Scudder
21st Century
Growth Fund
Annual Report
August 31, 1997
Pure No-Load(TM) Funds
A fund investing primarily in securities of emerging growth companies poised to
be leaders in the 21st century. For investors seeking long-term growth of
capital.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
SCUDDER (logo)
<PAGE>
In Brief
o During the period from the beginning of operations on September 9, 1996,
through the end of August 1997, Scudder 21st Century Growth Fund provided a
total return of 9.25%.
o For most of the period, larger capitalization issues outperformed small
company growth stocks by a wide margin; however, this situation reversed itself
to a degree over the latter part of the Fund's fiscal year.
o A valuation gap between large and small stocks remains to be closed following
an extended period of large-cap strength, and while there are no guarantees, the
stage appears to have been set for a period of strong small growth company
performance.
Table of Contents
3 Letter from the Fund's President 21 Financial Highlights
4 Performance Update 22 Notes to Financial Statements
5 Portfolio Summary 25 Report of Independent Accountants
6 Portfolio Management Discussion 28 Officers and Trustees
10 Glossary of Investment Terms 29 Investment Products and Services
12 Investment Portfolio 30 Scudder Solutions
18 Financial Statements
2 - Scudder 21st Century Growth Fund
<PAGE>
Letter From the Fund's President
Dear Shareholders,
We are pleased to present the first annual report for Scudder 21st Century
Growth Fund. For the period of slightly less than 12 months from the beginning
of Fund operations on September 9, 1996, through August 31, 1997, the Fund
provided a total return of 9.25%.
As outlined in the management discussion that follows, the past year was
not always easy for investors in small growth stocks. For much of the first part
of the Fund's fiscal period, stock performance of smaller capitalization,
high-growth companies badly lagged that of large companies. This disparity was
due to a host of factors, including higher interest rates and strong large-cap
earnings growth.
Since April, conditions for small growth companies have improved, and there
have been strong signs that investor interest in this segment of the market has
heightened. To illustrate, the Russell 2000 Growth Index, a barometer for small
and medium-sized growth stocks, returned 11.95% over the three months ended
August 31, versus 6.48% for the large-cap S&P 500 Index. In view of previous
price declines, we believe many of the Fund's holdings remain at attractive
levels, given their strong potential for future earnings gains. We look forward
to the coming year, and thank you for your continued investment in Scudder 21st
Century Growth Fund.
For those of you interested in hearing about new products, we would like to
take this opportunity to introduce Scudder International Growth and Income Fund.
The Fund employs a yield-oriented approach to international investing and seeks
to provide long-term growth of capital plus current income. Investors who desire
international exposure but who wish to take a more conservative approach may
appreciate the Fund's emphasis on the dividend paying stocks of established
companies listed on foreign exhanges. For a complete listing of Scudder's mutual
fund offerings, see page.
If you have any questions regarding Scudder 21st Century Growth Fund or any
other Scudder fund, please do not hesitate to call Investor Relations at
1-800-225-2470.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder 21st Century Growth Fund
3 - Scudder 21st Century Growth Fund
<PAGE>
Performance Update as of August 31, 1997
- -------------------------------------
Fund Index Comparisons
- -------------------------------------
Total Return
- -------------------------------------
Period Ended Growth of
8/31/97 $10,000 Cumulative
- -------------------------------------
Scudder 21st Century Growth Fund
Ticker Symbol: SCTGX
- -------------------------------------
Life of Fund* $10,925 9.25%
- -------------------------------------
Russell 2000 Growth Index
- -------------------------------------
Life of Fund* $11,414 14.14%
- -------------------------------------
*The Fund commenced operations on
September 9, 1996.
Index comparisons begin September 30, 1996.
- ------------------------------------------------
Growth of a $10,000 Investment
- ------------------------------------------------
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Russell 2000 Growth Index
Year Amount
- ----------------------
9/96* $10,000
10/96 $ 9,569
11/96 $ 9,835
12/96 $10,027
1/97 $10,269
2/97 $ 9,649
3/97 $ 8,968
4/97 $ 8,864
5/97 $10,196
6/97 $10,542
7/97 $11,082
8/97 $11,414
Scudder 21st Century Growth Fund
Year Amount
- ----------------------
9/96* $10,000
10/96 $ 9,444
11/96 $ 9,444
12/96 $ 9,373
1/97 $ 9,413
2/97 $ 8,778
3/97 $ 8,119
4/97 $ 7,897
5/97 $ 9,302
6/97 $ 9,833
7/97 $10,214
8/97 $10,405
The Russell 2000 Growth Index is an unmanaged capitalization-
weighted measure of 2,000 of the smallest capitalized U.S. companies
with a greater-than-average growth orientation and whose common
stocks trade on the NYSE, AMEX, and NASDAQ. Index returns assume
reinvestment of dividends and, unlike Fund returns, do not reflect
any fees or expenses.
- -----------------------------------------------------------------
Returns and Per Share Information
- -----------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
Yearly periods ended August 31
1997*
- --------------------------------------------------------------------------------
Net Asset Value $13.11
- --------------------------------------------------------------------------------
Income Dividends $ --
- --------------------------------------------------------------------------------
Capital Gains Distributions $ --
- --------------------------------------------------------------------------------
Fund Total Return (%) 9.25
- --------------------------------------------------------------------------------
Index Total Return (%) 14.14
- --------------------------------------------------------------------------------
Performance is historical and assumes reinvestment of all dividends and
capital gains, and is not indicative of future results. Total return and
principal value will fluctuate, so an investor's shares, when redeemed, may
be worth more or less than when purchased. If the Adviser had not maintained
the Fund's expenses, the total return for the life of Fund period would
have been lower.
