-----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, ObnLqUydml+lijC5Qg+mWlL4TgkMIgLJ5h6xxBrjx4we//0R4coc0YNs1AwafFHg hWgox4fDqoxKgS84DFhERw== 0000088053-02-000252.txt : 20020415 0000088053-02-000252.hdr.sgml : 20020415 ACCESSION NUMBER: 0000088053-02-000252 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20020301 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INVESTMENT TRUST CENTRAL INDEX KEY: 0000088064 IRS NUMBER: 042212654 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1933 Act SEC FILE NUMBER: 002-13628 FILM NUMBER: 02564255 BUSINESS ADDRESS: STREET 1: 160 FEDERAL ST CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6173305590 FORMER COMPANY: FORMER CONFORMED NAME: SCUDDER INVESTMENT TRUST DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SCUDDER GROWTH & INCOME FUND DATE OF NAME CHANGE: 19910402 FORMER COMPANY: FORMER CONFORMED NAME: SCUDDER COMMON STOCK FUND INC DATE OF NAME CHANGE: 19841125 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INVESTMENT TRUST CENTRAL INDEX KEY: 0000088064 IRS NUMBER: 042212654 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485APOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-00043 FILM NUMBER: 02564256 BUSINESS ADDRESS: STREET 1: 160 FEDERAL ST CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6173305590 FORMER COMPANY: FORMER CONFORMED NAME: SCUDDER INVESTMENT TRUST DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SCUDDER GROWTH & INCOME FUND DATE OF NAME CHANGE: 19910402 FORMER COMPANY: FORMER CONFORMED NAME: SCUDDER COMMON STOCK FUND INC DATE OF NAME CHANGE: 19841125 485APOS 1 ptc-inv.txt Filed electronically with the Securities and Exchange Commission on March 1, 2002. File No. 2-13628 File No. 811-43 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Pre-Effective Amendment No. Post-Effective Amendment No. 127 --- and REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 78 -- INVESTMENT TRUST ------------------ (Exact Name of Registrant as Specified in Charter) Two International Place, Boston, MA 02110-4103 ------- ---------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code: (6l7) 295-2572 -------------- John Millette Zurich Scudder Investments, Inc. Two International Place, Boston, MA 02110 ------------------------------------------- (Name and Address of Agent for Service) It is proposed that this filing will become effective (check appropriate box): / / Immediately upon filing pursuant to paragraph (b) / / 60 days after filing pursuant to paragraph (a) (1) /X/ On May 1, 2002 pursuant to paragraph (a)(1) / / 75 days after filing pursuant to paragraph (a) (2) / / On ______________ pursuant to paragraph (b) / / On ______________ pursuant to paragraph (a) (3) / / On ______________ pursuant to paragraph (a) (3) of Rule 485. If Appropriate, check the following box: / / This post-effective amendment designates a new effective date for a previously filed post-effective amendment. SCUDDER INVESTMENTS Core/Index Funds Class AARP and Class S Shares Prospectus May 1, 2002 Scudder S&P 500 Index 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 How to Buy, Sell and Exchange Strategy Class AARP Shares 6 The Main Risks of Investing 18 How to Buy, Sell and Exchange in the Fund Class S Shares 7 The Fund's Performance 20 Policies You Should Know History About 9 How Much Investors Pay 24 Understanding Distributions and Taxes 10 Other Policies and Risks 11 Who Manages and Oversees the Fund 13 Financial Highlights 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 its 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, and you could lose money by investing in them. This prospectus offers two classes of shares of the fund. Class AARP shares have been created especially for AARP members. Class S shares are generally not available to new investors. Unless otherwise noted, all information in this prospectus applies to both classes. You can find Scudder prospectuses on the Internet for Class AARP shares at aarp.scudder.com and for Class S shares at myScudder.com. - -------------------------------------------------------------------------------- Class AARP Class S ticker symbol ASPIX SCPIX fund number 201 301 Scudder S&P 500 Index Fund - -------------------------------------------------------------------------------- The Fund's Main Investment Strategy The fund seeks to provide investment results that, before expenses, correspond to the total return of common stocks publicly traded in the United States, as represented by the Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index). The fund is a feeder fund in a master/feeder fund arrangement. The fund pursues its investment objective by investing substantially all of its assets in a master portfolio -- the Equity 500 Index Portfolio (portfolio), which has the same investment objective as the fund. Deutsche Asset Management, Inc. is the investment advisor to the portfolio (Advisor). Zurich Scudder Investments, Inc. is the investment manager to the fund (Manager) and, as such, monitors the fund's investments in the portfolio. Equity 500 Index Portfolio. Under normal circumstances, the portfolio intends to invest at least 80% of its assets, determined at the time of purchase, in the common stocks of the companies that comprise the S&P 500 Index. In addition, the Advisor may use various techniques, such as buying and selling futures contracts, to increase or decrease the portfolio's exposure to changing security prices or other factors that affect security values. The portfolio's securities are weighted to make its investment characteristics similar to those of the S&P 500 Index as a whole. The portfolio may not always hold all of the same securities as the S&P 500 Index. The Advisor may choose, if extraordinary circumstances warrant, to exclude an index stock from the portfolio and substitute a similar stock if doing so will help the portfolio achieve its objective. - -------------------------------------------------------------------------------- OTHER INVESTMENTS Although most of the fund's investments are common stocks, the fund may also invest up to 20% of its assets in short-term debt securities and money market instruments. 4 Scudder S&P 500 Index Fund The portfolio's assets may also be invested in short-term debt securities and money market instruments. Futures contracts and options on futures contracts may be used as a low-cost method of gaining exposure to a particular securities market without directly investing in those securities. In selecting futures and options, the Advisor will assess such factors as current and anticipated stock prices, relative liquidity and price levels in the options and futures markets compared to the securities markets, and the portfolio's cash flow and cash management needs. The portfolio is not managed according to traditional methods of "active" investment management, which involve the buying and selling of securities based upon economic, financial, and market analyses and investment judgment. Instead, the portfolio, utilizing a "passive" or "indexing" investment approach, attempts to replicate, before expenses, the performance of the S&P 500 Index. To attempt to match the risk and return characteristics of the S&P 500 Index as closely as possible, the portfolio invests in a statistically selected sample of the stocks found in the S&P 500 Index, using a process known as "optimization." Optimization allows the portfolio to select stocks whose industry weightings, market capitalizations and fundamental characteristics (price to book ratios, price to earnings ratios, debt to asset ratios and dividend yields) closely match those of the stocks in the S&P 500 Index. In using optimization, the portfolio first buys the stocks that make up the larger portions of the S&P 500 Index's value in roughly the same proportion as the S&P 500 Index. Next, smaller stocks are analyzed and selected based on liquidity. In selecting smaller stocks, the Advisor tries to match the industry and risk characteristics of all the smaller companies of the S&P 500 Index without buying all of those stocks. Over the long term, the Advisor seeks a correlation between the performance of the portfolio (before expenses) and the S&P 500 Index of 98% or better. A figure of 100% would indicate perfect correlation. Of course, there can be no guarantee that by following these investment strategies, the fund will achieve its objective. Scudder S&P 500 Index Fund 5 The Main Risks of Investing in the Fund The primary factor affecting this fund's performance is the stock market. The fund's share price will fluctuate -- up and down -- with changes in the levels of the U.S. stock market. The U.S. stock market tends to be cyclical, with periods when stock prices generally rise and periods when stock prices generally decline. Stock prices could decline generally or underperform other investments. Moreover, the returns on large U.S. companies' stock, such as those that comprise the S&P 500 Index, could trail the returns of the stock of medium or small companies. The fund and the portfolio may not be able to replicate the S&P 500 Index closely enough to meet the S&P 500 Index's performance for a number of reasons, including the portfolio's incurrence of brokerage and other costs in buying and selling stocks, the difficulty and expense of executing relatively small stock transactions, the cash flow in and out of the fund and the portfolio due to such things as shareholder redemptions and investments, and the underperformance of stocks selected by the Advisor. If the Advisor incorrectly judges factors in selecting options and futures strategies, or if the price changes in the portfolio's futures and options positions are not well correlated with those of its other investments, the portfolio would not be pursuing, and may not achieve, its investment objective. The portfolio could also be exposed to risk if it could not close out its futures and options positions because of an illiquid secondary market. There are market and investment risks with any security and the value of an investment in the fund will fluctuate over time and it is possible to lose money invested in the fund. THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS. This fund is designed for long-term investors who want a fund that is designed to avoid substantially underperforming the overall large-cap stock market. 6 Scudder S&P 500 Index Fund 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 how the returns for the fund's Class S shares have varied from year to year, which may give some idea of risk. The table shows average annual total returns of the fund's Class S shares and the S&P 500 Index (which, unlike the fund, does not have any fees or expenses). The performance of both the fund and the index varies over time. All figures on this page assume reinvestment of dividends and distributions (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 S only and will vary for Class AARP. 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 Index Fund - -------------------------------------------------------------------------------- Annual Total Returns (%) as of 12/31 each year Class S - -------------------------------------------------------------------------------- THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE BAR CHART DATA: 1998 28.29 1999 20.37 2000 -9.50 For the periods included in the bar chart: Best Quarter: %, Q Worst Quarter: -%, Q Scudder S&P 500 Index Fund 7 - -------------------------------------------------------------------------------- Average Annual Total Returns (%) as of 12/31/2001 - -------------------------------------------------------------------------------- 1 Year Since Inception* - -------------------------------------------------------------------------------- Fund -- Class S** - -------------------------------------------------------------------------------- Return before Taxes - -------------------------------------------------------------------------------- Return after Taxes on Distributions - -------------------------------------------------------------------------------- Return after Taxes on Distributions and Sale of Fund Shares - -------------------------------------------------------------------------------- Index (reflects no deductions for fees, expenses or taxes) - -------------------------------------------------------------------------------- Index: Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index), an unmanaged capitalization-weighted index that includes 500 large-cap U.S. stocks. * Fund inception: 8/29/1997. Index comparison begins 8/31/1997. ** Performance for Class AARP shares is not provided because this class does not have a full calendar year of performance. In the chart, total returns for 1998 through 2001 would have been lower if operating expenses hadn't been reduced. In the table, total returns from inception through 2001 would have been lower if operating expenses hadn't been reduced. 8 Scudder S&P 500 Index Fund How Much Investors Pay This fund's Class AARP and Class S shares have no sales charges or other shareholder fees. The fund does have annual operating expenses, and as a shareholder of either Class AARP or Class S shares, you pay them indirectly. - -------------------------------------------------------------------------------- Fee Table - -------------------------------------------------------------------------------- Shareholder Fees, paid directly from your investment None - -------------------------------------------------------------------------------- Annual Operating Expenses, deducted from fund assets - -------------------------------------------------------------------------------- Management Fee % - -------------------------------------------------------------------------------- Distribution (12b-1) Fee None - -------------------------------------------------------------------------------- Other Expenses* % - -------------------------------------------------------------------------------- Total Annual Operating Expenses** % - -------------------------------------------------------------------------------- * Includes a fixed rate administrative fee of 0.25% and an administrative service fee of 0.10%. ** Includes expenses of the Equity 500 Index Portfolio. Information in the table has been restated to reflect a new fixed rate administrative fee which became effective on September 11, 2000. The information contained above and the example below reflects the aggregate expenses for both the fund and the portfolio. Based on the costs above, this example helps you compare this fund's expenses to those of other mutual funds. This example assumes operating expenses remain the same. It also assumes that you invested $10,000, earned 5% annual returns, reinvested all dividends and distributions and sold your shares at the end of each period. This is only an example; actual expenses will be different. - -------------------------------------------------------------------------------- Example 1 Year 3 Years 5 Years 10 Years - -------------------------------------------------------------------------------- Class AARP/S shares $ $ $ $ - -------------------------------------------------------------------------------- Scudder S&P 500 Index Fund 9 Other Policies and Risks While the sections on the previous pages describe the main points of the fund's strategy and risks, there are a few other issues to know about: o Although major changes tend to be infrequent, the fund's Board could change the fund's investment goal without seeking shareholder approval, but will provide shareholders with at least 60 days' notice prior to making any changes to the fund's 80% investment policy. o As a temporary defensive measure, the fund could shift up to 100% of its assets into investments such as money market securities. This could prevent losses, but would mean that the fund was not pursuing its goal. o The fund may trade securities more actively than many funds. This could raise transaction costs (and lower returns) and could mean higher taxable distributions. o The fund's equity investments are mainly common stocks, but may also include other types of equities such as preferred or convertible stocks. 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 back cover tells you how to do this). Keep in mind that there is no assurance that any mutual fund will achieve its goal. 10 Other Policies and Risks Who Manages and Oversees the Fund The investment advisor Deutsche Asset Management is the marketing name in the U.S. for the asset management activities of Deutsche Bank AG, ___________, Deutsche Fund Management, Inc., Deutsche Banc Alex. Brown Inc., Deutsche Asset Management, Inc. and Deutsche Asset Management Investment Services Limited. Under the supervision of the Board of Trustees, _________ with headquarters at _________, New York, NY ______, acts as the investment advisor for the fund. As investment advisor, _______ makes the fund's investment decisions. The fund's investment advisor buys and sells securities for the fund and conducts research that leads to these purchase and sale decisions. The fund's investment advisor is also responsible for selecting brokers and dealers and for negotiating brokerage commissions and dealer charges. The advisor's asset management teams include investment professionals, economists, research analysts, traders and other investment specialists, located in offices across the United States and around the world. The advisor receives a management fee from the fund. Below is the actual rate paid by the fund for the most recent fiscal year, as a percentage of the fund's average daily net assets. Fund Name Fee Paid - -------------------------------------------------------------------------------- Scudder S&P 500 Index Fund % - -------------------------------------------------------------------------------- _______ provides a full range of international investment advisory services to institutional and retail clients, and as of December 31, 2001, managed approximately $___ billion in assets. _______ 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. Who Manages and Oversees the Fund 11 AARP through its affiliates monitors and approves the AARP Investment Program from Scudder Investments, but does not recommend specific mutual funds. The advisor has agreed to pay a fee to AARP and/or its affiliates in return for the use of the AARP trademark and services relating to investments by AARP members in AARP Class shares of the fund. This fee is calculated on a daily basis as a percentage of the combined net assets of the AARP Classes of all funds managed by the advisor. The fee rates, which decrease as the aggregate net assets of the AARP Classes become larger, are as follows: 0.07% for the first $6 billion in net assets, 0.06% for the next $10 billion and 0.05% thereafter. These amounts are used for the general purposes of AARP and its members. 12 Who Manages and Oversees the Fund Financial Highlights This table is designed to help you understand the fund's financial performance [in recent years]. The figures in the first part of each table are for a single share. The total return figures represent the percentage that an investor in the fund would have earned (or lost), assuming all dividends and distributions were reinvested. This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the annual report (see "Shareholder reports" on the back cover). Scudder S&P 500 Index Fund -- Class AARP Financial Highlights 13 Scudder S&P 500 Index Fund -- Class S 14 Financial Highlights How to Invest in the Fund The following pages tell you how to invest in the fund and what to expect as a shareholder. If you're investing directly with Scudder, all of this information applies to you. If you're investing through a "third party provider" -- for example, a workplace retirement plan, financial supermarket or financial advisor -- your provider may have its own policies or instructions, and you should follow those. As noted earlier, there are two classes of shares of the fund available through this prospectus. The instructions for buying and selling each class are slightly different. Instructions for buying and selling Class AARP shares, which have been created especially for AARP members, are found on the next two pages. These are followed by instructions for buying and selling Class S shares, which are generally not available to new investors. Be sure to use the appropriate table when placing any orders to buy, exchange or sell shares in your account. How to Buy, Sell and Exchange Class AARP Shares Buying Shares: Use these instructions to invest directly. Make out your check to "The AARP Investment Program." - -------------------------------------------------------------------------------- First investment Additional investments - -------------------------------------------------------------------------------- $1,000 or more for regular accounts $50 minimum for regular accounts and IRA accounts $500 or more for IRAs $50 minimum with an Automatic Investment Plan, Payroll Deduction or Direct Deposit - -------------------------------------------------------------------------------- By mail or express mail (see below) o For enrollment forms, call Send a personalized investment slip or 1-800-253-2277 short note that includes: o Fill out and sign an enrollment form o fund and class name o Send it to us at the appropriate o account number address, along with an investment check o check payable to "The AARP Investment Program" - -------------------------------------------------------------------------------- By wire o Call 1-800-253-2277 for instructions o Call 1-800-253-2277 for instructions (minimum $50) - -------------------------------------------------------------------------------- By phone - -- o Call 1-800-253-2277 for instructions - -------------------------------------------------------------------------------- With an automatic investment plan o Fill in the information required on o To set up regular investments from a your enrollment form and include a bank checking account, call voided check 1-800-253-2277 (minimum $50) - -------------------------------------------------------------------------------- Payroll Deduction or Direct Deposit o Select either of these options on o Once you specify a dollar amount your enrollment form and submit it. (minimum $50), investments are You will receive further automatic. instructions by mail. - -------------------------------------------------------------------------------- Using QuickBuy - -- o Call 1-800-253-2277 to speak to a representative o or, to use QuickBuy on the Easy-Access Line, call 1-800-631-4636 and follow the instructions on how to purchase shares - -------------------------------------------------------------------------------- On the Internet o Go to "services and forms-- How to o Call 1-800-253-2277 to ensure you open an account" at aarp.scudder.com have electronic services o Print out a prospectus and an o Register at aarp.scudder.com enrollment form o Follow the instructions for buying o Complete and return the enrollment shares with money from your bank form with your check account - -------------------------------------------------------------------------------- Regular mail: The AARP Investment Program, First Investment: PO Box 219735, Kansas City, MO 64121-9735 Additional Investments: PO Box 219743, Kansas City, MO 64121-9743 Express, registered or certified mail: The AARP Investment Program, 811 Main Street, Kansas City, MO 64105-2005 Fax number: 1-800-821-6234 (for exchanging and selling only) 16 How to Buy, Sell and Exchange Class AARP Shares Exchanging or Selling Shares: Use these instructions to exchange or sell shares in an account opened directly with Scudder. - -------------------------------------------------------------------------------- Exchanging into another fund Selling shares - -------------------------------------------------------------------------------- $1,000 or more to open a new account Some transactions, including most for ($500 or more for IRAs) over $100,000, can only be ordered in writing; if you're in doubt, see page $50 or more for exchanges between 22 existing accounts - -------------------------------------------------------------------------------- By phone o Call 1-800-253-2277 for instructions o Call 1-800-253-2277 for instructions - -------------------------------------------------------------------------------- Using Easy-Access Line o Call 1-800- 631-4636 and follow the o Call 1-800-631-4636 and follow the instructions instructions - -------------------------------------------------------------------------------- By mail, express mail or fax (see previous page) Your instructions should include: Your instructions should include: o your account number o your account number o names of the funds, class and number o name of the fund, class and number of shares or dollar amount you want of shares or dollar amount you want to exchange to redeem - -------------------------------------------------------------------------------- With an automatic withdrawal plan - -- o To set up regular cash payments from an account, call 1-800-253-2277 - -------------------------------------------------------------------------------- Using QuickSell - -- o Call 1-800-253-2277 - -------------------------------------------------------------------------------- On the Internet o Register at aarp.scudder.com -- o Go to "services and forms" o Follow the instructions for making on-line exchanges - -------------------------------------------------------------------------------- To reach us: o Web site aarp.scudder.com o Program representatives 1-800-253-2277, M-F, 8 a.m. - 7 p.m. EST o Confidential fax line 1-800-821-6234, always open o TDD line 1-800-634-9454, M-F, 9 a.m. - 5 p.m. EST Class AARP Services o AARP Lump Sum Service for planning and setting up a lump sum distribution o AARP Legacy Service for organizing financial documents and planning the orderly transfer of assets to heirs o AARP Goal Setting and Asset Allocation Service for allocating assets and measuring investment progress o For more information, please call 1-800-253-2277. How to Buy, Sell and Exchange Class AARP Shares 17 How to Buy, Sell and Exchange Class S Shares Buying Shares: Use these instructions to invest directly. Make out your check to "The Scudder Funds." - -------------------------------------------------------------------------------- First investment Additional investments - -------------------------------------------------------------------------------- $2,500 or more for regular accounts $50 or more for regular accounts and IRA accounts $1,000 or more for IRAs $50 or more with an Automatic Investment Plan - -------------------------------------------------------------------------------- By mail or express mail (see below) o Fill out and sign an application Send a Scudder investment slip or short note that includes: o Send it to us at the appropriate address, along with an investment o fund and class name check o account number o check payable to "The Scudder Funds" - -------------------------------------------------------------------------------- By wire o Call 1-800-SCUDDER for instructions o Call 1-800-SCUDDER for instructions (minimum $50) - -------------------------------------------------------------------------------- By phone - -- o Call 1-800-SCUDDER for instructions - -------------------------------------------------------------------------------- With an automatic investment plan o Fill in the information on your o To set up regular investments from a application and include a voided bank checking account, call check 1-800-SCUDDER (minimum $50) - -------------------------------------------------------------------------------- Using QuickBuy - -- o Call 1-800-SCUDDER to speak to a representative o or, to use QuickBuy on SAIL(TM), call 1-800-343-2890 and follow the instructions on how to purchase shares - -------------------------------------------------------------------------------- On the Internet o Go to "funds and prices" at o Call 1-800-SCUDDER to ensure you myScudder.com have electronic services o Print out a prospectus and a new o Register at myScudder.com account application o Follow the instructions for buying o Complete and return the application shares with money from your bank with your check account - -------------------------------------------------------------------------------- Regular mail: First Investment: Scudder Investments, PO Box 219669, Kansas City, MO 64121-9669 Additional Investments: Scudder Investments, PO Box 219664, Kansas City, MO 64121-9664 Express, registered or certified mail: Scudder Investments, 811 Main Street, Kansas City, MO 64105-2005 Fax number: 1-800-821-6234 (for exchanging and selling only) 18 How to Buy, Sell and Exchange Class S Shares Exchanging or Selling Shares: Use these instructions to exchange or sell shares in an account opened directly with Scudder. - -------------------------------------------------------------------------------- Exchanging into another fund Selling shares - -------------------------------------------------------------------------------- $2,500 or more to open a new account Some transactions, including most for ($1,000 or more for IRAs) over $100,000, can only be ordered in writing; if you're in doubt, see page $50 or more for exchanges between 22 existing accounts - -------------------------------------------------------------------------------- By phone or wire o Call 1-800-SCUDDER for instructions o Call 1-800-SCUDDER for instructions - -------------------------------------------------------------------------------- Using SAIL(TM) o Call 1-800-343-2890 and follow the o Call 1-800-343-2890 and follow the instructions instructions - -------------------------------------------------------------------------------- By mail, express mail or fax (see previous page) Your instructions should include: Your instructions should include: 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 o the dollar amount or number of shares 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 o a daytime telephone number account o a daytime telephone number - -------------------------------------------------------------------------------- With an automatic withdrawal plan - -- o To set up regular cash payments from a Scudder account, call 1-800-SCUDDER - -------------------------------------------------------------------------------- Using QuickSell - -- o Call 1-800-SCUDDER - -------------------------------------------------------------------------------- On the Internet o Register at myScudder.com o Register at myScudder.com o Follow the instructions for making o Follow the instructions for making on-line exchanges on-line redemptions - -------------------------------------------------------------------------------- How to Buy, Sell and Exchange Class S Shares 19 Policies You Should Know About Along with the instructions on the previous pages, the policies below may affect you as a shareholder. Some of this information, such as the section on dividends and taxes, applies to all investors, including those investing through investment providers. If you are investing through an investment provider, check the materials you got from them. As a general rule, you should follow the information in those materials wherever it contradicts the information given here. Please note that an investment provider may charge its own fees. In either case, keep in mind that the information in this prospectus applies only to the fund's Class AARP and Class S shares. 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 call 1-(800) 253-2277 (Class AARP) or 1-800-SCUDDER (Class S). Policies about transactions The fund is open for business each day the New York Stock Exchange is open. The fund calculates its share price [If fund has multiple classes: 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 Service Corporation, and they have determined that it is in "good order," it will be processed at the next share price calculated. Ordinarily, your investment will start to accrue dividends the next business day after your purchase is processed. When selling shares you'll generally receive the dividend for the day on which your shares were sold. THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS. Questions? You can speak to a Scudder representative between 8 a.m. and 7 p.m. Eastern time on any fund business day by calling 1-800-253-2277 (Class AARP) or 1-800-SCUDDER (Class S). 20 Policies You Should Know About Automated phone information is available 24 hours a day. You can use your automated phone services to get information on Scudder funds generally and on accounts held directly at Scudder. If you signed up for telephone services, you can also use this service to make exchanges and sell shares. For Class AARP shares - -------------------------------------------------------------------------------- Call Easy-Access Line, the AARP Program Automated Information Line, at 1-800-631-4636 - -------------------------------------------------------------------------------- For Class S shares - -------------------------------------------------------------------------------- Call SAIL(TM), the Scudder Automated Information Line, at 1-800-343-2890 - -------------------------------------------------------------------------------- QuickBuy and QuickSell let you set up a link between a Scudder account and a bank account. Once this link is in place, you can move money between the two with a phone call. You'll need to make sure your bank has Automated Clearing House (ACH) services. To set up QuickBuy or QuickSell on a new account, see the account application; to add it to an existing account, call 1-800-253-2277 (Class AARP) or 1-800-SCUDDER (Class S). 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. 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 completed within 24 hours. The funds can only send wires of $1,000 or more and accept wires of $50 or more. THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS. The Scudder Web site can be a valuable resource for shareholders with Internet access. To get up-to-date information, review balances or even place orders for exchanges, go to aarp.scudder.com (Class AARP) or myScudder.com (Class S). Policies You Should Know About 21 Exchanges are a shareholder privilege, not a right: we may reject any exchange order, particularly when there appears to be a pattern of "market timing" or other frequent purchases and sales. We may also reject or limit purchase orders, for these or other reasons. 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. Money from shares you sell is normally sent out within one business day of when your order is processed (not when it is received), although it could be delayed for up to seven days. There are also two circumstances when it could be longer: when you are selling shares you bought recently by check and that check hasn't cleared yet (maximum delay: 15 days) or when unusual circumstances prompt the SEC to allow further delays. Certain expedited redemption processes may also be delayed when you are selling recently purchased shares. How the fund calculates share price For each share class, the price at which you buy shares is as follows: To calculate NAV, each share class uses the following equation: TOTAL ASSETS - TOTAL LIABILITIES - ---------------------------------- = NAV TOTAL NUMBER OF SHARES OUTSTANDING For each share class, the price at which you sell shares is also the NAV. We typically use market prices to value securities. However, when a market price isn't available, or when we have reason to believe it doesn't represent market realities, we may use fair value methods approved by the fund's Board. In such a case, the fund's value for a security is likely to be different from quoted market prices. 22 Policies You Should Know About Other rights we reserve You should be aware that we may do any of the following: o withhold 30% (in 2002 and 2003) 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 close your account and send you the proceeds if your balance falls below $1,000 for Class AARP shareholders, for Class S shareholders, $2,500 and $250 for retirement accounts; for Class S shareholders, charge you $10 a year if your account balance falls below $2,500; in either case, we will give you 60 days notice so you can either increase your balance or close your account (these policies don't apply to retirement accounts, to investors with $100,000 or more in Scudder fund shares or in any case where a fall in share price created the low balance) o Class AARP shareholders can go to aarp.scudder.com and Class S shareholders can go to myScudder.com to get up-to-date information, review balances or even place orders for exchange o reject a new account application if you don't provide a correct Social Security or other tax ID number; if the account has already been opened, we may give you 30 days' notice to provide the correct number o pay you for shares you sell by "redeeming in kind," that is, by giving you marketable securities (which typically will involve brokerage costs for you to liquidate) rather than cash; the fund generally won't make a redemption in kind unless your requests over a 90-day period total more than $250,000 or 1% of the value of the fund's net assets, whichever is less o change, add or withdraw various services, fees and account policies (for example, we may change or terminate the exchange privilege at any time) 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. Policies You Should Know About 23 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 has a regular schedule for paying out any earnings to shareholders: o Income: declared and paid quarterly in March, June, September and December o Long-term and short-term capital gains: November or December or otherwise as needed You can choose how to receive your dividends and distributions. You can have them all automatically reinvested in fund shares, all deposited directly to your bank account or all sent to you by check. Tell us your preference on your application. If you don't indicate a preference, your dividends and distributions will all be reinvested. For retirement plans, reinvestment is the only option. Buying and selling fund shares will usually have tax consequences for you (except in an IRA or other tax-advantaged account). Your sales of shares may result in a capital gain or loss for you; whether long-term or short-term depends on how long you owned the shares. For tax purposes, an exchange is the same as a sale. THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPHS. Because each shareholder's tax situation is unique, it's always a good idea to ask your tax professional about the tax consequences of your investments, including any state and local tax consequences. 24 Understanding Distributions and Taxes 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. Understanding Distributions and Taxes 25 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 1-800-253-2277 (Class AARP) or 1-800-SCUDDER (Class S), or contact Scudder Investments at the address listed below. These documents and other information about a 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 a 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 1-202-942-8090. AARP Investment Program Scudder from Scudder Investments Investments (Class AARP) (Class S) SEC - -------------------------------------------------------------------------------- PO Box 219735 PO Box 219669 Public Reference Section Kansas City, MO Kansas City, MO Washington, D.C. 64121-9735 64121-9669 20549-0102 aarp.scudder.com myScudder.com www.sec.gov 1-800-253-2277 1-800-SCUDDER 1-202-942-8090 SEC File Number - -------------------------------------------------------------------------------- Scudder S&P 500 Index Fund 811-43 Distributor Scudder Investor Services, Inc. Two International Place Boston, MA 02110-4103 SCUDDER INVESTMENTS [RECYCLE LOGO] Printed on recycled paper. XXXXX (00/00/01) XXXXX SCUDDER S&P 500 INDEX FUND A series of Investment Trust A No-Load (No Sales Charges) Mutual Fund seeking to provide investment results that, before expenses, correspond to the total return of common stocks publicly traded in the United States, as represented by the Standard & Poor's 500 Composite Stock Price Index - -------------------------------------------------------------------------------- STATEMENT OF ADDITIONAL INFORMATION Class AARP and Class S May 1, 2002 - -------------------------------------------------------------------------------- This Statement of Additional Information is not a prospectus and should be read in conjunction with the Prospectus of Scudder S&P 500 Index Fund dated May 1, 2002, as amended from time to time, a copy of which may be obtained without charge by writing to Scudder Investor Services, Inc., Two International Place, Boston, Massachusetts 02110-4103. The Annual Report to Shareholders of Scudder S&P 500 Index Fund dated December 31, 2001, is incorporated by reference and is hereby deemed to be part of this Statement of Additional Information.
