This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
Scudder
Capital Growth
Fund
Semiannual Report
March 31, 1995
o A fund designed to maximize long-term capital growth through a diversified
portfolio of growth-oriented common stocks.
o A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
<PAGE>
CONTENTS
2 Highlights
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
9 Investment Portfolio
17 Financial Statements
20 Financial Highlights
21 Notes to Financial Statements
26 Investment Products and Services
27 How to Contact Scudder
HIGHLIGHTS
* Scudder Capital Growth Fund returned 1.42% during the six months ended
March 31, 1995, including price change and a $0.73 per share capital gain
distribution.
* Technology stocks, which were increased significantly during the period,
were the Fund's best-performing holdings.
* Non-U.S. holdings were reduced in favor of domestic issues with greater and
more clear-cut potential.
* The Fund's significant holdings in communications and media stocks were
maintained for their longer-term potential even though they lagged the
market generally during the period.
2
<PAGE>
Dear Shareholders,
Investors have adjusted to the higher interest rates of 1994 and now
seem more sanguine about long-term investment opportunities. This positive shift
in investor sentiment can be seen since January in increased stock mutual fund
subscriptions and higher stock prices. For instance, the unmanaged S&P 500 Index
returned 9.74% in the three months ended March 31, 1995, compared with a 1.32%
return recorded for all of 1994.
In the coming months, we expect positive returns for stocks but believe
that overall gains will be modest. Despite recent declines, interest rates are
still significantly higher than at this time last year and appear to be slowing
the rate of economic growth, as corporations face higher borrowing costs and
waning consumer demand. Throughout the year, the corporate sector should
continue to generate higher profits, even in an environment of slowing business
activity, thanks to months of debt reduction, improved efficiencies, and the
accumulation of large cash reserves. The investment markets clearly prefer this
so-called economic soft landing. On the other hand, gently slowing growth is by
no means assured, and renewed economic activity and possible higher inflation
may lead to additional rate increases. Commodity prices continue to rise,
factory production is still pushing the limits of capacity, and the dollar has
fallen to record lows against the Japanese yen and German mark. Further rate
hikes could choke off growth and make for a bumpier economic and investment
ride.
The Scudder Capital Growth Fund continues to invest in a diversified
portfolio of domestic and foreign stocks believed to offer above-average growth
potential, as well as other securities with attractive investment
characteristics. If you have questions about your Fund or your investments,
please call a Scudder Investor Relations representative at 1-800-225-2470. Page
27 provides more information on how to contact Scudder. Thank you for choosing
Scudder Capital Growth Fund to help meet your investment needs.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Capital Growth Fund
3
<PAGE>
Scudder Capital Growth Fund
Performance Update as of March 31, 1995
-----------------------------------------------------------------
Growth of a $10,000 Investment
-----------------------------------------------------------------
Scudder Capital Growth Fund
----------------------------------------
Total Return
Period Growth -------------
Ended of Average
3/31/95 $10,000 Cumulative Annual
--------- ------- ---------- -------
1 Year $10,204 2.04% 2.04%
5 Year $15,614 56.14% 9.32%
10 Year $33,876 238.76% 12.98%
S&P 500 Index
--------------------------------------
Total Return
Period Growth -------------
Ended of Average
3/31/95 $10,000 Cumulative Annual
--------- ------- ---------- -------
1 Year $11,557 15.57% 15.57%
5 Year $17,167 71.67% 11.41%
10 Year $38,528 285.28% 14.43%
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Yearly periods ended March 31
Scudder Capital Growth Fund
Year Amount
----------------------
85 10000
86 13751
87 16375
88 15475
89 20688
90 21696
91 23682
92 27652
93 31742
94 33197
95 33876
S&P 500 Index
Year Amount
----------------------
85 10000
86 13766
87 17374
88 15926
89 18817
90 22442
91 25677
92 28512
93 32854
94 33338
95 38528
The Standard & Poor's (S&P) 500 Index is an unmanaged
capitalization-weighted measure of 500 widely held common
stocks listed on the New York Stock Exchange, American Stock
Exchange, and Over-The-Counter market. Index returns assume
reinvestment of dividends and, unlike Fund returns, do not
reflect any fees or expenses.
-----------------------------------------------------------------
Returns and Per Share Information
-------------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
Yearly periods ended March 31
-----------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
------------------------------------------------------------------------------
Net Asset Value... $18.14 $18.47 $14.82 $18.75 $18.14 $17.74 $19.43 $20.88 $19.42 $19.06
Income Dividends.. $ .23 $ .23 $ .20 $ .07 $ .16 $ .37 $ .22 $ .10 $ -- $ --
Capital Gains
Distributions..... $ 1.88 $ 2.46 $ 2.14 $ .79 $ 1.45 $ 1.35 $ .98 $ 1.25 $ 2.62 $ .73
Fund Total
Return (%)........ 37.51 19.08 -5.50 33.69 4.87 9.15 16.76 14.79 4.58 2.04
Index Total
Return (%)........ 37.67 26.20 -8.34 18.12 19.23 14.37 11.03 15.22 1.48 15.57
</TABLE>
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results.
Investment return and principal value will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than when purchased.
4
<PAGE>
Portfolio Summary as of March 31, 1995
---------------------------------------------------------------------------
Diversification
---------------------------------------------------------------------------
Equity Securities 98% Our strategy is to keep the portfolio
Cash Equivalents 2% fully invested in stocks of companies
---- believed to offer the potential for
100% above-average earnings growth.
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
--------------------------------------------------------------------------
Sectors (Excludes 2% Cash Equivalents)
--------------------------------------------------------------------------
Media 20%
Technology 16%
Consumer Discretionary 11% We increased the Fund's technology
Communications 10% exposure during the period, with a
Financial 10% particular emphasis on semiconductor
Health 9% stocks.
