Scudder
21st Century
Growth Fund
Annual Report
August 31, 1998
Pure No-Load(TM) Funds
A pure no-load(TM) (no sales charges) mutual fund which seeks long-term growth
of capital by investing primarily in securities of emerging growth companies
poised to be leaders in the 21st century.
SCUDDER (logo)
<PAGE>
Scudder 21st Century Growth Fund
- --------------------------------------------------------------------------------
Total Net Assets as of
Date of Inception: 9/9/96 8/31/98: $26.93 million Ticker Symbol: SCTGX
- --------------------------------------------------------------------------------
o Small-cap stocks have experienced a significant downturn in the past year due
to concerns over financial instability in the emerging markets and slowing
profit growth in the United States.
o Scudder 21st Century Growth Fund's total return of -22.58% for the
twelve-month period ended August 31, 1998 was disappointing, but it did beat the
return of -26.31% on its unmanaged benchmark, the Russell 2000 Growth Index, for
the same period.
o The Fund favored investments in consistently growing areas with limited
exposure to the emerging markets, falling commodity prices, and the effects of a
strong U.S. dollar.
Table of Contents
3 Letter from the Fund's President 18 Financial Highlights
4 Performance Update 19 Notes to Financial Statements
5 Portfolio Summary 22 Report of Independent Accountants
6 Portfolio Management Discussion 24 Officers and Trustees
9 Glossary of Investment Terms 25 Investment Products and Services
10 Investment Portfolio 26 Scudder Solutions
15 Financial Statements
2 - Scudder 21st Century Growth Fund
<PAGE>
Letter from the Fund's President
Dear Shareholders,
In the last twelve months, the economic crisis in the emerging markets has
spread across the globe, causing investors to seek cover in safer havens such as
U.S. Treasury bonds and stocks of large, familiar companies. In the process,
small company stocks have been driven down despite positive fundamentals. In a
market downdraft such as this, shares of reasonably valued, quality companies
often get hit as hard as those with flawed strategies and poor management. As
difficult as these sell-offs are to deal with, they can provide extraordinary
opportunities for those willing to endure volatility. Over the long term, we
believe that well run companies with strong earnings will ultimately provide
superior returns. In a challenging climate such as this, we believe that
investors should remain focused on their long-term investment goals, despite the
short-term fluctuations of the market.
As Fund managers Peter Chin and Roy McKay outline in the discussion which
begins on page 6, they are coping with this volatility by continuing to avoid
companies whose earnings are vulnerable to economic downturns overseas, falling
commodity prices, and the effects of the strong dollar. Consistent with their
ongoing strategy, Messrs. Chin and McKay are continuing to search for
well-positioned companies with strong growth prospects and reasonable
valuations, in order to take advantage of the renewed focus on fundamentals that
they believe will inevitably occur when the markets stabilize.
For those of you who are interested in new Scudder funds, we recently
introduced the Scudder International Growth Fund and the Scudder International
Value Fund. With the addition of these funds, Scudder becomes one of the few
companies to offer investors the ability to diversify internationally across
both growth and value styles. For further information on these new funds, please
call Scudder Investor Information at 1-800-225-2470.
Thank you for your continued investment in Scudder 21st Century Growth
Fund. If you have questions about your account, please call Scudder Investor
Relations at the toll-free number above, or visit our Web site at
http://funds.scudder.com.
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, 1998
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
8/31/98 $10,000 Cumulative Annual
- --------------------------------------
SCUDDER 21ST CENTURY GROWTH FUND
- --------------------------------------
1 Year $ 7,742 -22.58% -22.58%
Life of
Fund* $ 8,458 -15.42% -8.13%
- --------------------------------------
RUSSELL 2000 GROWTH INDEX
- --------------------------------------
1 Year $ 7,369 -26.31% -26.31%
Life of
Fund* $ 8,418 -15.82% -8.59%
*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:
SCUDDER 21ST CENTURY GROWTH FUND
Year Amount
- ----------------------
9/96* $10,000
11/96 $ 9,444
2/97 $ 8,778
5/97 $ 9,302
8/97 $10,405
11/97 $10,119
2/98 $11,397
5/98 $11,175
8/98 $ 8,056
RUSSELL 2000 GROWTH INDEX
Year Amount
- ----------------------
9/96* $10,000
11/96 $ 9,835
2/97 $ 9,657
5/97 $10,204
8/97 $11,423
11/97 $11,317
2/98 $12,160
5/98 $11,820
8/98 $ 8,418
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* 1998
-------------------
NET ASSET VALUE... $ 13.11 $ 10.15
INCOME DIVIDENDS.. $ -- $ --
CAPITAL GAINS
DISTRIBUTIONS..... $ -- $ --
FUND TOTAL
RETURN (%)........ 9.25 -22.58
INDEX TOTAL
RETURN (%)........ 14.14 -26.31
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 one year and
life of Fund periods would have been lower.
