Filed with the Securities and Exchange Commission on January 30, 1996.
File No. 2-78724
File No. 811-1444
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 23
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 23
Scudder Equity Trust
--------------------
(Exact Name of Registrant as Specified in Charter)
Two International Place, Boston, MA 02110
-----------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (617) 295-2567
Thomas F. McDonough
Scudder, Stevens & Clark, Inc.
Two International Place, Boston, MA 02110
-----------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
_____ immediately upon filing pursuant to paragraph (b)
X on February 1, 1996 pursuant to paragraph (b)
-----
_____ 60 days after filing pursuant to paragraph (a)(i)
_____ on __________ pursuant to paragraph (a)(i)
_____ 75 days after filing pursuant to paragraph (a)(ii)
_____ on __________ pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following:
_____ this post-effective amendment designates a new effective date
for a previously filed post-effective amendment
The Registrant has filed a declaration registering an indefinite amount of
securities pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended. The Registrant has filed the notice required by Rule 24f-2 for its most
recent fiscal year on November 27, 1995.
<PAGE>
SCUDDER EQUITY TRUST
Calculation of Registration Fee under the Securities Act of 1933
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
Being Being Price Per Offering Registration
Registered Registered Share (1) Price (1,2) Fee (2)
---------- ---------- ---------- ---------- ----------
Shares of
Beneficial
Interest,
$.01 Par Value
Scudder Capital
Growth Fund 4,431,117 $20.54 $290,000 $100.00
This Post-Effective Amendment No. 23 seeks to register 4,431,117 additional
shares of beneficial interest under the Securities Act of 1933.
(1) Computed under Rule 457(d) on the basis of the net asset value per
share of registrant's shares of beneficial interest at the close
of business on January 17, 1996. The above calculation shall not
be deemed a representation as to the actual offering price.
(2) Calculated pursuant to Rule 24e-2 under the Investment Company Act
of 1940.
(a) Total number of shares redeemed during
previous fiscal year 14,398,197
(b) Total number of shares included in (a)
previously used under Rule 24e-2 this fiscal
year -0-
(c) Total number of shares included in (a)
previously used under Rule 24f-2(c) this
fiscal year 9,981,199
(d) Total number of shares included in (a) being
used to reduce maximum aggregate offering
price in this Post-Effective Amendment 4,416,998
<PAGE>
SCUDDER CAPITAL GROWTH FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
---------------------------
<TABLE>
<CAPTION>
PART A
- ------
Item
No. Item Caption Prospectus Caption
- --- ------------ ------------------
<S> <C> <C>
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial Information FINANCIAL HIGHLIGHTS
DISTRIBUTION AND PERFORMANCE INFORMATION
4. General Description INVESTMENT OBJECTIVE AND POLICIES
of Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
FUND ORGANIZATION
5. Management of the A MESSAGE FROM SCUDDER'S CHAIRMAN
Fund FINANCIAL HIGHLIGHTS
FUND ORGANIZATION--Investment adviser, Transfer agent
TRUSTEES AND OFFICERS
5A. Management's Discussion SHAREHOLDER BENEFITS--A team approach to investing
of Fund Performance
6. Capital Stock and Other Securities TRANSACTION INFORMATION--Tax information
DISTRIBUTION AND PERFORMANCE INFORMATION--Dividends and capital
gains distributions
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder Automated Information Line,
T.D.D. service for the hearing impaired, Dividend
reinvestment plan
FUND ORGANIZATION
HOW TO CONTACT SCUDDER
7. Purchase of Securities Being Offered PURCHASES
TRANSACTION INFORMATION--Purchasing shares, Share price,
Processing time, Third party transactions, Minimum balances
SHAREHOLDER BENEFITS--Dividend Reinvestment Plan
INVESTMENT PRODUCTS AND SERVICES
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
FUND ORGANIZATION--Underwriter
8. Redemption or Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax Identification
Number, Minimum balances
9. Pending Legal Proceedings NOT APPLICABLE
</TABLE>
Cross Reference - Page 1
<PAGE>
SCUDDER CAPITAL GROWTH FUND
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
PART B
- ------
Item
No. Item Caption Caption in Statement of Additional Information
- --- ------------ ----------------------------------------------
<S> <C> <C>
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and History FUND ORGANIZATION
13. Investment Objectives and Policies THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
PORTFOLIO TRANSACTIONS--Brokerage Commissions and Portfolio
Turnover
14. Management of the Fund INVESTMENT ADVISER
TRUSTEES AND OFFICERS
REMUNERATION
15. Control Persons and Principal Holders of TRUSTEES AND OFFICERS
Securities
16. Investment Advisory and Other Services INVESTMENT ADVISER
DISTRIBUTOR
ADDITIONAL INFORMATION--Experts, Other Information
17. Brokerage Allocation and Other Practices PORTFOLIO TRANSACTIONS--Brokerage Commissions and Portfolio
Turnover
18. Capital Stock and Other Securities FUND ORGANIZATION
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
19. Purchase, Redemption and Pricing of PURCHASES
Securities Being Offered EXCHANGES AND REDEMPTIONS
FEATURES AND SERVICES OFFERED BY THE FUND--Distribution Plans
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of Performance Data PERFORMANCE INFORMATION
23. Financial Statements FINANCIAL STATEMENTS
</TABLE>
Cross Reference - Page 2
<PAGE>
SCUDDER VALUE FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
---------------------------
<TABLE>
<CAPTION>
PART A
- ------
Item
No. Item Caption Prospectus Caption
- --- ------------ ------------------
<S> <C> <C>
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial Information FINANCIAL HIGHLIGHTS
DISTRIBUTION AND PERFORMANCE INFORMATION
4. General Description of Registrant INVESTMENT OBJECTIVE AND POLICIES
WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
FUND ORGANIZATION
5. Management of the Fund A MESSAGE FROM SCUDDER'S CHAIRMAN
FINANCIAL HIGHLIGHTS
FUND ORGANIZATION--Investment adviser, Transfer agent
TRUSTEES AND OFFICERS
5A. Management's Discussion of Fund SHAREHOLDER BENEFITS--A team approach to investing
Performance
6. Capital Stock and Other Securities TRANSACTION INFORMATION--Tax information
DISTRIBUTION AND PERFORMANCE INFORMATION--Dividends and capital
gains distributions
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder Automated Information Line,
T.D.D. service for the hearing impaired, Dividend
reinvestment plan
FUND ORGANIZATION
HOW TO CONTACT SCUDDER
7. Purchase of Securities Being Offered PURCHASES
TRANSACTION INFORMATION--Purchasing shares, Share price,
Processing time, Third party transactions, Minimum balances
SHAREHOLDER BENEFITS--Dividend Reinvestment Plan
INVESTMENT PRODUCTS AND SERVICES
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
FUND ORGANIZATION--Underwriter
8. Redemption or Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax Identification
Number, Minimum balances
9. Pending Legal Proceedings NOT APPLICABLE
</TABLE>
Cross Reference - Page 3
<PAGE>
SCUDDER VALUE FUND
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
PART B
- ------
Item
No. Item Caption Caption in Statement of Additional Information
- --- ------------ ----------------------------------------------
<S> <C> <C>
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and History FUND ORGANIZATION
13. Investment Objectives and Policies THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
PORTFOLIO TRANSACTIONS--Brokerage Commissions and Portfolio
Turnover
14. Management of the Fund INVESTMENT ADVISER
TRUSTEES AND OFFICERS
REMUNERATION
15. Control Persons and Principal Holders of TRUSTEES AND OFFICERS
Securities
16. Investment Advisory and Other Services INVESTMENT ADVISER
DISTRIBUTOR
ADDITIONAL INFORMATION--Experts, Other Information
17. Brokerage Allocation and Other Practices PORTFOLIO TRANSACTIONS--Brokerage Commissions and Portfolio
Turnover
18. Capital Stock and Other Securities FUND ORGANIZATION
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
19. Purchase, Redemption and Pricing of PURCHASES
Securities Being Offered EXCHANGES AND REDEMPTIONS
FEATURES AND SERVICES OFFERED BY THE FUND--Distribution Plans
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of Performance Data PERFORMANCE INFORMATION
23. Financial Statements FINANCIAL STATEMENTS
</TABLE>
Cross Reference - Page 4
<PAGE>
This prospectus sets forth concisely the information about Scudder Capital
Growth Fund, a series of Scudder Equity Trust, an open-end management investment
company, that a prospective investor should know before investing. Please retain
it for future reference.
