SCUDDER
INVESTMENTS (SM)
[LOG]
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EQUITY/DOMESTIC
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Scudder 21st Century Growth Fund
Fund #050
Semiannual Report
January 31, 2000
For investors seeking long-term growth of capital by investing primarily in
common stocks of emerging growth companies poised to be leaders in the 21st
century.
A no-load fund with no commissions to buy, sell, or exchange shares.
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Contents
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4 Letter from the Fund's President
6 Performance Update
8 Portfolio Summary
10 Portfolio Management Discussion
13 Glossary of Investment Terms
15 Investment Portfolio
22 Financial Statements
25 Financial Highlights
26 Notes to Financial Statements
31 Officers and Trustees
32 Investment Products and Services
34 Scudder Solutions
2
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Scudder 21st Century Growth Fund
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ticker symbol SCTGX fund number 050
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Date of o Scudder 21st Century Growth Fund's total return was
Inception: 58.36% for the six months ended January 31, 2000, while
9/9/96 its benchmark, the unmanaged Russell 2000 Growth Index,
returned 29.66%.
Total Net
Assets as of o The fund benefited from the strong outperformance of
1/31/00: small-cap growth stocks relative to large-cap growth
$215million stocks.
o Several holdings in the technology, services, and
biotechnology sectors performed well for the fund.
3
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Letter from the Fund's President
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Dear Shareholders,
Thanks largely to technology companies, small-cap growth stocks were very strong
performers during the past six months, and your fund's performance was even
better. For the six months ended January 31, 2000, Scudder 21st Century Growth
Fund's total return was 58.36%, while its benchmark, the Russell 2000 Growth
Index, returned 29.66%.
As noted in the interview that begins on page 8, small-cap growth company stocks
- -- particularly those of technology and "dot-com" companies -- have continued to
outperform large-cap stocks. Many of these companies are closely tied to the
rapid expansion of the Internet, particularly business-to- business e-commerce,
which is growing even faster than business-to-consumer Internet retailing. We
believe this segment of the Internet business offers tremendous potential for
companies to cut costs.
In addition, a number of service-oriented companies in such businesses as
executive recruiting, legal information, and travel continue to benefit from the
expanding economy. Although there is added risk in small-company growth stocks,
I believe the fund's recent performance illustrates the enormous potential that
can come from a diversified portfolio of well managed, fundamentally sound small
growth companies.
4
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If you have any questions regarding Scudder 21st Century Growth Fund or any
other Scudder fund, please call Investor Relations at 1-800-SCUDDER
(1-800-728-3337). Or visit Scudder's Web site at www.scudder.com.
Sincerely,
/s/Lynn S. Birdsong
Lynn S. Birdsong
President,
Scudder 21st Century Growth Fund
5
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Performance Update
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January 31, 2000
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Growth of a $10,000 Investment
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THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
Scudder 21st Century Growth Fund Russell 2000 Growth Index*
9/96** 10000 10000
1/97 9412 10277
7/97 10214 11090
1/98 10063 11173
7/98 10508 10944
1/99 12087 11980
7/99 14675 12534
1/00 23238 16252
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Fund Index Comparison
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Total Return
Growth of Average
Period ended 1/31/2000 $10,000 Cumulative Annual
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Scudder 21st Century Growth Fund
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1 year $ 19,226 92.26% 92.26%
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Life of Fund** $ 24,401 144.01% 30.05%
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Russell 2000 Growth Index*
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1 year $ 13,566 35.66% 35.66%
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Life of Fund** $ 16,252 62.52% 15.66%
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* 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.
** The Fund commenced operations on September 9, 1996. Index comparisons begin
September 30, 1996.
6
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Returns and Per Share Information
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Yearly periods ended January 31
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
Scudder 21st Century Growth Fund Russell 2000 Growth Index*
1997** -1.17 2.77
1998 6.91 8.72
1999 20.11 7.22
2000 92.26 35.66
1997** 1998 1999 2000
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Fund Total
Return (%) -1.17 6.91 20.11 92.26
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Index Total
Return (%) 2.77 8.72 7.22 35.66
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Net Asset
Value ($) 11.86 12.68 15.23 28.44
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Income
Dividends ($) -- -- -- --
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Capital Gains
Distributions($) -- -- -- 0.82
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* 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.
** The Fund commenced operations on September 9, 1996. Index comparisons begin
September 30, 1996.
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 returns would have been lower.
7
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Portfolio Summary
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January 31, 2000
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Asset Allocation
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A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
Common Stock 95%
Cash Equivalents 5%
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100%
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The fund retained a modest cash position during the period.
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Sector Diversification
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(Excludes 5% Cash Equivalents)
A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
TechnologyED] 43%
Health 12%
Service Industries 11%
Communications 5%
Consumer Discretionary 5%
Manufacturing 5%
Energy 5%
Durables 5%
Media 4%
Other 5%
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100%
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With holdings in 12 separate sectors and more than 90 issues, the fund is widely
diversified.
8
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Ten Largest Equity Holdings
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(24% of Portfolio)
Holdings in business-to-business technology services were major contributors to
the fund's returns over the period.