4 - Scudder 21st Century Growth Fund
<PAGE>
PORTFOLIO SUMMARY as of August 31, 1997
- ---------------------------------------------------------------------------
ASSET ALLOCATION
- ---------------------------------------------------------------------------
Equity Holdings 95%
Cash Equivalents 5%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The Fund seeks to be fully
invested in stocks of small U.S.
growth companies.
- --------------------------------------------------------------------------
SECTOR DIVERSIFICATION
(Excludes 5% Cash Equivalents)
- --------------------------------------------------------------------------
Technology 32%
Health 19%
Service Industries 16%
Consumer Discretionary 12%
Financial 8%
Transportation 3%
Consumer Staples 3%
Energy 2%
Durables 2%
Other 3%
- ---------------------------------------------
100%
- ---------------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
We found growth opportunities in
technology and health care companies
with strong domestic businesses.
- --------------------------------------------------------------------------
10 LARGEST EQUITY HOLDINGS
(33% OF PORTFOLIO)
- --------------------------------------------------------------------------
1. Vitesse Semiconductor Corp.
Manufacturer of digital integrated circuits
2. MedQuist, Inc.
Electronic document transcription and management services
3. Pinnacle Systems, Inc.
Manufacturer of video post-production workstations
4. QuadraMed Corp.
Developer of financial management and data interchange software products
and services
5. MAPICS, Inc.
Business planning and control solutions and services
6. Network Appliance, Inc.
Designer and manufacturer of network data storage devices
7. Sapient Corp.
Producer of flexible information technology software
8. Wilmar Industries, Inc.
National distributor of repair and maintenance products for apartment
and housing market
9. Renters Choice, Inc.
Operator of rent-to-own stores offering home electronics, appliances,
furniture and accessories
10. Wackenhut Corrections Corp.
Manager of privatized correctional and detention facilities
Management emphasized investment
themes such as outsourcing and
productivity enhancement as a way
to minimize the effects of volatility in
the emerging markets.
- -----------------------------------------------------------------------------
For more complete details about the Fund's investment portfolio,
see page 10. A quarterly Fund Summary and Portfolio Holdings are available
upon request.
5 - Scudder 21st Century Growth Fund
<PAGE>
Portfolio Management Discussion
In the following interview, Peter Chin and Roy C. McKay, portfolio managers of
Scudder 21st Century Growth Fund, discuss the Fund's strategy and the market
environment during the twelve-month period ended August 31, 1998.
Q: How did the Scudder 21st Century Growth Fund perform relative to its
benchmark, the unmanaged Russell 2000 Growth Index, for the twelve-month fiscal
period ended August 31, 1998?
A: The Fund outperformed its benchmark by posting a negative total return of
22.58% for the twelve months, compared to a decline of 26.31% for the index for
the same period. Small growth stocks experienced significant volatility
throughout the year, falling in the fourth quarter of 1997 when the severity of
the Asian financial crisis became more apparent, then rebounding through the
first half of 1998. The market then collapsed in the summer months due to fears
that the recession in parts of the developing world would soon spread to the
United States, causing the index to fall 23.08% in August alone. While 1998 has
so far proven to be a very difficult time for investors, our strategy of buying
companies with minimal foreign exposure helped the Fund to outperform the index
for the three-, six-, and twelve-month periods ended August 31.
Q: How would you characterize the current investment environment?
A: Decelerating earnings growth and the continuing turmoil in the emerging
markets are two important factors that are driving the current "flight to
quality" into highly liquid securities such as blue chip stocks and Treasury
bonds. This shift has resulted in selling across areas with higher perceived
risk, such as small company stocks, as investors look for safe havens. While the
combination of low interest rates and a strong dollar would ordinarily be
extremely beneficial for the small-cap stocks we hold in the portfolio, the
focus on risk aversion that has dominated the market has far outweighed the
positives for small-cap stocks in this period. In contrast to the weak
performance of the Russell 2000 Growth Index, the positive total return of 8.12%
for the S&P 500 for the year ended August 31 demonstrates the bias toward the
relative safety of large-cap stocks.
Q: What strategy did the Fund employ to deal with the negative market
conditions?
