Scudder Capital Growth Fund
Annual Report
September 30, 1996
Pure No-Load(TM) Funds
A fund designed to maximize long-term capital growth through a diversified
portfolio of growth-oriented common stocks.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
<PAGE>
Table of Contents
2 In Brief
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
9 Investment Portfolio
15 Financial Statements
18 Financial Highlights
19 Notes to Financial Statements
23 Report of Independent Accountants
24 Tax Information
25 Officers and Trustees
26 Investment Products and Services
27 How to Contact Scudder
o Scudder Capital Growth Fund provided a total return of 15.94% for the fiscal
year ended September 30, 1996, roughly in keeping with the return of the average
growth fund tracked by Lipper Analytical Services.
o At the end of September, the portfolio's largest weighting was in interest
rate sensitive issues, which include financial, utility, and communications
stocks.
o The average price-earnings ratio (based on anticipated 1997 earnings) for
portfolio holdings on September 30 was approximately 12 times earnings, versus
14.5 for S&P 500 companies, illustrating the Fund's value orientation.
2-Scudder Capital Growth Fund
<PAGE>
Letter From the Fund's President
Dear Shareholders,
Your shareholder report has a new look which we hope you will enjoy. The
new format is designed to enhance the attractiveness and readability of the
annual and semiannual reports. Let us know what you think.
In this age of electronic information we have also taken a look at our
short-form quarterly reports, sent after the end of your Fund's first and third
fiscal quarters. Many shareholders have told us that these reports are no longer
as useful as they once were, so they have been discontinued. Portfolio
information, however, will be available on a more timely basis going forward --
each month in most cases -- through Scudder's Web site, Scudder's automated
information line (SAIL), and by calling a Scudder Investor Relations
representative.
We are pleased to report that Scudder Capital Growth Fund provided a solid
total return of 15.94% for the fiscal year ended September 30, 1996. As the
management discussion that follows outlines, the Fund continues to apply a
disciplined approach to investing in the U.S. stock market. We believe that the
key role value plays in the Fund's stock selection process makes it particularly
appropriate for investors seeking capital appreciation over time without undue
risk.
Finally, for those of you who like to stay informed about new funds offered
by Scudder, we introduced two new equity funds in September. Scudder Classic
Growth Fund seeks long-term capital appreciation with a higher degree of
principal stability than the average growth fund. Scudder 21st Century Growth
Fund takes a more aggressive approach, focusing primarily on emerging companies
with the potential to benefit from the rapidly changing industrial and economic
landscape. For more information on these and other Scudder Fund products and
services, please turn to page 26.
Thank you for your continued investment in Scudder Capital Growth Fund.
Please do not hesitate to call Investor Relations at 1-800-225-2470 with any
questions regarding your account.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Capital Growth Fund
3-Scudder Capital Growth Fund
<PAGE>
PERFORMANCE UPDATE as of September 30, 1996
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
9/30/96 $10,000 Cumulative Annual
- --------------------------------------
SCUDDER CAPITAL GROWTH FUND
- --------------------------------------
1 Year $11,594 15.94% 15.94%
5 Year $18,332 83.32% 12.89%
10 Year $36,288 262.88% 13.76%
- --------------------------------------
S&P 500 INDEX
- --------------------------------------
1 Year $12,034 20.34% 20.34%
5 Year $20,315 103.15% 15.21%
10 Year $40,429 304.29% 14.98%
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
YEARLY PERIODS ENDED SEPTEMBER 30
SCUDDER CAPITAL GROWTH FUND
Year Amount
- ----------------------
'86 $10,000
'87 $13,903
'88 $13,123
'89 $18,904
'90 $13,572
'91 $19,795
'92 $20,906
'93 $26,934
'94 $25,663
'95 $31,297
'96 $36,288
S&P 500 INDEX
Year Amount
- ----------------------
'86 $10,000
'87 $14,342
'88 $12,569
'89 $16,717
'90 $15,173
'91 $19,901
'92 $22,100
'93 $24,974
'94 $25,894
'95 $33,596
'96 $40,429
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 SEPTEMBER 30
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
-------------------------------------------------------------------------------
NET ASSET VALUE... $20.41 $16.10 $22.30 $14.77 $19.30 $19.12 $23.06 $19.54 $22.92 $22.64
INCOME DIVIDENDS.. $ .23 $ .20 $ .07 $ .16 $ .37 $ .22 $ .10 $ - $ - $ .08
CAPITAL GAINS
DISTRIBUTIONS..... $ 2.46 $ 2.38 $ .55 $ 1.45 $ 1.35 $ .98 $ 1.25 $ 2.62 $ .73 $ 3.50
FUND TOTAL
RETURN (%)........ 39.03 -5.61 44.05 -28.20 45.85 5.61 28.83 -4.72 21.96 15.94
INDEX TOTAL
RETURN (%)........ 43.42 -12.39 32.95 -9.24 31.09 11.04 12.97 3.68 29.75 20.34
</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-Scudder Capital Growth Fund
<PAGE>
PORTFOLIO SUMMARY as of September 30, 1996
- ---------------------------------------------------------------------------
DIVERSIFICATION
- ---------------------------------------------------------------------------
Equity Securities 99%
Cash Equivalents 1%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The Fund is essentially fully invested in common stocks.