1. TSI International Software, Ltd.
Provider of software and related services to businesses
2. Pinnacle Systems, Inc.
Manufacturer of video post-production workstations
3. National Information Consortium, Inc.
Provider of Internet based electronic government
solutions
4. ISS Group, Inc.
Provider of network security monitoring, detection, and
response software
5. Silicon Storage Technology, Inc.
Designer of memory chips
6. Polycom, Inc.
Manufacturer of audio and data conferencing products
7. Mercury Interactive Corp.
Producer of automated software testing tools
8. Insight Communications Co., Inc.
Cable television system operator
9. Research in Motion, Ltd.
Manufacturer and marketer of radio modem technology for a wide variety
of access devices in the wireless communications services
10. QLT PhotoTherapeutics, Inc.
Developer of pharmaceutical products
For more complete details about the Fund's investment portfolio, see page 15. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
9
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Portfolio Management Discussion
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January 31, 2000
In the following interview, Peter Chin and Roy C. McKay, portfolio managers of
Scudder 21st Century Growth Fund, discuss the fund's market environment and
strategy for the six-month period ended January 31, 2000, as well as their
outlook for the coming months.
Q: How did Scudder 21st Century Growth Fund perform over the most recent six
months?
A: The fund posted a strong 58.36% return for the six months ended January 31,
2000. Over the same period, the fund outpaced the 29.66% return of its
benchmark, the Russell 2000 Growth Index.
Q: How do you account for the fund's strong performance?
A: First, the fund has continued to benefit from the strong outperformance of
small-cap growth stocks relative to large-cap growth stocks. While many people
know that technology and "dot-com" companies racked up impressive gains during
the year, many smaller-cap names also earned impressive returns. Second, we had
a lot of strong winners in this period, many of which were in the technology,
services, and biotechnology sectors.
Q: How do you select companies for the fund?
A: Using extensive fundamental and field research, managers look for small
companies, such as those in the Russell 2000 Index, that have low debt,
exceptional management teams that hold a significant stake in the company,
strong current or potential competitive positioning and potential annual
earnings growth of at least 15%, among other factors.
Q: What stocks made important contributions to the fund's return over the
period?
A: Commerce One was one of the biggest contributors to performance. The price of
this e-marketplace stock rose more than ten-fold from the time we bought it. But
that increase pushed the stock beyond the market capitalization
10
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limits we have set for the fund, so we sold it. Another is Mercury Interactive
Software, which provides companies the capability to test new software before
actual activation. This testing greatly reduces the risk of purchasing and
integrating software into the companies' systems. In the services sector, we
benefited from our holding of Copart, which cleans up cars that have been in
accidents and maximizes the resale value on behalf of insurance companies, and
Pinnacle Systems, which designs, manufactures, and markets digital video editing
equipment for broadcasters and consumers.
Q: What were some other top performers for the fund?
A: While technology companies had the best performance, a number of other
service companies also helped. For example, Korn/Ferry International, an
executive recruiting firm, contributed to performance. As companies continue to
grow and increase hiring at all levels, they have turned to firms like
Korn/Ferry to help them fill their management ranks. Another contributor was
Loislaw.com. This company provides legal information, including legal
precedents, to law firms over the Internet -- at a much lower price than
proprietary systems that require dedicated access lines. Another service company
that performed well was Sapient Corp., a consulting firm that helps companies
transform themselves into e-businesses. Finally, Pegasus Systems has done well.
The company provides transaction processing and billing services to the travel
industry.
Q: Were there any companies that hurt performance?
A: VISIX hurt the most. The company makes laser technology that can help correct
eye problems, such as nearsightedness and farsightedness, so people don't have
to wear glasses. Unfortunately, the company lost an International Trade
Commission dispute, ruling that a competitor's product did not violate VISIX's
patents. Another underperformer was Consolidated Graphics. This printing company
has been able to grow rapidly by
11
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acquiring other, smaller printing companies around the country. Recently,
however, it has had trouble making new acquisitions, so investors have become
concerned about its future growth.
Q: What's your outlook for coming months, and how is that outlook reflected in
the fund?
A: We think one of the most promising areas is business-to-business e-commerce.
It has been estimated that this segment is far larger than consumer Internet
retailing, and we believe it offers tremendous potential for businesses to cut
costs. Beyond that, because small-cap stocks performed so well in 1999, some
investors have expressed concerns about a correction in these stocks. While
rapid and sharp increases in interest rates could hurt small-cap growth stocks
in the short run, if the Federal Reserve Board raises rates in small, gradual
increments, the impact should be muted. Given this environment, we have
eliminated the fund's positions in companies that have posted big gains, such as
Commerce One, Network Appliance, and Free Markets. At the same time we've been
reinvesting in companies that we believe have more upside potential. We believe
the Scudder 21st Century Growth Fund is an appropriate vehicle for investors
seeking exposure to this dynamic segment of the U.S. economy.
12
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Glossary of Investment Terms
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Diversification The spreading of risk by investing in several asset
categories, industry sectors, or individual
securities. An investor with a broadly diversified
portfolio will likely receive some protection from
the price declines of an individual asset class.
Fundamental Analysis of companies based on the projected impact
Research of management, products, sales, and earnings on their
balance sheets and income statements. Distinct from
technical analysis, which evaluates the
attractiveness of a stock based on historical price
and trading volume movements, rather than the
financial results of the underlying company
Growth Fund A fund that invests primarily in companies that have
displayed above average earnings growth and are
expected to continue to increase profits faster than
the overall market. Stocks of such companies usually
trade at higher valuations and experience more price
volatility than the market as a whole.
Growth Stock Stock of a company that has displayed above average
earnings growth and is expected to continue to
increase profits faster than the overall market.
Stocks of such companies usually trade at higher
valuations and experience more price volatility than
the market as a whole. Distinct from value stock.
Market The market value of a company's outstanding shares of
Capitalization 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. "Large-cap" stocks
tend to be more liquid.
Monetary The decision of a central bank to control the level
Policy of economic activity by either supplying credit
through lower interest rates or open market
purchases, or by restricting credit through higher
rates or open market sales. Looser credit tends to
stimulate the economy, while tighter credit tends to
calm inflationary forces.