If you require more detailed information, a combined Statement of Additional
Information dated February 1, 1996, as amended from time to time, may be
obtained without charge by writing Scudder Investor Services, Inc., Two
International Place, Boston, MA 02110-4103 or calling 1-800-225-2470. The
Statement, which is incorporated by reference into this prospectus, has been
filed with the Securities and Exchange Commission.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Contents--see page 4.
49-2-26
SFD49PR1
MIS49P
Scudder
Capital Growth
Fund
Prospectus
February 1, 1996
A pure no-load(TM) (no sales charges) mutual fund which seeks to maximize
long-term capital growth.
<PAGE>
Expense information
- -------------------
How to compare a Scudder pure no-load(TM) fund
This information is designed to help you understand the various costs and
expenses of investing in Scudder Capital Growth Fund (the "Fund"). By reviewing
this table and those in other mutual funds' prospectuses, you can compare the
Fund's fees and expenses with those of other funds. With Scudder's pure
no-load(TM) funds, you pay no commissions to purchase or redeem shares, or to
exchange from one fund to another. As a result, all of your investment goes to
work for you.
1) Shareholder transaction expenses: Expenses charged directly to your
individual account in the Fund for various transactions.
Sales commissions to purchase shares (sales load) NONE
Commissions to reinvest dividends NONE
Redemption fees NONE*
Fees to exchange shares NONE
2) Annual Fund operating expenses: Expenses paid by the Fund before it
distributes its net investment income, expressed as a percentage of the
Fund's average daily net assets for the fiscal year ended September 30,
1995.
Investment management fee 0.67%
12b-1 fees NONE
Other expenses 0.31%
-----
Total Fund operating expenses 0.98%
=====
Example
Based on the level of total Fund operating expenses listed above, the total
expenses relating to a $1,000 investment, assuming a 5% annual return and
redemption at the end of each period, are listed below. Investors do not pay
these expenses directly; they are paid by the Fund before it distributes its net
investment income to shareholders. (As noted above, the Fund has no redemption
fees of any kind.)
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$10 $31 $54 $120
See "Fund organization--Investment adviser" for further information about the
investment management fee. This example assumes reinvestment of all dividends
and distributions and that the percentage amounts listed under "Annual Fund
operating expenses" remain the same each year. This example should not be
considered a representation of past or future expenses or return. Actual Fund
expenses and return vary from year to year and may be higher or lower than those
shown.
* You may redeem by writing or calling the Fund. If you wish to receive your
redemption proceeds via wire, there is a $5 wire service fee. For
additional information, please refer to "Transaction information--Redeeming
shares."
2
<PAGE>
Financial highlights
- --------------------
<TABLE>
<CAPTION>
The following table includes selected data for a share outstanding throughout each period and other performance information derived
from the audited financial statements.
If you would like more detailed information concerning the Fund's performance, a complete portfolio listing and audited financial
statements are available in the Fund's Annual Report dated September 30, 1995 and may be obtained without charge by writing or
calling Scudder Investor Services, Inc.
Years Ended September 30,
-------------------------------------------------------------------------------------------------
1995 1994 1993(b) 1992 1991 1990 1989 1988 1987 1986
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <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
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income (loss) . . . . . .13 (.02) .06 .12 .20 .30(a) .21 .09 .16 .26
Net realized and
unrealized gain (loss)
on investment
transactions . . . . . . 3.98 (.88) 5.23 .90 6.05 (6.22) 6.61 (1.82) 5.77 3.67
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations . . . . . . . 4.11 (.90) 5.29 1.02 6.25 (5.92) 6.82 (1.73) 5.93 3.93
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions from:
Net investment
income . . . . . . . . . -- -- (.10) (.22) (.37) (.16) (.07) (.20) (.23) (.23)
Net realized gains
on investment
transactions . . . . . . (.73) (2.62) (1.25) (.98) (1.35) (1.45) (.55) (2.38) (2.46) (1.88)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions. . . . . . . (.73) (2.62) (1.35) (1.20) (1.72) (1.61) (.62) (2.58) (2.69) (2.11)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period . . . . . . . . $22.92 $19.54 $23.06 $19.12 $19.30 $14.77 $22.30 $16.10 $20.41 $17.17
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Return (%) . . . . . . . . 21.96 (4.72) 28.83 5.61 45.85 (28.20) 44.05 (5.61) 39.03 28.46
Ratios and
Supplemental Data
Net assets, end of
period ($ millions) . . . . . 1,492 1,338 1,387 1,054 1,058 712 1,013 491 583 414
Ratio of operating
expenses to average
net assets (%). . . . . . . . .98 .97 .96 .98 1.04 .94 .88 .95 .88 .84
Ratio of net
investment income
(loss) to average
net assets (%). . . . . . . . .62 (.12) .22 .57 1.24 1.56 1.22 .63 .86 1.50
Portfolio turnover
rate (%). . . . . . . . . . . 153.6 75.8 92.2 92.4 93.2 87.9 55.7 48.5 58.2 55.8
<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.