4 - Scudder 21st Century Growth Fund
<PAGE>
Portfolio Summary as of August 31, 1997
- -------------------------------
Asset Allocation
- -------------------------------
Equity Holdings 98%
Cash Equivalents 2%
- -------------------------------
100%
- -------------------------------
The Fund is essentially fully
invested in small U.S. growth
stocks.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- ------------------------------
Sector Diversification
(Excludes 2% Cash Equivalents)
- ------------------------------
Technology 21%
Health 15%
Service Industries 15%
Consumer Discretionary 11%
Manufacturing 9%
Consumer Staples 7%
Energy 7%
Durables 5%
Financial 3%
Other 7%
- ------------------------------
100%
- ------------------------------
The Technology and Health
sectors of the market contain
many growth-oriented companies.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- -------------------------------
Ten Largest Equity Holdings
(21% of Portfolio)
- -------------------------------
1. Nuevo Energy Co.
Oil and gas exploration, development and
production
2. Aptargroup, Inc.
Manufacturer of packaging equipment
components
3. MAPICS Inc.
Business planning and control solutions and
services
4. Wind River Systems
Producer of advanced software operation systems
and development tools
5. Simula, Inc.
Development and production of transportation
safety products
6. Cymer, Inc.
Provider of laser illumination sources for
ultra-violet photolithography systems
7. Renters Choice, Inc.
Operator of rent-to-own stores offering home
electronics, appliances, furniture and accessories
8. Lamalie Associates, Inc.
Executive search company
9. Cognex Corp.
Manufacturer of machine vision systems
10. MedQuist, Inc.
Electronic document transcription and
management services
Top holdings include companies positioned to be leaders in growing areas of the
economy.
For more complete details about the Fund's investment portfolio, see page 12.
A monthly Investment Portfolio Summary and quarterly Portfolio Holdings
are available upon request.
5 - Scudder 21st Century Growth Fund
<PAGE>
Portfolio Management Discussion
In the following interview, Lead Portfolio Manager Peter Chin and Portfolio
Manager Roy McKay discuss Scudder 21st Century Growth Fund's strategy and the
market environment over the period since the Fund began operations on September
9, 1996.
Q: Could you outline the Fund's investment approach?
A: The Fund seeks growth from smaller companies we believe are positioned to
become leaders in the economy of tomorrow. In general, we are looking for
companies for which we expect the level and visibility of earnings growth going
forward to be high. Within this context, we are opportunistic investors, seeking
growth wherever we can find it, focusing on companies positioned to be leaders
in their chosen niches.
Many of the companies held by the Fund feature a high percentage of stock
ownership by insiders -- nearly half of outstanding equity on a weighted average
basis. This indicates to us that management's interests are generally very much
in alignment with ours, as pure investors, and reflects our effort to find
tomorrow's leading companies before they are generally recognized as such by the
investment community.
Q: How did small stocks perform overall during the period since the Fund's
inception?
A: For most of the period, larger capitalization issues outperformed small
company growth stocks by a wide margin. For the year ended August 31, 1997,
large cap stocks, as gauged by the S&P 500 Index, returned 40.65%, versus the
20.03% return of the Russell 2000 Growth Index.
This disparity reflects small cap performance that was weak on both a relative
and absolute basis over the first part of the period. For the six months from
the beginning of September 1996 through the end of February 1997, the S&P 500
Index provided a total return of 22.53%, versus 1.46% for the Russell 2000
Growth Index. Erratic earnings are always a risk to investors in the small cap
sector of the stock market, and earnings disappointments among this group were
swiftly reflected in lower stock prices during this period.
This situation reversed itself to a degree over the latter part of the Fund's
fiscal year. For the six months ended August 31, 1997, the Russell 2000 Growth
Index returned 18.30% versus 14.78% for the S&P 500.
Q: Please summarize the Fund's performance since its inception almost a year
ago.
A: From the beginning of operations on September 9, 1996, through the end of
August 1997, the Fund provided a total return of 9.25%. For purposes of rough
comparison, for the full twelve month period beginning last September and
running through the end of August, the Russell 2000 Growth Index -- a commonly
used gauge of small growth stock performance -- returned 20.03%.
The Fund's underperformance versus the benchmark index reflects a number of
earnings disappointments experienced by portfolio holdings in the first half of
the fiscal period. It is also in part a function of adverse conditions early in
the period for investors focusing on the small end of the market capitalization
spectrum. The Russell 2000 Growth Index includes companies with market
6 - Scudder 21st Century Growth Fund
<PAGE>
capitalizations as high as $1.3 billion, while Scudder 21st Century Growth Fund
has a smaller cap tilt than the Index, holding companies with market
capitalizations below $750 million. As a result, the Fund experienced a stronger
headwind than the Index over the period of large cap leadership that extended
into April 1997.
As the year progressed and smaller stocks began to recover, conditions became
more favorable for our investment style. Over the last six months of the period,
the Fund provided a total return of 18.54% versus 18.30% for the Index.
Q: What areas of the market are most heavily represented in the portfolio?
A: Technology and healthcare companies, at 21% and 15% of portfolio assets,
respectively, are the Fund's leading sectors. These sectors will generally be
heavily weighted given the growth orientation of the Fund. We have recently
uncovered a number of growth opportunities among consumer stocks, and consumer
discretionary and consumer staples companies together represent another 18% of
assets.
Q: Could you discuss some of the Fund's larger holdings and recent additions?
A: Several of the Fund's top holdings and new positions illustrate our focus on
the early identification of companies poised to provide solutions to tomorrow's
problems or to apply more advanced techniques to meeting today's needs. Large
technology positions include Pinnacle Systems, a leader in the design,
manufacture and marketing of sophisticated video post-production tools used in
TV and motion pictures, and Vantive, a developer of software used by businesses
to manage customer information and relationships.