13
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Price/Earnings A widely used gauge of a stock's valuation that
Ratio (also indicates what investors are paying for a company's
"earnings earning power at the current stock price. A P/E ratio
multiple") 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.
Total Return The most common yardstick to measure the
performance of a fund. Total return -- annualized or
compounded -- is based on a combination of share
price changes plus income and capital gain
distributions, if any, expressed as a percentage gain
or loss in value.
(Source: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
14
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Investment Portfolio as of January 31, 2000 (Unaudited)
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Principal
Amount ($) Value ($)
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Short Term Investments 5.0%
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Student Loan Marketing Association, 5.72%, 2/1/2000
(Cost $10,088,000) .................................... 10,088,000 10,088,000
Shares
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Common Stocks 95.0%
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Consumer Discretionary 4.7%
Department & Chain Stores 1.5%
Pacific Sunwear of California Inc.* (Operator of
a nationwide mall-based specialty retail chain
of stores) ........................................... 45,800 1,345,375
Rent-A-Center, Inc.* (Owner and operator of rent-to-own
stores and franchises) ................................ 99,400 1,714,650
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3,060,025
Recreational Products 0.6% ----------
The 3DO Company* (Developer of special effect video
systems) .............................................. 155,800 1,119,813
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Restaurants 1.2%
The Cheesecake Factory Inc.* (Operator of casual dining
restaurants) .......................................... 81,500 2,332,938
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Specialty Retail 1.4%
David's Bridal, Inc.* (Seller of wedding attire) ....... 41,700 417,000
Gildan Activewear Inc.* (Manufacturer and marketer of
branded basic activewear) ............................. 90,400 2,384,300
----------
2,801,300
Consumer Staples 1.2% ----------
Food & Beverage
Hain Food Group, Inc.* (Manufacturer of specialty food
products) ............................................. 93,900 2,324,025
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Health 11.0%
Biotechnology 5.4%
Alexion Pharmaceuticals, Inc.* (Developer of
immunoregulatory compounds) ........................... 53,600 2,345,000
CryoLife, Inc.* (Cryopreservation of viable human tissue
for transplants) ...................................... 132,400 1,919,800
Enzon Inc.* (Biopharmaceutical research company) ....... 59,000 2,983,188
The accompanying notes are an integral part of the financial statements.
15
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<TABLE>
<CAPTION>
Shares Value ($)
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<S> <C> <C>
QLT PhotoTherapeutics, Inc.* (Developer of pharmaceutical
products) ............................................... 49,600 3,359,690
Sequenom, Inc.* (Genetic and DNA research and
development) ............................................ 6,400 166,400
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10,774,078
Health Industry Services 0.6% -----------
MedQuist, Inc.* (Electronic document transcription and
management services) .................................... 62,500 1,246,094
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Medical Supply & Specialty 1.1%
Cytyc Corp.* (Manufacturer of medical equipment) ......... 39,800 1,196,488
Fusion Medical Technologies, Inc.* (Develops surgical
sealants for the treatment of surgical wounds) .......... 87,400 1,070,650
-----------
2,267,138
Pharmaceuticals 2.4% -----------
Biovail Corp. Intl.* (Full-service pharmaceutical company) 54,600 2,723,175
Maxim Pharmaceuticals, Inc.* (Pharmaceutical company) .... 60,300 2,046,431
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4,769,606
Miscellaneous 1.5% -----------
SciQuest.com, Inc.* (Provider of scientific and laboratory
products on the Internet) ............................... 53,100 3,006,788
Communications 4.9%
Cellular Telephone 1.9%
Research in Motion Ltd.* (Manufacturer and marketer of
radio modem technology for a wide variety of access
devices in the wireless communications services) ........ 54,800 3,609,649
TeleCorp. PCS, Inc.* (Provider of wireless communication
services) ............................................... 2,300 99,044
interWAVE Communications International, Ltd.* (Wireless
communication systems) .................................. 3,700 135,050
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3,843,743
Telephone/Communications 3.0% -----------
AVT Corp.* (Developer and marketer of a variety of open
systems based computer telephony products) .............. 87,400 1,955,564
Proxim, Inc.* (Manufacturer of wireless local area
networking products) .................................... 8,200 700,588
SBA Communications Corp.* (Wireless communications) ...... 69,600 2,109,751
Xircom, Inc. (Developer, manufacturer and seller of
communication solutions for computer users) ............. 24,800 1,222,950
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5,988,853
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The accompanying notes are an integral part of the financial statements.
16
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Shares Value ($)
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Financial 1.8%
Banks 0.6%
People's Heritage Financial Group, Inc. (Holding company
for full-service banks) ...................................... 82,700 1,214,656
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Real Estate 1.2%
Reckson Services Industries, Inc.* (Service provider for office
and industrial properties) ................................... 44,800 2,315,600
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Media 3.9%
Advertising 0.6%
Speedway Motorsports, Inc.* (Marketer and promoter of
motorsports entertainment) ................................... 38,200 1,203,300
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Broadcasting & Entertainment 1.4%
Cumulus Media Inc. "A" (Radio broadcasting company) ........... 65,700 2,566,406
Radio Unica Corp.* (Operator of a Spanish-language
national radio network) ...................................... 8,000 192,000
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2,758,406
Cable Television 1.9% -------------
Insight Communications Co., Inc.* (Cable television system
operator) .................................................... 145,800 3,708,788
Service Industries 10.7%
EDP Services 2.5%
Micromuse, Inc.* (Developer of software solutions to
manage information technology infrastructure) ................ 15,600 2,545,726
Pegasus Systems, Inc.* (Provider of global electronic
commerce and transaction processing solutions to
diverse businesses) .......................................... 55,500 1,498,500
Ultimate Software Group, Inc.* (Developer of personnel
and payroll management software solutions) ................... 107,400 939,750
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4,983,976
Investment 0.8% -------------
Multex.com Inc.* (Provider of online investment research and
information services) ........................................ 62,400 1,567,800
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Miscellaneous Commercial Services 6.7%
AnswerThink Consulting Group, Inc.* (Provider of consulting
and technology enabled solutions focused on the
Internet and web-enabled commerce) ............................ 78,100 2,543,131
Copart, Inc.* (Auctioneer of damaged vehicles for insurance
companies) .................................................... 170,400 2,896,800
The accompanying notes are an integral part of the financial statements.