A: The Fund has been taking a multifaceted approach to dealing with the
prevailing market conditions. First, since the economic difficulty overseas has
been the primary source of fear in the market, we continued to avoid stocks with
exposure to Asia or the negative effects of the strong dollar. Second, we stayed
away from sectors that have been indirectly harmed by the global slowdown. These
include energy stocks, which have been dragged down by falling commodity prices,
and cyclical stocks, whose performance is directly correlated with the strength
of the U.S. economy. Beyond these top-down considerations, we continued to
employ a bottom-up approach to finding the most consistent growers in the
strongest domestic industries. This strategy has led us to the health care
sector, which stands to benefit from the aging population, and to technology
stocks, an area that we believe will continue to benefit from the push for
increased productivity in corporate America. In the process of selecting the
6 - Scudder 21st Century Growth Fund
<PAGE>
highest-quality growth stocks for the Fund, we have been taking advantage of
dips in the broader market to buy good companies at bargain prices.
Q: Can you tell us about some individual stocks that best demonstrate your
approach?
A: Certainly. Vitesse Semiconductor, the Fund's largest holding, is a maker of
computer chips with faster processing speeds than traditional silicon chips.
Since this technology is used in conjunction with improved communications
applications, Vitesse is an example of a company that should benefit from the
trend of American companies using better tools to increase productivity.
Earnings have been on the rise, and the stock appreciated 15% over the
twelve-month period.
Another stock that performed well for us is Medquist, a rapidly-growing leader
in medical transcription services. By providing software and specialized
services to hospitals in the United States, this company is capitalizing on the
larger trend of firms seeking to improve productivity by outsourcing non-core
functions. Medquist posted sales growth of 43% from June 1997 to June 1998, and
the stock has been an excellent performer for the Fund.
Q: What were some of the disappointments?
A: A company called Quadramed typifies the effect that negative market
conditions can have on an otherwise fundamentally sound stock. A developer of
software for healthcare providers, this company saw revenues increase 306% over
the twelve-month period ended June 30. With no earnings disappointments and an
excellent outlook, one would expect that under normal conditions the stock would
7 - Scudder 21st Century Growth Fund
<PAGE>
provide solid returns. Instead, it lost 14% in 1998 through August 31. A drop
such as this demonstrates how even good companies have fallen victim to
indiscriminate selling in the small cap area.
Q: What is your outlook for small company growth stocks?
A: Due to the uncertainty concerning the foreign markets and the ability of the
economy to maintain its strong performance, we expect volatility to continue in
the immediate future. The positive side to the past year's downtrend in small
company stocks is that they are currently selling at historically low valuations
compared to large-cap stocks, despite stronger earnings growth. The accompanying
graph shows that the P/E ratio of the Russell 2000 Growth Index is at its lowest
point in ten years. Another potentially positive factor for the Fund is that the
low-to-declining interest rate environment should benefit smaller firms by
lowering their cost of debt.
Throughout this difficult period, we remain committed to our approach of finding
the best small companies for long-term growth of capital. For investors who are
able to look past short-term volatility, we believe that the Fund remains an
attractive vehicle for gaining exposure to this dynamic sector of the stock
market.
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART TITLE:
Small-Caps Attractive Relative to Large-Caps
As measured by the P/E ratios of the unmanaged Russell 2000 Growth and S&P 500
indices, small-cap stocks are at historically attractive levels.
1/88 1.18
1.34
1.58
12/88 1.57
1.54
1.56
1.63
1.46
1.29
1.26
1.43
12/90 1.18
1.14
1.32
1.19
1.21
1.09
1.18
1.24
12/92 1.20
1.37
1.22
1.16
1.29
1.39
1.38
1.43
12/94 1.58
1.65
1.63
1.78
1.82
1.69
1.73
2.28
12/96 2.05
1.96
1.58
1.64
1.71
1.40
1.32
1.37
8/98 1.07
Source: Frank Russell Co., Factset Data Systems, SKI\QS
Values greater than 1.0 indicate a higher valuation for the Russell 2000 Growth
Index; values less than 1.0 indicate a higher valuation for the S&P 500.
Scudder 21st Century Growth Fund: A Team Approach
to Investing
Scudder 21st Century Growth Fund is managed by a team of Scudder Kemper
Investments, Inc. (the "Adviser") 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 the Adviser's large staff of economists, research analysts,
traders, and other investment specialists who work in our offices across the
United States and abroad. We believe our team approach benefits Fund investors
by bringing together many disciplines and leveraging our extensive resources.
Lead Portfolio Manager Peter Chin has responsibility for the Fund's day-to-day
management and investment strategies. Mr. Chin has 24 years of research and
portfolio management experience, primarily in small company growth stocks.
Portfolio Manager Roy C. McKay has 30 years of investment experience, with 21
years specializing in small company growth stocks.
8 - Scudder 21st Century Growth Fund
<PAGE>
Glossary of Investment Terms
EARNINGS The net income of a company after expenses and
dividends are subtracted from total revenues.
Earnings are the primary tool used to gauge a
company's health.