</FN>
</TABLE>
3
<PAGE>
A message from Scudder's chairman
- ---------------------------------
Scudder, Stevens & Clark, Inc., investment adviser to the Scudder Family of
Funds, was founded in 1919. We offered America's first no-load mutual fund in
1928. Today, we manage in excess of $100 billion for many private accounts and
over 50 mutual fund portfolios. We manage the mutual funds in a special program
for the American Association of Retired Persons, as well as the fund options
available through Scudder Horizon Plan, a tax-advantaged variable annuity. We
also advise The Japan Fund and nine closed-end funds that invest in countries
around the world.
The Scudder Family of Funds is designed to make investing easy and less costly.
It includes money market, tax free, income and growth funds as well as IRAs,
401(k)s, Keoghs and other retirement plans.
Services available to all shareholders include toll-free access to the
professional service representatives of Scudder Investor Relations, easy
exchange among funds, shareholder reports, informative newsletters and the
walk-in convenience of Scudder Funds Centers.
All Scudder mutual funds are pure no-load(TM). This means you pay no commissions
to purchase or redeem your shares or to exchange from one fund to another. There
are no "12b-1" fees either, which many other funds now charge to support their
marketing efforts. All of your investment goes to work for you. We look forward
to welcoming you as a shareholder.
/s/Daniel Pierce
Scudder Capital Growth Fund
- ---------------------------
Investment objective
* to maximize long-term capital growth
Investment characteristics
* a broad and flexible investment program emphasizing common stocks
* above-average capital growth potential
* the possibility for above-average stock market risk
* daily liquidity at current net asset value
Contents
- --------
Investment objective and policies ........... 5
Why invest in the Fund? ..................... 5
Investment results .......................... 6
Additional information about policies
and investments .......................... 7
Distribution and performance information .... 10
Fund organization ........................... 10
Transaction information ..................... 11
Purchases ................................... 12
Exchanges and redemptions ................... 13
Shareholder benefits ........................ 17
Trustees and Officers ....................... 20
Investment products and services ............ 21
How to contact Scudder ...................... 22
4
<PAGE>
Investment objective and policies
- ---------------------------------
Scudder Capital Growth Fund (the "Fund"), a diversified series of Scudder Equity
Trust, seeks to maximize long-term capital growth through a broad and flexible
investment program. The Fund invests in marketable securities, principally
common stocks and, consistent with its objective of long-term capital growth,
preferred stocks. Additionally, the Fund may invest in debt securities,
repurchase agreements, convertible securities, and may engage in strategic
transactions as described under "Investment restrictions."
Except as otherwise indicated, the Fund's investment objective and policies are
not fundamental and may be changed without a vote of shareholders. Shareholders
will receive written notice of any changes in the Fund's objective. If there is
a change in investment objective, shareholders should consider whether the Fund
remains an appropriate investment in light of their then current financial
position and needs. There can be no assurance that the Fund's objective will be
met.
Investments
The Fund is free to invest in a wide range of marketable securities which the
Fund's investment adviser, Scudder, Stevens & Clark, Inc. (the "Adviser"),
believes offer the potential for long-term, above-average growth. This makes the
Fund different from growth funds with more specialized investment policies.
The Fund's investment flexibility enables it to pursue investment value in all
sectors of the stock market, including:
* companies that generate or apply new technologies, new and improved
distribution techniques or new services, such as those in the business
equipment, electronics, specialty merchandising and health service
industries;
* companies that own or develop natural resources, such as energy exploration
companies;
* companies that may benefit from changing consumer demands and lifestyles,
such as financial service organizations and telecommunications companies;
* foreign companies, including those in countries with more rapid economic
growth than the U.S.;
* companies whose earnings growth is projected at a pace well in excess of
the average (growth companies); and
* companies whose earnings are temporarily depressed and are currently out of
favor with most investors.
Why invest in the Fund?
- -----------------------
The expansion of the U.S. and world economies and ongoing technological
development continuously create new investment opportunities. Through its
investments in common stocks, the Fund gives investors the chance to participate
in these opportunities and the potential they offer to maximize long-term
capital growth.
In seeking capital growth, the Fund looks for companies whose securities appear
to present a favorable relationship between market price and opportunity. These
may include securities of companies whose fundamentals or products may be of
only average promise.
Market misconceptions, temporary bad news, and other factors may cause a
security to be out of favor in the stock market and to trade at a price below
its potential value. These "undervalued" securities can provide the opportunity
for above-average market performance.
In addition, the Fund offers all the benefits of the Scudder Family of Funds.
Scudder, Stevens & Clark, Inc. manages a diverse family of pure no-load(TM)
funds and provides a wide range of services to help investors meet their
investment needs. Please refer to "Investment products and services" for
additional information.
5
<PAGE>
Investment results
- ------------------
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
The Fund is designed for long-term investors who can accept stock market risk. The value of the Fund's portfolio
securities fluctuates with market and economic conditions, causing returns and principal value to fluctuate. Depending
upon when shares are sold, their value may be higher or lower than when purchased. In return for accepting stock market
risk, there may be a greater return on investment than from a money market or income fund.
-------------------------------------------------------------------------------------------------------------------------
Annual capital changes* Standard & Poor's
Scudder Capital Growth Fund 500 Stock Index
----------------------------------------------------------------- ---------------------------------
Net Asset Capital Gains Capital Price Capital
September 30, Value/Share Dividends Distributions Change Level Change
------------- ----------- --------- ------------- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
1985 $15.35 -- -- -- 182 --
1986 17.17 $0.23 $1.88 +26.7% 231 +26.9%
1987 20.41 0.23 2.46 + 37.3 322 + 39.4
1988 16.10 0.20 2.38 - 6.8 272 - 15.5
1989 22.30 0.07 0.55 + 43.4 349 + 28.3
1990 14.77 0.16 1.45 - 28.8 306 - 12.3
1991 19.30 0.37 1.35 + 42.6 388 + 26.7
1992 19.12 0.22 0.98 + 4.4 418 + 7.7
1993 23.06 0.10 1.25 + 28.2 459 + 9.8
1994 19.54 -- 2.62 - 4.7 463 + 0.9
1995 22.92 -- 0.73 + 22.0 584 + 26.3
-------------------------------------------------------------------------------------------------------------------------
Growth of a $10,000 investment
Standard & Poor's
Scudder Capital Growth Fund 500 Stock Index
----------------------------------------------------------------- ---------------------------------
Total Return Total Return
----------------------- -----------------------
Years Ended Value of Initial Average Value of Initial Average
September 30, 1995 $10,000 Investment Cumulative Annual $10,000 Investment Cumulative Annual
------------------ ------------------ ---------- ------ ------------------ ---------- ------
One Year $ 12,196 + 21.96% +21.96% $ 12,975 + 29.75% +29.75%
Five Years 23,060 + 130.60 +18.19 22,143 + 121.43 +17.22
Ten Years 40,205 + 302.05 +14.93 44,259 + 342.59 +16.03
All total return calculations assume that income dividends and capital gains distributions, if any, were reinvested.