17
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Shares Value ($)
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Cornell Corrections, Inc.* (Developer and operator of
correctional, detention and pre-release facilities) ....... 81,100 826,206
Digital River, Inc.* (Provider of comprehensive electronic
commerce outsourcing solutions to software publishers
and online retailers) ..................................... 37,600 982,301
Korn/Ferry International* (A global executive search firm) . 69,400 2,389,963
MedicaLogic, Inc.* (Connects physicians and patients
through the Internet) ..................................... 4,200 123,375
NetRatings, Inc.* (Provider of Internet audience
measurement information) .................................. 2,100 77,700
Newgen Results Corp.* (Provider of customized database
management and related services for automobile
dealerships and manufacturers) ............................ 52,600 552,300
Whittman-Hart, Inc.* (Information technology consulting
and system integration services) .......................... 86,900 3,084,950
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13,476,726
Miscellaneous Consumer Services 0.7% -------------
Loislaw.com, Inc.* (Provider of legal information over the
Internet) ................................................. 42,200 801,800
Steiner Leisure Ltd.* (Provider of spa services and skin and
hair products on cruise ships) ............................ 36,700 644,544
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1,446,344
Durables 4.3% -------------
Telecommunications Equipment
Antec Corp.* (Developer and supplier of optical
transmission equipment for cable TV) ...................... 56,700 2,218,388
Com21, Inc.* (Designer, developer, and retailer of
value-added, high-speed communications solutions) ......... 73,700 2,326,156
Polycom, Inc.* (Manufacturer of audio and data
conferencing products) .................................... 66,800 4,033,050
-------------
8,577,594
Manufacturing 4.6% -------------
Chemicals 0.9%
Albany Molecular Research, Inc.* (An integrated chemistry
outsourcing company) ...................................... 43,200 1,852,201
-------------
Electrical Products 1.8%
Power Intergrations, Inc.* (Designer and developer of analog
integrated circuits for use in AC to DC power
conversion) ............................................... 44,900 1,641,657
Power-One, Inc.* (Manufacturer of power supplies for
electronic equipment manufacturers) ....................... 55,900 1,914,575
-------------
3,556,232
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The accompanying notes are an integral part of the financial statements.
18
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Shares Value ($)
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Machinery/Components/Controls 1.3%
Asyst Technologies, Inc.* (Manufacturer of material handling
systems for semiconductor producers) ...................... 36,200 2,624,500
---------
Miscellaneous 0.6%
Jakks Pacific, Inc.* (Manufacturer and developer of toys and
related products for children) ............................ 69,050 1,128,536
---------
Technology 40.7%
Computer Software 22.9%
Advent Software, Inc.* (Provider of stand-alone and
client/server software products) .......................... 35,600 2,354,051
BSQUARE Corp.* (Software developer) ........................ 38,000 1,384,625
Caminus Corp.* (Provider of software solutions and
consulting services to utility companies) ................. 15,500 344,875
Deltathree.com, Inc., "A"* (Provider of Web-based
communication services) ................................... 56,600 2,490,400
Digex, Inc.* (Provider of Web site hosting services) ....... 5,100 432,863
Digital Courier Technologies, Inc.* (Developer of Internet
software and services) .................................... 162,300 1,927,313
E-Stamp Corp.* (Provider of Internet related software) ..... 56,700 963,900
ISS Group, Inc.* (Provider of network security monitoring,
detection, and response software) ......................... 77,000 5,096,438
ITXC Corp.* (Provider of Internet-based voice and fax
services) ................................................. 14,300 1,537,250
Information Architects Corp.* (Provider of Web-based
digital content and information management solutions) ..... 129,200 1,728,050
Interactive Intelligence, Inc.* (Developer of communications
software) ................................................. 16,000 418,000
Interleaf, Inc.* (Developer and marketer of software
products) ................................................. 31,400 1,312,912
Internet Pictures Corp.* (Provider of visual content and
infrastructure for electronic commerce) ................... 95,568 3,058,189
Intertrust Technologies Corp.* (Internet software
developer) ................................................ 3,100 447,563
Keynote Systems, Inc.* (Provider of Internet software) ..... 2,000 162,250
Mediaplex, Inc.* (Provider of eBusiness marketing
solutions) ................................................ 29,800 3,039,600
Preview Systems, Inc.* (Developer of software that enables
networks to electronically distribute and license
products) ................................................. 21,300 1,043,700
Quintus Corp.* (Provider of Internet commerce software) .... 52,100 1,758,375
RSA Security Inc.* (Provider of Internet security solutions
for electronic business worldwide) ........................ 16,800 913,500
The accompanying notes are an integral part of the financial statements.
