Scudder
21st Century
Growth Fund
Semiannual Report
February 28, 1999
No-Load Funds
A no-load (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]
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Scudder 21st Century Growth Fund
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<S> <C> <C>
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Date of Inception: 9/9/96 Total Net Assets as of 2/28/99: $40.8 million Ticker Symbol: SCTGX
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o Small-cap stocks -- led by the technology sector -- rebounded from a difficult
period during the summer months to post outstanding performance, especially
during the fourth quarter of 1998.
o Scudder 21st Century Growth Fund posted an impressive 36.35% total return for
its most recent semiannual period ended February 28, 1999, outpacing the 29.29%
return of the Russell 2000 Growth Index over the same period.
o The Fund benefited from the strong performance of Internet advertising and
infrastructure stocks as well as information technology stocks during the
period.
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 Shareholder Meeting Results
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
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Letter from the Fund's President
Dear Shareholders,
Although a tight circle of large capitalization growth stocks has generally
led market performance during the six months ended February 28, 1999, Scudder
21st Century Growth performed strongly. The Fund posted an impressive 36.35%
return over its most recent semiannual period, outpacing the 29.29% return of
the Russell 2000 Growth Index. The Fund benefited from investor excitement over
small high technology firms that are paving the way to the next century,
especially those dealing with Internet advertising and infrastructure, and
information technology. As portfolio team members Peter Chin and Roy McKay state
in the interview that begins on page 29, we are hopeful that small companies
will be rewarded going forward for their above-average earnings growth as they
have been over many past periods.
For those of you who are interested in new Scudder products, we are pleased
to introduce Scudder Select 500 Fund and Scudder Select 1000 Growth Fund. Both
funds are managed with the goal of providing long term outperformance compared
to their benchmark indices, the S&P 500 Index and the Russell 1000 Growth Index,
respectively. For more information on either Select fund, please call us at the
number below.
If you have any questions regarding Scudder 21st Century Growth Fund or any
other Scudder fund, please call Investor Relations at 1-800-225-2470. Or visit
Scudder's Web site at www.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder 21st Century Growth Fund
3 - Scudder 21st Century Growth Fund
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Performance Update as of February 28, 1999
Fund Index Comparison
Total Return
---------------------------------------------
Period Ended Growth of Cumulative Average
2/28/1999 $10,000 Annual
---------------------------------------------
Scudder 21st Century Growth Fund
---------------------------------------------
1 Year $ 9,638 -3.62% -3.62%
Life of Fund* $ 11,533 15.33% 5.96%
---------------------------------------------
Russell 2000 Growth Index
---------------------------------------------
1 Year $ 8,950 -10.50% -10.50%
Life of Fund* $ 10,884 8.84% 3.57%
---------------------------------------------
* The Fund commenced operations on September 9, 1996.
Index comparisons begin September 30, 1996.
Growth of a $10,000 Investment
=========================================
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
CHART DATA:
Scudder 21st Russell 2000
Century Growth Fund Growth Index
-------------------- -------------
9/96* 10000 10000
11/96 9444 9835
2/97 8778 9657
5/97 9302 10204
8/97 10405 11423
11/97 10119 11317
2/98 11397 12160
5/98 11175 11820
8/98 8056 8418
11/98 9833 10512
2/99 10984 10884
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
=========================================
Yearly Periods Ended February 28
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE FUND TOTAL RETURN (%) AND
INDEX TOTAL RETURN (%)
CHART DATA:
1997* 1998 1999
- -----------------------------------------------------------------
Net Asset Value $ 11.06 $ 14.36 $ 13.84
- -----------------------------------------------------------------
Income Dividends $ -- $ -- $ --
- -----------------------------------------------------------------
Capital Gains Distributions $ -- $ -- $ --
- -----------------------------------------------------------------
Fund Total Return (%) -7.83 29.84 -3.62
- -----------------------------------------------------------------
Index Total Return (%) -3.43 25.92 -10.50
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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
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Portfolio Summary as of February 28, 1999
Asset Allocation
=========================================
THE PRINTED DOCUMENT CONTAINS A PIE CHART HERE:
PIE CHART DATA:
Equity Holdings 93%
Cash Equivalents 7%
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100%
======================================
The Fund increased its cash position last September and purchased stocks
aggressively in early October in advance of the fourth quarter upturn in small
cap growth stocks.