- --------------------------------------------------------------------------
SECTORS
(Excludes 1% Cash Equivalents)
- --------------------------------------------------------------------------
Financial 25%
Consumer Staples 13%
Manufacturing 10%
Energy 9%
Health 7%
Technology 6%
Consumer Discretionary 6%
Durables 6%
Communications 6%
Other 12%
- ---------------------------------------------
100%
- ---------------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The Fund's single largest concentration is in the interest rate sensitive
financial services sector.
- --------------------------------------------------------------------------
10 LARGEST EQUITY HOLDINGS
(21% OF PORTFOLIO)
- --------------------------------------------------------------------------
1.FEDERAL NATIONAL MORTGAGE ASSOCIATION
Insurer and holder of mortgage loans
2.ALLSTATE CORP.
Property, liability, and life insurance company
3.AMERICAN HOME PRODUCTS CORP.
Major U.S. diversified pharmaceutical company
4.BELL ATLANTIC CORP.
Telecommunication service
5.TRAVELERS GROUP, INC.
Provider of diversified financial services
6.PHILIP MORRIS COMPANIES INC.
Tobacco, food products and brewing
7.AMERICAN EXPRESS CREDIT CORP.
Travel and investment services, insurance, banking
8.BRISTO-MYERS SQUIBB
Diversified pharmaceutical and consumer products company
9.INTERNATIONAL BUSINESS MACHINES CORP.
Principal manufacturer and servicer of business and computing machines
10.WHRILPOOL CORP.
Manufacturer of major household appliances
Top holdings include such familiar names as IBM and American Express.
- -----------------------------------------------------------------------------
For more complete details about the Fund's investment portfolio,
see page 9. A monthly Investment Portfolio Summary and quarterly Portfolio
Holdings are available upon request.
5-Scudder Capital Growth Fund
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
Scudder Capital Growth Fund provided a total return of 15.94% for the fiscal
year ended September 30, 1996, roughly in keeping with the 15.89% return of the
average growth fund tracked by Lipper Analytical Services over the same period.
For the same 12 months, the overall stock market as gauged by the unmanaged S&P
500 Index returned 20.34%.
Market Sentiment Rotates
For most of the first half of the Fund's fiscal period, the U.S. stock market
was buoyed by slow growth, a low rate of inflation, and the prospect of further
interest rate declines. In March, stocks began to display increasing volatility
as investors reacted to conflicting signals about the direction of economic
growth, inflation and interest rates. During the second quarter of 1996, market
sentiment shifted away from the value stocks held by the Fund. The unmanaged
Russell 1000 Value Index provided a total return of 2.04% between April and June
as compared to 6.33% for the unmanaged Russell 1000 Growth Index. This rotation
in market leadership accounted for the bulk of the Fund's underperformance not
only for the second quarter but for the year versus the overall stock market as
gauged by the S&P 500. We remain confident that the value-based strategies
employed by the Fund will serve shareholders well over the long term.
Disciplined Investment
Approach
In this rapidly shifting environment, the Fund continued to apply its
disciplined approach to seeking long-term capital appreciation. Our focus is on
the selection of individual stocks, based principally on three criteria:
relative valuation; an assessment of "normal" earnings; and the rating of our
analysts based on fundamental research. By purchasing stocks at reasonable
valuations, we seek to reduce the volatility of the Fund's share price.
Attractive valuation and below normal current earnings are just the starting
point, however, as our analysts evaluate prospective portfolio holdings on the
basis of their own research, digging into each company's financial statements,
and assessing the company's prospects, management, and strategy, among other
factors.
We rank one thousand stocks based on their relative value, earnings outlook, and
fundamentals, and construct a portfolio from among the stocks we rate most
highly. In building the portfolio, risk control is also a central concern. Our
goal is to manage a portfolio with lower price volatility (as measured by
standard deviation) than the S&P 500, and the Fund's share price was in fact
consistently less volatile than the S&P 500 for the 12-month period covered by
this report.
6-Scudder Capital Growth Fund
<PAGE>
Portfolio Structure Stresses
Diversification
Diversification plays a key role in reducing risk. We not only carefully
allocate portfolio assets across what we believe are the most attractive stocks,
but also among broad stock groupings -- i.e. cyclical, non-cyclical (or
"consumer-defensive"), interest rate sensitive, energy -- and sectors that
anticipate changes in the economy in different ways. In this vein, at the end of
September, the portfolio's largest weighting was in interest rate sensitive
issues, which include financial, utility, and communications stocks. This
position, while overweight versus the S&P 500, in part reflects the Fund's focus
on value and the heavy representation of value stocks among the interest rate
sensitive group.
In terms of specific sectors, interest rate sensitive financial stocks are most
heavily represented in the portfolio, at 25% of assets. The Fund's largest
position is in the Federal National Mortgage Association ("Fannie Mae"), an
insurer and holder of mortgage loans. In keeping with our focus on larger
capitalization companies, the Fund's top ten holdings include other such
familiar names as American Express and IBM. At the end of September, the average
price-earnings ratio (based on anticipated 1997 earnings) for portfolio holdings
was approximately 12 times earnings, versus 14.5 for S&P 500 companies,
illustrating the Fund's value orientation.