19
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Shares Value ($)
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S1 Corp.* (Provider of Internet-based financial services
solutions) ............................................... 10,100 914,681
Silknet Software, Inc.* (Provider of Internet related
software) ................................................ 12,300 1,815,788
THQ, Inc.* (Developer, publisher and distributor of
interactive entertainment software) ...................... 78,100 1,620,575
TSI International Software Ltd.* (Provider of software and
related services to businesses) .......................... 125,200 7,676,325
Viador Inc.* (Provider of Internet software) .............. 10,900 392,400
VocalTec, Ltd.* (Producer of software for audio
communications on the Internet) .......................... 28,600 811,525
Xpedior, Inc.* (Provider of eBusiness solutions to Internet
businesses) .............................................. 66,000 1,815,000
eSPEED, Inc., "A"* (Operator of interactive electronic
marketplaces) ............................................ 3,900 267,881
----------
45,728,029
Diverse Electronic Products 1.6% ----------
InterVU Inc.* (Provider of Internet video delivery
products) ................................................ 34,800 3,219,000
----------
EDP Peripherals 1.9%
Mercury Interactive Corp.* (Producer of automated software
testing tools) ........................................... 34,600 3,784,375
----------
Electronic Data Processing 0.0%
Turnstone Systems, Inc.* (Provides loop management
solutions) ............................................... 1,500 43,500
----------
Office/Plant Automation 4.0%
National Computer Corp. ................................... 31,600 1,082,300
Pinnacle Systems, Inc.* (Manufacturer of video
post-production workstations) ............................ 143,000 6,971,250
----------
8,053,550
Semiconductors 6.2% ----------
Burr-Brown Corp.* (Manufacturer of analog and
mixed-signal integrated circuits) ........................ 47,300 1,750,100
Silicon Image, Inc.* (Developer of semiconductors) ........ 40,500 3,007,125
Silicon Storage Technology, Inc.* (Designer of memory
chips) ................................................... 115,800 4,523,437
Transwitch Corp.* (Developer, marketer and supporter of
integrated digital and mixed-signal semiconductors for
telecommunication markets) ............................... 42,250 2,099,297
Vitesse Semiconductor Corp.* (Manufacturer of digital
integrated circuits) ..................................... 23,200 1,009,200
----------
12,389,159
----------
The accompanying notes are an integral part of the financial statements.
20
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Shares Value ($)
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Miscellaneous 4.1%
National Information Consortium, Inc.* (Provider of Internet
based electronic government solutions) ..................... 131,800 5,782,725
Semitool, Inc.* (Designer of equipment used in fabrication
of semiconductors) ......................................... 2,500 60,000
SonicWALL, Inc.* (Provider of Internet security solutions) .. 3,800 221,350
SonoSite, Inc.* (Developer of miniaturized digital ultrasound
imaging devices) ........................................... 68,700 2,194,106
----------
8,258,181
Energy 4.3% ----------
Oil & Gas Production 2.4%
Barrett Resources Corp.* (Oil and gas exploration and
production) ................................................ 71,600 2,116,675
Key Production Co., Inc.* (Oil and gas production) .......... 112,400 997,551
Swift Energy Co.* (Oil and gas exploration and production) .. 160,900 1,779,956
----------
4,894,182
Oil Companies 1.1% ----------
Stone Energy Corporation* (Independent oil and gas
company) ................................................... 59,200 2,205,200
----------
Oilfield Services/Equipment 0.8%
National-Oilwell, Inc.* (Manufacturer of oil and gas drilling
equipment) ................................................. 84,400 1,582,500
----------
Construction 2.9%
Building Materials 0.4%
Simpson Manufacturing Co., Inc.* (Manufacturer of
wood-to-wood, wood-to-concrete and wood-to-masonry
connectors) ................................................ 21,600 850,500
----------
Building Products 2.5%
CoStar Group Inc.* (Provider of building plan information) .. 71,400 2,302,650
Trex Company, Inc.* (Manufacturer of non-wood decking
alternative products) ...................................... 98,700 2,664,900
4,967,550
----------
- --------------------------------------------------------------------------------------
Total Common Stocks (Cost $158,611,070) 189,924,786
- --------------------------------------------------------------------------------------
Total Investment Portfolio-- 100.0% (Cost $168,699,070) (a) 200,012,786
- --------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) The cost for federal income tax purposes was $168,738,807. At January 31,
2000, net unrealized appreciation for all securities based on tax cost was
$31,273,979. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of value over tax cost of
$38,141,121 and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over value of $6,867,142.