FUNDAMENTAL RESEARCH Analysis of companies based on the projected impact
of management, products, sales, and earnings on
their balance sheets and income statements.
Fundamental research is 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 and experience more price volatility than
the market as a whole.
LIQUIDITY A characteristic of an investment or an asset
referring to the ease of convertibility into cash
within a reasonably short period of time.
MARKET CAPITALIZATION The market value of a company's outstanding shares
of common stock, determined by multiplying the
number of shares outstanding by the share price
(shares x price = market capitalization).
The universe of publicly traded companies is
frequently divided into large-, mid-, and
small-capitalization
PRICE/EARNINGS RATIO A widely used gauge of a stock's valuation that
(P/E) (also "earnings indicates what investors are paying for a company's
multiple") earning power at the current stock price. A P/E
ratio 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 disappointment.
(Sources: Scudder Kemper Investments, Inc.; Barron's Dictionary of
Finance and Investment Terms)
9 - Scudder 21st Century Growth Fund
<PAGE>
Investment Portfolio as of August 31, 1998
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 5.3%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with State Street Bank and Trust Company dated 8/31/1998 at
5.75%, to be repurchased at $1,390,222 on 9/1/1998, collateralized by a -----------
$1,410,000 U.S. Treasury Bond, 5.875%, 1/31/1999 (Cost $1,390,000) .................... 1,390,000 1,390,000
-----------
Shares
- ------------------------------------------------------------------------------------------------------------------------------
Common Stocks 94.7%
- ------------------------------------------------------------------------------------------------------------------------------
Consumer Discretionary 11.5%
Apparel & Shoes 3.2%
Ashworth, Inc.* (Manufacturer of golf sportswear) ....................................... 53,900 303,188
Columbia Sportswear Co.* (Manufacturer of active outdoor apparel) ....................... 19,300 246,075
St. John Knits, Inc. (Manufacturer of women's clothing) ................................. 16,300 310,719
-----------
859,982
-----------
Department & Chain Stores 2.4%
Renters Choice, Inc.* (Operator of rent-to-own stores offering home electronics,
appliances, furniture and accessories) ................................................ 27,600 624,450
-----------
Hotels & Casinos 0.9%
Cavanaughs Hospitality Corp.* (Developer and owner of full service hotels) .............. 22,000 228,250
-----------
Recreational Products 1.4%
Family Golf Centers, Inc.* (Operator of golf-related recreational facilities) ........... 24,450 369,806
-----------
Restaurants 1.1%
Il Fornaio America Corp.* (Restaurant chain) ............................................ 29,200 292,000
-----------
Specialty Retail 2.5%
Wilmar Industries, Inc.* (National distributor of repair and maintenance
products for the apartment housing market) ............................................ 34,500 655,500
-----------
Consumer Staples 2.4%
Farming 0.7%
Hines Horticulture, Inc.* (Operator of commercial nurseries) ............................ 26,000 185,250
-----------
Food & Beverage 1.7%
Horizon Organic Holding Corp.* (Producer and marketer of a line of organic dairy
products) ............................................................................. 35,000 446,250
-----------
Health 18.1%
Food & Beverage 1.4%
Twinlab Corp.* (Manufacturer and marketer of nutritional products including a
line of vitamin and mineral supplements) .............................................. 12,800 372,800
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder 21st Century Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Biotechnology 2.3%
CryoLife, Inc.* (Cryopreservation of viable human tissue for transplants) ............... 25,000 321,875
Hyseq, Inc.* (Developer of gene-based therapeutic and diagnostic products) .............. 28,200 148,050
Vysis, Inc.* (Developer of genetic disease evaluation products) ......................... 25,700 128,500
-----------
598,425
-----------
Health Industry Services 5.5%
IDX Systems Corp.* (Provider of health care information systems to physician
groups and academic medical centers) .................................................. 9,900 420,750
MedQuist, Inc.* (Electronic document transcription and management services) ............. 49,500 1,039,500
-----------
1,460,250
-----------
Hospital Management 1.1%
Sunrise Assisted Living, Inc.* (Provider of assisted living to the elderly) ............. 10,700 282,213
-----------
Medical Supply & Specialty 6.8%
ESC Medical Systems Ltd.* (Producer of devices for non-invasive treatment of
benign vascular lesions) .............................................................. 24,400 455,975
Focal, Inc.* (Manufacturer of synthetic liquid surgical sealants) ....................... 22,800 171,000
Novoste Corp.* (Developer of a beta radiation catheter delivery system) ................. 15,600 202,800
Perclose, Inc.* (Developer and producer of minimally invasive single-use systems
to close arterial access sites surgically) ........................................... 29,200 501,875
Theragenics Corp.* (Manufacturer of device for treatment of prostate cancer) ............ 36,500 460,813
-----------
1,792,463
-----------
Pharmaceuticals 1.0%
Coulter Pharmaceutical, Inc.* (Developer of drugs and therapies for treatment of
cancer) ............................................................................... 20,000 280,000
-----------
Financial 7.8%
Banks 2.0%
Silicon Valley Bancshares* (Commercial bank holding company) ............................ 11,200 273,700
Southwest Bancorporation of Texas, Inc.* (Commercial bank holding company) .............. 18,500 257,844
-----------
531,544
-----------
Insurance 3.5%
ARM Financial Group, Inc. (Retirement savings and investment products for retail
and institutional customers) .......................................................... 17,000 246,500
ESG Re Ltd. (Accident, health, life and special risk reinsurance) ....................... 28,900 502,138