TABLE OF CONTENTS Page THE FUND'S INVESTMENT OBJECTIVE AND POLICIES.........................................................................1 PURCHASES...........................................................................................................11 Minimum Balances...........................................................................................13 Additional Information About Making Subsequent Investments.................................................13 Additional Information About Making Subsequent Investments by QuickBuy.....................................13 Checks.....................................................................................................14 Wire Transfer of Federal Funds.............................................................................14 Share Price................................................................................................14 Share Certificates.........................................................................................15 Other Information..........................................................................................15 EXCHANGES AND REDEMPTIONS...........................................................................................15 Exchanges..................................................................................................15 Redemption by Telephone....................................................................................16 Redemption by QuickSell....................................................................................17 Redemption by Mail or Fax..................................................................................17 Other Information..........................................................................................17 FEATURES AND SERVICES OFFERED BY THE FUND...........................................................................18 Dividends and Capital Gains Distribution Options...........................................................18 Scudder Investor Centers...................................................................................19 Reports to Shareholders....................................................................................19 Transaction Summaries......................................................................................19 THE SCUDDER FAMILY OF FUNDS.........................................................................................19 SPECIAL PLAN ACCOUNTS...............................................................................................21 Scudder Retirement Plans: Profit-Sharing and Money Purchase Pension Plans for Corporations and Self-Employed Individuals.........................................................................21 Scudder 401(k): Cash or Deferred Profit-Sharing Plan for Corporations and Self-Employed Individuals.......21 Scudder IRA: Individual Retirement Account................................................................21 Scudder Roth IRA: Individual Retirement Account...........................................................22 Scudder 403(b) Plan........................................................................................22 Automatic Withdrawal Plan..................................................................................23 Group or Salary Deduction Plan.............................................................................23 DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS...........................................................................24 PERFORMANCE INFORMATION.............................................................................................24 FUND ORGANIZATION...................................................................................................26 INVESTMENT MANAGER AND ADMINISTRATOR FOR THE FUND...................................................................27 Code of Ethics.............................................................................................30 AMA InvestmentLink(SM) Program.............................................................................30 INVESTMENT ADVISOR AND ADMINISTRATOR FOR THE PORTFOLIO..............................................................30 Administrator..............................................................................................31 TRUSTEES AND OFFICERS OF THE TRUST..................................................................................32 REMUNERATION........................................................................................................34 TRUSTEES AND OFFICERS OF THE PORTFOLIO..............................................................................35 REMUNERATION........................................................................................................45 Control Persons and Principal Holders of Securities........................................................45 DISTRIBUTOR.........................................................................................................46 TAXES...............................................................................................................47 i TABLE OF CONTENTS (continued) Page PORTFOLIO TRANSACTIONS..............................................................................................50 NET ASSET VALUE.....................................................................................................51 ADDITIONAL INFORMATION..............................................................................................53 FINANCIAL STATEMENTS................................................................................................54 APPENDIX A
ii THE FUND'S INVESTMENT OBJECTIVE AND POLICIES Scudder S&P 500 Index Fund (the "Fund") is a diversified, no-load series of Investment Trust (the "Trust"), an open-end management investment company which continuously offers and redeems its shares. It is a company of the type commonly known as a mutual fund. General Investment Objective and Policies Descriptions in this Statement of Additional Information of a particular investment practice or technique in which the Portfolio may engage (such as hedging, etc.) or a financial instrument which the Portfolio may purchase (such as options, forward foreign currency contracts, etc.) are meant to describe the spectrum of investments that ______("________" or the "Advisor"), in its discretion, might, but is not required to, use in managing the Portfolio's assets. On April 30, 2001, the investment advisor changed from Bankers Trust Company to Deutsche Asset Management, Inc. The Advisor employs such practice, technique or instrument at its discretion. 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 Portfolio, but, to the extent employed, could, from time to time, have a material impact on the Portfolio's performance. The Fund's investment objective is to provide investment results that, before expenses, correspond to the total return of common stocks of large U.S. Companies publicly traded in the United States, as represented by the Standard & Poor's Composite Stock Price Index (S&P 500 Index"). As described in the Prospectus, the Trust seeks to achieve the investment objective of the Fund by investing substantially all of the investable assets of the Fund in an open-end management investment company having the same investment objective as the Fund. The investment company in which the Fund invests is the Equity 500 Index Portfolio (the "Portfolio"), advised by Deutsche Asset Management. The Fund retains the investment management firm of Zurich Scudder Investments, Inc., a Delaware corporation (the "Manager") as investment manager to the Fund to monitor the Fund's investments in the Portfolio subject to the authority of and supervision by the Trust's Board of Trustees. Since the investment characteristics of the Fund will correspond directly with those of the Portfolio in which the Fund invests all of its investable assets, the following includes a discussion of the various investments of and techniques employed by the Portfolio. Interfund Borrowing and Lending Program The Trust's Board of Trustees has approved the filing of an application for exemptive relief with the SEC which would permit the Fund to participate in an interfund lending program among certain investment companies advised by the Manager. If the Fund receives the requested relief, the interfund lending program would allow 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, a 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. A fund may have to borrow from a bank at a higher interest rate if an interfund loan is called or not renewed. Any delay in repayment to a lending fund could result in a lost investment opportunity or additional costs. The program is subject to the oversight and periodic review of the Boards of the participating funds. To the extent the Fund is actually engaged in borrowing through the interfund lending program, the Fund, as a matter of non-fundamental policy, may not borrow for other than temporary or emergency purposes (including through dollar roll transactions) for any purpose in excess of 10% of the Fund's (Portfolio's) assets (taken at cost). Additional Information Regarding the S&P 500 Index Neither the Fund nor the Portfolio is 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 and the Portfolio particularly, or the ability of the S&P 500 Index to track general stock market performance. S&P's only relationship to the Fund and the Portfolio 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 or the Portfolio. S&P has no obligation to take the needs of the shareholders of the Fund or the Portfolio 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 and the Portfolio, or the timing of the issuance or sale of shares of the Fund and the Portfolio, or in the determination or calculation of the equation by which the Fund or the Portfolio is to be converted into cash. S&P has no obligation or liability in connection with the administration, marketing or trading of the Fund or the Portfolio. 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 OR THE PORTFOLIO, SHAREHOLDERS OF THE FUND OR THE PORTFOLIO, 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 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 Techniques Equity Securities. The Portfolio may invest in equity securities listed on any domestic or foreign securities exchange or traded in the over-the-counter market as well as certain restricted or unlisted securities. As used herein, "equity securities" are defined as common stock, preferred stock, trust or limited partnership interests, rights and warrants to subscribe to or purchase such securities, sponsored or unsponsored American Depositary Receipts ("ADRS"), European Depositary Receipts ("EDRs"), Global Depositary Receipts ("GDRs"),\, and convertible securities, consisting of debt securities or preferred stock that may be converted into common stock or that carry the right to purchase common stock. Common stocks, the most familiar type, 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. Short-Term Instruments. When the Portfolio experiences large cash inflows through the sale of securities and desirable equity securities, that are consistent with the Portfolio's investment objective, which are unavailable in sufficient quantities or at attractive prices, the Portfolio 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 Standard & Poor's Ratings Corporation ("S&P") or Aa or higher by Moody's Investors Service, Inc. ("Moody's") or, if unrated, of comparable quality in the opinion of Deutsche Asset Management; (iii) commercial paper; (iv) bank obligations, including negotiable certificates of deposit, time deposits and banker's acceptances; and (v) repurchase agreements. At the time the Portfolio invests in commercial paper, bank obligations or repurchase agreements, the issuer of 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 Deutsche Asset Management. 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 2 obtain funds to finance commercial transactions. Generally, an acceptance is a time draft drawn on a bank by an exporter or an importer to obtain a stated amount of funds to pay for specific merchandise. The draft is then "accepted" by a bank that, in effect, unconditionally guarantees to pay the face value of the instrument on its maturity date. The acceptance may then be held by the accepting bank as an earning asset or it may be sold in the secondary market at the going rate of discount for a specific maturity. Although maturities for acceptances can be as long as 270 days, most acceptances have maturities of six months or less. Commercial Paper. Commercial paper consists of short-term (usually from 1 to 270 days) unsecured promissory notes issued by corporations in order to finance their current operations. A variable amount master demand note (which is a type of commercial paper) represents a direct borrowing arrangement involving periodically fluctuating rates of interest under a letter agreement between a commercial paper issuer and an institutional lender pursuant to which the lender may determine to invest varying amounts. For a description of commercial paper ratings, see Appendix A. Derivatives. The Portfolio may invest in various instruments that are commonly known as "derivatives." Generally, a derivative is a financial arrangement, the value of which is based on, or "derived" from, a traditional security, asset, or market index. Some derivatives such as mortgage-related and other asset-backed securities are in many respects like any other investment, although they may be more volatile or less liquid than more traditional debt securities. There are, in fact, many different types of derivatives and many different ways to use them. There is a range of risks associated with those uses. Futures and options are commonly used for traditional hedging purposes to attempt to protect a fund from exposure to changing interest rates, securities prices, or currency exchange rates and as a low cost method of gaining exposure to a particular securities market without investing directly in those securities. However, some derivatives are used for leverage, which tends to magnify the effects of an instrument's price changes as market conditions change. Leverage involves the use of a small amount of money to control a large amount of financial assets, and can in some circumstances, lead to significant losses. The Advisor will use derivatives only in circumstances where they offer the most efficient means of improving the risk/reward profile of the Portfolio and when consistent with the Portfolio's investment objective and policies. The use of derivatives for non-hedging purposes may be considered speculative. 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 Composite Stock Price Index. They are issued by the SPDR Trust, a unit investment trust that holds shares of substantially all the companies in the S&P 500 in substantially the same weighting and seeks to closely track the price performance and dividend yield of the Index. MidCap SPDRs(R): MidCap SPDRs are based on the S&P MidCap 400 Index. They are issued by the MidCap SPDR Trust, a unit investment trust that holds a portfolio of securities consisting of substantially all of the common stocks in the S&P MidCap 400 Index in substantially the same weighting and seeks to closely track the price performance and dividend yield of the Index. Select Sector SPDRs(R): Select Sector SPDRs are based on a particular sector or group of industries that are represented by a specified Select Sector Index within the Standard & Poor's Composite Stock Price Index. They are issued by The 3 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. Illiquid Securities and Restricted Securities. The Fund may purchase securities that are subject to legal or contractual restrictions on resale ("restricted securities"). Generally speaking, restricted securities may be sold (i) only to qualified institutional buyers; (ii) in a privately negotiated transaction to a limited number of purchasers; (iii) in limited quantities after they have been held for a specified period of time and other conditions are met pursuant to an exemption from registration; or (iv) in a public offering for which a registration statement is in effect under the Securities Act of 1933, as amended. Issuers of restricted securities may not be subject to the disclosure and other investor protection requirements that would be applicable if their securities were publicly traded. Restricted securities are often illiquid, but they may also be liquid. For example, restricted securities that are eligible for resale under Rule 144A are often deemed to be liquid. ). The Fund's Board has approved guidelines for use by the Advisor in determining whether a security is liquid or illiquid. Among the factors the Advisor may consider in reaching liquidity decisions relating to Rule 144A securities are: (1) the frequency of trades and quotes for the security; (2) the number of dealers wishing to purchase or sell the security and the number of other potential purchasers; (3) dealer undertakings to make a market in the security; and (4) the nature of the security and the nature of the market for the security (i.e., the time needed to dispose of the security, the method of soliciting offers, and the mechanics of the transfer]Issuers of restricted securities may not be subject to the disclosure and other investor protection requirement that would be applicable if their securities were publicly traded. Where a registration statement is required for the resale of restricted securities, the Fund may be required to bear all or part of the registration expenses. The Fund may be deemed to be an "underwriter" for purposes of the Securities Act of 1933, as amended when selling restricted securities to the public and, in such event, the Fund may be liable to purchasers of such securities if the registration statement prepared by the issuer is materially inaccurate or misleading. The Fund may also purchase securities that are not subject to legal or contractual restrictions on resale, but that are deemed illiquid. Such securities may be illiquid, for example, because there is a limited trading market for them. The Fund may be unable to sell a restricted or illiquid security. In addition, it may be more difficult to determine a market value for restricted or illiquid securities. Moreover, if adverse market conditions were to develop during the period between the Fund's decision to sell a restricted or illiquid security and the point at which the Fund is permitted or able to sell such security, the Fund might obtain a price less favorable than the price that prevailed when it decided to sell. This investment practice, therefore, could have the effect of increasing the level of illiquidity of the Fund. When-Issued and Delayed Delivery Securities. The Portfolio may purchase securities on a when-issued or delayed delivery basis. Delivery of and payment for these securities can take place a month or more after the date of the purchase commitment. The purchase price and the interest rate payable, if any, on the securities are fixed on the purchase commitment date or at the time the settlement date is fixed. The value of such securities is subject to market fluctuation and no interest accrues to the Portfolio until settlement takes place. At the time the Portfolio makes the commitment to purchase securities on a when-issued or delayed delivery basis, it will record the transaction, reflect the value each day of such securities in determining its net asset value and, if applicable, calculate the maturity for the purposes of average maturity from that date. At the time of settlement a when-issued security may be valued at less than the purchase price. 4 To facilitate such acquisitions, the Portfolio identifies, as part of a segregated account, cash or liquid securities, in an amount at least equal to such commitments. On delivery dates for such transactions, the Portfolio will meet its obligations from maturities or sales of the securities held in the segregated account and/or from cash flow. If the Portfolio chooses to dispose of the right to acquire a when-issued security prior to its acquisition, it could, as with the disposition of any other portfolio obligation, incur a gain or loss due to market fluctuation. It is the current policy of the Portfolio not to enter into when-issued commitments exceeding in the aggregate 15% of the market value of the Portfolio's total assets, less liabilities other than the obligations created by when-issued commitments. 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 Portfolio 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 Portfolio 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 Portfolio could experience a loss. In all cases, the Advisor must find the creditworthiness of the other party to the transaction satisfactory. Investment of Uninvested Cash Balances. Each 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, each Fund may use Uninvested Cash to purchase shares of affiliated funds including money market funds, short-term bond funds and Scudder Cash Management Investment Trust, or one or more future entities for which Zurich Scudder Kemper Investments acts as trustee or investment advisor that operate as cash management investment vehicles and that are 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 each Fund in shares of the Central Funds will be in accordance with each 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 each Fund's ability to manage Uninvested Cash. Each Fund will invest Uninvested Cash in Central Funds only to the extent that each Fund's aggregate investment in the Central Funds does not exceed 25% of its total assets in shares of the Central Funds. Purchase and sales of shares of Central Funds are made at net asset value. Index Futures Contracts and Options on Index Futures Contracts Futures Contracts. Futures contracts are contracts to purchase or sell a fixed amount of an underlying instrument, commodity or index at a fixed time and place in the future. U.S. futures contracts have been designed by exchanges which have been designated "contracts markets" by the Commodity Futures Trading Commission ("CFTC"), and must be executed through a futures commission merchant, or brokerage firm, which is a member of the relevant contract market. 5 Futures contracts trade on a number of exchanges and clear through their clearing corporations. The Portfolio may enter into contracts for the purchase or sale for future delivery of the Index. At the same time a futures contract on the Index is entered into, the Portfolio must allocate cash or securities as a deposit payment ("initial margin"). Daily thereafter, the futures contract is valued and the payment of "variation margin" may be required, since each day the Portfolio would provide or receive cash that reflects any decline or increase in the contract's value. Although futures contracts (other than those that settle in cash) by their terms call for the actual delivery or acquisition of the instrument underlying the contract, in most cases the contractual obligation is fulfilled by offset before the date of the contract without having to make or take delivery of the instrument underlying the contract. The offsetting of a contractual obligation is accomplished by buying entering into an opposite position in the identical futures contract on the commodities exchange on which the futures contract was entered into (or a linked exchange). Such a transaction, which is effected through a member of an exchange, cancels the obligation to make or take delivery of the instrument underlying the contract. Since all transactions in the futures market are made, offset or fulfilled through a clearinghouse associated with the exchange on which the contracts are traded, the Portfolio will incur brokerage fees when it enters into futures contracts. The ordinary spreads between prices in the cash and futures market, due to differences in the nature of those markets, are subject to distortions. First, all participants in the futures market are subject to initial deposit and variation margin requirements. Rather than meeting additional variation margin requirements, investors may close futures contracts through offsetting transactions which could distort the normal relationship between the cash and futures markets. Second, the liquidity of the futures market depends on most participants entering into offsetting transactions rather than making or taking delivery. To the extent that many participants decide to make or take delivery, liquidity in the futures market could be reduced, thus producing distortion. Third, from the point of view of speculators, the margin deposit requirements in the futures market are less onerous than margin requirements in the securities market. Therefore, increased participation by speculators in the futures market may cause temporary price distortions. Due to the possibility of distortion, a correct forecast of securities price trends by the Advisor may still not result in a successful transaction. In addition, futures contracts entail risks. Although the Advisor believes that use of such contracts will benefit the Portfolio, if the Advisor's investment judgment about the general direction of the Index is incorrect, the Portfolio's overall performance would be poorer than if it had not entered into any such contract. For example, if the Portfolio has hedged against the possibility of a decrease in the Index which would adversely affect the value of the securities held in its portfolio and securities prices increase instead, the Portfolio will lose part or all of the benefit of the increased value of its securities which it has hedged because it will have offsetting losses in its futures positions. In addition, in such situations, if the Portfolio has insufficient cash, it may have to sell securities from its portfolio to meet daily variation margin requirements. Such sales of securities may be, but will not necessarily be, at increased prices which reflect the rising market. The Portfolio may have to sell securities at a time when it may be disadvantageous to do so. Options On Index Futures Contracts. The Portfolio may purchase and write options on futures contracts with respect to the Index. The purchase of a call option on an index futures contract is similar in some respects to the purchase of a call option on such an index. For example, when the Portfolio is not fully invested it may purchase a call option on an index futures contract to hedge against a market advance. The writing of a call option on a futures contract with respect to the Index may constitute a partial hedge against declining prices of the underlying securities which are deliverable upon exercise of the futures contract. If the futures price at expiration of the option is below the exercise price, the Portfolio will retain the full amount of the option premium which provides a partial hedge against any decline that may have occurred in the Portfolio's holdings. The writing of a put option on an index futures contract may constitute a partial hedge against increasing prices of the underlying securities which are deliverable upon exercise of the futures contract. If the futures price at expiration of the option is higher than the exercise price, the Portfolio will retain the full amount of the option premium which provides a partial hedge against any increase in the price of securities which the Portfolio intends to purchase. If a put or call option the Portfolio has written is exercised, the Portfolio will incur a loss which will be reduced by the amount of the premium it receives. Depending on the degree of correlation between changes in the value of its portfolio securities and changes in the value of its futures positions, the Portfolio's losses from existing options on futures may to some extent be reduced or increased by changes in the value of portfolio securities. The purchase of a put option on a futures contract with respect to the Index is similar in some respects to the purchase of protective put options on the Index. For example, the Portfolio may purchase a put option on an index futures contract to hedge against the risk of lowering securities values. 6 The amount of risk the Portfolio assumes when it purchases an option on a futures contract with respect to the Index is the premium paid for the option plus related transaction costs. In addition to the correlation risks discussed above, the purchase of such an option also entails the risk that changes in the value of the underlying futures contract will not be fully reflected in the value of the option purchased. The Board of Trustees of the Portfolio has adopted the requirement that index futures contracts and options on index futures contracts be used only for cash management purposes. In compliance with current CFTC regulations, the Portfolio will not enter into any futures contracts or options on futures contracts if immediately thereafter the amount of margin deposits on all the futures contracts of the Portfolio and premiums paid on outstanding options on futures contracts owned by the Portfolio would exceed 5% of the Portfolio's net asset value, after taking into account unrealized profits and unrealized losses on any such contracts. Options On Securities Indexes. The Portfolio may write (sell) covered call and put options to a limited extent on the Index ("covered options") in an attempt to increase income. Such options give the holder the right to receive a cash settlement during the term of the option based upon the difference between the exercise price and the value of the Index. The Portfolio may forgo the benefits of appreciation on the Index or may pay more than the market price of the Index pursuant to call and put options written by the Portfolio. By writing a covered call option, the Portfolio forgoes, in exchange for the premium less the commission ("net premium"), the opportunity to profit during the option period from an increase in the market value of the Index above the exercise price. By writing a covered put option, the Portfolio, in exchange for the net premium received, accepts the risk of a decline in the market value of the Index below the exercise price. The Portfolio may terminate its obligation as the writer of a call or put option by purchasing an option with the same exercise price and expiration date as the option previously written. When the Portfolio writes an option, an amount equal to the net premium received by the Portfolio is included in the liability section of the Portfolio's Statement of Assets and Liabilities as a deferred credit. The amount of the deferred credit will be subsequently marked to market to reflect the current market value of the option written. The current market value of a traded option is the last sale price or, in the absence of a sale, the mean between the closing bid and asked prices. If an option expires on its stipulated expiration date or if the Portfolio enters into a closing purchase transaction, the Portfolio will realize a gain (or loss if the cost of a closing purchase transaction exceeds the premium received when the option was sold), and the deferred credit related to such option will be eliminated. If a call option is exercised, the Portfolio will realize a gain or loss from the sale of the underlying security and the proceeds of the sale will be increased by the premium originally received. The writing of covered call options may be deemed to involve the pledge of the securities against which the option is being written. Securities against which call options are written will be segregated on the books of the custodian for the Portfolio. The Portfolio may purchase call and put options on the Index. The Portfolio would normally purchase a call option in anticipation of an increase in the market value of the Index. The purchase of a call option would entitle the Portfolio, in exchange for the premium paid, to purchase the underlying securities at a specified price during the option period. The Portfolio would ordinarily have a gain if the value of the securities increased above the exercise price sufficiently to cover the premium and would have a loss if the value of the securities remained at or below the exercise price during the option period. The Portfolio would normally purchase put options in anticipation of a decline in the market value of the Index ("protective puts"). The purchase of a put option would entitle the Portfolio, in exchange for the premium paid, to sell the underlying securities at a specified price during the option period. The purchase of protective puts is designed merely to offset or hedge against a decline in the market value of the Index. The Portfolio would ordinarily recognize a gain if the value of the Index decreased below the exercise price sufficiently to cover the premium and would recognize a loss if the value of the Index remained at or above the exercise price. Gains and losses on the purchase of protective put options would tend to be offset by countervailing changes in the value of the Index. The Portfolio has adopted certain other nonfundamental policies concerning index option transactions which are discussed below. The Portfolio's activities in index options may also be restricted by the requirements of the Code, for qualification as a regulated investment company. The hours of trading for options on the Index may not conform to the hours during which the underlying securities are traded. To the extent that the option markets close before the markets for the underlying securities, significant price and rate movements can take place in the underlying securities markets that cannot be reflected in the option markets. It is 7 impossible to predict the volume of trading that may exist in such options, and there can be no assurance that viable exchange markets will develop or continue. Because options on securities indices require settlement in cash, the Advisor may be forced to liquidate portfolio securities to meet settlement obligations. Asset Coverage. To assure that the Portfolio's use of futures and related options, as well as when-issued and delayed-delivery securities and foreign currency exchange transactions, are not used to achieve investment leverage, the Portfolio will cover such transactions, as required under applicable interpretations of the SEC, either by owning the underlying securities or by segregating with the Portfolio's Custodian or futures commission merchant liquid securities in an amount at all times equal to or exceeding the Portfolio's commitment with respect to these instruments or contracts. Special Information Concerning Master-Feeder Fund Structure. Unlike other open-end management investment companies (mutual funds) which directly acquire and manage their own portfolio securities, the Fund seeks to achieve its investment objective by investing all of its assets in the Portfolio, a separate registered investment company with the same investment objective as the Fund. Therefore, an investor's interest in the Portfolio's securities is indirect. In addition to selling a beneficial interest to the Fund, the Portfolio may sell beneficial interests to other mutual funds, investment vehicles or institutional investors. Such investors will invest in the Portfolio on the same terms and conditions and will pay a proportionate share of the Portfolio's expenses. However, the other investors investing in the Portfolio are not required to sell their shares at the same public offering price as the Fund due to variations in sales commissions and other operating expenses. Therefore, investors in the Fund should be aware that these differences may result in differences in returns experienced by investors in the different funds that invest in the Portfolio. Such differences in returns are also present in other mutual fund structures. Information concerning other holders of interests in the Portfolio is available from Deutsche Asset Management Service Center at 1-800-730-1313. Smaller funds investing in the Portfolio may be materially affected by the actions of larger funds investing in the Portfolio. For example, if a large fund withdraws from the Portfolio, the remaining funds may experience higher pro rata operating expenses, thereby producing lower returns (however, this possibility exists as well for traditionally structured funds which have large institutional investors). Additionally, the Portfolio may become less diverse, resulting in increased portfolio risk. Also, funds with a greater pro rata ownership in the Portfolio could have effective voting control of the operations of the Portfolio. Except as permitted by the SEC, whenever the Trust is requested to vote on matters pertaining to the Portfolio, the Trust will hold a meeting of shareholders of the Fund and will cast all of its votes in the same proportion as the votes of the Fund's shareholders. Fund shareholders who do not vote will not affect the Trust's votes at the Portfolio meeting. The percentage of the Trust's votes representing the Fund's shareholders not voting will be voted by the Trustees or officers of the Trust in the same proportion as the Fund shareholders who do, in fact, vote. Certain changes in the Portfolio's investment objectives, policies or restrictions may require the Fund to withdraw its interest in the Portfolio. Any such withdrawal could result in a distribution "in kind" of portfolio securities (as opposed to a cash distribution from the Portfolio). If securities are distributed, the Fund could incur brokerage, tax or other charges in converting the securities to cash. In addition, the distribution in kind may result in a less diversified portfolio of investments or adversely affect the liquidity of the Fund. Notwithstanding the above, there are other means for meeting redemption requests, such as borrowing. The Fund may withdraw its investment from the Portfolio at any time, if the Board of Trustees of the Trust determines that it is in the best interests of the shareholders of the Fund to do so. Upon any such withdrawal, the Board of Trustees of the Trust would consider what action might be taken, including the investment of all the assets of the Fund in another pooled investment entity having the same investment objective as the Fund or the retaining of an investment advisor to manage the Fund's assets in accordance with the investment policies described herein with respect to the Portfolio. Unless otherwise stated, the Fund's investment objective and policies are not fundamental and may be changed upon notice to, but without the approval of, the Fund's shareholders. If there is a change in the Fund's investment objective, the Fund's shareholders should consider whether the Fund remains an appropriate investment in light of their then-current needs. The investment objective of the Portfolio is also not a fundamental policy. Shareholders of the Fund will receive 30 days prior written notice with respect to any change in the investment objective of the Fund or the Portfolio. Rating Services. The ratings of Moody's and S&P represent their opinions as to the quality of the Municipal Obligations and other securities that they undertake to rate. It should be emphasized, however, that ratings are relative and subjective and are not absolute standards of quality. Although these ratings are an initial criterion for selection of portfolio investments, the Advisor also makes its own evaluation of these securities, subject to review by the Portfolio's Board of Trustees. After purchase by the Portfolio, an obligation may cease to be rated or its rating may be reduced below the 8 minimum required for purchase by the Portfolio. Neither event would require the Portfolio to eliminate the obligation from its portfolio, but the Advisor will consider such an event in its determination of whether the Portfolio should continue to hold the obligation. A description of the ratings categories of Moody's and S&P is set forth in Appendix A to this SAI. Investment Restrictions Fundamental Policies. The following investment restrictions are "fundamental policies" of the Fund and the Portfolio and may not be changed with respect to the Fund or the Portfolio without the approval of a "majority of the outstanding voting securities" of the Fund or the Portfolio, as the case may be. "Majority of the outstanding voting securities" under the Investment Company Act of 1940, as amended (the "1940 Act"), and as used in this SAI and the Prospectus, means, with respect to the Fund (or the Portfolio), the lesser of (i) 67% or more of the outstanding voting securities of the Fund (or of the total beneficial interests of the Portfolio) present at a meeting, if the holders of more than 50% of the outstanding voting securities of the Fund or of the total beneficial interests of the Portfolio) are present or represented by proxy or (ii) more than 50% of the outstanding voting securities of the Fund (or of the total beneficial interests of the Portfolio). Whenever the Trust is requested to vote on a fundamental policy of the Portfolio, the Trust will hold a meeting of the Fund's shareholders and will cast its vote as instructed by the Fund's shareholders. Fund shareholders who do not vote will not affect the Trust's votes at the Portfolio meeting. The percentage of the Trust's votes representing Fund shareholders not voting will be voted by the Trustees of the Trust in the same proportion as the Fund shareholders who do, in fact, vote. As a matter of fundamental policy, the Portfolio (or Fund) may not (except that no investment restriction of the Fund shall prevent the Fund from investing all of its assets in an open-end investment company with substantially the same investment objective): (1) borrow money or mortgage or hypothecate assets of the Fund (Portfolio), except that in an amount not to exceed 1/3 of the current value of the Fund's net (Portfolio's) assets, it may borrow money as a temporary measure for extraordinary or emergency purposes and enter into reverse repurchase agreements or dollar roll transactions, and except that it may pledge, mortgage or hypothecate not more than 1/3 of such assets to secure such borrowings (it is intended that money would be borrowed only from banks and only either to accommodate requests for the withdrawal of beneficial interests while effecting an orderly liquidation of portfolio securities or to maintain liquidity in the event of an unanticipated failure to complete a portfolio security transaction or other similar situations) or reverse repurchase agreements, provided that collateral arrangements with respect to options and futures, including deposits of initial deposit and variation margin, are not considered a pledge of assets for purposes of this restriction and except that assets may be pledged to secure letters of credit solely for the purpose of participating in a captive insurance company sponsored by the Investment Company Institute; for additional related restrictions, see clause (i) under the caption "Additional Restrictions" below. (As an operating policy, the Portfolio may not engage in dollar roll transactions); (2) underwrite securities issued by other persons except insofar as the Portfolio (Trust or Fund) may technically be deemed an underwriter under the 1933 Act, in selling a portfolio security; (3) make loans to other persons except: (a) through the lending of the Portfolio's (Fund's) portfolio securities and provided that any such loans not exceed 30% of the Portfolio's (Fund's) total assets (taken at market value); (b) through the use of repurchase agreements or the purchase of short-term obligations; or (c) by purchasing a portion of an issue of debt securities of types distributed publicly or privately; (4) purchase or sell real estate (including limited partnership interests but excluding securities secured by real estate or interests therein), interests in oil, gas or mineral leases, commodities or commodity contracts (except futures and option contracts) in the ordinary course of business (except that the Portfolio (Trust)may hold and sell, for the Portfolio's (Fund's) (portfolio, real estate acquired as a result of the Portfolio's (Fund's) ownership of securities); (5) concentrate its investments in any particular industry (excluding U.S. Government securities), but if it is deemed appropriate for the achievement of the Portfolio's (Fund's) investment objective, up to 25% of its total assets may be invested in any one industry; 9 (6) issue any senior security (as that term is defined in the 1940 Act) if such issuance is specifically prohibited by the 1940 Act or the rules and regulations promulgated thereunder, provided that collateral arrangements with respect to options and futures, including deposits of initial deposit and variation margin, are not considered to be the issuance of a senior security for purposes of this restriction; and (7) with respect to 75% of the Fund's (Portfolio's) total assets, invest more than 5% of its total assets in the securities of any one issuer (excluding cash and cash-equivalents, U.S. government securities and the securities of other investment companies) or own more than 10% of the voting securities of any issuer. Other Investment Policies The Trustees of the Trust have voluntarily adopted certain policies and restrictions which are observed in the conduct of the Fund's affairs. These represent intentions of the Trustees based upon current circumstances. They differ from fundamental investment policies in that they may be changed or amended by action of the Trustees without requiring prior notice to or approval of shareholders. As a matter of nonfundamental policy, the Fund and the Portfolio may not: (1) borrow money (including through dollar roll transactions) for any purpose in excess of 10% of the Fund's (Portfolio's) assets (taken at cost) except that the Fund (Portfolio) may borrow for temporary or emergency purposes up to 1/3 of its net assets; (2) pledge, mortgage or hypothecate for any purpose in excess of 10% of the Fund's (Portfolio's) total assets (taken at market value), provided that collateral arrangements with respect to options and futures, including deposits of initial deposit and variation margin, and reverse repurchase agreements are not considered a pledge of assets for purposes of this restriction; (3) purchase any security or evidence of interest therein on margin, except that such short-term credit as may be necessary for the clearance of purchases and sales of securities may be obtained and except that deposits of initial deposit and variation margin may be made in connection with the purchase, ownership, holding or sale of futures; (4) sell any security which it does not own unless by virtue of its ownership of other securities it has at the time of sale a right to obtain securities, without payment of further consideration, equivalent in kind and amount to the securities sold and provided that if such right is conditional the sale is made upon the same conditions; (5) invest for the purpose of exercising control or management; (6) purchase securities issued by any investment company except by purchase in the open market where no commission or profit to a sponsor or dealer results from such purchase other than the customary broker's commission, or except when such purchase, though not made in the open market, is part of a plan of merger or consolidation; provided, however, that securities of any investment company will not be purchased for the Fund (Portfolio) if such purchase at the time thereof would cause (a) more than 10% of the Fund's (Portfolio's) total assets (taken at the greater of cost or market value) to be invested in the securities of such issuers; (b) more than 5% of the Fund's (Portfolio's) total assets (taken at the greater of cost or market value) to be invested in any one investment company; or (c) more than 3% of the outstanding voting securities of any such issuer to be held for the Fund (Portfolio), unless permitted to exceed these limitations by an exemptive order of the SEC; provided further that, except in the case of merger or consolidation, the Fund (Portfolio) shall not invest in any other open-end investment company unless the Fund (Portfolio) (1) waives the investment advisory fee with respect to assets invested in other open-end investment companies and (2) incurs no sales charge in connection with the investment (as an operating policy the Fund (Portfolio) will not invest in another open-end registered investment company); 10 (7) invest more than 15% of the Fund's (Portfolio's) net assets (taken at the greater of cost or market value) in securities that are illiquid or not readily marketable, not including (a) Rule 144A securities that have been determined to be liquid by the Board of Trustees; and (b) commercial paper that is sold under section 4(2) of the 1933 Act which: (i) is not traded flat or in default as to interest or principal; and (ii) is rated in one of the two highest categories by at least two nationally recognized statistical rating organizations and the Fund's (Portfolio's) Board of Trustees have determined the commercial paper to be liquid; or (iii) is rated in one of the two highest categories by one nationally recognized statistical rating agency and the Fund's (Portfolio's) Board of Trustees have determined that the commercial paper is equivalent quality and is liquid; (8) make short sales of securities or maintain a short position, unless at all times when a short position is open it owns an equal amount of such securities or securities convertible into or exchangeable, without payment of any further consideration, for securities of the same issue and equal in amount to, the securities sold short, and unless not more than 10% of the Portfolio's (Fund's) net assets (taken at market value) is represented by such securities, or securities convertible into or exchangeable for such securities, at any one time (the Portfolio (Fund) have no current intention to engage in short selling); (9) write puts and calls on securities unless each of the following conditions are met: (a) the security underlying the put or call is within the investment policies of the Fund (Portfolio) and the option is issued by the Options Clearing Corporation, except for put and call options issued by non-U.S. entities or listed on non-U.S. securities or commodities exchanges; (b) the aggregate value of the obligations underlying the puts determined as of the date the options are sold shall not exceed 50% of the Fund's (Portfolio's) net assets; (c) the securities subject to the exercise of the call written by the Fund (Portfolio) must be owned by the Fund (Portfolio) at the time the call is sold and must continue to be owned by the Fund (Portfolio) until the call has been exercised, has lapsed, or the Fund (Portfolio) has purchased a closing call, and such purchase has been confirmed, thereby extinguishing the Fund's (Portfolio's) obligation to deliver securities pursuant to the call it has sold; and (d) at the time a put is written, the Fund (Portfolio) establishes a segregated account with its custodian consisting of cash or short-term U.S. Government securities equal in value to the amount the Fund (Portfolio) will be obligated to pay upon exercise of the put (this account must be maintained until the put is exercised, has expired, or the Fund (Portfolio) has purchased a closing put, which is a put of the same series as the one previously written); and (10) buy and sell puts and calls on securities, stock index futures or options on stock index futures, or financial futures or