Energy 6%
Consumer Staples 4%
Utilities 3%
Other 11%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
--------------------------------------------------------------------------
Ten Largest Equity Holdings
--------------------------------------------------------------------------
1. Time Warner Inc.
Publishing, broadcasting, and video entertainment company
2. Tele-Communications Inc.
Cable TV systems and microwave services
3. Comcast Corp.
Cable TV, sound and telecommunication systems
4. Intel Corp.
Semiconductor memory circuits
5. Rogers Communications Inc.
Cable TV operator in Canada, U.S., and Ireland
6. Microsoft Corp.
Computer operating systems software
7. Century Telephone Enterprises
Telecommunication services
8. Texas Instruments Inc.
Semiconductors and electronic equipment
9. Philip Morris Companies Inc.
Tobacco, food products and brewing
10. Viacom Inc.
Diverse entertainment and communications company
The dramatic gain in the price of Intel in recent months helped the
stock to become the Fund's fourth largest holding.
For more complete details about the Fund's Investment Portfolio,
see page 9.
A monthly Investment Portfolio Summary is available upon request.
5
<PAGE>
SCUDDER CAPITAL GROWTH FUND
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
The Scudder Capital Growth Fund has lagged the market generally during
the past six months. This underperformance was due to the Fund's emphasis on the
communications, media, automotive, and retail industries, which for one reason
or another were not market favorites in this short time period. The performance
update on page 4 contains specific information on your Fund's performance
relative to the unmanaged S&P 500 Index.
Portfolio Sector Allocation
Scudder Capital Growth Fund seeks long-term price appreciation. Our
primary focus is on stocks of companies that have superior management, strong
balance sheets, and the potential for earnings growth. Our domestic and foreign
stock selections are principally made on a stock-by-stock basis, although we
occasionally target specific industries we believe will benefit from developing
economic trends.
The Fund's performance during the period was influenced substantially
by the portfolio's concentration in the communications and media industries (30%
of the portfolio as of March 31). Cable stocks, in which the Fund continues to
hold a large position, remained volatile and generally underperformed the
market. The recent performance of these stocks reflects the slowing cash flow
growth of cable companies as well as investor uncertainty regarding upcoming
Congressional legislation that may impact cable rates and industry competition.
Despite widespread concern, we believe pending legislation will be positive for
the cable industry, providing some deregulation, rate relief, and eventually a
full-scale entry into the lucrative telephone business. However, with the
objective of reducing volatility, we have reduced our positions in
communications and media companies, including Time Warner Inc.,
Tele-Communications Inc., Comcast Corp. and Rogers Communications Inc.
Another area in which we look for future improvement is technology. The
worldwide corporate push for increased productivity and reduced production costs
will, in our opinion, benefit many technology companies. Semiconductor
manufacturers, for example, stand to gain from vastly improved cash flows, as a
result of their central role in the rapidly growing computer and wireless
communications industries. During the period, the Fund substantially increased
its semiconductor holdings with the addition of Texas Instruments, National
Semiconductor, and Samsung Electronics. Other additions to the Fund's technology
holdings include Micron Technology, KLA Instruments, and Applied Materials,
although we have already sold partial positions due to their rapid price
appreciation. The Fund's emphasis on technology paid handsomely in the first
quarter of 1995, as this was the portfolio's best-performing sector.
6
<PAGE>
In addition to increasing the Fund's exposure to technology stocks, we
have sought to emphasize high-quality yet reasonably valued growth stocks. Our
purchases of Philip Morris, H&R Block, and American International Group (AIG)
during the period reflect this commitment. Philip Morris is the world's largest
consumer packaged goods company, with an extensive portfolio of tobacco, food,
and beer brand names. While H&R Block is generally known for its income tax
preparation and related services, the company also owns CompuServe, a rapidly
growing on-line computer information and networking service. AIG is the largest
underwriter of commercial and industrial insurance coverage in the United
States. Other recent purchases include Mobil Oil, Bankers Trust, and Carnival
Cruise Lines.
Elsewhere, we reduced the Fund's exposure to the gaming sector by
selling Mirage Resorts and Circus Circus as these stocks appreciated. We also
sold or scaled back our position in a number of stocks with recently
disappointing fundamental business prospects. These stocks included Ford and
Chrysler, which declined on expectations of reduced earnings; and selected
retailers such as Fingerhut, Spiegel, and Fred Meyer, which were hurt by
continued lackluster sales and, in some instances, by higher operating costs. We
will continue, however, to consider select high-quality retailers.
Non-U.S. Holdings Reduced
The Fund's foreign holdings were reduced to 16.6% of portfolio assets
on March 31, 1995, from a high of 19.2% on December 31, 1994. Our reduced
commitment to foreign stocks in general and Latin American stocks in particular
reflects the increased investor uncertainty following the devaluation of the
Mexican peso. In Latin America, we reduced our Brazilian stock exposure by
selling partial positions in Usiminas, Telespe, and Cemig. In Mexico, the Fund's
already small position was cut further through the sale of Grupo Tribasa and
Grupo Desarrollo. In Argentina, however, we have increased our investment,
primarily by adding to YPF, the giant international oil company whose stock
declined amidst the panicked selling that followed the Mexican peso devaluation.
In Japan, we sold NTT and Nichiei after the earthquake in Kobe increased the
level of investment risk in the Japanese stock market. And in Europe, we reduced
or eliminated positions in Nokia, SAP, Astra, and Luxottica after these stocks
appreciated substantially in price.
7
<PAGE>
Expectations of Moderating Economic Growth
Our forecast calls for U.S. economic growth to slow from last winter's
robust 5% annualized pace to about 3% in 1995. After nearly five years of
economic expansion, investors are now focusing on when the business cycle will
turn down. Unfortunately, the answer is not clear. Indications such as the
slowdown in interest-rate-sensitive sectors of the economy, the growing shortage
of savings, and the deterioration in the trade deficit point to slower growth.
Other risks to the economy include the possibility of further interest rate
hikes by the Federal Reserve, which could choke off growth more precipitously.
On the other hand, excess corporate cash, an increase in stock buybacks by
corporations, a reasonable level of inventories, and moderate inflation suggest
there is room for continued modest expansion.