The performance of Scudder Capital Growth Fund is compared with that of Standard & Poor's 500 Stock Index, an unmanaged
index of 500 industrial, transportation, utility and financial companies, widely regarded as representative of the
equity market in general. The Standard & Poor's 500 Stock Index does not take into account the brokerage and other
transaction costs investors incur when investing directly in stocks on the index. The Fund's performance reflects
actual investment experience, net of all operating expenses, which are paid from the Fund's gross investment income.
*For definition of "capital change" please see "Distribution and performance information."
Performance figures are historical and are not intended to indicate future investment performance.
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
Additional information about policies and investments
- -----------------------------------------------------
Investment restrictions
The Fund has adopted certain fundamental policies which may not be changed
without a vote of shareholders and which are designed to reduce the Fund's
investment risk.
The Fund may not borrow money except as a temporary measure for extraordinary or
emergency purposes and may not make loans except through the lending of
portfolio securities, the purchase of debt securities or through repurchase
agreements.
As a matter of nonfundamental policy, the Fund may not invest more than 10% of
its total assets, in the aggregate, in securities which are not readily
marketable, in restricted securities and repurchase agreements maturing in more
than seven days. The Fund may invest:
1) for temporary defensive purposes, in debt securities and short term
indebtedness as market or economic conditions may warrant, and
2) up to 20% of its net assets in debt securities when management anticipates
that the capital appreciation on debt securities is likely to equal or exceed
the capital appreciation on common stocks over a selected time, such as during
periods of unusually high interest rates. As interest rates fall, the prices of
debt securities tend to rise.
A complete description of these and other policies and restrictions is contained
under "Investment Restrictions" in the Fund's combined Statement of Additional
Information.
Debt securities
The Fund may purchase investment-grade debt securities, which are those rated
Aaa, Aa, A or Baa by Moody's Investors Service, Inc. ("Moody's"), or AAA, AA, A
or BBB by Standard & Poor's ("S&P") or, if unrated, of equivalent quality as
determined by the Adviser. The Fund may also purchase debt securities which are
rated below investment-grade. (See "Risk factors.")
Repurchase agreements
As a means of earning income for periods as short as overnight, the Fund may
enter into repurchase agreements with selected banks and broker/dealers. Under a
repurchase agreement, the Fund acquires securities, subject to the seller's
agreement to repurchase them at a specified time and price.
Convertible securities
The convertible securities in which the Fund may invest consist of bonds, notes,
debentures and preferred stocks which may be converted or exchanged at a stated
or determinable exchange ratio into underlying shares of common stock.
Prior to their conversion, convertible securities may have characteristics
similar to nonconvertible securities of the same type.
Foreign securities
In addition to investments in companies domiciled in the U.S., the Fund may
invest in listed and unlisted foreign securities that meet the same criteria as
the Fund's domestic holdings. The Fund may invest in foreign securities when the
anticipated performance of foreign securities is believed by the Adviser to
offer more potential than domestic alternatives in keeping with the investment
objective of the Fund.
Strategic Transactions and derivatives
The Fund may, but is not required to, utilize various other investment
strategies as described below to hedge various market risks (such as interest
rates, currency exchange rates, and broad or specific equity or fixed-income
market movements), to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio or to enhance potential gain. These
strategies may be executed through the use of derivative contracts. Such
strategies are generally accepted as a part of modern portfolio management and
7
<PAGE>
Additional information about policies and investments (cont'd)
- --------------------------------------------------------------
are regularly utilized by many mutual funds and other institutional investors.
Techniques and instruments may change over time as new instruments and
strategies are developed or regulatory changes occur.
In the course of pursuing these investment strategies, the Fund may purchase and
sell exchange-listed and over-the-counter put and call options on securities,
equity and fixed-income indices and other financial instruments, purchase and
sell financial futures contracts and options thereon, enter into various
interest rate transactions such as swaps, caps, floors or collars, and enter
into various currency transactions such as currency forward contracts, currency
futures contracts, currency swaps or options on currencies or currency futures
(collectively, all the above are called "Strategic Transactions").
Strategic Transactions may be used without limit to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for the Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio, or to establish a position in the
derivatives markets as a temporary substitute for purchasing or selling
particular securities. Some Strategic Transactions may also be used to enhance
potential gain although no more than 5% of the Fund's assets will be committed
to Strategic Transactions entered into for non-hedging purposes. Any or all of
these investment techniques may be used at any time and in any combination, and
there is no particular strategy that dictates the use of one technique rather
than another, as use of any Strategic Transaction is a function of numerous
variables including market conditions. The ability of the Fund to utilize these
Strategic Transactions successfully will depend on the Adviser's ability to
predict pertinent market movements, which cannot be assured. The Fund will
comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. Strategic Transactions involving
financial futures and options thereon will be purchased, sold or entered into
only for bona fide hedging, risk management or portfolio management purposes and
not for speculative purposes. Please refer to "Risk factors--Strategic
Transactions and derivatives" for more information.
Portfolio turnover
Recent economic and market conditions have necessitated more active trading,
resulting in a higher portfolio turnover rate for the Fund. A higher rate
involves greater transaction costs to the Fund and may result in the realization
of net capital gains, which would be taxable to shareholders when distributed.
Risk factors
The Fund's risks are determined by the nature of the securities held and the
portfolio management strategies used by the Adviser. The following are
descriptions of certain risks related to the investments and techniques that the
Fund may use from time to time.
Debt securities. The Fund may invest in bonds rated Baa or BBB. Moody's
considers bonds it rates Baa to have speculative elements as well as
investment-grade characteristics. The Fund may also invest up to 20% of its net
assets in debt securities which are rated below investment- grade, or of
equivalent quality as determined by the Adviser (commonly referred to as "junk
bonds"). The lower the ratings of such debt securities, the greater their risks
render them like equity securities. The Fund will invest no more than 10% of its
net assets in securities rated B or lower by Moody's or S&P, but may invest in
8
<PAGE>
securities rated C by Moody's or D by S&P, which may be in default with respect
to payment of principal or interest. Also, longer maturity bonds tend to
fluctuate more in price as interest rates change than do short-term bonds,
providing both opportunity and risk.