options on financial futures unless such options are written by other persons and: (a) the options or futures are offered through the facilities of a national securities association or are listed on a national securities or commodities exchange, except for put and call options issued by non-U.S. entities or listed on non-U.S. securities or commodities exchanges; (b) the aggregate premiums paid on all such options which are held at any time do not exceed 20% of the Fund's (Portfolio's) total net assets; and (c) the aggregate margin deposits required on all such futures or options thereon held at any time do not exceed 5% of the Fund's (Portfolio's) total assets. There will be no violation of any investment restrictions or policies (except with respect to fundamental investment restriction (1) above) if that restriction is complied with at the time the relevant action is taken, notwithstanding a later change in the market value of an investment, in net or total assets, or in the change of securities rating of the investment, or any other later change. PURCHASES Additional Information about opening an Account All new investors in Class AARP of the Funds are required to provide an AARP membership number on their account application. In addition, Class S shares of the Funds will generally not be available to new investors. The following investors may continue to purchase Class S shares of Scudder Funds: 11 (1) Existing shareholders of Class S shares of any Scudder Fund through any broker-dealer or service agent account until June 30, 2001. After June 30, 2001, only investors who owned Class S shares as of June 30, 2001 and household members residing at the same address may open new accounts in Class S of any Scudder Fund. (2) Investors may purchase Class S shares of any Scudder Fund through any broker-dealer or service agent account until June 20, 2001. After June 30, 2001, only investors who owned Class S shares as of June 30, 2001 and household members residing at the same address may open new accounts in Class S of any Scudder Fund. (3) Any retirement, employee stock, bonus, pension or profit sharing plans. (4) Any participant who owns Class S shares of any Scudder Fund through an employer sponsored retirement, employee stock, bonus, pension or profit sharing plan as of December 29, 2000 may, at a later date, open a new individual account in Class S of any Scudder Fund. (5) Any participant who owns Class S shares of any Scudder Fund through a retirement, employee stock, bonus, pension or profit sharing plan may complete a direct rollover to an IRA account that will hold Class S shares. This applies for individuals who begin their retirement plan investments with a Scudder Fund at any time, including after December 29, 2000. (6) Officers, Fund Trustees and Directors, and full-time employees and their family members, of Zurich Financial Services and its affiliates. (7) Class S shares are available to any accounts managed by Zurich Scudder Investments, Inc., or any advisory products offered by Zurich Scudder Investments, Inc. or Scudder Investor Services, Inc., and to the portfolios of Scudder Pathway Series. (8) Registered investment advisors ("RIAs") may continue to purchase Class S shares of Scudder Funds for all clients until June 30, 2001. After June 30, 2001, RIAs may purchase Class A shares for any client that has an existing position in Class S shares of Scudder Funds as of June 30, 2001. (9) Broker-dealers and RIAs who have clients participating in comprehensive fee programs may continue to purchase Class S shares of Scudder Funds until June 30, 2001. After June 30, 2001, broker dealers and RIAs may purchase Class S shares in comprehensive fee programs for any client that has an existing position in Class S shares of a Scudder Fund as of June 30, 2001. (10) Scudder Investor Services, Inc. may, at is discretion, require appropriate documentation that shows an investor is eligible to purchase Class S shares. Clients having a regular investment counsel account with the Advisor or its affiliates and members of their immediate families, officers and employees of the Advisor or of any affiliated organization and their immediate families, members of the National Association of Securities Dealers, Inc. ("NASD") and banks may, if they prefer, subscribe initially for at least $2,500 for Class S and $1,000 for Class AARP of Fund shares through Scudder Investor Services, Inc. (the "Distributor") by letter, fax, or telephone. Shareholders of other Scudder funds who have submitted an account application and have a certified a tax identification number, clients having a regular investment counsel account with the Advisor or its affiliates and members of their immediate families, officers and employees of the Advisor or of any affiliated organization and their immediate families, members of the NASD, and banks may open an account by wire. These investors interested in investing in Class S must call 1-800-225-5163 to get an account number. During the call, the investor will be asked to indicate the Fund name, class name, amount to be wired ($2,500 minimum for Class S and $1,000 for Class AARP), name of bank or trust company from which the wire will be sent, the exact registration of the new account, the taxpayer identification number or Social Security number, address and telephone number. The investor must then call the bank to arrange a wire transfer to The Scudder Funds, State Street Bank and Trust Company, Boston, MA 02110, ABA Number 011000028, DDA Account Number: 9903-5552. The investor must give the Scudder fund name, class name, account name and the new 12 account number. Finally, the investor must send the completed and signed application to the Fund promptly. Investors interested in investing in Class AARP should call 1-800-253-2277 for further instructions. The minimum initial purchase amount is less than $2,500 for Class S under certain plan accounts and is $1,000 for Class AARP under certain special plan accounts. Minimum Balances Shareholders should maintain a share balance worth at least $2,500 for Class S and $1,000 for Class AARP. For fiduciary accounts such as IRAs, and custodial accounts such as Uniform Gift to Minor Act, and Uniform Trust to Minor Act accounts, the minimum balance is $1,000 for Class S and $500 for Class AARP. The Fund's Board of Directors may change these amounts. A shareholder may open an account with at least $1,000 ($500 for fiduciary/custodial accounts), if an automatic investment plan (AIP) of $50/month is established. Scudder group retirement plans and certain other accounts have similar or lower minimum share balance requirements. The Fund reserve the right, following 60 days' written notice to applicable shareholders, to: o for Class S, assess an annual $10 per Fund charge (with the Fee to be paid to the Fund) for any non-fiduciary/non-custodial account without an automatic investment plan (AIP) in place and a balance of less than $2,500; and o redeem all shares in Class AARP accounts below $1,000 and in non-retirement Class S accounts below $2,500 and in retirement accounts below $250 where a reduction in value has occurred due to a redemption, exchange or transfer out of the account. The Fund will mail the proceeds of the redeemed account to the shareholder. Reductions in value that result solely from market activity will not trigger an involuntary redemption. Shareholders with a combined household account balance in any of the Scudder Funds of $100,000 or more, as well as group retirement and certain other accounts will not be subject to a fee or automatic redemption. Fiduciary (e.g., IRA or Roth IRA) and custodial accounts (e.g., UGMA or UTMA) with balances below $100 are subject to automatic redemption following 60 days' written notice to applicable shareholders. Additional Information About Making Subsequent Investments Subsequent purchase orders for $10,000 or more and for an amount not greater than four times the value of the shareholder's account may be placed by telephone, fax, etc. by established shareholders (except by Scudder Individual Retirement Account (IRA), Scudder Horizon Plan, Scudder Profit Sharing and Money Purchase Pension Plans, Scudder 401(k) and Scudder 403(b) Plan holders), members of the NASD, and banks. Contact the Distributor at 1-800-SCUDDER for additional information. Orders placed in this manner may be directed to any office of the Distributor listed in the Fund's prospectus. A confirmation of the purchase will be mailed out promptly following receipt of a request to buy. Federal regulations require that payment be received within three business days. If payment is not received within that time, the order is subject to cancellation. In the event of such cancellation or cancellation at the purchaser's request, the purchaser will be responsible for any loss incurred by the Fund or the principal underwriter by reason of such cancellation. If the purchaser is a shareholder, the Trust shall have the authority, as agent of the shareholder, to redeem shares in the account in order to reimburse the Fund or the principal underwriter for the loss incurred. Net losses on such transactions which are not recovered from the purchaser will be absorbed by the principal underwriter. Any net profit on the liquidation of unpaid shares will accrue to the Fund. Additional Information About Making Subsequent Investments by QuickBuy Shareholders, whose predesignated bank account of record is a member of the Automated Clearing House Network (ACH) and who have elected to participate in the QuickBuy program, may purchase shares of the Fund by telephone (minimum $50 and maximum $250,000). To purchase shares by QuickBuy, shareholders should call before the close of regular trading on the New York Stock Exchange, Inc. (the "Exchange"), normally 4 p.m. eastern time. Proceeds in the amount of your purchase will be transferred from your bank checking account two or three business days following your call. For requests received by the close of regular trading on the Exchange, shares will be purchased at the net asset value 13 per share calculated at the close of trading on the day of your call. QuickBuy requests received after the close of regular trading on the Exchange will begin their processing and be purchased at the net asset value calculated the following business day. If you purchase shares by QuickBuy and redeem them within seven days of the purchase, the Fund may hold the redemption proceeds for a period of up to seven business days. If you purchase shares and there are insufficient funds in your bank account, the purchase will be canceled and you will be subject to any losses or fees incurred in the transaction. QuickBuy transactions are not available for most retirement plan accounts. However, QuickBuy transactions are available for Scudder IRA accounts. In order to request purchases by QuickBuy, shareholders must have completed and returned to the Transfer Agent the application, including the designation of a bank account from which the purchase payment will be debited. New investors wishing to establish QuickBuy may so indicate on the application. Existing shareholders who wish to add QuickBuy to their account may do so by completing a QuickBuy Enrollment Form. After sending in an enrollment form shareholders should allow 15 days for this service to be available. The Fund employs procedures, including recording telephone calls, testing a caller's identity, and sending written confirmation of telephone transactions, designed to give reasonable assurance that instructions communicated by telephone are genuine and to discourage fraud. To the extent that the Funds do not follow such procedures, they may be liable for losses due to unauthorized or fraudulent telephone instructions. The Funds will not be liable for acting upon instructions communicated by telephone that they reasonably believe to be genuine. Investors interested in making subsequent investments in Class AARP of the Fund should call 1-800-253-2277 for further information. Checks A certified check is not necessary, but checks are only accepted subject to collection at full face value in U.S. funds and must be drawn on, or payable through, a U.S. bank. If shares of the Fund are purchased by a check which proves to be uncollectible, the Trust reserves the right to cancel the purchase immediately and the purchaser will be responsible for any loss incurred by the Trust or the principal underwriter by reason of such cancellation. If the purchaser is a shareholder, the Trust will have the authority, as agent of the shareholder, to redeem shares in the account in order to reimburse the Fund or the principal underwriter for the loss incurred. Investors whose orders have been canceled may be prohibited from, or restricted in, placing future orders in any of the Scudder funds. Wire Transfer of Federal Funds To obtain the net asset value determined as of the close of regular trading on the Exchange on a selected day, your bank must forward federal funds by wire transfer and provide the required account information so as to be available to the Fund prior to the close of regular trading on the Exchange (normally 4 p.m. eastern time). The bank sending an investor's federal funds by bank wire may charge for the service. Presently, the Distributor pays a fee for receipt by State Street Bank and Trust Company of "wired funds," but the right to charge investors for this service is reserved. Boston banks are closed on certain holidays although the Exchange may be open. These holidays include Columbus Day (the 2nd Monday in October) and Veterans Day (November 11). Investors are not able to purchase shares by wiring federal funds on such holidays because the Custodian is not open to receive such federal funds on behalf of the Fund. Share Price Purchases will be filled without sales charge at the net asset value per share next computed after receipt of the application in good order. Net asset value normally will be computed for each class as of the close of regular trading on each day during which the Exchange is open for trading. Orders received after the close of regular trading on the Exchange will be executed at the next business day's net asset value. If the order has been placed by a member of the NASD, other than the Distributor, it is the responsibility of that member broker, rather than the Fund, to forward the purchase order to Scudder Service Corporation (the "Transfer Agent") in Kansas City by the close of regular trading on the Exchange. 14 Share Certificates Due to the desire of the Fund's management to afford ease of redemption, certificates will not be issued to indicate ownership in the Fund. Share certificates now in a shareholder's possession may be sent to the Fund's Transfer Agent for cancellation and credit to such shareholder's account. Shareholders who prefer may hold the certificates in their possession until they wish to exchange or redeem such shares. All issued and outstanding shares of what were formerly AARP Funds that were subsequently reorganized into existing Scudder Funds were simultaneously cancelled on the books of the AARP Funds. Share certificates representing interests in shares of the relevant AARP Fund will represent a number of shares of Class AARP of the relevant Scudder Fund into which the AARP Fund was reorganized. Class AARP shares of the fund will not issue certificates representing shares in connection with the reorganization. Other Information The Fund has authorized certain members of the NASD other than the Distributor to accept purchase and redemption orders for its shares. Those brokers may also designate other parties to accept purchase and redemption orders on the Fund's behalf. Orders for purchase or redemption will be deemed to have been received by the Fund when such brokers or their authorized designees accept the orders. Subject to the terms of the contract between the Fund and the broker, ordinarily orders will be priced at a class' net asset value next computed after acceptance by such brokers or their authorized designees. Further, if purchases or redemptions of the Fund's shares are arranged and settlement is made at an investor's election through any other authorized NASD member, that member may, at its discretion, charge a fee for that service. The Board of Directors and the Distributor, also the Fund's principal underwriter, each has the right to limit the amount of purchases by, and to refuse to sell to, any person. The Board of Directors and the Distributor may suspend or terminate the offering of shares of the Fund at any time for any reason. The "Tax Identification Number" section of the Application must be completed when opening an account. Applications and purchase orders without a certified tax identification number and certain other certified information (e.g., from exempt organizations a certification of exempt status), will be returned to the investor. The Funds reserve the right, following 30 days' notice, to redeem all shares in accounts without a correct certified Social Security or tax identification number. A shareholder may avoid involuntary redemption by providing the Fund with a tax identification number during the 30-day notice period. The Trust may issue shares at net asset value in connection with any merger or consolidation with, or acquisition of the assets of, any investment company or personal holding company, subject to the requirements of the 1940 Act. EXCHANGES AND REDEMPTIONS Exchanges Exchanges are comprised of a redemption from one Scudder fund and a purchase into another Scudder fund. The purchase side of the exchange either may be an additional investment into an existing account or may involve opening a new account in the other fund. When an exchange involves a new account, the new account will be established with the same registration, tax identification number, address, telephone redemption option, "Scudder Automated Information Line" (SAIL) transaction authorization and dividend option as the existing account. Other features will not carry over automatically to the new account. Exchanges to a new Fund account must be for a minimum of $2,500 for Class S and $1,000 for Class AARP. When an exchange represents an additional investment into an existing account, the account receiving the exchange proceeds must have identical registration, address, and account options/features as the account of origin. Exchanges into an existing account must be for $50 or more If the account receiving the exchange proceeds is to be different in any respect, the exchange request must be in writing and must contain an original signature guarantee. Exchange orders received before the close of regular trading on the Exchange on any business day ordinarily will be executed at respective net asset values determined on that day. Exchange orders received after the close of regular trading on the Exchange will be executed on the following business day. Investors may also request, at no extra charge, to have exchanges automatically executed on a predetermined schedule from one Scudder fund to an existing account in another Scudder fund, at current net asset value, through Scudder's 15 Automatic Exchange Program. Exchanges must be for a minimum of $50. Shareholders may add this free feature over the telephone or in writing. Automatic Exchanges will continue until the shareholder requests by telephone or in writing to have the feature removed, or until the originating account is depleted. The Trust and the Transfer Agent each reserves the right to suspend or terminate the privilege of the Automatic Exchange Program at any time. There is no charge to the shareholder for any exchange described above. An exchange into another Scudder fund is a redemption of shares and therefore may result in tax consequences (gain or loss) to the shareholder, and the proceeds of such an exchange may be subject to backup withholding. (See "TAXES.") Investors currently receive the exchange privilege, including exchange by telephone, automatically without having to elect it. The Fund employs procedures, including recording telephone calls, testing a caller's identity, and sending written confirmation of telephone transactions, designed to give reasonable assurance that instructions communicated by telephone are genuine and to discourage fraud. To the extent that the Fund does not follow such procedures, it may be liable for losses due to unauthorized or fraudulent telephone instructions. The Fund will not be liable for acting upon instructions communicated by telephone that it reasonably believes to be genuine. The Fund and the Transfer Agent each reserves the right to suspend or terminate the privilege of exchanging by telephone or fax at any time. The Scudder Funds into which investors may make an exchange are listed under "THE SCUDDER FAMILY OF FUNDS" herein. Before making an exchange, shareholders should obtain from Scudder Investor Services, Inc. a prospectus of the Scudder fund into which the exchange is being contemplated. The exchange privilege may not be available for certain Scudder Funds or classes of Scudder Funds. For more information, please call 1-800-225-5163 (Class S) and 1-800-253-2277 (Class AARP). Scudder retirement plans may have different exchange requirements. Please refer to appropriate plan literature. Redemption by Telephone Shareholders currently receive the right automatically, without having to elect it, to redeem by telephone up to $100,000 and have the proceeds mailed to their address of record. Shareholders may also request by telephone to have the proceeds mailed or wired to their predesignated bank account. In order to request wire redemptions by telephone, shareholders must have completed and returned to the Transfer Agent the application, including the designation of a bank account to which the redemption proceeds are to be sent. (a) NEW INVESTORS wishing to establish the telephone redemption privilege must complete the appropriate section on the application. (b) EXISTING SHAREHOLDERS (except those who are Scudder IRA, Scudder pension and profit-sharing, Scudder 401(k) and Scudder 403(b) Planholders) who wish to establish telephone redemption to a predesignated bank account or who want to change the bank account previously designated to receive redemption proceeds should either return a Telephone Redemption Option Form (available upon request), or send a letter identifying the account and specifying the exact information to be changed. The letter must be signed exactly as the shareholder's name(s) appears on the account. An original signature and an original signature guarantee are required for each person in whose name the account is registered. If a request for a redemption to a shareholder's bank account is made by telephone or fax, payment will be by Federal Reserve bank wire to the bank account designated on the application, unless a request is made that the redemption check be mailed to the designated bank account. There will be a $5 charge for all wire redemptions. Note: Investors designating a savings bank to receive their telephone redemption proceeds are advised that if the savings bank is not a participant in the Federal Reserve System, redemption proceeds must be wired through a commercial bank which is a correspondent of the savings bank. As this may delay receipt by the shareholder's account, it is suggested that investors wishing to use a savings bank discuss wire procedures with their bank and submit any special wire transfer information with the telephone redemption authorization. If appropriate wire information is not supplied, redemption proceeds will be mailed to the designated bank. The Fund employs procedures, including recording telephone calls, testing a caller's identity, and sending written confirmation of telephone transactions, designed to give reasonable assurance that instructions communicated by 16 telephone are genuine and to discourage fraud. To the extent that the Fund does not follow such procedures, it may be liable for losses due to unauthorized or fraudulent telephone instructions. The Fund will not be liable for acting upon instructions communicated by telephone that it reasonably believes to be genuine. Redemption requests by telephone (technically a repurchase agreement between the Fund and the shareholder) of shares purchased by check will not be accepted until the purchase check has cleared which may take up to seven business days. Redemption by QuickSell Shareholders, whose predesignated bank account of record is a member of the Automated Clearing House Network (ACH) and have elected to participate in the QuickSell program, may sell shares of the Fund by telephone (minimum $50 and maximum $250,000). Proceeds in the amount of your redemption will be transferred to your bank checking account in two or three business days following your call. For requests received by the close of regular trading on the Exchange, normally 4 p.m. eastern time, shares will be redeemed at the net asset value per share calculated at the close of trading on the day of your call. QuickSell requests received after the close of regular trading on the Exchange will begin their processing the following business day. QuickSell transactions are not available for Scudder IRA accounts and most other retirement plan accounts. In order to request redemptions by QuickSell, shareholders must have completed and returned to the Transfer Agent the application, including the designation of a bank account. New investors wishing to establish QuickSell may so indicate on the application. Existing shareholders who wish to add QuickSell to their account may do so by completing a QuickSell Enrollment Form. After sending in an enrollment form, shareholders should allow for 15 days for this service to be available. The Fund employs procedures, including recording telephone calls, testing a caller's identity, and sending written confirmation of telephone transactions, designed to give reasonable assurance that instructions communicated by telephone are genuine and to discourage fraud. To the extent that the Fund does not follow such procedures, it may be liable for losses due to unauthorized or fraudulent telephone instructions. The Fund will not be liable for acting upon instructions communicated by telephone that it reasonably believes to be genuine. Redemption by Mail or Fax Any existing share certificates representing shares being redeemed must accompany a request for redemption and be duly endorsed or accompanied by a proper stock assignment form with signature(s) guaranteed. In order to ensure proper authorization before redeeming shares, the Transfer Agent may request additional documents such as, but not restricted to, stock powers, trust instruments, certificates of death, appointments as executor, certificates of corporate authority and waivers of tax (required in some states when settling estates). It is suggested that shareholders holding shares registered in other than individual names contact the Transfer Agent prior to any redemptions to ensure that all necessary documents accompany the request. When shares are held in the name of a corporation, trust, fiduciary agent, attorney or partnership, the Transfer Agent requires, in addition to the stock power, certified evidence of authority to sign. These procedures are for the protection of shareholders and should be followed to ensure prompt payment. Redemption requests must not be conditional as to date or price of the redemption. Proceeds of a redemption will be sent within seven (7) business days after receipt by the Transfer Agent of a request for redemption that complies with the above requirements. Delays of more than seven (7) days of payment for shares tendered for repurchase or redemption may result, but only until the purchase check has cleared. The requirements for IRA redemptions are different from those for regular accounts. For more information call 1-800-225-5163. Other Information If a shareholder redeems all shares in the account after the record date of a dividend, the shareholder will receive, in addition to the net asset value thereof, all declared but unpaid dividends thereon. The value of shares redeemed or repurchased may be more or less than the shareholder's cost depending on the net asset value at the time of redemption or repurchase. A wire charge may be applicable for redemption proceeds wired to an investor's bank account. 17 Redemptions of shares, including an exchange into another Scudder fund, may result in tax consequences (gain or loss) to the shareholder and the proceeds of such redemptions may be subject to backup withholding. (see "TAXES.") Shareholders who wish to redeem shares from Special Plan Accounts should contact the employer, trustee or custodian of the Plan for the requirements. The determination of net asset value and a shareholder's right to redeem shares and to receive payment may be suspended at times and a shareholder's right to redeem shares and to receive payment may be suspended at times during which (a) the Exchange is closed, other than customary weekend and holiday closings, (b) trading on the Exchange is restricted for any reason, (c) an emergency exists as a result of which disposal by the Fund of securities owned by it is not reasonably practicable or it is not reasonably practicable for the Fund fairly to determine the value of its net assets, or (d) a governmental body having jurisdiction over the Fund may by order permit such a suspension for the protection of the Trust's shareholders; provided that applicable rules and regulations of the SEC (or any succeeding governmental authority) shall govern as to whether the conditions prescribed in (b), (c) or (d) exist. The Trust, on behalf of the Fund, has elected to be governed by Rule 18f-1 under the 1940 Act, as a result of which the Fund is obligated to redeem shares, with respect to any one shareholder during any 90 day period, solely in cash up to the lesser of $250,000 or 1% of the net asset value of the Fund at the beginning of the period. FEATURES AND SERVICES OFFERED BY THE FUND Internet access World Wide Web Site -- The address of the Scudder Funds site is www.myScudder.com. The address for Class AARP shares is aarp.scudder.com. These sites offer guidance on global investing and developing strategies to help meet financial goals and provide access to the Scudder investor relations department via e-mail. The sites also enable users to access or view fund prospectuses and profiles with links between summary information in Fund Summaries and details in the Prospectus. Users can fill out new account forms on-line, order free software, and request literature on funds. Account Access -- The 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. Dividends and Capital Gains Distribution Options Investors have freedom to choose whether to receive cash or to reinvest any dividends from net investment income or distributions from realized capital gains in additional Shares of the Fund. A change of instructions for the method of payment may be given to the Transfer Agent in writing at least five days prior to a dividend record date. Shareholders may change their dividend option by calling 1-800-225-5163 for Class S and 1-800-253-2277 for Class AARP or by sending written instructions to the Transfer Agent. Please include your account number with your written request. Reinvestment is usually made at the closing net asset value determined on the business day following the record date. Investors may leave standing instructions with the Transfer Agent designating their option for either reinvestment or cash distribution of any income dividends or capital gains distributions. If no election is made, dividends and distributions will be invested in additional class shares of the Fund. 18 Investors may also have dividends and distributions automatically deposited to their predesignated bank account through Scudder's Direct Distributions Program. Shareholders who elect to participate in the Direct Distributions Program, and whose predesignated checking account of record is with a member bank of Automated Clearing House Network (ACH) can have income and capital gain distributions automatically deposited to their personal bank account usually within three business days after the Fund pays its distribution. A Direct Distributions request form can be obtained by calling 1-800-225-5163 for Class S and 1-800-253-2277 for Class AARP. Confirmation Statements will be mailed to shareholders as notification that distributions have been deposited. Investors choosing to participate in Scudder's Automatic Withdrawal Plan must reinvest any dividends or capital gains. For most retirement plan accounts, the reinvestment of dividends and capital gains is also required. Scudder Investor Centers Investors may visit any of the Investor Centers maintained by the Distributor listed in the Funds' prospectuses. The Centers are designed to provide individuals with services during any business day. Investors may pick up literature or obtain assistance with opening an account, adding monies or special options to existing accounts, making exchanges within the Scudder Family of Funds, redeeming shares or opening retirement plans. Checks should not be mailed to the Centers but should be mailed to "The Scudder Funds" at the address listed under "Purchases" in the prospectus. Reports to Shareholders The Trust issues shareholders unaudited semiannual financial statements and annual financial statements audited by independent accountants, including a list of investments held and statements of assets and liabilities, operations, changes in net assets and financial highlights. The Trust presently intends to distribute to shareholders informal quarterly reports during the intervening quarters, containing a statement of the investments of the Funds. Transaction Summaries Annual summaries of all transactions in each Fund account are available to shareholders. The summaries may be obtained by calling 1-800-SCUDDER. 19 20 SPECIAL PLAN ACCOUNTS Detailed information on any Scudder investment plan, including the applicable charges, minimum investment requirements and disclosures made pursuant to Internal Revenue Service (the "IRS") requirements, may be obtained by contacting Scudder Investor Services, Inc., Two International Place, Boston, Massachusetts 02110-4103 or by calling toll free, 1-800-225-2470. The discussions of the plans below describe only certain aspects of the federal income tax treatment of the plan. The state tax treatment may be different and may vary from state to state. It is advisable for an investor considering the funding of the investment plans described below to consult with an attorney or other investment or tax advisor with respect to the suitability requirements and tax aspects thereof. Shares of the Fund may also be a permitted investment under profit sharing and pension plans and IRAs other than those offered by the Fund's distributor depending on the provisions of the relevant plan or IRA. None of the plans assures a profit or guarantees protection against depreciation, especially in declining markets. Scudder Retirement Plans: Profit-Sharing and Money Purchase Pension Plans for Corporations and Self-Employed Individuals Shares of the Fund may be purchased as the investment medium under a plan in the form of a Scudder Profit-Sharing Plan (including a version of the Plan which includes a cash-or-deferred feature) or a Scudder Money Purchase Pension Plan (jointly referred to as the Scudder Retirement Plans) adopted by a corporation, a self-employed individual or a group of self-employed individuals (including sole proprietorships and partnerships), or other qualifying organization. Each of these forms was approved by the IRS as a prototype. The IRS's approval of an employer's plan under Section 401(a) of the Internal Revenue Code will be greatly facilitated if it is in such approved form. Under certain circumstances, the IRS will assume that a plan, adopted in this form, after special notice to any employees, meets the requirements of Section 401(a) of the Internal Revenue Code as to form. Scudder 401(k): Cash or Deferred Profit-Sharing Plan for Corporations and Self-Employed Individuals Shares of the Fund may be purchased as the investment medium under a plan in the form of a Scudder 401(k) Plan adopted by a corporation, a self-employed individual or a group of self-employed individuals (including sole proprietors and partnerships), or other qualifying organization. This plan has been approved as a prototype by the IRS. Scudder IRA: Individual Retirement Account Shares of the Fund may be purchased as the underlying investment for an Individual Retirement Account which meets the requirements of Section 408(a) of the Internal Revenue Code. A single individual who is not an active participant in an employer-maintained retirement plan, such as a pension or profit sharing plan, a governmental plan, a simplified employee pension plan, a simple retirement account, or a tax-deferred annuity program (a "qualified plan"), and a married individual who is not an active participant in a qualified plan and whose spouse is also not an active participant in a qualified plan, are eligible to make tax deductible contributions of up to $2,000 to an IRA prior to the year such individual attains age 70 1/2. In addition, certain individuals who are active participants in qualified plans (or who have spouses who are active participants) are also eligible to make tax-deductible contributions to an IRA; the annual amount, if any, of the contribution which such an individual will be eligible to deduct will be determined by the amount of his, her, or their adjusted gross income for the year. If an individual is an active 21 participant, the deductibility of his or her IRA contributions in 2000 is phased out if the individual has gross income between $33,000 and $43,000 and is single, if the individual has gross income between $53,000 and $63,000 and is married filing jointly, or if the individual has gross income between $0 and $10,000 and is married filing separately; the phase-out ranges for individuals who are single or married filing jointly are subject to annual adjustment through 2005 and 2007, respectively. If an individual is married filing jointly and the individual's spouse is an active participant but the individual is not, the deductibility of his or her IRA contributions is phased out if their combined gross income is between $150,000 and $160,000. Whenever the adjusted gross income limitation prohibits an individual from contributing what would otherwise be the maximum tax-deductible contribution he or she could make, the individual will be eligible to contribute the difference to an IRA in the form of nondeductible contributions. There are special rules for determining how withdrawals are to be taxed if an IRA contains both deductible and nondeductible amounts. In general, a proportionate amount of each withdrawal will be deemed to be made from nondeductible contributions; amounts treated as a return of nondeductible contributions will not be taxable. An eligible individual may contribute as much as $2,000 of qualified income (earned income or, under certain circumstances, alimony) to an IRA each year (up to $2,000 per individual for married couples, even if only one spouse has earned income). All income and capital gains derived from IRA investments are reinvested and compound tax-deferred until distributed. Such tax-deferred compounding can lead to substantial retirement savings. Scudder Roth IRA: Individual Retirement Account Shares of the Fund may be purchased as the underlying investment for a Roth individual Retirement Account which meets the requirements of Section 408A of the Internal Revenue Code. A single individual earning below $95,000 can contribute up to $2,000 per year to a Roth IRA. The maximum contribution amount diminishes and gradually falls to zero for single filers with adjusted gross incomes ranging from $95,000 to $110,000. Married couples earning less than $150,000 combined, and filing jointly, can contribute a full $4,000 per year ($2,000 per IRA). The maximum contribution amount for married couples filing jointly phases out from $150,000 to $160,000. An eligible individual can contribute money to a traditional IRA and a Roth IRA as long as the total contribution to all IRAs does not exceed $2,000. No tax deduction is allowed under Section 219 of the Internal Revenue Code for contributions to a Roth IRA. Contributions to a Roth IRA may be made even after the individual for whom the account is maintained has attained age 70 1/2. All income and capital gains derived from Roth IRA investments are reinvested and compounded tax-free. Such tax-free compounding can lead to substantial retirement savings. No distributions are required to be taken prior to the death of the original account holder. If a Roth IRA has been established for a minimum of five years, distributions can be taken tax-free after reaching age 59 1/2, for a first-time home purchase ($10,000 maximum, one-time use) or upon death or disability. All other distributions of earnings from a Roth IRA are taxable and subject to a 10% tax penalty unless an exception applies. Exceptions to the 10% penalty include: disability, certain medical expenses, the purchase of health insurance for an unemployed individual and qualified higher education expenses. An individual with an income of $100,000 or less (who is not married filing separately) can roll his or her existing IRA into a Roth IRA. However, the individual must pay taxes on the taxable amount in his or her traditional IRA. Individuals who complete the rollover in 1998 will be allowed to spread the tax payments over a four-year period. After 1998, all taxes on such a rollover will have to be paid in the tax year in which the rollover is made. Scudder 403(b) Plan Shares of the Fund may also be purchased as the underlying investment for tax sheltered annuity plans under the provisions of Section 403(b)(7) of the Internal Revenue Code. In general, employees of tax-exempt organizations described in Section 501(c)(3) of the Internal Revenue Code (such as hospitals, churches, religious, scientific, or literary organizations and educational institutions) or a public school system are eligible to participate in a 403(b) plan. 22 Automatic Withdrawal Plan Non-retirement plan shareholders may establish an Automatic Withdrawal Plan to receive monthly, quarterly or periodic redemptions from his or her account for any designated amount of $50 or more. Shareholders may designate which day they want the automatic withdrawal to be processed. The check amounts may be based on the redemption of a fixed dollar amount, fixed share amount, percent of account value or declining balance. The Plan provides for income dividends and capital gains distributions, if any, to be reinvested in additional shares. Shares are then liquidated as necessary to provide for withdrawal payments. Since the withdrawals are in amounts selected by the investor and have no relationship to yield or income, payments received cannot be considered as yield or income on the investment and the resulting liquidations may deplete or possibly extinguish the initial investment and any reinvested dividends and capital gains distributions. Requests for increases in withdrawal amounts or to change the payee must be submitted in writing, signed exactly as the account is registered, and contain signature guarantee(s) as described under "Transaction information - -- Redeeming shares -- Signature guarantees" in the Fund's prospectus. Any such requests must be received by the Fund's transfer agent ten days prior to the date of the first automatic withdrawal. An Automatic Withdrawal Plan may be terminated at any time by the shareholder, the Corporation or its agent on written notice, and will be terminated when all shares of the Fund under the Plan have been liquidated or upon receipt by the Corporation of notice of death of the shareholder. An Automatic Withdrawal Plan request form can be obtained by calling 1-800-225-5163 for Class S and 1-800-253-2277 for Class AARP. Group or Salary Deduction Plan An investor may join a Group or Salary Deduction Plan where satisfactory arrangements have been made with Scudder Investor Services, Inc. for forwarding regular investments through a single source. The minimum annual investment is $240 per investor which may be made in monthly, quarterly, semiannual or annual payments. The minimum monthly deposit per investor is $20. Except for trustees or custodian fees for certain retirement plans, at present there is no separate charge for maintaining group or salary deduction plans; however, the Trust and its agents reserve the right to establish a maintenance charge in the future depending on the services required by the investor. The Trust reserves the right, after notice has been given to the shareholder, to redeem and close a shareholder's account in the event that the shareholder ceases participating in the group plan prior to investment of $1,000 per individual or in the event of a redemption which occurs prior to the accumulation of that amount or which reduces the account value to less than $1,000 and the account value is not increased to $1,000 within a reasonable time after notification. An investor in a plan who has not purchased shares for six months shall be presumed to have stopped making payments under the plan. Automatic Investment Plan Shareholders may arrange to make periodic investments Class S through automatic deductions from checking accounts by completing the appropriate form and providing the necessary documentation to establish this service. The minimum investment is $50 for Class S shares. Shareholders may arrange to make periodic investments in Class AARP of the Fund through automatic deductions from checking accounts. The minimum pre-authorized investment amount is $50. New shareholders who open a Gift to Minors Account pursuant to the Uniform Gift to Minors Act (UGMA) and the Uniform Transfer to Minors Act (UTMA) and who sign up for the Automatic Investment Plan will be able to open the Fund account for less than $500 if they agree to increase their investment to $500 within a 10 month period. Investors may also invest in any Class AARP for $500 if they establish a plan with a minimum automatic investment of at least $100 per month. This feature is only available to Gifts to Minors Account investors. The Automatic Investment Plan may be discontinued at any time without prior notice to a shareholder if any debit from their bank is not paid, or by written notice to the shareholder at least thirty days prior to the next scheduled payment to the Automatic Investment Plan. The Automatic Investment Plan involves an investment strategy called dollar cost averaging. Dollar cost averaging is a method of investing whereby a specific dollar amount is invested at regular intervals. By investing the same dollar amount each period, when shares are priced low the investor will purchase more shares than when the share price is higher. Over a period of time this investment approach may allow the investor to reduce the average price of the shares 23 purchased. However, this investment approach does not assure a profit or protect against loss. This type of regular investment program may be suitable for various investment goals such as, but not limited to, college planning or saving for a home. Uniform Transfers/Gifts to Minors Act Grandparents, parents or other donors may set up custodian accounts for minors. The minimum initial investment is $1,000 unless the donor agrees to continue to make regular share purchases for the account through Scudder's Automatic Investment Plan (AIP). In this case, the minimum initial investment is $500. The Trust reserves the right, after notice has been given to the shareholder and custodian, to redeem and close a shareholder's account in the event that regular investments to the account cease before the $1,000 minimum is reached. DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS The Fund intends to follow the practice of distributing substantially all of its investment company taxable income, which includes any excess of net realized short-term capital gains over net realized long-term capital losses. The Fund may follow the practice of distributing the entire excess of net realized long-term capital gains over net realized short-term capital losses. However, the Fund may retain all or part of such gain for reinvestment, after paying the related federal income taxes for which the shareholders may claim a credit against their federal income tax liability. If the Fund does not distribute the amount of capital gains and/or ordinary income required to be distributed by an excise tax provision of the Code, the Fund may be subject to that excise tax. In certain circumstances, the Fund may determine that it is in the interest of shareholders to distribute less than the required amount. (See "TAXES.") The Fund intends to distribute investment company taxable income, exclusive of net short-term capital gains in excess of net long-term capital losses in March, June, September and December each year. Distributions of net capital gains realized during each fiscal year will be made annually before the end of the Fund's fiscal year on December 31. Additional distributions, including distributions of net short-term capital gains in excess of net long-term capital losses, may be made, if necessary. Both types of distributions will be made in shares of the Fund and confirmations will be mailed to each shareholder unless a shareholder has elected to receive cash, in which case a check will be sent. The Fund will reinvest dividend checks (and future dividends) in shares of the same Fund and class if checks are returned as undeliverable. PERFORMANCE INFORMATION From time to time, quotations of the Fund's performance may be included in advertisements, sales literature or reports to shareholders or prospective investors. These performance figures will be calculated in the following manner: Average Annual Total Return Average Annual Total Return is the average annual compound rate of return for the periods of one year and the life of the Fund, all ended on the last day of a recent calendar quarter. Average annual total return quotations reflect changes in the price of the Fund's shares and assume that all dividends and capital gains distributions during the respective periods were reinvested in Fund shares. Average annual total return is calculated by finding the average annual compound rates of return of a hypothetical investment over such periods, according to the following formula (average annual total return is then expressed as a percentage): T = (ERV/P)^1/n - 1 Where: P = A hypothetical initial investment of $1,000 T = Average Annual Total Return n = Number of years 24 ERV = Ending redeemable value: ERV is the value, at the end of the applicable period, of a hypothetical $1,000 investment made at the beginning of the applicable period. Total Return for the periods ended December 31, 2001 Scudder S&P 500 Index Fund One Year Life of the Fund^(1) -------------------- ^(1) For the period from August 29, 1997, commencement of operations to December 31, 2001. Note: If the Advisor had not maintained expenses, the total returns would have been lower. Cumulative Total Return Cumulative Total Return is the cumulative rate of return on a hypothetical initial investment of $1,000 for a specified period. Cumulative Total Return quotations reflect changes in the price of the Fund's shares and assume that all dividends and capital gains distributions during the period were reinvested in Fund shares. Cumulative Total Return is calculated by finding the cumulative rates of return of a hypothetical investment over such periods, according to the following formula (Cumulative Total Return is then expressed as a percentage): C = (ERV/P) - 1 Where: C = Cumulative Total Return P = A hypothetical initial investment of $1,000 ERV = Ending redeemable value: ERV is the value, at the end of the applicable period, of a hypothetical $1,000 investment made at the beginning of the applicable period Cumulative Total Return for the periods ended December 31, 2001 Scudder S&P 500 Index Fund One Year Life of the Fund^(1) -------------------- ^(1) For the period from August 29, 1997, commencement of operations to December 31, 2001. Note: If the Advisor had not maintained expenses, the total returns would have been lower. Total Return Total Return is the rate of return on an investment for a specified period of time calculated in the same manner as Cumulative Total Return. Comparison of Fund Performance In connection with communicating its performance to current or prospective shareholders, the Fund also may compare these figures to the performance of unmanaged indices which may assume reinvestment of dividends or interest but generally do not reflect deductions for administrative and management costs. From time to time, in advertising and marketing literature, this Fund's performance may be compared to the performance of broad groups of mutual funds with similar investment goals, as tracked by independent organizations. 