Sector Diversification
(Excludes 7% Cash Equivalents)
=========================================
THE PRINTED DOCUMENT CONTAINS A PIE CHART HERE:
PIE CHART DATA:
Technology 33%
Service Industries 16%
Health 16%
Consumer Discretionary 12%
Financial 6%
Media 5%
Communications 3%
Transportation 3%
Consumer Staples 2%
Other 4%
--------------------------------------
100%
======================================
In the Internet area, the Fund's approach has been to identify growing
companies that focus on Web advertising and infrastructure.
Ten Largest Equity Holdings
(26% of Portfolio)
=========================================
1. Xylan Corp.
Producer of switching systems for
local area networks
2. Vitesse Semiconductor Corp.
Manufacturer of digital
integrated circuits
3. Pinnacle Systems, Inc.
Manufacturer of video
post-production workstations
4. VISX Inc.
Developer of laser technologies
and systems for vision correction
5. DoubleClick, Inc.
Internet advertising network
6. Mercury Interactive Corp.
Producer of automated software
testing tools
7. Digital River, Inc.
Provider of comprehensive
electronic commerce outsourcing
solutions to software publishers
and online retailers
8. Realty Information Group Inc.
Provider of building-specific information
to the U.S. commercial real estate industry
9. ITT Educational Services, Inc.
Provider of technology-oriented
postsecondary degree programs
10. CyroLife, Inc.
Cyropreservation of viable human tissue for transplants
Top holdings include the stocks of small companies positioned to be leaders
in industries of the future.
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
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Portfolio Management Discussion
In the following interview, Peter Chin and Roy McKay, portfolio managers of
Scudder 21st Century Growth Fund, discuss the Fund's market environment and
strategy for the six-month period ended February 28, 1999, as well as their
outlook for the coming months.
Q: How did Scudder 21st Century Growth Fund perform over the past six months?
A: Following a difficult period last summer, the Fund made a strong comeback,
posting a 36.35% total return over the six months ended February 28. Over the
same period, the return of the Fund's benchmark, the Russell 2000 Growth Index,
was 29.29%.
Q: In recent months the investment environment has seemed to favor large
capitalization stocks. Can you characterize the environment for small-cap growth
stocks over the period?
A: The environment for small growth stocks had not been positive for most of
1998, but it turned around during the fourth quarter. In 1999, the overall
performance of these stocks has been mixed. Despite some volatile periods, the
Fund performed well, primarily because we hitched onto some outstanding
performers and avoided most of the potential bumps. Timing was also in our
favor: We built up the Fund's cash position in September and bought stocks
aggressively in early October in advance of the fourth quarter upturn. The
Fund's performance has been particularly impressive in the first two months of
1999 given the continuing difficult environment for small capitalization growth
issues.
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART TITLE:
Small Cap Valuations Attractive Relative to
Large Caps
P/E ratios of small cap stocks as percent of large cap
stock P/Es (based on unmanaged Saloman Smith Barney
Emerging Growth Index versus S&P 500 Index)
LINE CHART DATA:
12/88 1.55
1.50
1.34
1.33
12/90 1.26
1.33
1.32
1.18
12/92 1.24
1.42
1.51
1.35
12/94 1.62
1.69
1.78
1.64
12/96 1.43
1.27
1.22
1.07
12/98 1.03
2/99 0.89
Source: Salomon Smith Barney; SKI\QS
Small cap stocks are currently trading at P/Es below those of large cap stocks.
Q: Please describe the Fund's strategy in general terms.
A: Our ongoing strategy is to look for companies that are unique, those that
have a leadership position in the marketplace, and those companies that appear
to be moving into a leadership position by posting significant market share
gains. A framework of the Fund's strategy is to identify emerging trends in the
corporate environment and capitalize on those trends by investing in companies
early.
6 - Scudder 21st Century Growth Fund
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Q: Have there been examples of this that you can identify over the past six
months?
A: The most obvious example is the Internet area -- that's the most rapidly
growing trend we've witnessed of late. The question is, how do you approach
Internet stocks? Our approach has been to identify companies that focus on
Internet advertising and Internet infrastructure, rather than companies that
provide content for the Web.