7-Scudder Capital Growth Fund
<PAGE>
Going forward, we will continue to make gradual changes in the portfolio's
composition as indicated by our analysis. Within the interest rate sensitive
grouping, utility stocks currently appear attractive from a valuation
standpoint, both versus the overall market and by that sector's historical
standards. Conversely, the recent rally in energy stocks has lifted many out of
the undervalued category. Health stocks in the aggregate remain more expensive
than their historical average, although some HMO stock prices have reached
appealingly low levels. While the Fund will typically be underweight in
technology stocks, recent price weakness has brought more of these issues to
levels where they are attractive values. Finally, financial stocks will continue
to provide significant opportunities, given their typical strong profile from a
relative valuation standpoint.
Scudder Capital Growth Fund will continue to apply a disciplined approach to
investing in the stocks of large U.S. companies. While the market environment
will shift periodically in favor of one investment style or another, we feel
confident that the Fund is well-positioned to benefit investors seeking capital
appreciation over time. Thank you for your continued investment in the Fund.
Sincerely,
Your Portfolio Management Team
/s/Kathleen T. Millard /s/Lois R. Friedman
Kathleen T. Millard Lois R. Friedman
Scudder Capital Growth Fund: A Team Approach to Investing
Scudder Capital Growth Fund is managed by a team of Scudder investment
professionals who each play an important role in the Fund's management
process. Team members work together to develop investment strategies and
select securities for the Fund's portfolio. They are supported by Scudder's
large staff of economists, research analysts, traders, and other investment
specialists who work in Scudder's offices across the United States and abroad.
We believe our team approach benefits Fund investors by bringing together many
disciplines and leveraging Scudder's extensive resources.
Lead Portfolio Manager Kathleen T. Millard assumed responsibility for the
Fund's day-to-day management in 1995. Ms. Millard, who joined Scudder in 1991,
has been involved in the investment industry since 1983 and has worked as a
portfolio manager since 1986. Lois R. Friedman, Portfolio Manager, joined the
Fund in 1995 and Scudder in 1994 and has nine years of experience as an equity
analyst.
8-Scudder Capital Growth Fund
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO AS OF SEPTEMBER 30, 1996
<CAPTION>
PRINCIPAL MARKET
AMOUNT($) VALUE($)
- -------------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS 1.5%
- -------------------------------------------------------------------------------
Repurchase Agreement with Donaldson, Lufkin &
Jenrette dated 9/30/96 at 5.7%, to be
repurchased at $24,731,915 on 10/1/96,
collateralized by a $25,268,000 U.S. Treasury ----------
Note, 5.125%, 3/31/98 (Cost $24,728,000) ........... 24,728,000 24,728,000
----------
SHARES
- -------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS 0.5%
- -------------------------------------------------------------------------------
CONSUMER DISCRETIONARY
DEPARTMENT & CHAIN STORES ----------
Kmart 7.75% (Cost $8,180,439) ....................... 158,500 7,746,688
----------
COMMON STOCKS 98%
- -------------------------------------------------------------------------------
CONSUMER DISCRETIONARY 5.4%
APPAREL & SHOES 0.9%
Reebok International Ltd. ........................... 445,900 15,495,025
----------
DEPARTMENT & CHAIN STORES 3.5%
J.C. Penney Co., Inc. ............................... 512,400 27,733,650
Melville Corp. ...................................... 186,600 8,233,725
Rite Aid Corp. ...................................... 617,200 22,373,500
----------
58,340,875
----------
HOME FURNISHINGS 1.0%
Armstrong World Industries, Inc. .................... 265,000 16,529,375
----------
CONSUMER STAPLES 12.4%
ALCOHOL & TOBACCO 4.0%
Anheuser-Busch Companies, Inc. ...................... 856,000 32,207,000
Philip Morris Companies Inc. ........................ 375,000 33,656,250
----------
65,863,250
----------
CONSUMER ELECTRONIC & PHOTOGRAPHIC PRODUCTS 3.7%
Eastman Kodak Co. ................................... 275,100 21,595,350
Polaroid Corp. ...................................... 177,000 7,788,000
Whirlpool Corp. ..................................... 640,600 32,430,375
----------
61,813,725
----------
FOOD & BEVERAGE 3.7%
American Stores Co. ................................. 286,000 11,440,000
ConAgra Inc. ........................................ 362,900 17,872,825
Hershey Foods Corp .................................. 346,000 17,386,500
Unilever NV (New York shares) ....................... 94,000 14,816,750
----------
61,516,075
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9-Scudder Capital Growth Fund
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
- -------------------------------------------------------------------------------
<S> <C> <C>
TEXTILES 1.0%
VF Corporation ...................................... 278,500 16,744,813
-----------
HEALTH 6.8%
HEALTH INDUSTRY SERVICES 1.1%
Bergen Brunswig Corp. "A" ........................... 579,600 18,402,300
-----------
HOSPITAL MANAGEMENT 1.1%
Humana Inc.* ........................................ 884,200 17,905,050
-----------
MEDICAL SUPPLY & SPECIALTY 0.5%
Bausch & Lomb, Inc. ................................. 240,400 8,834,700
-----------
PHARMACEUTICALS 4.1%
American Home Products Corp. ........................ 534,000 34,042,500
Bristol-Myers Squibb Co. ............................ 347,400 33,480,675
-----------
67,523,175
-----------
COMMUNICATIONS 5.5%
TELEPHONE/COMMUNICATIONS
American Telephone & Telegraph Co ................... 306,400 16,009,400
Bell Atlantic Corp. ................................. 565,800 33,877,275
GTE Corp. ........................................... 290,500 11,184,250
MCI Communications Corp. ............................ 626,200 16,046,375
Telefonos de Mexico S.A. de C.V. "L" (ADR) .......... 200,000 6,425,000
US West Inc. ........................................ 275,800 8,205,050
-----------
91,747,350
-----------
FINANCIAL 24.4%
BANKS 9.7%
Banc One Corp. ...................................... 238,000 9,758,000
Bank of Boston Corp. ................................ 414,000 23,960,250