25 From time to time, in marketing and other Fund literature, Trustees and officers of the Fund, the Fund's portfolio manager, or members of the portfolio management team may be depicted and quoted to give prospective and current shareholders a better sense of the outlook and approach of those who manage the Fund. In addition, the amount of assets that the Advisor has under management in various geographical areas may be quoted in advertising and marketing materials. The Fund may be advertised as an investment choice in the Manager's college planning program. The description may contain illustrations of projected future college costs based on assumed rates of inflation and examples of hypothetical fund performance, calculated as described above. Statistical and other information, as provided by the Social Security Administration, may be used in marketing materials pertaining to retirement planning in order to estimate future payouts of social security benefits. Estimates may be used on demographic and economic data. Marketing and other Fund literature may include a description of the potential risks and rewards associated with an investment in the Fund. The description may include a "risk/return spectrum" which compares the Fund to other Scudder funds or broad categories of funds, such as money market, bond or equity funds, in terms of potential risks and returns. Money market funds are designed to maintain a constant $1.00 share price and have a fluctuating yield. Share price, yield and total return of a bond fund will fluctuate. The share price and return of an equity fund also will fluctuate. The description may also compare the Fund to bank products, such as certificates of deposit. Unlike mutual funds, certificates of deposit are insured up to $100,000 by the U.S. government and offer a fixed rate of return. Because bank products guarantee the principal value of an investment and money market funds seek stability of principal, these investments are considered to be less risky than investments in either bond or equity funds, which may involve the loss of principal. However, all long-term investments, including investments in bank products, may be subject to inflation risk, which is the risk of erosion of the value of an investment as prices increase over a long time period. The risks/returns associated with an investment in bond or equity funds depend upon many factors. For bond funds these factors include, but are not limited to, a fund's overall investment objective, the average portfolio maturity, credit quality of the securities held, and interest rate movements. For equity funds, factors include a fund's overall investment objective, the types of equity securities held and the financial position of the issuers of the securities. The risks/returns associated with an investment in international bond or equity funds also will depend upon currency exchange rate fluctuation. A risk/return spectrum generally will position the various investment categories in the following order: bank products, money market funds, bond funds and equity funds. Shorter-term bond funds generally are considered less risky and offer the potential for less return than longer-term bond funds. The same is true of domestic bond funds relative to international bond funds, and bond funds that purchase higher quality securities relative to bond funds that purchase lower quality securities. Growth and income equity funds are generally considered to be less risky and offer the potential for less return than growth funds. In addition, international equity funds usually are considered more risky than domestic equity funds but generally offer the potential for greater return. Evaluation of Fund performance or other relevant statistical information made by independent sources may also be used in advertisements concerning the Fund, including reprints of, or selections from, editorials or articles about this Fund. FUND ORGANIZATION The Fund is a diversified series of Investment Trust, a Massachusetts business trust established under a Declaration of Trust dated September 20, 1984, as amended. The name of the Trust was changed effective March 6, 1991, from Scudder Growth and Income Fund, and on June 10, 1998 from Scudder Investment Trust. The Trust's authorized capital consists of an unlimited number of shares of beneficial interest, par value $0.01 per share. The Trust's shares are currently divided into seven series, Classic Growth Fund, Scudder Capital Growth Fund, Scudder Dividend & Growth Fund, Scudder Growth and Income Fund, Scudder Large Company Growth Fund, Scudder S&P 500 Index Fund, and Scudder Small Company Stock Fund, The Trustees have the authority to issue additional series of shares and to designate the relative rights and preferences as between the different series. Each share of the Fund has equal rights with each other share of the Fund as to voting, dividends and liquidation. All shares issued and outstanding will be fully paid and nonassessable by the Trust, and 26 redeemable as described in this Statement of Additional Information and in the Fund's prospectus. The Fund is further dividend into two classes of shares, Class AARP and Class S shares. The assets of the Trust received for the issue or sale of the shares of each series and all income, earnings, profits and proceeds thereof, subject only to the rights of creditors, are specifically allocated to such series and constitute the underlying assets of such series. The underlying assets of each series are segregated on the books of account, and are to be charged with the liabilities in respect to such series and with a proportionate share of the general liabilities of the Trust. If a series were unable to meet its obligations, the assets of all other series may in some circumstances be available to creditors for that purpose, in which case the assets of such other series could be used to meet liabilities which are not otherwise properly chargeable to them. Expenses with respect to any two or more series are to be allocated in proportion to the asset value of the respective series except where allocations of direct expenses can otherwise be fairly made. The officers of the Trust, subject to the general supervision of the Trustees, have the power to determine which liabilities are allocable to a given series, or which are general or allocable to two or more series. In the event of the dissolution or liquidation of the Trust or any series, the holders of the shares of any series are entitled to receive as a class the underlying assets of such shares available for distribution to shareholders. Shares of the Trust entitle their holders to one vote per share; however, separate votes are taken by each series on matters affecting that individual series. For example, a change in investment policy for a series would be voted upon only by shareholders of the series involved. Additionally, approval of the investment advisory agreement is a matter to be determined separately by each series. The Trustees, in their discretion, may authorize the division of shares of the Fund (or shares of a series) into different classes, permitting shares of different classes to be distributed by different methods. Although shareholders of different classes of a series would have an interest in the same portfolio of assets, shareholders of different classes may bear different expenses in connection with different methods of distribution. The Declaration of Trust provides that obligations of the Fund are not binding upon the Trustees individually but only upon the property of the Fund, that the Trustees and officers will not be liable for errors of judgment or mistakes of fact or law and that the Trust will indemnify its Trustees and officers against liabilities and expenses incurred in connection with litigation in which they may be involved because of their offices with the Fund, except if it is determined in the manner provided in the Declaration of Trust that they have not acted in good faith in the reasonable belief that their actions were in the best interests of the Fund. Nothing in the Declaration of Trust, however, protects or indemnifies a Trustee or officer against any liability to which that person would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of that person's office. INVESTMENT MANAGER AND ADMINISTRATOR FOR THE FUND Deutsche Asset Management is the marketing name in the US for the asset management activities of Deutsche Bank, ___________, Deutsche Fund Management, Inc., Deutsche Banc Alex. Brown Inc., Deutsche Asset Management, Inc. (`DeAM, Inc.') and Deutsche Asset Management Investment Services Limited (`DeAMIS'). _______ provides a full range of international investment advisory services to institutional and retail clients, and as of December 31, 2001, managed approximately $__ billion in assets. _______ is an indirect wholly owned subsidiary of Deutsche Bank. Deutsche Bank 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. On December 3, 2001, Zurich Financial Services, the majority owner of Zurich Scudder Investments, Inc. ("Scudder"), the Fund's investment manager, entered into a Transaction Agreement with Deutsche Bank AG ("Deutsche Bank") under which Deutsche Bank will acquire 100% of Scudder. Following this transaction, Scudder will become part of Deutsche Asset Management. Scudder will subsequently change its name to _____ although the Fund will continue to be branded and marketed as a "Scudder" fund. Pending shareholder approval, each fund will enter into an investment management agreement with Deutsche Bank AG ("Deutsche Bank"), a global financial institution, effective April 5, 2002. Deutsche Bank manages, directly and through its wholly owned subsidiaries, more than $500 billion in assets (as of December 31, 2001), including approximately 27 $53 billion of assets in open- and closed-end investment companies managed in the United States. The terms of the proposed investment management agreement for each fund are substantially identical to the terms of each fund's current management agreement with Zurich Scudder Investments, Inc., except that, under the proposed investment management agreement, Zurich Scudder Investments, Inc., subject to Board approval, would be authorized to appoint certain affiliates as subadvisors. Zurich Scudder Investments, Inc. ("Scudder"), an investment counsel firm, acted as investment manager to the Fund to monitor the Fund's investments in the Portfolio subject to the authority of and supervision by the Trust's Board of Trustees. 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 changed to Zurich Scudder Investments, Inc. On September 7, 1998, the businesses of Zurich (including Zurich's 70% interest in Scudder Kemper) and the financial services businesses of B.A.T Industries p.l.c. ("B.A.T") were combined to form a new global insurance and financial services company known as Zurich Financial Services Group. By way of a dual holding company structure, former Zurich shareholders initially owned approximately 57% of Zurich Financial Services Group, with the balance initially owned by former B.A.T shareholders. On October 17, 2000, the dual holding company structure of Zurich Financial Services Group, comprised of Allied Zurich, p.l.c. in the United Kingdom and Zurich Allied A.G. in Switzerland, was unified into a single Swiss holding company, Zurich Financial Services. 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, colleges, industrial corporations, and financial and banking organizations, as well as providing investment advice to over 280 open- and closed-end mutual 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. The Advisor's international investment management team travels the world, researching hundreds of companies. In selecting the securities in which the Fund may invest, the conclusions and investment decisions of the Advisor with respect to the Fund are based primarily on the analyses of its own research department. As described above, the Fund retains the Advisor as investment manager to the Fund, pursuant to an investment management agreement, to monitor the Fund's investments in the Portfolio, subject to the authority of and supervision by the Trust's Board of Trustees. The prior investment management agreement between the Fund and Scudder terminated on _________and was replaced by the current investment management agreement (the "Agreement"), between the Fund and the Advisor. The Agreement was approved by the Trustees on _________ and by the shareholders at a special shareholders meeting on _____ and became effective _________. The Agreement will continue in effect until _________ and from year to year thereafter only if its continuance is approved annually by the vote of a majority of those Trustees who are not parties to such Agreement or interested persons of the 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 terminates in the event of its assignment. 28 The Advisor receives no fee for providing these monitoring services. In the event the Board of Trustees determines it is in the best interests of the Fund's shareholders to withdraw its investment in the Portfolio, the Advisor would become responsible for directly managing the assets of the Fund. In such event, the Fund would pay the Advisor an annual fee of 0.15% of the Fund's average daily net assets, accrued daily and paid monthly. Under an Administrative Services Agreement dated December 31, 1997, Scudder provided shareholder and administration services to the Fund. Scudder received a fee of 0.10% of the Fund's average daily net assets, accrued daily and paid monthly. For the period January 1, 2000 to December 31, 2000, under the terms of a Third Party Feeder Agreement between the Fund and Scudder, Scudder waived the expenses of the Portfolio to the extent necessary to limit the expenses of the Portfolio to 0.05% of its annual average net assets. For the period January 1, 2000 to September 10, 2000, Scudder has agreed to maintain expenses of the Fund to 0.40% of its annual average daily net assets (including the Fund's pro rata share of the expenses of the Portfolio). For the year ended December 31, 1999, Scudder did not impose any of its administrative fee, which amounted to $251,451. Further, due to the limitations of such Agreement, Scudder's reimbursement to the Fund for the period ended December 31, 1999 amounted to $11,936. For the period ended December 31, 2000, Scudder did not impose a portion of it administrative fee aggregating $219,568. For the period ended December 31, 2000, the amount imposed amounted to $332,183 of which $88,275 was unpaid at December 31, 2000. For the period ended December 31, 2001, the fee amounted to $______. 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. The Agreement identifies the Advisor as the exclusive licensee of the rights to use and sublicense the names "Scudder," "Zurich Scudder Investments, Inc." and "Scudder, Stevens and Clark, Inc." (together, the "Scudder Marks"). Under this license, the Trust, with respect to the Fund, has the non-exclusive right to use and sublicense the Scudder name and marks as part of its name, and to use the Scudder Marks in the Trust's investment products and services. The term Scudder Investments is the designation given to the services provided by Zurich Scudder Investments, Inc. and its affiliates to the Scudder Family of Funds. AARP through its affiliates monitors and approves the AARP Investment Program from Scudder Investments, but does not recommend specific mutual funds. The Manager has agreed to pay a fee to AARP and/or its affiliates in return for the use of the AARP trademark and services relating to investments by AARP members in AARP Class shares of each fund. This fee is calculated on a daily basis as a percentage of the combined net assets of AARP Classes of all funds managed by the Manager. The fee rates, which decrease as the aggregate net assets of the AARP Classes become larger, are as follows: 0.07% for the first $6 billion in net assets, 0.06% for the next $10 billion and 0.05% thereafter. These amounts are used for the general purposes of AARP and its members. Administrative Fee The Fund has entered into an administrative services agreement with the Manager (the "Administrative Agreement"), pursuant to which the Manager will provide or pay others to provide substantially all of the administrative services required by the Fund (other than those provided by the Manager under its administrative and services agreement with the Fund) in exchange for the payment by the Fund of an administrative services fee (the "Administrative Fee") of 0.25% of its average daily net assets. One effect of these arrangements is to make the Fund's future expense ratio more predictable. The Administrative Fee became effective on September 11, 2000. Various third-party service providers (the "Service Providers"), some of which are affiliated with the Manager, provide certain services to the Fund pursuant to separate agreements with the Fund. Scudder Fund Accounting Corporation, a subsidiary of the Manager, computes net asset value for the Fund and maintains their accounting records. Scudder Service Corporation, also a subsidiary of the Manager, provides subaccounting and recordkeeping services for shareholders in certain retirement and employee benefit plans. As custodian, State Street Bank and Trust Company holds the portfolio securities of the Fund, pursuant to a custodian agreement. PricewaterhouseCoopers LLP audits the financial statements of the Fund and provides other audit, tax and related services. Dechert acts as general counsel for the Fund. 29 The Manager 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 Manager and Administrative Fee. The Administrative Agreement has an initial term of three years, subject to earlier termination by the Fund's Board. The fee payable by the Fund to the Manager pursuant to the Administrative Agreement is reduced by the amount of any credit received from the Fund's custodian for cash balances. Certain expense of the Fund will not be borne by the Manager 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 Manager and would continue to bear, indirectly, the fees paid under the portfolio's investment advisory agreement with Deutsche Asset Management. For the period September 11, 2000 through December 31, 2000, the Administrative Agreement expense charged to the Fund amounted to $830,458, of which $220,688 is unpaid at December 31, 2000. In addition, a one-time reduction of certain costs incurred in connection with the reorganization amounting to $95,289 on Class AARP is included in the administrative fee. For the period ended December 31, 2001, the fee charged to the Fund amounted to $______. Code of Ethics The Fund, the Advisor and principal underwriter have each adopted codes of ethics under rule 17j-1 of the Investment Company Act. Board members, officers of the Fund and employees of the Advisor and 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. AMA InvestmentLink (SM) Program Pursuant to an Agreement between Zurich Scudder Investments, Inc. and AMA Solutions, Inc., a subsidiary of the American Medical Association (the "AMA"), dated May 9, 1997, the Manager has agreed, subject to applicable state regulations, to pay AMA Solutions, Inc. royalties in an amount equal to 5% of the management fee received by the Manager with respect to assets invested by AMA members in Scudder funds in connection with the AMA InvestmentLink(SM) Program. The Manager will also pay AMA Solutions, Inc. a general monthly fee, currently in the amount of $833. The AMA and AMA Solutions, Inc. are not engaged in the business of providing investment advice and neither is registered as an investment advisor or broker/dealer under federal securities laws. Any person who participates in the AMA InvestmentLink(SM) Program will be a customer of the Manager (or of a subsidiary thereof) and not the AMA or AMA Solutions, Inc. AMA InvestmentLink(SM) is a service mark of AMA Solutions, Inc. INVESTMENT ADVISOR AND ADMINISTRATOR FOR THE PORTFOLIO Deutsche Asset Management is a wholly owned subsidiary of Deutsche Bank AG ("Deutsche Bank"). Deutsche Bank is a banking company with limited liability organized under the laws of the Federal Republic of Germany. Deutsche Bank is the parent company of a group consisting of banks, capital markets companies, fund management companies, mortgage banks, a property finance company, installments financing and leasing companies, insurance companies, research and consultancy companies and other domestic and foreign companies. Under the terms of the Portfolio's investment advisory agreement with the Advisor (the "Advisory Agreement"), the Advisor manages the Portfolio subject to the supervision and direction of the Board of Trustees of the Portfolio. The Advisor will: (i) act in strict conformity with the Portfolio's Declaration of Trust, the 1940 Act and the Investment Advisors Act of 1940, as the same may from time to time be amended; (ii) manage the Portfolio in accordance with the 30 Portfolio's investment objective, restrictions and policies; (iii) make investment decisions for the Portfolio; and (iv) place purchase and sale orders for securities and other financial instruments on behalf of the Portfolio. The Advisor bears all expenses in connection with the performance of services under the Advisory Agreement. The Portfolio bears certain other expenses incurred in its operation, including: taxes, interest, brokerage fees and commissions, if any; fees of Trustees of the Portfolio who are not officers, directors or employees of the Advisor, ICC Distributors, Inc. or any of their affiliates; SEC fees; charges of custodians and transfer and dividend disbursing agents; certain insurance premiums; outside auditing and legal expenses; costs of maintenance of corporate existence; costs attributable to investor services, including, without limitation, telephone and personnel expenses; costs of preparing and printing prospectuses and statements of additional information for regulatory purposes and for distribution to existing shareholders; costs of shareholders' reports and meetings of shareholders, officers and Trustees of the Portfolio; and any extraordinary expenses. The Advisor may have deposit, loan and other commercial banking relationships with the issuers of obligations which may be purchased on behalf of the Portfolio, including outstanding loans to such issuers which could be repaid in whole or in part with the proceeds of securities so purchased. Such affiliates deal, trade and invest for their own accounts in such obligations and are among the leading dealers of various types of such obligations. The Advisor has informed the Portfolio that, in making its investment decisions, it does not obtain or use material inside information in its possession or in the possession of any of its affiliates. In making investment recommendations for the Portfolio, the Advisor will not inquire or take into consideration whether an issuer of securities proposed for purchase or sale by the Portfolio is a customer of the Advisor, its parent or its subsidiaries or affiliates and, in dealing with its customers, the Advisor, its parent, subsidiaries and affiliates will not inquire or take into consideration whether securities of such customers are held by any fund managed by the Advisor or any such affiliate. Under its Investment Advisory Agreement, Deutsche Asset Management receives a fee from the Portfolio, computed daily and paid monthly, at the annual rate of 0.05% of the average daily net assets of the Portfolio. For the period January 1, 1998 to May 6, 1998, the Advisory fee was 0.10%. Effective March 15, 2000, the fee was reduced to 0.05%. For the years ended December 31, 2000 and 1999, Scudder accrued $4,136,851 and $5,134,906, respectively, in compensation for investment advisory services provided to the Portfolio. During the same periods, Deutsche Asset Management reimbursed $0to the Portfolio to cover expenses. For the year ended December 31, 2001, Scudder accrued $______ in compensation for investment advisory services provided to the Portfolio. Administrator Under an administration and services agreement, Bankers Trust Company, an affiliate of Deutsche Asset Management, Inc. is obligated on a continuous basis to provide such administrative services as the Board of Trustees of the Portfolio reasonably deem necessary for the proper administration of the Portfolio. Bankers Trust Company will generally assist in all aspects of the Portfolio's operations; supply and maintain office facilities (which may be in the Bankers Trust Company's own offices), statistical and research data, data processing services, clerical, accounting, bookkeeping and recordkeeping services (including without limitation the maintenance of such books and records as are required under the 1940 Act and the rules thereunder, except as maintained by other agents), internal auditing, executive and administrative services, and stationery and office supplies; prepare reports to shareholders or investors; prepare and file tax returns; supply financial information and supporting data for reports to and filings with the SEC; supply supporting documentation for meetings of the Board of Trustees; provide monitoring reports and assistance regarding compliance with Declarations of Trust, by-laws, investment objectives and policies and with Federal and state securities laws; arrange for appropriate insurance coverage; calculate NAVs of the Portfolio, net income and realized capital gains or losses; and negotiate arrangements with, and supervise and coordinate the activities of, agents and others to supply services. Under the Administration and Services Agreement, the Manager receives a fee from the Fund, computed daily and paid monthly at an annual rate of 0.10% of the average daily net assets of the Fund. For the period January 1, 2000 to September 10, 2000, the Manager had contractually agreed to maintain expenses of the Fund to the extent necessary to limit the expenses of the Fund to 0.40% of its annual average daily net assets (including the Fund's pro rata share of the expenses of the Portfolio). Accordingly, for the year ended December 31, 2000 the Manager did not impose a portion of its administrative services fee aggregating $219,568 and the amount imposed aggregated $332,183, of which $88,275 is 31 unpaid at December 31, 2000. This amount imposed was equivalent to an annual effective rate of 0.06% of the average annual net assets. For the year ended December 31, 2001, the fee amounted to $______. For the period January 1, 2000 to December 31, 2000, under the terms of a Third Party Feeder Agreement between the Fund, the Manager and the Advisor, the Advisor receives a fee accrued daily and paid monthly, computed as a percentage of the average daily net assets of the Portfolio. Effective March 15, 2000, the Advisor waived the expenses of the Portfolio to the extent necessary to limit the expenses of the Portfolio to 0.05% of its annual average net assets. Effective March 15, 2000, the expense limitation was reduced from 0.08% to 0.05%. For the year ended December 31, 1999, the Advisor accrued $344,960 in compensation for administrative and other services provided to the Portfolio. 32 33 34 OFFICERS AND TRUSTEES Scudder S&P 500 Index Fund The following table presents information regarding each Trustee of the Fund as of March 1, 2002. Each Trustee's age of March 1, 2002 is set forth in parentheses after his or her name. Unless otherwise noted, (i) each Trustee 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 Trustee is c/o Zurich Scudder Investments, Inc., Two International Place, Boston, Massachusetts 02110-4103. The term of office for each Trustee is until the next meeting of shareholders called for the purpose of electing Trustees is until the next meeting of shareholders called for the purpose of electing Trustees and until the election and qualification of a successor, or until such Trustee sooner dies, resigns or is removed as provided in the governing documents of the Fund. Because the Fund does not hold an annual meeting of shareholders, each Trustee will hold office for an indeterminate period.
Length of Time Served Number of Name, Age and Position(s) for Portfolios in Held Investment Principal Occupation(s) Fund Complex with the Fund Trust During Past 5 Years Overseen Other Directorships Held - ------------- ----- ------------------- -------- ------------------------ 35 Length of Time Served Number of Name, Age and Position(s) for Portfolios in Held Investment Principal Occupation(s) Fund Complex with the Fund Trust During Past 5 Years Overseen Other Directorships Held - ------------- ----- ------------------- -------- ------------------------ Henry P. Becton (68) 2000 - President, WGBH 49 American Public Trustee present Educational Foundation Television; New England Aquarium; Becton Dickinson and Company; Mass Corporation for Educational Telecommunications; The A.H. Belo Company; Committee for Economic Development; Concord Academy; Public Broadcasting Service; Boston Museum of Science Dawn-Marie Driscoll (55) 2000 - President, Driscoll 49 Computer Rescue Squad; Trustee present Associates (consulting Advisory Board, Center for firm); Executive Fellow, Business Ethics, Bentley Center for Business College; Board of Ethics, Bentley College Governors, Investment Company Institute; Chairman, ICI Directors Services Committee Edgar R. Fiedler (72) 2000 - Senior Fellow and 49 None Trustee present Economic Counsellor, The Conference Board, Inc. (not-for-profit business research organization) Keith R. Fox (57) 1996 - Managing Partner, Exeter 49 Facts on File (school and Trustee present Capital Partners (private library publisher); equity funds) Progressive Holding Corporation (kitchen importer and distributor) Jean Gleason Stromberg 2000 - Consultant (1997 to 49 The William and Flora (58) present present); prior thereto, Hewlett Foundation; Trustee Director, U.S. General Director, Labnetics, Inc. Accounting Office (medical equipment (1996-1997); Partner, company); Director, Fulbright & Jaworski (law Metatomix, Inc. (database firm) (1978-1996) management(; Director, Aberdeen Group (technology 36 research) Length of Time Served Number of Name, Age and Position(s) for Portfolios in Held Investment Principal Occupation(s) Fund Complex with the Fund Trust During Past 5 Years Overseen Other Directorships Held - ------------- ----- ------------------- -------- ------------------------ Jean C. Tempel (58) 2000 -present Managing Partner, First 49 United Way of Mass Bay; Trustee Light Capital (venture Sonesta International capital group) Hotels, Inc.; Northeastern University Funds and Endowment Committee; Connecticut College Finance Committee; Commonwealth Institute (not-for-profit start-up for women's enterprises); The Reference, Inc. (IT consulting for financial services)
Interested Directors and Officers* The following table presents information about each Officer of the Fund. Each Officer's age as of March 1, 2002 is in parentheses after his or her name. Unless otherwise noted, the address of each Officer is c/o Zurich Scudder Investments, Inc., Two International Place, Boston, Massachusetts 02110-4103. The President, Treasurer and Secretary each holds office until his or her successor is duly elected and qualified; all other officers hold offices in accordance with the By-Laws of the Fund. Each Officer of the Fund is an employee of Zurich Scudder Investments, Inc.
Number of Portfolios Positions(s) Term of Office in Fund Held and Length of Principal Occupation(s) Complex Other Directorships Name, Address, and Age with Fund Time Served During Past 5 Years Overseen Held - ---------------------- --------- ----------- ------------------- -------- ---- Linda C. Coughlin(50) Chairperson, 2000 - present Managing Director of 134 None Director and Zurich Scudder President Investments, Inc. Steven Zaleznick (47) Director 2000 - present President and CEO, AARP 49 None 601 E Street, NW Services, Inc. 7th Floor Washington, D.C. 20004 Thomas V. Bruns# (44) Vice 2000 - present Managing Director of Not None President Zurich Scudder Applicable Investments, Inc. - -------------------------- * Ms. Coughlin and each Fund officer are considered "interested persons" of the Fund because of their affiliation with the Fund's Advisor. Mr. Zaleznick may be considered an "interested person" of the Fund because of his affiliation with AARP, which receives fees from the Advisor pursuant to the terms of a licensing agreement. # Address: 222 South Riverside Plaza, Chicago, Illinois 37 Number of Portfolios Positions(s) Term of Office in Fund Held and Length of Principal Occupation(s) Complex Other Directorships Name, Address, and Age with Fund Time Served During Past 5 Years Overseen Held - ---------------------- --------- ----------- ------------------- -------- ---- William F. Glavin (43) Vice 2000 - present Managing Director of Not Trustee, Crossroads President Zurich Scudder Applicable for Kids, Inc. Investments, Inc. (serves at-risk children) James E. Masur (41) Vice 2000 - present Managing Director of Not None President Zurich Scudder Applicable Investments, Inc. Kathryn L. Quirk+ (49) Vice 1997 - present Managing Director of Not None President Zurich Scudder Applicable and Investments, Inc. Assistant Secretary Howard S. Schneider (44) Vice 2000 - present Managing Director of Not None President Zurich Scudder Applicable Investments, Inc. Gary French (53) Treasurer 2002 - present Managing Director of Not None Zurich Scudder Applicable Investments, Inc. John R. Hebble (43) Assistant 1998 - present Senior Vice President Not None Treasurer of Zurich Scudder Applicable Investments, Inc. Brenda Lyons (39) Assistant 1998 - present Senior Vice President Not None Treasurer of Zurich Scudder Applicable Investments, Inc. Thomas Lally (34) Assistant 2001 - present Senior Vice President Not None Treasurer of Zurich Scudder Applicable Investments, Inc. Caroline Pearson (39) Assistant 1997 - present Managing Director of Not None Secretary Zurich Scudder Applicable Investments, Inc.; Associate, Dechert Price & Rhoads (law firm) 1989-1997 John Millette (39) Vice 1999 - present Vice President of Not None President Zurich Scudder Applicable and Secretary Investments, Inc. Darko Kuzmanovic (34)@(1) Vice 2001 - present Vice President of Not None President Zurich Scudder Applicable Investments, Inc. - ---------------------- + 345 Park Avenue, New York, New York 38 Number of Portfolios Positions(s) Term of Office in Fund Held and Length of Principal Occupation(s) Complex Other Directorships Name, Address, and Age with Fund Time Served During Past 5 Years Overseen Held - ---------------------- --------- ----------- ------------------- -------- ---- Nick Raffan (49)@(1) Vice 2001 - present Vice President of Not None President Zurich Scudder Applicable Investments, Inc. Peter Chin (60)+(2) Vice 1995 - present Managing Director of Not None President Zurich Scudder Applicable Investments, Inc. J. Brooks Dougherty (43)+(2) Vice 1998 - present Managing Director of Not None President Zurich Scudder Applicable Investments, Inc. James E. Fenger (42)+(2) 1998 - present Managing Director of Not None Vice Zurich Scudder Applicable President Investments, Inc. Sewall Hodges (47)+(2) Vice 2000 - present Managing Director of Not None President Zurich Scudder Applicable Investments, Inc. Robert L. Horton (35)+(2) Vice 2000 - present Managing Director of Not None President Zurich Scudder Applicable Investments, Inc. Blair J. Treisman (34)+(2) Vice 2000 - present Managing Director of Not None President Zurich Scudder Applicable Investments, Inc. Robert D. Tymoczko (31)++(2) Vice 2001 - present Senior Vice President Not None President of Zurich Scudder Applicable Investments, Inc.
+ Address: 345 Park Avenue, New York, New York ++ Address: 101 California Street, Suite 4100, San Francisco, California @ Address: Level 42, AAP Centre, 259 George Street, Sydney NSW 2000, Australia (1) Officer of Scudder Mutual Funds, Inc. only. (2) Officer of Scudder Securities Trust only. 39 Director's and Officer's Role with Principal Underwriter: Scudder Investor Services, Inc. Kathryn L. Quirk: Director, Senior Vice President, Chief Legal Officer and Assistant Clerk John Hebble: Assistant Treasurer Caroline Pearson: Assistant Clerk Trustee's Responsibilities. Each Board of Trustees primary responsibility is to represent the interests of the Fund's shareholders and to provide oversight of the management of the Fund. Currently, 75% of the Board is comprised of Non-interested Trustees ("Independent Trustees"). The Trustees meet multiple times during the year to review the investment performance of the Fund and other operational matters, including policies and procedures designed to assure compliance with regulatory and other requirements. In 2001, the Trustees conducted over 20 meetings to deal with fund issues (including regular and special board and committee meetings). These meetings included six regular board meetings, six special meetings relating to the proposed acquisition of the Advisor by Deutsche Bank, and two audit committee meetings. Furthermore, the Independent Trustees review the fees paid to the Advisor and its affiliates for investment advisory services and other administrative and shareholder services. The Trustees have adopted specific policies and guidelines that, among other things, seek to further enhance the effectiveness of the Independent Trustees in performing their duties. Many of these are similar to those suggested in the Investment Company Institute's 1999 Report of the Advisory Group on Best Practices for Fund Directors. For example, the Independent Trustees select independent legal counsel to work with them in reviewing fees, advisory and other contracts and overseeing fund matters. The Trustees are also assisted in this regard by the Fund's independent public accountants and other independent experts retained from time to time for this purpose. The Independent Trustees regularly meet privately with their counsel and other advisors. In addition, the Independent Trustees from time to time have appointed task forces and subcommittees from their members to focus on particular matters such as investment, accounting and shareholders servicing issues. In connection with their deliberations relating to the continuation of the Fund's current investment management agreement in August 2001, the Trustees considered such information and factors as they believe, in the light of the legal advice furnished to them by their independent legal counsel and their own business judgment, to be relevant to the interests of the shareholders of the Fund. The factors considered by the Trustees included, among others, the nature, quality and extent of services provided by the Advisor to the Fund; investment performance, both of the Fund themselves and relative to appropriate peer groups and market indices; investment management fees, expense ratios and asset sizes of the Fund, themselves and relative to appropriate peer groups; the Advisor's profitability from managing the Fund (both individually and collectively) and the other investment companies managed by the Advisor before marketing expenses paid by the Advisor; possible economies of scale; and possible financial and other benefits to the Advisor from serving as investment adviser and from affiliates of the Advisor providing various services to the Funds. Committees. The following table provides information regarding the Fund's standing committees, including certain of each committee's principal functions.
Number of Meetings Held Name of Committee Function of Committee Members of Committee Last Fiscal Year - ----------------- --------------------- -------------------- ---------------- Audit Recommends selection of Henry P. Becton, Jr. 2 a fund's independent Dawn-Marie Driscoll public accounts to full Edgar R. Fiedler board; reviews the Keith R. Fox independence of such Jean Gleason Stromberg firm; reviews scope of Jean C. Tempel audit and internal controls; considers and reports to the board on matters relating to the fund's accounting and financial reporting practices. Committee on Selects and nominates Henry P. Becton, Jr. 0 40 Independent Independent Dawn-Marie Driscoll Trustees/Directors Trustees/Directors*; Edgar R. Fiedler establishes Keith R. Fox Trustee/Director Jean Gleason Stromberg compensation, retirement Jean C. Tempel and fund ownership policies. Valuation Oversees fund valuation Linda C. Coughlin [_____] matters, including Keith R. Fox valuation methodologies; establishes "fair valuation" procedures to determine fair market value of securities held by a fund when actual market values are unavailable. Shareholder Servicing Reviews and reports to Edgar R. Fiedler 3 board on matters Keith R. Fox relating to the quality, Jean C. Tempel type and level of services provided to fund shareholders.
o Fund shareholders may also submit nominees that will be considered by the Committee when a Board vacancy occurs. Submissions should be mailed to the attention of the Secretary of each Fund. Trustee Fund Ownership The following sets forth ranges of Trustee beneficial share ownership as of December 31, 2001.
Range of Shares Owned of All Scudder Funds Name of Trustee Range of Fund Shares Owned Overseen by Trustees - --------------- -------------------------- -------------------- Henry P. Becton Linda C. Coughlin Dawn-Marie Driscoll Edgar R. Fiedler Keith R. Fox Jean Gleason Stromberg Jean C. Tempel Steven Zaleznick
Securities Beneficially Owned
Name of Trustee Name of Owner(s) and Company Title of Class Value of Securities Percent of Class - --------------- Relationship ------- -------------- ------------------- ---------------- 41 to Trustee ----------
As of January 31, 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 X% of the Fund. To the best of the Fund's knowledge, as of January 31, 2002, no [other] person owned beneficially more than X% of each class of the Fund's outstanding shares. Remuneration. Each Independent Trustee receives compensation from the Fund for his or her services, which includes an annual retainer and an attendance fee for each meeting attended. No additional compensation is paid to any Independent Trustee for travel time to meetings, attendance at director's educational seminars or conferences, service on industry or association committees, participation as speakers at directors' conferences or service on special director task forces or subcommittees. Independent Trustees do not receive any employee benefits such as pension or retirement benefits or health insurance. The Independent Trustees members also serve in the same capacity for other funds managed by the Advisor, which may have substantially different Trustee fee schedules. The following table shows the aggregate compensation received by each Independent Trustee from the Fund/Trust and from all of the Scudder funds as a group for the most recent fiscal year. As noted above, the Trustees conducted over 20 meetings in 2001 to deal with fund issues (including regular and special board and committee meetings). These meetings included six regular board meetings, six special meetings relating to the proposed acquisition of the Advisor by Deutsche Bank, and two audit committee meetings. Members of the Board of Trustees who are employees 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.
Pension or Retirement Total Compensation Compensation from Benefits Accrued as Part Paid to Trustees Name of Trustee Investment Trust* of Fund Expenses ^(3)^(4)^(5) - --------------- ----------------- ---------------- ------------ Henry P. Becton, Jr. Dawn-Marie Driscoll^(1) Edgar R. Fiedler^(2) Keith R. Fox Jean Gleason Stromberg Jean C. Tempel
* Investment Trust consists of one fund: Scudder S&P 500 Index Fund (1) Ms. Driscoll received an additional $XXXX in annual retainer fees in her role as Lead Trustee/Director. (2) In addition to the amounts shown, Mr. Fiedler received a payment of $XXX pursuant to deferred compensation agreement with certain Funds. (3) Includes compensation for services on the boards of 19 Scudder trusts/corporations comprised of 53 fund/portfolios. (4) Aggregate compensation for Mr. Fiedler includes $XXXX in retainer fees in his role as Trustee for Farmers Investment Trust (merged into Scudder Pathway Series on April 6, 2001) and $XXXX pursuant to a special retirement plan with The Brazil Fund, Inc. (5) Aggregate compensation reflects amounts paid to the Trustees for numerous special meetings in connection with the proposed sale of the Advisor to Deutsche Bank. Such amounts totaled $XXXX for Ms. Driscoll 42 and Ms. Tempel and Messrs. Becton and Fox, respectively, and $XXXX for Mr. Fiedler and Ms. Stromberg, respectively. These meeting fees were borne by Scudder. TRUSTEES AND OFFICERS OF THE PORTFOLIO The Board of Trustees is composed of persons experienced in financial matters who meet throughout the year to oversee the activities of the Portfolio. In addition, the Trustees review contractual arrangements with companies that provide services to the Portfolio and review the Portfolio's performance. The Trustees and officers of the Portfolio, their ages and their principal occupations during the past five years are set forth below. Their titles may have varied during that period.
Position with Position with Underwriter Name, Age and Address the Portfolio Principal Occupation ICC Distributors, Inc. - --------------------- ------------- -------------------- ---------------------- Charles P. Biggar (69) Trustee Trustee of each of the other investment -- 12 Hitching Post Lane companies in the Deutsche Asset Chappaqua, NY 10514 Management Fund Complex;^1 Retired; formerly Vice President, International Business Machines ("IBM") and President, National Services and the Field Engineering Divisions of IBM S. Leland Dill (70) Trustee Trustee of each of the other investment -- 5070 North Ocean Drive companies in the Deutsche Asset Singer Island, FL 33404 Management Fund Complex;^1 Retired; formerly Partner, KPMG Peat Marwick; Director, Vinters International Company Inc.; Director, Coutts (U.S.A.) International; Trustee, Phoenix Zweig Series Trust; Trustee, Phoenix Euclid Market Neutral Fund; Director, Coutts Trust Holdings Ltd.; Director, Coutts Group; General Partner, Pemco^2 Martin J. Gruber (62) Trustee Trustee of each of the other investment -- 229 South Irving Street companies in the Deutsche Asset Management Ridgewood, New Jersey 07450 Fund Complex; Nomura Professor of Finance, Leonard N. Stern School of Business, New York University (since 1964); Trustee, TIAA;2 Director, S.G. Cowen Mutual Funds;^2 Director, Japan Equity Fund, Inc;^2 Director, Taiwan Equity Fund, Inc. ^2 - ----------------------- 1 The "Deutsche Asset Management Fund Complex" consists of BT Investment Funds, BT Institutional Funds, BT Pyramid Mutual Funds, BT Advisor Funds, Cash Management Portfolio, Intermediate Tax Free Portfolio, Tax Free Money Portfolio, NY Tax Free Money Portfolio, Treasury Money Portfolio, International Equity Portfolio, Equity 500 Index Portfolio, Capital Appreciation Portfolio, Asset Management Portfolio and BT Investment Portfolios. 43 Position with Position with Underwriter Name, Age and Address the Portfolio Principal Occupation ICC Distributors, Inc. - --------------------- ------------- -------------------- ---------------------- Richard T. Hale (54)* Trustee Trustee of each of the other investment -- One South Street companies in the Deutsche Asset Baltimore, Maryland 21202 Management Fund Complex; Managing Director, Deutsche Asset Management; Director, Flag Investors Funds; ^2 Managing Director, Deutsche Banc Alex. Brown Incorporated; Director and President, Investment Company Capital Corp. Richard J. Herring (54) Trustee Trustee of each of the other investment -- 325 South Roberts Road companies in the Deutsche Asset Bryn Mawr, Pennsylvania Management Fund Complex; Jacob Safra 19010 Professor of International Banking and Professor, Finance Department, The Wharton School, University of Pennsylvania (since 1972). Bruce E. Langton (68) Trustee Trustee of each of the other investment -- 99 Jordan Lane companies in the Deutsche Asset Stamford, Connecticut 06903 Management Fund Complex; Retired; formerly Assistant Treasurer of IBM Corporation (until 1986); Trustee and Member, Investment Operations Committee, Allmerica Financial Mutual Funds (1992-present); Member, Investment Committee, Unilever U.S. Pension and Thrift Plans (1989 to present);^3 Director, TWA Pilots Directed Account Plan and 401(k) Plan (1988 to present)^2 Philip Saunders, Jr. (64) Trustee Trustee of each of the other investment -- Philip Saunders Associates companies in the Deutsche Asset 445 Glen Road Management Fund Complex; Principal, Weston, MA 02193 Philip Saunders Associates (Economic and Financial Consulting); former Director, Financial Industry Consulting, Wolf & Company; President, John Hancock Home Mortgage Corporation; Senior Vice President of Treasury and Financial Services, John Hancock Mutual Life Insurance Company, Inc. - ----------------------------- 2 An investment company registered under the Investment Company Act of 1940. 3 A publicly held company with securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended. 44 Position with Position with Underwriter Name, Age and Address the Portfolio Principal Occupation ICC Distributors, Inc. - --------------------- ------------- -------------------- ---------------------- Harry Van Benschoten (73) Trustee Trustee of each of the other investment -- 6581 Ridgewood Drive companies in the Deutsche Asset Naples, Florida 34108 Management Fund Complex; Retired; Corporate Vice President, Newmont Mining Corporation (prior to 1987); Director, Canada Life Insurance Corporation of New York (since 1987). Charles A. Rizzo (42) Treasurer Vice President and Department Head, __ One South Street Deutsche Asset Management since 1998; Baltimore, Maryland 21202 Senior Manager, PricewaterhouseCoopers LLP from 1993 to 1998. Daniel O. Hirsch (45) Secretary Director, Deutsche Banc Alex. Brown since __ One South Street July 1998; Assistant General Counsel, Baltimore, Maryland 21202 Office of the General Counsel, United States Securities and Exchange Commission from 1993 to 1998.