Advertising represents a large portion of the total revenue going to all the
Internet companies. And we think we have the leader in the Internet advertising
arena with DoubleClick, Inc. (the Fund's fifth largest holding at 2.3% of
assets). DoubleClick has a sophisticated system that allows companies that
advertise on the Internet to focus very specifically on certain types of
consumers. They are able to combine all the traditional consumer demographic
data with an individual's behavior as an online user, and report that data back
to an advertiser, such as a car company. Over the period, DoubleClick rose from
$23 7/8 at the end of August to $89 7/8 at the end of February.
In terms of Internet infrastructure, there's Digital River (2.2% of assets, the
Fund's seventh largest holding), which provides comprehensive electronic
commerce resources for companies that market software. Most of these companies
don't want to incur the expense of marketing software through their own Web
sites, so many of them are outsourcing through Digital River. The company just
signed up Wal-Mart as a customer a few weeks ago; they have a whole host of
companies coming to them.
We purchased Digital River at a cost of $8. We sold approximately one half of
our position when it reached $50. That certainly helped the Fund's performance.
Q: What other issues performed well for the Fund?
A: Sapient is probably a good one to mention. The company -- in the business of
information technology ("IT") -- is benefiting from the outsourcing that
corporations are now doing for IT projects. IT is changing so rapidly that most
corporations can't keep pace with new software, new technology, and new hardware
coming out, so more and more they tend to outsource their IT projects. Sapient
has benefited from this but they've also made some Internet-related acquisitions
and beefed up their Internet expertise, so their stock rode the recent updraft
of Internet buying.
Another successful holding was PMC-Sierra, a company that provides
semiconductors primarily for the communications business. We had a 1.4% position
at the end of August, when the stock was priced at $30 9/16. As of the end of
February the stock was $70 7/8. PMC-Sierra's business is booming, based on the
need for increased signal capacity, more bandwidth, and more speed for Internet
users.
Q: What about stocks that detracted from the Fund's performance?
A: There were some. Computer Horizons is another company in the IT services
business. But a significant part of their business is related to Y2K projects.
It became more and more evident that after Y2K the growth rate of the business
7 - Scudder 21st Century Growth Fund
<PAGE>
was suspect. The stock's price declined from $23 3/8 to $15 over the period.
Another issue that underperformed was RIT Technology -- a company that was
negatively affected by the economic downturns in Russia and Brazil. Demand from
RIT's customers in those countries for a key product that helps to evaluate
cabling infrastructure is expected to decline precipitously.
Q: What is your outlook for Scudder 21st Century Growth Fund and its sector of
the market?
A: Our long-term outlook is extremely positive because the companies we're
investing in are exciting companies. They're doing new and great things and
they're growing like weeds. Of course, as young companies they typically are
less proven than the big cap companies and are more prone to volatility. Many
are not covered as closely by Wall Street and are less liquid. So
disappointments can have a dramatic impact on the stock. But the same holds true
on the positive side: When these companies post good results their upside can be
very strong.
Q: How much does the outlook for the U.S. economy factor into your outlook for
the Fund?
A: Most of our companies are niche-oriented, and their businesses are very new.
As a result, they tend to be less vulnerable to the economic cycle. Of course,
if there's a major economic downturn nobody escapes. But because these companies
are offering relatively new services and products, they tend to be less subject
to small downdrafts in the economy. When the earnings growth of large companies
declines -- as has happened recently -- these smaller companies often continue
to do well. Historically, when the relative earnings gap between small and
large-cap firms (i.e., the amount by which small-cap earnings growth exceeds
that for large caps) widens, small-cap stocks often outperform. The last example
of this was back in the early 1990s. In recent years, though, small stock
performance hasn't improved when the earnings growth margin over large caps
widened.
Another uncertainty is the direction of interest rates. As long as inflation
remains in check and interest rates remain stable, your Fund should continue to
perform well. A rising rate environment would be detrimental to most growth
stocks as well as to the market overall. However, Scudder Kemper is not
expecting this to happen in the near future.
While the exact timing is difficult or impossible to predict, we expect the
market to eventually recognize the superior growth potential of small companies.