The health sector contains many dynamic small companies that, in our view, are
on the verge of seeing long-term investments come to fruition. Fund holdings in
this area are focused on biotechnology and medical device companies that are
solving problems or reducing the costs of care, rather than on caregivers such
as HMOs. In this vein, we have recently added to our position in Norland Medical
Systems, a provider of devices used to measure bone density. The market for
these devices has been created by new treatments for osteoporosis, and the
company is receiving backing from pharmaceutical giant Merck in the marketing of
its products.
Simula, one of the Fund's ten largest holdings, is a manufacturer of specialized
airbags designed initially for use in sport utility vehicles and luxury
passenger cars to protect drivers in the event of a rollover. This technology
was in the past used exclusively in the military for fighter planes and
helicopters. BMW is now promoting the use of this product in its `98 models, and
we expect more manufacturers will follow suit.
7 - Scudder 21st Century Growth Fund
<PAGE>
Wackenhut Corrections Corp. is a recent addition to the portfolio. Wackenhut is
positioned to ride the trend on both the federal and state levels -- driven by
taxpayer pressure -- towards turning over the construction and management of
prisons to the private sector. While privatization contracts for new facilities
are growing at 30% per annum, management by private facilities stands at only
about 5% of the total existing corrections market, so we believe that a great
deal of upside potential remains in this business.
Q: What is your outlook for small growth stocks?
A: Very optimistic. Over the last three months of the Fund's fiscal period, as
gauged by the Russell 2000 Growth and S&P 500 indices, small growth stocks
outperformed large cap issues by 11.95% to 6.48%. While projections are always
difficult, we believe the recent reversal in leadership was driven by a number
of factors that remain in place.
The small cap recovery began in mid-April, and was triggered by a drop in
interest rates that sparked renewed interest in high growth stocks. June
introduced a new element -- faltering earnings on the part of large-cap
companies, caused in part by the turmoil in Asian currencies. Large companies
had experienced well above average earnings growth over an extended period, but
disappointments began to increase among this group. This led many investors to
look elsewhere in the market for earnings growth.
Small cap issues continued to outperform larger companies as rates moved up in
August. This was partly a function of continued large company earnings
disappointments, but also a response to the signing into law of a capital gains
8 - Scudder 21st Century Growth Fund
<PAGE>
tax rate cut. With the long-term capital gains rate reduced to 20% -- versus
rates of as high as 39.6% on income -- investor interest in high growth stocks
that pay no cash dividends was heightened. Historically, the price-earnings
ratios of such companies has tended to rise relative to slower growth, cash
dividend paying companies when the capital gains tax rate has declined.
Moreover, despite the recent outperformance of smaller companies, a valuation
gap between large and small stocks remains to be closed following an extended
period of large cap strength. In short, while the future is never certain, the
stage appears to be set for a period of strong small growth company performance.
Scudder 21st Century Growth Fund: A Team Approach
to Investing
Scudder 21st Century Growth Fund is managed by a team of Scudder investment
professionals, who each play an important role in the Fund's management
process. Team members work together to develop investment strategies and
select securities for the Fund's portfolio. They are supported by Scudder's
large staff of economists, research analysts, traders and other investment
specialists who work in Scudder's offices across the United States and abroad.
Scudder believes its team approach benefits Fund investors by bringing
together many disciplines and leveraging Scudder's extensive resources.
Lead Portfolio Manager Peter Chin has responsibility for the Fund's day-to-day
management and investment strategies. Mr. Chin has 23 years of research and
portfolio management experience, primarily in small company growth stocks. Roy
C. McKay, Portfolio Manager, has 29 years of investment experience, with 20
years specializing in small company growth stocks.
9 - Scudder 21st Century Growth Fund
<PAGE>
Glossary of Investment Terms
CURRENCY EXCHANGE RATE The price at which one country's currency can be
exchanged into another currency. When the U.S.
dollar rises relative to foreign currencies, this
decreases the buying power of overseas purchasers of
U.S. goods and services and tends to hurt the
earnings of U.S. companies that export; by contrast,
a weak dollar promotes U.S. exports.
DIVIDEND YIELD With stocks, a company's payment out of earnings to
shareholders divided by its share price. For
example, a stock that sells for $10 and pays annual
dividends totaling $1 has a yield of 10%; if the
stock price goes up to $20, the yield would fall to
5%.
FEDERAL FUNDS RATE A benchmark short-term interest rate, the Fed Funds
rate is the interest charged by Federal Reserve
member banks to other member banks requiring
overnight loans to meet regulatory reserve
requirements. The Fed Funds rate is a key instrument
of U.S. monetary policy, by which the Federal
Reserve seeks to influence growth and inflation by
controlling the supply of money in the economy.
FUNDAMENTAL RESEARCH Analysis of companies based on the projected impact
of management, products, sales, and earnings on
their balance sheets and income statements. Distinct
from technical analysis, which evaluates the
attractiveness of a stock based on historical price
and trading volume movements, rather than the
financial results of the underlying company.
GROWTH STOCK Stock of a company that has displayed above average
earnings growth and is expected to continue to
increase profits rapidly going forward. Stocks of
such companies usually trade at higher multiples to
earnings (see price/earnings ratio) and experience
more price volatility than the market as a whole.
Distinct from value stock.
LIQUIDITY A stock that is liquid has enough shares outstanding
and a substantial enough market capitalization to
allow large purchases and sales to occur without
causing a significant move in its market price as a
result.
10 - Scudder 21st Century Growth Fund
<PAGE>
MARKET CAPITALIZATION The value of a company's outstanding shares of
common stock, determined by the number of shares
outstanding multiplied by the share price (shares x
price = market capitalization). The universe of
publicly traded companies is frequently divided into
large-, mid-, and small-capitalization. "Large-cap"
stocks tend to be more liquid.
NASDAQ The Nasdaq Stock Market (for National Association of
Securities Dealers Automated Quotation system). A
computerized system that provides brokers and
dealers with price quotations for securities traded
over the counter ("OTC"), as well as for some
securities listed on the New York Stock Exchange or
American Stock Exchange. Historically, most
securities traded OTC using the Nasdaq quotation
system have been smaller-capitalization stocks that
do not qualify for listing on a major exchange.