As the economic and investment landscape unfolds, we will pursue a
relatively cautious investment strategy. In the coming months, we intend to
increase portfolio diversification, continue to emphasize reasonably valued
quality growth stocks, and limit exposure to foreign stock markets. While the
U.S. stock market's performance for the remainder of the year is not likely to
match the strong pace of the first quarter, we believe the Fund is positioned to
provide shareholders with significant capital appreciation over time.
Sincerely,
Your Portfolio Management Team
/s/Steven P. Aronoff /s/Julia D. Cox
Steven P. Aronoff Julia D. Cox
/s/William F. Gadsden
William F. Gadsden
8
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO as of March 31, 1995 (Unaudited)
-----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
------------------------------------------------------------------------
1.1% REPURCHASE AGREEMENT
------------------------------------------------------------------------
13,993,000 Repurchase Agreement with Donaldson,
Lufkin and Jenrette dated 3/31/95 at
6.15% to be repurchased at $14,000,171
on 4/3/95, collateralized by a $14,337,000
U.S. Treasury Bill, 6/29/95
(Cost $13,993,000) ........................... 13,993,000
-----------
------------------------------------------------------------------------
0.8% COMMERCIAL PAPER
------------------------------------------------------------------------
FINANCIAL
Other Financial Companies 10,000,000 Associates Corp. of North America, 5.98%,
4/11/95 (Cost $9,983,389) .................... 9,983,389
-----------
------------------------------------------------------------------------
0.2% CONVERTIBLE BOND
------------------------------------------------------------------------
FINANCIAL
Banks 6,000,000 Banco Nacional de Mexico, 7%, 12/15/99
(Cost $7,357,500) ............................ 3,120,000
-----------
------------------------------------------------------------------------
1.3% CONVERTIBLE PREFERRED STOCKS
------------------------------------------------------------------------
Shares
------------------------------------------------------------------------
DURABLES
Automobiles 139,700 Chrysler Corp., $4.625 (Cost $17,826,382) ..... 16,248,856
-----------
------------------------------------------------------------------------
0.7% PREFERRED STOCKS
------------------------------------------------------------------------
FINANCIAL 0.3%
Banks 40,000 First Nationwide Bank, non-cum. 11.5% ......... 4,045,000
-----------
TECHNOLOGY 0.4%
Electronic Components/
Distributors 50,560 Samsung Electronics Co., Ltd. (b) ............. 4,010,984
9,550 Samsung Electronics Co., Ltd. (New(c)) (b) .... 756,862
-----------
4,767,846
-----------
TOTAL PREFERRED STOCKS
(Cost $7,937,987) ............................ 8,812,846
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
SCUDDER CAPITAL GROWTH FUND
-----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
------------------------------------------------------------------------
93.2% COMMON STOCKS
------------------------------------------------------------------------
CONSUMER DISCRETIONARY 8.9%
Apparel & Shoes 0.5% 252,400 Jones Apparel Group, Inc.* .................. 6,814,800
-----------
Department & Chain Stores 2.2% 1,266,000 Charming Shoppes Inc. ........................ 7,121,250
353,400 Consolidated Stores Corp.* .................. 7,112,175
200,000 Federated Department Stores, Inc.* .......... 4,425,000
1,526,600 Filene's Basement Corp.* ..................... 5,152,275
10,700 Fred Meyer Inc.* ............................. 316,988
200,000 Limited Inc. ................................ 4,625,000
-----------
28,752,688
-----------
Hotels & Casinos 1.1% 310,000 President Casinos, Inc.* ..................... 1,743,750
276,000 Promus Companies Inc.* ....................... 10,350,000
-----------
220,100 Station Casinos Inc.* ........................ 2,531,150
-----------
14,624,900
Recreational Products 3.2% 560,000 Acclaim Entertainment Inc.* ................. 9,730,000
303,800 Bally Gaming International Inc.* ............ 2,392,425
343,900 Electronic Arts Inc.* ........................ 7,780,738
943,400 International Game Technology Inc. ............ 12,735,900
366,700 Mattel Inc. ................................... 9,029,988
-----------
41,669,051
-----------
Specialty Retail 1.9% 642,400 Fingerhut Companies, Inc. .................... 7,628,500
490,000 Home Shopping Network Inc.* .................. 3,858,750
500,000 Toys "R" Us Inc.* ............................. 12,812,500
-----------
24,299,750
-----------
CONSUMER STAPLES 3.4%
Alcohol & Tobacco 2.0% 400,000 Philip Morris Companies Inc. ................. 26,100,000
-----------
Food & Beverage 0.7% 360,000 Panamerican Beverages Inc. "A" ................ 9,405,000
-----------
Package Goods/Cosmetics 0.7% 290,200 American Safety Razor Co.* .................... 3,409,850
83,300 Colgate-Palmolive Co. ........................ 5,497,800
-----------
8,907,650
-----------
HEALTH 9.0%
Biotechnology 0.5% 200,000 BioChem Pharma, Inc.* ......................... 3,200,000
200,000 Centocor Inc.* ................................ 3,175,000
-----------
6,375,000
-----------
Health Industry Services 2.1% 300,000 U.S. HealthCare, Inc. ........................ 13,275,000
300,000 United Healthcare Corp. ....................... 14,025,000
-----------
27,300,000
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
-----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Hospital Management 1.7% 500,000 Columbia/HCA Healthcare Corp. ............... 21,500,000
-----------
Medical Supply & Specialty 0.5% 200,000 Bergen Brunswig Corp. "A" .................... 5,350,000