We believe the Fund continues to be an appropriate vehicle for investors seeking
exposure to this dynamic segment of the economy.
8 - Scudder 21st Century Growth Fund
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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 (P/E) A widely used gauge of a stock's
(also "earnings multiple") valuation that indicates what investors
are paying for a company's 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
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Investment Portfolio as of February 28, 1999 (Unaudited)
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<CAPTION>
Principal Market
Amount ($) Value ($)
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Repurchase Agreements 7.4%
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Repurchase Agreement with State Street Bank and Trust Company dated 2/26/1999 at 4.74%, to be
repurchased at $3,071,213 on 3/1/1999, collateralized by a $3,235,000 U.S. Treasury Note, -----------
3.625%, 1/15/2007 (Cost $3,070,000) ................................................... 3,070,000 3,070,000
-----------
Shares
- ------------------------------------------------------------------------------------------------------------------------------
Common Stocks 92.6%
- ------------------------------------------------------------------------------------------------------------------------------
Consumer Discretionary 10.9%
Department & Chain Stores 2.9%
Pacific Sunwear of California* (Operator of a nation-wide mall-based specialty
retail chain) ...................................................................... 17,000 484,500
Rent-A-Center, Inc.* (Owner and operator of rent-to-own stores and franchises) .......... 27,600 700,350
-----------
1,184,850
-----------
Hotels & Casinos 0.9%
Cavanaughs Hospitality Corp.* (Developer and owner of full service hotels) .............. 43,200 353,700
-----------
Recreational Products 0.4%
Family Golf Centers, Inc.* (Operator of golf-related recreational facilities) ........... 30,450 181,748
-----------
Restaurants 3.5%
Dave & Buster's, Inc.* (Operator of restaurant/entertainment complexes) ................. 19,200 378,000
Il Fornaio America Corp.* (Restaurant chain) ............................................ 29,200 240,900
The Cheesecake Factory Incorporated* (Operator of casual dining restaurants) ............ 39,900 817,950
-----------
1,436,850
-----------
Specialty Retail 3.2%
Party City Corporation* (Provider of party supplies through company-owned and
franchised stores) .................................................................... 58,500 639,844
Wilmar Industries, Inc.* (National distributor of repair and maintenance products for the
apartment housing market) ............................................................. 38,900 680,750
-----------
1,320,594
-----------
Consumer Staples 1.9%
Farming 0.6%
Hines Horticulture, Inc.* (Operator of commercial nurseries) ............................ 26,000 258,375
-----------
Food & Beverage 1.3%
Horizon Organic Holding Corp.* (Producer and marketer of organic dairy products) ........ 35,000 542,500
-----------
Health 14.8%
Biotechnology 2.8%
CryoLife, Inc.* (Cryopreservation of viable human tissue for transplants) ............... 81,100 851,550
Hyseq, Inc.* (Developer of gene-based therapeutic and diagnostic products) .............. 28,200 125,138
The accompanying notes are an integral part of the financial statements.
10 - Scudder 21st Century Growth Fund
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Market
Shares Value ($)
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Vysis, Inc.* (Developer of genetic disease evaluation products) ......................... 39,800 189,050
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1,165,738
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Health Industry Services 1.4%
MEDE AMERICA Corp.* (Provider of electronic interchange products and services to the
healthcare industry) .................................................................. 23,600 404,150
PAREXEL International Corporation* (Provider of outsourcing services to the worldwide
pharmaceutical, biotechnology and medical device industries) .......................... 7,500 156,094
-----------
560,244
-----------
Hospital Management 1.1%
Sunrise Assisted Living, Inc.* (Provider of assisted living to the elderly) ............. 11,900 459,638
-----------
Medical Supply & Specialty 6.0%
Focal, Inc.* (Manufacturer of synthetic liquid surgical sealants) ....................... 28,100 281,000
Fusion Medical Technologies, Inc.* (Developer of surgical sealants for the treatment of
surgical wounds) ...................................................................... 48,800 292,800
Novoste Corp.* (Developer of a beta radiation catheter delivery system) ................. 15,600 399,750
Perclose, Inc.* (Developer and producer of minimally invasive single-use systems to close
arterial access sites surgically) ..................................................... 10,300 435,175
VISX Inc.* (Developer of laser technologies and systems for vision correction) .......... 17,200 1,062,100
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2,470,825
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Pharmaceuticals 3.5%
Alexion Pharmaceuticals, Inc.* (Developer of immunoregulatory compounds) ................ 30,700 356,888
Coulter Pharmaceutical, Inc.* (Developer of drugs and therapies for treatment of cancer). 26,400 537,900
Sepracor, Inc.* (Developer of enhanced forms of existing pharmaceuticals) ............... 4,400 548,900
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1,443,688
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Communications 2.9%
Cellular Telephones 1.0%
Research in Motion Ltd.* (Manufacturer and marketer of radio modem technology for a wide
variety of access devices in the wireless communications services) .................... 46,000 408,672
-----------
Miscellaneous 1.9%
Terayon Communication Systems, Inc.* (Developer and seller of cable modem systems that enable
cable operators to deploy two-way broadband access services) .......................... 25,900 804,519
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Financial 6.0%
Banks 1.8%
Astoria Financial Corp. (Holding company specializing in single-family residential
mortgage lending) ..................................................................... 16,600 752,188
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The accompanying notes are an integral part of the financial statements.