OVER/UNDER WEIGHTING Refers to the allocation of assets -- usually by
sector, industry, or country -- within a portfolio
relative to the portfolio's benchmark index or
investment universe.
PRICE/EARNINGS RATIO A widely used gauge of a stock's valuation, that
indicates what investors are paying for a company's
earning power at the current stock price. May be
based on a company's projected earnings for the
coming 12 months. A higher "earnings multiple"
indicates higher expected earnings growth, along
with greater risk of earnings disappointments.
VALUE STOCK A company whose stock price does not fully reflect
its intrinsic value, as indicated by price/earnings
ratio, price/book value ratio, dividend yield, or
some other valuation measure, relative to its
industry or the market overall. Value stocks tend to
display less price volatility and may carry higher
dividend yields. Distinct from growth stock.
(Sources: Scudder; Barron's Dictionary of Finance and Investment Terms)
11 - Scudder 21st Century Growth Fund
<PAGE>
Investment Portfolio as of August 31, 1997
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 2.0%
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement with State Street Bank and Trust Company dated 8/29/97
at 5.45%, to be repurchased at $472,286 on 9/2/97, collateralized by a $340,000 -----------
U.S. Treasury Bond, 12%, 8/15/13 (Cost $472,000) ...................................... 472,000 472,000
-----------
<CAPTION>
Shares
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks 98.0%
- ------------------------------------------------------------------------------------------------------------------------------
Consumer Discretionary 11.0%
Apparel & Shoes 1.5%
St. John Knits Inc. (Manufacturer of woman's clothing) .................................. 8,100 341,213
-----------
Department & Chain Stores 2.0%
Renters Choice, Inc.* (Operator of rent-to-own stores offering home electronics,
appliances, furniture and accessories) ................................................ 21,400 476,150
-----------
Hotels & Casinos 2.1%
Grand Casinos Inc.* (Casino manager) .................................................... 13,200 203,775
Rio Hotel and Casino, Inc.* (Owner and operator of hotel and casino complex) ............ 14,300 279,744
-----------
483,519
-----------
Recreational Products 1.6%
Family Golf Centers, Inc.* (Operator of golf-related recreational facilities) ........... 16,300 377,956
-----------
Specialty Retail 3.8%
Cole National Corp.* (Operator of specialty service retail stores) ...................... 5,000 222,812
West Marine, Inc.* (Retailer of recreational and commercial boating supplies
and apparel) .......................................................................... 15,350 291,650
Wilmar Industries, Inc.* (National distributor of repair and maintenance products
for the apartment housing market) ..................................................... 15,600 390,000
-----------
904,462
-----------
Consumer Staples 6.7%
Alcohol & Tobacco 1.6%
Robert Mondavi Corp. "A"* (Premium wine producer) ....................................... 8,410 382,655
-----------
Farming 1.8%
Scheid Vineyards Inc. "A"* (Producer of wine grapes) .................................... 40,000 430,000
-----------
Food & Beverage 3.3%
Authentic Specialty Foods, Inc.* (Producer and distributor of Mexican foods) ............ 1,700 15,937
Hain Food Group, Inc.* (Provider of specialty food products) ............................ 34,000 348,500
Suiza Foods Corp.* (Food distributor) ................................................... 10,100 416,625
-----------
781,062
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder 21st Century Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Health 15.1%
Biotechnology 3.7%
ESC Medical Systems Ltd.* (Producer of devices for non-invasive treatment of benign
vascular lesions) ..................................................................... 7,600 248,900
Hyseq, Inc.* (Developer of gene-based therapeutic and diagnostic products) .............. 2,100 29,662
Norland Medical Systems, Inc.* (Marketer of systems used in diagnosis of
bone disorders) ....................................................................... 26,700 300,375
Protein Design Labs, Inc.* (Developer of human and humanized antibodies) ................ 8,100 288,563
-----------
867,500
-----------
Health Industry Services 4.6%
BioReliance Corp.* (Contract research organization) ..................................... 400 8,700
IDX Systems Corp.* (Provider of health care information systems to physician
groups and academic medical centers) .................................................. 9,900 335,363
MedQuist, Inc.* (Electronic document transcription and management services) ............. 13,700 455,525
Staff Builders, Inc. "A"* (Provider of home health care services) ....................... 100,000 281,250
-----------
1,080,838
-----------
Hospital Management 1.2%
Karrington Health, Inc.* (Owner and operator of private pay assisted living residences) . 10,900 129,438
Sunrise Assisted Living, Inc.* (Provider of assisted living to the elderly) ............. 4,600 143,175
-----------
272,613
-----------
Medical Supply & Specialty 2.7%
ArthroCare Corp.* (Manufacturer of orthopedic surgery equipment) ........................ 3,500 37,187
Closure Medical Corp.* (Manufacturer of medical adhesive products) ...................... 8,200 228,575
Intelligent Medical Imaging, Inc.* (Producer of an automated microscope system) ......... 29,500 175,156
Perclose, Inc.* (Developer and producer of minimally invasive single-use systems
to close arterial access sites surgically) ............................................ 8,000 188,000
-----------
628,918
-----------
Pharmaceuticals 2.9%
Cyanotech Corp.* (Producer of algal products for nutritional and
pharmaceutical markets) ............................................................... 28,500 143,391
Guilford Pharmaceuticals, Inc.* (Research and development of therapeutic and
diagnostic drugs) ..................................................................... 13,600 365,500
Sugen, Inc.* (Developer of small molecule drugs for use in cancer and
diabetes treatment) ................................................................... 10,400 146,900
Zonagen, Inc.* (Biopharmaceutical company) .............................................. 1,200 37,950
-----------
693,741
-----------
Financial 3.3%
Banks 2.9%
First Federal Financial Corp.* (Commercial bank holding company) ........................ 6,900 232,875
Magna Group, Inc. (Commercial banking and financial services) ........................... 7,600 275,975
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder 21st Century Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Southwest Bancorporation of Texas, Inc.* (Commercial bank holding company) .............. 6,700 175,038
-----------
683,888
-----------
Insurance 0.4%
CapMAC Holdings, Inc. (Provider of financial guaranty insurance) ........................ 3,100 86,025
-----------
Media 1.8%
Advertising
Universal Outdoor Holdings, Inc.* (Outdoor advertising company) ......................... 12,300 421,275
-----------
Service Industries 14.7%
EDP Services 2.6%
Analysts International Corp. (Contract programming and software services) ............... 11,400 390,450
Aris Corp.* (Information technology services) ........................................... 500 12,250
Computer Horizons Corp.* (Diversified information technology services and solutions) .... 5,250 208,687
-----------
611,387
-----------
Environmental Services 0.1%
Commodore Applied Technologies, Inc.* (Developer of environmental technologies) ......... 3,900 18,281
-----------
Miscellaneous Commercial Services 12.0%
ABR Information Services, Inc.* (Benefits, compliance and information services) ......... 7,400 198,875
Alternative Resources Corp.* (Provider of technical personnel specializing in
information services) ................................................................. 11,200 250,600