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
Financial Statements
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities as of January 31, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Assets
- --------------------------------------------------------------------------------
Investments in securities, at value (cost $168,699,070) . $ 200,012,786
Cash .................................................... 1,169
Receivable for investments sold ......................... 25,260,311
Receivable for Fund shares sold ......................... 1,111,724
Deferred organization expense ........................... 6,994
Other assets ............................................ 941
-------------
Total assets ............................................ 226,393,925
Liabilities
- --------------------------------------------------------------------------------
Payable for invesments purchased ........................ 10,158,443
Payable for Fund shares redeemed ........................ 833,318
Accrued management fee .................................. 123,208
Other accrued expenses and payables ..................... 305,472
-------------
Total liabilities ....................................... 11,420,441
- --------------------------------------------------------------------------------
Net assets, at value $ 214,973,484
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
Net assets consist of:
Accumulated net investment loss ......................... (769,406)
Net unrealized appreciation (depreciation) on investments 31,313,716
Accumulated net realized gain (loss) .................... 33,080,483
Paid-in capital ......................................... 151,348,691
- --------------------------------------------------------------------------------
Net assets, at value $ 214,973,484
- --------------------------------------------------------------------------------
Net Asset Value
- --------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($214,973,484 / 7,559,868 outstanding shares of beneficial
interest, $.01 par value, unlimitednumber of shares
authorized) ............................................ $ 28.44
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations for the six months ended January 31, 2000 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income
- --------------------------------------------------------------------------------
Dividends ..................................................... $ 8,429
Interest ...................................................... 225,761
------------
Total income .................................................. 234,190
------------
Expenses:
Management fee ................................................ 568,767
Services to shareholders ...................................... 330,978
Custodian and accounting fees ................................. 41,646
Trustees' fees and expenses ................................... 25,068
Auditing ...................................................... 8,958
Registration fees ............................................. 40,875
Reports to shareholders ....................................... 16,989
Legal ......................................................... 7,546
Amortization of organization expense .......................... 2,191
Other ......................................................... 5,166
------------
Total expenses, before expense reductions ..................... 1,048,184
Expense reductions ............................................ (44,588)
------------
Total expenses, after expense reductions ...................... 1,003,596
Net investment income (loss) .................................. (769,406)
Realized and unrealized gain (loss) on investment transactions
- --------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ................................................... 33,826,163
Foreign currency related transactions ......................... (151)
------------
33,826,012
------------
Net unrealized appreciation (depreciation) during the period on
investments .................................................. 15,845,764
- --------------------------------------------------------------------------------
Net gain (loss) on investment transactions 49,671,776
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 48,902,370
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
- ---------------------------------------------------------------------------------------------------------
Six Months
Ended
January 31, Eleven Months Year Ended
Increase (Decrease) in Net 2000 Ended July 31, August 31,
Assets (Unaudited) 1999 1998
- ---------------------------------------------------------------------------------------------------------
Operations:
<S> <C> <C> <C>
Net investment income (loss) ........................ $ (769,406) $ (589,976) $ (448,014)
Net realized gain (loss) on
investment transactions ............................ 33,826,012 6,048,657 (75,261)
Net unrealized appreciation
(depreciation) on investment
transactions during the period ..................... 15,845,764 19,613,097 (8,260,290)
------------- ------------- -------------
Net increase (decrease) in net
assets resulting from operations ................... 48,902,370 25,071,778 (8,783,565)
Distributions to shareholders:
From net realized gains ............................. (4,561,756) -- --
------------- ------------- -------------
Fund share transactions:
Proceeds from shares sold ........................... 124,558,615 34,857,980 21,758,221
Reinvestment of distributions ....................... 4,508,959 -- --
Cost of shares redeemed ............................. (30,091,457) (15,346,773) (9,368,423)
Redemption fees ..................................... 105,026 43,738 22,595
------------- ------------- -------------
Net increase (decrease) in net
assets from Fund share
transactions ....................................... 99,081,143 19,554,945 12,412,393
------------- ------------- -------------
Increase (decrease) in net assets ................... 143,421,757 44,626,723 3,628,828
Net assets at beginning of period ................... 71,551,727 26,925,004 23,296,176
Net assets at end of period (including accumulated
net investment loss of $769,406 at ------------- ------------- -------------
January 31, 2000.) ................................. $ 214,973,484 $ 71,551,727 $ 26,925,004
------------- ------------- -------------
Other Information
- ---------------------------------------------------------------------------------------------------------
Shares outstanding at beginning
of period ........................................... 3,870,878 2,653,082 1,776,347
------------- ------------- -------------
Shares sold ......................................... 4,779,316 2,232,047 1,580,844
Shares issued to shareholders in
reinvestment of distributions ...................... 155,588 -- --
Shares redeemed ..................................... (1,245,914) (1,014,251) (704,109)
------------- ------------- -------------
Net increase (decrease) in Fund
shares ............................................. 3,688,990 1,217,796 876,735
Shares outstanding at end of ........................ ------------- ------------- -------------
period ............................................. 7,559,868 3,870,878 2,653,082
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
- -------------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
- -------------------------------------------------------------------------------------
2000(b) 1999(c) 1998(d) 1997(e)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $18.48 $10.15 $13.11 $12.00
-----------------------------------------
- -------------------------------------------------------------------------------------
Income (loss) from investment operations:
- -------------------------------------------------------------------------------------
Net investment income (loss) (a) (.16) (.19) (.19) (.15)
- -------------------------------------------------------------------------------------
Net realized and unrealized gain on
investment transactions 10.92 8.51 (2.78) 1.25
-----------------------------------------
- -------------------------------------------------------------------------------------
Total from investment operations 10.76 8.32 (2.97) 1.10
- -------------------------------------------------------------------------------------
Less distributions from:
- -------------------------------------------------------------------------------------
Net realized gains on investment
transactions (.82) -- -- --
-----------------------------------------
- -------------------------------------------------------------------------------------
Total distributions (.82) -- -- --
- -------------------------------------------------------------------------------------
Redemption fees .02 .01 .01 .01
- -------------------------------------------------------------------------------------
Net asset value, end of period $28.44 $18.48 $10.15 $13.11
-----------------------------------------
- -------------------------------------------------------------------------------------
Total Return (%) (f) 58.36(g)**82.07(g)** (22.58) 9.25(g)**
- -------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
- -------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 215 72 27 23
- -------------------------------------------------------------------------------------
Ratio of expenses before expense
reductions (%) 1.83* 2.22* 2.17 3.52*
- -------------------------------------------------------------------------------------
Ratio of expenses after expense
reductions (%) 1.75* 1.75* 1.75 1.75*
- -------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (1.34)* (1.42)* (1.38) (1.27)*
- -------------------------------------------------------------------------------------
Portfolio turnover rate (%) 157* 148* 120 92*
- -------------------------------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) For the six months ended January 31, 2000 (Unaudited).