29,800 Heart Technology Inc.* ...................... 558,750
-----------
5,908,750
-----------
Pharmaceuticals 4.2% 787,500 Astra AB "B" (Free) .......................... 20,401,140
285,000 Baxter International Inc. ................... 9,333,750
400,000 Carter-Wallace Inc. .......................... 4,750,000
100,000 Eli Lilly Co. ................................ 7,312,500
100,000 Merck & Co. Inc. ............................. 4,262,500
6,200 Schering AG .................................. 4,571,740
60,000 Schering-Plough Corp. ........................ 4,462,500
-----------
55,094,130
-----------
COMMUNICATIONS 9.9%
Cellular Telephone 2.5% 314,900 AirTouch Communications, Inc.* ............... 8,581,025
360,855 Associated Group, Inc. "A"* ................. 7,126,886
360,855 Associated Group, Inc. "B"* ................. 6,856,245
10,000 Grupo Iusacell S.A. de CV "D" (ADR)* ......... 103,750
217,600 Grupo Iusacell S.A. de CV "L" (ADR)* ......... 2,584,000
1,600 Korea Mobile Telecom (b) ..................... 1,225,863
420,000 NEXTEL Communications Inc. "A"* .............. 5,722,500
-----------
32,200,269
-----------
Telephone/Communications 7.4% 416,200 American Telephone & Telegraph Co. ........... 21,538,350
967,800 Century Telephone Enterprises ................ 29,396,925
415 DDI Corp. ................................... 3,585,829
300,000 Mobile Telecommunications Technology Corp.* .. 6,937,500
100,000 Telecom Argentina S.A. "B" (ADR) ............. 4,325,000
10,500,000 Telecomunicacoes de Sao Paulo S.A. (pfd.) .... 1,086,207
356,000 Telefonica de Argentina (ADR) ................ 8,588,500
526,000 Telephone & Data Systems, Inc. ............... 20,777,000
-----------
96,235,311
-----------
FINANCIAL 9.4%
Banks 2.9% 400,000 Citicorp ..................................... 17,000,000
14,000 First Empire State Corp. ..................... 2,394,000
550,600 MBNA Corp. ................................... 15,967,400
51,000 Mercantile Bancorporation Inc. ............... 1,861,500
-----------
37,222,900
-----------
Insurance 5.7% 200,000 American International Group, Inc. ........... 20,850,000
300,000 EXEL, Ltd. ................................... 13,237,500
156,700 General Re Corp. ............................. 20,684,400
189,100 Liberty Corp. ................................ 5,200,250
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
SCUDDER CAPITAL GROWTH FUND
-----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
100,000 MBIA Inc. ................................... 6,287,500
260,700 Mid Ocean Limited* .......................... 7,104,075
-----------
73,363,725
-----------
Other Financial Companies 0.3% 51,600 Federal National Mortgage Association ........ 4,198,950
-----------
Real Estate 0.5% 542,650 Price Enterprises, Inc. ...................... 6,376,138
-----------
MEDIA 20.0%
Broadcasting &
Entertainment 8.8% 300,000 BET Holdings Inc. "A"* ....................... 5,212,500
109,500 Jacor Communications, Inc. "A"* .............. 1,478,250
200,000 King World Productions, Inc.* ................ 7,875,000
117,700 Savoy Pictures Entertainment Inc.* ........... 941,600
1,950,000 Time Warner Inc. ............................. 73,612,500
50,400 Viacom Inc. "A"* ............................. 2,305,800
484,474 Viacom Inc. "B"* ............................. 21,680,212
-----------
113,105,862
-----------
Cable Television 11.2% 3,254,250 Comcast Corp. "A" ............................ 50,847,656
2,803,200 Rogers Communications Inc. "B"* .............. 36,566,527
2,730,883 Tele-Communications Inc. "A"* ................ 57,348,543
-----------
144,762,726
-----------
SERVICE INDUSTRIES 2.9%
Environmental Services 0.6% 200,000 Browning Ferris Industries ................... 6,800,000
-----------
Investment 0.6% 200,000 Franklin Resources Inc. ...................... 7,775,000
-----------
Miscellaneous Consumer
Services 1.0% 300,000 H & R Block Inc. ............................. 13,012,500
-----------
Printing/Publishing 0.7% 200,000 Reuters Holdings PLC "B" (ADR) ............... 9,200,000
-----------
DURABLES 1.5%
Automobiles 0.8% 220,000 Autoliv AB (Free) ............................ 8,303,515
300,000 Collins & Aikman Corp.* ...................... 2,400,000
-----------
10,703,515
-----------
Telecommunications
Equipment 0.7% 63,100 Nokia AB Oy (Preference) ..................... 9,194,634
-----------
MANUFACTURING 2.5%
Containers & Paper 0.9% 200,000 James River Corp. of Virginia ................ 5,200,000
260,000 Stone Container Corp.* ....................... 5,947,500
-----------
11,147,500
-----------
Diversified Manufacturing 0.3% 300,000 Canadian Pacific Ltd. ........................ 4,500,000
-----------
Electrical Products 1.3% 500,000 Philips NV (New York shares) ................. 17,062,500
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
----------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TECHNOLOGY 12.8%
Computer Software 2.9% 189,700 Informix Corp.* .............................. 6,520,938
436,000 Microsoft Corp.* ............................. 31,010,500
-----------
37,531,438
-----------
Diverse Electronic Products 2.2% 200,000 Applied Materials, Inc.* ..................... 11,025,000
325,400 Motorola Inc. ................................ 17,774,975
-----------
28,799,975
-----------
Electronic Components/
Distributors 0.1% 60,000 LG Electronics Inc. (GDR) .................... 840,000
-----------
Electronic Data Processing 1.6% 100,000 Digital Equipment Corp.* ..................... 3,787,500
200,000 International Business Machines Corp. ........ 16,375,000
-----------
20,162,500
-----------