Repurchase agreements. If the seller under a repurchase agreement becomes
insolvent, the Fund's right to dispose of the securities may be restricted. In
the event of the commencement of bankruptcy or insolvency proceedings of the
seller of the securities before repurchase of the securities under a repurchase
agreement, the Fund may encounter delay and incur costs, including a decline in
value of the securities, before being able to sell the securities.
Convertible securities. While convertible securities generally offer lower
yields than nonconvertible debt securities of similar quality, their prices may
reflect changes in the value of the underlying common stock. Convertible
securities entail less credit risk than the issuer's common stock.
Illiquid investments. The absence of a trading market can make it difficult to
ascertain a market value for illiquid investments. Disposing of illiquid
investments may involve time- consuming negotiation and legal expenses, and it
may be difficult or impossible for the Fund to sell them promptly at an
acceptable price.
Foreign securities. Investments in foreign securities involve special
considerations, due to more limited information, higher brokerage costs and
different accounting standards. They may also entail certain risks, such as
possible imposition of dividend or interest withholding or confiscatory taxes,
possible currency blockages or transfer restrictions, expropriation,
nationalization or other adverse political or economic developments and the
difficulty of enforcing obligations in other countries. Foreign securities may
be less liquid and more volatile than comparable domestic securities, and there
is less government regulation of stock exchanges, brokers, listed companies and
banks than in the U.S. Purchases of foreign securities are usually made in
foreign currencies and, as a result, the Fund may incur currency conversion
costs and may be affected favorably or unfavorably by changes in the value of
foreign currencies against the U.S. dollar.
Strategic Transactions and derivatives. Strategic Transactions, including
derivative contracts, have risks associated with them including possible default
by the other party to the transaction, illiquidity and, to the extent the
Adviser's view as to certain market movements is incorrect, the risk that the
use of such Strategic Transactions could result in losses greater than if they
had not been used. Use of put and call options may result in losses to the Fund,
force the sale or purchase of portfolio securities at inopportune times or for
prices higher than (in the case of put options) or lower than (in the case of
call options) current market values, limit the amount of appreciation the Fund
can realize on its investments or cause the Fund to hold a security it might
otherwise sell. The use of currency transactions can result in the Fund
incurring losses as a result of a number of factors including the imposition of
exchange controls, suspension of settlements or the inability to deliver or
receive a specified currency. The use of options and futures transactions
entails certain other risks. In particular, the variable degree of correlation
between price movements of futures contracts and price movements in the related
portfolio position of the Fund creates the possibility that losses on the
hedging instrument may be greater than gains in the value of the Fund's
position. In addition, futures and options markets may not be liquid in all
circumstances and certain over-the-counter options may have no markets. As a
result, in certain markets, the Fund might not be able to close out a
transaction without incurring substantial losses, if at all. Although the use of
futures contracts and options transactions for hedging should tend to minimize
9
<PAGE>
the risk of loss due to a decline in the value of the hedged position, at the
same time they tend to limit any potential gain which might result from an
increase in value of such position. Finally, the daily variation margin
requirements for futures contracts would create a greater ongoing potential
financial risk than would purchases of options, where the exposure is limited to
the cost of the initial premium. Losses resulting from the use of Strategic
Transactions would reduce net asset value, and possibly income, and such losses
can be greater than if the Strategic Transactions had not been utilized. The
Strategic Transactions that the Fund may use and some of their risks are
described more fully in the Fund's combined Statement of Additional Information.
Distribution and performance information
- ----------------------------------------
Dividends and capital gains distributions
The Fund intends to distribute any dividends from its net investment income and
any net realized capital gains after utilization of capital loss carryforwards,
if any, in November or December to prevent application of federal excise tax,
although an additional distribution may be made if required, at a later date.
Any dividends or capital gains distributions declared in October, November or
December with a record date in such a month and paid during the following
January will be treated by shareholders for federal income tax purposes as if
received on December 31 of the calendar year declared. According to preference,
shareholders may receive distributions in cash or have them reinvested in
additional shares of the Fund. If an investment is in the form of a retirement
plan, all dividends and capital gains distributions must be reinvested into the
shareholder's account.
Generally, dividends from net investment income are taxable to shareholders as
ordinary income. Long-term capital gains distributions, if any, are taxable as
long-term capital gains regardless of the length of time shareholders have owned
their shares. Short-term capital gains and any other taxable income
distributions are taxable as ordinary income. A portion of dividends from net
investment income may qualify for the dividends-received deduction for
corporations.
The Fund sends detailed tax information about the amount and type of its
distributions to shareholders by January 31 of the following year.
Performance information
From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature or shareholder reports. All performance figures
are historical, show the performance of a hypothetical investment and are not
intended to indicate future performance. "Total return" is the change in value
of an investment in the Fund for a specified period. The "average annual total
return" of the Fund is the average annual compound rate of return of an
investment in the Fund assuming the investment has been held for one year, five
years and ten years as of a stated ending date. "Cumulative total return"
represents the cumulative change in value of an investment in the Fund for
various periods. All types of total return calculations assume that all
dividends and capital gains distributions during the period were reinvested in
shares of the Fund. "Capital change" measures return from capital, including
reinvestment of any capital gains distributions but does not include the
reinvestment of dividends. Performance will vary based upon, among other things,
changes in market conditions and the level of the Fund's expenses.
Fund organization
- -----------------
Scudder Capital Growth Fund is a diversified series of Scudder Equity Trust (the
"Trust"), an open-end management investment company registered under the
Investment Company Act of 1940 (the "1940 Act"). The Trust's predecessor was
10
<PAGE>
organized as a Delaware corporation in May 1966. The Trust was reorganized as a
Massachusetts business trust in October 1985.
The Fund's activities are supervised by the Trust's Board of Trustees.
Shareholders have one vote for each share held on matters on which they are
entitled to vote. The Trust is not required to hold and has no current intention
of holding annual shareholder meetings, although special meetings may be called
for purposes such as electing or removing Trustees, changing fundamental
investment policies or approving an investment management contract. Shareholders
will be assisted in communicating with other shareholders in connection with
removing a Trustee as if Section 16(c) of the 1940 Act were applicable.
Investment adviser
The Fund retains the investment management firm of Scudder, Stevens & Clark,
Inc., a Delaware corporation, to manage the Fund's daily investment and business
affairs subject to the policies established by the Board of Trustees. The
Trustees have overall responsibility for the management of the Fund under
Massachusetts law.
For the fiscal year ended September 30, 1995, the Adviser received an investment
management fee of 0.67% of the Fund's average daily net assets on an annual
basis. The fee is graduated so that increases in the Fund's net assets may
result in a lower fee and decreases in the Fund's net assets may result in a
higher fee. The fee is payable monthly, provided that the Fund will make such
interim payments as may be requested by the Adviser not to exceed 75% of the
amount of the fee then accrued on the books of the Fund and unpaid.