BankAmerica Corp. ................................... 316,900 26,025,413
Chase Manhattan Corp. (New) ......................... 394,100 31,577,263
First Chicago NBD Corp .............................. 184,400 8,344,100
J.P. Morgan & Co., Inc. ............................. 240,900 21,409,988
KeyCorp (New) ....................................... 281,200 12,372,800
NationsBank Corp. ................................... 324,300 28,173,563
-----------
161,621,377
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10-Scudder Capital Growth Fund
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
- -------------------------------------------------------------------------------
<S> <C> <C>
INSURANCE 7.3%
Allstate Corp. ...................................... 724,100 35,661,925
Cigna Corp. ......................................... 207,400 24,862,075
EXEL, Ltd. .......................................... 533,700 18,546,075
MBIA Inc. ........................................... 291,800 25,021,850
Mid Ocean Limited ................................... 294,000 12,531,750
Providian Corp. ..................................... 98,800 4,248,400
-----------
120,872,075
-----------
OTHER FINANCIAL COMPANIES 6.4%
American Express Credit Corp. ....................... 725,900 33,572,875
Federal National Mortgage Association ............... 1,088,500 37,961,438
Travelers Group, Inc. ............................... 688,200 33,807,825
-----------
105,342,138
-----------
REAL ESTATE 1.0%
Nationwide Health Properties Inc. (REIT) ............ 770,000 16,940,000
-----------
MEDIA 1.0%
PRINT MEDIA
Times Mirror Co. "A" ................................ 373,200 16,607,400
-----------
SERVICE INDUSTRIES 2.6%
ENVIRONMENTAL SERVICES 0.6%
Browning Ferris Industries .......................... 367,000 9,175,000
-----------
INVESTMENT 1.0%
Merrill Lynch & Co., Inc. ........................... 253,400 16,629,375
-----------
PRINTING/PUBLISHING 1.0%
R.R. Donnelley & Sons Co. ........................... 489,000 15,770,250
-----------
DURABLES 5.8%
AEROSPACE 1.6%
Rohr Industries Inc.* ............................... 732,000 14,365,500
United Technologies Corp. ........................... 94,000 11,291,750
-----------
25,657,250
-----------
AUTOMOBILES 1.8%
Eaton Corp. ......................................... 289,200 17,460,450
General Motors Corp. ................................ 247,300 11,870,400
-----------
29,330,850
-----------
CONSTRUCTION/AGRICULTURAL EQUIPMENT 0.6%
Caterpillar Inc. .................................... 121,000 9,120,375
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11-Scudder Capital Growth Fund
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
- -------------------------------------------------------------------------------
<S> <C> <C>
TIRES 1.8%
Goodyear Tire & Rubber Co. .......................... 640,200 29,529,225
----------
MANUFACTURING 10.0%
CHEMICALS 4.6%
B.F. Goodrich Co., Inc. ............................. 545,400 24,611,175
Dow Chemical Co. .................................... 361,500 29,010,375
E.I. du Pont de Nemours & Co. ....................... 101,000 8,913,250
Great Lakes Chemicals Corp. ......................... 233,200 13,292,400
----------
75,827,200
----------
CONTAINERS & PAPER 0.9%
Crown Cork & Seal Co. Inc.* ......................... 333,600 15,387,300
----------
DIVERSIFIED MANUFACTURING 1.9%
Dresser Industries Inc. ............................. 495,000 14,726,250
Textron, Inc. ....................................... 202,800 17,238,000
----------
31,964,250
----------
ELECTRICAL PRODUCTS 1.1%
Emerson Electric Co. ................................ 203,300 18,322,413
----------
MACHINERY/COMPONENTS/CONTROLS 0.7%
Ingersoll-Rand Co. .................................. 247,300 11,746,750
----------
OFFICE EQUIPMENT/SUPPLIES 0.8%
Xerox Corp. ......................................... 242,100 12,982,613
----------
TECHNOLOGY 6.3%
DIVERSE ELECTRONIC PRODUCTS 1.4%
Harris Corp. ........................................ 348,400 22,689,550
----------
ELECTRONIC DATA PROCESSING PERIPHERALS 0.3%
Western Digital Corp.* .............................. 146,500 5,878,313
----------
ELECTRONIC DATA PROCESSING 2.0%
International Business Machines Corp. ............... 261,300 32,531,850
----------
MILITARY ELECTRONICS 1.6%
General Dynamics Corp. .............................. 200,000 13,775,000
Raytheon Co. ........................................ 230,300 12,810,438
----------
26,585,438
----------
PRECISION INSTRUMENTS 1.0%
Perkin-Elmer Corp. .................................. 294,700 17,055,763
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12-Scudder Capital Growth Fund
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
- -------------------------------------------------------------------------------
<S> <C> <C>
ENERGY 8.4%
OIL & GAS PRODUCTION 1.5%
Coastal Corp. ....................................... 597,500 24,646,875
-----------
OIL COMPANIES 6.9%
Atlantic Richfield Co. .............................. 127,800 16,294,500
British Petroleum PLC (ADR) ......................... 204,300 25,537,500
Exxon Corp. ......................................... 375,100 31,227,075
Mobil Corp. ......................................... 137,200 15,880,900
Royal Dutch Petroleum Co. ........................... 35,000 5,467,153
Royal Dutch Petroleum Co. (New York shares) ......... 71,200 11,116,100
Texaco Inc. ......................................... 90,000 8,280,000
-----------
113,803,228
-----------
CONSTRUCTION 2.2%
BUILDING MATERIALS 0.2%
Vulcan Materials Co. ................................ 47,000 2,820,000
-----------
FOREST PRODUCTS 2.0%
Louisiana-Pacific Corp. ............................. 327,300 7,446,075
Weyerhaeuser Co. .................................... 573,600 26,457,300
-----------
33,903,375
-----------
TRANSPORTATION 3.2%
AIRLINES 0.9%
AMR Corp.* .......................................... 177,900 14,165,288
-----------
RAILROADS 2.3%
Canadian National Railway Co. ....................... 474,500 9,727,250
Canadian Pacific Ltd. ............................... 712,900 16,485,813
Union Pacific Corp. ................................. 177,900 13,031,175
-----------
39,244,238
-----------
UTILITIES 4.0%
ELECTRIC UTILITIES 3.0%
Duke Power Co. ...................................... 208,200 9,707,325
FPL Group, Inc. ..................................... 290,000 12,542,500
Pacific Gas & Electric Co. .......................... 474,000 10,309,500