11 - Scudder 21st Century Growth Fund
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Market
Shares Value ($)
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Insurance 2.1%
ESG Re Ltd. (Accident, health, life and special risk reinsurance) ....................... 28,900 489,494
Stirling Cooke Brown Holdings Ltd. (Provider of risk management services and products) .. 27,400 366,475
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855,969
-----------
Real Estate 2.1%
Realty Information Group Inc.* (Provider of building-specific information to the U.S.
commercial real estate industry) ...................................................... 43,900 869,769
-----------
Media 4.7%
Advertising
DoubleClick,Inc.* (Internet advertising network) ........................................ 10,400 934,700
Network Event Theater, Inc.* (Marketer of media to college campuses) .................... 24,700 421,444
Speedway Motorsports, Inc.* (Marketer and promoter of motorsports entertainment) ........ 16,100 574,569
-----------
1,930,713
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Service Industries 14.5%
EDP Services 3.5%
Complete Business Solutions, Inc.* (Provider of information technology services
to organizations) ..................................................................... 14,000 395,500
Computer Horizons Corp.* (Provider of diversified information technology services and
solutions) ............................................................................ 1,150 17,172
Pegasus Systems, Inc.* (Provider of global electronic commerce and transaction processing
solutions to diverse businesses) ...................................................... 15,100 566,250
Sapient Corp.* (Producer of flexible information technology applications) ............... 7,000 468,125
-----------
1,447,047
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Miscellaneous Commercial Services 8.9%
Cornell Corrections, Inc.* (Developer and operator of correctional, detention and
pre-release facilities) ............................................................... 28,500 470,250
Digital River, Inc.* (Provider of comprehensive electronic commerce outsourcing solutions to
software publishers and online retailers) ............................................. 24,200 931,700
Eagle USA Airfreight, Inc.* (Provider of airfreight forwarding services) ................ 27,100 782,513
Korn/Ferry International* (A global executive search firm) .............................. 27,300 310,538
Modis Professional Services, Inc.* (Provider of business services including consulting,
outsourcing, outplacement, training and strategic staffing) ........................... 35,400 484,538
Wackenhut Corrections Corp.* (Manager of privatized correctional and detention
facilities) ........................................................................... 32,900 703,238
-----------
3,682,777
-----------
Miscellaneous Consumer Services 2.1%
ITT Educational Services, Inc.* (Provider of technology-oriented postsecondary degree
programs) ............................................................................. 23,800 867,213
-----------
Manufacturing 1.1%
Chemicals
Albany Molecular Research, Inc.* (An integrated chemistry outsourcing company) .......... 23,100 462,000
-----------
The accompanying notes are an integral part of the financial statements.