All the Fund's expenses are paid out of gross investment income. Shareholders
pay no direct charges or fees for investment or administrative services.
Scudder, Stevens & Clark, Inc. is located at Two International Place, Boston,
Massachusetts.
Transfer agent
Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts 02107-2291, a
subsidiary of the Adviser, is the transfer, shareholder servicing and
dividend-paying agent for the Fund.
Underwriter
Scudder Investor Services, Inc., a subsidiary of the Adviser, is the Fund's
principal underwriter. Scudder Investor Services, Inc. confirms, as agent, all
purchases of shares of the Fund. Scudder Investor Relations is a telephone
information service provided by Scudder Investor Services, Inc.
Custodian
State Street Bank and Trust Company is the Fund's custodian.
Fund accounting agent
Scudder Fund Accounting Corporation, a subsidiary of the Adviser, is responsible
for determining the daily net asset value per share and maintaining the general
accounting records of the Fund.
Transaction information
- -----------------------
Purchasing shares
Purchases are executed at the next calculated net asset value per share after
the Fund's transfer agent in Boston receives the purchase request in good order.
Purchases are made in full and fractional shares. (See "Share price.")
By check. If you purchase shares with a check that does not clear, your purchase
will be canceled and you will be subject to any losses or fees incurred in the
transaction. Checks must be drawn on or payable through a U.S. bank. If you
purchase shares by check and redeem them within seven business days of purchase,
the Fund may hold redemption proceeds until the purchase check has cleared. If
you purchase shares by federal funds wire, you may avoid this delay. Redemption
(Continued on page 14)
11
<PAGE>
Purchases
- ---------
<TABLE>
<S> <C>
Opening Minimum initial investment: $1,000; IRAs $500
an account Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums. See appropriate
plan literature.
o By Mail Send your completed and signed application and check
Make checks
payable to "The by regular mail to: or by express, registered,
Scudder Funds." or certified mail to:
The Scudder Funds Scudder Shareholder Services
P.O. Box 2291 Center
Boston, MA 42 Longwater Drive
02107-2291 Norwell, MA
02061-1612
o By Wire Please see Transaction information--Purchasing shares--
By wire following these tables for details, including the ABA wire
transfer number. Then call 1-800-225-5163 for instructions.
o In Person Visit one of our Funds Centers to complete your application with the help
of a Scudder representative. Funds Center locations are listed under
Shareholder benefits.
-----------------------------------------------------------------------------------------------------------------------
Purchasing Minimum additional investment: $100; IRAs $50
additional shares Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums. See appropriate
plan literature.
Make checks o By Mail Send a check with a Scudder investment slip, or with a letter of
payable to "The instruction including your account number and the complete Fund name, to
Scudder Funds." the appropriate address listed above.
o By Wire Please see Transaction information--Purchasing shares-- By wire following these
tables for details, including the ABA wire transfer number.
o In Person Visit one of our Funds Centers to make an additional investment in your
Scudder fund account. Funds Center locations are listed under Shareholder
benefits.
o By Telephone Please see Transaction information--Purchasing shares--
By AutoBuy or By telephone order for more details.
o By Automatic You may arrange to make investments on a regular basis through automatic
Investment Plan deductions from your bank checking account. Please call 1-800-225-5163
($50 minimum) for more information and an enrollment form.
</TABLE>
12
<PAGE>
Exchanges and redemptions
- -------------------------
<TABLE>
<S> <C>
Exchanging Minimum investments: $1,000 to establish a new account; $100 to exchange among existing accounts
shares
o By Telephone To speak with a service representative, call 1-800-225-5163 from
8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day).
o By Mail Print or type your instructions and include:
or Fax - the name of the Fund and the account number you are exchanging from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to exchange;
- the name of the Fund you are exchanging into; and
- your signature(s) as it appears on your account and a daytime telephone
number.
Send your instructions
by regular mail to: or by express, registered, or by fax to:
or certified mail to:
The Scudder Funds Scudder Shareholder 1-800-821-6234
P.O. Box 2291 Services Center
Boston, MA 02107-2291 42 Longwater Drive
Norwell, MA
02061-1612
-----------------------------------------------------------------------------------------------------------------------
Redeeming shares o By Telephone To speak with a service representative, call 1-800-225-5163 from
8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day). You may have redemption
proceeds sent to your predesignated bank account, or redemption proceeds of up
to $50,000 sent to your address of record.
o By Mail Send your instructions for redemption to the appropriate address or fax number
or Fax above and include:
- the name of the Fund and account number you are redeeming from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to redeem; and
- your signature(s) as it appears on your account and a daytime telephone
number.
A signature guarantee is required for redemptions over $50,000. See Transaction
information--Redeeming shares following these tables.
o By Automatic You may arrange to receive automatic cash payments periodically. Call
Withdrawal 1-800-225-5163 for more information and an enrollment form.
Plan
</TABLE>
13
<PAGE>
Transaction information (cont'd)
- --------------------------------
(Continued from page 11)
or exchange requests by telephone prior to the expiration of the seven-day
period will not be accepted.
By wire. To open a new account by wire, first call Scudder at 1-800-225-5163 to
obtain an account number. A representative will instruct you to send a
completed, signed application to the transfer agent in Boston. Accounts cannot
be opened without a completed, signed application and a Scudder fund account
number. Contact your bank to arrange a wire transfer to:
The Scudder Funds
State Street Bank and Trust Company
Boston, MA 02101
ABA Number 011000028
DDA Account 9903-5552
Your wire instructions must also include:
- -- the name of the fund in which the money is to be invested,
- -- the account number of the fund, and
- -- the name(s) of the account holder(s).
The account will be established once the application and money order are
received in good order.
You may also make additional investments of $100 or more to your existing
account by wire.
By telephone order. Existing shareholders may purchase shares at a certain day's
price by calling 1-800-225-5163 before the close of regular trading on the New
York Stock Exchange (the "Exchange"), normally 4 p.m. eastern time, on that day.
Orders must be for $10,000 or more and cannot be for an amount greater than four
times the value of your account at the time the order is placed. A confirmation
with complete purchase information is sent shortly after your order is received.
You must include with your payment the order number given at the time the order
is placed. If payment by check or wire is not received within three business
days, the order is subject to cancellation and the shareholder will be
responsible for any loss to the Fund resulting from this cancellation. Telephone
orders are not available for shares held in Scudder IRA accounts and most other
Scudder retirement plan accounts.
By "AutoBuy." If you elected "AutoBuy" for your account, you can call toll-free
to purchase shares. The money will be automatically transferred from your
predesignated bank checking account. Your bank must be a member of the Automated
Clearing House for you to use this service. If you did not elect "AutoBuy," call
1-800-225-5163 for more information.