* "Interested Person" within the meaning of Section 2(a)(19) of the Act. Mr. Hale is a Managing Director of Deutsche Asset Management, the U.S. asset management unit of Deutsche Bank AG and its affiliates. The Board has an Audit Committee that meets with the Portfolio's independent accountants to review the financial statements of the Portfolio, the adequacy of internal controls and the accounting procedures and policies of the Portfolio. Each member of the Board except Mr. Hale also is a member of the Audit Committee. Messrs. Rizzo and Hirsch also hold similar positions for other investment companies for which ICC Distributors, Inc. or an affiliate serves as the principal underwriter. No person who is an officer or director of Deutsche Asset Management is an officer or Trustee of the Trust or the Portfolio. No director, officer or employee of ICC Distributors, Inc. or any of its affiliates will receive any compensation from the Trust or the Portfolio for serving as an officer or Trustee of the Trust or the Portfolio. REMUNERATION Control Persons and Principal Holders of Securities Each Deutsche Asset Management Fund has informed the Portfolio that whenever it is requested to vote on matters pertaining to the fundamental policies of the Portfolio, the Deutsche Asset Management Fund will hold a meeting of shareholders and will cast its votes as instructed by the Deutsche Asset Management Fund's shareholders. It is anticipated that other registered investment companies investing in the Portfolio will follow the same or a similar practice. Compensation of Officers and Trustees of the Portfolio The following table reflects fees paid to the Trustees of the Portfolio for the year ended December 31, 2001: 45 TRUSTEE COMPENSATION TABLE
Aggregate Total Compensation from Compensation Deutsche Asset Management Trustee From Portfolio* Fund Complex** ------- -------------- ------------ Charles P. Biggar S. Leland Dill Martin Gruber Richard J. Herring Bruce E. Langton Philip Saunders, Jr. Harry Van Benschoten
* The aggregate compensation is provided for the Equity 500 Index Portfolio for the Portfolio's fiscal year ended December 31, 2001. ** Aggregated information is furnished for the Deutsche Asset Management Fund Complex which consists of the following: BT Investment Funds, BT Institutional Funds, BT Pyramid Mutual Funds, BT Advisor Funds, BT Investment Portfolios, Cash Management Portfolio, Treasury Money Portfolio, Tax Free Money Portfolio, NY Tax Free Money Portfolio, International Equity Portfolio, Intermediate Tax Free Portfolio, Asset Management Portfolio, Equity 500 Index Portfolio, and Capital Appreciation Portfolio. The compensation is provided for the calendar year ended December 31, 2001. DISTRIBUTOR The Trust on behalf of the Fund has an underwriting agreement with Scudder Investor Services, Inc. Two International Place, Boston, MA 02110-4103, a Massachusetts corporation, which is a subsidiary of the Manager, a Delaware corporation. The Trust's underwriting agreement dated May 8, 2000 will remain in effect until _________ and from year to year thereafter only if its continuance is approved annually by a majority of the Trustees who are not parties to such agreement or interested persons of any such party and either by vote of a majority of the Board of Trustees or a majority of the outstanding voting securities of a Fund. The continuance of the underwriting agreement was most recently approved by the Trustees on __________ and will continue in effect until - ----------. Under the underwriting agreement, the Fund is responsible for: the payment of all fees and expenses in connection with the preparation and filing with the SEC of its registration statement and prospectus and any amendments and supplements thereto; the registration and qualification of shares for sale in the various states, including registering the Fund as a broker or dealer in the various states as required; the fees and expenses of preparing, printing and mailing prospectuses annually to existing shareholders (see below for expenses relating to prospectuses paid by the Distributor), notices, proxy statements, reports or other communications to shareholders of the Fund; the cost of printing and mailing confirmations of purchases of shares and any prospectuses accompanying such confirmations; any issuance taxes and/or any initial transfer taxes; a portion of shareholder toll-free telephone charges and expenses of shareholder service representatives; the cost of wiring funds for share purchases and redemptions (unless paid by the shareholder who initiates the transaction); the cost of printing and postage of business reply envelopes; and a portion of the cost of computer terminals used by both the Fund and the Distributor. The Distributor will pay for printing and distributing prospectuses or reports prepared for its use in connection with the offering of the Fund's shares to the public and preparing, printing and mailing any other literature or advertising in connection with the offering of the shares of the Fund to the public. The Distributor will pay all fees and expenses in connection with its qualification and registration as a broker or dealer under federal and state laws, a portion of the cost of toll-free telephone service and expenses of shareholder service representatives, a portion of the cost of computer terminals, and expenses of any activity which is primarily intended to result in the sale of shares issued by the Fund, unless a 12b-1 Plan is in effect which provides that the Fund shall bear some or all of such expenses. As agent, the Distributor currently offers the Fund's shares on a continuous basis to investors in all states in which shares of the Fund may from time to time be registered or where permitted by applicable law. The underwriting agreement 46 provides that the Distributor accepts orders for shares at net asset value as no sales commission or load is charged to the investor. The Distributor has made no firm commitment to acquire shares of the Fund. TAXES The Fund has elected to be treated as a regulated investment company under Subchapter M of the Code or a predecessor statute, and has qualified as such since its inception. It intends to continue to qualify for such treatment. Such qualification does not involve governmental supervision or management of investment practices or policy. A regulated investment company qualifying under Subchapter M of the Code is required to distribute to its shareholders at least 90 percent of its investment company taxable income (including net short-term capital gain) and generally is not subject to federal income tax to the extent that it distributes annually its investment company taxable income and net realized capital gains in the manner required under the Code. 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). In such event, dividend distributions would be taxable to shareholders to the extent of the Fund's earnings and profits, and would be eligible for the dividends received deduction, in the case of corporate shareholders. The Fund is subject to a 4% nondeductible excise tax on amounts required to be but not distributed under a prescribed formula. The formula requires payment to shareholders during a calendar year of distributions representing at least 98% of the Fund's ordinary income for the calendar year, at least 98% of the excess of its capital gains over capital losses (adjusted for certain ordinary losses) realized during the one-year period ending October 31 during such year, and all ordinary income and capital gains for prior years that were not previously distributed. Investment company taxable income includes dividends, interest and net short-term capital gains in excess of net long-term capital losses, less expenses. Net realized capital gains for a fiscal year are computed by taking into account any capital loss carryforward of the Fund. At December 31, 2000, the Fund had a net tax basis capital loss carryforward of approximately $3,553,000, which may be applied against any realized net taxable capital gains of each succeeding year until fully utilized or until December 31, 2006 ($3,502,000) and December 31, 2007 ($51,000), the respective expiration dates, whichever occurs first. From November 1, 2000 through December 31, 2000, the Fund incurred approximately $20,365,000 of net realized capital losses. If permitted by tax regulations, the Fund intends to elect to differ these losses and treat them as arising in the fiscal year ended December 31, 2001. If any net realized long-term capital gains in excess of net realized short-term capital losses are retained by the Fund for reinvestment, requiring federal income taxes to be paid thereon by the Fund, the Fund intends to elect to treat such capital gains as having been distributed to shareholders. As a result, each shareholder will report such capital gains as long-term capital gains, will be able to claim a relative share of federal income taxes paid by the Fund on such gains as a credit against personal federal income tax liability, and will be entitled to increase the adjusted tax basis on Fund shares by the difference between such reported gains and the individual tax credit. Distributions of investment company taxable income are taxable to shareholders as ordinary income. To the extent that dividends from domestic corporations constitute a portion of the Fund's gross income, a portion of the income distributions of the Fund may be eligible for the deduction for dividends received by corporations. Shareholders will be informed of the portion of dividends which so qualify. The dividends-received deduction is reduced to the extent the shares of the Fund with respect to which the dividends are received are treated as debt-financed under federal income tax law, and is eliminated if either those shares or the shares of the Fund are deemed to have been held by the Fund or the shareholder, as the case may be, for less than 46 days during the 90-day period beginning 45 days before the shares become ex-dividend. Properly designated distributions of the excess of net long-term capital gain over net short-term capital loss are taxable to shareholders as long-term capital gains, regardless of the length of time the shares of the Fund have been held by such shareholders. Such distributions are not eligible for the dividends-received deduction. Any loss realized upon the 47 redemption of shares held at the time of redemption for six months or less will be treated as a long-term capital loss to the extent of any amounts treated as distributions of long-term capital gain during such six-month period. Distributions of investment company taxable income and net realized capital gains will be taxable as described above, whether received in shares or in cash. Shareholders electing to receive distributions in the form of additional shares will have a cost basis for federal income tax purposes in each share so received equal to the net asset value of a share on the reinvestment date. All distributions of investment company taxable income and net realized capital gain, whether received in shares or in cash, must be reported by each shareholder on his or her federal income tax return. Dividends and capital gains distributions declared in October, November or December and payable to shareholders of record in such a month will be deemed to have been received by shareholders on December 31 if paid during January of the following year. Redemptions of shares, including exchanges for shares of another Scudder fund, may result in tax consequences (gain or loss) to the shareholder and are also subject to these reporting requirements. A qualifying individual may make a deductible IRA contribution for any taxable year only if (i) neither the individual nor his or her spouse (unless filing separate returns) is an active participant in an employer's retirement plan, or (ii) the individual (and his or her spouse, if applicable) has an adjusted gross income below a certain level ($52,000 for married individuals filing a joint return, with a phase-out of the deduction for adjusted gross income between $52,000 and $62,000; $32,000 for a single individual, with a phase-out for adjusted gross income between $32,000 and $42,000). However, an individual not permitted to make a deductible contribution to an IRA for any such taxable year may nonetheless make nondeductible contributions up to $2,000 to an IRA (up to $2,500 per individual for married couples if only one spouse has earned income) for that year. There are special rules for determining how withdrawals are to be taxed if an IRA contains both deductible and nondeductible amounts. In general, a proportionate amount of each withdrawal will be deemed to be made from nondeductible contributions; amounts treated as a return of nondeductible contributions will not be taxable. Also, annual contributions may be made to a spousal IRA even if the spouse has earnings in a given year if the spouse elects to be treated as having no earnings (for IRA contribution purposes) for the year. Distributions by the Fund result in a reduction in the net asset value of the Fund's shares. Should a distribution reduce the net asset value below a shareholder's cost basis, such distribution would nevertheless be taxable to the shareholder as ordinary income or capital gain as described above, even though, from an investment standpoint, it may constitute a partial return of capital. In particular, investors should consider the tax implications of buying shares just prior to a distribution. The price of shares purchased at that time includes the amount of the forthcoming distribution. Those purchasing just prior to a distribution will then receive a partial return of capital upon the distribution, which will nevertheless be taxable to them. Equity options (including covered call options on portfolio stock) and over-the-counter options on debt securities written or purchased by the Portfolio will be subject to tax under Section 1234 of the Code. In general, no loss is recognized by the Portfolio upon payment of a premium in connection with the purchase of a put or call option. The character of any gain or loss recognized (i.e., long-term or short-term) will generally depend, in the case of a lapse or sale of the option, on the Portfolio's holding period for the option, and in the case of an exercise of a put option, on the Portfolio's holding period for the underlying stock. The purchase of a put option may constitute a short sale for federal income tax purposes, causing an adjustment in the holding period of the underlying stock or substantially identical stock in the Portfolio's portfolio. If the Portfolio writes a put or call option, no gain is recognized upon its receipt of a premium. If the option lapses or is closed out, any gain or loss is treated as a short-term capital gain or loss. If a call option is exercised, any resulting gain or loss is a short-term or long-term capital gain or loss depending on the holding period of the underlying stock. The exercise of a put option written by the Portfolio is not a taxable transaction for the Portfolio. Many futures and forward contracts entered into by the Portfolio and all listed non-equity options written or purchased by the Portfolio (including options on futures contracts and options on broad-based stock indices) will be governed by Section 1256 of the Code. Absent a tax election to the contrary, gain or loss attributable to the lapse, exercise or closing out of any such position generally will be treated as 60% long-term and 40% short-term capital gain or loss, and on the last trading day of the Portfolio's fiscal year, all outstanding Section 1256 positions will be marked to market (i.e. treated as if such positions were closed out at their closing price on such day), with any resulting gain or loss recognized as 60% long-term and 40% short-term capital gain or loss. Under certain circumstances, entry into a futures contract to sell a 48 security may constitute a short sale for federal income tax purposes, causing an adjustment in the holding period of the underlying security or a substantially identical security in the Portfolio's portfolio. Positions of the Portfolio which consist of at least one stock and at least one other position with respect to a related security which substantially diminishes the Portfolio's risk of loss with respect to such stock could be treated as a "straddle" which is governed by Section 1092 of the Code, the operation of which may cause deferral of losses, adjustments in the holding periods of stock or securities and conversion of short-term capital losses into long-term capital losses. An exception to these straddle rules exists for certain "qualified covered call options" on stock written by the Portfolio. Positions of the Portfolio which consist of at least one position not governed by Section 1256 and at least one futures or forward contract or nonequity option governed by Section 1256 which substantially diminishes the Portfolio's risk of loss with respect to such other position will be treated as a "mixed straddle." Although mixed straddles are subject to the straddle rules of Section 1092 of the Code, certain tax elections exist for them which reduce or eliminate the operation of these rules. The Portfolio intends to monitor its transactions in options and futures and may make certain tax elections in connection with these investments. Notwithstanding any of the foregoing, recent tax law changes may require the Portfolio to recognize gain (but not loss) from a constructive sale of certain "appreciated financial positions" if the Portfolio enters into a short sale, offsetting notional principal contract, futures or forward contract transaction with respect to the appreciated position or substantially identical property. Appreciated financial positions subject to this constructive sale treatment are interests (including options, futures and forward contracts and short sales) in stock, partnership interests, certain actively traded trust instruments and certain debt instruments. Constructive sale treatment of appreciated financial positions does not apply to certain transactions closed in the 90-day period ending with the 30th day after the close of the Portfolio's taxable year, if certain conditions are met. Similarly, if the Portfolio enters into a short sale of property that becomes substantially worthless, the Portfolio will be required to recognize gain at that time as though it had closed the short sale. Future regulations may apply similar treatment to other strategic transactions with respect to property that becomes substantially worthless. The Fund will be required to report to the Internal Revenue Service all distributions of taxable income and capital gains as well as gross proceeds from the redemption or exchange of Fund shares, except in the case of certain exempt shareholders. Under the backup withholding provisions of Section 3406 of the Code, distributions of taxable income and capital gains and proceeds from the redemption or exchange of the shares of a regulated investment company may be subject to withholding of federal income tax at the rate of 31% in the case of non-exempt shareholders who fail to furnish the investment company with their taxpayer identification numbers and with required certifications regarding their status under the federal income tax law. Withholding may also be required if the Fund is notified by the IRS or a broker that the taxpayer identification number furnished by the shareholder is incorrect or that the shareholder has previously failed to report interest or dividend income. If the withholding provisions are applicable, any such distributions and proceeds, whether taken in cash or reinvested in additional shares, will be reduced by the amounts required to be withheld. Shareholders of the Fund may be subject to state and local taxes on distributions received from the Fund and on redemptions of the Fund's shares. Each distribution is accompanied by a brief explanation of the form and character of the distribution. In January of each year the Fund issues to each shareholder a statement of the federal income tax status of all distributions. The Fund is organized as a series of a Massachusetts business trust and is not liable for any income or franchise tax in the Commonwealth of Massachusetts, provided that it qualifies as a regulated investment company for federal income tax purposes. The foregoing discussion of U.S. federal income tax law relates solely to the application of that law to U.S. persons, i.e., U.S. citizens and residents and U.S. corporations, partnerships, trusts and estates. Each shareholder who is not a U.S. person should consider the U.S. and foreign tax consequences of ownership of shares of the Fund, including the possibility that such a shareholder may be subject to a U.S. withholding tax at a rate of 30% (or at a lower rate under an applicable income tax treaty) on amounts constituting ordinary income received by him or her, where such amounts are treated as income from U.S. sources under the Code. 49 Shareholders should consult their tax advisors about the application of the provisions of tax law described in this Statement of Additional Information in light of their particular tax situations. Tax Status. The Portfolio is organized as a trust under New York law. Under the anticipated method of operation of the Portfolio, the Portfolio will not be subject to any income tax. However each investor in the Portfolio, including the Fund, will be taxable on its share (as determined in accordance with the governing instruments of the Portfolio) of the Portfolio's income, gain, loss, deductions, credits and tax preference items, without regard to whether the investor has received any distributions from the Portfolio. The determination of such share will be made in accordance with the Internal Revenue Code of 1986, as amended (the "Code"), and regulations promulgated thereunder. Distributions received by the Fund from the Portfolio generally will not result in the Fund recognizing any gain or loss for federal income tax purposes, except that (1) gain will be recognized to the extent that any cash distributed exceeds the Fund's basis in its interest in the Portfolio prior to the distribution, (2) income or gain may be realized if the distribution is made in liquidation of the Fund's entire interest in the Portfolio and includes a disproportionate share of any unrealized receivables held by the Portfolio, and (3) loss may be recognized if the distribution is made in liquidation of the Fund's entire interest in the Portfolio and consists solely of cash and/or unrealized receivables. The Fund's basis in its interest in the Portfolio generally will equal the amount of cash and the basis of any property which the Fund invests in the Portfolio, increased by the Fund's share of income from the Portfolio, and decreased by the amount of any cash distributions and the basis of any property distributed from the Portfolio. The Portfolio's taxable year end is December 31. Although, as described above, the Portfolio will not be subject to Federal income tax, it will file appropriate income tax returns. It is intended that the Portfolio's assets, income and distributions will be managed in such a way that an investor in the Portfolio will be able to satisfy the requirements of Subchapter M of the Code, assuming that the investor invested all of its assets in the Portfolio. PORTFOLIO TRANSACTIONS Brokerage Allocation And Other Practices The Advisor is responsible for decisions to buy and sell securities, futures contracts and options on such securities and futures for the Portfolio, the selection of brokers, dealers and futures commission merchants to effect transactions and the negotiation of brokerage commissions, if any. Broker-dealers may receive brokerage commissions on portfolio transactions, including options, futures and options on futures transactions and the purchase and sale of underlying securities upon the exercise of options. Orders may be directed to any broker-dealer or futures commission merchant, including to the extent and in the manner permitted by applicable law, Deutsche Asset Management or its subsidiaries or affiliates. Purchases and sales of certain portfolio securities on behalf of the Portfolio are frequently placed by Deutsche Asset Management with the issuer or a primary or secondary market-maker for these securities on a net basis, without any brokerage commission being paid by the Portfolio. Trading does, however, involve transaction costs. Transactions with dealers serving as market-makers reflect the spread between the bid and asked prices. Transaction costs may also include fees paid to third parties for information as to potential purchasers or sellers of securities. Purchases of underwritten issues may be made which will include an underwriting fee paid to the underwriter. The Advisor seeks to evaluate the overall reasonableness of the brokerage commissions paid (to the extent applicable) in placing orders for the purchase and sale of securities for the Portfolio taking into account such factors as price, commission (negotiable in the case of national securities exchange transactions), if any, size of order, difficulty of execution and skill required of the executing broker-dealer through familiarity with commissions charged on comparable transactions, as well as by comparing commissions paid by the Portfolio to reported commissions paid by others. The Advisor reviews on a routine basis commission rates, execution and settlement services performed, making internal and external comparisons. The Advisor is authorized, consistent with Section 28(e) of the Securities Exchange Act of 1934, as amended, when placing portfolio transactions for the Portfolio with a broker to pay a brokerage commission (to the extent applicable) in excess of that which another broker might have charged for effecting the same transaction on account of the receipt of research, market or statistical information. The term "research, market or statistical information" includes advice as to the value of securities; the advisability of investing in, purchasing or selling securities; the availability of securities or 50 purchasers or sellers of securities; and furnishing analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy and the performance of accounts. Consistent with the policy stated above, the Conduct Rules of the National Association of Securities Dealers, Inc. and such other policies as the Portfolio's Trustees may determine, the Advisor may consider sales of securities of shares of the Portfolio's investors as a factor in the selection of broker-dealers to execute portfolio transactions. The Advisor will make such allocations if commissions are comparable to those charged by nonaffiliated, qualified broker-dealers for similar services. Higher commissions may be paid to firms that provide research services to the extent permitted by law. The Advisor may use this research information in managing the Portfolio's assets, as well as the assets of other clients. Except for implementing the policies stated above, there is no intention to place portfolio transactions with particular brokers or dealers or groups thereof. In effecting transactions in over-the-counter securities, orders are placed with the principal market-makers for the security being traded unless, after exercising care, it appears that more favorable results are available otherwise. Although certain research, market and statistical information from brokers and dealers can be useful to the Portfolio and to the Advisor, it is the opinion of the management of the Portfolio that such information is only supplementary to Deutsche Asset Management's 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 Portfolio, and not all such information is used by the Advisor in connection with the Portfolio. Conversely, such information provided to Deutsche Asset Management by brokers and dealers through whom other clients of the Advisor effect securities transactions may be useful to Deutsche Asset Management in providing services to the Portfolio. In certain instances there may be securities which are suitable for the Portfolio as well as for one or more of the Advisor's other clients. Investment decisions for the Portfolio and for the Advisor's other clients are made with a view to achieving their respective investment objectives. It may develop that a particular security is bought or sold for only one client even though it might be held by, or bought or sold for, other clients. Likewise, a particular security may be bought for one or more clients when one or more clients are selling that same security. Some simultaneous transactions are inevitable when several clients receive investment advice from the same investment advisor, particularly when the same security is suitable for the investment objectives of more than one client. When two or more clients are simultaneously engaged in the purchase or sale of the same security, the securities are allocated among clients in a manner believed to be equitable to each. It is recognized that in some cases this system could have a detrimental effect on the price or volume of the security as far as the Portfolio in concerned. However, it is believed that the ability of the Portfolio to participate in volume transactions will produce better executions for the Portfolio. For the fiscal years ended December 31, 2001, 2000 and 1999, the Portfolio paid brokerage commissions in the amounts of _______, $810,824 and $678,820, respectively. For the years ended December 31, 2000 and December 31, 1999, the Portfolio did not pay brokerage commissions to an affiliate. For the year ended December 31, 2001, the Portfolio paid $______ in brokerage commissions to an affiliate. Portfolio Turnover The frequency of portfolio transactions, the Portfolio's turnover rate, will vary from year to year depending on market conditions and the Portfolio's cash flows. NET ASSET VALUE The net asset value of shares of the Fund is computed as of the close of regular trading on the Exchange on each day the Exchange is open for trading. The Exchange is scheduled to be closed on the following holidays: New Year's Day, Dr. Martin Luther King 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 51 Sunday, respectively. Net asset value per share is determined by dividing the value of the total assets of the Fund, (i.e., the value of investments in the Portfolio and other assets) less all liabilities, by the total number of shares outstanding. The Portfolio values its equity and debt securities (other than short-term debt obligations maturing in 60 days or less), including listed securities and securities for which price quotations are available, on the basis of market valuations furnished by a pricing service. Short-term debt obligations and money market securities maturing in 60 days or less are valued at amortized cost, which approximates market value. Other assets are valued at fair value using methods determined in good faith by the Portfolio's Board of Trustees. Each investor in the Portfolio, including the Fund, may add to or reduce its investment in the Portfolio on each day that the Exchange is open for business and New York charter banks are not closed owing to customary or local holidays. As of the close of the Exchange, currently 4:00 p.m. (New York time or earlier if the Exchange closes earlier) on each such day, the value of each investor's interest in the Portfolio will be determined by multiplying the net asset value of the Portfolio by the percentage representing that investor's share of the aggregate beneficial interests in the Portfolio. Any additions or reductions which are to be effected on that day will then be effected. The investor's percentage of the aggregate beneficial interests in the Portfolio will then be recomputed as the percentage equal to the fraction (1) the numerator of which is the value of such investor's investment in the Portfolio as of the close of the Exchange on such day plus or minus, as the case may be, the amount of net additions to or reductions in the investor's investment in the Portfolio effected on such day and (2) the denominator of which is the aggregate net asset value of the Portfolio as of 4:00 p.m. or the close of the Exchange on such day plus or minus, as the case may be, the amount of net additions to or reductions in the aggregate investments in the Portfolio by all investors in the Portfolio. The percentage so determined will then be applied to determine the value of the investor's interest in the Portfolio as of 4:00 p.m. or the close of the Exchange on the following day the Exchange is open for trading. An exchange-traded equity security is valued by the Portfolio at its most recent sale price on the exchange it is traded as of the Value Time. Lacking any sales, the security is valued at the calculated mean between the most recent bid quotation and the most recent asked quotation (the "Calculated Mean") on such exchange as of the Value Time. Lacking a Calculated Mean, the security is valued at the most recent bid quotation on such exchange as of the Value Time. An equity security which is traded on The National Association of Securities Dealers Automated Quotation ("Nasdaq") system will be valued at its most recent sale price on such system as of the Value Time. Lacking any sales, the security will be valued at the most recent bid quotation as of the Value Time. The value of an equity security not quoted on the Nasdaq system, but traded in another over-the-counter market, is its most recent sale price if there are any sales of such security on such market as of the Value Time. Lacking any sales, the security is valued at the Calculated Mean quotation for such security as of the Value Time. Lacking a Calculated Mean quotation, the security will be valued at the most recent bid quotation as of the Value Time. Debt securities, other than money market instruments, are valued at prices supplied by the Portfolio's pricing agent(s) which reflect broker/dealer supplied valuations and electronic data processing techniques. Money market instruments with an original maturity of sixty days or less maturing at par shall be valued at amortized cost, which the Board believes approximates market value. If it is not possible to value a particular debt security pursuant to these valuation methods, the value of such security is the most recent bid quotation supplied by a bona fide marketmaker. If it is not possible to value a particular debt security pursuant to the above methods, the Advisor may calculate the price of that debt security, subject to limitations established by the Board. An exchange traded options contract on securities, currencies, futures and other financial instruments is valued at its most recent sale price on such exchange. Lacking any sales, the options contract is valued at the Calculated Mean. Lacking any Calculated Mean, the options contract is valued at the most recent bid quotation in the case of a purchased options contract, or the most recent asked quotation in the case of a written options contract. An options contract on securities, currencies and other financial instruments traded over-the-counter is valued at the most recent bid quotation in the case of a purchased options contract and at the most recent asked quotation in the case of a written options contract. Futures contracts are valued at the most recent settlement price. Foreign currency exchange forward contracts are valued at the value of the underlying currency at the prevailing exchange rate. If a security is traded on more than one exchange, or upon one or more exchanges and in the over-the-counter market, quotations are taken from the market in which the security is traded most extensively. 52 If, in the opinion of the Portfolio's Valuation Committee, the value of a portfolio asset as determined in accordance with these procedures does not represent the fair market value of the portfolio asset, the value of the portfolio asset is taken to be an amount which, in the opinion of the Valuation Committee, represents fair market value on the basis of all available information. The value of other portfolio holdings owned by the Portfolio is determined in a manner which, in the discretion of the Valuation Committee most fairly reflects fair market value of the property on the valuation date. Following the valuations of securities or other portfolio assets in terms of the currency in which the market quotation used is expressed ("Local Currency"), the value of these portfolio assets in terms of U.S. dollars is calculated by converting the Local Currency into U.S. dollars at the prevailing currency exchange rate on the valuation date. ADDITIONAL INFORMATION Experts The Financial Highlights of the Portfolio incorporated by reference in this Statement of Additional Information have been so included or incorporated by reference in reliance on the report of PricewaterhouseCoopers LLP, 250 West Pratt Street, Baltimore, Maryland 21201, independent accountants, and given on the authority of that firm as experts in accounting and auditing. Effective July 1, 1998, Coopers & Lybrand L.L.P. and Price Waterhouse LLP merged to become PricewaterhouseCoopers LLP. PricewaterhouseCoopers LLP is responsible for performing annual audits of the financial statements and financial highlights of the Fund in accordance with generally accepted auditing standards, and the preparation of federal tax returns. Shareholder Indemnification The Trust is an organization of the type commonly known as a Massachusetts business trust. Under Massachusetts law, shareholders of such a trust may, under certain circumstances, be held personally liable as partners for the obligations of the Trust. The Declaration of Trust contains an express disclaimer of shareholder liability in connection with the Fund's property or the acts, obligations or affairs of the Trust. The Declaration of Trust also provides for indemnification out of the Fund's property of any shareholder held personally liable for the claims and liabilities which a shareholder may become subject by reason of being or having been a shareholder. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the Fund itself would be unable to meet its obligations. Other Information The name "Investment Trust" is a designation of the Trustees for the time being under a Declaration of Trust dated September 20, 1984, as amended from time to time, and all persons dealing with the Fund must look solely to the property of the Fund for the enforcement of any claims against the Fund as neither the Trustees, officers, agents or shareholders assume any personal liability for obligations entered into on behalf of the Fund. No series of the Trust shall be liable for the obligations of any other series. Upon the initial purchase of shares of the Fund, the shareholder agrees to be bound by the Trust's Declaration of Trust, as amended from time to time. The Declaration of Trust is on file at the Massachusetts Secretary of State's Office in Boston, Massachusetts. The Fund has a fiscal year end of December 31. The CUSIP number of Scudder S&P 500 Index Fund Class S is 811167402. The CUSIP number of Scudder S&P 500 Index Fund Class AARP is 460965-775 PricewaterhouseCoopers LLP, 250 West Pratt Street, Baltimore, Maryland 21201 has been selected as the Independent Accountants for the Fund and the Portfolio. State Street Bank and Trust Company serves as custodian to the Fund and Deutsche Asset Management serves as Custodian for the Portfolio. The firm of Dechert is counsel to the Fund. The firm of Willkie Farr & Gallagher is counsel to the Portfolio. 53 Scudder Fund Accounting Corporation (or its agent) computes net asset value for the Fund. The Fund pays Scudder Fund Accounting Corporation an annual fee of $10,000 for this service. Scudder Service Corporation ("SSC"), P.O. Box 2291, Boston, Massachusetts 02107-2291, a subsidiary of the Manager, is the transfer and dividend paying agent for the Fund. The Fund pays SSC an annual fee for each account maintained for a participant. Pursuant to a services agreement with SSC, SSC may perform, from time to time, certain transaction and shareholder servicing functions. Prior to September 11, 2000, SSC, did not impose any of its fee, which amounted to $115,707. For the year ended December 31, 2000, the amount imposed amounted to $475,349, of which $205,479 was unpaid at December 31, 2000. The Fund, or the Manager (including any affiliate of the Manager), or both, may pay unaffiliated third parties for providing recordkeeping and other administrative services with respect to accounts of participants in retirement plans or other beneficial owners of Fund shares whose interests are generally held in an omnibus account. Scudder Trust Company ("STC"), an affiliate of the Manager, provides recordkeeping and other services in connection with certain retirement and employee benefit plans invested in the Fund. Prior to September 11, 2000, STC did not impose any of its fee, which amounted to $19,026. The amount imposed aggregated $78,163 of which $36,190 was unpaid at December 31, 2000. Effective September 11, 2000, the above fees will be paid by the Manager in accordance with the Administrative Agreement. The Fund's prospectus and this Statement of Additional Information omit certain information contained in the Registration Statement which the Fund has filed with the SEC under the Securities Act of 1933 and reference is hereby made to the Registration Statement for further information with respect to the Fund and the securities offered hereby. This Registration Statement and its amendments are available for inspection by the public at the SEC in Washington, D.C. FINANCIAL STATEMENTS The financial statements, including the investment portfolio of the Portfolio, together with the Report of Independent Accountants, Financial Highlights and notes to financial statements in the Annual Report of the Portfolio and the Fund dated December 31, 2001 are incorporated by reference in their entirety and are hereby deemed to be a part of this Statement of Additional Information. 54 APPENDIX A Set forth below are descriptions of the ratings of Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Corporation Ratings Group ("S&P"), which represent their opinions as to the quality of the securities which they undertake to rate. It should be emphasized, however, that ratings are relative and subjective and are not absolute standards of quality. S&P's Commercial Paper Ratings A is the highest commercial paper rating category utilized by S&P, which uses the numbers 1+, 1, 2 and 3 to denote relative strength within its A classification. Commercial paper issues rated A by S&P have the following characteristics: Liquidity ratios are better than industry average. Long-term debt rating is A or better. The issuer has access to at least two additional channels of borrowing. Basic earnings and cash flow are in an upward trend. Typically, the issuer is a strong company in a well-established industry and has superior management. Moody's Commercial Paper Ratings Issuers rated Prime-1 (or related supporting institutions) have a superior capacity for repayment of short-term promissory obligations. Prime-1 repayment capacity will normally be evidenced by the following characteristics: leading market positions in well-established industries; high rates of return on funds employed; conservative capitalization structures with moderate reliance on debt and ample asset protection; broad margins in earnings coverage of fixed financial charges and high internal cash generation; well-established access to a range of financial markets and assured sources of alternate liquidity. Issuers rated Prime-2 (or related supporting institutions) have a strong capacity for repayment of short-term promissory obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, will be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. Issuers rated Prime-3 (or related supporting institutions) have an acceptable capacity for repayment of short-term promissory obligations. The effect of industry characteristics and market composition may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and the requirement for relatively high financial leverage. Adequate alternate liquidity is maintained. PART C. OTHER INFORMATION INVESTMENT TRUST Scudder S&P 500 Index Fund
