistent with applicable laws and regulations. You shall determine the securities, instruments, investments, currencies, repurchase agreements, futures, options and other contracts relating to investments to be purchased, sold or entered into by the Fund and place orders with broker-dealers, foreign currency dealers, futures commission merchants or others pursuant to your determinations and all in accordance with Fund policies as expressed in the Registration Statement. You shall determine what portion of the Fund's portfolio shall be invested in securities and other assets and what portion, if any, should be held uninvested. You shall furnish to the Trust's Board of Trustees periodic reports on the investment performance of the Fund and on the performance of your obligations pursuant to this Agreement, and you shall supply such additional reports and information as the Trust's officers or Board of Trustees shall reasonably request. 3. Delegation of Portfolio Management Services. Subject to the prior approval of a majority of the members of the Fund's Board of Trustees, including a majority of the Trustees who are not "interested persons," as defined in the 1940 Act, you may, through a sub-advisory agreement or other arrangement, delegate to any other company that you control, are controlled by, or are under common control with, or to specified employees of any such companies, or to more than one such company, to the extent permitted by applicable law, certain of your duties enumerated in section 2 hereof; provided, that you shall continue to supervise the services provided by such company or employees and any such delegation shall not relieve you of any of your obligations hereunder. Subject to the provisions of this Agreement, the duties of any sub-adviser or delegate, the portion of portfolio assets of the Fund that the sub-adviser or delegate shall manage and the fees to be paid to the sub-adviser or delegate by you under and pursuant to any sub-advisory agreement or other arrangement entered into in accordance with this Agreement may be adjusted from time to time by you, subject to the prior approval of a majority of the members of the Fund's Board of Trustees, including a majority of the Trustees who are not "interested persons," as defined in the 1940 Act. 4. Administrative Services. In addition to the portfolio management services specified above in section 2, you shall furnish at your expense for the use of the Fund such office space and facilities in the United States as the Fund may require for its reasonable needs, and you (or one or more of your affiliates designated by you) shall render to the Trust administrative services on behalf of the Fund necessary for operating as an open end investment company and not provided by persons not parties to this Agreement including, but not limited to, preparing reports to and meeting materials for the Trust's Board of Trustees and reports and notices to Fund shareholders; supervising, negotiating contractual arrangements with, to the extent appropriate, and monitoring the performance of, accounting agents, custodians, depositories, transfer agents and pricing agents, accountants, attorneys, printers, underwriters, brokers and dealers, insurers and other persons in any capacity deemed to be necessary or desirable to Fund operations; preparing and making filings with the Securities and Exchange Commission (the "SEC") and other regulatory and self-regulatory organizations, including, but not limited to, preliminary and definitive proxy materials, post-effective amendments to the Registration Statement, semi-annual reports on Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the tabulation of proxies by the Fund's transfer agent; assisting in the preparation and filing of the Fund's federal, state and local tax returns; preparing and filing the Fund's federal excise tax return pursuant to Section 4982 of the Code; providing assistance with investor and public 2 relations matters; monitoring the valuation of portfolio securities and the calculation of net asset value; monitoring the registration of Shares of the Fund under applicable federal and state securities laws; maintaining or causing to be maintained for the Fund all books, records and reports and any other information required under the 1940 Act, to the extent that such books, records and reports and other information are not maintained by the Fund's custodian or other agents of the Fund; assisting in establishing the accounting policies of the Fund; assisting in the resolution of accounting issues that may arise with respect to the Fund's operations and consulting with the Fund's independent accountants, legal counsel and the Fund's other agents as necessary in connection therewith; establishing and monitoring the Fund's operating expense budgets; reviewing the Fund's bills; processing the payment of bills that have been approved by an authorized person; assisting the Fund in determining the amount of dividends and distributions available to be paid by the Fund to its shareholders, preparing and arranging for the printing of dividend notices to shareholders, and providing the transfer and dividend paying agent, the custodian, and the accounting agent with such information as is required for such parties to effect the payment of dividends and distributions; and otherwise assisting the Trust as it may reasonably request in the conduct of the Fund's business, subject to the direction and control of the Trust's Board of Trustees. Nothing in this Agreement shall be deemed to shift to you or to diminish the obligations of any agent of the Fund or any other person not a party to this Agreement which is obligated to provide services to the Fund. 5. Allocation of Charges and Expenses. Except as otherwise specifically provided in this section 4, you shall pay the compensation and expenses of all Trustees, officers and executive employees of the Trust (including the Fund's share of payroll taxes) who are affiliated persons of you, and you shall make available, without expense to the Fund, the services of such of your directors, officers and employees as may duly be elected officers of the Trust, subject to their individual consent to serve and to any limitations imposed by law. You shall provide at your expense the portfolio management services described in section 2 hereof and the administrative services described in section 3 hereof. You shall not be required to pay any expenses of the Fund other than those specifically allocated to you in this section 4. In particular, but without limiting the generality of the foregoing, you shall not be responsible, except to the extent of the reasonable compensation of such of the Fund's Trustees and officers as are directors, officers or employees of you whose services may be involved, for the following expenses of the Fund: organization expenses of the Fund (including out of-pocket expenses, but not including your overhead or employee costs); fees payable to you and to any other Fund advisors or consultants; legal expenses; auditing and accounting expenses; maintenance of books and records which are required to be maintained by the Fund's custodian or other agents of the Trust; telephone, telex, facsimile, postage and other communications expenses; taxes and governmental fees; fees, dues and expenses incurred by the Fund in connection with membership in investment company trade organizations; fees and expenses of the Fund's accounting agent for which the Trust is responsible pursuant to the terms of the Fund Accounting Services Agreement, custodians, subcustodians, transfer agents, dividend disbursing agents and registrars; payment for portfolio pricing or valuation services to pricing agents, accountants, bankers and other specialists, if any; expenses of preparing share certificates and, except as provided below in this section 4, other expenses in connection with the issuance, offering, distribution, sale, redemption or repurchase of securities issued by the Fund; expenses relating to investor and public relations; expenses and fees of registering or qualifying Shares of the Fund for sale; interest charges, bond premiums and other insurance expense; freight, insurance and other charges in connection with the shipment of the Fund's portfolio securities; the compensation and all expenses (specifically including travel expenses relating to Trust business) of Trustees, officers and employees of the Trust who are not affiliated persons of you; brokerage commissions or other costs of acquiring or disposing of any portfolio securities of the Fund; expenses of printing and distributing reports, notices and dividends to shareholders; expenses of printing and mailing Prospectuses and SAIs of the Fund and supplements thereto; costs of stationery; any litigation expenses; indemnification of Trustees and officers of the Trust; and costs of shareholders' and other meetings. You shall not be required to pay expenses of any activity which is primarily intended to result in sales of Shares of the Fund if and to the extent that (i) such expenses are required to be borne by a principal underwriter which acts as the distributor of the Fund's Shares pursuant to an underwriting agreement which provides that the underwriter shall assume some or all of such expenses, or (ii) the Trust on behalf of the Fund shall have adopted a plan in conformity with Rule 12b-1 under the 1940 Act providing that the Fund (or some other party) shall assume some or all of such expenses. You shall be required to pay such of the foregoing sales expenses as are not required to be paid by the 3 principal underwriter pursuant to the underwriting agreement or are not permitted to be paid by the Fund (or some other party) pursuant to such a plan. 6. Management Fee. For all services to be rendered, payments to be made and costs to be assumed by you as provided in sections 2, 3, 4 and 5 hereof, the Trust on behalf of the Fund shall pay you in United States Dollars on the last day of each month the unpaid balance of a fee equal to the excess of 1/12 of 0.33 of 1 percent of the average daily net assets as defined below of the Fund for such month; provided that, for any calendar month during which the average of such values exceeds $100,000,000 the fee payable for that month based on the portion of the average of such values in excess of $100,000,000 shall be 1/12 of 0.29 of 1 percent of such portion; provided further that, for any calendar month during which the average of such values exceeds $200,000,000 the fee payable for that month based on the portion of the average of such values in excess of $200,000,000 shall be 1/12 of 0.27 of 1 percent of such portion; over the lowest applicable expense fully described below or over any compensation waived by you from time to time (as more fully described below). You shall be entitled to receive during any month such interim payments of your fee hereunder as you shall request, provided that no such payment shall exceed 75 percent of the amount of your fee then accrued on the books of the Fund and unpaid. The "average daily net assets" of the Fund shall mean the average of the values placed on the Fund's net assets as of 4:00 p.m. (New York time) on each day on which the net asset value of the Fund is determined consistent with the provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines the value of its net assets as of some other time on each business day, as of such time. The value of the net assets of the Fund shall always be determined pursuant to the applicable provisions of the Declaration and the Registration Statement. If the determination of net asset value does not take place for any particular day, then for the purposes of this section 5, the value of the net assets of the Fund as last determined shall be deemed to be the value of its net assets as of 4:00 p.m. (New York time), or as of such other time as the value of the net assets of the Fund's portfolio may be lawfully determined on that day. If the Fund determines the value of the net assets of its portfolio more than once on any day, then the last such determination thereof on that day shall be deemed to be the sole determination thereof on that day for the purposes of this section 5. You may waive all or a portion of your fees provided for hereunder and such waiver shall be treated as a reduction in purchase price of your services. You shall be contractually bound hereunder by the terms of any publicly announced waiver of your fee, or any limitation of the Fund's expenses, as if such waiver or limitation were fully set forth herein. 7. Avoidance of Inconsistent Position; Services Not Exclusive. In connection with purchases or sales of portfolio securities and other investments for the account of the Fund, neither you nor any of your directors, officers or employees shall act as a principal or agent or receive any commission. You or your agent shall arrange for the placing of all orders for the purchase and sale of portfolio securities and other investments for the Fund's account with brokers or dealers selected by you in accordance with Fund policies as expressed in the Registration Statement. If any occasion should arise in which you give any advice to clients of yours concerning the Shares of the Fund, you shall act solely as investment counsel for such clients and not in any way on behalf of the Fund. Your services to the Fund pursuant to this Agreement are not to be deemed to be exclusive and it is understood that you may render investment advice, management and services to others. In acting under this Agreement, you shall be an independent contractor and not an agent of the Trust. Whenever the Fund and one or more other accounts or investment companies advised by you have available funds for investment, investments suitable and appropriate for each shall be allocated in accordance with procedures believed by you to be equitable to each entity. Similarly, opportunities to sell securities shall be allocated in a manner believed by you to be equitable. The Fund recognizes that in some cases this procedure may adversely affect the size of the position that may be acquired or disposed of for the Fund. 8. Limitation of Liability of Manager. As an inducement to your undertaking to render services pursuant to this Agreement, the Trust agrees that you shall not be liable under this Agreement for any error of judgment or mistake of law or for any loss suffered by the Fund in connection with the matters to which this Agreement relates, provided that nothing in this Agreement shall be deemed to protect or purport to protect you against any liability to the Trust, the Fund or its shareholders to which you would otherwise be subject by reason of willful misfeasance, 4 bad faith or gross negligence in the performance of your duties, or by reason of your reckless disregard of your obligations and duties hereunder. 9. Duration and Termination of This Agreement. This Agreement shall remain in force until September 30, 2002, and continue in force from year to year thereafter, but only so long as such continuance is specifically approved at least annually (a) by the vote of a majority of the Trustees who are not parties to this Agreement or interested persons of any party to this Agreement, cast in person at a meeting called for the purpose of voting on such approval, and (b) by the Trustees of the Trust, or by the vote of a majority of the outstanding voting securities of the Fund. The aforesaid requirement that continuance of this Agreement be "specifically approved at least annually" shall be construed in a manner consistent with the 1940 Act and the rules and regulations thereunder and any applicable SEC exemptive order therefrom. This Agreement may be terminated with respect to the Fund at any time, without the payment of any penalty, by the vote of a majority of the outstanding voting securities of the Fund or by the Trust's Board of Trustees on 60 days' written notice to you, or by you on 60 days' written notice to the Trust. This Agreement shall terminate automatically in the event of its assignment. This Agreement may be terminated with respect to the Fund at any time without the payment of any penalty by the Board of Trustees or by vote of a majority of the outstanding voting securities of the Fund in the event that it shall have been established by a court of competent jurisdiction that you or any of your officers or directors has taken any action which results in a breach of your covenants set forth herein. 10. Amendment of this Agreement. No provision of this Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought, and no amendment of this Agreement shall be effective until approved in a manner consistent with the 1940 Act and rules and regulations thereunder and any applicable SEC exemptive order therefrom. 