Stirling Cooke Brown Holdings Ltd. (Holding company which provides risk
management services and products) ..................................................... 13,200 178,200
-----------
926,838
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder 21st Century Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Real Estate 2.3%
Correctional Properties Trust (REIT) (Acquisition and leasing of correctional
and detention facilities) ............................................................. 10,500 149,625
Realty Information Group Inc.* (Provider of building-specific information to the
U.S. commercial real estate industry) ................................................ 70,400 466,400
-----------
616,025
-----------
Media 0.8%
Advertising
DoubleClick, Inc.* (Internet advertising network) ....................................... 9,100 217,263
-----------
Service Industries 15.5%
EDP Services 6.5%
Analysts International Corp. (Contract programming and software services) ............... 18,750 396,094
Computer Horizons Corp.* (Diversified information technology services and
solutions) ............................................................................ 5,250 122,719
Keane, Inc.* (Provider of computer software project management and design
development services) ................................................................. 6,400 268,800
Sapient Corp.* (Producer of flexible information technology applications) ............... 18,600 726,563
Ultimate Software Group, Inc.* (Developer of personnel and payroll management
software solutions) ................................................................... 35,000 210,000
-----------
1,724,176
-----------
Miscellaneous Commercial Services 7.9%
ABR Information Services, Inc.* (Benefits, compliance and information services) ......... 21,800 316,090
Cornell Corrections, Inc.* (Developer and operator of correctional, detention
and pre-release facilities) ........................................................... 18,500 148,000
Digital River, Inc.* (Provider of comprehensive electronic commerce outsourcing
solutions to software publishers and online retailers) ................................ 27,900 142,988
Eagle USA Airfreight, Inc.* (Airfreight forwarding services) ............................ 25,100 511,413
International Telecommunication Data Systems, Inc.* (Telecommunications billing
and management solutions) ............................................................. 15,100 296,338
Lamalie Associates, Inc.* (Executive search company) .................................... 25,000 148,438
Wackenhut Corrections Corp.* (Manager of privatized correctional and detention
facilities) ........................................................................... 32,900 516,119
-----------
2,079,386
-----------
Miscellaneous Consumer Services 1.1%
ITT Educational Services, Inc.* (Provider of technology-oriented postsecondary
degree programs) ...................................................................... 10,700 294,250
-----------
Durables 1.8%
Leasing Companies 0.8%
Budget Group, Inc.* (Automobile, van and truck leasing and renting) ..................... 12,600 214,200
-----------
Telecommunications Equipment 1.0%
RIT Technologies Ltd.* (Manufacturer of wiring products and systems) .................... 57,400 258,300
-----------
</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>
Manufacturing 0.7%
Office Equipment/Supplies
SMED International, Inc.* (Designer and manufacturer of office furniture, wall
systems and seating) .................................................................. 18,200 182,001
-----------
Technology 30.1%
Computer Software 14.2%
Advent Software, Inc.* (Provider of stand-alone and client/server software
products) ............................................................................. 10,400 315,900
Entrust Technologies Inc.* (Developer and seller of services that allow
enterprises to secure electronic communications and transactions over the
networks) ............................................................................. 4,700 62,275
H.T.E., Inc.* (Developer of software applications for utilities and municipal
agencies) ............................................................................. 34,000 289,000
JDA Software Group, Inc.* (Comprehensive software solutions for management of
retailing information) ................................................................ 40,000 480,000
Lycos, Inc.* (Developer of online guides to the Internet) ............................... 15,000 325,313
MAPICS, Inc.* (Business planning and control solutions and services) .................... 56,800 986,900
QuadraMed Corp.* (Developer of financial management and data interchange
software products and services) ....................................................... 42,700 1,014,125
Xylan Corp.* (Producer of switching systems for local area networks) .................... 18,000 274,500
-----------
3,748,013
-----------
EDP Peripherals 3.6%
Network Appliance, Inc.* (Designer and manufacturer of network data storage
devices) .............................................................................. 23,000 958,813
-----------
Electronic Components/Distributors 1.9%
Daisytek International Corp.* (Wholesale distributor of computer and office
automation supplies) .................................................................. 28,200 500,550
-----------
Office/Plant Automation 4.8%
Mercury Computer Systems, Inc.* (Manufacturer of digital signal processing
computer systems) ..................................................................... 23,100 239,663
Pinnacle Systems, Inc.* (Manufacturer of video post-production workstations) ............ 34,400 1,036,300
-----------
1,275,963
-----------
Semiconductors 5.6%
PMC-Sierra, Inc.* (Producer of high speed internetworking component solutions) .......... 9,800 299,513
Vitesse Semiconductor Corp.* (Manufacturer of digital integrated circuits) .............. 43,800 1,188,075
-----------
1,487,588
-----------
Energy 2.0%
Oil & Gas Production 1.6%
Key Production Co., Inc.* (Oil and gas production) ...................................... 30,300 181,800
Virginia Gas Co. (Natural gas pipeline and storage company) ............................. 60,400 249,150
-----------