(c) For the eleven months ended July 31, 1999. On September 16, 1998 the
Trustees of the Fund changed the fiscal year end to July 31 from August 31.
(d) For the year ended August 31, 1998.
(e) For the period September 9, 1996 (commencement of operations) to August 31,
1997.
(f) Total return would have been lower had certain expenses not been reduced.
(g) 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
25
<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 (the "Trust") which is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as an open-end management investment
company organized as a Massachusettes business trust.
On September 16, 1998, the Trustees of the Fund changed the fiscal year end to
July 31 from August 31.
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 consistently by the Fund in the
preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close
of regular trading on the New York Stock Exchange. 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 ("Nasdaq"), for which there have been sales, are valued at
the most recent sale price reported. 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, or if no sale occurred, at the calculated mean between the most recent
bid and asked quotations on such market. 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.
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Investment securities and other assets and liabilities
denominated in a foreign currency are translated into U.S. dollars at the
prevailing exchange rates at period end. Purchases and sales of investment
securities, income and expenses are translated into U.S. dollars at the
prevailing exchange rates on the respective dates of the transactions.
26
<PAGE>
Net realized and unrealized gains and losses on foreign currency transactions
represent net gains and losses between trade and settlement dates on securities
transactions, the disposition of forward foreign currency exchange contracts and
foreign currencies, and the difference between the amount of net investment
income accrued and the U.S. dollar amount actually received. That portion of
both realized and unrealized gains and losses on investments that results from
fluctuations in foreign currency exchange rates is not separately disclosed but
is included with net realized and unrealized gains and losses on investment
securities.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian or
sub-custodian bank, 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
principal amount of the repurchase price plus accrued interest.
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. From November 1, 1998, through July 31, 1999,
the Fund incurred approximately $542,000 of net realized long term capital
losses. As permitted by tax regulations, the Fund intends to defer these losses
and treat them as arising in the fiscal year ended July 31, 2000.
Distribution of Income and Gains. Distributions of net investment income, if
any, are made annually. 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 at least
annually.
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.
27
<PAGE>
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date. Realized gains and
losses from investment transactions are recorded on an identified cost basis.
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.
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.
B. Purchases and Sales of Securities
For the six months ended January 31, 2000, purchases and sales of investment
securities (excluding short-term investments) aggregated $159,459,933 and
$87,097,807, respectively.
C. Related Parties
Under the Investment Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. (the "Adviser"), the Fund pays the Adviser a fee equal to an
annual rate of 1.00% of the Fund's average daily net assets, computed and
accrued daily and payable monthly. As manager of the assets of the Fund, the
Adviser directs the investments of the Fund in accordance with its investment
objective, policies, and restrictions. The Adviser determines the securities,
instruments and other contracts relating to investments to be purchased, sold or
entered into by the Fund. In addition to portfolio management services, the
Adviser provides certain administrative services in accordance with the
Agreement. The Adviser has agreed not to impose all or a portion of the Fund's
management fee until November 30, 2000 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 January 31, 2000, the Adviser did not impose a portion of its
management fee amounting to $41,892 and the amount imposed amounted to $526,875,
which was equivalent to an annualized effective rate of 0.92%.
28
<PAGE>
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 January 31, 2000, SSC imposed fees amounting to $196,092, of
which $134,988 was unpaid at January 31, 2000.
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 January
31, 2000, STC imposed fees amounting to $52,868, of which $25,742 was unpaid at
January 31, 2000.
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 January 31, 2000, SFAC imposed fees amounting to $32,666, of which $8,816
was unpaid at January 31, 2000.
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
January 31, 2000, the Special Servicing Agreement expense charged to the Fund
amounted to $53,908.
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 January 31, 2000, the Trustees' fees and expenses
aggregated $25,068.
D. Expense Off-Set Arrangements
The Fund has entered into an arrangement with its custodian and transfer agent
whereby credits realized as a result of uninvested cash balances were used to
reduce a portion of the Fund's expenses. During the period, the Fund's custodian
and transfer agents fees were reduced by $848 and $1,848, respectively.
29
<PAGE>
E. Line of Credit
The Fund and several Scudder Funds (the "Participants") share in a $1 billion
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 pro rata 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.
30
<PAGE>
Officers and Trustees
- --------------------------------------------------------------------------------
Lynn S. Birdsong* Peter Chin*
o President o Vice President
Sheryle J. Bolton J. Brooks Dougherty*
o Trustee; Chief Executive Officer, o Vice President
Scientific Learning Corporation
James M. Eysenbach*
William T. Burgin o Vice President
o Trustee; General Partner, Bessemer
Venture Partners James E. Fenger*
o Vice President
Keith R. Fox
o Trustee; Private Equity Investor Philip S. Fortuna*
o Vice President
William H. Luers
o Trustee; Chairman and President, Sewall F. Hodges*
U.N. Association of America o Vice President
Kathryn L. Quirk* Ann M. McCreary*
o Trustee, Vice President and o Vice President
Assistant Secretary
Thaddeus Paluszek*
Joan E. Spero o Vice President
o Trustee; President, Doris Duke
Charitable Foundation John Millette*
o Vice President and Secretary
Paul Bancroft III
o Honorary Trustee; Venture John R. Hebble*
Capitalist and Consultant o Treasurer
Wilson Nolen Caroline Pearson*
o Honorary Trustee; Consultant o Assistant Secretary
Robert G. Stone, Jr. *Scudder Kemper Investments, Inc.