11. Limitation of Liability for Claims. The Declaration, a copy of which, together with all amendments thereto, is on file in the Office of the Secretary of The Commonwealth of Massachusetts, provides that the name "Scudder Investors Trust" refers to the Trustees under the Declaration collectively as Trustees and not as individuals or personally, and that no shareholder of the Fund, or Trustee, officer, employee or agent of the Trust, shall be subject to claims against or obligations of the Trust or of the Fund to any extent whatsoever, but that the Trust estate only shall be liable. You are hereby expressly put on notice of the limitation of liability as set forth in the Declaration and you agree that the obligations assumed by the Trust on behalf of the Fund pursuant to this Agreement shall be limited in all cases to the Fund and its assets, and you shall not seek satisfaction of any such obligation from the shareholders or any shareholder of the Fund or any other series of the Trust, or from any Trustee, officer, employee or agent of the Trust. You understand that the rights and obligations of each Fund, or series, under the Declaration are separate and distinct from those of any and all other series. 12. Miscellaneous. The captions in this Agreement are included for convenience of reference only and in no way define or limit any of the provisions hereof or otherwise affect their construction or effect. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. In interpreting the provisions of this Agreement, the definitions contained in Section 2(a) of the 1940 Act (particularly the definitions of "affiliated person," "assignment" and "majority of the outstanding voting securities"), as from time to time amended, shall be applied, subject, however, to such exemptions as may be granted by the SEC by any rule, regulation or order. 5 This Agreement shall be construed in accordance with the laws of The Commonwealth of Massachusetts, provided that nothing herein shall be construed in a manner inconsistent with the 1940 Act, or in a manner which would cause the Fund to fail to comply with the requirements of Subchapter M of the Code. This Agreement shall supersede all prior investment advisory or management agreements entered into between you and the Trust on behalf of the Fund. If you are in agreement with the foregoing, please execute the form of acceptance on the accompanying counterpart of this letter and return such counterpart to the Trust, whereupon this letter shall become a binding contract effective as of the date of this Agreement. 6 Yours very truly, SCUDDER INVESTORS TRUST, on behalf of Scudder S&P 500 Stock Fund By: /s/William F. Glavin --------------------------- William F. Glavin Vice President The foregoing Agreement is hereby accepted as of the date hereof. DEUTSCHE INVESTMENT MANAGEMENT AMERICAS INC. By: /S/Mark S. Casady ------------------------------ Mark S. Casady Managing Director 7 EX-99.E 6 exe3-sin.txt Exhibit (e)(3) UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT AGREEMENT made this 5th day of April, 2002, between SCUDDER INVESTORS TRUST, a Massachusetts business trust (the "Fund"), and SCUDDER DISTRIBUTORS, INC., a Delaware corporation ("SDI"). In consideration of the mutual covenants hereinafter contained, it is hereby agreed by and between the parties hereto as follows: 1. The Fund hereby appoints SDI to act as principal underwriter of shares of beneficial interest (hereinafter called "shares") of the Fund in jurisdictions wherein shares of the Fund may legally be offered for sale; provided, however, that the Fund in its absolute discretion may (a) issue or sell shares directly to holders of shares of the Fund upon such terms and conditions and for such consideration, if any, as it may determine, whether in connection with the distribution of subscription or purchase rights, the payment or reinvestment of dividends or distributions, or otherwise; (b) issue or sell shares at net asset value to the shareholders of any other investment company, for which SDI shall act as exclusive distributor, who wish to exchange all or a portion of their investment in shares of such other investment company for shares of the Fund; or (c) issue shares in connection with the merger or consolidation of any other investment company with the Fund or the Fund's acquisition, by purchase or otherwise, of all or substantially all of the assets of any other investment company or all or substantially all of the outstanding shares of any such company. SDI shall appoint various financial service firms ("Firms") to provide distribution services to investors. The Firms shall provide such office space and equipment, telephone facilities, personnel, literature distribution, advertising and promotion as is necessary or beneficial for providing information and distribution services to existing and potential clients of the Firms. SDI may also provide some of the above services for the Fund. SDI accepts such appointment as principal underwriter and agrees to render such services and to assume the obligations herein set forth for the compensation herein provided. SDI shall for all purposes herein provided be deemed to be an independent contractor and, unless expressly provided herein or otherwise authorized, shall have no authority to act for or represent the Fund in any way. SDI, by separate agreement with the Fund, may also serve the Fund in other capacities. The services of SDI to the Fund under this Agreement are not to be deemed exclusive, and SDI shall be free to render similar services or other services to others so long as its services hereunder are not impaired thereby. In carrying out its duties and responsibilities hereunder, SDI will, pursuant to separate written contracts, appoint various Firms to provide advertising, promotion and other distribution services contemplated hereunder directly to or for the benefit of existing and potential shareholders who may be clients of such Firms. Such Firms shall at all times be deemed to be independent contractors retained by SDI and not the Fund. SDI shall use its best efforts with reasonable promptness to sell such part of the authorized shares of the Fund remaining unissued as from time to time shall be effectively registered under the Securities Act of 1933 ("Securities Act"), at prices determined as hereinafter provided and on terms hereinafter set forth, all subject to applicable federal and state laws and regulations and to the Fund's organizational documents, provided, however, that SDI may in its discretion refuse to accept orders for shares from any particular applicant. 2. SDI shall sell shares of the Fund to or through qualified Firms in such manner, not inconsistent with the provisions hereof and the Fund's currently effective registration statement, including the prospectus and statement of additional information and any supplements or amendments thereto ("Registration Statement"), as SDI may determine from time to time, provided that no Firm or other person shall be appointed or authorized to act as agent of the Fund without prior consent of the Fund. In addition to sales made by it as agent of the Fund, SDI may, in its discretion, also sell shares of the Fund as principal to persons with whom it does not have selling group agreements. Shares of any class of any series of the Fund offered for sale or sold by SDI shall be so offered or sold at a price per share determined in accordance with the Registration Statement. The price the Fund shall receive for all shares purchased from it shall be the net asset value used in determining the public offering price applicable to the sale of such shares. Any excess of the sales price over the net asset value of the shares of the Fund sold by SDI as agent shall be retained by SDI as a commission for its services hereunder. SDI may compensate Firms for sales of shares at the commission levels provided in the Registration Statement from time to time. SDI may pay other commissions, fees or concessions to Firms, and may pay them to others in its discretion, in such amounts as SDI shall determine from time to time. SDI shall be entitled to receive and retain any applicable contingent deferred sales charge as described in the Registration Statement. SDI shall also receive any distribution services fee payable by the Fund as provided in the Fund's Rule 12b-1 Plan, as amended from time to time (the "Plan"). SDI will require each Firm to conform to the provisions hereof and the Registration Statement with respect to the public offering price or net asset value, as applicable, of the Fund's shares, and neither SDI nor any such Firms shall withhold the placing of purchase orders so as to make a profit thereby. 3. The Fund will use its best efforts to keep effectively registered under the Securities Act for sale as herein contemplated such shares as SDI shall reasonably request and as the Securities and Exchange Commission shall permit to be so registered. Notwithstanding any other provision hereof, the Fund may terminate, suspend or withdraw the offering of shares whenever, in its sole discretion, it deems such action to be desirable. 4. The Fund will execute any and all documents and furnish any and all information that may be reasonably necessary in connection with the qualification of its shares for sale (including the qualification of the Fund as a dealer where necessary or advisable) in such states as SDI may reasonably request (it being understood that the Fund shall not be required without its consent to comply with any requirement which in its opinion is unduly burdensome). The Fund will furnish to SDI from time to time such information with respect to the Fund and its shares as SDI may reasonably request for use in connection with the sale of shares of the Fund. 2 5. SDI shall issue and deliver or shall arrange for various Firms to issue and deliver on behalf of the Fund such confirmations of sales made by it pursuant to this Agreement as may be required. At or prior to the time of issuance of shares, SDI will pay or cause to be paid to the Fund the amount due the Fund for the sale of such shares. Certificates shall be issued or shares registered on the transfer books of the Fund in such names and denominations as SDI may specify. 6. SDI shall order shares of the Fund from the Fund only to the extent that it shall have received purchase orders therefor. SDI will not make, or authorize Firms or others to make (a) any short sales of shares of the Fund; or (b) any sales of such shares to any Board member or officer of the Fund or to any officer or Board member of SDI or of any corporation or association furnishing investment advisory, managerial or supervisory services to the Fund, or to any corporation or association, unless such sales are made in accordance with the Registration Statement relating to the sale of such shares. SDI, as agent of and for the account of the Fund, may repurchase the shares of the Fund at such prices and upon such terms and conditions as shall be specified in the Registration Statement. In selling or reacquiring shares of the Fund for the account of the Fund, SDI will in all respects conform to the requirements of all state and federal laws and the Conduct Rules of the National Association of Securities Dealers, Inc., relating to such sale or reacquisition, as the case may be. SDI will observe and be bound by all the provisions of the Fund's organizational documents (and of any fundamental policies adopted by the Fund pursuant to the Investment Company Act of 1940, as amended (the "Investment Company Act"), notice of which shall have been given to SDI) which at the time in any way require, limit, restrict, prohibit or otherwise regulate any action on the part of SDI hereunder. SDI agrees to indemnify and hold harmless the Fund and each of its Board members and officers and each person, if any, who controls the Fund within the meaning of Section 15 of the Securities Act, against any and all losses, claims, damages, liabilities or litigation (including legal and other expenses) to which the Fund or such Board members, officers, or controlling persons may become subject under such Act, under any other statute, at common law or otherwise, arising out of the acquisition of any shares by any person which (i) may be based upon any wrongful act by SDI or any of SDI's employees or representatives, or (ii) may be based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statement therein not misleading if such statement or omission was made in reliance upon information furnished to the Fund by SDI, or (iii) may be incurred or arise by reason of SDI's acting as the Fund's agent instead of purchasing and reselling shares as principal in distributing the shares to the public, provided, however, that in no case (i) is SDI's indemnity in favor of a Board member or officer or any other person deemed to protect such Board member or officer or other person against any liability to which any such person would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance of his duties or by reason of his reckless disregard of obligations and duties under this Agreement or (ii) is SDI to be liable under the indemnity agreement contained in this paragraph with respect to any claim made against the Fund or any person indemnified unless the Fund or such person, as the case may be, shall have notified SDI in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claims shall have been served upon the Fund or upon such 3 person (or after the Fund or such person shall have received notice of such service on any designated agent), but failure to notify SDI of any such claim shall not relieve SDI from any liability which SDI may have to the Fund or any person against whom such action is brought otherwise than on account of SDI's indemnity agreement contained in this paragraph. SDI shall be entitled to participate, at SDI's own expense, in the defense, or, if SDI so elects, to assume the defense of any suit brought to enforce any such liability, but if SDI elects to assume the defense, such defense shall be conducted by counsel chosen by SDI and satisfactory to the Fund, to its officers and Board members, or to any controlling person or persons, defendant or defendants in the suit. In the event that SDI elects to assume the defense of any such suit and retain such counsel, the Fund, such officers and Board members or controlling person or persons, defendant or defendants in the suit shall bear the fees and expenses of any additional counsel retained by them, but, in case SDI does not elect to assume the defense of any such suit, SDI will reimburse the Fund, such officers and Board members or controlling person or persons, defendant or defendants in such suit for the reasonable fees and expenses of any counsel retained by them. SDI agrees to notify the Fund promptly of the commencement of any litigation or proceedings against it in connection with the issue and sale of any shares. The Fund shall not, without the prior written consent of SDI, effect any settlement of any pending or threatened action, suit or proceeding in respect of which the Fund is or could have been a party and indemnity has or could have been sought hereunder by the Fund, unless such settlement includes an unconditional release of SDI from all liability on claims that are the subject matter of such action, suit or proceeding. The Fund agrees to indemnify and hold harmless SDI and each of SDI's directors and officers and each person, if any, who controls SDI within the meaning of Section 15 of the Securities Act, against any and all losses, claims, damages, liabilities or litigation (including legal and other expenses) to which SDI or such directors, officers or controlling persons may become subject under such Act, under any other statute, at common law or otherwise, arising out of the acquisition of any shares by any person which (i) may be based upon any wrongful act by the Fund or any of its employees or representatives, or (ii) may be based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission was not made in reliance upon information furnished to SDI by the Fund; provided, however, that in no case (i) is the Fund's indemnity in favor of a director or officer or any other person deemed to protect such director or officer or other person against any liability to which any such person would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance of his duties or by reason of his reckless disregard of obligations and duties under this Agreement or (ii) is the Fund to be liable under its indemnity agreement contained in this paragraph with respect to any claims made against SDI or any such director, officer or controlling person unless SDI or such director, officer or controlling person, as the case may be, shall have notified the Fund in writing within a reasonable time after the summons or other first legal process giving information of the nature of the claim shall have been served upon SDI or upon such director, officer or controlling person (or after SDI or such director, officer or controlling person shall have received notice of such service on any designated agent), but failure to notify the Fund of any such claim shall not relieve it from any liability which it may have to the person against whom such action is brought otherwise than on account of its 4 indemnity agreement contained in this paragraph. The Fund will be entitled to participate at its own expense in the defense, or, if it so elects, to assume the defense of any suit brought to enforce any such liability, but if the Fund elects to assume the defense, such defense shall be conducted by counsel chosen by it and satisfactory to SDI, its directors, officers, or controlling person or persons, defendant or defendants in the suit. In the event that the Fund elects to assume the defense of any such suit and retain such counsel, SDI, its directors, officers or controlling person or persons, defendant or defendants in the suit, shall bear the fees and expenses of any additional counsel retained by them, but, in case the Fund does not elect to assume the defense of any such suit, it will reimburse SDI or such directors, officers or controlling person or persons, defendant or defendants in the suit, for the reasonable fees and expenses of any counsel retained by them. The Fund agrees to notify SDI promptly of the commencement of any litigation or proceedings against it or any of its officers or directors in connection with the issuance or sale of any shares. SDI shall not, without the prior written consent of the Fund, effect any settlement of any pending or threatened action, suit or proceeding in respect of which either SDI is or could have been a party and indemnity has or could have been sought hereunder by SDI, unless such settlement includes an unconditional release of the Fund from all liability on claims that are the subject matter of such action, suit or proceeding. 