PowerGen PLC ........................................ 1,155,800 8,756,115
PowerGen PLC (Sponsored ADR) ........................ 21,000 648,375
</TABLE>
The accompanying notes are an integral part of the financial statements.
13-Scudder Capital Growth Fund
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE($)
- -------------------------------------------------------------------------------
<S> <C> <C>
Public Service Co. of New Mexico .................... 456,300 8,897,844
-------------
50,861,659
-------------
NATIONAL GAS DISTRIBUTION 1.0%
Pacific Enterprises ................................. 554,800 16,782,700
-------------
- ------------------------------------------------------------------------------
TOTAL COMMON STOCKS (cOST $1,431,465,947) ........... 1,624,509,831
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0% (Cost $1,464,374,386)(a) 1,656,984,519
- ------------------------------------------------------------------------------
* Non-income producing security.
(a) The cost for federal income tax purposes was $1,470,741,557. At September
30, 1996, net unrealized appreciation for all securities based on tax cost
was $186,242,962. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of market value over tax
cost of $202,094,739 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$15,851,777.
Transactions in written call options on securities indices during the year
ended September 30, 1996 were as follows:
NUMBER OF CONTRACTS PREMIUMS RECEIVED($)
---------------------------------------------
<S> <C> <C>
Outstanding at
September 30, 1995 .......... 6,000 9,993,236
Contracts closed ............ (6,000) (9,993,236)
------ ----------
Outstanding at
September 30, 1996 .......... -- --
====== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
14-Scudder Capital Growth Fund
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
AS OF SEPTEMBER 30, 1996
<CAPTION>
<S> <C>
ASSETS
- ----------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $1,464,374,386) (Note A) ................ $1,656,984,519
Cash ............................................................................ 275
Receivable on investments sold .................................................. 6,605,412
Dividends and interest receivable ............................................... 3,184,212
Receivable on Fund shares sold .................................................. 673,425
Receivable on foreign taxes recoverable ......................................... 35,109
Other assets .................................................................... 6,146
--------------
Total assets .................................................................... 1,667,489,098
LIABILITIES
- ----------------------------------------------------------------------------------------------------------
Payables for investments purchased .............................................. $ 6,745,070
Payable for Fund shares redeemed ................................................ 7,859,969
Accrued management fee (Note C) ................................................. 890,702
Other accrued expenses (Note C) ................................................. 533,560
--------------
Total liabilities ............................................................... 16,029,301
--------------------------------------------------------------------------------------------------
NET ASSETS, AT MARKET VALUE ..................................................... $1,651,459,797
--------------------------------------------------------------------------------------------------
NET ASSETS
- ----------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ............................................. $ 5,294,851
Unrealized appreciation on:
Investments ................................................................... 192,610,133
Foreign currency related transactions ......................................... 333
Accumulated net realized gain ................................................... 155,034,736
Shares of beneficial interest ................................................... 729,347
Additional paid-in capital ...................................................... 1,297,790,397
--------------------------------------------------------------------------------------------------
NET ASSETS, AT MARKET VALUE ..................................................... $1,651,459,797
--------------------------------------------------------------------------------------------------
NET ASSET VALUE
- ----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, offering and redemption price per share ($1,651,459,797 /
72,934,700 outstanding shares of beneficial interest, $.01 par value, --------------
unlimited number of shares authorized ....................................... $22.64
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
------------------------------------------------------------------------
15 -Scudder Capital Growth Fund
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1996
<CAPTION>
<S> <C>
INVESTMENT INCOME
- -----------------------------------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $225,728) ........................ $ 37,561,072
Interest ..................................................................... 2,649,360
------------
40,210,432
Expenses:
Management fee (Note C) ...................................................... 10,505,409
Services to shareholders (Note C) ............................................ 2,991,666
Trustees' fees (Note C) ...................................................... 52,867
Custodian and accounting fees (Note C) ....................................... 375,075
Reports to shareholders ...................................................... 479,318
Auditing ..................................................................... 48,878
Legal ........................................................................ 23,235
Registration ................................................................. 38,772
Other ........................................................................ 56,877
------------
14,572,097
----------------------------------------------------------------------------------------------
NET INVESTMENT INCOME ........................................................ 25,638,335
----------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