Item 23 Exhibits - ------- -------- (a) (1) Amended and Restated Declaration of Trust dated November 3, 1987. (Incorporated by reference to Post-Effective Amendment No. 78 to the Registration Statement.) (2) Certificate of Amendment of Declaration of Trust dated November 13, 1990. (Incorporated by reference to Post-Effective Amendment No. 78 to the Registration Statement.) (3) Certificate of Amendment of Declaration of Trust dated February 12, 1991. (Incorporated by reference to Post-Effective Amendment No. 78 to the Registration Statement.) (4) Certificate of Amendment of Declaration of Trust dated May 28, 1998. (Incorporated by reference to Post-Effective Amendment No. 105 to the Registration Statement, as filed on May 28, 1999.) (5) Establishment and Designation of Series of Shares of Beneficial Interest, $0.01 par value, with respect to Scudder Growth and Income Fund and Scudder Quality Growth Fund. (Incorporated by reference to Post-Effective Amendment No. 78 to the Registration Statement.) (6) Establishment and Designation of Series of Shares of Beneficial Interest, $0.01 par value, with respect to Scudder Classic Growth Fund. (Incorporated by reference to Post-Effective Amendment No. 76 to the Registration Statement.) (7) Establishment and Designation of Series of Shares of Beneficial Interest, $0.01 par value, with respect to Scudder Growth and Income Fund, Scudder Large Company Growth Fund, Scudder Classic Growth Fund, and Scudder S&P 500 Index Fund. (Incorporated by reference to Post-Effective Amendment No. 105 to the Registration Statement, as filed on May 28, 1999.) (8) Establishment and Designation of Series of Shares of Beneficial Interest, $0.01 par value, with respect to Scudder Real Estate Investment Fund. (Incorporated by reference to Post-Effective Amendment No. 105 to the Registration Statement, as filed on May 28, 1999.) (9) Establishment and Designation of Series of Shares of Beneficial Interest, $0.01 par value, with respect to Dividend + Growth Fund. (Incorporated by reference to Post-Effective Amendment No. 105 to the Registration Statement, as filed on May 28, 1999.) (10) Establishment and Designation of Series of Shares of Beneficial Interest, $0.01 par value, with respect to Scudder Tax Managed Growth Fund and Scudder Tax Managed Small Company Fund. (Incorporated by reference to Post-Effective Amendment No. 105 to the Registration Statement, as filed on May 28, 1999.) (11) Establishment and Designation of Classes of Shares of Beneficial Interest, $0.01 par value, Kemper A, B & C Shares, and Scudder S Shares, with respect to Classic Growth Fund. (Incorporated by reference to Post-Effective Amendment No. 94 to the Registration Statement.) (12) Establishment and Designation of Classes of Shares of Beneficial Interest, $0.01 par value, Class R Shares, with respect to Scudder Growth and Income Fund. (Incorporated by reference to Post-Effective Amendment No. 105 to the Registration Statement, as filed on May 28, 1999.) (13) Establishment and Designation of Classes of Shares of Beneficial Interest, $0.01 par value, Class R Shares, with respect to Scudder Large Company Growth Fund. (Incorporated by reference to Post-Effective Amendment No. 105 to the Registration Statement, as filed on May 28, 1999.) (14) Redesignation of Series, Scudder Classic Growth Fund to Classic Growth Fund. (Incorporated by reference to Post-Effective Amendment No. 94 to the Registration Statement.) (15) Redesignation of Series, Scudder Quality Growth Fund to Scudder Large Company Growth Fund. (Incorporated by reference to Post-Effective Amendment No. 105 to the Registration Statement, as filed on May 28, 1999.) (16) Redesignation of Series, Scudder Dividend + Growth Fund to Scudder Dividend & Growth Fund. (Incorporated by reference to Post-Effective Amendment No. 105 to the Registration Statement, as filed on May 28, 1999.) Part C - Page 2 (17) Establishment and Designation of Classes of Shares of Beneficial Interest, $0.01 par value, Class S and Class AARP, with respect to Scudder Dividend and Growth Fund. (Incorporated by reference to Post-Effective Amendment No. 117 to the Registration Statement, as filed on May 12, 2000.) (18) Amended and Restated Establishment and Designation of Classes of Shares of Beneficial Interest, $0.01 par value, Class R, Class S and Class AARP with respect to Scudder Growth and Income Fund. (Incorporated by reference to Post-Effective Amendment No. 117 to the Registration Statement, as filed on May 12, 2000.) (19) Establishment and Designation of Classes of Shares of Beneficial Interest, $0.01 par value, Class S and Class AARP, with respect to Scudder S&P 500 Index Fund. (Incorporated by reference to Post-Effective Amendment No. 117 to the Registration Statement, as filed on May 12, 2000.) (20) Establishment and Designation of Classes of Shares of Beneficial Interest, $0.01 par value, Class S and Class AARP, with respect to Scudder Small Company Stock Fund. (Incorporated by reference to Post-Effective Amendment No. 117 to the Registration Statement, as filed on May 12, 2000.) (21) Establishment and Designation of Classes of Shares of Beneficial Interest, $0.01 par value, Class S and Class AARP, with respect to Scudder Capital Growth Fund. (Incorporated by reference to Post-Effective Amendment No. 117 to the Registration Statement, as filed on May 12, 2000.) (22) Amended and Restated Establishment and Designation of Classes of Shares of Beneficial Interest, $.01 Par Value, Class R, Class S and Class AARP, with respect to Scudder Large Company Growth Fund. (Incorporated by reference to Post-Effective Amendment No. 118 to the Registration Statement, as filed on July 14, 2000.) (23) Amended and Restated Establishment and Designation of Series of Shares of Beneficial Interest, $.01 Par Value, Class S and Class AARP, with respect to Scudder Capital Growth Fund and Scudder Small Company Stock Fund. (Incorporated by reference to Post-Effective Amendment No. 118 to the Registration Statement, as filed on July 14, 2000.) (24) Establishment and Designation of Classes of Shares of Beneficial Interest, $.01 Par Value, Class S and Class AARP, with respect to Scudder Capital Growth Fund. (Incorporated by reference to Post-Effective Amendment No. 118 to the Registration Statement, as filed on July 14, 2000.) Part C - Page 3 (25) Establishment and Designation of Classes of Shares of Beneficial Interest, $.01 par Value, Class S and Class AARP, with respect to Scudder Small Company Stock Fund. (Incorporated by reference to Post-Effective Amendment No. 118 to the Registration Statement, as filed on July 14, 2000.) (26) Amended and Restated Establishment and Designation of Shares of Beneficial Interest, Classes A, B, C and I of Scudder Capital Growth Fund. (Incorporated by reference to Post-Effective Amendment No. 124 to the Registration Statement, as filed on December 29, 2000.) (27) Amended and Restated Establishment and Designation of Shares of Beneficial Interest, Classes A, B, and C of Scudder Growth and Income Fund. (Incorporated by reference to Post-Effective Amendment No. 124 to the Registration Statement, as filed on December 29, 2000.) (28) Amended and Restated Establishment and Designation of Shares of Beneficial Interest, Classes A, B, C and I of Scudder Large Company Growth Fund. (Incorporated by reference to Post-Effective Amendment No. 124 to the Registration Statement, as filed on December 29, 2000.) (29) Amended and Restated Establishment and Designation of Shares of Beneficial Interest, Classes A, B, and C of Scudder Dividend and Growth Fund. (Incorporated by reference to Post-Effective Amendment No. 124 to the Registration Statement, as filed on December 29, 2000.) (30) Amended and Restated Establishment and Designation of Shares of Beneficial Interest, Classes A, B, and C of Scudder Small Company Stock Fund. (Incorporated by reference to Post-Effective Amendment No. 124 to the Registration Statement, as filed on December 29, 2000.) (b) (1) Amendment to By-Laws of the Registrant dated November 12, 1991. (Incorporated by reference to Post-Effective Amendment No. 78 to the Registration Statement.) (2) Amendment to By-Laws of the Registrant, dated February 7, 2000. (Incorporated by reference to Post-Effective Amendment No. 120 to the Registration Statement.) Part C - Page 4 (3) Amendment to By-Laws of the Registrant, dated November 13, 2000. (Incorporated by reference to Post-Effective Amendment No. 124 to the Registration Statement, as filed on December 29, 2000.) (c) Inapplicable. (d) (1) Investment Management Agreement between the Registrant (on behalf of Scudder Growth and Income Fund) and Scudder Kemper Investments, Inc. dated September 7, 1998. (Incorporated by reference to Post-Effective Amendment No. 100 to the Registration Statement.) (2) Investment Management Agreement between the Registrant (on behalf of Scudder Large Company Growth Fund) and Scudder Kemper Investments, Inc. dated September 7, 1998. (Incorporated by reference to Post-Effective Amendment No. 100 to the Registration Statement.) (3) Investment Management Agreement between the Registrant (on behalf of Classic Growth Fund) and Scudder Kemper Investments, Inc. dated September 7, 1998. (Incorporated by reference to Post-Effective Amendment No. 100 to the Registration Statement.) (4) Investment Management Agreement between the Registrant (on behalf of Scudder Real Estate Investment Fund) and Scudder Kemper Investments, Inc. dated September 7, 1998. (Incorporated by reference to Post-Effective Amendment No. 100 to the Registration Statement.) (5) Investment Management Agreement between the Registrant (on behalf of Scudder S&P 500 Index Fund) and Scudder Kemper Investments, Inc. dated September 7, 1998. (Incorporated by reference to Post-Effective Amendment No. 100 to the Registration Statement.) (6) Investment Management Agreement between the Registrant (on behalf of Scudder Dividend & Growth Fund) and Scudder Kemper Investments, Inc. dated September 7, 1998. (Incorporated by reference to Post-Effective Amendment No. 100 to the Registration Statement.) (7) Investment Management Agreement between the Registrant (on behalf of Scudder Tax Managed Growth Fund) and Scudder Kemper Investments, Inc. dated September 7, 1998. (Incorporated by reference to Post-Effective Amendment No. 100 to the Registration Statement.) Part C - Page 5 (8) Investment Management Agreement between the Registrant (on behalf of Scudder Tax Managed Small Company Fund) and Scudder Kemper Investments, Inc. dated September 7, 1998. (Incorporated by reference to Post-Effective Amendment No. 100 to the Registration Statement.) (9) Investment Advisory Agreement between the Registrant (on behalf of Scudder S&P 500 Index Fund) and Bankers Trust Company dated September 9, 1999. (Incorporated by reference to Post-Effective Amendment No. 109 to the Registration Statement.) (10) Investment Management Agreement between the Registrant (on behalf of Scudder Capital Growth Fund) and Scudder Kemper Investments, Inc., dated July 17, 2000. (Incorporated by reference to Post-Effective Amendment No. 120 to the Registration Statement.) (11) Investment Management Agreement between the Registrant (on behalf of Scudder Small Company Stock Fund) and Scudder Kemper Investments, Inc., dated July 17, 2000. (Incorporated by reference to Post-Effective Amendment No. 120 to the Registration Statement.) (12) Investment Management Agreement between the Registrant (on behalf of Scudder Growth and Income Fund) and Scudder Kemper Investments, Inc., dated August 14, 2000. (Incorporated by reference to Post-Effective Amendment No. 121 to the Registration Statement.) (13) Amended and Restated Investment Management Agreement between the Registrant (on behalf of Scudder Dividend & Growth Fund) and Scudder Kemper Investments, Inc., dated October 2, 2000. (Incorporated by reference to Post-Effective Amendment No. 124 to the Registration Statement, as filed on December 29, 2000.) (14) Amended and Restated Investment Management Agreement between the Registrant (on behalf of Scudder Large Company Growth Fund) and Scudder Kemper Investments, Inc., dated October 2, 2000. (Incorporated by reference to Post-Effective Amendment No. 124 to the Registration Statement, as filed on December 29, 2000.) Investment Management Agreement between the Registrant, on behalf of the fund, and Zurich Scudder Investments, Inc. (to be renamed), to be filed under subsequent amendment. Part C - Page 6 (e) (1) Underwriting Agreement and Distribution Services Agreement between the Registrant on behalf of Classic Growth Fund and Kemper Distributors, Inc. dated September 7, 1998. (Incorporated by reference to Post-Effective Amendment No. 100 to the Registration Statement.) (2) Underwriting Agreement between the Registrant and Scudder Investor Services, Inc. dated September 7, 1998. (Incorporated by reference to Post-Effective Amendment No. 100 to the Registration Statement.) (3) Amendment dated August 31, 1999 to the Underwriting and Distribution Services Agreement between the Registrant, on behalf of Classic Growth Fund, and Kemper Distributors, Inc. (Incorporated by reference to Post-Effective Amendment No. 109 to the Registration Statement.) (4) Amendment dated November 2, 1999 to the Underwriting and Distribution Services Agreement between the Registrant, on behalf of Classic Growth Fund, and Kemper Distributors, Inc. (Incorporated by reference to Post-Effective Amendment No. 109 to the Registration Statement.) (5) Underwriting Agreement between the Registrant and Scudder Investor Services dated May 8, 2000. (Incorporated by reference to Post-Effective Amendment No. 118 to the Registration Statement, as filed on July 14, 2000.) (6) Underwriting and Distribution Services Agreement between the Registrant and Kemper Distributors, Inc. (on behalf of Scudder Capital Growth Fund, Scudder Dividend & Growth Fund, Scudder Growth and Income Fund, Scudder Large Company Growth Fund, Scudder S&P 500 Index Fund, and Scudder Small Company Stock Fund), dated November 13, 2000. (Incorporated by reference to Post-Effective Amendment No. 124 to the Registration Statement, as filed on December 29, 2000.) (f) Inapplicable. (g) (1) Custodian Agreement between the Registrant (on behalf of Scudder Growth and Income Fund) and State Street Bank and Trust Company ("State Street Bank") dated December 31, 1984. (Incorporated by reference to Post-Effective Amendment No. 78 to the Registration Statement.) Part C - Page 7 (2) Amendment dated April 1, 1985 to the Custodian Agreement between the Registrant and State Street Bank. (Incorporated by reference to Post-Effective Amendment No. 78 to the Registration Statement.) (3) Amendment dated August 8, 1987 to the Custodian Agreement between the Registrant and State Street Bank. (Incorporated by reference to Post-Effective Amendment No. 78 to the Registration Statement.) (4) Amendment dated August 9, 1988 to the Custodian Agreement between the Registrant and State Street Bank. (Incorporated by reference to Post-Effective Amendment No. 78 to the Registration Statement.) (5) Amendment dated July 29, 1991 to the Custodian Agreement between the Registrant and State Street Bank. (Incorporated by reference to Post-Effective Amendment No. 78 to the Registration Statement.) (6) Amendment dated February 8, 1999 to the Custodian Agreement between the Registrant and State Street Bank. (Incorporated by reference to Post-Effective Amendment No. 109 to the Registration Statement.) (7) Amendment to the Custodian Agreement between the Registrant and State Street Bank. (Incorporated by reference to Post-Effective Amendment No. 124 to the Registration Statement, as filed on December 29, 2000.) (8) Custodian fee schedule for Scudder S&P 500 Index Fund. (Incorporated by reference to Post-Effective Amendment No. 84 to the Registration Statement.) (9) Subcustodian Agreement with fee schedule between State Street Bank and The Bank of New York, London office, dated December 31, 1978. (Incorporated by reference to Post-Effective Amendment No. 78 to the Registration Statement.) (10) Subcustodian Agreement between State Street Bank and The Chase Manhattan Bank, N.A. dated September 1, 1986. (Incorporated by reference to Post-Effective Amendment No. 78 to the Registration Statement.) (11) Custodian fee schedule for Scudder Quality Growth Fund and Scudder Growth and Income Fund. (Incorporated by reference to Post-Effective Amendment No. 72 to the Registration Statement.) Part C - Page 8 (12) Custodian fee schedule for Scudder Classic Growth Fund dated August 1, 1994. (Incorporated by reference to Post-Effective Amendment No. 77 to the Registration Statement.) (h) (1) Transfer Agency and Service Agreement with fee schedule between the Registrant and Scudder Service Corporation dated October 2, 1989. (Incorporated by reference to Post-Effective Amendment No. 78 to the Registration Statement.) (1)(a) Revised fee schedule dated October 6, 1995. (Incorporated by reference to Post-Effective Amendment No. 76 to the Registration Statement.) (1)(b) Form of revised fee schedule dated October 1, 1996. (Incorporated by reference to Post-Effective Amendment No. 78 to the Registration Statement.) (2) Transfer Agency Fee Schedule between the Registrant, on behalf of Scudder Classic Growth Fund, and Kemper Service Company dated January 1, 1999. (Incorporated by reference to Post-Effective Amendment No. 109 to the Registration Statement.) (3) Agency Agreement between the Registrant on behalf of Classic Growth Fund and Kemper Service Company dated April 1998. (Incorporated by reference to Post-Effective Amendment No. 100 to the Registration Statement.) (4) Agency Agreement between the Registrant on behalf of Scudder Growth and Income Fund Class R shares and Scudder Large Company Growth Fund Class R shares, and Kemper Service Company dated May 3, 1999. (Incorporated by reference to Post-Effective Amendment No. 106 to the Registration Statement.) (5) Agency Agreement between the Registrant (on behalf of Scudder Capital Growth Fund, Scudder Dividend & Growth Fund, Scudder Growth and Income Fund, Scudder Large Company Growth Fund, and Scudder Small Company Stock Fund) and Kemper Service Company, dated November 13, 2000. (Incorporated by reference to Post-Effective Amendment No. 124 to the Registration Statement, as filed on December 29, 2000.) Part C - Page 9 (6) COMPASS Service Agreement and fee schedule between the Registrant and Scudder Trust Company dated January 1, 1990. (Incorporated by reference to Post-Effective Amendment No. 78 to the Registration Statement.) (7) COMPASS and TRAK 2000 Service Agreement between Scudder Trust Company and the Registrant dated October 1, 1995. (Incorporated by reference to Post-Effective Amendment No. 74 to the Registration Statement.) (7)(a) Fee Schedule for Services Provided Under Compass and TRAK 2000 Service Agreement between Scudder Trust Company and the Registrant dated October 1, 1996. (Incorporated by reference to Post-Effective Amendment No. 109 to the Registration Statement.) (8) Fund Accounting Services Agreement between the Registrant, on behalf of Scudder Quality Growth Fund and Scudder Fund Accounting Corporation dated November 1, 1994. (Incorporated by reference to Post-Effective Amendment No. 72 to the Registration Statement.) (9) Fund Accounting Services Agreement between the Registrant, on behalf of Scudder Growth and Income Fund and Scudder Fund Accounting Corporation dated October 17, 1994. (Incorporated by reference to Post-Effective Amendment No. 73 to the Registration Statement.) (10) Fund Accounting Services Agreement between the Registrant, on behalf of Scudder Classic Growth Fund, and Scudder Fund Accounting Corporation dated September 9, 1996. (Incorporated by reference to Post-Effective Amendment No. 99 to the Registration Statement.) (11) Amendment No. 1 dated August 31, 1999 to the Fund Accounting Services Agreement between the Registrant, on behalf of Classic Growth Fund, and Scudder Fund Accounting Corporation. (Incorporated by reference to Post-Effective Amendment No. 109 to the Registration Statement.) (12) Fund Accounting Services Agreement between the Registrant, on behalf of Scudder Tax Managed Small Company and Scudder Fund Accounting Corporation dated July 30, 1998. (Incorporated by reference to Post-Effective Amendment No. 99 to the Registration Statement.) Part C - Page 10 (13) Fund Accounting Services Agreement between the Registrant, on behalf of Scudder Tax Managed Growth Fund and Scudder Fund Accounting Corporation dated July 30, 1998. (Incorporated by reference to Post-Effective Amendment No. 99 to the Registration Statement.) (14) Fund Accounting Services Agreement between the Registrant, on behalf of Scudder Dividend & Growth Fund and Scudder Fund Accounting Corporation dated June 1, 1998. (Incorporated by reference to Post-Effective Amendment No. 99 to the Registration Statement.) (15) Scudder Accounting Fee Schedule between the Registrant, on behalf of Scudder Large Company Growth Fund - Class R Shares, and Scudder Fund Accounting Corporation dated September 14, 1999. (Incorporated by reference to Post-Effective Amendment No. 109 to the Registration Statement.) (16) Fund Accounting Services Agreement between the Registrant, on behalf of Scudder Real Estate Investment Fund and Scudder Fund Accounting Corporation dated March 2, 1998. (Incorporated by reference to Post-Effective Amendment No. 99 to the Registration Statement.) (17) Fund Accounting Services Agreement between the Registrant, on behalf of Scudder Capital Growth Fund and Scudder Fund Accounting Corporation, dated July 17, 2000. (Incorporated by reference to Post-Effective Amendment No. 121 to the Registration Statement.) (18) Fund Accounting Services Agreement between the Registrant, on behalf of Scudder Small Company Stock Fund and Scudder Fund Accounting Corporation, dated July 17, 2000. (Incorporated by reference to Post-Effective Amendment No. 121 to the Registration Statement.) (19) Revised Fund Accounting Services Agreement between the Registrant (on behalf of Scudder Capital Growth Fund) and Scudder Fund Accounting Corporation, dated November 13, 2000. (Incorporated by reference to Post-Effective Amendment No. 124 to the Registration Statement, as filed on December 29, 2000.) Part C - Page 11 (20) Revised Fund Accounting Services Agreement between the Registrant (on behalf of Scudder Dividend & Growth Fund) and Scudder Fund Accounting Corporation, dated November 13, 2000. (Incorporated by reference to Post-Effective Amendment No. 124 to the Registration Statement, as filed on December 29, 2000.) (21) Revised Fund Accounting Services Agreement between the Registrant (on behalf of Scudder Growth and Income Fund) and Scudder Fund Accounting Corporation, dated November 13, 2000. (Incorporated by reference to Post-Effective Amendment No. 124 to the Registration Statement, as filed on December 29, 2000.) (22) Revised Fund Accounting Services Agreement between the Registrant (on behalf of Scudder Large Company Growth Fund) and Scudder Fund Accounting Corporation, dated November 13, 2000. (Incorporated by reference to Post-Effective Amendment No. 124 to the Registration Statement, as filed on December 29, 2000.) (23) Revised Fund Accounting Services Agreement between the Registrant (on behalf of Scudder Small Company Stock Fund) and Scudder Fund Accounting Corporation, dated November 13, 2000. (Incorporated by reference to Post-Effective Amendment No. 124 to the Registration Statement, as filed on December 29, 2000.) (24) Investment Accounting Agreement between the Registrant, on behalf of Scudder S&P 500 Index Fund and Scudder Fund Accounting Corporation dated August 28, 1997. (Incorporated by reference to Post-Effective Amendment No. 99 to the Registration Statement.) (25) Shareholder Services Agreement between the Registrant and Charles Schwab & Co., Inc. dated June 1, 1990. (Incorporated by reference to Post-Effective Amendment No. 78 to the Registration Statement.) (26) Service Agreement between Copeland Associates, Inc. and Scudder Service Corporation (on behalf of Scudder Quality Growth Fund and Scudder Growth and Income Fund) dated June 8, 1995. (Incorporated by reference to Post-Effective Amendment No. 74 to the Registration Statement.) Part C - Page 12 (27) Administrative Services Agreement between the Registrant on behalf of Classic Growth Fund, and Kemper Distributors, Inc., dated April 1998. (Incorporated by reference to Post-Effective Amendment No. 100 to the Registration Statement.) (27)(a) Amendment No. 1 to the Administrative Services Agreement between the Registrant on behalf of Classic Growth Fund, and Kemper Distributors, Inc., dated August 31, 1999. (Incorporated by reference to Post-Effective Amendment No. 109 to the Registration Statement.) (28) Administrative Services Agreement between the Registrant on behalf of Scudder Growth and Income Fund, and Scudder Investor Services, Inc., dated May 3, 1999. (Incorporated by reference to Post-Effective Amendment No. 105 to the Registration Statement, as filed on May 28, 1999.) (29) Administrative Services Agreement between the Registrant on behalf of Scudder Large Company Growth Fund, and Scudder Investor Services, Inc., dated May 3, 1999. (Incorporated by reference to Post-Effective Amendment No. 105 to the Registration Statement, as filed on May 28, 1999.) (30) Administrative Services Agreement between the Registrant (on behalf of Scudder Capital Growth Fund, Scudder Dividend &Growth Fund, Scudder Growth and Income Fund, Scudder Large Company Growth Fund, Scudder S&P 500 Index Fund, Scudder Small Company Stock Fund and Scudder Kemper Investments, Inc.), dated July 17, 2000. (Incorporated by reference to Post-Effective Amendment No. 121 to the Registration Statement.) (31) Amended and Restated Administrative Services Agreement between the Registrant (on behalf of Scudder Capital Growth Fund, Scudder Dividend &Growth Fund, Scudder Growth and Income Fund, Scudder Large Company Growth Fund, Scudder S&P 500 Index Fund, and Scudder Small Company Stock Fund), dated November 13, 2000. (Incorporated by reference to Post-Effective Amendment No. 124 to the Registration Statement, as filed on December 29, 2000.) Part C - Page 13 (32) Shareholder Services Agreement between the Registrant (on behalf of Scudder Capital Growth Fund, Scudder Dividend & Growth Fund, Scudder Growth and Income Fund, Scudder Large Company Growth Fund, Scudder S&P 500 Index Fund, and Scudder Small Company Stock Fund) and Kemper Distributors, Inc., dated November 13, 2000. (Incorporated by reference to Post-Effective Amendment No. 124 to the Registration Statement, as filed on December 29, 2000.) (i) Inapplicable. (j) Inapplicable. (k) Inapplicable. (l) Inapplicable. (m) (1) 12b-1 Plan between the Registrant, on behalf of Scudder Growth and Income Fund (Class R shares) and Scudder Large Company Growth Fund (Class R shares), and Scudder Investor Services, Inc. (Incorporated by reference to Post-Effective Amendment No. 105 to the Registration Statement, as filed on May 28, 1999.) (2) Rule 12b-1 Plan for Scudder Capital Growth Fund Class A, B and C Shares, dated December 29,2000. (Incorporated by reference to Post-Effective Amendment No. 124 to the Registration Statement, as filed on December 29, 2000.) (3) Rule 12b-1 Plan for Scudder Dividend and Growth Fund Class A, B and C Shares, dated December 29,, 2000. (Incorporated by reference to Post-Effective Amendment No. 124 to the Registration Statement, as filed on December 29, 2000.) (4) Rule 12b-1 Plan for Scudder Growth and Income Fund Class B and C Shares, dated December 29, 2000. (Incorporated by reference to Post-Effective Amendment No. 124 to the Registration Statement, as filed on December 29, 2000.) (5) Rule 12b-1 Plan for Scudder Large Company Growth Fund Class B and C Shares, dated December 292000. (Incorporated by reference to Post-Effective Amendment No. 124 to the Registration Statement, as filed on December 29, 2000.) Part C - Page 14 (6) Rule 12b-1 Plan for Scudder Small Company Stock Fund Class A, B and C Shares, dated December 29, 2000. (Incorporated by reference to Post-Effective Amendment No. 124 to the Registration Statement, as filed on December 29, 2000.) (n) (1) Mutual Funds Multi-Distribution System Plan, Rule 18f-3 Plan. (Incorporated by reference to Post-Effective Amendment No. 94 to the Registration Statement.) (2) Plan with respect to Scudder Growth and Income Fund pursuant to Rule 18f-3. (Incorporated by reference to Post-Effective Amendment No. 105 to the Registration Statement, as filed on May 28, 1999.) (3) Plan with respect to Scudder Large Company Growth Fund pursuant to Rule 18f-3. (Incorporated by reference to Post-Effective Amendment No. 105 to the Registration Statement, as filed on May 28, 1999.) (4) Plan with respect to Scudder Dividend & Growth Fund pursuant to Rule 18f-3. (Incorporated by reference to Post-Effective Amendment No. 118 to the Registration Statement, as filed on July 14, 2000.) (5) Plan with respect to Scudder Capital Growth Fund pursuant to Rule 18f-3. (Incorporated by reference to Post-Effective Amendment No. 118 to the Registration Statement, as filed on July 14, 2000.) (6) Plan with respect to Scudder Growth and Income Fund pursuant to Rule 18f-3. (Incorporated by reference to Post-Effective Amendment No. 118 to the Registration Statement, as filed on July 14, 2000.) (7) Plan with respect to Scudder S&P 500 Index Fund pursuant to Rule 18f-3. (Incorporated by reference to Post-Effective Amendment No. 118 to the Registration Statement, as filed on July 14, 2000.) (8) Plan with respect to Scudder Small Company Stock Fund pursuant to Rule 18f-3. (Incorporated by reference to Post-Effective Amendment No. 118 to the Registration Statement, as filed on July 14, 2000.) (9) Amended and Restated Plan with respect to Scudder Dividend &Growth Fund pursuant to Rule 18f-3. (Incorporated by reference to Post-Effective Amendment No. 118 to the Registration Statement, as filed on July 14, 2000.) Part C - Page 15 (10) Amended and Restated Plan with respect to Scudder Capital Growth Fund pursuant to Rule 18f-3. (Incorporated by reference to Post-Effective Amendment No. 118 to the Registration Statement, as filed on July 14, 2000.) (11) Amended and Restated Plan with respect to Scudder Growth and Income Fund pursuant to Rule 18f-3. (Incorporated by reference to Post-Effective Amendment No. 118 to the Registration Statement, as filed on July 14, 2000.) (12) Amended and Restated Plan with respect to Scudder S&P 500 Index Fund pursuant to Rule 18f-3. (Incorporated by reference to Post-Effective Amendment No. 118 to the Registration Statement, as filed on July 14, 2000.) (13) Amended and Restated Plan with respect to Scudder Small Company Stock Fund pursuant to Rule 18f-3. (Incorporated by reference to Post-Effective Amendment No. 118 to the Registration Statement, as filed on July 14, 2000.) (14) Amended and Restated Plan with respect to Scudder Large Company Growth Fund pursuant to Rule 18f-3. (Incorporated by reference to Post-Effective Amendment No. 121 to the Registration Statement.) (15) Amended and Restated Plan with respect to Investment Trust pursuant to Rule 18f-3. (Incorporated by reference to Post-Effective Amendment No. 124 to the Registration Statement, as filed on December 29, 2000.) (p) (1) Scudder Kemper Investments, Inc., Scudder Investor Services, Inc. and Kemper Distributors, Inc. Code of Ethics. (Incorporated by reference to Post-Effective Amendment No. 114 to the Registration Statement, as filed on April 12, 2000.) (1)(a) Code of Ethics for Zurich Scudder Investments, Inc., dated January 1, 2002. (Filed herein). (2) Bankers Trust Company Code of Ethics. (Incorporated by reference to Post-Effective Amendment No. 114 to the Registration Statement, as filed on April 12, 2000.) (3) Amended Code of Ethics of Scudder Kemper Investments, Inc., Kemper Distributors, Inc. and Scudder Investor Services, Inc. dated December 15, 2000. (Incorporated by reference to Post-Effective Amendment No.126 to the Registration Statement) Part C - Page 16 (4) Amended Codes of Ethics of Scudder Capital Growth Fund, Scudder Dividend & Growth Fund, Scudder Growth and Income Fund, Scudder Large Company Growth Fund, Scudder S&P 500 Index Fund, and Scudder Small Company Stock Fund. (Incorporated by reference to Post-Effective Amendment No.126 to the Registration Statement)
Item 24. Persons Controlled by or under Common Control with Fund - -------- ------------------------------------------------------- None Item 25. Indemnification. - -------- ---------------- As permitted by Sections 17(h) and 17(i) of the Investment Company Act of 1940, as amended (the "1940 Act"), pursuant to Article IV of the Registrant's By-Laws (filed as Exhibit No. 2 to the Registration Statement), officers, directors, employees and representatives of the Funds may be indemnified against certain liabilities in connection with the Funds, and pursuant to Section 12 of the Underwriting Agreement dated May 6, 1998 (filed as Exhibit No. 6(c) to the Registration Statement), Scudder Investor Services, Inc. (formerly "Scudder Fund Distributors, Inc."), as principal underwriter of the Registrant, may be indemnified against certain liabilities that it may incur. Said Article IV of the By-Laws and Section 12 of the Underwriting Agreement are hereby incorporated by reference in their entirety. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Act"), may be permitted to directors, officers and controlling persons of the Registrant and the principal underwriter pursuant to the foregoing provisions or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant and the principal underwriter in connection with the successful defense of any action, suit or proceeding) is asserted against the Registrant by such director, officer or controlling person or the principal underwriter in connection with the shares being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Item 26. Business or Other Connections of Investment Adviser - -------- --------------------------------------------------- Zurich Scudder Investments, Inc. has stockholders and employees who are denominated officers but do not as such have corporation-wide responsibilities. Such persons are not considered officers for the purpose of this Item 26. Part C - Page 17
Business and Other Connections of Board Name of Directors of Registrant's Adviser ---- ------------------------------------ Lynn S. Birdsong Director and Vice President, Zurich Scudder Investments, Inc.** Director and Chairman, Scudder Investments (Luxembourg) S.A.# Director, Scudder Investments (U.K.) Ltd. oo Director and Chairman of the Board, Scudder Investments Asia, Ltd. ooo Director and Chairman, Scudder Investments Japan, Inc. + Senior Vice President, Scudder Investor Services, Inc. Director and Chairman, Scudder Trust (Cayman) Ltd. @@@ Director, Scudder, Stevens & Clark Australia x Director and Vice President, Zurich Investment Management, Inc. xx Director and President, Scudder, Stevens & Clark Corporation ** Director and President, Scudder , Stevens & Clark Overseas Corporation o Director, Scudder Threadneedle International Ltd. Director, Korea Bond Fund Management Co., Ltd. @@ Nicholas Bratt Director and Vice President, Zurich Scudder Investments, Inc.** Vice President, Scudder, Stevens & Clark Corporation ** Vice President, Scudder, Stevens & Clark Overseas Corporation o Laurence W. Cheng Director, Zurich Scudder Investments, Inc.** Member, Corporate Executive Board, Zurich Insurance Company of Switzerland ## Director, ZKI Holding Corporation xx Chris C. DeMaio Treasurer, Zurich Scudder Investments, Inc.** Director, Vice President and Treasurer, SRV Investment Corporation** Assistant Treasurer, Zurich Scudder Investments Canada Ltd. Martin Feinsteim Director, Zurich Scudder Investments, Inc.** Paula Gaccione Assistant Secretary, Zurich Scudder Investments, Inc.** Secretary, Scudder Financial Services, Inc. Secretary, Scudder Investment Service Company Clerk, Scudder Service Corporation* Steven Gluckstern Director, Chairman of the Board, Zurich Scudder Investments, Inc. ** Gunther Gose Director, Zurich Scudder Investments, Inc.** CFO, Member Group Executive Board, Zurich Financial Services, Inc. ## CEO/Branch Offices, Zurich Life Insurance Company ## Part C - Page 18 James J. McGovern Assistant Treasurer, Zurich Scudder Investments, Inc.** Assistant Treasurer and Vice President, SFA, Inc. Chief Financial Officer and Treasurer, Scudder Financial Services, Inc. Chief Financial Officer, Scudder Investments Service Company Director, Vice President and Assistant Treasurer, Scudder Realty Holdings Corporation* Treasurer, Scudder Service Corporation* Treasurer, Zurich Scudder Insurance Agency of Alabama, Inc. Treasurer, Zurich Scudder Insurance Agency, Inc. Kathryn L. Quirk Chief Legal Officer, Chief Compliance Officer and Secretary, Zurich Scudder Investments, Inc.** Director, Vice President, Chief Legal Officer and Secretary, Scudder Distributors, Inc. Director and Secretary, Scudder Service Company Director, Senior Vice President, Chief Legal Officer & Assistant Clerk, Scudder Investor Services, Inc. Director, Vice President & Secretary, Scudder Fund Accounting Corporation* Director, Vice President & Secretary, Scudder Realty Holdings Corporation* Director & Assistant Clerk, Scudder Service Corporation* Director and Secretary, SFA, Inc.* Vice President, Director & Assistant Secretary, Scudder Precious Metals, Inc.*** Director, Scudder, Stevens & Clark Japan, Inc. ### Director, Vice President and Secretary, Scudder, Stevens & Clark of Canada, Ltd.*** Director, Vice President and Secretary, Scudder Canada Investor Services Limited*** Director, Vice President and Secretary, Scudder Realty Advisers, Inc. @ Director and Secretary, Scudder, Stevens & Clark Corporation** Director and Secretary, Scudder, Stevens & Clark Overseas Corporation o Director, Vice President and Secretary, Scudder Defined Contribution Services, Inc.** Director, Vice President and Secretary, Scudder Capital Asset Corporation** Director, Vice President and Secretary, Scudder Capital Stock Corporation** Director, Vice President and Secretary, Scudder Capital Planning Corporation** Director, Vice President and Secretary, SS&C Investment Corporation** Director, Vice President and Secretary, SIS Investment Corporation** Director, Vice President and Secretary, SRV Investment Corporation** Director, Vice President, Chief Legal Officer and Secretary, Scudder Financial Services, Inc.* Director, Korea Bond Fund Management Co., Ltd. @@ Director, Scudder Threadneedle International Ltd. Director, Chairman of the Board and Secretary, Scudder Investments Canada, Ltd. Director, Scudder Investments Japan, Inc. + Director and Secretary, Scudder Kemper Holdings (UK) Ltd. oo Director and Secretary, Zurich Investment Management, Inc. xx Part C - Page 19 Farhan Sharaff Chief Investment Officer, Zurich Scudder Investments, Inc.** Edmond D. Villani Director, President and Chief Executive Officer, Zurich Scudder Investments, Inc.** Director, Scudder, Stevens & Clark Japan, Inc. ### President and Director, Scudder, Stevens & Clark Overseas Corporation o President and Director, Scudder, Stevens & Clark Corporation** Director, Scudder Realty Advisors, Inc. @ Director, IBJ Global Investment Management S.A. Luxembourg, Grand-Duchy of Luxembourg Director, Scudder Threadneedle International Ltd. Director, Scudder Investments Japan, Inc. + Director, Scudder Kemper Holdings (UK) Ltd. oo President and Director, Zurich Investment Management, Inc. xx Director and Deputy Chairman, Scudder Investment Holdings Ltd.
* Two International Place, Boston, MA 333 South Hope Street, Los Angeles, CA @ ** 345 Park Avenue, New York, NY # Societe Anonyme, 47, Boulevard Royal, L-2449 Luxembourg, R.C. Luxembourg B 34.564 *** Toronto, Ontario, Canada Grand Cayman, Cayman Islands, British West Indies @@@ o 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan ### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan xx 222 S. Riverside, Chicago, IL xxx Zurich Towers, 1400 American Ln., Schaumburg, IL @@ P.O. Box 309, Upland House, S. Church St., Grand Cayman, British West Indies ## Mythenquai-2, P.O. Box CH-8022, Zurich, Switzerland One South Place, 5th Floor, London EC2M 2ZS England oo ooo One Exchange Square, 29th Floor, Hong Kong + Kamiyachyo Mori Building, 12F1, 4-3-20, Toranomon, Minato-ku, Tokyo 105-0001 x Level 3, Five Blue Street, North Sydney, NSW 2060 Item 27. Principal Underwriters. - -------- ---------------------- (a) Scudder Investor Services, Inc. acts as principal underwriter of the Registrant's shares and also acts as principal underwriter for other funds managed by Zurich Scudder Investments, Inc. (b) Part C - Page 20 The Underwriter has employees who are denominated officers of an operational area. Such persons do not have corporation-wide responsibilities and are not considered officers for the purpose of this Item 27.