7. The Fund shall assume and pay all charges and expenses of its operations not specifically assumed or otherwise to be provided by SDI under this Agreement or the Plan. The Fund will pay (or will enter into arrangements providing that others will pay) all fees and expenses in connection with the registration of the Fund and its shares under the United States securities laws and, effective April 5, 2002, the registration and qualification of shares for sale in the various jurisdictions in which the Fund shall determine it advisable to qualify such shares for sale (including registering the Fund as a broker or dealer or any officer of the Fund or other person as agent or salesman of the Fund in any such jurisdictions) ("Blue Sky expenses"). Prior to April 5, 2002, SDI will pay all such Blue Sky expenses. In addition, SDI will pay all expenses (other than expenses which one or more Firms may bear pursuant to any agreement with SDI) incident to the sale and distribution of the shares issued or sold hereunder, including, without limiting the generality of the foregoing, all (a) expenses of printing and distributing any prospectus and of preparing, printing and distributing or disseminating any other literature, advertising and selling aids in connection with the offering of the shares for sale (except that such expenses need not include expenses incurred by the Fund in connection with the preparation, typesetting, printing and distribution of any registration statement or prospectus, report or other communication to shareholders in their capacity as such), and (b) expenses of advertising in connection with such offering. No transfer taxes, if any, which may be payable in connection with the issue or delivery or shares sold as herein contemplated or of the certificates for such shares shall be borne by the Fund, and SDI will bear all such transfer taxes. 8. This Agreement shall become effective on the date hereof and shall continue until September 30, 2002; and shall continue from year to year thereafter only so long as such continuance is approved in the manner required by the Investment Company Act. 5 This Agreement shall automatically terminate in the event of its assignment and may be terminated at any time without the payment of any penalty by the Fund or by SDI on sixty (60) days' written notice to the other party. The indemnity provisions contained herein shall remain operative and in full force and effect regardless of any termination of this Agreement. The Fund may effect termination with respect to any class of any series of the Fund by a vote of (i) a majority of the Board members who are not interested persons of the Fund and who have no direct or indirect financial interest in the operation of the Plan, this Agreement, or in any other agreement related to the Plan, or (ii) a majority of the outstanding voting securities of such series or class. Without prejudice to any other remedies of the Fund, the Fund may terminate this Agreement at any time immediately upon SDI's failure to fulfill any of its obligations hereunder. All material amendments to this Agreement must be approved by a vote of a majority of the Board, and of the Board members who are not interested persons of the Fund and who have no direct or indirect financial interest in the operation of the Plan, this Agreement or in any other agreement related to the Plan, cast in person at a meeting called for such purpose. The terms "assignment," "interested person" and "vote of a majority of the outstanding voting securities" shall have the meanings set forth in the Investment Company Act and the rules and regulations thereunder. SDI shall receive such compensation for its distribution services as set forth in the Plan. Termination of this Agreement shall not affect the right of SDI to receive payments on any unpaid balance of the compensation earned prior to such termination, as set forth in the Plan. Notwithstanding anything in this Agreement to the contrary, SDI shall be contractually bound hereunder by the terms of any publicly announced waiver of or cap on the compensation received for its distribution services under the Plan or by the terms of any written document provided to the Board of the Fund announcing a waiver or cap, as if such waiver or cap were fully set forth herein. 9. SDI will not use or distribute, or authorize the use, distribution or dissemination by Firms or others in connection with the sale of Fund shares any statements other than those contained in the Registration Statement, except such supplemental literature or advertising as shall be lawful under federal and state securities laws and regulations. SDI will furnish the Fund with copies of all such material. 10. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder shall not be thereby affected. 11. Any notice under this Agreement shall be in writing, addressed and delivered or mailed, postage prepaid, to the other party at such address as such other party may designate for the receipt of such notice. 12. All parties hereto are expressly put on notice of the Fund's Agreement and Declaration of Trust, and all amendments thereto, all of which are on file with the Secretary of The Commonwealth of Massachusetts, and the limitation of shareholder and trustee liability 6 contained therein. This Agreement has been executed by and on behalf of the Fund by its representatives as such representatives and not individually, and the obligations of the Fund hereunder are not binding upon any of the Trustees, officers or shareholders of the Fund individually but are binding upon only the assets and property of the Fund. With respect to any claim by SDI for recovery of any liability of the Fund arising hereunder allocated to a particular series or class, whether in accordance with the express terms hereof or otherwise, SDI shall have recourse solely against the assets of that series or class to satisfy such claim and shall have no recourse against the assets of any other series or class for such purpose. 13. This Agreement shall be construed in accordance with applicable federal law and with the laws of The Commonwealth of Massachusetts. 14. This Agreement is the entire contract between the parties relating to the subject matter hereof and supersedes all prior agreements between the parties relating to the subject matter hereof. IN WITNESS WHEREOF, the Fund and SDI have caused this Agreement to be executed as of the day and year first above written. SCUDDER INVESTORS TRUST Attest: /s/John Millette By: /s/Mark S. Casady - ------------------------ ------------------------ John Millette Mark S. Casady Secretary President Attest: SCUDDER DISTRIBUTORS, INC. /s/Philip J. Collora By: /s/Thomas V. Bruns - ------------------------ ------------------------ Philip J. Collora Thomas V. Bruns Assistant Secretary President 7 EX-99.H 7 exh9-sin.txt Exhibit (h)(9) SHAREHOLDER SERVICES AGREEMENT FOR CLASS A, CLASS B AND CLASS C SHARES AGREEMENT dated this 5th day of April 2002 by and between SCUDDER INVESTORS TRUST, a Massachusetts business trust (the "Fund"), and SCUDDER DISTRIBUTORS, INC., a Delaware corporation ("SDI"). In consideration of the mutual covenants hereinafter contained, it is hereby agreed by and between the parties hereto as follows: 1. The Fund hereby appoints SDI to provide information and administrative services for the benefit of the Fund and shareholders of Class A, Class B and Class C shares (each, a "Retail Class") of each series of the Fund. In this regard, SDI shall appoint various broker-dealer firms and other financial services or administrative firms ("Firms") to provide related services and facilities for investors in each Retail Class of the Fund ("investors"). The Firms shall provide such office space and equipment, telephone facilities, personnel or other services as may be necessary or beneficial for providing information and services to investors in each Retail Class of the Fund. Such services and assistance may include, but are not limited to, establishing and maintaining accounts and records, processing purchase and redemption transactions, answering routine inquiries regarding the Fund and its special features, assisting investors in changing dividend and investment options, account designations and addresses, and such other administrative services as the Fund or SDI may reasonably request. Firms may include affiliates of SDI. SDI may also provide some of the above services for the Fund directly. SDI accepts such appointment and agrees during the term hereof to render such services and to assume the obligations herein set forth for the compensation herein provided. SDI shall for all purposes herein provided be deemed to be an independent contractor and, unless otherwise expressly provided or authorized, shall have no authority to act for or represent the Fund in any way or otherwise be deemed an agent of the Fund. SDI, by separate agreement with the Fund, may also serve the Fund in other capacities. The services of SDI to the Fund under this Agreement are not to be deemed exclusive, and SDI shall be free to render similar services or other services to others. In carrying out its duties and responsibilities hereunder, SDI will appoint various Firms to provide administrative and other services described herein directly to or for the benefit of investors in each Retail Class of the Fund. Such Firms shall at all times be deemed to be independent contractors retained by SDI and not the Fund. SDI and not the Fund will be responsible for the payment of compensation to such Firms for such services. 2. For the administrative services and facilities described in Section 1, the Fund may pay SDI any amounts authorized for payment to SDI out of the Rule 12b-1 Plan adopted by the Fund on behalf of each Retail Class (each, a "Plan"). The current fee authorized under the Plan and the current fee schedule agreed upon between the parties is set forth on Appendix I hereto. The administrative service fee will be calculated separately for each Retail Class of each series of the Fund as an expense of each such Retail Class. For the month and year in which this Agreement becomes effective or terminates, there shall be an appropriate proration on the basis of the number of days that the Agreement is in effect during such month and year, respectively. SDI may use such payments, in its discretion, to compensate Firms who provide administrative services to the extent permitted by the Plan. The payment of fees pursuant to this Agreement, for each Retail Class, is subject to and contingent upon, the continued effectiveness of a duly adopted Rule 12b-1 Plan authorizing such payment for such class. SDI shall be contractually bound hereunder by the terms of any publicly announced fee cap or waiver of its fee or by the terms of any written document provided to the Board of Trustees of the Fund announcing a fee cap or waiver of its fee, or any limitation of the Fund's expenses, as if such fee cap, fee waiver or expense limitation were fully set forth herein. The net asset value for each Retail Class shall be calculated in accordance with the provisions of the Fund's current prospectus. On each day when net asset value is not calculated, the net asset value of a share of a Retail Class shall be deemed to be the net asset value of such a share as of the close of business on the last day on which such calculation was made for the purpose of the foregoing computations. 3. The Fund shall assume and pay all charges and expenses of its operations not specifically assumed or otherwise to be provided by SDI under this Agreement. 4. This Agreement shall become effective on the date hereof and shall continue until September 30, 2002, and shall continue from year to year thereafter only so long as such continuance is approved at least annually by a vote of a majority of the trustees, including trustees who are not interested persons of the Fund and have no direct or indirect financial interest in the operation of the Plans, this Agreement or in any other agreement related to the Plans, at a meeting called for such purpose. This Agreement shall automatically terminate in the event of its assignment and may be terminated at any time without the payment of any penalty by the Fund or by SDI on sixty (60) days' written notice to the other party. The Fund may effect termination with respect to any Retail Class of any series of the Fund by a vote of (i) a majority of the Trustees of the Fund who are not interested persons of the Fund and who have no direct or indirect financial interest in the operation of the Plan , this Agreement or in any other agreement related to the Plans or this Agreement or (ii) a majority of the outstanding voting securities of such Retail Class. Without prejudice to any other remedies of the Fund, the Fund may terminate this Agreement at any time immediately upon SDI's failure to fulfill any of its obligations hereunder. This Agreement may not be amended to materially increase the amount payable to SDI by the Fund for services hereunder with respect to a Retail Class of the Fund without a vote of a majority of the outstanding voting securities of such class. All material amendments to this Agreement must in any event be approved by a vote of a majority of the Board of Trustees of the Fund including the trustees who are not interested persons of the Fund and who have no direct or indirect financial interest in the operation of the Plans, this Agreement or in any other agreement related to the Plans or this Agreement, cast in person at a meeting called for such purpose. 2 The terms "assignment" "interested person" and "vote of a majority of the outstanding voting securities" shall have the meanings set forth in the Investment Company Act of 1940, as amended (the "1940 Act") and the rules and regulations thereunder. 5. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder shall not be thereby affected. 6. Any person authorized to direct the disposition of monies paid or payable by the Fund pursuant to the Plans, this Agreement, or any related agreement, shall provide to the Fund's Board of Trustees and the Trustees shall review, at least quarterly, a written report of the amounts so expended and the purposes for which such expenditures were made. 7. Any notice under this Agreement shall be in writing, addressed and delivered or mailed, postage prepaid, to the other party at such address as such other party may designate for the receipt of such notice. 