12 - Scudder 21st Century Growth Fund
<PAGE>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Technology 30.6%
Computer Software 9.0%
Advent Software, Inc.* (Provider of stand-alone and client/server software products) .... 16,600 765,675
CBT Group PLC (ADR)* (Provider of interactive education software) ....................... 50,700 808,031
Entrust Technologies, Inc.* (Developer and seller of products and services that allow
enterprises to secure electronic communications and transactions over the networks) ... 20,000 492,500
HNC Software, Inc.* (Developer, marketer and supporter of client-server software solutions
for mission-critical decision applications) ........................................... 15,200 408,500
MAPICS, Inc.* (Supplier and servicer of business planning and control applications) ..... 38,600 417,363
pcOrder.com, Inc.* (Provider of Internet-based electronic commerce solutions) ........... 3,300 155,513
TSI International Software Ltd.* (Provider of software and related services to
businesses) ........................................................................... 10,200 511,913
VerticalNet, Inc.* (Creator and operator of vertical trade communities, which are targeted to
business-to-business communities of commerce on the internet) ......................... 3,500 144,375
-----------
3,703,870
-----------
Diverse Electronic Products 5.4%
InterVU, Inc.* (Provider of Internet video delivery products) ........................... 34,400 705,200
Xylan Corp.* (Producer of switching systems for local area networks) .................... 58,100 1,539,650
-----------
2,244,850
-----------
EDP Peripherals 4.3%
Mercury Interactive Corp.* (Producer of automated software testing tools) ............... 14,400 933,300
Network Appliance, Inc.* (Designer and manufacturer of network data storage devices) .... 20,200 848,400
-----------
1,781,700
-----------
Electronic Components/Distributors 1.7%
Daisytek International Corp.* (Wholesale distributor of computer and office
automation supplies) .................................................................. 37,300 711,031
-----------
Electronic Data Processing 0.8%
Veeco Instruments, Inc.* (Manufacturer of data storage systems) ......................... 9,100 348,075
-----------
Office/Plant Automation 4.5%
Mercury Computer Systems, Inc.* (Manufacturer of digital signal processing
computer systems) ..................................................................... 28,600 564,850
Pinnacle Systems, Inc.* (Manufacturer of video post-production workstations) ............ 35,600 1,274,925
-----------
1,839,775
-----------
Semiconductors 4.9%
PMC-Sierra, Inc.* (Producer of high speed internetworking component solutions) .......... 9,800 694,575
Vitesse Semiconductor Corp.* (Manufacturer of digital integrated circuits) .............. 29,100 1,336,781
-----------
2,031,356
-----------
The accompanying notes are an integral part of the financial statements.
13 - Scudder 21st Century Growth Fund
<PAGE>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Energy 1.8%
Oil & Gas Production 1.2%
Key Production Co., Inc.* (Oil and gas production) ...................................... 30,300 195,056
Swift Energy Co.* (Oil and gas exploration and production) ............................. 49,600 297,600
-----------
492,656
-----------
Oilfield Services/Equipment 0.6%
National-Oilwell, Inc.* (Manufacturer of oil and gas drilling equipment) ................ 28,400 252,050
-----------
Construction 0.9%
Building Materials
Simpson Manufacturing Co., Inc.* (Manufacturer of wood-to-wood, wood-to-concrete and
wood-to-masonry connectors) ........................................................... 10,400 368,550
-----------
Transportation 2.5%
Airlines 1.6%
America West Holdings Corp. "B"* (Passenger airline) .................................... 39,700 674,900
-----------
Miscellaneous 0.9%
United Road Services, Inc.* (Motor vehicle towing and transport services) ............... 22,100 364,650
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $34,430,982) 38,273,080
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $37,500,982) (a) 41,343,080
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) The cost for federal income tax purposes was $37,567,781. At February 28,
1999, net unrealized appreciation for all securities based on tax cost was
$3,775,299. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $7,348,617 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$3,573,318.