(1) (2) (3) (1) (2) (3) Scudder Investor Services, Inc. Name and Principal Position and Offices with Positions and Business Address Scudder Investor Services, Inc. Offices with Registrant ---------------- ------------------------------- ----------------------- Mark S. Casady President and Director Two International Place Boston, MA 02110-4103 Victor L. Hymes Vice President and Director 345 Park Avenue New York, NY 10154-0010 Stanley H. Reese Vice President and Director 345 Park Avenue New York, NY 10154-0010 Farhan Sharaff Vice President and Director 345 Park Avenue New York, NY 10154-0010 James J. McGovern Chief Financial Officer and Treasurer 345 Park Avenue New York, NY 10154-0010 Paula M. Gaccione Clerk 345 Park Avenue New York, NY 10154-0010 Linda J. Wondrack Vice President and Chief Compliance Two International Place Officer Boston, MA 02110-4103 Richard W. Desmond Vice President 345 Park Avenue New York, NY 10154-0010 Robert J. Guerin Vice President Two International Place Boston, MA 02110-4103 Deborah W. LaBerge Vice President 345 Park Avenue New York, NY 10154-0010 Part C - Page 21 (1) (2) (3) Scudder Investor Services, Inc. Name and Principal Position and Offices with Positions and Business Address Scudder Investor Services, Inc. Offices with Registrant ---------------- ------------------------------- ----------------------- Kurt P. Miscinski Vice President 345 Park Avenue New York, NY 10154-0010 Gloria S. Nelund Vice President 345 Park Avenue New York, NY 10154-0010 John Hebble Assistant Treasurer Treasurer Two International Place Boston, MA 02110-4103 James E. Keating Assistant Treasurer 345 Park Avenue New York, NY 10154-0010 Ann P. Burbank Assistant Clerk Two International Place Boston, MA 02110-4103 Philip J. Collora Assistant Clerk 222 South Riverside Plaza Chicago, IL 60606 Daniel J. Gillis Assistant Clerk Two International Place Boston, MA 02110-4103 Caroline Pearson Assistant Clerk Assistant Secretary Two International Place Boston, MA 02110-4103 Kevin G. Poole Assistant Clerk Two International Place Boston, MA 02110-4103
(c) Inapplicable Item 28. Location of Accounts and Records. - -------- --------------------------------- Certain accounts, books and other documents required to be maintained by Section 31(a) of the 1940 Act and the Rules promulgated thereunder are maintained by Zurich Scudder Investments Inc., Two International Place, Boston, MA 02110-4103. Records relating to the duties of the Part C - Page 22 Registrant's custodian are maintained by State Street Bank and Trust Company, Heritage Drive, North Quincy, Massachusetts. Records relating to the duties of the Registrant's transfer agent are maintained by Scudder Service Corporation, Two International Place, Boston, Massachusetts. Item 29. Management Services. - -------- -------------------- Inapplicable. Item 30. Undertakings. - -------- ------------- Inapplicable. Part C - Page 23 SIGNATURES ---------- Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant pursuant to Rule 485(a) under the Securities Act of 1933 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 28th day of February 2002. INVESTMENT TRUST By /s/ John Millette ----------------- John Millette Secretary Pursuant to the requirements of the Securities Act of 1933, this amendment to its Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - --------- ----- ---- /s/ Linda C. Coughlin - -------------------------------------- Linda C. Coughlin Trustee and President (Chief February 28, 2002 Executive Officer) /s/ Henry P. Becton, Jr. - -------------------------------------- Henry P. Becton, Jr.* Trustee February 28, 2002 /s/Dawn-Marie Driscoll - -------------------------------------- Dawn-Marie Driscoll* Trustee February 28, 2002 /s/ Edgar R. Fiedler - -------------------------------------- Edgar R. Fiedler * Trustee February 28, 2002 /s/ Keith R. Fox - -------------------------------------- Keith R. Fox* Trustee February 28, 2002 /s/ Jean Gleason Stromberg - -------------------------------------- Jean Gleason Stromberg * Trustee February 28, 2002 /s/ Jean C. Tempel - -------------------------------------- Jean C. Tempel* Trustee February 28, 2002 /s/ Steven Zaleznick - -------------------------------------- Steven Zaleznick* Trustee February 28, 2002 /s/ Gary L. French - -------------------------------------- Gary L. French Treasurer (Chief Financial and February 28, 2002 Accounting Officer)
*By: /s/ John Millette ----------------- John Millette** Secretary ****Attorney-in-fact pursuant to the powers of attorney contained in and incorporated by reference to Post- Effective Amendment No. 118 to the Registration Statement, as filed on July 14, 2000. File No. 2-13628 File No. 811-43 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 EXHIBITS TO FORM N-1A POST-EFFECTIVE AMENDMENT NO. 127 TO REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 AND AMENDMENT NO. 78 TO REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 INVESTMENT TRUST INVESTMENT TRUST Exhibit Index p(1)(a) 2 EX-99.P 3 exp1a-inv.txt Exhibit (p)(1)(a) Zurich Scudder Investments, Inc. Code of Ethics January 1, 2002 Contents Preamble Part 1: Conflicts of Interest Part 2: Personal Investments o Definitions o Specific Rules and Regulations Applicable to Employees o Specific Rules and Regulations Applicable to Access Persons o Specific Rules and Regulations Applicable to Investment Personnel o Specific Rules and Regulations Applicable to Portfolio Managers o General o Excessive Trading Part 3: Insider Trading o Introduction o General Guidelines o Definitions Part 4: Confidentiality Part 5: Proprietary Rights of the Firm Part 6: Gifts, Entertainment and Political Contributions o Overview o General Guidelines o Reporting and Supervision Part 7: Fiduciary and Corporate Activities o Executorships o Trusteeships o Custodianships for Minors o Directorships and Consultant Positions in Business Corporations o Public and Charitable Positions o Outside Activities o New Employees o Written Approval Part 8: External Communications Part 9: Reporting Apparent Violations Part 10: Condition of Employment or Service 2 Form 1 Quarterly Personal Trading Report Form 2 Personal Transaction Preclearance Form Form 3 Special Transaction Preclearance Form Form 4 Annual Acknowledgment of Obligations Under Code of Ethics Form 5 Affiliated Persons Letter (407 Letter) Form 6 Report of Gifts, Entertainment and Political Contributions Form 7 Request for Approval of Fiduciary, Corporate or Other Outside Activity Form 8 Annual Review of Personal Activities Form 9 Personal Securities Holdings Form 3 ZURICH SCUDDER INVESTMENTS, INC. Effective Date: 1/1/02 Distribution: General ZURICH SCUDDER INVESTMENTS POLICY AND PROCEDURE CODE OF ETHICS Preamble We will at all times conduct ourselves with integrity and distinction, putting first the interests of our clients. From the time of our Firm's inception, we have looked on our obligations to our clients as fiduciary in nature. Our relationships were to be unencumbered in fact or appearance by conflicts of interest, and the needs of our clients thus represented a benchmark for assessing our own business decisions. We believe and have always believed that our own long-term business interests are best served by strict adherence to these principles. They are reflected in the following internal policies and are implicit in the judgment that our responsibilities exceed in scope and depth the literal restrictions imposed by law on investor behavior (e.g., the prohibition on use of inside information.). The rules set forth in this Code have been adopted by Zurich Scudder Investments, Inc. ("Zurich Scudder") and certain of its subsidiaries (the "Covered Companies"), including Scudder Investor Services, Inc. ("SIS"), Scudder Distributors, Inc. ("SDI"), Scudder Financial Services, Inc., Scudder Service Investment Company, Scudder Service Corporation, Scudder Trust Company, Scudder Fund Accounting Corporation, and by Zurich Scudder-sponsored investment companies as their codes of ethics applicable to Zurich Scudder-affiliated personnel. The Firm has an Ethics Committee that is empowered to administer, apply, interpret, and enforce the Code of Ethics. The Ethics Committee's responsibilities include issuing periodic revisions of the Code, granting exemptions, approving exceptions, and determining sanctions. 4 Part 1: Conflicts of Interest This Code does not attempt to spell out all possible cases of conflicts of interest and we believe that members of the organization should be conscious that areas other than personal investment transactions may involve conflicts of interest. One such area would be accepting favors from brokers or other vendors or service providers. We are a natural object of cultivation by Firms wishing to do business with us and it is possible that this consideration could impair our objectivity. A conflict of interest could also occur in securities which have a thin market or are being purchased or sold in volume by any client or clients. Likewise, the purchase of stocks or bonds in anticipation of (1) an upwards change to "Buy" in the price rating, (2) their being added to the Investment Universe with a "Buy" rating, or (3) their being purchased by a large account or group of accounts would clearly be in conflict with our clients' interest. Other examples of such conflicts would include the purchase or sale of a security by a member of the organization prior to initiating a similar recommendation to a client. Analysts occupy a particularly visible position. It follows that analysts should be particularly careful to avoid the appearance of "jumping the gun" before recommending a change in the rating on one of the stocks for which he or she is responsible. Accordingly, all personnel are required to adhere to the following rules governing their investment activities. These rules cannot cover 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 the Legal Department for appropriate consideration, before any transaction is executed. We are anxious to give every member of the Firm reasonable freedom with respect to his/her own and family's investment activities. Furthermore, we believe that we will be stronger and our product better if the members of the organization have a personal interest in investing and the courage of their convictions with respect to investment decisions. At the same time, in a profession such as ours, it is possible to abuse the trust which has been placed in us and there could be conflicts of interest between our clients and our personal investment activities. In many cases such conflicts might be somewhat theoretical. On the other hand, in a matter of this nature we must be almost as careful of appearances as we are of the actual facts. Our underlying philosophy has always been to avoid conflicts of interest wherever possible and, where they unavoidably occur, to resolve them in favor of the client. When a conflict does occur, an individual in an investment counsel organization must recognize that the client's interests supercede the interests of the Firm's employees and those of any members of the person's family whom he or she may advise. This condition inevitably places some restriction on freedom of investment for members of the organization and their families. Quarterly Personal Securities Trading Reports are reviewed by designees of the Ethics Committee, who are responsible for determining whether violations have occurred, giving the person involved an opportunity to supply additional information, and recommending appropriate follow-up action including disciplinary measures for late reports or other infractions. 5 Part 2: Personal Investments Definitions (a) Access Person includes officers and directors of Zurich Scudder, SIS, SDI, and Zurich Scudder sponsored investment companies as well as employees of Covered Companies who have access to timely information relating to investment management activities, research and/or client portfolio holdings. (b) Affiliated person letter (407 letter) is a letter from the Legal Department on behalf of Zurich Scudder Investments, Inc. authorizing an employee to open a brokerage account and providing for the direction of duplicate trade confirmations and account statements to the Legal Department. All Access Persons must apply for an affiliated person letter for each personal account prior to making any trades in the account. Employees who are not deemed Access Persons can obtain an affiliated person letter on request, but such letter will NOT require the direction of duplicate trade confirmations and account statements. (c) Beneficial Interest. You will be considered to have a Beneficial Interest in any investment that is (whether directly or indirectly) held by you, or by others for your benefit (such as custodians, trustees, executors, etc.); held by you as a trustee for members of your immediate family (spouse, children, stepchildren, grandchildren, parents, stepparents, grandparents, siblings, parents-in-law, children-in-law, siblings-in-law); or held in the name of your spouse, or minor children (including custodians under the Uniform Gifts to Minors Act) or any relative of yours or of your spouse (including an adult child) who is sharing your home, whether or not you supervise such investments. You will also be considered to have a Beneficial Interest in any investment as to which you have a contract, understanding, relationship, agreement or other arrangement that gives you, or any person described above, a present or future direct or indirect benefit substantially equivalent to an ownership interest in that investment. For example, you would be considered to have a Beneficial Interest in the following: o an investment held by a trust of which you are the settlor, if you have the power to revoke the trust without obtaining the consent of all the beneficiaries; o an investment held by any partnership in which you are a partner; o an investment held by an investment club of which you are a member; o an investment held by a personal holding company controlled by you alone or jointly with others. If you have any question as to whether you have a Beneficial Interest in an investment, you should review it with the Legal Department. (d) Covered Company is defined in the Preamble. (e) Derivative includes 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. 6 (f) Employees includes all employees of each of the Covered Companies who do not fall within the definition of Access Person, Investment Personnel or Portfolio Manager. (g) Initial Public Offering shall include initial offerings in equities to the public. (h) Investment Personnel are traders, analysts, and other employees who work directly with Portfolio Managers in an assistant capacity, 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). As those responsible for providing information or advice to Portfolio Managers or otherwise helping to execute or implement the Portfolio Managers' recommendations, Investment Personnel occupy a comparably sensitive position, and thus additional rules outlined herein apply to such individuals. (i) Personal Account means an account through which an employee of a Covered Company has a Beneficial Interest in any Security or Derivative. (j) Personal Transaction means an investment transaction in a Security or Derivative in which an employee of a Covered Company has a Beneficial Interest. (k) Portfolio Managers are those employees of a Covered Company entrusted with the direct responsibility and authority to make investment decisions affecting a client. PIC Consultants are included in this definition. In their capacities as fiduciaries, Portfolio Managers occupy a more sensitive position than many members of the Zurich Scudder organization because they are originating transactions for their clients. (l) Private Placement is defined as an offering of a security, which is being acquired in connection with an offering not being made to "the public" but to a limited number of investors and which has been deemed not to require registration with the SEC. All forms of Hedge Funds are included under this definition. (m) Reportable Transaction includes any transaction in a Security or Derivative; except such term does not include any transaction in (i) direct obligations of the U.S. Government, (ii) bankers' acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements, or (iii) shares of open-end investment companies (mutual funds). (n) Security includes without limitation stocks, bonds, debentures, notes, bills and any interest commonly known as a security, and all rights or contracts to purchase or sell a security. (o) Zurich Scudder Funds means each registered investment company to which a Zurich Scudder affiliated Adviser renders advisory services. (p) Waiver from preclearance exempts certain accounts from the preclearance requirements (provided, that no waiver shall be granted for Investment Personnel or Portfolio Managers from the prior approval requirements with respect to IPOs or private placements). An Access Person may apply for a certificate of waiver from preclearance under the following circumstances: 7 (i) Account under the exclusive discretion of an access person's spouse, where the spouse is employed by an investment firm where the spouse is subject to comparable preclearance requirements; (ii) The account is under the exclusive discretion of an outside money manager; or (iii) Any other situation where a waiver of preclearance is deemed appropriate by the Ethics Committee. A certificate of waiver from preclearance is available at the discretion of the Ethics Committee. All accounts receiving a certificate of waiver from preclearance must still apply for a 407 letter. Transactions occurring in accounts which have obtained a waiver from preclearance are not exempt from the quarterly reporting requirement or annual personal securities holdings reporting requirement. Specific Rules and Restrictions Applicable to all Employees, Access Persons, Investment Personnel and Portfolio Managers (a) Every Employee must file by the seventh day of the month following the end of each calendar quarter a Quarterly Personal Trading Report for the immediately preceding quarter (Form 1: Quarterly Personal Securities Trading Report). Each report must set forth every Reportable Transaction for any Personal Account in which the Employee has any Beneficial Interest. This report must be filed electronically for those with access to the Firm's intranet. In filing the reports for accounts within these rules please note: (i) You must file a report every quarter whether or not there were any Reportable Transactions. For every Security listed on the report, all information called for in each column must be completed by all reporting individuals. (ii) Reports must show sales, purchases, or other acquisitions or dispositions, including gifts, exercise of conversion rights and the exercise or sale of subscription rights. (iii) Quarterly reports on family and other accounts that are fee-paying firm clients need merely list the Zurich Scudder account number under Item #1 of the report; these securities transactions do not have to be itemized. (iv) Employees may not purchase securities issued as part of an initial public offering until three business days after the public offering date (i.e., the settlement date), and then only at the prevailing market price. In addition, employees may not participate in new issues of municipal bonds until a CUSIP number has been identified. (b) Employees are not permitted to serve on the boards of publicly traded companies unless such service is approved in advance by the Ethics Committee or its designee on the basis that it would be consistent with the interests of the Firm. In the case of Investment Personnel and Portfolio Mangers service on the board of a 8 public company must be consistent with the interests of the Fund with which such person is associated as well as the shareholders of such Fund, and the Investment Personnel/Portfolio Manager must be isolated from participating in investment decisions relating to that company. See Part 7: Fiduciary and Corporate Activities for further detail on the approval process. (c) For purposes of this Code, a prohibition or requirement applicable to any given person applies also to transactions in securities for any of that person's Personal Accounts, including transactions executed by that person's spouse or relatives living in that person's household, unless such account is specifically exempted from such requirement by the Ethics Committee or its designee. (d) Employees may not purchase or sell securities which they are aware are on the Restricted List absent a special exception from the Legal Department. Employees may not disclose the identities of issuers on the Restricted List to others outside the Firm. Please See Part 3: Insider Trading. (e) Employees shall submit an Annual Acknowledgement of Obligations Under the Code of Ethics (Form 4). This report must be filed electronically for those with access to the Firm's intranet. (f) Employees shall submit an Annual Review of Personal Activities Form (Form 8). This report must be filed electronically for those with access to the Firm's intranet. Additional Specific Rules and Restrictions Applicable to all Access Persons (a) Access Persons are subject to each of the foregoing rules and restrictions. (b) Access Persons may not purchase or sell a Private Placement security or holding in a hedge fund without the prior written approval of the Ethics Committee or its designee and, in the case of Portfolio Managers and research analysts, in each case the additional approval of their supervisor (see Form 3: Special Preclearance Form). Typically, such purchases will not be approved where any part of the offering is being acquired by a client. (c) All Access Persons must disclose promptly to the Ethics Committee or its designee the existence of any Personal Account and must direct their brokers to supply duplicate confirmations of all Reportable Transactions and copies of periodic statements for all such accounts to an individual designated by the Ethics Committee. (Use Form 5: Affiliated Persons Letter.) These confirmations will be used to check for conflicts of interest by comparing the information on the confirmations against the Firm's pre-clearance records and Quarterly Personal Securities Trading Reports. (d) All Access Persons are required to "pre-clear" their personal transactions with the Ethics Committee's designee. (Use Form 2: Preclearance Form or Form 3: Special Preclearance Form.) If circumstances are such that the Firm lacks the ability to preclear a particular transaction, permission to execute that transaction will not be granted. Submissions for request of trade approval must be submitted no later than 3:30 pm. If preclearance is granted, the Access Person has until the 9 end of the day preclearance is granted to execute his or her trade. After such time the Access Person must obtain preclearance again. Prior approval is not required for transactions in Securities excepted from the definition of "Reportable Transaction." Similarly, prior approval is not required for acquisitions by give in an account, or dispositions by gift to an account, in which the Access Person has no Beneficial Interest, the rounding out of fractional shares, the receipt of stock dividends or stock splits, and the exercise of options. (Prior approval is required for the sale of stock received as the result of the exercise of options.) (e) Access Persons may not purchase any Security where the investment rating is upgraded to "Neutral" or "Buy" (or any Security added to the Investment Universe with a "Neutral" or "Buy" rating until two weeks after the date of the rating change or addition. (f) Access Persons may not sell any Security where the investment rating is downgraded to "Neutral" or "Unattractive" until two weeks after the date of the rating change. (g) Access Persons may not purchase securities that are added to the PIC Universe until two weeks after the date of the addition. (h) In the event that an Access Person desires to trade less than $10,000 of a Security that has a market capitalization of at least $5 billion, pre-clearance will be granted absent special circumstances. (However, please note that even trades falling within this de minimus exception must be pre-cleared with the Ethics Committee or its designee.) (i) No Access Person will receive approval to execute a Securities transaction when any client has a pending "buy" or "sell" order in that same (or a related) Security until all such client orders are executed or withdrawn. Examples of related Securities include options, warrants, rights, convertible securities and American Depository Receipts, each of which is considered "related" to the Security into which it can be converted or exchanged. (j) Within 10 days of the commencement of employment (or within 10 days of obtaining Access Person status) all Access Persons must disclose, through use of a Form 9, all holdings of Securities and/or Derivatives in which they have a Beneficial Interest (and indicate which of those holdings are private placements). Holdings in direct obligations of the U.S. Government, shares of mutual (i.e., open-end) funds, bankers' acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements, need not be listed. 10 (k) Access Persons are permitted to maintain Margin Accounts. Nonetheless, sales by Access Persons pursuant to margin calls must be precleared in accordance with standard preclearance procedures. Additional Specific Rules and Restrictions Applicable to Investment Personnel (a) Investment Personnel are subject to each of the foregoing rules and restrictions applicable to Employees and Access Persons. (b) Investment Personnel are prohibited from profiting from the buying and selling, or selling and buying, of the same (or related) Securities within a 60 calendar-day period. (c) Investment Personnel who hold a security offered in a Private Placement of an issuer whose securities are being considered for purchase by a client must disclose to their supervisor that preexisting interest where they are involved in the consideration of the investment by the client (using Form 3: Special Transaction Preclearance Form). The client's purchase of such securities must be approved by the relevant supervisor. (d) Research analysts are required to obtain special preclearance (using Form 3: Special Transaction Preclearance Form) and approval from their supervisor prior to purchasing or selling a Security in an industry or country that he or she follows. Additional Specific Rules and Restrictions Applicable to Portfolio Managers (a) Portfolio Managers are subject to each of the foregoing rules and restrictions applicable to Employees, Access Persons and Investment Personnel. (b) Fund Portfolio Managers may not buy or sell a Security within seven calendar days before and after a portfolio that he or she manages trades in that Security. If a Fund Portfolio Manager believes circumstances have changed such to warrant a trade by a client within 7 days following a trade in the same or related security in his or her own account (or an account he or she has a beneficial interest in), the Fund Portfolio Manager should approach an Ethics Committee member to discuss the change in circumstances. An exception to the above prohibition may in fact be warranted. The Client's best interests must be assessed. (c) When a Portfolio Manager wants to sell from his or her Personal Account Securities held by his or her clients, the Portfolio Manager must receive prior written approval from the Ethics Committee or its designee (using Form 3) before acting for the Personal Account. The Portfolio Manager must explain his or her reasons for selling the securities. (d) When a Portfolio Manager wants to purchase for a Personal Account a Security eligible for purchase by one of his or her clients, the Portfolio Manager must receive prior written approval from the Ethics Committee or its designee (using Form 3) before acting for the Personal Account. The Portfolio Manager must explain his or her reasons for purchasing the securities. (e) A Portfolio Manager may not engage in short sales other than "short sales against the box" for which both Regular and Special Preclearance are required. 11 General (a) Apart from these specific rules, purchases and sales should be arranged in such a way as to avoid any conflict with clients in order to implement the intent of this Code. Any attempt by an employee to do indirectly what this Code is meant to prohibit will be deemed a direct violation of the Code. If there is any doubt whether you may be in conflict with clients, particularly with respect to securities with thin markets, you should check before buying or selling with the Ethics Committee or its designee. (b) Hardship exceptions may be granted, in the sole discretion of the Ethics Committee or its designee, with respect to certain provisions of this Code in rare instances where unique circumstances exist. (c) The Ethics Committee or its designee, on behalf of the Firm, will report annually to each Zurich Scudder Fund's board of directors concerning material issues arising under Part 1-3, Part 6, Part 9 and 10 of this Code, existing procedures and any material changes to those procedures as well as any instances requiring significant remedial action during the past year which relate to that Fund. Such report will be in writing and include any certification required by law. Excessive Trading The Firm believes that it is appropriate for its members to participate in the public securities markets as part of their overall personal investment programs. As in other areas, however, this should be done in a way that creates no potential conflicts with the interests of our clients or our Firm. Further, it is important that members recognize that otherwise appropriate trading, if excessive (measured in terms of frequency, complexity of trading programs or number of trades), or if conducted during work-time or using Firm resources, can give rise to conflicts of a different category such as by distracting time, focus, and energy from our efforts on behalf of our clients or by exceeding a reasonable standard of Firm accommodation of members' basic personal needs. Accordingly, personal trading rising to such dimension as to create this possibility is not consistent with the Code of Ethics, should be avoided, may be reported to supervisors, and may ultimately not be approved. Sanctions Violations of the Code will result in sanctions as determined by the Ethics Committee. Such sanctions may include reversal of trade and disgorgement of profits, fines, suspensions of trading privileges, additional supervision, and, in the case of the most serious violations or after a series of violations, termination of employment. Sanctions may be implemented either by the Ethics Committee or by appropriate managers in consultation with the Ethics Committee. 12 Part 3: Insider Trading I. Introduction Zurich Scudder has traditionally stressed research in depth and avoided using or seeking "hot tips" or "material non-public information" (defined below) about securities as a basis for recommendations to our clients or for our own investment transactions. Various SEC rules, and Federal and State Laws prohibit the misuse of confidential non-public information. Accordingly, Zurich Scudder has developed a comprehensive insider trading policy which defines insider trading, as well as offers guidance on steps employees must take when they believe they are in possession of material non-public information. Violations of this policy can not only lead to job termination, but could expose both you and the Firm to criminal and civil liability. Employees may not transact in a security while in possession of material, nonpublic information relating to the issuer of the security. This prohibition applies to trading on behalf of client accounts and personal accounts. In addition, employees may not convey material, nonpublic information about publicly traded issuers to others outside the company. Employees must not disclose the identities of issuers on the Restricted List to others outside the Firm. The company policy on Insider Trading is incorporated into this Code of Ethics by reference. II. General guidelines Employees may not transact in a security, on behalf of a client account or a personal account, while in possession of material, nonpublic information concerning the issuer of the security. a. Employees who receive information which they believe may be material and nonpublic are required to contact Kevin Medina in the Legal Department immediately. In such circumstances, employees should not share the information with other employees, including supervisors. Employees may not share material, nonpublic information with others outside the Firm. b. Employees may not purchase or sell securities on the Restricted List absent a special exception from the Legal Department. Employees may not disclose the identities of issuers on the Restricted List to others outside the Firm. c. Employees may not solicit material, nonpublic information from officers, directors or employees of public issuers. 13 d. Employees may not knowingly transact in securities prior to trades made on behalf of clients, or prior to the publication of research relating to the security. e. Employees may not cause nonpublic information about a security to be passed across a firewall (defined below). III. Definitions Material information is information that a reasonable investor would find relevant to making an investment decision. Any information which if announced to the public, would likely cause a change in the price of a security, is likely to be material. The following types of information are likely to be material: earnings, mergers and acquisitions, dividends and special dividends, product developments, licenses, changes in management, major litigation or regulatory action, and/or actions by prominent investors. Nonpublic information is information that has not been disclosed to the public. Information available in newspapers, magazines, radio, television, and/or news services is generally public information. Restricted List is a document maintained by the Legal Department setting forth securities which employees may not buy and/or sell for personal and client accounts. A firewall is a procedure designed to prevent the misuse of material, nonpublic information received by the Firm in the course of its business. Employees with questions concerning firewall procedures and their applicability should contact the Legal Department for further guidance. The company policy on Firewall Procedures is incorporated into the Code of Ethics by reference. Part 4: Confidentiality Our obligation as fiduciaries to act at all times in our clients' best interests requires that we share information concerning our clients -- including particularly information concerning their identities, holdings and account transactions -- with those outside the Firm only on a "need to know" basis. Accordingly, no member of the organization may discuss with, or otherwise inform others of, the identity of any client, or any actual or contemplated transaction for the account of a client, except in the performance of employment duties or in an official capacity and then only for the benefit of the client, and in no event for a direct or indirect personal benefit. Part 5: Proprietary Rights of the Firm Three key elements - our clients, our employees, and the proprietary knowledge we have created through our collective efforts over the years - are central to the Firm's value. The information that relates to our activities is owned solely by the Firm, and we undertake extensive measures to ensure the confidentiality and integrity of this information, which is proprietary to the Firm. Moreover, because we act as fiduciaries for our clients, all of us are subject to special ethical, regulatory, legal and professional duties and considerations, not all of which are specifically addressed below, but which are made known to you throughout the term of your employment. 14 In addition to these fundamental considerations, the Firm requires that you, as an employee, acknowledge and abide by the terms and conditions set forth below: A. Non-Disclosure of Confidential, Non-Public and/or Proprietary Information ------------------------------------------------------------------------- Unless authorized in writing by the Firm, you shall not, during or at any time after your employment with the Firm, disclose to others, use, copy or remove any confidential, non-public or proprietary information concerning the Firm, its clients or its third-party suppliers ("Confidential Information"), except as required in the conduct of the Firm's business. Confidential Information includes, but is not limited to, the following: o names, addresses, telephone numbers or other identifying information and other client contact and correspondence information; o records and files of our clients' accounts, including the computer database; o account operational procedures and instructions; o asset listings for clients and prospects, including cost prices, dates of acquisition and the like; o all Firm research memoranda, procedures and files, including drafts thereof, as well as procedures, notes or tapes of research interviews, discussions, annual reports and company releases, brokers' reports, outside consultants' reports and any other material pertaining to investments; o all operating memoranda such as Standard Policy and Procedures memoranda, operations manuals, procedures and memoranda, and compliance checklists; o all computer software programs, databases and related documentation pertaining to account or research operations; o presentation materials (including drafts, memoranda and other materials related thereto) prepared for marketing purposes or client meetings; o all information pertaining to investment counsel and fund prospects, including lists and contact logs; o account performance data for any accounts which have been or are under the supervision of the Firm; o internal analyses, management information reports and worksheets such as marketing and business plans, profit margin studies and compensation reviews; o all information pertaining to potential investments, dispositions or other transactions by or on behalf of clients or the Firm; and o financial models, discoveries and inventions and the like. These restrictions apply to all Confidential Information that you obtain in connection with your employment, whether or not developed by you or others in the Firm or obtained by the Firm from third parties, and whether or not any of the information was identified as secret or confidential. B. Non-Solicitation of the Firm's Clients and Employees ---------------------------------------------------- In order to protect Confidential Information (as defined above) obtained during your employment, and to protect the Firm's relationship with Firm Clients (as defined below), you agree that during the term of your employment and for twelve months thereafter, you will not: (i) directly or indirectly solicit or facilitate obtaining business from any Firm Client, or participate in any discussions relating to the obtaining of business from any Firm Client, in any case other than for Zurich Scudder during your employment, 15 (ii) induce or attempt to induce any Firm Client to reduce or terminate its business with the Firm, or (iii) solicit or encourage any employee to leave the Firm. A "Firm Client" is any person, Firm or entity (a) that was a client of the Firm, or that the Firm has solicited or with which the Firm has had active discussions concerning potential business, at any time during the twelve months preceding the termination of your employment, and (b) with which you or your business unit had any involvement or contact. C. Inventions, Discoveries, Writings and other Proprietary Information ------------------------------------------------------------------- You acknowledge that the Firm shall own all right, title and interest (including patent rights, copyrights, trade secret rights and other rights throughout the world) in any inventions, works of authorship, ideas or information made or conceived or reduced to practice, in whole or in part, by you (either alone or with others) during your employment with the Firm (collectively, "Developments"). However, the term "Developments" does not include inventions, works of authorship, ideas or information for which no equipment, supplies, facilities or trade secret information of the Firm was used, which were developed entirely on your time, and (i) which do not relate to the business of the Firm or to the Firm's actual or demonstrably anticipated research or development, (ii) which do not result from any work performed by you for the Firm, or (iii) for California employees, which qualifies fully under the provisions of California Labor Code Section 2870. You will promptly and fully disclose to the Firm any and all Developments. You hereby assign to the Firm all rights, title and interest in and to any and all Developments. You shall assist the Firm to evidence, record and perfect these assignments, and to perfect, obtain, maintain, enforce, and defend any rights to Developments, without further charge during your employment. After termination of employment, we will compensate you for this assistance on an hourly basis at the base salary rate (excluding any bonuses, deferred compensation or other benefits) you had during your last year of employment. You irrevocably appoint the Firm and its agents as attorneys-in-fact, to act for and on your behalf, to execute and file any document, and to do all other lawfully permitted acts to protect our rights to Developments, with the same legal force and effect as if executed by you. In addition, you acknowledge that all original works of authorship made by you (solely or jointly with others) within the scope of employment and which are protectable by copyright are "works made for hire," as that term is defined in the United States Copyright Act (17 USCA, ss. 101). D. Return of Documents ------------------- You acknowledge that all originals and copies of all lists, materials, catalogs, binders, client lists and other client information, supplier lists, financial information, and other records or documents containing Confidential Information prepared by you or coming into your possession in connection with your employment are and shall remain the property of the Firm. Within three business days of termination of your employment, you will (i) return to the Firm any of the above items that are within your custody or control, and (ii) delete all Confidential Information from any computer or electronic storage device medium owned by you. 16 E. Enforcement ----------- You acknowledge that: (a) the Firm may enforce the rights set forth above pursuant to appropriate judicial proceedings, or that, alternatively, the Firm, in its discretion, may initiate proceedings before the American Arbitration Association in New York, New York, in order to resolve any controversy or claim it may have arising out of this policy or any breach of this policy; (b) judgment on an award entered by the arbitrator may be entered in any court having jurisdiction; and (c) an application to a court for temporary or preliminary or interim relief shall not be considered incompatible with or in derogation of the Firm's right to compel arbitration. To the extent the provisions of this policy are governed by state law, you agree that the laws of the State of New York, without regard to New York's principles of conflicts of laws, shall govern. The invalidity or unenforceability of any provision of this policy shall not affect the validity or enforceability of any other provision of this policy. If any provision of this policy shall be held invalid or unenforceable in part, the remaining portion of that provision, together with all other provisions of this policy, shall remain valid and enforceable and continue in full force and effect to the fullest extent consistent with law. Part 6: Gifts, Entertainment and Political Contributions I. Overview (a) It is appropriate for employees to maintain friendly but professional relationships with persons with whom Zurich Scudder conducts its business. These business counterparts may include persons who are associated with Zurich Scudder's vendors, contractors, providers of service, Zurich Scudder clients and members of the investment community. It is appropriate for employees to give and/or receive gifts, business meals and/or entertainment from such business counterparts, provided that they are not excessive in value or frequency. The good judgment of our employees and their supervisors is of paramount importance in ensuring compliance with this provision. (b) Gifts given by Zurich Scudder employees to government officials may create the appearance of serious impropriety. Should you have any questions whether a gift you contemplate may cause such an appearance please consult, in advance, with the Legal Department. (c) No employee is permitted to make political contributions to governmental entities in connection with obtaining or maintaining advisory contracts. Employees will be asked to certify that they have not made such political contributions on the Annual Acknowledgement of Obligations Under Code of Ethics (Form 4). 17 II. General Guidelines (a) Employees may not accept gifts that are excessive in value or frequency. (b) The following types of transactions should be approved by a supervisor using Form 6 (The Zurich Scudder Gift Form; See Section III): i. Gifts valued in excess of $100; ii. Business meals valued in excess of $200; and iii. Entertainment valued in excess of $300. (c) Invitations which involve the payment of substantial expenses generally should be avoided. Under most circumstances lodging and transportation charges should be considered the obligation of Zurich Scudder. (d) The frequency of invitations should also be taken into account, especially entertainment. Employees generally should not accept more than three invitations a year from any single individual, group or organization, subject to approval from a supervisor. (e) When analysts and product leaders accept broker invitations to research and investment meetings, an effort should be made to use firms on our "Approved List" or those which are bona fide candidates for the list. It is not good business practice to accept assistance and invitations from firms with which we are not likely to do business. (f) Employees may not accept gifts of cash, absent advance approval by the Ethics Committee which may be granted in extenuating circumstances. Employees may not accept gifts of favorable rates on financial transactions such as loans or brokerage commissions. III. Reporting and Supervision As described above, gifts valued at over $100 and the other items outlined in II(b) hereof, must be approved by a supervisor. The supervisor must have a corporate title of Managing Director or Senior Vice President, and must be in the same department as the employee receiving the gift. The Zurich Scudder Gift Form (Form 6) must be completed within ten days of receipt of the gift. Completed gift forms should be sent to Chelsa Cruz, at 345 Park Avenue, NY, NY 10154. In addition, gifts subject to Form 6 must be reported on the Quarterly Personal Securities Trading Report. IV. Non-Cash Compensation Employees, Registered Representatives and Associated Persons of Zurich Scudder's broker dealer affiliates must also comply with National Association of Securities Dealers, Inc. (NASD(R)) Rules governing the payment of Non-Cash Compensation. Non-Cash Compensation encompasses any form of compensation received in connection with the sale and distribution of variable contracts and investment company securities that is not cash compensation, including, but not limited to, merchandise, gifts and prizes, travel expenses, meals, and lodging. For more information on the policy go to intra.scudder.com/glcomp/sales/noncash.asp. 18 Part 7: Fiduciary and Corporate Activities In many fiduciary and corporate activities, members of the organization are, or will become, engaged in responsible duties involving the expenditure of time and the application of information and experience which properly belong to the firm or are derived from the Zurich Scudder relationship. With certain exceptions referred to below, any compensation or profits from these activities are, accordingly, considered to be Zurich Scudder's income. The Ethics Committee must give written approval to all existing or prospective relationships and activities as described below, and no new relationship should be initiated without prior written authorization on Form 7: Request For Approval of Fiduciary, Corporate or Other Outside Activity. In those instances when approval of a prospective fiduciary relationship, e.g., executor or trustee, has been given and the individual subsequently is in a position to qualify and act in the fiduciary capacity, that person is required to reapply for approval if the character of the activity changes. The same procedures should be followed as those for the approval of any fiduciary activity except that reference should be made to the earlier obtained approval under "Salient Facts" on the approval form. Executorships The duties of an executor are often arduous, time consuming and, to a considerable extent, foreign to our business. As a general rule, Zurich Scudder wishes to discourage 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 members of the organization accept executorships under clients' wills, the organization has consistently held to the belief that these individuals are acting for Zurich Scudder and that fees received for executors' services rendered while associated with the firm are exclusively Zurich Scudder 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 Zurich Scudder's authorization to act as executor 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 Zurich Scudder. (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. Trusteeships It is often 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 19 rule, Zurich Scudder 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. 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 for acting. This applies to trusts which employ Zurich Scudder as investment counsel or those which are invested in one or more of the Funds administered by Zurich Scudder. It is recognized that individuals may be asked to serve as trustees of trusts which do not employ Zurich Scudder. 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. 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 Zurich Scudder 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 Zurich Scudder believes such role will not be unduly time consuming or create conflicts of interest. Directorships and Consultant Positions in Business Corporations Occasionally, members of the organization are asked to serve as directors or consultants in business organizations. As a general policy, Zurich Scudder considers it inadvisable for such individuals to serve in these capacities. No such position may be accepted without the prior written authorization of the Ethics Committee or its designee. In the exceptional instances where such authorization is granted, the fees or other income resulting from such a relationship are to be turned over to Zurich Scudder (unless the firm decides otherwise) to compensate it for the resources made available. Zurich Scudder reserves the right to require that any member of the organization relinquish any outside business connection when it believes that such connection is unduly time consuming or conflicts with the interests of the Firm or its clients. Public and Charitable Positions Zurich Scudder has consistently encouraged members of the organization to take part in community activities and to take an active role in public and charitable organizations. The firm expects that when accepting such duties, members of the organization will consider possible conflicts of interest with our business as well as the demands that such positions make upon their time. Several examples of possible conflicts might be helpful. When agreeing to serve in a public or charitable position, a member of the organization should clarify in advance in writing that he or she will not provide free continuous investment advice and management. This should be made particularly clear where Investment Committee responsibilities are considered. Serving without compensation on the Investment Committee of 20 a charity which might appropriately employ Zurich Scudder would ordinarily not be in our best interest and prior written approval is required. Another example of a possible conflict which should be avoided arises when a charity is involved in fund raising. Our work gives us access to detailed knowledge of each client's capacity to contribute and is compounded by the close relationship which should exist between consultant and client. For any member of the organization in the course of a charitable solicitation to take advantage of this confidential relationship -- or even to seem to do so -- would be unprofessional. Even under the best circumstances, the solicitation of a client by a member of the organization is awkward and discouraged. Members of the organization should also make it clear in writing to the public or charitable organization that they will not participate in any search or selection process for a future investment adviser. It is expected that the participation of a member of the Zurich Scudder organization in a charitable organization will not preclude the firm from being a candidate for employment as investment counsel to that organization. Outside Activities The foregoing does not cover all situations in which a member of the organization may be in a position to realize financial gain which should be treated as belonging to Zurich Scudder. It is expected that opportunities for substantial compensation or profit from sources outside of the firm may, for example, be offered to a member of the organization by reason of his association with the firm or because of his investment and financial skill or experience. Zurich Scudder reserves the right to decide if such compensation or profit should be accepted and, if accepted, whether or not it should be turned over to Zurich Scudder. All such cases must be reported promptly in writing for Ethics Committee review and before they are operative. New Employees It is desirable that any fiduciary or corporate activities of a prospective employee be reviewed by Zurich Scudder prior to the conclusion of arrangements for employment. However, if such activities have not been reported prior to employment, they should be reported in writing as promptly as possible thereafter. It is recognized that there may be justification for treating such activities which ante-date the individual's association with the firm on a different basis than might otherwise apply. However, Zurich Scudder reserves the right to make what it considers an appropriate determination in each case. It also reserves the right to require that any employee give up any fiduciary or corporate activity which it finds in conflict with the best interests of the firm or any of its clients. Written Approval Where written approval is required, Form 7 should be filed with the Ethics Committee or its designee. A separate form should be filed for each trust, executorship and the like. Note that once an activity has been approved, no additional requests for approval need be filed unless the character of the activity changes. Part 8: External Communications In our sales, marketing, client reporting and corporate communications activities, the Firm's products, services, capabilities, and past and potential accomplishments must be presented 21 fairly, accurately and clearly. All marketing materials must be reviewed by the Global Compliance Group. All press interviews must be cleared in advance by Public Relations. Reports to clients, including client account valuation and performance data, must be fair. Part 9: Reporting Apparent Violations Zurich Scudder believes that maintaining a strong compliance culture is in the best interest of the firm and its clients, in that it helps both to maintain client and employee confidence, and to avoid the costs (both reputational and monetary) associated with compliance violations. While reducing compliance violations to a minimum is our goal, realistically speaking, violations may occur from time to time in an organization as large as ours. When violations occur, it is important that they be dealt with immediately by the appropriate members of the organization. We encourage all Zurich Scudder employees to report apparent compliance violations to the Director of Global Compliance. Violations that go unreported have the potential to cause far more damage than violations that are taken care of immediately upon discovery. It is extremely important that apparent compliance violations be reported through the appropriate channels. The Legal Department should be contacted in all cases except cases involving potential violations of Human Resources policies, which should be reported directly to Human Resources. While resolving apparent compliance violations should virtually always involve the management of the business unit involved, it is not necessarily appropriate (nor is it required) that an employee report apparent violations to his or her manager, as well as to the Legal Department. Reports of apparent compliance violations will be treated confidentially to the fullest extent possible. In no event will the firm tolerate retaliation against persons who report apparent compliance violations. We realize that employees may lack the training to distinguish actual from apparent compliance violations, and accordingly, the fact that a reported incident proves, after investigation, not to have involved a compliance violation will not result in any sanction against the reporter, provided that the report was made in good faith. Part 10: Condition of Employment or Service Compliance with the Code of Ethics is a condition of employment or continued affiliation with a Covered Company, and conduct not in accordance with the Code of Ethics shall constitute grounds for actions including termination of employment or removal from office. Employees must certify annually that they have read and complied with the provisions of this Code of Ethics and that they have disclosed or reported all personal transactions and accounts/holdings it requires to be disclosed or reported. (See Form 4: Annual Acknowledgement of Obligations Under Code of Ethics). In addition, each year every member of the organization is required to file with the Legal Department a complete list of all fiduciary, corporate, and other relationships of the nature described in Part 7 above. The report is titled Form 8: Annual Review of Personal Activities and is attached to this memorandum. 22 SAMPLE - ------ CONFIDENTIAL - Complete Form on Zurich Scudder Intranet by 7th day of start of subsequent quarter Form 1-1/1/02 QUARTERLY PERSONAL SECURITIES TRADING REPORT , 20 ---------------------------------------------------- ------- Quarter Check one: |_| Employee |_| Access Person |_| Investment Personnel |_| Portfolio Manager - ---------------------------- -------------- --------------- ------------- Name Office Employee No. Extension
This form must be filed quarterly, whether or not you have had any transactions, by the 7th day of the start of the subsequent quarter and must cover all Personal Accounts in which you have a direct or indirect Beneficial Interest. These would include any accounts, including those of clients, in which you have a "Beneficial Interest," including those of your spouse and relatives living in your household (unless you obtain written permission from the Ethics Committee or its designee to exclude these accounts), and all non-client accounts over which you act in an advisory capacity. Refer to Code of Ethics for a full explanation of reporting requirements. Please answer all three questions. If it is not applicable write N/A. 1. Zurich Scudder client account numbers in which I have a "Beneficial Interest"(only report PIC accounts here):
- ------------------------------------- -------------------------------------------- -------------------------------------------- PIC ACCOUNT NUMBER ACCOUNT NAME PIC CONSULTANT - ------------------------------------- -------------------------------------------- -------------------------------------------- - ------------------------------------- -------------------------------------------- -------------------------------------------- - ------------------------------------- -------------------------------------------- -------------------------------------------- - ------------------------------------- -------------------------------------------- --------------------------------------------
2. I (had) (had no) Reportable Transactions* during the above quarter. (List all Reportable Transactions on the reverse.) If any such purchases or sales were transacted without obtaining preclearance, so indicate under Name of Account on the reverse. 3. I (received) (did not receive) any gifts or entertainment from brokers, dealers, investment bankers, vendors or other service providers during the above quarter with a value in excess of $100; if any such gifts or entertainment (as defined in Code of Ethics, Part 6) were received, complete and attach Form 6. ------------------------ Signature *Reportable Transactions are all transactions, 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, (c) shares of registered open-end investment companies (mutual funds), and (d) transactions in clients' accounts listed under #1 above. Non-volitional transactions are not required to be reported. The following types of trades will be deemed non-volitional: stock split, automatic tender offer, stock gained from mergers or spin-off companies, dividends received in shares, demutualizations, trust distributions and dividend reinvestment plans. SALES
- --------- ------ -------- ---------- ------- --------- ------------- --------------- ---------- ---------- ------------ ------------ Security Units Ticker/ Issuer/ Trade Price Principal Broker/ Acct # Interest Maturity Gift/Waiver/ Type Cusip Company Date Amount Dealer/Bank(3) Rate(1) Date(1) AIP/NBI(2) ========= ====== ======== ========== ======= ========= ============= =============== ========== ========== ============ ============ - --------- ------ -------- ---------- ------- --------- ------------- --------------- ---------- ---------- ------------ ------------ - --------- ------ -------- ---------- ------- --------- ------------- --------------- ---------- ---------- ------------ ------------ - --------- ------ -------- ---------- ------- --------- ------------- --------------- ---------- ---------- ------------ ------------ - --------- ------ -------- ---------- ------- --------- ------------- --------------- ---------- ---------- ------------ ------------ - --------- ------ -------- ---------- ------- --------- ------------- --------------- ---------- ---------- ------------ ------------ - --------- ------ -------- ---------- ------- --------- ------------- --------------- ---------- ---------- ------------ ------------ - --------- ------ -------- ---------- ------- --------- ------------- --------------- ---------- ---------- ------------ ------------ PURCHASES - -------- ------ -------- ---------- ------- --------- ------------- --------------- ---------- ---------- ------------ ------------- Security Units Ticker/ Issuer/ Trade Price Principal Broker/ Acct # Interest Maturity Gift/Waiver/ Type Cusip Company Date Amount Dealer/Bank(3) Rate(1) Date(1) AIP/NBI(2) - -------- ------ -------- ---------- ------- --------- ------------- --------------- ---------- ---------- ------------ ------------- - -------- ------ -------- ---------- ------- --------- ------------- --------------- ---------- ---------- ------------ ------------- - -------- ------ -------- ---------- ------- --------- ------------- --------------- ---------- ---------- ------------ ------------- - -------- ------ -------- ---------- ------- --------- ------------- --------------- ---------- ---------- ------------ ------------- - -------- ------ -------- ---------- ------- --------- ------------- --------------- ---------- ---------- ------------ ------------- - -------- ------ -------- ---------- ------- --------- ------------- --------------- ---------- ---------- ------------ ------------- - -------- ------ -------- ---------- ------- --------- ------------- --------------- ---------- ---------- ------------ ------------- - -------- ------ -------- ---------- ------- --------- ------------- --------------- ---------- ---------- ------------ -------------
DID YOU ESTABLISH ANY BROKERAGE ACCOUNTS THIS QUARTER? IF SO INSERT THE FOLLOWING INFORMATION BELOW: Name of Brokerage Firm ---------------------------------------------------------- Account Number ------------------------------------------------------------------ Date Account was opened --------------------------------------------------------- FOOTNOTES (Use additional forms if necessary to report all transactions.) (1) For Fixed Income securities only. (2) Indicate here if transaction is a Gift, Waiver, Automatic Investment Plan, or No Beneficial Interest (you do not have any direct or indirect beneficial ownership in such transactions). (3) If you have made a direct issuer trade (i.e. traded directly with the company) enter N/A in this column SAMPLE - ------ Form 2-1/1/02 PERSONAL TRANSACTION PRECLEARANCE --------------------------------- TO: Preclearance Officer/Fax Number (212) 486-9281 From: ----------------- ---------------- -------------- ----------- Applicant's Name Employee Number Office Extension I. Description of Proposed Transaction I wish to: [ ] BUY [ ] SELL the following: [ ] Common Stock [ ] Fixed Income [ ] Option [ ] Other (specify):_______ - --------------------- -------- -------------- ----------- ------------ Issuer/Company Name Units Expected Price Ticker/CUSIP Option/Fixed (in US dollars) (underlying Income Ticker Description for Options) This Transaction is for: [ ] My Own Account [ ] An account of which the investment is attributed to me (See Code Part 2: Definitions) (e.g., spouse, trust for which I am trustee) - ------------------------- ---------------------- Account Number Account Number II. Certifications A. By signing this form, I certify that the information stated above is accurate and the following statements are true: o The security identified above is not part of an IPO (initial public offering), nor has the issuer completed an IPO within the past three business days (this statement applies to proposed purchases only). o To the best of my knowledge, the security identified above has not been upgraded to a Neutral or a Buy rating, nor added to the Scudder Investment Universe with a Neutral or Buy rating, within the past two weeks (this statement applies to proposed purchases only). o To the best of my knowledge, the security identified above has not been downgraded to a Neutral or an Unattractive rating within the past two weeks (this statement applies to proposed sales only). o To the best of my knowledge, the security identified above has not been added to the PIC Universe within the past two weeks (this statement applies to proposed purchases only). o I believe that this transaction is not in conflict with the interests of any client, unless otherwise described in the attached Special Transaction Preclearance Form. B. If I am in the Investment Personnel or Portfolio Manager category (as defined in the Code of Ethics), I certify that the statements in Part II A and the following statements are true: o I have not, for my own account or for any account the investments of which are attributed to me, entered into any transaction within the past sixty (60) days in the security identified above or a related security (within the meaning of the Code) which, together with the proposed transaction, would result in a profit prohibited under the Code. o Unless otherwise explained in the attached Special Transaction Preclearance Form, I do not believe this (i) security is appropriate for inclusion in, or sale by, the portfolio of any client account that I manage. (ii) is a security in an industry (or, for country analysts, a country) which I follow in my capacity as a research analyst. C. If I am a Portfolio Manager (as defined in the Code of Ethics) for one or more registered investment companies, I certify that the statements in Part II A and B and the following statement are true: o No registered investment company of which I am a Portfolio Manager has executed a transaction in the security identified above within the past seven days. o I have determined (by checking with the Lead Portfolio Manager, if other than myself) that no registered investment company of which I am a Portfolio Manager intends to place a transaction in the security identified above within the next seven days. III. Special Transactions: Check one of the following: [ ] The proposed transaction does not involve: (a) the sale of a security for my own account or an account attributable to me which is currently held in the portfolio of a client account that I manage, (b) the purchase for my account or an account attributable to me of a security which is eligible for purchase by a client account which I manage, (c) a private placement transaction, (d) a transaction in a hedge fund, (e) the purchase or sale for my account or an account attributable to me of a security in an industry (or for country analysts, a country) which I follow in my capacity as research analyst. [ ] The proposed transaction involves a "special transaction", and I have attached a completed Special Transaction Preclearance Form. I understand that special transactions are prohibited unless specifically approved as provided in the Code of Ethics. ------------------------------------ Signature IV. Approval The proposed transaction described above is [ ] Approved [ ] Disapproved - ---------------------------------------- ---------------------------- Date and Time of Approval Reviewer SAMPLE Form 3-1/1/02 - ------ SPECIAL TRANSACTION PRECLEARANCE FORM TO: Preclearance Officer/Fax (212) 486-9281 (This form must be submitted along with Form 2) From: ----------------- ---------------- -------------- ----------- Applicant's Name Employee Number Office Extension Date Submitted: --------------------- I. Description of Proposed Transaction ----------------------------------- |_| buy 1. I wish to |_| sell the following: - ------------------------- ------------------------- ------------------ Issuer (company name) Security description/type Ticker Symbol/CUSIP - ------------------- ------------------------------ Units Expected price (in US Dollars) 2. This transaction is for: |_| My Own Account |_| An account of which the investment is attributed to me (See Code Part 2: Definitions) (e.g., spouse, trust for which I am trustee) - ------------------------- ---------------------- Account Number Account Number 3. This transaction involves (check all that apply): |_| a private placement |_| a hedge fund/a fund of hedge funds |_| the purchase for my own account (or an account attributed to me) of a security which is eligible for purchase by a client account which I manage. |_| the sale by me for my own account (or an account attributed to me) of securities which are currently held in client accounts which I manage. |_| the purchase by me for my own account (or an account attributed to me) of a security in an industry (or, for country analysts, a country) which I follow in my capacity as a research analyst. |_| the sale by me for my own account (or an account attributed to me) of a security in an industry (or, for country analysts, a country) which I follow in my capacity as a research analyst. |_| a "short sale against the box" and I am a Portfolio Manager. |_| other (describe): ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- II. Potential Conflicts ------------------- 1. Describe any beneficial interest that you (or any accounts attributed to you) currently have in the security described in Section I.1 above or any related securities. Account Issuer and Security #Units Date Acquired Cost ------- ------------------- ------ ------------- ---- 2. Describe generally any interest that any account(s) managed by you currently have in the security described above or any related securities. 3. Describe any personal or professional relationship you may have with the issuer of the security described in I above, its officers, directors, controlling persons or affiliates. 4. If the proposed transaction involves the sale for your own (or an attributed) account of securities held in one or more client accounts managed by you, explain why you believe it is appropriate for you to sell that security when the client is not. 5. If the proposed transaction involves the sale for your own (or an attributed) account of securities held in one or more client accounts managed by you, give transaction details (account(s), units, date acquired, cost) of any client accounts which have acquired the security within the last 14 days. 6. If the proposed transaction involves the purchase for your own (or an attributed) account of a security which is eligible for purchase by one or more client accounts that you manage, explain why you believe this security is not appropriate for inclusion in the client's portfolio. 7. If the proposed transaction involves a purchase or sale by you of a security in an industry (or, for country analysts, a country) you follow in your capacity as a research analyst, explain why you have not recommended such security for purchase or sale, as applicable, by a client account. 8. Describe any potential conflict of interest presented by the proposed transaction that has not been described above. 9. To the best of your knowledge, is any client a co-investor or co-partner with you in this venture or does any client have a pre-existing interest or propose to invest in this venture? 10. Describe how this investment opportunity came to your attention and any personal or professional relationship you may have to any underwriter or placement agent for the transaction. III. Certification ------------- I hereby certify that the foregoing information is correct and complete to the best of my knowledge. ----------------------- signature IV. Approval by Supervisor (To be Obtained Prior to Submission for ---------------------- Preclearance): (applicable only for: (a) Portfolio Managers and research analysts desiring to purchase or sell a private placement holding or hedge fund holding, (b) research analysts purchasing/selling a security in an industry/country they cover, or (c) any Investment Personnel involved in a contemplated client purchase of a security of an issuer in the event that such Investment Personnel also holds a privately placed security of such issuer.) ------------------------- ----------------------- date and time of approval BY: Supervisor's Name: Ext.: V. To be completed by Pre-clearance Officer ----------------------------------------- Approval - -------- |_| Purchase described above is: |_| Approved The proposed |_| Sale |_| Disapproved. - -------------------- ---- --------------------------- date and time of approval Reviewer |_| The proposed transaction has been discussed with the following investment supervisory personnel: -------------------------------------------------------- names Reviewer analysis: SAMPLE - ------ Form 4-1/1/02 Complete Form on Zurich Scudder Intranet Annual Acknowledgement of Obligations Under the Code of Ethics - -------------------------------- --------------- --------- --------------------------------- ------ -------- Applicant's Name (print clearly) Employee Number Dept Code Employee Type Office Extension (i.e. Employee, Access Person, Investment Personnel, Portfolio Mgr.)