8. All parties hereto are expressly put on notice of the Fund's Agreement and Declaration of Trust and all amendments thereto, all of which are on file with the Secretary of The Commonwealth of Massachusetts, and the limitation of shareholder and trustee liability contained therein. This Agreement has been executed by and on behalf of the Fund by its representatives as such representatives and not individually, and the obligations of the Fund thereunder are not binding upon any of the trustees, officers or shareholders of the Fund individually but are binding upon only the assets and property of the Fund. With respect to any claim by SDI for recovery of that portion of the administrative services fees (or any other liability of the Fund arising hereunder) related to a particular series and class of the Fund, whether in accordance with the express terms hereof or otherwise, SDI shall have recourse solely against the assets of such series and class to satisfy such claim and shall have no recourse against the assets of any other series and class of the Fund for such purpose. 9. This Agreement shall be construed in accordance with applicable federal law and with the laws of The Commonwealth of Massachusetts. 3 IN WITNESS WHEREOF, the Fund and SDI have caused this Agreement to be executed as of the day and year first above written. SCUDDER INVESTORS TRUST By: /s/Mark S. Casady --------------------------------------------- Name: Mark S. Casady Title: President SCUDDER DISTRIBUTORS, INC. By: /s/Thomas V. Bruns --------------------------------------------- Name: Thomas V. Bruns Title: President 4 APPENDIX I SCUDDER INVESTORS TRUST FEE SCHEDULE FOR SHAREHOLDER SERVICES AGREEMENT Pursuant to Section 2 of the Shareholder Services Agreement between Scudder Investors Trust (the "Fund") and Scudder Distributors, Inc. ("SDI"), the Fund and SDI agree that the administrative service fee will be computed at an annual rate of .25 of 1% based upon the average daily net assets with respect to which a Firm other than SDI provides administrative services and .15 of 1% based upon the average daily net assets with respect to which SDI provides administrative services. SCUDDER INVESTORS TRUST SCUDDER DISTRIBUTORS, INC. By: /s/Mark S. Casady By: /s/Thomas V. Bruns ---------------------------- ---------------------------- Name: Mark S. Casady Name: Thomas V. Bruns Title: President Title: President Dated: April 5, 2002 5 EX-99.I 8 exi-sin.txt Exhibit (i) [Dechert Letterhead] December 27, 2002 Scudder Investors Trust Two International Place Boston, MA 02110 Re: Post-Effective Amendment No. 13 to the Registration Statement on Form N-1A (SEC File No. 333-65661) Ladies and Gentlemen: Scudder Investors Trust, formerly Kemper Funds Trust, (the "Trust") is a trust created under a written Declaration of Trust dated October 14, 1998. The Declaration of Trust, as amended from time to time, is referred to as the "Declaration of Trust." The beneficial interest under the Declaration of Trust is represented by transferable shares with a par value of $.01 per share (the "Shares"). The Trustees have the powers set forth in the Declaration of Trust, subject to the terms, provisions and conditions therein provided. We are of the opinion that all legal requirements have been complied with in the creation of the Trust and that said Declaration of Trust is legal and valid. Under Article V, Section 5.4 of the Declaration of Trust, the Trustees are empowered, in their discretion, from time to time, to issue Shares for such amount and type of consideration, at such time or times and on such terms as the Trustees may deem best. Under Article V, Section 5.1, it is provided that the number of Shares authorized to be issued under the Declaration of Trust is unlimited. Under Article V, Section 5.11, the Trustees may authorize the division of Shares into two or more series and under Article V, Section 5.13, the Trustees may also authorize the division of Shares of series of the Trust into two or more classes. By written instruments, the Trustees have from time to time established various series of the Trust and various classes of the series. The Shares are currently divided into one series, Scudder S&P 500 Stock Fund (the "Fund"). Currently, the Shares of the Fund are divided into two or more classes. By vote adopted on July 24, 2002, the Trustees of the Trust authorized the President, any Vice President, the Secretary and the Treasurer, from time to time, to cause to be registered with the Securities and Exchange Commission an indefinite number of Shares of the Trust and its series and to cause such Shares to be issued and sold to the public. We understand that you are about to file with the Securities and Exchange Commission, on Form N-1A, Post-Effective Amendment No. 13 to the Trust's Registration Statement (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), in connection with the continuous offering of the Shares of the Fund. We understand that our opinion is required to be filed as an exhibit to the Registration Statement. Scudder Investors Trust December 27, 2002 Page 2 We are of the opinion that all necessary Trust action precedent to the issue of the Shares of the Fund named above has been duly taken, and that all such Shares may be legally and validly issued for cash, and when sold will be fully paid and non-assessable by the Trust upon receipt by the Trust or its agent of consideration for such Shares in accordance with the terms in the Registration Statement, subject to compliance with the Securities Act, the Investment Company Act of 1940, as amended, and applicable state laws regulating the sale of securities. We consent to your filing this opinion with the Securities and Exchange Commission as an Exhibit to Post-Effective Amendment No. 13 to the Registration Statement. Very truly yours, /s/ DECHERT EX-99.J 9 exj-sin.txt CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the references to our firm under the captions "Financial Highlights" for Scudder S&P 500 Stock Fund (one of the series comprising Scudder Investors Trust) in the Core/Index Funds Prospectus and "Independent Auditors and Reports to Shareholders" and "Financial Statements" in the Scudder Investors Trust Statement of Additional Information and to the incorporation by reference in Post-Effective Amendment Number 14 to the Registration Statement (Form N-1A, No. 333-65661) of our report dated October 16, 2002 on the financial statements and financial highlights of Scudder S&P 500 Stock Fund included in the Annual Report dated August 31, 2002. /s/ERNST & YOUNG LLP ERNST & YOUNG LLP Boston, Massachusetts December 26, 2002 EX-99.N 10 exn2-sin.txt Exhibit (n)(2) AMENDED AND RESTATED MULTI-DISTRIBUTION SYSTEM PLAN WHEREAS, each investment company adopting this Amended and Restated Multi-Distribution System Plan (each a "Fund" and collectively the "Funds") is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"); WHEREAS, Deutsche Investment Management Americas Inc. ("DeIM") serves as investment adviser and Scudder Distributors, Inc. serves as principal underwriter for each Fund; WHEREAS, each Fund has established a Multi-Distribution System enabling each Fund, as more fully reflected in its prospectus, to offer investors the option of purchasing shares (a) with a front-end sales load (which may vary among Funds) and a Rule 12b-1 plan providing for a service fee ("Class A shares"); (b) without a front-end sales load, but subject to a Contingent Deferred Sales Charge ("CDSC") (which may vary among Funds), and a Rule 12b-1 plan providing for a distribution fee and a service fee ("Class B shares"); (c) with a front-end sales load, and subject to a CDSC (which may very among Funds), and a Rule 12b-1 plan providing for a distribution fee and a service fee ("Class C shares"); (d) for certain Funds, without a front-end sales load, a CDSC, a distribution fee or a service fee ("Class I shares"); (e) for certain funds, without a front-end sales load, a CDSC, a distribution fee or a service fee ("Class S shares"); and (f) for certain funds, without a front-end sales load, a CDSC, a distribution fee or a service fee ("Institutional Class shares"); and WHEREAS, Rule 18f-3 under the 1940 Act permits open-end management investment companies to issue multiple classes of voting stock representing interests in the same portfolio notwithstanding Sections 18(f)(1) and 18(i) under the 1940 Act if, among other things, such investment companies adopt a written plan setting forth the separate arrangement and expense allocation of each class and any related conversion features or exchange privileges; NOW, THEREFORE, each Fund, wishing to be governed by Rule 18f-3 under the 1940 Act, hereby adopts this Amended and Restated Multi-Distribution System Plan as follows: 1. Each class of shares will represent interests in the same portfolio of investments of the Fund (or series thereof, as applicable), and be identical in all respects to each other class, except as set forth below. The only differences among the various classes of shares of the Fund (or series) will relate solely to: (a) different distribution fee payments associated with any Rule 12b-1 Plan for a particular class of shares and any other costs relating to implementing or amending such Rule 12b-1 Plan (including obtaining shareholder approval of such Rule 12b-1 Plan or any amendment thereto), which will be borne solely by shareholders of such classes; (b) different service fees; (c) different account minimums; (d) different class expenses, as defined in Section 2(b) below; (e) different voting rights related to any Rule 12b-1 Plan affecting a specific class of shares; (f) different exchange privileges; and (g) different conversion features. 2. (a) The gross income, realized and unrealized capital gains and losses and expenses (other than Class Expenses, as defined below) of the Fund or series thereof, as applicable, shall be allocated to each class on the basis of its net asset value relative to the net asset value of the Fund or series thereof, as applicable, pursuant to Rule 18f-3(c)(2)(ii) of the 1940 Act. Expenses to be so allocated include expenses of the Fund that are not specifically attributable to a series of the Fund, which shall first be allocated among the series of the Fund based upon their relative aggregate net assets ("Fund Expenses") and expenses of the Series not attributable to a particular class of the Series ("Series Expenses") to the extent that such expenses are not paid by DeIM pursuant to the Administrative Services Agreement between DeIM and the Fund, as amended (the "Administrative Services Agreement"). Fund Expenses may include, but are not limited to, Trustees'/Directors' fees and certain legal fees. Series Expenses include, but are not limited to, the Serieswide Administrative Fee under the Administrative Services Agreement, advisory fees and other expenses relating to the management of the series' assets. (b) Expenses attributable to one or more particular classes, which are allocated on the basis of the amount incurred on behalf of each class ("Class Expenses"), will include the Class Administrative Fee charged with respect to each class under the Administrative Services Agreement, and may also include the following types of expenses to the extent that such expenses are not paid by DeIM under the Administrative Services Agreement and to the extent that such expenses are attributable to a specific class: (a) transfer agent fees attributable to a specific class; (b) distribution fees or service fees associated with a Rule 12b-1 Plan for a particular class and any other costs relating to implementing or amending such Rule 12b-1 Plan (including obtaining shareholder approval of such Rule 12b-1 Plan or any amendment thereto); (c) printing and postage expenses related to preparing and distributing material such as shareholder reports, prospectuses and proxy materials to current shareholders of the Series; (d) registration fees (other than state filing fees imposed on a Fund-wide basis and Securities and Exchange Commission registration fees); (e) the expense of administrative personnel and services as required to support the shareholders of a specific class; (f) litigation or other legal expenses and audit or other accounting expenses relating to a specific class; (g) fees of Board members incurred as a result of issues relating to a specific class; and (h) shareholder or Board meeting costs that relate to a specific class. All expenses described in clauses (a) through (h) of this paragraph may be allocated as Class Expenses, but only if the Fund's President and Treasurer have determined, subject to review by the Board of Trustees/Directors (the "Board"), which expenses will be treated as Class Expenses, consistent with applicable legal principles under the 1940 Act and the Internal Revenue Code of 1986, as amended. In the event that a particular expense is no longer reasonably allocable by class or to a particular class, it shall be treated as a Fund Expense or Series Expense, and in the event a Fund Expense or Series Expense becomes allocable at a different level, including as a Class Expense, it shall be so allocated, subject to compliance with Rule 18f-3 and to approval or ratification by the Board. Any changes in the categories of expenses that will be allocated as Class Expenses shall be reviewed and approved by the Board, including a majority of the Board members who are not "interested persons" of the Fund or series, as defined in the 1940 Act. Any changes to such expense allocation shall be set forth in a schedule as amended from time to time by the Board, 2 including a majority of the Board members who are not "interested persons" of the Fund, which shall form a part of this Plan. 3. After a shareholder's Class B shares have been outstanding for six years, they will automatically convert to Class A shares of the Fund or series thereof, as applicable, at the relative net asset values of the two classes. Class B shares issued upon reinvestment of income and capital gain dividends and other distributions will be converted to Class A shares on a pro rata basis with the Class B shares. 4. Any conversion of shares of one class to shares of another class is subject to the continuing availability of a ruling of the Internal Revenue Service or an opinion of counsel to the effect that the conversion of shares does not constitute a taxable event under federal income tax law. Any such conversion may be suspended if such a ruling or opinion is no longer available. 5. To the extent exchanges are permitted, shares of any class of the Fund will be exchangeable with shares of the same class of another Fund, or with money market fund shares as described in the applicable prospectus. Exchanges will comply with all applicable provisions of Rule 11a-3 under the 1940 Act. For purposes of calculating the time period remaining on the conversion of Class B shares to Class A shares, Class B shares received on exchange retain their original purchase date. 6. Dividends paid by the Fund or series thereof, as applicable, as to each class of its shares, to the extent any dividends are paid, will be calculated in the same manner, at the same time, on the same day, and will be in the same amount; except that any distribution fees, service fees, shareholder servicing fees and class expenses allocated to a class will be borne exclusively by that class. 