Office/Plant Automation 1.5% 500,000 Cisco Systems, Inc.* ......................... 19,062,500
-----------
Semiconductors 4.5% 111,600 Advanced Micro Devices Inc.* ................ 3,780,450
160,000 Intel Corp. .................................. 13,580,000
800,000 National Semiconductor Corp.* ................ 14,000,000
300,000 Texas Instruments Inc. ....................... 26,550,000
-----------
57,910,450
-----------
ENERGY 5.3%
Oil & Gas Production 2.5% 140,000 Anadarko Petroleum Corp. ..................... 6,125,000
200,000 Apache Corp. ................................. 5,450,000
708,000 Perez Companc S.A. "B" ....................... 2,633,628
395,300 Perez Companc S.A. "B" (ADR) ................. 2,915,337
396,700 Triton Energy Corp.* ......................... 15,173,775
-----------
32,297,740
-----------
Oil Companies 2.1% 200,000 Chevron Corp. ................................ 9,600,000
960,000 YPF SA "D" (ADR) ............................. 18,240,000
-----------
27,840,000
-----------
Oilfield Services/Equipment 0.7% 954,300 Global Marine Inc.* .......................... 4,055,775
309,600 Smith International Inc.* .................... 4,411,800
-----------
8,467,575
-----------
METALS AND MINERALS 1.7%
Steel & Metals 216,100 Allegheny Ludlum Corp. ....................... 4,511,087
103,200 Oregon Steel Mills Inc. ...................... 1,883,400
40,858 Pohang Iron & Steel Co., Ltd. (b) ............ 4,111,750
131,400 Pohang Iron & Steel Co., Ltd. (ADR) .......... 3,794,175
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
SCUDDER CAPITAL GROWTH FUND
-----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
620,000 Usinas Siderurgicas de Minas Gerais S/A
(pfd.) (ADR) .............................. 7,130,000
-------------
21,430,412
-------------
CONSTRUCTION 0.7%
Building Products 0.3% 200,000 USG Corp.* .................................. 4,600,000
-----------
Homebuilding 0.4% 474,000 Hovnanian Enterprises Inc. "A"* ............. 2,666,250
92,200 Kaufman & Broad Home Corp. .................. 1,094,875
100,000 Toll Brothers Inc.* ......................... 1,162,500
-------------
4,923,625
-------------
TRANSPORTATION 2.0%
Marine Transportation 548,000 Carnival Corp., Class A ..................... 12,809,500
477,700 Royal Caribbean Cruises Ltd. ................ 12,479,913
-------------
25,289,413
UTILITIES 3.2% -------------
Electric Utilities 135,000 CMS Energy Corp. ............................ 3,155,625
80,000 Centerior Energy Corp. ...................... 710,000
3,800 Central Costanera SA (ADR) .................. 112,337
93,264,800 Companhia Energetica de Minas Gerais (pfd.).. 1,867,371
100,000 Companhia Energetica de Minas Gerais
(pfd.) (ADR) ............................... 2,000,000
386,200 Destec Energy Inc.* ........................ 3,862,000
30,000 Eastern Utilities Association ............... 716,250
103,000 Empresa Nacional de Electricidad SA (ADR) ... 4,364,625
40,000 Illinova Corp. .............................. 910,000
120,000 Korea Electric Power Co.* ................... 4,184,057
115,000 Midlands Electricity PLC .................... 1,131,926
100,000 National Power PLC* ......................... 691,834
30,000 Pacific Gas & Electric Co. .................. 746,250
200,000 PowerGen PLC* ............................... 1,497,084
533,000 Public Service Co. of New Mexico* .......... 6,662,500
50,000 Shandong Huaneng Power Co. (ADR) ............ 450,000
50,000 Southern Electric PLC ....................... 476,345
120,000 TNP Enterprises Inc. ....................... 1,800,000
244,200 Unicom Corp. ................................ 5,799,750
-------------
41,137,954
-------------
TOTAL COMMON STOCKS
(Cost $1,130,542,155) ...................... 1,203,906,831
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
----------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
-----------------------------------------------------------------------
2.5% WARRANTS
-----------------------------------------------------------------------
TECHNOLOGY
Semiconductors 1,521,500 Intel Corp. Warrants (expire 3/14/98)*
(Cost $18,335,138) ........................ 33,187,719
-------------
-----------------------------------------------------------------------
0.2% PURCHASED OPTIONS
-----------------------------------------------------------------------
Number of Contracts
-----------------------------------------------------------------------
2,000 Put on Intel Corp., strike price 85,
expiration date 7/22/95 ................... 925,000
2,000 Put on Intel Corp., strike price 90,
expiration date 7/22/95 ................... 1,300,000
1,000 Put on Texas Instruments, strike price 95,
expiration date 7/22/95 ................... 925,000
-------------
TOTAL PURCHASED OPTIONS
(Cost $2,366,620) ......................... 3,150,000
-------------
----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $1,208,342,171) (a) ................. 1,292,402,641
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
SCUDDER CAPITAL GROWTH FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $1,208,342,171. At
March 31, 1995, net unrealized appreciation for all securities based on
tax cost was $84,060,470. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market
value over tax cost of $183,700,250 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost
over market value of $99,639,780.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Trustees. The cost of these securities at March 31, 1995 aggregated
$8,913,051. See Note A of the Notes to Financial Statements.
(c) New shares issued during 1995, eligible for a pro rata share of 1995
dividends.
* Non-income producing security.