- -----------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments .................................................................. 156,368,635
Options ...................................................................... 140,316
Foreign currency related transactions ........................................ (23,205)
------------
156,485,746
Net unrealized appreciation during the period on:
Investments .................................................................. 48,482,955
Options ...................................................................... 1,719,264
Foreign currency related transactions ........................................ 19,923
------------
50,222,142
------------
Net gain on investment transactions .......................................... 206,707,888
----------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ......................... $232,346,223
----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
------------------------------------------------------------------------
16 --Scudder Capital Growth Fund
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
YEARS ENDED SEPTEMBER 30,
INCREASE (DECREASE) IN NET ASSETS 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ....................................................... $ 25,638,335 $ 8,448,247
Net realized gain from investment transactions .............................. 156,485,746 232,953,105
Net unrealized appreciation on investment transactions during the period .... 50,222,142 32,843,602
-------------- --------------
Net increase in net assets resulting from operations ........................ 232,346,223 274,244,954
-------------- --------------
Distributions to shareholders from:
Net investment income ....................................................... (5,186,735) --
-------------- --------------
Net realized gains on investment transactions ............................... (226,928,336) (48,924,819)
-------------- --------------
Fund share transactions:
Proceeds from shares sold ................................................... 242,975,623 198,066,318
Net asset value of shares issued to shareholders in reinvestment of
distributions ............................................................ 222,385,560 47,065,999
Cost of shares redeemed ..................................................... (305,801,902) (317,084,600)
-------------- --------------
Net increase (decrease) in net assets from Fund share transactions .......... 159,559,281 (71,952,283)
-------------- --------------
INCREASE IN NET ASSETS ...................................................... 159,790,433 153,367,852
Net assets at beginning of period ........................................... 1,491,669,364 1,338,301,512
NET ASSETS AT END OF PERIOD (including undistributed net investment -------------- --------------
income of 5,294,851 for 1996) ............................................. $1,651,459,797 $1,491,669,364
-------------- --------------
OTHER INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period ................................... 65,078,938 68,475,991
-------------- --------------
Shares sold ................................................................. 11,066,908 9,981,199
Shares issued to shareholders in reinvestment of distributions .............. 10,795,415 2,577,547
Shares redeemed ............................................................. (14,006,561) (15,955,799)
-------------- --------------
Net increase (decrease) in Fund shares ...................................... 7,855,762 (3,397,053)
-------------- --------------
Shares outstanding at end of period ......................................... 72,934,700 65,078,938
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load
------------------------------------------------------------------------
17 --Scudder Capital Growth Fund
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<CAPTION>
YEARS ENDED SEPTEMBER 30,
1996 1995 1994 1993(b) 1992 1991 1990 1989 1988 1987
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of ------------------------------------------------------------------------------------------
period.............................. $22.92 $19.54 $23.06 $19.12 $19.30 $14.77 $22.30 $16.10 $20.41 $17.17
------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss).......... .36 .13 (.02) .06 .12 .20 .30(a) .21 .09 .16
Net realized and unrealized gain
(loss) on investment transactions... 2.94 3.98 (.88) 5.23 .90 6.05 (6.22) 6.61 (1.82) 5.77
Total from investment ------------------------------------------------------------------------------------------
operations.......................... 3.30 4.11 (.90) 5.29 1.02 6.25 (5.92) 6.82 (1.73) 5.93
------------------------------------------------------------------------------------------
Less distributions from:
Net investment income................. (.08) -- -- (.10) (.22) (.37) (.16) (.07) (.20) (.23)
Net realized gains on investment
transactions........................ (3.50) (.73) (2.62) (1.25) (.98) (1.35) (1.45) (.55) (2.38) (2.46)
------------------------------------------------------------------------------------------
Total distributions................... (3.58) (.73) (2.62) (1.35) (1.20) (1.72) (1.61) (.62) (2.58) (2.69)
------------------------------------------------------------------------------------------
Net asset value, end of ------------------------------------------------------------------------------------------
period.............................. $22.64 $22.92 $19.54 $23.06 $19.12 $19.30 $14.77 $22.30 $16.10 $20.41
------------------------------------------------------------------------------------------
TOTAL RETURN (%)...................... 15.94 21.96 (4.72) 28.83 5.61 45.85 (28.20) 44.05 (5.61) 39.03
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) 1,651 1,492 1,338 1,387 1,054 1,058 712 1,013 491 583
Ratio of operating expenses to
average net assets (%).............. .92 .98 .97 .96 .98 1.04 .94 .88 .95 .88
Ratio of net investment income (loss)
to average net assets (%)........... 1.62 .62 (.12) .22 .57 1.24 1.56 1.22 .63 .86
Portfolio turnover rate (%)........... 150.7 153.6 75.8 92.2 92.4 93.2 87.9 55.7 48.5 58.2
Average commission rate paid (c)...... $.0533 $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
(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) Average commission rate paid per share of common and preferred stocks is calculated for fiscal years ending on or after
September 1, 1996.