7. Any distribution arrangement of the Fund, including distribution fees, front-end sales loads and CDSCs, will comply with Section 2830 of the Conduct Rules of the National Association of Securities Dealers, Inc. 8. All material amendments to this Plan must be approved by a majority of the members of the Fund's Board, including a majority of the Board members who are not interested persons of the Fund. The Fund's Board, including a majority of the Board members who are not interested persons of the Fund, has determined that this Amended and Restated Multi-Distribution System Plan, including the expense allocation, is in the best interests of each class of the Fund or series thereof, as applicable, and the Fund or series as a whole, based on their review of information furnished to them which they deemed reasonably necessary and sufficient to evaluate the Plan. Dated: November 20, 2002 3 EX-99.P 11 exp6-sin.txt Exibit (p)(6) SCUDDER FUNDS CODE OF ETHICS -------------- As of April 5, 2002 While affirming its confidence in the integrity and good faith of all of its officers and directors (references to a "director" apply to a trustee if the Fund is a business trust), the Fund recognizes that the knowledge of present or future portfolio transactions and/or, in certain instances, the power to influence portfolio transactions which may be possessed by certain of its officers or directors, could place such individuals, if they engage in personal securities transactions, in a position where their personal interests may conflict with that of the Fund. In view of this and of the provisions of Rule 17j-1(b) under the Investment Company Act of 1940, as amended ("1940 Act"), the Fund has determined to adopt this Code of Ethics to specify and prohibit certain types of personal securities transactions that may create conflicts of interest and to establish reporting requirements and enforcement procedures. This Code is divided into three parts. The first part contains provisions applicable to officers and directors who are also either officers, directors or employees of Deutsche Investment Management Americas Inc. (or an affiliate thereof), which is the investment adviser to the Fund (the "Adviser"); the second part pertains to directors and honorary directors unaffiliated with the Adviser; and the third part contains record-keeping and other general provisions. The Adviser imposes stringent reporting requirements and restrictions on the personal securities transactions of its personnel. The Fund has determined that the high standards established by the Adviser may be appropriately applied by the Fund to its officers and those of its directors who are affiliated with the Adviser and, accordingly, may have frequent opportunities for knowledge of and, in some cases, influence over, Fund portfolio transactions. In the experience of the Fund, directors and honorary directors who are unaffiliated with the Adviser have comparatively less current knowledge and considerably less influence over specific purchases and sales of securities by the Fund. Therefore, this Code contains separate provisions applicable to unaffiliated directors. I. Rules Applicable to Fund Officers and Directors Employed by the Adviser ----------------------------------------------------------------------- or by an Affiliate thereof. -------------------------- A. Incorporation of Codes of Ethics of Zurich Scudder -------------------------------------------------- Investments, Inc. and Deutsche Asset Management ----------------------------------------------- (1) All parts of the Code of Ethics of Zurich Scudder Investments, Inc. (the "ZSI Code"), which is attached as Appendix A hereto, other than Part 5, Part 7 and Part 8, are hereby incorporated herein by reference as the Fund's Code of Ethics applicable to officers and directors of the Fund who, on or before April 5, 2002, were officers, directors or employees of ZSI or an affiliate thereof. (2) Compliance with Parts 1-4, 6, 9 and 10 of the ZSI Code is deemed to satisfy the reporting and compliance requirements of the Fund's Code. A violation of any of these Parts of the ZSI Code shall constitute a violation of the Fund's Code. (3) All parts of the Code of Ethics of Deutsche Asset Management (the "DeAM Code"), which is attached as Appendix B hereto, except Part VI, are hereby incorporated herein by reference as the Fund's Code of Ethics applicable to officers and directors of the Fund who, on or before April 5, 2002, were officers, directors or employees of DeAM or an affiliate thereof. (4) Compliance with Parts I-V and VII-VIII of DeAM's Code of Ethics is deemed to satisfy the reporting and compliance requirements of the Fund's Code. A violation of these parts of DeAM's Code of Ethics shall constitute a violation of the Fund's Code. (5) The ZSI Code and DeAM Code will be referred to herein as the Adviser's Codes of Ethics. B. Reports. ------- (1) Officers and directors of the Fund who are also officers, directors or employees of the Adviser shall file the reports required under the Adviser's Codes of Ethics, as applicable, with a Fund officer designated from time to time by the board of directors to receive such reports or with such Fund officer's designee (the "Review Officer"). (2) The Review Officer shall submit all of his/her reports with respect to his/her personal holdings and personal securities transactions to an individual designated to receive his/her reports ("Alternate Review Officer"), who shall act in all respects in the manner prescribed herein for the Review Officer. (3) A report filed with the Review Officer (or in the case of a report of the Review Officer, with the Alternate Review Officer) shall be deemed to be filed with each of the registered investment companies sponsored and/or managed by the Adviser of which the reporting individual is an officer or director. C. Review. ------ (1) The Review Officer shall compare the reported personal holdings and personal securities transactions with completed and contemplated portfolio transactions of the Fund to determine whether a violation of this Code may have occurred. Before making any determination that a violation has been committed by any person, the Review Officer shall give such person an opportunity to supply additional explanatory material. 2 (2) If the Review Officer determines that a violation of this Code has or may have occurred, he/she shall submit his/her written determination, together with the reports and any additional explanatory material provided by the individual to the Deutsche Asset Management Compliance Department (the "Compliance Department"), who shall make an independent determination of whether a violation has occurred. D. Sanctions. --------- (1) If the Compliance Department finds that a violation has occurred, it shall impose upon the individual such sanctions as deemed appropriate and, if the violation or the sanction is deemed material, shall report the violation and the sanction imposed to the board of directors of the Fund. The sanctions that may be imposed hereunder include, without limitation, reversing the improper personal securities transaction and/or disgorging any profit realized, censure, imposition of restrictions on personal trading, fines, and/or termination of employment. (2) No person shall participate in a determination of whether he/she has committed a violation of the Code or of the imposition of any sanction against himself/herself. If a securities transaction of a member of the Compliance Department is under consideration, the remaining members of the Compliance Department shall make the determination of whether a violation has occurred and any sanction. II. Rules Applicable to Unaffiliated Directors and Honorary Directors. ----------------------------------------------------------------- A. Definitions. ----------- (1) "Beneficial ownership" shall be interpreted in the same manner as it would be under Rule 16a-1 (a)(2) under the Securities Exchange Act of 1934, as amended, except that the determination of direct or indirect beneficial ownership shall apply to all securities that an unaffiliated director has or acquires. (2) "Control" shall have the same meaning as that set forth in Section 2(a)(9) of the 1940 Act. Section 2(a)(9) provides in general that "control" means the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company. (3) "Derivative" means options, futures contracts, options on futures contracts, swaps, caps and the like, where the underlying instrument is a security, a securities index, a financial indicator, or a precious metal. (4) "Disinterested director" means a director or honorary director of the Fund who is not an "interested person" of the Fund within the meaning of Section 2(a)(19) of the 1940 Act. 3 (5) "Purchase or sale of a security" includes, among other things, the writing of an option to purchase or sell a security. (6) "Security" shall have the same meaning as that set forth in Section 2(a)(36) of the 1940 Act (in effect, all securities), except that it shall not include direct obligations of the United States Government, bankers' acceptances, bank certificates of deposit, commercial paper, other high quality short-term debt instruments, including repurchase agreements, and shares issued by registered open-end investment companies. The term "security" includes any separate security which is convertible into, exchangeable for or which carries a right to purchase a security and also includes derivatives. (7) "Unaffiliated director" means, for purposes of this Code, a director or honorary director of the Fund who is not a director, officer or employee of the Adviser, DeAM or an affiliate thereof. B. Prohibited Purchases and Sales. ------------------------------ No unaffiliated director shall purchase or sell, directly or indirectly, any security with respect to a security in which he/she has or by reason of such transaction acquires, any direct or indirect beneficial ownership and which to his/her actual knowledge at the time of such purchase or sale: (1) is being considered for purchase or sale by the Fund or the Adviser, or was being so considered, within the most recent 15 days; or (2) is being purchased or sold by the Fund or was purchased or sold by the Fund within the most recent 15 days. A security will be deemed "being considered for purchase or sale" when a recommendation formulated by the Adviser to purchase or sell a security has been communicated to a Fund portfolio manager. C. Preclearance. ------------ Unaffiliated directors are not generally required to preclear their personal trades. In the event any such director has, however, within the 15 days prior to the personal trade he/she is considering, learned about a specific security or company from a Fund officer or other person in a position to know about contemplated Fund transactions, preclearance with a Pre-Clearing Officer is required prior to trading such security or in any other security issued by such company. D. Exempted Transactions. --------------------- The Prohibitions of Section IIB and the procedures designated in Section IIC of this Code shall not apply to: 4 (1) purchases or sales effected in any account over which the unaffiliated director has no direct or indirect influence or control; (2) purchases or sales which are non-volitional on the part of either the unaffiliated director or the Fund (that is, purchases which are part of an automatic dividend reinvestment plan, demutualizations, stock splits, stock gained from mergers or spin-offs, automatic tender offers or stock dividends); (3) purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities to the extent such rights were acquired from such issuer (as opposed to the purchase or sale of such rights or the sale of securities received upon exercise of rights); (4) purchases or sales of securities which are not permitted to be held or acquired by the Fund, provided that the securities that are the subject of the transaction are not convertible or exercisable into securities which are permitted to be held or acquired by the Fund; and (5) purchases or sales previously approved and confirmed in writing by a Pre-Clearing Officer appointed from time to time by the Board for this purpose. If in doubt, directors should discuss their situations with the Review Officer prior to relying on one of the exceptions listed above. E. Reporting. --------- (1) Unaffiliated but not Disinterested Directors. Every unaffiliated director who is not a disinterested director shall file with the Review Officer, or his/her designee, a quarterly transaction report containing the information described in Section IIE(3) of this Code with respect to transactions in any security in which such person has, or by reason of such transaction acquires, any direct or indirect beneficial ownership, whether or not one of the exemptions listed in IID applies; provided, however, that no person shall be required to make a report with respect to (a) non-volitional transactions of the type described above or (b) transactions effected for any account over which such person does not have any direct or indirect influence or control. Each such director shall also file with the Review Officer, or his/her designee, the holdings reports containing the information described in Section IIE(6) below. (2) Disinterested Directors. Disinterested directors do not need to report personal security transactions or personal holdings. However, every disinterested director shall file with the Review Officer, or his/her designee, a quarterly transaction report containing the information described in Section IIE(3) of this Code with respect to transactions in any security in which such disinterested director has, or by reason of such transaction acquires, any direct or indirect beneficial ownership, whether or not one of the exemptions listed in Section IID applies, if such director at the time of that transaction, knew or, in the ordinary 5 course of fulfilling his/her official duties as a director of the Fund, should have known that, during the 15-day period immediately preceding or after the date of the transaction by the director: (i) such security was purchased or sold by the Fund; or (ii) such security was being considered for purchase or sale by the Fund or the Adviser or DeAM; provided, however, that in any case, a disinterested director shall not be required to make a report with respect to (a) non-volitional transactions of the type described above or (b) transactions effected for any account over which such person does not have any direct or indirect influence or control. (3) Every quarterly transaction report shall indicate the date it was submitted and be made not later than 10 days after the end of the calendar quarter in which the transaction to which the report relates was effected. Attachment A shall be used to report transactions required to be reported pursuant hereto. (4) Every report concerning a purchase or sale, including those prohibited under Section IIB hereof, with respect to which the reporting person relies upon one of the exemptions provided in Section IID shall contain a brief statement of the exemption relied upon and the circumstances of the transaction. (5) Within ten (10) days of commencing service as a director, each unaffiliated director who is not disinterested must report all holdings of securities in which he/she has beneficial ownership (use Attachment B). These directors must file such reports even if they have no holdings. (6) Any transaction or holdings report may contain a statement that the report shall not be construed as an admission by the person making such report that he/she has any direct or indirect beneficial ownership in the security to which the report relates. (7) Annually, all directors shall also submit an "Annual Acknowledgement of Obligations Under the Fund's Code of Ethics" (use Attachment C) within 30 days of such report being requested from a director by the Review Officer or his/her designee. F. Review. ------ (1) The Review Officer or his/her designee shall compare the reported personal holdings and personal securities transactions with completed and contemplated portfolio transactions of the Fund to determine whether any transactions ("Reviewable Transactions") listed in Section IIB may have occurred. (2) If a Reviewable Transaction may have occurred, the Review Officer shall submit the report and pertinent information concerning completed or contemplated portfolio transactions of the Fund to counsel for the unaffiliated directors and, in the event the unaffiliated directors do not have their own counsel, 6 counsel to the Fund. Such counsel shall determine whether a violation of this Code may have occurred. Before making any determination that a violation has been committed by an unaffiliated director, such counsel shall give such person an opportunity to supply additional information regarding the transaction in question. G. Sanctions. --------- If such counsel determines that a violation of this Code has occurred, such counsel shall so advise a committee consisting of the unaffiliated directors, other than the person whose transaction is under consideration, and shall provide the committee with the report, the record of pertinent actual or contemplated portfolio transactions of the Fund and any additional material supplied by such person. The committee, at its option, shall either impose such sanction as it deems appropriate or refer the matter to the board of directors, which shall impose such sanctions as are deemed appropriate. The sanctions that may be imposed hereunder include, without limitation, reversing the improper personal securities transaction and/or disgorging any profit realized, censure, imposition of restrictions on personal trading and fines. III. Miscellaneous. ------------- A. Amendments to Fund's and Adviser's Codes of Ethics. -------------------------------------------------- Any material amendments to this Code shall be approved by the board of directors of the Fund. Any amendment to the parts of the Adviser's Codes of Ethics incorporated herein shall be deemed an amendment to Section IA of this Code provided that any material amendment to any part of the Adviser's Codes of Ethics incorporated herein must be approved by the board of directors of the Fund within six (6) months of the change. B. Annual Report. -------------- The Review Officer, his/her designee or the Alternate Review Officer shall report annually to the board of directors concerning issues arising under this Code or existing procedures and any material changes to those procedures, as well as any material violations and sanctions imposed during the past year which related to the Fund. Such report shall be in writing and include any certification required by law. Such report may be made jointly with the report provided by the Adviser pursuant to the Adviser's Code or, if made separately, need not duplicate information provided in the Adviser's report. C. Records. ------- The Fund shall maintain records in the manner and to the extent set forth below, which records may be maintained on microfilm or such other medium permitted under Rule 31a-2(f) under the 1940 Act and shall be made available for examination by representatives of the Securities and Exchange Commission. 