<TABLE>
At March 31, 1995, outstanding written call options were as follows (Note A):
<CAPTION>
NUMBER OF EXPIRATION STRIKE MARKET
CONTRACTS DATE PRICE VALUE ($)
--------------------------------------------------------
<S> <C> <C> <C> <C>
S&P 500 Index ........ 600 Apr. 95 495 669,000
S&P 500 Index ........ 600 Apr. 95 500 468,000
---------
Total outstanding written options (Premiums received $640,490) ........... 1,137,000
=========
</TABLE>
<TABLE>
Transactions in written call options during the six months ended March 31, 1995 were as follows:
<CAPTION>
PREMIUMS
NUMBER OF CONTRACTS RECEIVED ($)
-------------------------------------------------
<S> <C> <C>
Outstanding at
September 30, 1994 ............ - -
Contracts written ............. 4,200 1,445,656
Contracts closed .............. (2,500) (729,043)
Contracts expired ............. (500) (76,123)
-------------------------------------------------
Outstanding at
March 31, 1995 ................ 1,200 640,490
====== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
----------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
----------------------------------------------------------------------------------------------
<CAPTION>
MARCH 31, 1995 (UNAUDITED)
----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $1,208,342,171)
(Note A) ............................................... $ 1,292,402,641
Cash ...................................................... 762
Receivables:
Investments sold ....................................... 28,590,618
Dividends and interest ................................. 2,187,191
Fund shares sold ....................................... 1,660,948
Other assets .............................................. 6,146
---------------
Total assets ....................................... 1,324,848,306
LIABILITIES
Payables:
Investments purchased .................................. $ 18,439,383
Fund shares redeemed ................................... 2,623,292
Accrued management fee (Note C) ........................ 730,361
Other accrued expenses (Note C) ........................ 429,656
Written options, at market (premiums
received $640,490) (Note A) ........................ 1,137,000
---------------
Total liabilities .................................. 23,359,692
---------------
Net assets, at market value ............................... $ 1,301,488,614
===============
NET ASSETS
Net assets consist of:
Undistributed net investment income .................... $ 1,562,710
Unrealized appreciation (depreciation) on:
Investments ........................................ 84,060,470
Written Options .................................... (496,510)
Foreign currency related transactions .............. 293
Accumulated net realized gain ......................... 45,896,883
Shares of beneficial interest .......................... 682,858
Additional paid-in capital ............................. 1,169,781,910
---------------
Net assets, at market value ............................... $ 1,301,488,614
===============
NET ASSET VALUE, offering and redemption price per
share ($1,301,488,614 / 68,285,845 outstanding
shares of beneficial interest, $.01 par value,
unlimited number of shares authorized) ................. $19.06
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
SCUDDER CAPITAL GROWTH FUND
<TABLE>
FINANCIAL STATEMENTS
----------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
----------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED MARCH 31, 1995 (UNAUDITED)
----------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of $112,930)...... $ 7,193,621
Interest .................................................. 839,275
------------
8,032,896
Expenses:
Management fee (Note C) ................................... $ 4,400,780
Services to shareholders (Note C) ......................... 1,493,738
Custodian and accounting fees (Note C) .................... 200,394
Trustees' fees (Note C) ................................... 15,602
Reports to shareholders ................................... 203,395
Auditing .................................................. 25,050
State registration ........................................ 15,836
Legal ..................................................... 11,170
Other ..................................................... 44,757 6,410,722
------------- ------------
Net investment income ..................................... 1,622,174
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments ............................................ 42,141,665
Options ................................................ (479,400)
Foreign currency related transactions .................. (134,115) 41,528,150
Net unrealized appreciation (depreciation) during -------------
the period on:
Investments ............................................ (25,484,252)
Written Options ........................................ (496,510)
Foreign currency related transactions .................. 293 (25,980,469)
------------- ------------
Net gain on investment transactions ....................... 15,547,681
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...... $ 17,169,855
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
-----------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
-----------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED
1995 SEPTEMBER 30,
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED) 1994
-----------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) ......................... $ 1,622,174 $ (1,586,189)
Net realized gain from investment transactions ....... 41,528,150 82,893,794
Net unrealized depreciation on
investment transactions during the period ......... (25,980,469) (146,799,743)
Net increase (decrease) in net assets -------------- --------------
resulting from operations ......................... 17,169,855 (65,492,138)
Distributions to shareholders from -------------- --------------
net realized gains ($.73 and $2.62
per share, respectively) .......................... (48,924,819) (156,922,223)
Fund share transactions: -------------- --------------
Proceeds from shares sold ............................ 102,387,018 406,188,595
Net asset value of shares issued to
shareholders in reinvestment of distributions ..... 47,065,999 150,450,426
Cost of shares redeemed .............................. (154,510,951) (383,278,397)
Net increase (decrease) in net assets from -------------- --------------
Fund share transactions ........................... (5,057,934) 173,360,624
-------------- --------------
DECREASE IN NET ASSETS ............................... (36,812,898) (49,053,737)
Net assets at beginning of period .................... 1,338,301,512 1,387,355,249
-------------- --------------
NET ASSETS AT END OF PERIOD (INCLUDING
undistributed net investment income
of $1,562,710 and accumulated net
investment loss of $59,464, respectively) ......... $1,301,488,614 $1,338,301,512
============== ==============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period ............ 68,475,991 60,171,937
-------------- --------------
Shares sold .......................................... 5,423,428 19,506,116
Shares issued to shareholders in reinvestment
of distributions .................................. 2,577,547 7,147,289
Shares redeemed ...................................... (8,191,121) (18,349,351)
-------------- --------------
Net increase in Fund shares .......................... (190,146) 8,304,054
-------------- --------------
Shares outstanding at end of period .................. 68,285,845 68,475,991
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
SCUDDER CAPITAL GROWTH FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL STATEMENTS.
Six Months Ended
March 31, Years Ended September 30,
1995 -------------------------------------------------------------------------------------
(Unaudited) 1994 1993(b) 1992 1991 1990 1989 1988 1987 1986 1985
-------------- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period.......... $19.54 $23.06 $19.12 $19.30 $14.77 $22.30 $16.10 $20.41 $17.17 $15.35 $13.70
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from
investment
operations:
Net investment
income (loss)... .02 (.02) .06 .12 .20 .30(a) .21 .09 .16 .26 .26
Net realized and
unrealized gain
(loss) on
investment
transactions.... .23 (.88) 5.23 .90 6.05 (6.22) 6.61 (1.82) 5.77 3.67 2.19
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from
investment
operations........ .25 (.90) 5.29 1.02 6.25 (5.92) 6.82 (1.73) 5.93 3.93 2.45
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions
from:
Net investment
income.......... -- -- (.10) (.22) (.37) (.16) (.07) (.20) (.23) (.23) (.29)
Net realized
gains on
investment
transactions.... (.73) (2.62) (1.25) (.98) (1.35) (1.45) (.55) (2.38) (2.46) (1.88) (.51)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions. (.73) (2.62) (1.35) (1.20) (1.72) (1.61) (.62) (2.58) (2.69) (2.11) (.80)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period..... $19.06 $19.54 $23.06 $19.12 $19.30 $14.77 $22.30 $16.10 $20.41 $17.17 $15.35
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%).... 1.42(d) (4.72) 28.83 5.61 45.85 (28.20) 44.05 (5.61) 39.03 28.46 18.88
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
period ($ millions) 1,301 1,338 1,387 1,054 1,058 712 1,013 491 583 414 302
Ratio of operating
expenses to
average net
assets (%)........ .99(c) .97 .96 .98 1.04 .94 .88 .95 .88 .84 .86
Ratio of net
investment income
(loss) to average
net assets (%).... .25(c) (.12) .22 .57 1.24 1.56 1.22 .63 .86 1.50 1.74
Portfolio turnover
rate (%).......... 80.4(c) 75.8 92.2 92.4 93.2 87.9 55.7 48.5 58.2 55.8 57.6
<FN>
(a) Net investment income per share includes nonrecurring dividend income amounting to $.14 per share.