430,950
-----------
Oilfield Services/Equipment 0.4%
National-Oilwell, Inc.* (Manufacturer of oil and gas drilling equipment) ................ 12,100 93,775
-----------
</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>
Construction 1.1%
Building Materials
Simpson Manufacturing Co., Inc.* (Manufacturer of wood-to-wood, wood-to-concrete
and wood-to-masonry connectors) ....................................................... 10,400 302,900
-----------
Transportation 2.9%
Airlines 1.1%
America West Holdings Corp. "B" (Passenger airline) ..................................... 15,700 305,169
-----------
Miscellaneous 1.8%
Travel Services International Inc.* (Provider of leisure travel services
including airline, cruise and auto rental) ............................................ 11,300 245,775
United Road Services, Inc.* (Motor vehicle towing and transport services) ............... 22,100 223,763
-----------
469,538
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $29,210,026) 25,064,881
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $30,600,026) (a) 26,454,881
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) The cost for federal income tax purposes was $31,007,100. At August 31,
1998, net unrealized depreciation for all securities based on tax cost was
$4,552,219. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $3,009,437 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$7,561,656.
The accompanying notes are an integral part of the financial statements.
14 - Scudder 21st Century Growth Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of August 31, 1998
<TABLE>
<CAPTION>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments, at market (identified cost $30,600,026) ................ $ 26,454,881
Cash ................................................................ 912
Receivable for investments sold ..................................... 659,153
Receivable for Fund shares sold ..................................... 48,381
Dividends and interest receivable ................................... 3,466
Deferred organization expenses ...................................... 13,163
Other assets ........................................................ 73
----------------
Total assets ........................................................ 27,180,029
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for Fund shares redeemed .................................... 181,205
Accrued management fee .............................................. 13,814
Other payables and accrued expenses ................................. 60,006
----------------
Total liabilities ................................................... 255,025
-------------------------------------------------------------------------------------------
Net assets, at market value $ 26,925,004
-------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation (depreciation) on investments ........... (4,145,145)
Accumulated net realized gain (loss) ................................ (1,643,526)
Paid-in capital ..................................................... 32,713,675
-------------------------------------------------------------------------------------------
Net assets, at market value $ 26,925,004
-------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($26,925,004 / 2,653,082 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares ----------------
authorized) ....................................................... $10.15
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder 21st Century Growth Fund
<PAGE>
Statement of Operations
for the year ended August 31, 1998
<TABLE>
<CAPTION>
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income:
Dividends ........................................................... $ 46,233
Interest ............................................................ 72,729
----------------
118,962
Expenses:
Management fee ...................................................... 323,987
Services to shareholders ............................................ 191,319
Custodian and accounting fees ....................................... 51,536
Trustees' fees and expenses ......................................... 55,131
Auditing ............................................................ 17,635
Registration fees ................................................... 17,253
Reports to shareholders ............................................. 23,204
Legal ............................................................... 14,634
Amortization of organization expense ................................ 4,347
Other ............................................................... 4,732
----------------
Total expenses before reductions .................................... 703,778
Expense reductions .................................................. (136,802)
----------------
Expenses, net ....................................................... 566,976
-------------------------------------------------------------------------------------------
Net investment gain (loss) (448,014)
-------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from investments ........................... (75,261)
Net unrealized appreciation (depreciation) during the period on
investments ....................................................... (8,260,290)
-------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions (8,335,551)
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ (8,783,565)
-------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder 21st Century Growth Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Period
September 9,
1996
(commencement
Year Ended of operations)
August 31, to August 31,
Increase (Decrease) in Net Assets 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment gain (loss) ................................. $ (448,014) $ (164,846)
Net realized gain (loss) from investment transactions ...... (75,261) (1,568,265)
Net unrealized appreciation (depreciation) on investment
transactions during the period ........................... (8,260,290) 4,115,145
---------------- ----------------
Net increase (decrease) in net assets resulting from
operations ............................................... (8,783,565) 2,382,034
---------------- ----------------
Fund share transactions:
Proceeds from shares sold .................................. 21,758,221 24,126,673
Cost of shares redeemed .................................... (9,368,423) (3,228,689)
Redemption fees ............................................ 22,595 14,958
---------------- ----------------
Net increase (decrease) in net assets from Fund share
transactions ............................................. 12,412,393 20,912,942
---------------- ----------------
Increase (decrease) in net assets .......................... 3,628,828 23,294,976
Net assets at beginning of period .......................... 23,296,176 1,200
---------------- ----------------
Net assets at end of period ................................ $ 26,925,004 $ 23,296,176
---------------- ----------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period .................. 1,776,347 100
---------------- ----------------
Shares sold ................................................ 1,580,844 2,058,513
Shares redeemed ............................................ (704,109) (282,266)
---------------- ----------------
Net increase (decrease) in Fund shares ..................... 876,735 1,776,247
---------------- ----------------
Shares outstanding at end of period ........................ 2,653,082 1,776,347
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - 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
Year Ended of operations) to
August 31, August 31,
1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
---------------------------------
Net asset value, beginning of period ................................................ $ 13.11 $ 12.00
---------------------------------
Income from investment operations:
Net investment gain (loss) .......................................................... (.19) (.15)
Net realized and unrealized gain on investments ..................................... (2.78) 1.25
---------------------------------
Total from investment operations .................................................... (2.97) 1.10
---------------------------------
Redemption fees ..................................................................... .01 .01
---------------------------------
Net asset value, end of period ...................................................... $ 10.15 $ 13.11
---------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (%) (b) (c) ............................................................ (22.58) 9.25**
Ratios and Supplemental Data
Net assets, end of period ($ millions) .............................................. 27 23
Ratio of operating expenses, net to average daily net assets (%) .................... 1.75 1.75*
Ratio of operating expenses before expense reductions, to average daily net
assets (%) ........................................................................ 2.17 3.52*
Ratio of net investment gain (loss) to average daily net assets (%) ................. (1.38) (1.27)*
Portfolio turnover rate (%) ......................................................... 119.8 92.0*
</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
18 - Scudder 21st Century Growth Fund
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder 21st Century Growth Fund Century Growth Fund Century Growth Fund 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 Stock Market, Inc.
("Nasdaq"), for which there have been sales, are valued at the most recent sale
price reported on Nasdaq. If there are no such sales, the value is the high or
"inside" bid quotation. Securities which are not quoted on Nasdaq 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.
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, as amended, 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, 1998, the Fund had a net tax
basis capital loss carryforward of approximately $554,000, which may be applied
against any realized net taxable gains of each succeeding year until fully
utilized or until August 31, 2005, ($7,000) and August 31, 2006 ($547,000), the
respective expiration dates, whichever occur first. In addition, from August 31,
1997 through August 31, 1998, the Fund incurred approximately $683,000 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, 1999.
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 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.
19 - Scudder 21st Century Growth Fund
<PAGE>
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. These
differences primarily relate to net investment losses incurred by the Fund. 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 year ended August 31, 1998, purchases and sales of investment securities
(excluding short-term investments) aggregated $46,724,351 and $36,369,360,
respectively.
C. Related Parties
Effective December 31, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") and The
Zurich Insurance Company ("Zurich"), an international insurance and financial
services organization, formed a new global investment organization by combining
Scudder's business with that of Zurich's subsidiary, Zurich Kemper Investments,
Inc. As a result of the transaction, Scudder changed its name to Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"). The transaction between
Scudder and Zurich resulted in the termination of the Fund's Investment
Management Agreement with Scudder. However, a new Investment Management
Agreement (the "Management Agreement") between the Fund and Scudder Kemper was
approved by the Fund's Board of Directors and by the Fund's Shareholders. The
Management Agreement, which is effective December 31, 1997, is the same in all
material respects as the corresponding previous Investment Management Agreement,
except that Scudder Kemper is the new investment adviser to the Fund.
Under the Management Agreement with Scudder Kemper, 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 Management Agreement. The Adviser has agreed not to impose all or a
portion of the Fund's management fee until December 31, 1998 in order to
maintain the annualized expenses of the Fund at not more than 1.75% of average
daily net assets. For the year ended August 31, 1998, the Adviser did not impose
a portion of its management fee amounting to $136,802 and the amount imposed
amounted to $187,185, of which $13,814 was unpaid at August 31, 1998.