CMG Information Services, Inc.* (Developer of information-based products and services
for direct marketing) ................................................................. 16,600 371,425
Cornell Corrections, Inc.* (Developer and operator of correctional, detention and
pre-release facilities) ............................................................... 14,900 217,912
CorporateFamily Solutions, Inc.* (Management and consulting services) ................... 500 7,500
G & K Services Inc. "A" (Uniform rentals) ............................................... 7,700 268,537
Lamalie Associates, Inc.* (Executive search company) .................................... 25,000 475,000
Sitel Corp.* (Nebraska based telemarketing company for major credit-card and insurance
companies) ............................................................................ 34,500 366,563
TeleTech Holdings Inc.* (Provider of customer care solutions) ........................... 14,800 242,350
Veterinary Centers of America, Inc.* (Owner and manager of veterinary hospitals) ........ 15,300 212,288
Wackenhut Corrections Corp.* (Manager of privatized correctional and
detention facilities) ................................................................. 7,900 209,350
-----------
2,820,400
-----------
Durables 5.0%
Aerospace 2.1%
Simula, Inc.* (Development and production of transportation safety products) ............ 20,900 485,925
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - Scudder 21st Century Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automobiles 1.2%
Tower Automotive, Inc.* (Producer of engineered metal stampings and assemblies for
automotive industry) .................................................................. 6,300 282,713
-----------
Telecommunications Equipment 1.7%
RIT Technologies Ltd.* (Manufacturer of wiring products and systems) .................... 45,000 410,625
-----------
Manufacturing 8.8%
Containers & Paper 2.2%
Aptargroup, Inc. (Manufacturer of packaging equipment components) ....................... 9,300 523,125
-----------
Diversified Manufacturing 0.6%
Alyn Corp.* (Manufacturer of consumer and industrial materials) ......................... 16,700 139,862
-----------
Electrical Products 1.7%
Advanced Lighting Technologies, Inc.* (Manufacturer of metal halide lighting products) .. 17,100 410,400
-----------
Industrial Specialty 1.5%
Lydall, Inc.* (Engineered fiber materials) .............................................. 5,500 130,625
National-Oilwell, Inc.* (Manufacturer of oil and gas drilling equipment) ................ 3,600 221,625
-----------
352,250
-----------
Office Equipment/Supplies 2.8%
Encad, Inc.* (Manufacturer of large format color inkjet printers) ....................... 10,700 375,837
TransAct Technologies Inc.* (Manufacturer of transaction record printers) ............... 17,200 273,050
-----------
648,887
-----------
Technology 21.0%
Computer Software 11.5%
Advent Software, Inc.* (Provider of stand-alone and client/server software products) .... 6,000 159,000
CBT Group PLC (ADR)* (Developer and publisher of software focusing on client/server
technologies) ......................................................................... 5,100 331,500
Genesys Telecommunications Laboratories, Inc.* (Producer of enterprise-wide platform
and applications software) ............................................................ 1,300 36,400
JDA Software Group, Inc.* (Comprehensive software solutions for management of
retailing information) ................................................................ 4,100 128,125
Keane, Inc.* (Provider of computer software project management and design development
services) ............................................................................. 3,200 188,000
Lycos, Inc.* (Developer of online guides to the Internet) ............................... 1,037 32,471
MAPICS, Inc.* (Business planning and control solutions and services) .................... 44,000 517,000
Peritus Software Services, Inc.* (Information technology software products
and services) ......................................................................... 600 15,000
SeaChange International, Inc.* (Manufacturer of software-based products for
management and distribution of digital video for television and
telecommunication companies) .......................................................... 22,800 361,950
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder 21st Century Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Vantive Corp.* (Provider of customer interaction applications software) ................. 14,400 439,200
Wind River Systems* (Producer of advanced software operation systems and
development tools) .................................................................... 11,600 497,350
-----------
2,705,996
-----------
EDP Peripherals 1.1%
Network Appliance, Inc.* (Designer and manufacturer of network data storage devices) .... 5,200 245,700
-----------
Electronic Components/Distributors 1.3%
Galileo Technology Ltd.* (Producer of digital semiconductor network devices) ............ 400 12,450
Rofin-Sinar Technologies, Inc.* (Manufacturer of laser products used for
cutting and welding) .................................................................. 10,000 172,500
Sawtek, Inc.* (Manufacturer of electronic signal processing components) ................. 400 15,750
Trident International, Inc.* (Manufacturer of impulse ink jet subsystems) ............... 7,300 110,413
-----------
311,113
-----------
Office/Plant Automation 3.2%
Cognex Corp.* (Manufacturer of machine vision systems) .................................. 12,200 466,650
Pinnacle Systems, Inc.* (Manufacturer of video post-production workstations) ............ 11,500 293,250
-----------
759,900
-----------
Semiconductors 3.9%
Cymer, Inc.* (Provider of laser illumination sources for ultra-violet
photolithography systems) ............................................................. 5,300 481,637
Vitesse Semiconductor Corp.* (Manufacturer of digital integrated circuits) .............. 9,300 438,263
-----------
919,900
-----------
Energy 6.5%
Oil & Gas Production 4.1%
KCS Energy, Inc. (Crude oil and natural gas exploration, development and production) .... 5,200 138,775
Nuevo Energy Co.* (Oil and gas exploration, development and production) ................. 10,400 528,450
St. Mary Land & Exploration Co. (Oil and gas exploration, development and production) ... 3,000 107,250
Virginia Gas Company (Integrated natural gas company) ................................... 20,000 177,500
-----------
951,975
-----------
Oilfield Services/Equipment 2.4%
Friede Goldman International, Inc.* (Oilfield services) ................................. 7,100 285,775
Global Industries, Ltd.* (Pipeline construction, derrick and diving services for
offshore oil and gas industry) ........................................................ 7,700 280,569
-----------
566,344
-----------
Metals & Minerals 2.5%
Steel & Metals
Maverick Tube Corp.* (Manufacturer of steel tubular products for oil and gas wells) ..... 13,000 424,125
RMI Titanium Co.* (Producer of titanium products) ....................................... 7,700 161,219
-----------
585,344
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder 21st Century Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Construction 1.6%
Building Materials
Simpson Manufacturing Co., Inc.* (Manufacturer of wood-to-wood, wood-to-concrete and
wood-to-masonry connectors) ........................................................... 10,400 383,500
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $18,930,297) 23,045.442
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $19,402,297) (a) 23,517,442
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) The cost for federal income tax purposes was $19,626,233. At August 31,
1997, net unrealized appreciation for all securities based on tax cost was