1. CODE OF ETHICS I have read/reread the "Code of Ethics" including the material on "Personal Investments" (Code of Ethics, Part 2) and "Gifts, Entertainment and Political Contributions," (Code of Ethics, Part 6) and attachments thereto and understand them and recognize that I am subject to them. Further, I have disclosed or reported all personal transactions required to be disclosed or reported pursuant to the requirements of the Code and I certify that I complied with the provisions of the Code of Ethics applicable to me over the past year. (a) CHECK THE APPROPRIATE STATEMENT (check only one): [ ] I am not an access person, investment personnel or portfolio manager; or [ ] I have arranged for provision to the Legal Department of a complete report of all my holdings information in the form of duplicate account statements for all of my covered accounts. I have disclosed the existence of all brokerage accounts to the Legal Department, and have filed Affiliated Person Letters (Form 5) for each account directing that duplicate confirms and account statements be forwarded to the Legal Department. (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 to the Legal Department); or [ ] I have not arranged for provision to the Legal Department of all of my holdings, so I have submitted a supplemental report of all current holdings which the Legal Department has not thus far received, concurrently herewith (Use Form 9 to list additional holdings not on file with the Legal Department); or [ ] I am an Access Person, Investment Personnel or Portfolio Manager who has no holdings and no bank/broker/dealer accounts. (b) The following is a complete list of all brokerage accounts that contain holdings wherein I have a Beneficial Interest: Account Number Broker Name --------------------------- ------------------------ --------------------------- ------------------------ --------------------------- ------------------------ 2. INSIDER TRADING I have read/reread Code of Ethics, including the Material on Insider Trading (Code of Ethics, Part 3). I understand and agree to conform with the policies and procedures set forth in it. 3. OTHER CODE PROVISIONS I have read/reread Code of Ethics including the material on "Conflicts of Interest," (Code of Ethics, Part 1) "Confidentiality," (Code of Ethics, Part 4) "Proprietary Rights of the Firm," (Code of Ethics, Part 5) "Fiduciary and Corporate Activities," (Code of Ethics, Part 7) "External Communications," (Code of Ethics, Part 8) "Reporting Apparent Violations," (Code of Ethics, Part 9) and "Condition of Employment or Service," (Code of Ethics, Part 10) understand them and agree to comply with their content and spirit. 4. POLITICAL CONTRIBUTIONS I have not made any political contributions in connection with obtaining or maintaining advisory contracts to governmental entities. 5. EMPLOYEE COMPLIANCE QUESTIONNAIRE I have read/reread the Compliance Questionnaire regarding disciplinary, legal, or administrative matters. There have been no changes to answers that I have previously reported. 6. FIRMWIDE SECURITY POLICIES I have read/reread the Firm Wide Security Policies, including the material on User Responsibilities for Security. I understand and agree to conform with the policies and procedures set forth in it. - ------------------- --------------------------------------- Date Signature SAMPLE Form 5-1/1/02 - ------ Return Completed Form To: Chelsa Cruz (NY)/ x63976 / Facsimile Number: 212-486-9281 FORM 407/3050: AFFILIATED PERSONS LETTER (A separate form must be used to supply information for each brokerage account.) [ ] I have completed Personal Securities Holdings Report (Form 9) Account Name:* ---------------------------------------------------------- Employee's Office Location: ---------------------------------------------------------- Employee's extension ---------------------------------------------------------- Employee Designation / Dept Number: (i.e. Employee, Access Person, Invest. Personnel, Port. Mgr.) ---------------------------------------------------------- Employee ID Number: ---------------------------------------------------------- Broker (Company Name): ---------------------------------------------------------- Contact at Broker: ---------------------------------------------------------- Mailing Address (Broker): ---------------------------------------------------------- City State Zip Fax Number of Broker: ---------------------------------------- Telephone Number of Broker: ---------------------------------------- Account Number: ---------------------------------------- Additional Names on Account: (if any) ----------------------------------------
*If this form is being used to complete information regarding the account of a spouse or relative of a Scudder employee, please supply the account name above and information regarding the Scudder employee below: Employee Name: ---------------------------------------- Office Location: ---------------------------------------- Employee Number: ---------------------------------------- Department Number: ---------------------------------------- SAMPLE - ------ Form 6-1/1/02 Return To: Chelsa Cruz - NY/24 GIFT AND ENTERTAINMENT FORM 1) _____________________________ 2) ___________________________ Name of Employee Provider / Receiver of gift (circle one) 3) GIFT / BUSINESS MEAL / ENTERTAINMENT (circle one) 4) ____________________________ Date of gift / entertainment 5) Description of gift / entertainment (include restaurant name, address, business reason, etc.): ----------------------------------------------------------------------- ----------------------------------------------------------------------- ----------------------------------------------------------------------- 6) Other attendees (if any) 7) $___________________ Approximate value of ----------------------------------- gift / entertainment ----------------------------------- ----------------------------------- 8) I attest that the gift and/or entertainment activity listed above complies with all company rules and regulations concerning giving and receiving gifts. ---------------------------------- --------------------- Employee Date Reminder: This form must be submitted within ten business days of the activity, gift, etc. ----------------------------------------------------------------------- APPROVAL -------- --------------------------------- ---------------------- Supervisor Date (Must be a Senior Vice President or Managing Director) Comments of Legal Department: SAMPLE Form 7-1/1/02 - ------ RETURN TO: Pat Fiore - NY/24 REQUEST FOR APPROVAL OF FIDUCIARY, CORPORATE OR OTHER OUTSIDE ACTIVITY From: ---------------- --------------- --------- -------- ----------- Applicant's Name Employee Number Extension Office Dept. Code 1. I believe that the activity described below is not in conflict with the interests of the firm or its clients and I request that it be approved. 2. Activity (check one and include the start date of the Activity)* [ ] Trustee ____________ [ ] Business Consultant ______ [ ] Executor ____________ [ ] Director ____________ [ ] Custodian ____________ [ ] Other (describe)____________ [ ] Power of Attorney (over investments) __________ 3. Name of trust, estate, account, corporation or other entity 4. Timing/Status (check one) [ ] I am currently serving. [ ] I anticipate serving. (Must be reviewed and reapproved when actual service begins.) 5. Salient Facts (relationship, nature of duties, client status and any facts indicating possible conflict or lack thereof): 6. Assignment Status (check one) [ ] I hereby assign any income from this activity to the firm. [ ] I believe any income should appropriately be retained by me. [ ] No income is expected from this activity. - ---------------------------- -------------------------------------- Date Signature The above activity is approved. It is/is not (circle one) to be considered subject to the firm's standard indemnification. The firm reserves the right to withdraw this approval at any time. By - --------------------------- ------------------------------------------ Date On Behalf of the Ethics Committee Comments: *If applicable, I have filled out Form 5 for the account(s) I oversee. SAMPLE Form 8-1/1/02 - ------ Complete Form on Zurich Scudder Intranet Annual Review of Personal Activities Form ----------------------------------------- - ----------------- --------------- --------- ----------------- ------ --------- Applicant's Name Employee Number Dept Code Employee Type Office Extension (i.e. Employee, Access Person, Investment Personnel, Portfolio Mgr.)
As required annually of all members of Zurich Scudder Investments and its affiliated corporations, please indicate all fiduciary, corporate and outside relationships, positions and responsibilities. Below you are asked to refer to Code of Ethics, Part 7 where your reporting obligations are examined in greater detail. This report includes all activities covered in Code of Ethics, Part 7 whether or not previously authorized by the firm. If necessary, attach extra sheets for categories requiring lengthy answers and use heading as outlined below. 1. EXECUTORSHIPS*: (including those in which you are currently serving and all known future appointments as Executor.) Client Authorized of Firm by Firm Estate Yes/No Yes/No - ------ ------ ------ - -------------------------------------------------------------------------------- *Reporting unnecessary if position held with respect to the estate of one's spouse or parent. 2. TRUSTEESHIPS: (including T-1, T-10 and Scudder Directed Trusts (Internal Trusts)* and other client Trusteeships and all known future appointments as Trustee.) Client of Firm Authorized by Firm Trust Title Yes/No Yes/No - ----------- ------ ------ * Please indicate under Section 2 the account numbers of any Internal Trusts with which you are associated. 3. CUSTODIANSHIPS * - -------------------------------------------------------------------------------- Relationship Authorized by Firm* Name of Minor To Custodian Yes/No - ------------- ------------ ------ *Reporting unnecessary in the case of members of one's family - -------------------------------------------------------------------------------- 4. DIRECTORSHIPS*
Authorized Year Estimated Are Fees Name of by Firm First Annual Turned Over Organization Yes/No Elected Fees To Firm? ------------ ------ ------- ---- -------- *Other than Zurich Scudder Funds or affiliated corporations. - --------------------------------------------------------------------------------------------------------- 5. BUSINESS CONSULTING POSITIONS Authorized Year Estimated Are Fees by Firm First Annual Turned Over Corporation or Institution Yes/No Retained Fees ------ ------- ---- --------
6. PUBLIC AND CHARITABLE POSITIONS - Describe position and organization briefly. Also indicate whether authorized by the Firm or not. 7. POWERS OF ATTORNEY OVER INVESTMENTS- Describe position briefly. Also indicate whether authorized by the Firm or not. 8. OUTSIDE ACTIVITIES - For additional information about rules applicable to outside activities refer to Code of Ethics - Part 7 on Fiduciary and Corporate Activities. - --------------------------- ------------------------------------- Date Signature (Attach extra sheets if needed) SAMPLE PERSONAL SECURITIES HOLDINGS REPORT / FORM #9 1/1/02 - ------ Complete Form on Zurich Scudder Intranet - -------------------------------------------------------------------------------- Employee Name_________________________ Dept. Name & Number____________________ (print) (print) Employee Number ____________________________________ - --------------------------------------------------------------------------------
- -------------- --------------- ------------- --------- --------- ------------- ---------------- -------------- Ticker Symbol Issuer/Company Security Type Principal Number of Name of Account Number Name in which (or CUSIP) Amount Shares Broker/Dealer Security/Acct. or Bank is held - -------------- --------------- ------------- --------- --------- ------------- ---------------- -------------- - -------------- --------------- ------------- --------- --------- ------------- ---------------- -------------- - -------------- --------------- ------------- --------- --------- ------------- ---------------- -------------- - -------------- --------------- ------------- --------- --------- ------------- ---------------- -------------- - -------------- --------------- ------------- --------- --------- ------------- ---------------- -------------- - -------------- --------------- ------------- --------- --------- ------------- ---------------- -------------- - -------------- --------------- ------------- --------- --------- ------------- ---------------- -------------- - -------------- --------------- ------------- --------- --------- ------------- ---------------- -------------- - -------------- --------------- ------------- --------- --------- ------------- ---------------- -------------- - -------------- --------------- ------------- --------- --------- ------------- ---------------- -------------- - -------------- --------------- ------------- --------- --------- ------------- ---------------- --------------
The undersigned does not by this report admit that he/she has any direct 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 the date I submit this Form. /__/ 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 _____________________ Code of Ethics: Personal Trading; Part 2 Questions and Answers --------------------- (As of 1/1/02) 1. Q: If I am not an Access Person, Investment Personnel or Portfolio Manager, am I required to preclear my trades? A: No. Persons outside these designations are categorized as Employees and are not subject to the preclearance requirements. To determine what category you fall into there is a list of department codes and their designations posted on the intranet (Employee Tools, Code of Ethics, COE Home, Department Code Categories). Your Debt. code can be found on the intranet employee phone book. If you are still uncertain, you should ask your supervisor. Department transfer notification to the Legal Department is your responsibility. 2. Q: If I am categorized as an "Employee" do I need to disclose my accounts by completing a Form 407? A: Not unless such a letter is requested by your broker. 3. Q: As an Employee, what rules still apply to me? A: The rules applicable to Employees are stated in the Code of Ethics (the "Code"). Briefly, you remain subject to (a) quarterly personal securities trading reporting, (b) trading restrictions on IPOs, (c) obtaining approval of fiduciary, corporate or other outside activities, (d) rules against trading Restricted List securities and compliance with the Firm's Insider Trading and Proprietary Rights sections of the Code, (e) rules regarding Gifts and Entertainment and (f) completion of an Annual Acknowledgement. 4. Q: Assuming I am not in the Employee category, do I have to go through the preclearance process if I am buying or selling a security for my own account (or an account attributable to me) even if that security is not currently held by a Scudder client? A: Yes, unless a waiver from preclearance has been granted by the Ethics Committee. 5. Q: My spouse invests in his company's stock by means of an Automatic Investment Plan ("AIP"). (a) Does he have to preclear his AIP transactions? (b) Do I have any reporting obligation with respect to these transactions? A: (a) While a spouse is normally subject to the preclearance process to the same extent you are, if you or your spouse determines to participate in an AIP, these scheduled purchases (i.e. monthly, quarterly, etc.) do not have to be precleared. The sale, however, of any stock must be precleared prior to execution. Voluntary cash contributions to purchase fractional shares in an existing AIP need not be precleared. However, purchases or sales of securities transacted directly with the issuer, independent of an AIP, not using a brokerage account must still be precleared. (b) Yes. New employees must report participation in AIPs on the Personal Securities Holdings Form (Form 9). Thereafter, all employees must indicate AIP purchases on their Quarterly Personal Securities Trading Report (Form 1). 1 6. Q: Am I required to open a brokerage account before trading? A: Yes, for all trades that require preclearance with the exception of transactions taking place directly with the issuer (i.e. monthly contributions are set up in an account with Disney). When reporting direct issuer trades on your Quarterly Personal Securities Trading Report simply place an "N/A" (that is, indicate not applicable) under the column heading titled "Broker/Dealer". Further, outside of an AIP or issuer direct stock purchase, all employee accounts must be held with a broker providing duplicate confirms and statements to the Legal Department. Employee account opening requests with foreign brokers, online trading facilities or any other entity unwilling to provide this documentation will generally not be approved. 7. Q: My spouse is employed by a registered broker-dealer. Must she preclear her personal trades at Scudder? A: While generally spouses of access persons are required to submit their trades through the preclearance process, if your spouse is subject to a similar preclearance process by her employer with respect to her own trades and the account is solely in her name, then you should discuss your situation with a member of the Ethics Committee. A Waiver from Preclearance (see Code of Ethics; Part 2 Definitions) may be permissible under these circumstances providing both you and your spouse certify in writing that you will not share or discuss information relating to specific securities. Exemptions from the preclearance process may also be granted where the account in question is fully discretionary or is a blind trust. This exemption does not apply to the reporting requirement; all transactions (other than those in open-end mutual funds) must be reported on the Quarterly Personal Securities Trading Report. 8. Q: My son, who is 20 years of age and resides on a college campus most of the year, conducts his own trading of which I know nothing. Do I have to preclear his trades? A: If you truly have no knowledge of his trading activity nor do you influence or control his trading activity in any way (such as by making recommendations from time to time) then you should speak to a member of the Ethics Committee. An exception from the preclearance rules may be available if you and your son sign a certification to this effect. (Note - It is very important to this hypothetical fact pattern that the son resides in a separate household and that he receives the account statements at his address at college.) 9. Q: My wife participates in an employee stock purchase plan which works as follows: Every six months she has the right to purchase additional shares of stock at the lowest stock price during the past six months. Is she prohibited from selling such shares for sixty days from the day she purchases them? A: Technically no, but, if you are in the "Investment Personnel" or "Portfolio Manager" category, your wife would only be permitted to sell, for a profit, shares of stock that have already been held for 60 days. Selling to mitigate a loss within the 60-day period, however, does not violate the Code. (Refer to question #24 for information on how to compute the sixty-day period and question #25 for LIFO/FIFO rules.) 10. Q: (a) I sit on the finance committee of various charitable organizations. Do I need to preclear their security transactions? (b) I am a trustee of a charitable organization and as such I have investment discretion. Do I need to preclear the trust's securities transactions? A: (a) Not unless you are recommending specific transactions to them. You may give advice as to asset allocation and general outlook without being considered to have made a specific recommendation. (b) Yes, because as trustee you are deemed to have a beneficial interest in the assets of the trust. (Please refer to Code of Ethics; Part 7) which requires that you obtain permission prior to engaging in these types of arrangements.) 2 11. Q: Are U.S. Government securities, bankers' acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements and shares of registered open end investment companies subject to these rules? A: U.S. Government securities, bankers' acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements and shares of mutual funds are exempted from the preclearance and reporting requirements (as are the Scudder 401 (k) and profit sharing plans, see question #12 and Index Options, see question #33). However, shares of investment companies other than mutual funds (e.g., closed-end investment companies) must be precleared and reported just as you would for shares of an industrial company. 12. Q: Do I have a preclearance or reporting obligation with respect to my profit sharing or 401(k) plan which invests in Zurich Scudder mutual funds? A: No. (Transactions in a 401(k)/profit sharing plan of employee in a previous employer's plan, an employee's spouse or other person as to which you have beneficial interest (i.e. an account for a child), in something other than mutual funds must however be reported on the Personal Securities Holdings Form (Form 9).) 13. Q: I want to trade on foreign exchanges. The fact that preclearance is valid only on the day it is granted seems to effectively prevent my ability to trade on these exchanges given the time differences. Is my interpretation of the preclearance process correct? A: When trading securities on foreign exchanges, preclearance is valid until the end of the day on which it was granted, giving you until midnight (EST) that day to execute your trade. Therefore, you should be able to place trades even on those foreign markets that open after the New York Stock Exchange is closed. 14. Q: (a) I am a shareholder of The Korea Fund. The Korea Fund has just announced a rights offering. Do I need to obtain preclearance to exercise my right? (b) What rules apply to the exercise of common stock options? A: (a) No. Keep in mind, however, that if you wanted to sell or purchase (as opposed to exercise) rights issued in a transferable offering, preclearance is required. (b) The exercise of options does not require preclearance. However, preclearance is required before selling the underlying security received upon exercise of such options. 15. Q: Are we permitted to join Investment Clubs, and if so, what are the preclearance requirements? A: Yes, you are permitted to join Investment Clubs but the preclearance requirements remain the same. The brokerage account must be registered by completing a Form 407 so that we receive duplicate confirms and monthly statements and all transactions made by the investment club must be precleared. This includes securities recommended by you as well as those recommended by any other member of the club. 16. Q: Is there a limit to the number of trades a day I can get precleared? A: The firm believes that it is sensible and beneficial for members of the organization to become personally involved in the investment process by engaging in personal security trading as long as it in no way creates potential conflicts, however insignificant, with our clients. At the same time, otherwise appropriate trading if EXCESSIVE (measured in terms of frequency and complexity of trading programs and numbers of trades included in them) can give rise to conflicts of a different category by distracting time, focus, and energies from our efforts on behalf of our clients. Accordingly, personal trading considered to be of such dimension 3 as to give rise to this possibility is not consistent with the Code of Ethics and will not be approved. We will be reporting excessive trading volumes to supervisors. 17. Q: Are employees permitted to maintain margin accounts? A: Employees are permitted to maintain margin accounts. Nonetheless, sales by Access Persons pursuant to margin calls must be precleared in accordance with standard preclearance procedures. In addition, sales pursuant to margin calls are subject to the 60-day rule, meaning, the security in question must be sold at a loss or another security, not purchased in that account within the last 60-days, must be sold to cover the margin call. You are responsible for any sales in your account to cover margin calls whether or not initiated by you. 18. Q: I am an independent consultant, am I subject to the Code of Ethics? A: Independent consultants are not Zurich Scudder employees and, therefore, are not subject to the Code of Ethics. 19. Q: I would like to place a trade in a large cap stock, is it true this trade does not require preclearance? A: No. All stock trades require preclearance. However, in the event an Access Person wants to trade less than $10,000 of a security that has a market capitalization of at least $5 billion, preclearance will be granted absent special circumstances (e.g., the security is on the restricted list). 20. Q: Given that once I am granted preclearance I have until the end of the day on which the preclearance was granted to execute the order with my broker, does this mean that I cannot place a good until cancelled or a limit order? A: Yes 21. Q: I am a portfolio manager/PIC consultant and want to buy a security for a client account. Do I have to go through the preclearance process? A No. The preclearance process is not applicable where a security is desired to be traded in a client account. 22. Q: Does the seven-day blackout period really prohibit a fund portfolio manager from buying a security for his/her fund if he/she has bought that same security for himself/herself within the past seven days? A: The blackout period would by its terms prohibit this security from being bought by the fund; however, since we can not under any circumstances disadvantage our clients, the portfolio manager will likely be required to unwind his/her own trade (and disgorge any profits realized) so that the client is free to trade in that security. For this reason, before preclearance will be granted, fund portfolio managers must check with their lead portfolio manager to see if any team member intends on trading the security for a client within the next seven days. 23. Q: Are there any restrictions on a research analyst's ability to recommend a stock he/she owns? A: No, however, research analysts are required to obtain special preclearance and approval from their supervisor (as indicated on the Special Transaction Preclearance Form (Form 3) prior to purchasing or selling a security in an industry or country he or she follows. Obviously analysts must be careful to avoid the appearance of "jumping the gun" by executing a personal trade before recommending a change in such issuer's rating. 4 24. Q: Can you explain to me again how the sixty-day rule works? A: The sixty-day rule applies only to Investment Personnel and Portfolio Managers. It effectively prohibits people falling in these categories from profiting as a result of purchases and sales or sales and purchases within sixty calendar days. You are responsible for knowing the date on which you bought or sold a security. Thus, for example, you should not request preclearance to sell a security which you know you have purchased within the last sixty-days unless you will realize a loss from the sale. If you should inadvertently make such a request and preclearance is granted but your violation of the sixty-day rule later becomes evident you may be sanctioned. Repetitive requests for preclearance when the sixty-day rule is not complied with may also result in a sanction. 25. Q: Is the FIFO or LIFO method the correct procedure to apply when considering whether the sixty-day rule will be violated? A: The sixty-day rule will be monitored as part of the preclearance process; nevertheless, it is your responsibility to ensure compliance with application of the rule (see question #24 above). In the case of an ordinary transaction, LIFO will be applied to make this determination. Where an employee's spouse has compensation that is dependent upon or otherwise participates in a stock purchase plan FIFO is applied. 26. Q: I am Investment Personnel and I would like to preclear a purchase in a security and a stop-loss order in the same security at the same time. Is this a violation of the 60-day rule? A. Technically, a stop-loss order precleared in conjunction with a purchase order in the same security by Investment Personnel would constitute a contra-trade resulting in a 60-day rule restriction. However, since we make exception for sales at a loss, as long as the sale price is lower than the purchase price we will allow preclearance of the two at the same time. Please remain aware that with Stop-Loss trades any change in the parameters negates the preclearance and subsequent approval of the revised order must be obtained. Stop Loss orders intended to carry over beyond one day will not be honored. 27. Q: What happens if I buy a security and then the issuer makes a tender offer twenty days later. Can I sell this security for a profit without violating the sixty-day rule? A: Technically, the sixty-day rule would prohibit this subsequent sale by someone in the "Investment Personnel" or "Portfolio Manager" category; however, the Code provides that in unique circumstances, the Firm reserves the right to grant exceptions. It is probable that an exception would be granted if you had no reason to know of the impending tender offer when you bought the security. If you find yourself in this situation you should contact a member of the Ethics Committee to determine if an exception is permissible. 28. Q: Do commodities trades need to be precleared? What about options on futures? A. Commodity trades in precious metals require preclearance. For Investment Personnel and Portfolio Managers, options on futures may be exercised 60 days after the purchase of the options (assuming preclearance is approved). However, when exercised the commodity cannot be sold for another 60 days. 29. Q: I am Investment Personnel and would like to trade in options on securities in which I have holdings in the common stock. If the option is exercised within 60-days of the purchase or sale of the common stock, does this violate the 60-day rule? A: Preclearance for Investment Personnel of the purchase of call options and the sale of common shares for the same security is permitted; however, if the call strikes (is exercised) within 60 days and a profit is made, the profit must be disgorged for violation of the contra-trade rule (the same applies for the purchase of put options and common stock purchases). In interpreting the 60-day rule, we will not consider a transaction to 5 have occurred when an employee is merely rolling over an option position which is about to expire, provided that net exposure is not changed (e.g. when the number of the same contracts being sold and those being purchased are equal). When rolled over the 60-day clock begins again. Alternately, if you wanted to sell a put option (which gives you the obligation to buy the underlying security if the buyer of the option wishes to sell) with an expiration date of more than 60 days and someone bought the put and wanted to sell the underlying security before the expiration date (within 60 days), you would be obliged to buy the underlying security before the 60 days expired, resulting in a violation of the rule. 30. Q: My brother works for a company that is going public. He has been allocated a number of shares for his friends and family to purchase prior to the effective date of the offering, can I participate? A. No. The only exceptions to the IPO rule are (a) in the case where an employee's spouse works for a company going public and is allotted shares in the offering set aside from market shares. These shares are considered to be received as a benefit of employment, and (b) in the event of a demutualization of a bank or other company where shares are offered to investors prior to the effective date where the shares are set apart from those offered on the market. Speak in advance to a Preclearance Officer if you believe one of these exceptions to be applicable. 31. Q: Are employees permitted to purchase new issues of Municipal Bonds? A: Yes, however, employees may not participate in new issues of municipal bonds until a CUSIP number has been identified. 32. Q: I have a brokerage account with an online broker that allows trades to be executed after the market closes. Can trades precleared earlier in the day be executed after the market close (4:00PM)? A. No. All domestic trades must be executed before the close of the market at 4:00 PM EST. An increasing number of employees have incurred violations trading online by placing orders after the close, only to have them executed the following day. In addition, orders placed on hold before obtaining approval are frequently forgotten and automatically executed at the close without proper approval. Please be advised that online trades should only be submitted for execution after obtaining approval and well before the market close. 33. Q: What are the rules for trading Index Options/Funds/Depository Receipts (i.e. S&P, NASDAQ)? What about Sector Options, etc.? Do they require preclearance? A: Index options do not have to be precleared since they allow investors to trade in a particular market or industry group without having to transact in individual stocks. Similarly, Sector options that are broad based (composed of 10 or more companies) do not require preclearance. In both instances, however, quarterly reporting is required. In addition, UITs (Unit Investment Trusts) as well as exchange index instruments such as SPIDERS (S&P Depository Receipts), WEBS (World Equity Benchmark Shares), DIAMONDS (Dow-30) and QUBES (NASDAQ-100) are traded based on NAV and, therefore, do not require preclearance although they do require quarterly reporting. 34. Q: I would like to invest in a Venture Capital Fund. Does this need to be precleared? If a company in the fund goes public does this violate the IPO rule? 16998 6 First, an employee need not preclear an investment in a Venture Capital Fund, provided that there were no conflict of interest issues (such as Zurich Scudder being a co-investor). Nonetheless, the investment must be disclosed on the Quarterly Personal Securities Trading Report. Second, if an employee receives "in-kind" distributions of securities pursuant to a prior ownership interest then this distribution does not have to be precleared, but should be reported on the Quarterly Personal Securities Trading Report. Third, any sales of securities received after an "in-kind" distribution must be precleared and reported. Securities received as a result of an IPO must be held for three days following the effective date and may be sold thereafter. In addition, Venture Capital Funds are not to be confused with VENTURE CAPITAL LIMITED PARTNERSHIPS or Bridge Loans, which require Special Transaction Preclearance on Form 3. The reason for this being that with a Venture Capital Fund the investment is made initially into the fund, which in turn selects start-up companies in which to invest. A Venture Capital Limited Partnership is a direct investment in a private placement. 35. Q: Are non-volitional trades reportable on the Quarterly Personal Securities Trading Report (Form 1)? A: No, trades that an Employee has absolutely no control over are not subject to preclearance or quarterly reporting. They are however subject to disclosure under the annual reporting requirements of Form 4. Non-volitional trades include stock splits, stock dividends, demutualizations, tender offers, stock gained from mergers or spin-off companies and trust distributions. Margin sales (i.e., a sale by a broker without input from the employee) remain subject to the 60-day rule which Investment Personnel and Portfolio Managers must adhere to. (See question 17 for more information about Margin Accounts.) Moreover, trades in accounts that another adviser has discretion over are not considered non-volitional. If your transaction is not one of the above listed non-volitional transactions or you have any doubt whether your transaction will be deemed non-volitional you should contact a pre-clearance officer to discuss your situation. 36. Q: Are my domestic partner's transactions subject to the Code? A: No, transactions by your domestic partner (unlike transactions by a spouse or other relative living in your household) are not subject to the Code. 37. Q: What are the reporting requirements for employees on disability? A: Employees on maternity leave, short or long term disability - with no access to Zurich Scudder information - are not required to preclear while on leave. They are however required to file all required reports that were due while they were on leave, no later then the end of the month in which he/she returns to the office. However, Access Persons on leave with continued access to Zurich Scudder information (e.g., computer access) are required to preclear and report their trades while out. 38. Q: When should an employee complete the Report of Gifts and Entertainment (Form 6)? A: Employees should never accept gifts of cash or favorable rates on financial transactions. Transactions requiring reporting on Form 6 include gifts valued in excess of $100, business meals valued in excess of $200, and entertainment valued in excess of $300. It is important to note that these dollar amounts apply at the individual level. Thus, for example, if you and two clients go to dinner and the meal you order costs $100 7 you do not have to report it even though the total check adds up to $350. Please refer to Part 6 of the Code for more information. 39. Q: Do I need to complete Form 7 (Request For Approval of Fiduciary, Corporate or Other Outside Activity) if the activity is within the scope of my job? A: Yes. All outside activity must be reported. 40. Q: What is the Firm policy on political contributions? A: Employees are not permitted to make political contributions to governmental entities in connection with obtaining or maintaining advisory contracts. 41. Q: Who should I go to with further questions? A: For questions regarding the 407 process contact Chelsa Cruz in New York; regarding preclearance or reporting questions please contact Glory Ekpe, Pat Fiore or Pamela Ussery in New York. Currently, the Firm's Ethics Committee members are: Jerry Hartman, Randy Zeller, Ann McCreary and Paula Gaccione. 8 -----END PRIVACY-ENHANCED MESSAGE-----