To purchase additional shares, call 1-800-225-5163. Purchases must be for at
least $250 but not more than $250,000. Proceeds in the amount of your purchase
will be transferred from your bank checking account in two or three business
days following your call. For requests received by the close of regular trading
on the Exchange, shares will be purchased at the net asset value per share
calculated at the close of trading on the day of your call. "AutoBuy" requests
received after the close of regular trading on the Exchange will begin their
processing and be purchased at the net asset value calculated the following
business day.
If you purchase shares by "AutoBuy" and redeem them within seven days of the
purchase, the Fund may hold the redemption proceeds for a period of up to seven
business days. If you purchase shares and there are insufficient funds in your
bank account, the purchase will be canceled and you will be subject to any
losses or fees incurred in the transaction. "AutoBuy" transactions are not
available for Scudder IRA accounts and most other retirement plan accounts.
By exchange. Your new account will have the same registration and address as
your existing account.
The exchange requirements for corporations, other organizations, trusts,
fiduciaries, agents, institutional investors and retirement plans may be
14
<PAGE>
different from those for regular accounts. Please call 1-800-225-5163 for more
information, including information about the transfer of special account
features.
You can also make exchanges among your Scudder fund accounts on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.
Redeeming shares
The Fund allows you to redeem shares (i.e., sell them back to the Fund) without
redemption fees.
By telephone. This is the quickest and easiest way to sell Fund shares. If you
elected telephone redemption to your bank on your application, you can call to
request that federal funds be sent to your authorized bank account. If you did
not elect telephone redemption to your bank on your application, call
1-800-225-5163 for more information.
Redemption proceeds will be wired to your bank unless otherwise requested. If
your bank cannot receive federal reserve wires, redemption proceeds will be
mailed to your bank. There will be a $5 charge for all wire redemptions.
You can also make redemptions from your Scudder fund account on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.
If you open an account by wire, you cannot redeem shares by telephone until the
Fund's transfer agent has received your completed and signed application.
Telephone redemption is not available for shares held in Scudder IRA accounts
and most other Scudder retirement plan accounts.
In the event that you are unable to reach the Fund by telephone, you should
write to the Fund; see "How to contact Scudder" for the address.
By "AutoSell." If you elected "AutoSell" for your account, you can call
toll-free to redeem shares. The money will be automatically transferred to your
predesignated bank checking account. Your bank must be a member of the Automated
Clearing House for you to use this service. If you did not elect "AutoSell,"
call 1-800-225-5163 for more information.
To redeem shares, call 1-800-225-5163. Redemptions must be for at least $250.
Proceeds in the amount of your redemption will be transferred to your bank
checking account in two or three business days following your call. For requests
received by the close of regular trading on the Exchange, shares will be
redeemed at the net asset value per share calculated at the close of trading on
the day of your call. "AutoSell" requests received after the close of regular
trading on the Exchange will begin their processing and be redeemed at the net
asset value calculated the following business day.
"AutoSell" transactions are not available for Scudder IRA accounts and most
other retirement plan accounts.
Signature guarantees. For your protection and to prevent fraudulent redemptions,
on written redemption requests in excess of $50,000 we require an original
signature and an original signature guarantee for each person in whose name the
account is registered. (The Fund reserves the right, however, to require a
signature guarantee for all redemptions.) You can obtain a signature guarantee
from most banks, credit unions or savings associations, or from broker/dealers,
municipal securities broker/dealers, government securities broker/dealers,
national securities exchanges, registered securities associations or clearing
agencies deemed eligible by the Securities and Exchange Commission. Signature
guarantees by notaries public are not acceptable. Redemption requirements for
corporations, other organizations, trusts, fiduciaries, agents, institutional
investors and retirement plans may be different from those for regular accounts.
For more information, please call 1-800-225-5163.
Telephone transactions
Shareholders automatically receive the ability to exchange by telephone and the
15
<PAGE>
Transaction information (cont'd)
- --------------------------------
right to redeem by telephone up to $50,000 to their address of record.
Shareholders also may, by telephone, request that redemption proceeds be sent to
a predesignated bank account. The Fund uses procedures designed to give
reasonable assurance that telephone instructions are genuine, including
recording telephone calls, testing a caller's identity and sending written
confirmation of telephone transactions. If the Fund does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Fund will not be liable for acting upon instructions
communicated by telephone that it reasonably believes to be genuine.
Share price
Purchases and redemptions, including exchanges, are made at net asset value.
Scudder Fund Accounting Corporation determines net asset value per share as of
the close of regular trading on the Exchange, normally 4 p.m. eastern time, on
each day the Exchange is open for trading. Net asset value per share is
calculated by dividing the value of total Fund assets, less all liabilities, by
the total number of shares outstanding.
Processing time
All purchase and redemption requests received in good order by the Fund's
transfer agent in Boston by the close of regular trading on the Exchange are
executed at the net asset value per share calculated at the close of regular
trading that day.
Purchase and redemption requests received after the close of regular trading on
the Exchange will be executed the following business day.
If you wish to make a purchase of $500,000 or more, you should notify Scudder
Investor Relations by calling 1-800-225-5163.
The Fund will normally send your redemption proceeds within one business day
following the redemption request, but may take up to seven business days (or
longer in the case of shares recently purchased by check).
Short-term trading
Purchases and sales should be made for long-term investment purposes only. The
Fund and Scudder Investor Services, Inc. each reserves the right to restrict
purchases of Fund shares (including exchanges) when a pattern of frequent
purchases and sales made in response to short-term fluctuations in the Fund's
share price appears evident.
Tax information
A redemption of shares, including an exchange into another Scudder fund, is a
sale of shares and may result in a gain or loss for income tax purposes.
Tax identification number
Be sure to complete the Tax Identification Number section of the Fund's
application when you open an account. Federal tax law requires the Fund to
withhold 31% of taxable dividends, capital gains distributions and redemption
and exchange proceeds from accounts (other than those of certain exempt payees)
without a certified Social Security or tax identification number and certain
other certified information or upon notification from the IRS or a broker that
withholding is required. The Fund reserves the right to reject new account
applications without a certified Social Security or tax identification number.
The Fund also reserves the right, following 30 days' notice, to redeem all
shares in accounts without a certified Social Security or tax identification
number. A shareholder may avoid involuntary redemption by providing the Fund
with a tax identification number during the 30-day notice period.
Minimum balances
Shareholders should maintain a share balance worth at least $1,000, which amount
may be changed by the Board of Trustees. Scudder retirement plans have similar
or lower minimum share balance requirements. The Fund reserves the right,
following 60 days' written notice to shareholders, to redeem all shares in
16
<PAGE>
sub-minimum accounts, including accounts of new investors, where a reduction in
value has occurred due to a redemption or exchange out of the account.