20 - Scudder 21st Century Growth Fund
<PAGE>
On September 7, 1998, Zurich Insurance Company ("Zurich"), majority owner of the
adviser, entered into an agreement with B.A.T Industries p.l.c. ("B.A.T")
pursuant to which the financial services businesses of B.A.T were combined with
Zurich's businesses to form a new global insurance and financial services
company known as Zurich Financial Services. Upon consummation of the
transaction, the Fund's investment management agreement with Scudder Kemper was
deemed to have been assigned and, therefore, terminated. The Board of Trustees
of the Fund have approved a new investment management agreement with Scudder
Kemper, which is substantially identical to the former investment management
agreement, except for the dates of execution and termination. The Board of
Trustees of the Fund will seek shareholder approval of the new investment
management agreement through a proxy solicitation that is currently scheduled to
conclude in mid-December.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
year ended August 31, 1998, SSC imposed fees amounting to $109,029, of which
$9,660 was unpaid at August 31, 1998.
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 Fund 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. For the year ended August 31,
1998, the Special Servicing Agreement expense charged to the Fund amounted to
$53,609.
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 year ended August 31, 1998,
STC imposed fees amounting to $10,812, of which $3,299 was unpaid at August 31,
1998.
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 year ended
August 31, 1998, SFAC imposed fees amounting to $37,500, of which $3,125 was
unpaid at August 31, 1998.
The Fund pays each of its Trustees not affiliated with the Adviser an annual
retainer plus specified amounts for attended board and committee meetings. For
the year ended August 31, 1998, the Trustees' fees and expenses aggregated
$55,131.
21 - 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:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Scudder 21st Century Growth Fund
(the "Fund") at August 31, 1998, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods then ended, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at August 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
September 28, 1998
22 - Scudder 21st Century Growth Fund
<PAGE>
This Page
intentionally
left blank.
23 - Scudder 21st Century Growth Fund
<PAGE>
Officers and Trustees
Daniel Pierce*
President and Trustee
Paul Bancroft III
Trustee; Venture Capitalist and
Consultant
Sheryle J. Bolton
Trustee; Chief Executive Officer,
Scientific Learning Corporation
William T. Burgin
Trustee; General Partner,
Bessemer Venture Partners
Thomas J. Devine
Trustee; Consultant
Keith R. Fox
Trustee; Private Equity Investor
William H. Luers
Trustee; President, The
Metropolitan Museum of Art
Wilson Nolen
Trustee; Consultant
Kathryn L. Quirk*
Trustee, Vice President and
Assistant Secretary
Robert G. Stone, Jr.*
Honorary Trustee; Chairman
Emeritus and Director, Kirby
Corporation
Edmund R. Swanberg*
Honorary Trustee
Peter Chin*
Vice President
J. Brooks Dougherty*
Vice President
James M. Eysenbach*
Vice President
James E. Fenger*
Vice President
Philip S. Fortuna*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Roy C. McKay*
Vice President
Thaddeus Paluszek*
Vice President
Kimberly A. Purvis*
Vice President
Peter Taylor*
Vice President
Thomas F. McDonough*
Vice President, Secretary and
Treasurer
John R. Hebble*
Assistant Treasurer
Richard W. Desmond*
Assistant Secretary
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
24 - 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 Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment 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 Equity
- -------------
Worldwide
Scudder Global Fund
Scudder International Value Fund
Scudder International Growth and Income Fund
Scudder International Fund++
Scudder International Growth Fund
Scudder Global Discovery Fund***
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
Preferred Series
- ----------------
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small
Company Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal 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. ***Only the Scudder Shares of the Fund are part
of the Scudder Family of Funds. ++Only the International Shares of the Fund are
part of the Scudder Family of Funds. +++ +++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 Kemper Investments, Inc., are traded on the New York Stock Exchange and,
in some cases, on various other stock exchanges.
25 - 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 money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
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 previously designated.
Distributions Direct
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
- ------------------------------------------------------------------------------------------------------------------------------
26 - 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 8,000 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 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
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
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
</TABLE>
27 - Scudder 21st Century Growth Fund
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About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $230 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts. It is one of the ten largest mutual fund companies in the
United States.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 79
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Group. As a result, Zurich's subsidiary, Zurich Kemper Investments,
Inc., with 50 years of mutual fund and investment management experience, was
combined with Scudder. Headquartered in New York, Scudder Kemper Investments
offers a full range of investment counsel and asset management capabilities,
based on a combination of proprietary research and disciplined, long-term
investment strategies. With its global investment resources and perspective,
the firm seeks opportunities in markets throughout the world to meet the needs
of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Group. The Zurich Group is an internationally recognized leader in
financial services, including property/casualty and life insurance, reinsurance,
and asset management.
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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