$3,891,209. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $4,650,686 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$759,477.
The accompanying notes are an integral part of the financial statements.
17 - Scudder 21st Century Growth Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of August 31, 1997
<TABLE>
<S> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $19,402,297) ................... $ 23,517,442
Receivable for Fund shares sold ........................................ 63,147
Dividends and interest receivable ...................................... 2,114
Deferred organization expenses ......................................... 17,510
Other assets ........................................................... 161
----------------
Total assets ........................................................... 23,600,374
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ...................................... 183,600
Other payables and accrued expenses .................................... 120,598
----------------
Total liabilities ...................................................... 304,198
--------------------------------------------------------------------------------------------
Net assets, at market value $ 23,296,176
--------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation on investments ............................. 4,115,145
Accumulated net realized loss .......................................... (1,568,265)
Paid-in capital ........................................................ 20,749,296
--------------------------------------------------------------------------------------------
Net assets, at market value $ 23,296,176
--------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($23,296,176 / 1,776,347 outstanding shares of beneficial ----------------
interest, $.01 par value, unlimited number of shares authorized) ..... $13.11
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 - Scudder 21st Century Growth Fund
<PAGE>
Statement of Operations
for the period September 9, 1996 (commencement
of operations) to August 31, 1997
<TABLE>
<S> <C>
Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
Income:
Dividends .............................................................. $ 15,692
Interest ............................................................... 45,992
-----------------
61,684
Expenses:
Management fee ......................................................... 129,231
Services to shareholders ............................................... 120,314
Custodian and accounting fees .......................................... 59,124
Trustees' fees and expenses ............................................ 41,045
Auditing ............................................................... 19,300
Registration fees ...................................................... 44,171
Reports to shareholders ................................................ 21,993
Legal .................................................................. 9,874
Amortization of organization expense ................................... 4,741
Other .................................................................. 5,336
-----------------
Total expenses before reductions ....................................... 455,129
Expense reductions ..................................................... (228,599)
-----------------
Expenses, net .......................................................... 226,530
---------------------------------------------------------------------------------------------
Net investment loss (164,846)
---------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ------------------------------------------------------------------------------------------------------------------------------
Net realized loss from investments ..................................... (1,568,265)
Net unrealized appreciation during the period on investments ........... 4,115,145
---------------------------------------------------------------------------------------------
Net gain on investment transactions 2,546,880
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 2,382,034
---------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19 - Scudder 21st Century Growth Fund
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Period
September 9, 1996
(commencement of
operations) to
Increase (Decrease) in Net Assets August 31, 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Operations:
Net investment loss ................................................ $ (164,846)
Net realized loss from investment transactions ..................... (1,568,265)
Net unrealized appreciation on investment transactions during
the period........................................................ 4,115,145
--------------------
Net increase in net assets resulting from operations ............... 2,382,034
---------------------
Fund share transactions:
Proceeds from shares sold .......................................... 24,126,673
Cost of shares redeemed ............................................ (3,228,689)
Redemption fees .................................................... 14,958
---------------------
Net increase in net assets from Fund share transactions ............ 20,912,942
---------------------
Increase in net assets ............................................. 23,294,976
Net assets at beginning of period .................................. 1,200
---------------------
Net assets at end of period ........................................ $23,296,176
---------------------
Other Information
- ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period .......................... 100
---------------------
Shares sold ........................................................ 2,058,513
Shares redeemed .................................................... (282,266)
---------------------
Net increase in Fund shares ........................................ 1,776,247
---------------------
Shares outstanding at end of period ................................ 1,776,347
---------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 - Scudder 21st Century Growth Fund
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
the period (a) and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
For the Period
September 9, 1996
(commencement)
of operations) to
August 31, 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
------------------
Net asset value, beginning of period .................................................... $12.00
------------------
Income from investment operations:
Net investment loss ..................................................................... (.15)
Net realized and unrealized gain on investments ......................................... 1.25
------------------
Total from investment operations ........................................................ 1.10
------------------
Redemption fees ......................................................................... .01
------------------
Net asset value, end of period .......................................................... $13.11
------------------
- ----------------------------------------------------------------------------------------------------------------
Total Return (%) (b) .................................................................... 9.25(c)**
Ratios and Supplemental Data
Net assets, end of period ($ millions) .................................................. 23
Ratio of operating expenses, net to average daily net assets (%) ........................ 1.75*
Ratio of operating expenses before expense reductions, to average daily net assets (%) .. 3.52*
Ratio of net investment loss to average daily net assets (%) ............................ (1.27)*
Portfolio turnover rate (%) ............................................................. 92.0*
Average commission rate paid ............................................................ $.0405
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been reduced.