(b) Effective October 1, 1992, the Fund discontinued using equalization accounting.
(c) Annualized
(d) Not annualized
</FN>
</TABLE>
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
--------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------------------
Scudder Capital Growth Fund (the "Fund") is a diversified series of Scudder
Equity Trust (the "Trust"). The Trust is organized as a Massachusetts business
trust and is registered under the Investment Company Act of 1940, as amended,
as an open-end management investment company. The policies described below are
followed consistently by the Fund in the preparation of its financial statements
in conformity with generally accepted accounting principles.
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 National Association of
Securities Dealers Automatic Quotation ("NASDAQ") System, for which there have
been sales, are valued at the most recent sale price reported on such system.
If there are no such sales, the value is the high or "inside" bid quotation.
Securities which are not quoted on the NASDAQ System but are traded in another
over-the-counter market are valued at the most recent sale price on such market.
If no sale occurred, the security is then valued at the calculated mean between
the most recent bid and asked quotations. If there are no such bid and asked
quotations, the most recent bid quotation shall be used.
Portfolio debt securities with remaining maturities greater than sixty days are
valued by pricing agents approved by the officers of the Fund, which quotations
reflect broker/dealer-supplied valuations and electronic data processing
techniques. If the pricing agents are unable to provide such quotations, the
most recent bid quotation supplied by a bona fide market maker shall be used.
Short-term investments having a maturity of sixty days or less are valued at
amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Trustees. Securities valued in good
faith by the Valuation Committee of the Board of Trustees at fair value amounted
to $10,105,459 (0.78% of net assets) and have been noted in the investment
portfolio as of March 31, 1995.
21
<PAGE>
SCUDDER CAPITAL GROWTH FUND
--------------------------------------------------------------------------------
OPTIONS. The Fund may write (sell) exchange-listed and over-the-counter call
and put options on securities and other financial instruments. When the Fund
writes a call, it gives the purchaser of the call option the right to buy the
underlying security at the price specified in the option (the "exercise price")
at any time during the option period, generally ranging up to nine months.
When the Fund writes a put option, it gives the purchaser of the put option
the right to sell the underlying security to the Fund at the exercise price
at any time during the option period, generally ranging up to nine months.
If the option expires unexercised, the Fund will realize income, in the form of
a capital gain, to the extent of the amount received for the option (the
"premium"). If the option is exercised, a decision over which the Fund has no
control, the Fund must sell the underlying security to the option holder or
purchase the underlying security from the option holder at the exercise price.
Certain options, including options on indices will require cash settlement
by the Fund if the option is exercised. By writing a call option, the Fund
foregoes, in exchange for the premium less the commission ("net premium"), the
opportunity to profit during the option period from an increase in the market
value of the underlying security above the exercise price. By writing a put
option, the Fund, in exchange for the net premium received, accepts the risk of
a decline in the market value of the underlying security below the exercise
price.
The liability representing the Fund's obligation under an exchange traded
written call or put option is valued at the last sale price or, in the absence
of a sale, the mean between the closing bid and asked quotations or at the
most recent asked quotation if no bid and asked quotations are available.
Over-the-counter written options are valued at the most recent asked quotation.
In addition, the Fund may purchase, singly and in combination, call and put
options on securities and other financial instruments. Exchange traded purchased
options are valued at the last sales price or, in the absence of a sale, the
mean between the closing bid and asked quotations or at the most recent bid
quotation if no bid and asked quotations are available. Over-the-counter
purchased options are valued at the most recent bid quotation.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement and the underlying collateral, is equal to at least 100.5% of the
resale price.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. In connection with portfolio
purchases and sales of securities denominated in a foreign currency, the Fund
may enter into forward foreign currency exchange contracts ("contracts").
Additionally, the Fund may enter into contracts to hedge certain other foreign
currency denominated assets. Contracts are recorded at market value. Certain
risks may arise upon entering into these contracts from the potential inability
of counterparties to meet the terms of their contracts. Realized and
unrealized gains and losses arising from such transactions are included in net
realized and unrealized gain (loss) from foreign currency related transactions.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and other
liabilities at the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the rates of exchange prevailing on
the respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes
in market prices of the investments. Such fluctuations are included with the
net realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.
23
<PAGE>
SCUDDER CAPITAL GROWTH FUND
--------------------------------------------------------------------------------
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment companies
and to distribute all of its taxable income to its shareholders. Accordingly,
the Fund paid no federal income taxes and no federal income tax provision was
required.
DISTRIBUTION OF INCOME AND GAINS. Distributions of net investment income 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. Earnings
and profits distributed to shareholders on redemption of Fund shares ("tax
equalization") may be utilized by the Fund, to the extent permissible, as part
of the Fund's dividends paid deduction on its federal tax return.
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. The
differences primarily relate to foreign denominated investments, investments in
passive foreign investment companies, and deferral of certain losses for
tax purposes. 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.
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 an accrual basis. Original
issue discounts are accreted for both tax and financial reporting purposes.
B. PURCHASES AND SALES OF SECURITIES
--------------------------------------------------------------------------------
During the six months ended March 31, 1995, purchases and sales of investment
securities (excluding short-term investments) aggregated $513,725,896 and
$582,363,822, respectively.