7 (1) A copy of this Code and any other code which is, or at any time within the past five years has been, in effect shall be preserved in an easily accessible place; (2) A record of any violation of such code(s) of ethics and of any action taken as a result of such violation shall be preserved in an easily accessible place for a period of not less than five years following the end of the fiscal year in which the violation occurs; (3) A copy of each report made by an officer or director pursuant to such code(s) of ethics, including any information provided in lieu of such reports, shall be preserved for a period of not less than five years from the end of the fiscal year in which it is made or the information is provided, the first two years in an easily accessible place; (4) A list of all persons who are, or within the past five years have been, required to make reports pursuant to such code(s) of ethics shall be maintained in an easily accessible place; (5) A list of names of all persons who are, or within the past five years, have been responsible for reviewing any transaction or holdings reports filed pursuant to such code(s) shall be maintained in an easily accessible place; and (6) A copy of each report made to the board of directors pursuant to such code(s) shall be maintained for at least five (5) years after the end of the fiscal year in which it was made, the first two (2) years in an easily accessible place. (7) A record of any decision, and the reasons supporting the decision, to approve the acquisition by Investment Personnel (as such term is defined in Rule 17j-1(a)(7)) of securities under paragraph (e) of Rule 17j-1 for at least five (5) years after the end of the fiscal year in which the approval is granted. D. Confidentiality. --------------- All reports of securities transactions and any other information filed with the Fund pursuant to this Code shall be treated as confidential, except as otherwise provided herein. E. Interpretation of Provisions. ---------------------------- The board of directors may from time to time adopt such interpretations of this Code as it deems appropriate. 8 Attachment A CONFIDENTIAL QUARTERLY PERSONAL TRADING REPORT , 20 ---------------------------------------------- ------ [quarter & date] - ---------------------------------- Print Name The form on the next page discloses for the quarterly period above all acquisitions and dispositions noted in the definition of "Reportable Transactions" below. --------------------------------------------- Signature Date *Reportable transactions are all acquisitions or dispositions (e.g., exercise of rights, receipt of a gift), regardless of size, in securities or derivatives (including futures & options), except transactions in (a) direct obligations of the U.S. Government, (b) bankers' acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements and (c) shares of registered open-end investment companies (mutual funds). Non-volitional transactions are not required to be reported. The following types of transactions will be deemed non-volitional: stock splits, automatic tender offers, stock gained from mergers or spin-offs, stock dividends, demutualizations and purchases which are part of an automatic dividend reinvestment plan.
SALES OR OTHER DISPOSITIONS - -------------- ------ -------- ----------- ------ -------- --------------- -------------- -------- ---------- --------- ----------- Security Type Units Ticker/ Issuer/ Trade Price Principal Broker/ Acct # Interest Maturity Gift/ Cusip Company Date Amount Dealer/Bank(1) Rate(2) Date(2) AIP/NBI(3) ============== ====== ======== =========== ====== ======== =============== ============== ======== ========== ========= =========== - -------------- ------ -------- ----------- ------ -------- --------------- -------------- -------- ---------- --------- ----------- - -------------- ------ -------- ----------- ------ -------- --------------- -------------- -------- ---------- --------- ----------- - -------------- ------ -------- ----------- ------ -------- --------------- -------------- -------- ---------- --------- ----------- - -------------- ------ -------- ----------- ------ -------- --------------- -------------- -------- ---------- --------- ----------- - -------------- ------ -------- ----------- ------ -------- --------------- -------------- -------- ---------- --------- ----------- - -------------- ------ -------- ----------- ------ -------- --------------- -------------- -------- ---------- --------- ----------- - -------------- ------ -------- ----------- ------ -------- --------------- -------------- -------- ---------- --------- ----------- PURCHASES OR OTHER ACQUISITIONS - -------------- ----- --------- ----------- ------ -------- --------------- -------------- -------- ---------- --------- ----------- Security Type Units Ticker/ Issuer/ Trade Price Principal Broker/ Acct # Interest Maturity Gift/ Cusip Company Date Amount Dealer/Bank(1) Rate(2) Date(2) AIP/NBI(3) ============== ===== ========= =========== ====== ======== =============== ============== ======== ========== ========= =========== - -------------- ----- --------- ----------- ------ -------- --------------- -------------- -------- ---------- --------- ----------- - -------------- ----- --------- ----------- ------ -------- --------------- -------------- -------- ---------- --------- ----------- - -------------- ----- --------- ----------- ------ -------- --------------- -------------- -------- ---------- --------- ----------- - -------------- ----- --------- ----------- ------ -------- --------------- -------------- -------- ---------- --------- ----------- - -------------- ----- --------- ----------- ------ -------- --------------- -------------- -------- ---------- --------- ----------- - -------------- ----- --------- ----------- ------ -------- --------------- -------------- -------- ---------- --------- ----------- - -------------- ----- --------- ----------- ------ -------- --------------- -------------- -------- ---------- --------- ----------- DID YOU ESTABLISH ANY INVESTMENT ACCOUNTS (I.E., BROKER/DEALER/BANK) THIS QUARTER? IF SO INSERT THE FOLLOWING INFORMATION BELOW: Name of Broker, Dealer or Bank where account was established ----------------------------------------------------------------------- Account Number -------------------------------------------------------------------------------------------- Date Account was opened -----------------------------------------------------------------------------------
FOOTNOTES (1) If you have made a direct issuer trade (i.e. traded directly with the company) enter N/A in this column. (2) For Fixed Income securities only. (3) Indicate here if transaction is a Gift, Automatic Investment Plan (AIP), or No Beneficial Ownership (NBI-you claim that you do not have any direct or indirect beneficial ownership in such transactions). NOTE: Use additional forms if necessary to report all transactions. Attachment B PERSONAL SECURITIES HOLDINGS REPORT Return To: Glory Ekpe - 345 Park Avenue, NY, NY 10154
- ------------------------------------------------------------------------------------------------------------------- Name____________________________________________ (print) - ---------------- ---------------- ------------- -------------- ---------------- -------------- --------------- -------------------- Symbol Issuer/Company Security Type Principal Amt. Number of Name of Account Number Name in which (or CUSIP) Shares Broker/Dealer Security/Acct. or Bank is held - ---------------- ---------------- ------------- -------------- ---------------- -------------- --------------- -------------------- - ---------------- ---------------- ------------- -------------- ---------------- -------------- --------------- -------------------- - ---------------- ---------------- ------------- -------------- ---------------- -------------- --------------- -------------------- - ---------------- ---------------- ------------- -------------- ---------------- -------------- --------------- -------------------- - ---------------- ---------------- ------------- -------------- ---------------- -------------- --------------- -------------------- - ---------------- ---------------- ------------- -------------- ---------------- -------------- --------------- -------------------- - ---------------- ---------------- ------------- -------------- ---------------- -------------- --------------- --------------------
The undersigned does not by this report admit that he/she has any direct or indirect beneficial ownership in the securities listed. / / I certify that the securities listed above and/or the holdings statements attached reflect all my reportable securities holdings as of a date not earlier than 30 days prior to the date of my submission of this Report. / /I currently have no reportable securities holdings to report. Not all securities are required to be reported. Reportable Securities holdings do not include direct obligations of the U.S. Government, shares of open-end investment companies (mutual funds), bankers' acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements. ------------------------- -------------- Signature Date ATTACHMENT C Return Completed Form to: Glory Ekpe/345 Park Avenue, NY, NY, 10154 Annual Acknowledgement of Obligations Under the Fund's Code of Ethics - ------------------------------------------- Name (print clearly) I. CODE OF ETHICS I understand that my signature below means that I have read/reread and understand the Fund's Code of Ethics. Further, I have reported all personal holdings and transactions required to be reported pursuant to the requirements of the Code and have complied with the provisions of the Code of Ethics applicable to me over the past year and will continue to comply with such provisions. II. CHECK THE APPROPRIATE STATEMENTS: (a) [ ] I am a Disinterested Director and thus not required to provide duplicate account statements or disclose the existence of brokerage accounts; or (b) [ ] I am an Unaffiliated but not a Disinterested Director: (1) The following is a complete list of all broker, dealer or bank accounts that contain holdings wherein I have beneficial ownership: Account Number Broker Name ------------------------------------- ------------------------------ ------------------------------------- ------------------------------ ------------------------------------- ------------------------------ and (2) [ ] I have arranged for provision of a complete report of all my holdings information in the form of duplicate account statements for all of my covered accounts. (Holdings of direct obligations of the U.S. Government, shares of open-end investment companies (mutual funds), bankers' acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements, are not required to be reported); or (3) [ ] I have not arranged for provision of all of my holdings, so I have submitted a supplemental report of all current holdings concurrently herewith (Use Attachment B to list additional holdings not on file). - ------------------------------- -------------------------- Signature Date EX-99.P 12 exp7-sin.txt Exhibit (p)(7) DEUTSCHE ASSET MANAGEMENT CODE OF ETHICS A Member of the Deutsche Bank Group [LOGO] DEUTSCHE ASSET MANAGEMENT - U.S. CODE OF ETHICS - -------------------------------------------------------------------------------- I. Overview -------- This Code of Ethics ("Code") sets forth the specialized rules for business conduct and guidelines for the personal investing activities that generally are required of employees involved in the United States investment management areas of the Deutsche Bank Group and its affiliates (collectively "Deutsche Asset Management" or "DeAM").^1 The provisions of this Code shall apply to all DeAM employees, as categorized in the Definition Section on the next page and such other employees as the Compliance Department ("Compliance")^2 may determine from time to time. This Code supplements the Deutsche Bank Code of Professional Conduct and Global Master Compliance Manual (available at http://compliance.cc.intranet.db.com/ on the intranet). Each Employee must observe those policies, as well as abide by the additional principles and rules set forth in this Code, and any other applicable legal vehicle or division specific policies and obligations. II. General Rule ------------ DeAM employees will, in varying degrees, participate in or be aware of fiduciary and investment services provided to registered investment companies, institutional investment clients, employee benefit trusts and other types of investment advisory accounts. The fiduciary relationship mandates adherence to the highest standards of conduct and integrity. We will at all times conduct ourselves with integrity and distinction, putting first the interests of our clients. Accordingly, personnel acting in a fiduciary capacity must carry out their duties for the exclusive benefit of the client accounts. Consistent with this fiduciary duty, the interests of DeAM clients take priority over the investment desires of DeAM and DeAM personnel. All DeAM personnel must conduct themselves in a manner consistent with the requirements and procedures set forth in this Code. - ---------------------------------- ^1 Deutsche Asset Management is the marketing name in the US for the asset management activities of Deutsche Bank AG, Deutsche Bank Trust Company Americas (formerly Bankers Trust Co.), Deutsche Bank Securities Inc., Deutsche Asset Management Inc., Deutsche Asset Management Investment Services Ltd., Deutsche Investment Management Americas Inc. and Scudder Trust Company. ^2 "Compliance" refers to the DB Americas centralized Compliance Unit (generally referred to herein as "Central Compliance," and/or its unit specifically designated to the DeAM business unit: "DeAM Compliance." |_| There must be no conflict, or appearance of conflict, between the self-interest of any employee and the responsibility of that employee to Deutsche Bank, its shareholders or its clients.^3 |_| Employees must never improperly use their position with Deutsche Bank for personal or private gain to themselves, their family or any other person. DeAM employees may also be required to comply with other policies imposing separate requirements. Specifically, they may be subject to laws or regulations that impose restrictions with respect to personal securities transactions, including, but not limited to, Section 17(j) and Rule 17j-1 under the Investment Company Act of 1940 (the "Act"). The purpose of this Code of Ethics is to ensure that, in connection with his or her personal trading, no Access Person shall conduct any of the following acts upon a client account: o To employ any device, scheme or artifice to defraud; o To make any untrue statement of a material fact, or omit to state a material fact necessary in order to make the statement not misleading; o To engage in any act, practice or course of business that operates or would operate as a fraud or deceit; or o To engage in any manipulative practice. III. Definitions ----------- A. "Investment Personnel" shall mean and include: Portfolio Managers, traders, analysts (and other employees who work directly with Portfolio Managers in an assistant capacity). As those responsible for making investment decisions (or participating in such decisions) in client accounts or providing information or advice to Portfolio Managers or otherwise helping to execute or implement the Portfolio Managers' recommendations, Investment Personnel occupy a comparatively sensitive position, and thus additional rules outlined herein apply to such individuals. B. "Access Person" shall mean: (i) Officers and directors of DeAM entities and DeAM-sponsored investment companies as well as employees of these entities who have access to timely information relating to investment management activities, research and/or client portfolio holdings as well as those who in the course of their job regularly receive access to client trading activity (this would generally include members of the Investment Operations and Mutual Fund Accounting groups). Also included here are also natural persons in a control relationship (as defined in Section 2(a)(9) of the Act) to DeAM who obtain information concerning investment recommendations made to any client account. - ---------------------------------- ^3 The rules herein cannot anticipate all situations which may involve a possible conflict of interest. If an employee becomes aware of a personal interest that is, or might be, in conflict with the interest of a client, that person should disclose the potential conflict to DeAM Compliance or Legal prior to executing any such transaction. 