(c) Total return does not reflect the effect to the shareholder of the 1%
redemption fee on shares held less than one year.
* Annualized
** Not annualized
21 - Scudder 21st Century Growth Fund
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder 21st Century Growth Fund (the "Fund") is a diversified series of Scudder
Securities Trust, a Massachusetts business trust, and is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed by the Fund in the preparation of its
financial statements.
Security Valuation. Portfolio securities which are traded on U.S. or foreign
stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the Nasdaq System, for which
there have been sales, are valued at the most recent sale price reported on such
system. If there are no such sales, the value is the high or "inside" bid
quotation. Securities which are not quoted on the Nasdaq System but are traded
in another over-the-counter market are valued at the most recent sale price on
such market. If no sale occurred, the security is then valued at the calculated
mean between the most recent bid and asked quotations. If there are no such bid
and asked quotations the most recent bid quotation shall be used. Short-term
investments having a maturity of sixty days or less are valued at amortized
cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Trustees.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement, is equal to at least 100.5% of the repurchase price.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment companies
and to distribute all of its taxable income to its shareholders. Accordingly,
the Fund paid no federal income taxes and no federal income tax provision was
required. At August 31, 1997, the Fund had a net tax basis capital loss
carryforward of approximately $7,000, which may be applied against any realized
net taxable gains of each succeeding year until fully utilitzed or until August
31, 2005, the expiration date, whichever occurs first. In addition, from
November 1, 1996 through August 31, 1997, the Fund incurred approximately
$1,337,000 in net realized capital losses. As permitted by tax regulations, the
Fund intends to elect to defer these losses and treat them as arising in the
fiscal year ended August 31, 1998.
Redemption Fees. In general, shares of the Fund may be redeemed at net asset
value. However, upon the redemption or exchange of shares held by shareholders
for less than one year, a fee of 1% of the current net asset value of the shares
will be assessed and retained by the Fund for the benefit of the remaining
shareholders. The redemption fee is accounted for as an addition to paid-in
capital.
Distribution of Income and Gains. Distributions of net investment income, if
any, are made annually. During any particular year net realized gains from
investment transactions, in excess of available capital loss carryforwards,
would be taxable to the
22 - Scudder 21st Century Growth Fund
<PAGE>
Fund if not distributed and, therefore, will be distributed to shareholders
annually. An additional distribution may be made to the extent necessary to
avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. As a result, net
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
Organization Costs. Costs incurred by the Fund in connection with its
organization have been deferred and are being amortized on a straight-line basis
over a five-year period.
Other. Investment security transactions are accounted for on a trade-date basis.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis.
B. Purchases and Sales of Securities
For the period September 9, 1996 (commencement of operations) to August 31,
1997, purchases and sales of investment securities (excluding short-term
investments) aggregated $31,550,287 and $11,051,733, respectively.
C. Related Parties
Under the Fund's Investment Management Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Fund pays the Adviser a fee equal to
an annual rate of 1.00% of the Fund's average daily net assets, computed and
accrued daily and payable monthly. As manager of the assets of the Fund, the
Adviser directs the investments of the Fund in accordance with its investment
objective, policies, and restrictions. The Adviser determines the securities,
instruments and other contracts relating to investments to be purchased, sold or
entered into by the Fund. In addition to portfolio management services, the
Adviser provides certain administrative services in accordance with the
Agreement. The Adviser has agreed not to impose all or a portion of the Fund's
management fee until December 31, 1997 in order to maintain the annualized
expenses of the Fund at not more than 1.75% of average daily net assets. For the
period September 9, 1996 (commencement of operations) to August 31, 1997, the
Adviser did not impose any portion of its management fee amounting to $129,231.
On June 26, 1997, the Adviser entered into an agreement with The Zurich
Insurance Company ("Zurich"), an international insurance and financial services
organization, pursuant to which Zurich will acquire a majority interest in the
Adviser, and the Adviser will form a new global investment organization by
combining with Zurich's subsidiary, Zurich Kemper Investments, Inc. and change
its name to Scudder Kemper Investments, Inc. Subject to the receipt of the
required regulatory and shareholder approvals, the transaction is expected to
close in the fourth quarter of 1997.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
period September 9, 1996 (commencement of operations) to August 31, 1997, SSC
imposed fees amounting to $14,592, of which $14,592 was unpaid at August 31,
1997, and did not impose fees amounting to $65,550.