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 February 28, 1999 (Unaudited)
<TABLE>
<CAPTION>
Assets
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investments, at market (identified cost $37,500,982) .................. $ 41,343,080
Cash .................................................................. 973
Receivable for investments sold ....................................... 94,366
Receivable for Fund shares sold ....................................... 77,795
Dividends and interest receivable ..................................... 5,197
Deferred organization expenses ........................................ 11,007
Other assets .......................................................... 498
----------------
Total assets 41,532,916
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ..................................... 618,734
Payable for Fund shares redeemed ...................................... 7,178
Other payables and accrued expenses ................................... 62,966
----------------
Total liabilities 688,878
----------------------------------------------------------------------------------------
Net assets, at market value $ 40,844,038
----------------------------------------------------------------------------------------
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income (loss) ............................ (236,121)
Net unrealized appreciation (depreciation) on investments ............. 3,842,098
Accumulated net realized gain (loss) .................................. 705,866
Paid-in capital ....................................................... 36,532,195
----------------------------------------------------------------------------------------
Net assets, at market value $ 40,844,038
----------------------------------------------------------------------------------------
Net Asset Value
- -----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share ($40,844,038 /
2,950,312 outstanding shares of beneficial interest, $.01 par value, -----------
unlimited number of shares authorized) ............................. $13.84
-----------
The accompanying notes are an integral part of the financial statements.
15 - Scudder 21st Century Growth Fund
<PAGE>
Statement of Operations
for the six months ended February 28, 1999 (Unaudited)
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------
Income:
Dividends ............................................................. $ 13,593
Interest .............................................................. 54,354
----------------
67,947
Expenses:
Management fee ........................................................ 173,753
Services to shareholders .............................................. 183,168
Custodian and accounting fees ......................................... 24,597
Trustees' fees and expenses ........................................... 22,183
Auditing .............................................................. 13,584
Registration fees ..................................................... 9,701
Reports to shareholders ............................................... 7,934
Legal ................................................................. 4,151
Amortization of organization expense .................................. 2,156
Other ................................................................. 2,250
----------------
Total expenses before reductions ...................................... 443,477
Expense reductions .................................................... (139,409)
----------------
Expenses, net ......................................................... 304,068
-----------------------------------------------------------------------------------------
Net investment gain (loss) (236,121)
-----------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- -----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from investments ............................. 2,349,392
Net unrealized appreciation (depreciation) during the period on
investments ........................................................... 7,987,243
-----------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 10,336,635
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 10,100,514
-----------------------------------------------------------------------------------------
</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>
Six Months
Ended February Year Ended
28, 1999 August 31,
Increase (Decrease) in Net Assets (Unaudited) 1998
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment gain (loss) ............................. $ (236,121) $ (448,014)
Net realized gain (loss) from investment transactions .. 2,349,392 (75,261)
Net unrealized appreciation (depreciation) on
investment transactions during the period .............. 7,987,243 (8,260,290)
---------------- ----------------
Net increase (decrease) in net assets resulting from
operations ............................................. 10,100,514 (8,783,565)
---------------- ----------------
Fund share transactions:
Proceeds from shares sold .............................. 9,831,897 21,758,221
Cost of shares redeemed ................................ (6,032,807) (9,368,423)
Redemption fees ........................................ 19,430 22,595
---------------- ----------------
Net increase (decrease) in net assets from Fund share
transactions ........................................... 3,818,520 12,412,393
---------------- ----------------
Increase (decrease) in net assets ...................... 13,919,034 3,628,828
Net assets at beginning of period ...................... 26,925,004 23,296,176
Net assets at end of period (including undistributed ---------------- ----------------
net investment loss of $236,121 ........................ $ 40,844,038 $ 26,925,004
---------------- ----------------
Other Information
- -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period .............. 2,653,082 1,776,347
---------------- ----------------
Shares sold ............................................ 766,805 1,580,844
Shares redeemed ........................................ (469,575) (704,109)
---------------- ----------------
Net increase (decrease) in Fund shares ................. 297,230 876,735
---------------- ----------------
Shares outstanding at end of period .................... 2,950,312 2,653,082
---------------- ----------------
</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
Six Months September 9,
Ended 1996
February 28, Year Ended (commencement
1999 August 31, of operations) to
(Unaudited) 1998 August 31, 1997
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
--------------------------------------------------
Net asset value, beginning of period ..................................... $10.15 $13.11 $12.00
--------------------------------------------------
Income from investment operations:
Net investment gain (loss) ............................................... (.08) (.19) (.15)
Net realized and unrealized gain on investments .......................... 3.76 (2.78) 1.25
--------------------------------------------------
Total from investment operations ......................................... 3.68 (2.97) 1.10
--------------------------------------------------
Redemption fees .......................................................... .01 .01 .01
--------------------------------------------------
Net asset value, end of period ........................................... $13.84 $10.15 $13.11
--------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Total Return (%) (b) (c) ................................................. 36.35** (22.58) 9.25**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ................................... 41 27 23
Ratio of operating expenses, net to average daily net assets (%) ......... 1.75* 1.75 1.75*
Ratio of operating expenses before expense reductions, to average daily .. 2.55* 2.17 3.52*
net assets (%)
Ratio of net investment gain (loss) to average daily net assets (%) ...... (1.36)* (1.38) (1.27)*
Portfolio turnover rate (%) .............................................. 169.7* 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 (Unaudited)
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 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 most
recent 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 is equal to at least the repurchase price.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code of 1986, 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 six months ended February 28, 1999, purchases and sales of investment
securities (excluding short-term investments) aggregated $31,084,280 and
$28,212,611, respectively.