2 (ii) Any other personnel with responsibilities related to the asset management business or frequent interaction with Access Persons or Investment Personnel as determined by Compliance (e.g., Legal, Compliance, Risk, Operations, Sales & Marketing, as well as certain long-term temporary employees and consultants). C. "Non-Access Person" shall mean and include: DeAM personnel who are not defined in Section III A or B above, and who have access to neither client trading activity nor recommendations made in relation to any client account. Examples include employees in the Transfer Agent function in Kansas City and the Call Center in Chicago. D. "Employees" is a general term which shall include all DeAM employees, including Investment Personnel, Access Persons and Non-Access Persons as well as those non-DeAM employees who are subject to this Code of Ethics (see III.B.(ii) above). E. "Accounts" shall mean all securities accounts, whether brokerage or otherwise, and securities held directly outside of accounts, but shall not include open-end mutual fund accounts in which securities transactions cannot be effected. F. "Employee Related Account" of any person subject to this Code shall mean: (i) The Employee's own Accounts; (ii) The Employee's spouse's Accounts and the Accounts of minor children and other members of the household (whether by marriage or similarly committed status) living in the Employee's home; (iii) Accounts in which the Employee, his/her spouse/domestic partner, minor children or other persons living in their home have a beneficial interest (i.e., share in the profits even if there is no influence on voting or disposition of the shares); and (iv) Accounts (including corporate Accounts and trust Accounts) over which the Employee or his/her spouse/domestic partner exercises investment discretion or direct or indirect influence or control. NOTE: ANY PERSON SUBJECT TO THIS CODE IS RESPONSIBLE FOR COMPLIANCE WITH THESE RULES WITH RESPECT TO ANY EMPLOYEE RELATED ACCOUNT, AS APPLICABLE. G. "Securities" shall include equity or debt securities, derivatives of securities (such as options, warrants, and ADRs), closed-end mutual funds, futures, commodities and similar instruments, but do not include: (i) Shares of open-end mutual funds (unless otherwise directed by Compliance); (ii) Direct obligations of the United States government; or (iii) Bankers' acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements. 3 IV. Restrictions ------------ A. General (i) The Basic Policy: Employees have a personal obligation to conduct their investing activities and related securities transactions lawfully and in a manner that avoids actual or potential conflicts between their own interests and the interests of Deutsche Asset Management and its clients. Employees must carefully consider the nature of their DeAM responsibilities - and the type of information that he or she might be deemed to possess in light of any particular securities transaction - before engaging in that transaction. (ii) Material Nonpublic Information: Employees in possession of material nonpublic information about or affecting securities, or their issuer, are prohibited from buying or selling such securities, or advising any other person to buy or sell such securities. (iii) Corporate and Departmental Restricted Lists: Employees are not permitted to buy or sell any securities that are included on the Corporate Restricted List (available on the intranet) and/or other applicable departmental restricted lists. (iv) "Frontrunning:" Employees are prohibited from buying or selling securities or other instruments in their Employee Related Accounts so as to benefit from the employee's knowledge of the Firm's or a client's trading positions, plans or strategies, or forthcoming research recommendations. B. Specific Blackout Period Restrictions (i) Investment Personnel and Access Persons shall not knowingly effect the purchase or sale of a Security for an Employee Related Account on a day during which any client account has a "buy" or "sell" order for the same Security, until that order is executed or withdrawn; (ii) Investment Personnel shall not effect the purchase or sale of a Security for an Employee Related Account within seven calendar days before or seven calendar days after the same Security is traded (or contemplated to be traded) by a client account with which the individual is associated. (iii) Investment Personnel and other persons with real time access to "GERP"^4 shall not effect the purchase or sale of a Security for an Employee Related Account within seven calendar days before or seven calendar days after the same Security (a) is upgraded or downgraded; (b) is added to/deleted from or has its - ---------------------------------- ^4 GERP (Global Equity Research Portal) is a web-based application (Active Equity businesses) allowing for the publishing and dissemination of research and model portfolios in real-time by the Global Sector Teams, Portfolio Selection Teams, Local Research Teams, designated PIC/PB users and Small Cap Teams to Portfolio Managers, who will use GERP for investment recommendations and portfolio construction for clients. 4 weighting changed in the "Model" Portfolio; or (c) has research coverage initiated. (iv) Employees must always act to avoid any actual or potential conflict of interest between their DeAM duties and responsibilities, and their personal investment activities. To avoid potential conflicts, absent specific written approval from their Managing Officer^5 and Compliance, Employees should not personally invest in securities issued by companies with which they have significant dealings on behalf of DeAM, or in investment vehicles sponsored by them. Additional rules that apply to securities transactions by Employees, including the requirement for Employees to pre-clear personal securities transactions and rules regarding how Employee Related Accounts must be maintained, are described in more detail later in this Code. (v) Deutsche Bank Securities: During certain times of the year, all Deutsche Bank employees are prohibited from conducting transactions in the equity and debt securities of Deutsche Bank, which affect their beneficial interest in the firm. Central Compliance generally imposes these "blackout" periods around the fiscal reporting of corporate earnings. Blackouts typically begin two days prior to the expected quarterly or annual earnings announcement, and end after earnings are released publicly. Additional restricted periods may be required for certain individuals and events, and Compliance will announce when such additional restricted periods are in effect. (vi) Exceptions to Blackout Periods (above items i, ii, and iii only) The following Securities are exempt from the specified blackout periods: |_| Securities that are within the S&P 100 Index; |_| Futures and options transactions on indexes; |_| ETF's (Exchange Traded Funds - e.g., SPDRs or "Spiders" (S&P 500 Index), DIAs or "Diamonds" (Dow Jones Industrial Average), etc.); |_| Shares purchased under an issuer sponsored Dividend Reinvestment Plan ("DRIPs"), other than optional purchases; |_| To the extent acquired from the issuer, purchases effected upon the exercise of rights issued pro rata to holders of a class of securities; and |_| Securities purchased under an employer sponsored stock purchase plan or upon the exercise of employee stock options. Note: Transactions in Securities in derivative instruments, including warrants, convertible Securities, futures and options, etc. shall be restricted in the same manner as the underlying Security. - ---------------------------------- ^5 For purposes of this policy, "Managing Officer" is defined as an officer of at least the Managing Director level to whom the employee directly or indirectly reports, who is in charge of the employee's unit (e.g., a Department Head, Division Head, Function Head, Group Head, General Manager, etc). 5 C. New Issues (IPOs) Investment Personnel, Access Persons and Non-Access Persons are prohibited from purchasing or subscribing for Securities pursuant to an initial public offering. This prohibition applies even if Deutsche Bank (or any affiliate of Deutsche Bank) has no underwriting role and/or is not involved with the distribution. D. Short-Term Trading Employees must always conduct their personal trading activities lawfully, properly and responsibly, and are encouraged to adopt long-term investment strategies that are consistent with their financial resources and objectives. Deutsche Bank generally discourages short-term trading strategies, and employees are cautioned that such strategies may inherently carry a higher risk of regulatory and other scrutiny. In any event, excessive or inappropriate trading that interferes with job performance, or compromises the duty that Deutsche Bank owes to its clients and shareholders, will not be tolerated. Employees are prohibited from transacting in the purchase and sale, or sale and purchase, of the same (or equivalent) Securities within 30 calendar days. Therefore, for purposes of this section, the assumption is a last-in, first out order of transaction in a particular Security. The following Securities are exempted from this restriction: |_| Futures and options transactions on indexes; |_| ETF's (Exchange Traded Funds - e.g., SPDRs or "Spiders" (S&P 500 Index), DIAs or "Diamonds" (Dow Jones Industrial Average), etc.); |_| Shares purchased under an issuer sponsored Dividend Reinvestment Plan ("DRIPs"), other than optional purchases; |_| To the extent acquired from the issuer, purchases effected upon the exercise of rights issued pro rata to holders of a class of securities; |_| Securities purchased under an employer sponsored stock purchase plan; and |_| Securities pre-cleared and purchased with a specific stop-limit provision attached. E. Restricted List All Deutsche Bank employees are prohibited from buying or selling any securities that are included on the Corporate Restricted List (available on the intranet at: http://cct-grl-prd.svc.btco.com/corp/ cct/grl/grl_init.htm or the "Americas Portal" (http://americasportal. cc.db.com) listed under "Quick Links.") and/or other applicable departmental restricted lists. Please see Restricted List: Overview and Instructions. F. Private Placements Prior to effecting a transaction in private securities (i.e., Securities not requiring registration with the Securities and Exchange Commission, and sold directly to the investor), all Employees must first, in accordance with Deutsche Bank policy (attached in the Appendix), obtain the approval of his/her supervisor and then pre-clear the transaction with the Central Compliance Department, including completing the questionnaire (also in the Appendix). Any person who has previously purchased privately-placed Securities 6 must disclose such purchases to the Compliance Department before he or she participates in a Fund's or an advisory client's subsequent consideration of an investment in the Securities of the same or a related issuer. V. Compliance Procedures --------------------- A. Designated Brokerage Accounts All Employees must obtain the explicit permission of the Central Compliance Department prior to opening a new Employee Related Account. Upon joining Deutsche Bank, new Employees are required to disclose all of their Employee Related Accounts (as previously defined) to Central Compliance and must carry out the instructions provided to conform such accounts, if necessary, to the Firm's policies. Under no circumstance is an Employee permitted to open or maintain any Employee Related Account that is undisclosed to Compliance. Also, the policies, procedures and rules described throughout this Code apply to all Employee Related Accounts. Accordingly, all Employees are required to open and maintain their Employee Related Accounts in accordance with the Deutsche Bank Compliance Policies and Procedures (see Appendix): Employee/Employee-Related Trading, Procedures for Establishing Brokerage Accounts and Procedures for Pre-Clearing Personal Trades, including directing their brokers to supply duplicate copies of transaction confirmations and periodic account statements, as well as additional division-specific requirements, if any. B. Pre-Clearance Proposed Securities transactions must be pre-cleared with the Central Compliance Department (and approved by a Supervisor) in accordance with the Deutsche Bank Employee/Employee-Related Trading Policy (attached as an Appendix to this Code) via the intranet based Employee Trade Request ("ETR") system prior to their being placed with the broker. Such approvals are good only for the day on which they are issued. Employees are personally responsible for ensuring that the proposed transaction does not violate the Firm's policies or applicable securities laws and regulations by virtue of the employee's Deutsche Bank responsibilities or information he or she may possess about the securities or their issuer. The following Securities are exempted from the preclearance requirement: |_| Futures and options transactions on indexes; |_| ETF's (Exchange Traded Funds - e.g., SPDRs or "Spiders" (S&P 500 Index), DIAs or "Diamonds" (Dow Jones Industrial Average), etc.); |_| Shares purchased under an issuer sponsored Dividend Reinvestment Plan ("DRIPs"), other than optional purchases; |_| Accounts expressly exempted by Central Compliance which are managed under the exclusive direction of an outside money manager; |_| Securities pre-cleared and purchased with a specific stop-limit provision attached do not require additional preclearance prior to execution. |_| To the extent acquired from the issuer, purchases effected upon the exercise of rights issued pro rata to holders of a class of securities; and |_| Securities purchased under an employer sponsored stock purchase plan. 7 C. Reporting Requirements (i) Disclosure of Employee Related Accounts/Provision of Statements As stated in section V.A. above, upon joining Deutsche Bank, new employees are required to disclose all of their Employee Related Accounts to Central Compliance, and must carry out the instructions provided to conform such accounts, if necessary, to Deutsche Bank policies. In addition, pursuant to Rule 17j-1 of the Act, no later than ten days after an individual becomes an Access Person (i.e., joining/transferring into DeAM, etc.), he or she must also complete and return an "Initial Holdings Report" (see Appendix) to DeAM Compliance. (ii) Quarterly Personal Securities Trading Reports ("PSTs") Pursuant to Rule 17j-1 of the Act, within ten (10) days of the end of each calendar quarter, all Access Persons must sign and return to DeAM Compliance a PST report, unless exempted by a division-specific requirement, if any. All PSTs that have reportable personal Securities transactions for the quarter will be reviewed by the appropriate supervisory and/or Compliance person. (iii) Annual Holdings Report Once each year, at a date to be specified by DeAM Compliance, each Employee must provide to DeAM Compliance an Annual Holdings Report (see Appendix) current as of a date not more than 30 days prior to the date of the report. D. Confirmation of Compliance with Policies Annually, each Employee is required to sign a statement acknowledging that he or she has received this Code, as amended or updated, and confirm his or her adherence to it. Complying with this Code, and truthfully completing the Acknowledgment is the obligation of each Employee. Failure to perform this obligation may result in disciplinary action, including dismissal, as well as possible civil and criminal penalties. VI. Other Procedures/Restrictions ----------------------------- A. Service on Boards of Directors/Outside Business Affiliations Employees may not maintain outside business affiliations (e.g., officer or director, governor, trustee, part-time employment, etc.) without the prior written approval of the appropriate senior officer of their respective business units after consultation with Compliance (see request form in the Appendix), and disclosure to the Office of the Secretary as required. Service on Boards of publicly traded companies should be limited to a small number of instances. However, such service may be undertaken based upon a determination that these activities are consistent with the interests of DeAM and its clients. Employees serving as directors will not be permitted to participate in the process of making investment decisions on behalf of clients which involve the subject company. 