</TABLE>
18 -Scudder Capital Growth Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 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. 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.
OPTIONS. An option contract is a contract in which the writer of the option
grants the buyer of the option the right to purchase from (call option), or sell
to (put option), the writer a designated instrument at a specified price within
a specified period of time. Certain options, including options on indices, will
require cash settlement by the Fund if the option is exercised. During the
period, the Fund purchased put options as a hedge against potential adverse
price movements in the value of portfolio assets.
If the Fund writes an option and 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 Fund elects to close out the
option it would recognize a gain or loss based on the difference between the
cost of closing the option and the initial premium received. If the Fund
purchased an option and allows the option to expire it would realize a loss to
the extent of the premium paid. If the Fund elects to close out the option it
would recognize a gain or loss equal to the difference between the cost of
acquiring the option and the amount realized upon the sale of the option.
The gain or loss recognized by the Fund upon the exercise of a written call or
purchased put option is adjusted for the amount of option premium. If a written
put or purchased call option is exercised the Fund's cost basis of the acquired
security or currency would be the exercise price adjusted for the amount of the
option premium.
The liability representing the Fund's obligation under an exchange traded
written option or investment in a purchased option is valued at the last sale
price or, in the absence of a sale, the mean between the closing bid and asked
price or at the most recent
19 --Scudder Capital Growth Fund
<PAGE>
asked price (bid for purchased options) if no bid and asked price are available.
Over-the-counter written or purchased options are valued using dealer supplied
quotations.
When the Fund writes a covered call option, the Fund foregoes, in exchange for
the premium, the opportunity to profit during the option period from an increase
in the market value of the underlying security or currency above the exercise
price. When the Fund writes a put option it accepts the risk of a decline in the
market value of the underlying security or currency below the exercise price.
Over-the-counter options have the risk of the potential inability of
counterparties to meet the terms of their contracts. The Fund's maximum exposure
to purchased options is limited to the premium initially paid. In addition,
certain risks may arise upon entering into option contracts including the risk
that an illiquid secondary market will limit the Fund's ability to close out an
option contract prior to the expiration date and, that a change in the value of
the option contract may not correlate exactly with changes in the value of the
securities or currencies hedged.
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. A forward foreign currency exchange
contract (forward contract) is a commitment to purchase or sell a foreign
currency at the settlement date at a negotiated rate. During the period, the
Fund utilized forward contracts as a hedge in connection with portfolio
purchases and sales of securities denominated in foreign currencies.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
Certain risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their contracts. Additionally,
when utilizing forward contracts to hedge, the Fund gives up the opportunity to
profit from favorable exchange rate movements during the term of the contract.
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.
20 --Scudder Capital Growth Fund
<PAGE>
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.
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 options, 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 and market discounts are accreted for both tax and financial
reporting purposes.
B. PURCHASES AND SALES OF SECURITIES
During the year ended September 30, 1996, purchases and sales of investment
securities (excluding short-term investments) aggregated $2,355,199,579 and
$2,342,768,063, respectively.
C. RELATED PARTIES
On September 4, 1996, the Fund's Board of Trustees approved a new Investment
Management Agreement (the "Management Agreement") with Scudder, Stevens & Clark,
Inc. (the "Adviser"). Under the Management Agreement 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, the Adviser provides certain
administrative services in accordance with the Agreement. The management fee
payable under the Management Agreement is equal to an annual rate of
approximately 0.75% of the first
21 -Scudder Capital Growth Fund
<PAGE>
$500,000,000 of average daily net assets, 0.65% of the next $500,000,000 of such
net assets, 0.60% of the next $500,000,000 of such net assets and 0.55% of such
net assets in excess of $1,500,000,000, computed and accrued daily and payable
monthly.
Under the Investment Management Agreement between the Fund and the Adviser which
was in effect prior to September 4, 1996 (the "Agreement"), the Fund agreed to
pay the Adviser 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. Both Agreements also provide 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 year ended September 30, 1996, the fee pursuant to
the Agreement amounted to $10,505,409 which was equivalent to an annual
effective rate of 0.66% of the Fund's average daily net assets.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. Included
in services to shareholders is $1,715,004 charged to the Fund by SSC for the
year ended September 30, 1996, of which $142,526 is unpaid at September 30,
1996.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the year ended September 30,
1996, the amount charged to the Fund by STC aggregated $885,784, of which
$73,765 is unpaid at September 30, 1996.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the year ended
September 30, 1996, the amount charged to the Fund by SFAC aggregated $158,045,
of which $12,860 is unpaid at September 30, 1996.