C. Related Parties
Under the Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. ("Scudder Kemper" or 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 November 30, 1999 in order to maintain the
annualized expenses of the Fund at not more than 1.75% of average daily net
assets. For the six months ended February 28, 1999, the Adviser did not impose a
portion of its management fee amounting to $139,409 and the amount imposed
amounted to $34,344.
Effective 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 Management Agreement with Scudder Kemper was deemed to
have been assigned and, therefore, terminated. In December 1998, the Board of
Trustees and the shareholders of the Fund approved a new investment management
agreement with Scudder Kemper, which is substantially identical to the former
Management Agreement, except for the dates of execution and termination.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
six months ended February 28, 1999, SSC imposed fees amounting to $64,146, of
which $10,193 was unpaid at February 28, 1999.
20 - Scudder 21st Century Growth Fund
<PAGE>
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 six months ended February
28, 1999, STC imposed fees amounting to $16,309, of which $2,886 was unpaid at
February 28, 1999.
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 six months
ended February 28, 1999, SFAC imposed fees amounting to $18,750, of which $6,250
was unpaid at February 28, 1999.
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 six months ended
February 28, 1999, the Special Servicing Agreement expense charged to the Fund
amounted to $88,797.
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 six months ended February 28, 1999, the Trustees' fees and expenses
aggregated $22,183.
D. Line of Credit
The Fund and several Scudder Funds (the "Participants") share in a $850 million
revolving credit facility for temporary or emergency purposes, including the
meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated among each of the Participants. Interest is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up to a
maximum of 33 percent of its net assets under the agreement.
21 - Scudder 21st Century Growth Fund
<PAGE>
Shareholder Meeting Results
A Special Meeting of Shareholders (the "Meeting") of Scudder 21st Century Growth
Fund (the "Fund") was held on December 15, 1998, at the office of Scudder Kemper
Investments, Inc., Two International Place, Boston, Massachusetts 02110. At the
Meeting the following matters were voted upon by the shareholders (the resulting
votes for each matter are presented below).
1. To approve a new Investment Management Agreement for the Fund with Scudder
Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
1,867,732 37,953 42,329 0
2. To approve the revision of the Fund's fundamental lending policy.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
1,791,230 52,286 49,145 55,354
- --------------------------------------------------------------------------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary
power to vote on a particular matter.
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
Keith R. Fox
Trustee; Private Equity Investor
William H. Luers
Trustee; Chairman and President, U.N. Association of the U.S.A.
Kathryn L. Quirk*
Trustee, Vice President and Assistant Secretary
Joan Spero
Trustee; President, Doris Duke Charitable Foundation
Thomas J. Devine
Honorary Trustee; Consultant
Wilson Nolen
Honorary Trustee; Consultant
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
Thomas W. Joseph*
Vice President
Ann M. McCreary*
Vice President
Thaddeus Paluszek*
Vice President
Kurt R. Stalzer*
Vice President
Peter Taylor*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Richard W. Desmond*
Assistant Secretary
John R. Hebble*
Treasurer
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 --
Prime Reserve Shares*
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 Corporate Bond Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway 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
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
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.
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. +++ +++ +++A no-load variable
annuity contract issued by Glenbrook Life and Annuity Company and underwritten
by Allstate Financial Services, Inc., sold 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 -- www.scudder.com
1-800-343-2890
Personal Investment Organizer: 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
800 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
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $280 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts.
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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