23 - Scudder 21st Century Growth Fund
<PAGE>
The Fund is one of several Scudder Funds (the "Underlying Funds") in which the
Scudder Pathway Series Portfolios (the "Portfolios") invest. In accordance with
the Special Servicing Agreement entered into by the Adviser, the Portfolios, the
Underlying Funds, SSC, SFAC, STC, and Scudder Investor Services, Inc., expenses
from the operation of the Portfolios are borne by the Underlying Funds based on
each Underlying Fund's proportionate share of assets owned by the Portfolios. No
Underlying Funds will be charged expenses that exceed the estimated savings to
each respective Underlying Fund. These estimated savings result from the
elimination of separate shareholder accounts which either currently are or have
potential to be invested in the Underlying Funds. At August 31, 1997, the
Special Servicing Agreement expense charged to the Fund amounted to $26,361.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the period September 9, 1996
(commencement of operations) to August 31, 1997, STC imposed fees amounting to
$586, of which $586 is unpaid at August 31, 1997, and did not impose fees
amounting to $2,635.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the period
September 9, 1996 (commencement of operations) to August 31, 1997, SFAC imposed
fees amounting to $6,942, of which $6,942 is unpaid at August 31, 1997, and did
not impose fees amounting to $31,183.
The Fund pays each of its Trustees not affiliated with the Adviser $4,000
annually plus specified amounts for attended board and committee meetings. For
the period September 9, 1996 (commencement of operations) to August 31, 1997,
the Trustees' fees and expenses aggregated $41,045.
24 - Scudder 21st Century Growth Fund
<PAGE>
Report of Independent Accountants
To the Trustees of Scudder Securities Trust and the Shareholders of Scudder 21st
Century Growth Fund:
We have audited the accompanying statement of assets and liabilities of Scudder
21st Century Growth Fund, including the investment portfolio, as of August 31,
1997, and the related statement of operations, the statement of changes in net
assets, and the financial highlights for the period September 9, 1996
(commencement of operations) to August 31, 1997. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of August 31, 1997 by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder 21st Century Growth Fund as of August 31, 1997, the results of its
operations, the changes in its net assets and the financial highlights for the
period September 9, 1996 (commencement of operations) to August 31, 1997, in
conformity with generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
October 2, 1997
25 - Scudder 21st Century Growth Fund
<PAGE>
This Page
intentionally
left blank.
26 - Scudder 21st Century Growth Fund
<PAGE>
This Page
intentionally
left blank.
27 - Scudder 21st Century Growth Fund
<PAGE>
Officers and Trustees
Daniel Pierce*
President and Trustee
Paul Bancroft III
Trustee; Venture Capitalist and
Consultant
William T. Burgin*
Trustee; General Partner,
Bessemer Venture Partners
Thomas J. Devine
Trustee; Consultant
Keith R. Fox
Trustee; Private Equity Investor,
Exeter Capital Management
Corporation
David S. Lee*
Trustee and Vice President
Wilson Nolen
Trustee; Consultant
Kathryn L. Quirk
Trustee, Vice President and
Assistant Secretary
Dr. Gordon Shillinglaw
Trustee; Professor Emeritus of
Accounting, Columbia
University Graduate School of
Business
Robert W. Lear
Honorary Trustee;
Executive-in-Residence, Visiting
Professor, Columbia University
raduate School of Business
Robert G. Stone, Jr.
Honorary Trustee; Chairman
Emeritus and Director, Kirby
Corporation
Edmund R. Swanberg*
Honorary Trustee
Peter Chin*
Vice President
James M. Eysenbach*
Vice President
Philip S. Fortuna*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Roy C. McKay*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant
Treasurer
Richard W. Desmond*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
28 - Scudder 21st Century Growth Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Premium Shares*
Managed Shares*
Scudder Government Money Market Series --
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Growth and Income Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Retirement Programs
- -------------------
IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +++Funds within categories are listed
in order from expected least risk to most risk. Certain Scudder funds may not be
available for purchase or exchange. +A portion of the income from the tax-free
funds may be subject to federal, state, and local taxes. *A class of shares of
the Fund. **Not available in all states. +++ +++A no-load variable annuity
contract provided by Charter National Life Insurance Company and its affiliate,
offered by Scudder's insurance agencies, 1-800-225-2470. #These funds, advised
by Scudder, Stevens & Clark, Inc., are traded on various stock exchanges.
29 - Scudder 21st Century Growth Fund
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which you designate Lets you purchase Scudder fund shares
the purchase details and the bank account, and money is electronically, avoiding potential mailing delays;
electronically debited from that account monthly to designate a bank account and the transaction
regularly purchase fund shares and "dollar cost average" details, and money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from that account.
fewer when it's higher, which can reduce your average
purchase price over time.
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- http://funds.scudder.com
1-800-343-2890
Scudder Electronic Account Services: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you designate.
DistributionsDirect
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
30 - Scudder 21st Century Growth Fund
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 6,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
500 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with Scudder funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
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Additional Information on How to Contact Scudder:
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For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
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New From Scudder: Scudder International Growth and Income Fund
Scudder International Growth and Income Fund takes a yield-oriented approach to investing in international equities. The
Fund seeks to provide long-term growth of capital plus current income. Investors who desire international exposure but
who wish to take a more conservative approach may appreciate the Fund's emphasis on the dividend paying stocks of
well-established companies outside the United States.
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The share price of Scudder International Growth and Income Fund will fluctuate. International investing involves special
risks including currency fluctuation and political instability. Contact Scudder Investor Services, Inc., Distributor,
for a prospectus which contains more complete information, including management fees and other expenses. Please read it
carefully before you invest or send money.
</TABLE>
31 - Scudder 21st Century Growth Fund
<PAGE>
Celebrating Over 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven Clark,
Scudder, Stevens & Clark was the first independent investment counsel firm in
the United States. Since its birth, Scudder's pioneering spirit and commitment
to professional long-term investment management have helped shape the investment
industry. In 1928, we introduced the nation's first no-load mutual fund. Today
we offer over 40 pure no load(TM) funds, including the first international
mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication to
research and fundamental investment disciplines have helped us become one of the
largest and most respected investment managers in the world. Though times have
changed since our beginnings, we remain committed to our long-standing
principles: managing money with integrity and distinction; keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.
This information must be preceded or accompanied by a
current prospectus.
Portfolio changes should not be considered recommendations
for action by individual investors.
SCUDDER
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