o Honorary Trustee; Chairman
Emeritus and Director, Kirby
Corporation
Edmund R. Swanberg
o Honorary Trustee
31
<PAGE>
Investment Products and Services
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
<S> <C>
Money Market U.S. Growth and Income
Scudder U.S. Treasury Money Fund Scudder Balanced Fund
Scudder Cash Investment Trust Scudder Dividend & Growth Fund
Scudder Money Market Series -- Scudder Growth and Income Fund
Prime Reserve Shares* Scudder Select 500 Fund
Premium Shares* Scudder S&P 500 Index Fund
Managed Shares* Scudder Real Estate Investment Fund
Scudder Government Money Market
Series -- Managed Shares* U.S. Growth
Value
Tax Free Money Market+ Scudder Large Company Value Fund
Scudder Tax Free Money Fund Scudder Value Fund***
Scudder Tax Free Money Market Scudder Small Company Value Fund
Series -- Managed Shares* Scudder Micro Cap Fund
Scudder California Tax Free Money Fund** Growth
Scudder New York Tax Free Money Fund** Scudder Classic Growth Fund***
Scudder Large Company Growth Fund
Tax Free+ Scudder Select 1000 Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Medium Term Tax Free Fund Scudder 21st Century Growth Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund Global Equity
Scudder California Tax Free Fund** Worldwide
Scudder Massachusetts Limited Term Scudder Global Fund
Tax Free Fund** Scudder International Value Fund
Scudder Massachusetts Tax Free Fund** Scudder International Growth and
Scudder New York Tax Free Fund** Income Fund
Scudder Ohio Tax Free Fund** Scudder International Fund++
Scudder International Growth Fund
U.S. Income Scudder Global Discovery Fund***
Scudder Short Term Bond Fund Scudder Emerging Markets Growth Fund
Scudder GNMA Fund Scudder Gold Fund
Scudder Income Fund Regional
Scudder Corporate Bond Fund Scudder Greater Europe Growth Fund
Scudder High Yield Bond Fund Scudder Pacific Opportunities Fund
Scudder Latin America Fund
Global Income The Japan Fund, Inc.
Scudder Global Bond Fund
Scudder International Bond Fund Industry Sector Funds
Scudder Emerging Markets Income Fund Choice Series
Scudder Financial Services Fund
Asset Allocation Scudder Heath Care Fund
Scudder Pathway Conservative Portfolio Scudder Technology Fund
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio Preferred Series
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small Company Fund
</TABLE>
32
<PAGE>
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
- --------------------------------------------------------------------------------
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs Education Accounts
Traditional IRA Education IRA
Roth IRA UGMA/UTMA
SEP-IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Closed-End Funds#
- -----------------------------------------------------------------------------------------
<S> <C>
The Argentina Fund, Inc. Montgomery Street Income Securities, Inc.
The Brazil Fund, Inc. Scudder Global High Income Fund, Inc.
The Korea Fund, Inc. Scudder New Asia Fund, Inc.
</TABLE>
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 or classes thereof 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.
33
<PAGE>
Scudder Solutions
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Convenient Automatic Investment Plan
ways to invest,
quickly and A convenient investment program in which money is
reliably electronically debited from your bank account monthly to
regularly purchase fund shares and "dollar cost average" --
buy more shares when the fund's price is lower and fewer
when it's higher, which can reduce your average purchase
price over time.*
Automatic Dividend Transfer
The most timely, reliable, and convenient way to purchase
shares -- use distributions from one Scudder fund to
purchase shares in another, automatically (accounts with
identical registrations or the same social security or tax
identification number).
QuickBuy
Lets you purchase Scudder fund shares electronically,
avoiding potential mailing delays; money for each of your
transactions is electronically debited from a previously
designated bank account.
Payroll Deduction and Direct Deposit
Have all or part of your paycheck -- even government checks
-- invested in up to four Scudder funds at one time.
* 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- Scudder Automated Information Line: SAIL(TM) --
clock electronic 1-800-343-2890
account
service and Personalized account information, the ability to exchange
information, or redeem shares, and information on other Scudder funds
including some and services via touchtone telephone.
transactions
Scudder's Web Site -- www.scudder.com
Personal Investment Organizer: Offering account information
and transactions, interactive worksheets, prospectuses and
applications for all Scudder funds, plus your current asset
allocation, whenever your need them. Scudder's site also
provides news about Scudder funds, retirement planning
information, and more.
34
<PAGE>
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Retirees and Automatic Withdrawal Plan
those who depend
on investment You designate the bank account, determine the schedule (as
proceeds for frequently as once a month) and amount of the redemptions,
living expenses and Scudder does the rest.
can enjoy these
convenient, Distributions Direct
timely, and
reliable Automatically deposits your fund distributions into the
automated bank account you designate within three business days after
withdrawal each distribution is paid.
programs
QuickSell
Provides speedy access to your money by electronically
crediting your redemption proceeds to the bank account you
previously designated.
For more Call a Scudder representative at
information about 1-800-SCUDDER
these services
Or visit our Web site at
www.scudder.com
Please address The Scudder Funds
all written PO Box 2291
correspondence Boston, Massachusetts
to 02107-2291
35
<PAGE>
Notes
- --------------------------------------------------------------------------------
<PAGE>
Notes
- --------------------------------------------------------------------------------
<PAGE>
Notes
- --------------------------------------------------------------------------------
<PAGE>
Notes
- --------------------------------------------------------------------------------
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc. is one of the largest and most experienced
investment management organizations worldwide, managing more than $290 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 over 80
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Financial Services 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 Financial Services Group. The Zurich Financial Services 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 INVESTMENTS (SM)
[SCUDDER LOG]
PO Box 2291
Boston, MA 02107-2291
1-800-SCUDDER
www.scudder.com
A member of the [LOGO] Zurich Financial
Services Group