8 B. Executorships The duties of an executor are often arduous, time consuming and, to a considerable extent, foreign to our business. As a general rule, DeAM discourages acceptance of executorships by members of the organization. However, business considerations or family relationships may make it desirable to accept executorships under certain wills. In all cases (other than when acting as Executor for one's own spouse, or parent, or spouse's parent), it is necessary for the individual to have the written authorization of the firm to act as an executor. All such existing or prospective relationships should be reported in writing. When DeAM Employees accept executorships under clients' wills, the organization considers these individuals to be acting for DeAM and that fees received for executors' services rendered while associated with the firm are exclusively DeAM income. In such instances, the firm will indemnify the individual, and the individual will be required at the time of qualifying as executor to make a written assignment to the firm of any executor's fees due under such executorship. Copies of this assignment and DeAM's authorization to act as executor (see Appendix) are to be filed in the client's file. Generally speaking, it is not desirable for members of the organization to accept executorships under the wills of persons other than a client, a spouse, or a parent. Authorization may be given in other situations assuming that arrangements for the anticipated workload can be made without undue interference with the individual's responsibilities to DeAM. For example, this may require the employment of an agent to handle the large amount of detail which is usually involved. In such a case, the firm would expect the individual to retain the commission. There may be other exceptions which will be determined based upon the facts of each case. C. Trusteeships It can be desirable for members of the organization to act individually as trustees for clients' trusts. Such relationships are not inconsistent with the nature of our business. As a general rule, DeAM does not accept trustee's commissions where it acts as investment counsel. As in the case of most executorships, all trusteeships must have the written approval of the Firm (see request form in the Appendix). It is our standard practice to indemnify those individuals who act as trustees for clients' trusts at the request of the Firm. In this connection, the individual member of the organization acting as a trustee will be asked to agree not to claim or accept trustee's commissions. This applies to trusts which employ DeAM as investment counsel or those which are invested in one or more of the Funds administered by DeAM. It is recognized that individuals may be asked to serve as trustees of trusts which do not employ DeAM. The Firm will normally authorize individuals to act as trustees for trusts of their immediate family. Other non-client trusteeships can conflict with our clients' interests so that acceptance of such trusteeships will be authorized only in unusual circumstances. 9 D. Custodianships and Powers of Attorney It is expected that most custodianships will be for minors of an individual's immediate family. These will be considered as automatically authorized and do not require written approval of the Firm. However, the written approval of DeAM (see Appendix) is required for all other custodianships. Entrustment with a Power of Attorney to execute Securities transactions on behalf of another requires written approval of the Firm. Authorization will only be granted if DeAM believes such a role will not be unduly time consuming or create conflicts of interest. E. Gifts (i) Accepting Gifts Employees are prohibited from soliciting any personal payment or gift to influence, support or reward any service, transaction or business involving Deutsche Bank, or that appears to be made or offered in anticipation of any future service, transaction or business opportunity. A payment or gift includes any fee, compensation, remuneration or thing of value.^6 Subject to the prerequisites of honesty, absolute fulfillment of fiduciary duty to Deutsche Bank, relevant laws and regulations, and reasonable conduct on the part of the employee, however, the acceptance of some types of unsolicited, reasonable business gifts may be permissible. The rules are as follows: o Cash gifts of any amount are prohibited. This includes cash equivalents such as gift certificates, bonds, securities or other items that may be readily converted to cash. o Acceptance of non-cash gifts, momentos, tickets for sporting or entertainment events, and other items that are not excessive in value, is generally permitted with supervisor approval, when it is clear that they are unsolicited, unrelated to a transaction and the donor is not attempting to influence the employee. In accordance with regulations and practices in various jurisdictions, as well as the rules of the New York Stock Exchange and the National Association of Securities Dealers, certain employees may be subject to more stringent gift giving and receiving guidelines. For example, employees who are "associated persons" of Deutsche Bank Securities Inc. (NASD licensed) or other NYSE/NASD broker-dealer affiliate are generally not permitted to offer or accept gifts with a value greater than U.S. $100. Compliance should be consulted with questions. - ---------------------------------- ^6 Under the Bank Bribery Act and other applicable laws and regulations, severe penalties may be imposed on anyone who offers or accepts such improper payments or gifts. If you receive or are offered an improper payment or gift, or if you have any questions as to the application or interpretation of Deutsche Bank's rules regarding the acceptance of gifts, you must bring the matter to the attention of the Compliance Department. 11 o Acceptance of gifts, other than cash, given in connection with special occasions (e.g., promotions, retirements, weddings), that are of reasonable value in the circumstances are permissible, with Supervisory approval. o Employees may accept reasonable and conventional business courtesies, such as joining a client or vendor in attending sporting events, golf outings or concerts, provided that such activities involve no more than the customary amenities. o The cost of working session meals or reasonable related expenses involving the discussion or review of business matters related to Deutsche Bank may be paid by the client, vendor or others, provided that such costs would have otherwise been reimbursable to the employee by Deutsche Bank in accordance with its travel and entertainment and expense reimbursement policies. (ii) Gift Giving (to Persons other than Government Officials) In appropriate circumstances, it may be acceptable and customary for DeAM to extend gifts to clients or others who do business with Deutsche Bank. Employees should be certain that the gift will not give rise to a conflict of interest, or appearance of conflict, and that there is no reason to believe that the gift will violate applicable codes of conduct of the recipient. Employees with appropriate authority to do so may make business gifts at DeAM's expense, provided that the following requirements are met: o Gifts in the form of cash or cash equivalents may not be given regardless of amount. o The gift must be of reasonable value in the circumstances, and should not exceed a value of U.S. $100 unless the specific prior approval of the appropriate Managing Officer^7 is obtained. o The gift must be lawful and in accordance with NYSE/NASD rules and generally accepted business practices of the governing jurisdictions. (iii) Gifts to Government Officials The Compliance Department must be contacted prior to making any gift to a governmental employee or official. Various governmental agencies, legislative bodies and jurisdictions may have rules and regulations regarding the receipt of gifts by their employees or officials. In some cases, government employees or officials may be prohibited from accepting any gifts. (See next section for additional rules regarding political contributions.) - ---------------------------------- ^7 For purposes of this policy, "Managing Officer" is defined as an officer of at least the Managing Director level to whom the employee directly or indirectly reports, who is in charge of the employee's unit (e.g., a Department Head, Division Head, Function Head, Group Head, General Manager, etc). 12 F. Rules for Dealing with Governmental Officials and Political Candidates (i) Corporate Payments or Political Contributions No corporate payments or gifts of value may be made to any outside party, including any government official or political candidate or official, for the purpose of securing or retaining business for Deutsche Bank, or influencing any decision on its behalf. o The Federal Election Campaign Act prohibits corporations and labor organizations from using their general treasury funds to make contributions or expenditures in connection with federal elections, and therefore Deutsche Bank departments may not make contributions to U.S. Federal political parties or candidates. o Corporate contributions to political parties or candidates in jurisdictions not involving U.S. Federal elections are permitted only when such contributions are made in accordance with applicable local laws and regulations, and the prior approval of a member of the DeAM Executive Committee has been obtained, and the Deutsche Bank Americas Regional Cost Committee has been notified. Under the Foreign Corrupt Practices Act, Bank Bribery Law, Elections Law and other applicable regulations, severe penalties may be imposed on Deutsche Bank and on individuals who violate these laws and regulations. Similar laws and regulations may also apply in various countries and legal jurisdictions where Deutsche Bank does business. (ii) Personal Political Contributions No personal payments or gifts of value may be made to any outside party, including any government official or political candidate or official, for the purpose of securing business for Deutsche Bank or influencing any decision on its behalf. Employees should always exercise care and good judgment to avoid making any political contribution that may give rise to a conflict of interest, or the appearance of conflict. For example, if a DeAM business unit engages in business with a particular governmental entity or official, DeAM employees should avoid making personal political contributions to officials or candidates who may appear to be in a position to influence the award of business to Deutsche Bank. (iii) Entertainment of Government Officials Entertainment and other acts of hospitality toward government or political officials should never compromise or appear to compromise the integrity or reputation of the official or Deutsche Bank. When hospitality is extended, it should be with the expectation that it will become a matter of public knowledge. 13 G. Confidentiality Employees must not divulge contemplated or completed securities transactions or trading strategies of DeAM clients to any person, except as required by the performance of such person's duties, and only on a need-to-know basis. In addition, the Deutsche Bank standards contained in the Confidential, Material, Non-Public Information - Chinese Walls Policy, as well as those within the Code of Professional Conduct must be observed. VII. Sanctions --------- Any Employee who violates this Code may be subject to disciplinary actions, including possible dismissal. In addition, any Securities transactions executed in violation of this Code, such as short-term trading or trading during blackout periods, may subject the employee to sanctions, ranging from warnings and trading privilege suspensions, to financial penalties, including but not limited to, unwinding the trade and/or disgorging of the profits. Finally, violations and suspected violations of criminal laws will be reported to the appropriate authorities as required by applicable laws and regulations. VIII. Interpretations and Exceptions ------------------------------ Compliance shall have the right to make final and binding interpretations of this Code, and may grant an exception to certain of the above restrictions, as long as no abuse or potential abuse is involved. Each Employee must obtain approval from DeAM Compliance before taking action regarding such an exception. Any questions regarding the applicability, meaning or administration of this Code shall be referred in advance of any contemplated transaction, to DeAM Compliance. In addition, DeAM has an Ethics Committee that is empowered to administer, apply, interpret, and enforce the Code. 14 Deutsche Asset Management ACKNOWLEDGEMENT In connection with my employment with, or support of, one or more of the legal entities which make up Deutsche Asset Management, I acknowledge that I have received, read and understand the Deutsche Asset Management Code of Ethics ("the Code") dated July, 2002, and agree to adhere to and abide by the letter and spirit of its provisions. I have reviewed my own situation and conduct in light of the Code. I confirm that I am in compliance with the Code and have been in compliance with it since the date of my previous Acknowledgement, if any, including the requirements regarding the manner in which I maintain and report my employee related brokerage accounts and conduct my personal securities trading, as well as those surrounding the giving/receiving of gifts. I understand that any violation(s) of the Code is grounds for immediate disciplinary action up to, and including, dismissal. Signature _______________________________ Print Name _______________________________ Date _______________________________ Please return this form to DeAM Compliance at 280 Park Avenue, 6W (MS NYC03-0601). A Member of the Deutsche Bank Group [LOGO] 15 Deutsche Asset Management To: "Access Person" From: DeAM Compliance Re: Initial/Annual Holdings Report - Personal Securities Accounts - -------------------------------------------------------------------------------- In conformance with Securities and Exchange Commission Rule 17j-1 pursuant to the Investment Company Act of 1940 you are required to provide Compliance with this "Initial Holdings Report" within 10 days of joining Deutsche Asset Management ("DeAM"), and annually thereafter. Accordingly, please fill in the following requested information (or attach a copy of your most recent statement) for all securities^8 either held directly or held in your Employee-Related Accounts^9.
Broker/Acct.# Name of Issuer No. of Shares Principal Amount ------------------------------ ---------------------------- --------------------- ------------------------ ------------------------------ ---------------------------- --------------------- ------------------------ ------------------------------ ---------------------------- --------------------- ------------------------ ------------------------------ ---------------------------- --------------------- ------------------------ ------------------------------ ---------------------------- --------------------- ------------------------ ------------------------------ ---------------------------- --------------------- ------------------------ ------------------------------ ---------------------------- --------------------- ------------------------ ------------------------------ ---------------------------- --------------------- ------------------------ ------------------------------ ---------------------------- --------------------- ------------------------ ------------------------------ ---------------------------- --------------------- ------------------------ ------------------------------ ---------------------------- --------------------- ------------------------
Signature: _______________________________ Date: __________________ Print Name: _______________________________ Expense Code: _____________ - ---------------------------------- ^8 "Securities" includes equity or debt securities (both privately and publicly offered), derivatives of securities (such as options, warrants, indexes and ADRs), futures, commodities and similar instruments, but does not include: (i) shares of open-end mutual funds (unless otherwise directed by compliance) or (ii) direct obligations of the United States government. ^9 "Employee Related Accounts" include (i) employee's own accounts; (ii) the employee's spouse's accounts and the accounts of minor children and other members of the household (whether by marriage or similarly committed status) living in the employee's home; (iii) accounts in which the employee, his/her spouse/domestic partner, minor children or other persons living in their home have a beneficial interest (i.e., share in the profits even if there is no influence on voting or disposition of shares); and (iv) accounts (including corporate accounts and trust accounts) over which the employee or his/her spouse/domestic partner exercises investment discretion or control. **PLEASE COMPLETE AND RETURN TO COMPLIANCE AT MS NYC03-0601** 15 -----END PRIVACY-ENHANCED MESSAGE-----