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 year ended September 30, 1996, Trustees' fees and expenses aggregated
$52,867.
22 --Scudder Capital Growth Fund
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE TRUSTEES OF SCUDDER EQUITY TRUST AND THE SHAREHOLDERS OF SCUDDER CAPITAL
GROWTH FUND:
We have audited the accompanying statement of assets and liabilities of Scudder
Capital Growth Fund, including the investment portfolio, as of September 30,
1996, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the ten years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1996 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder Capital Growth Fund as of September 30, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the ten years in the period then ended, in conformity with generally accepted
accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
November 11, 1996
23 -Scudder Capital Growth Fund
<PAGE>
TAX INFORMATION
The Fund paid distributions of $2.83 per share from long-term capital gains
during its taxable year ended September 30, 1996. Pursuant to section 852 of the
Internal Revenue Code, the Fund designates $57,079,434 as capital gain dividends
for the year ended September 30, 1996.
Pursuant to section 854 of the Internal Revenue Code, the Fund designates
$33,208,514 as dividends eligible for the dividends received deduction for
corporations for the year ended September 30, 1996.
24 -Scudder Capital Growth Fund
Officers and Trustees
Daniel Pierce*
President and Trustee
Paul Bancroft III
Trustee; Venture Capitalist and Consultant
Sheryle J. Bolton
Trustee
Thomas J. Devine
Trustee; Consultant
Keith R. Fox
Trustee
Dudley H. Ladd*
Trustee
David S. Lee*
Vice President and Trustee
Dr. Wilson Nolen
Trustee; Consultant
Juris Padegs*
Vice President and Trustee
Dr. Gordon Shillinglaw
Trustee; Professor Emeritus of Accounting, Columbia University Graduate School
of Business
Robert G. Stone, Jr.
Honorary Trustee; Chairman of the Board and Director, Kirby Corporation
Robert W. Lear
Honorary Trustee; Executive-in-Residence, Visiting Professor, Columbia
University Graduate School of Business
Donald E. Hall*
Vice President
Thomas W. Joseph*
Vice President
Kathleen T. Millard*
Vice President
Thomas F. McDonough*
Vice President, Secretary and Assistant Treasurer
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Kathryn L. Quirk*
Vice President and Assistant Secretary
Coleen Downs Dinneen*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
25-Scudder Capital Growth Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds
- --------------------------------------------------------------------------------
Money Market
Scudder Cash Investment Trust
Scudder U.S. Treasury Money Fund
Tax Free Money Market+
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax Free+
Scudder California Tax Free Fund*
Scudder High Yield Tax Free Fund
Scudder Limited Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder Massachusetts Limited Term
Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder Medium Term Tax Free Fund
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
Growth and Income
Scudder Balanced Fund
Scudder Growth and Income Fund
Income
Scudder Emerging Markets Income Fund
Scudder Global Bond Fund
Scudder GNMA Fund
Scudder High Yield Bond Fund
Scudder Income Fund
Scudder International Bond Fund
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Growth
Scudder Capital Growth Fund
Scudder Classic Growth Fund
Scudder Development Fund
Scudder Emerging Markets Growth Fund
Scudder Global Discovery Fund
Scudder Global Fund
Scudder Gold Fund
Scudder Greater Europe Growth Fund
Scudder International Fund
Scudder Latin America Fund
Scudder Micro Cap Fund
Scudder Pacific Opportunities Fund
Scudder Quality Growth Fund
Scudder Small Company Value Fund
Scudder 21st Century Growth Fund
Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
- --------------------------------------------------------------------------------
IRAs
Keogh Plans
Scudder Horizon Plan*+++ (a variable annuity)
401(k) Plans
403(b) Plans
SEP-IRAs
Profit Sharing and Money Purchase
Pension Plans
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder 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.
26-Scudder Capital Growth Fund
<PAGE>
Account Service and Information
- --------------------------------------------------------------------------------
For existing account service and transactions
Scudder Investor Relations
1-800-225-5163
For personalized information about your Scudder accounts;
exchanges and redemptions; or information on any Scudder fund
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
Visit the Scudder World Wide Web Site at:
- --------------------------------------------------------------------------------
http://funds.scudder.com
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 Treasurers Trust(TM), an
institutional cash management service for corporations,
non-profit organizations and trusts which utilizes certain
portfolios of Scudder Fund, Inc.* ($100,000 minimum), call:
1-800-541-7703.
For information on Scudder Institutional Funds*, funds designed
to meet the broad investment management and service needs of
banks and other institutions, call:
1-800-854-8525.
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.
27-Scudder Capital Growth Fund
<PAGE>
Celebrating Over 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven Clark,
Scudder, Stevens & Clark was the first independent investment counsel firm in
the United States. Since its birth, Scudder's pioneering spirit and commitment
to professional long-term investment management have helped shape the investment
industry. In 1928, we introduced the nation's first no-load mutual fund. Today
we offer over 40 pure no load(TM) funds, including the first international
mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication to
research and fundamental investment disciplines have helped us become one of the
largest and most respected investment managers in the world. Though times have
changed since our beginnings, we remain committed to our long-standing
principles: managing money with integrity and distinction; keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