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
C. RELATED PARTIES
--------------------------------------------------------------------------------
Under the Fund's Investment Management Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Fund agrees to pay to the Adviser
a fee equal to an annual rate of approximately 0.75% of the first $500,000,000
of average daily net assets, 0.65% of the next $500,000,000 of such net assets
and 0.60% of such net assets in excess of $1,000,000,000, 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
objectives, 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 Agreement also provides that if the Fund's expenses, exclusive of
taxes, interest, and extraordinary expenses, exceed specified limits, such
excess, up to the amount of the management fee, will be paid by the Adviser. For
the six months ended March 31, 1995, the fee pursuant to the Agreement amounted
to $4,400,780 which was equivalent to an annual effective rate of 0.68% of the
Fund's average daily net assets.
Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the Adviser,
is the transfer, dividend paying and shareholder service agent for the Fund.
Included in services to shareholders is $1,336,793 charged to the Fund by SSC
for the six months ended March 31, 1995, of which $223,505 is unpaid at March
31, 1995.
Effective October 18, 1994, Scudder Fund Accounting Corporation ("SFAC"), a
wholly-owned subsidiary of the Adviser, assumed responsibility 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 March 31, 1995, the
amount charged to the Fund by SFAC aggregated $66,489, of which $12,270 is
unpaid at March 31, 1995.
The Fund pays each of its Trustees not affiliated with the Adviser $4,000
annually plus specified amounts for attended board and committee meetings. For
the six months ended March 31, 1995, Trustees' fees aggregated $15,602.
25
<PAGE>
INVESTMENT PRODUCTS AND SERVICES
<TABLE>
<C> <C>
The Scudder Family of Funds
Money Market Income
Scudder Cash Investment Trust Scudder Emerging Markets Income Fund
Scudder U.S. Treasury Money Fund Scudder GNMA Fund
Tax Free Money Market+ Scudder Income Fund
Scudder Tax Free Money Fund Scudder International Bond Fund
Scudder California Tax Free Money Fund* Scudder Short Term Bond Fund
Scudder New York Tax Free Money Fund* Scudder Short Term Global Income Fund
Tax Free+ Scudder Zero Coupon 2000 Fund
Scudder California Tax Free Fund* Growth
Scudder High Yield Tax Free Fund Scudder Capital Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Managed Municipal Bonds Scudder Global Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Global Small Company Fund
Scudder Massachusetts Tax Free Fund* Scudder Gold Fund
Scudder Medium Term Tax Free Fund Scudder Greater Europe Growth Fund
Scudder New York Tax Free Fund* Scudder International Fund
Scudder Ohio Tax Free Fund* Scudder Latin America Fund
Scudder Pennsylvania Tax Free Fund* Scudder Pacific Opportunities Fund
Growth and Income Scudder Quality Growth Fund
Scudder Balanced Fund Scudder Value Fund
Scudder Growth and Income Fund The Japan Fund
Retirement Plans and Tax-Advantaged Investments
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan+++* (a variable annuity) Profit Sharing and Money Purchase
401(k) Plans Pension Plans
Closed-End Funds#
The Argentina Fund, Inc. The Latin America Dollar Income Fund, Inc.
The Brazil Fund, Inc. Montgomery Street Income Securities, Inc.
The First Iberian Fund, Inc. Scudder New Asia Fund, Inc.
The Korea Fund, Inc. Scudder New Europe Fund, Inc.
Scudder World Income
Opportunities Fund, Inc.
Institutional Cash Management
Scudder Institutional Fund, Inc.
Scudder Fund, Inc.
Scudder Treasurers Trust(TM)++
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. +A portion of the income from the tax-free funds may be subject to
federal, state, and local taxes. *Not available in all states. +++A no-load variable annuity contract provided by Charter National
Life Insurance Company and its affiliate, offered by Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by Scudder,
Stevens & Clark, Inc. are traded on various stock exchanges. ++For information on Scudder Treasurers Trust,(TM) an institutional
cash management service that utilizes certain portfolios of Scudder Fund, Inc. ($100,000 minimum), call 1-800-541-7703.
</TABLE>
26
<PAGE>
HOW TO CONTACT SCUDDER
<TABLE>
<C> <C>
Account Service and Information
For existing account service and transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163
For account updates, prices, yields,
exchanges, and redemptions SCUDDER
AUTOMATED INFORMATION LINE (SAIL)
1-800-343-2890
Investment Information
To receive information about the Scudder
funds, for additional applications and
prospectuses, or for investment questions
SCUDDER INVESTOR RELATIONS
1-800-225-2470
For establishing 401(k) and 403(b) plans
SCUDDER DEFINED CONTRIBUTION SERVICES
1-800-323-6105
Please address all correspondence to
THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
Many shareholders enjoy the personal,
one-on-one service of the Scudder Funds
Centers. Check for a Funds Center near
you--they can be found in the following
cities:
Boca Raton New York
Boston Portland, OR
Chicago San Diego
Cincinnati San Francisco
Los Angeles Scottsdale
For information on Scudder For information on Scudder
Treasurers Trust,(TM)an Institutional Funds,* funds
institutional cash management designed to meet the broad
service for corporations, investment management and banks and
and trusts that uses certain other institutions, call
portfolios of Scudder Fund, 1-800-854-8525.
Inc.* ($100,000 minimum), call
1-800-541-7703.
Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a prospectus
with more complete information, including management fees and expenses.
Please read it carefully before you invest or send money.
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Celebrating 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven Clark,
Scudder, Stevens & Clark was the first independent investment counsel firm in
the United States. Since its birth, Scudder's pioneering spirit and commitment
to professional long-term investment management have helped shape the investment
industry. In 1928, we introduced the nation's first no-load mutual fund. Today
we offer 36 pure no load(TM) funds, including the first international mutual
fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication to
research and fundamental investment disciplines have helped us become one of the
largest and most respected investment managers in the world. Though times have
changed since our beginnings, we remain committed to our long-standing
principles: managing money with integrity and distinction; keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.