Reductions in value that result solely from market activity will not trigger an
involuntary redemption. The Fund will mail the proceeds of the redeemed account
to the shareholder. The shareholder may restore the share balance to $1,000 or
more during the 60-day notice period and must maintain it at no lower than that
minimum to avoid involuntary redemption.
Third party transactions
If purchases and redemptions of Fund shares are arranged and settlement is made
at an investor's election through a member of the National Association of
Securities Dealers, Inc., other than Scudder Investor Services, Inc., that
member may, at its discretion, charge a fee for that service.
Redemption-in-kind
The Fund reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase order by making
payment in whole or in part in readily marketable securities chosen by the Fund
and valued as they are for purposes of computing the Fund's net asset value (a
redemption-in-kind). If payment is made in securities, a shareholder may incur
transaction expenses in converting these securities to cash. The Trust has
elected, however, to be governed by Rule 18f-1 under the 1940 Act, as a result
of which the Fund is obligated to redeem shares, with respect to any one
shareholder during any 90-day period, solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Fund at the beginning of the
period.
Shareholder benefits
- --------------------
Experienced professional management
Scudder, Stevens & Clark, Inc., one of the nation's most experienced investment
management firms, actively manages your Scudder fund investment. Professional
management is an important advantage for investors who do not have the time or
expertise to invest directly in individual securities.
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. Scudder believes
its 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 eight years of experience as an equity analyst.
SAIL(TM)--Scudder Automated Information Line
For personalized account information including fund prices, yields and account
balances, to perform transactions in existing Scudder fund accounts, or to
17
<PAGE>
Shareholder benefits, (cont'd)
- ------------------------------
obtain information on any Scudder fund, shareholders can call Scudder's
Automated Information Line (SAIL) at 1-800-343-2890, 24 hours a day. During
periods of extreme economic or market changes, or other conditions, it may be
difficult for you to effect telephone transactions in your account. In such an
event you should write to the Fund; please see "How to contact Scudder" for the
address.
Investment flexibility
Scudder offers toll-free telephone exchange between funds at current net asset
value. You can move your investments among money market, income, growth,
tax-free and growth and income funds with a simple toll-free call or, if you
prefer, by sending your instructions through the mail or by fax. Telephone and
fax redemptions and exchanges are subject to termination and their terms are
subject to change at any time by the Fund or the transfer agent. In some cases,
the transfer agent or Scudder Investor Services, Inc. may impose additional
conditions on telephone transactions.
Dividend reinvestment plan
You may have dividends and distributions automatically reinvested in additional
Fund shares. Please call 1-800-225-5163 to request this feature.
Shareholder statements
You receive a detailed account statement every time you purchase or redeem
shares. All of your statements should be retained to help you keep track of
account activity and the cost of shares for tax purposes.
Shareholder reports
In addition to account statements, you receive periodic shareholder reports
highlighting relevant information, including investment results and a review of
portfolio changes.
To reduce the volume of mail you receive, only one copy of most Fund reports,
such as the Fund's Annual Report, may be mailed to your household (same surname,
same address). Please call 1-800-225-5163 if you wish to receive additional
shareholder reports.
Newsletters
Four times a year, Scudder sends you At the Helm, an informative newsletter
covering economic and investment developments, service enhancements and other
topics of interest to Scudder fund investors.
Scudder Funds Centers
As a convenience to shareholders who like to conduct business in person, Scudder
Investor Services, Inc. maintains Funds Centers in Boca Raton, Boston, Chicago,
Cincinnati, Los Angeles, New York, Portland (OR), San Diego, San Francisco and
Scottsdale.
T.D.D. service for the hearing impaired
Scudder's full range of investor information and shareholder services is
available to hearing impaired investors through a toll-free T.D.D. (Telephone
Device for the Deaf) service. If you have access to a T.D.D., call
1-800-543-7916 for investment information or specific account questions and
transactions.
18
<PAGE>
Scudder tax-advantaged retirement plans
- ---------------------------------------
Scudder offers a variety of tax-advantaged retirement plans for individuals,
businesses and non-profit organizations. These flexible plans are designed for
use with the Scudder Family of Funds (except Scudder tax-free funds, which are
inappropriate for such plans). Scudder Funds offer a broad range of investment
objectives and can be used to seek almost any investment goal. Using Scudder's
retirement plans can help shareholders save on current taxes while building
their retirement savings.
* Scudder No-Fee IRAs. These retirement plans allow a maximum annual
contribution of $2,000 per person for anyone with earned income. Many
people can deduct all or part of their contributions from their taxable
income, and all investment earnings accrue on a tax deferred basis. The
Scudder No-Fee IRA charges no annual custodial fee.
* 401(k) Plans. 401(k) plans allow employers and employees to make
tax-deductible retirement contributions. Scudder offers a full service
program that includes recordkeeping, prototype plan, employee
communications and trustee services, as well as investment options.
* Profit Sharing and Money Purchase Pension Plans. These plans allow
corporations, partnerships and people who are self-employed to make annual,
tax-deductible contributions of up to $30,000 for each person covered by
the plans. Plans may be adopted individually or paired to maximize
contributions. These are sometimes known as Keogh plans.
* 403(b) Plans. Retirement plans for tax-exempt organizations and school
systems to which employers and employees may both contribute.
* SEP-IRAs. Easily administered retirement plans for small businesses and
self-employed individuals. The maximum annual contribution to SEP-IRA
accounts is adjusted each year for inflation.
* Scudder Horizon Plan. A no-load variable annuity that lets you build assets
by deferring taxes on your investment earnings. You can start with $2,500
or more.
Scudder Trust Company (an affiliate of the Adviser) is Trustee or Custodian for
some of these plans and is paid an annual fee for some of the above retirement
plans. For information about establishing a Scudder No-Fee IRA, SEP-IRA, Profit
Sharing Plan, Money Purchase Pension Plan or a Scudder Horizon Plan, please call
1-800-225-2470. For information about 401(k)s or 403(b)s please call
1-800-323-6105. To effect transactions in existing IRA, SEP-IRA, Profit Sharing
or Pension Plan accounts, call 1-800-225-5163.
The variable annuity contract is provided by Charter National Life Insurance
Company (in New York State, Intramerica Life Insurance Company [S 1802]). The
contract is offered by Scudder Insurance Agency, Inc. (in New York State, Nevada
and Montana, Scudder Insurance Agency of New York, Inc.). CNL, Inc. is the
Principal Underwriter. Scudder Horizon Plan is not available in all states.
19
<PAGE>
Trustees and Officers
- ---------------------
Daniel Pierce*
President and Trustee
Paul Bancroft III
Trustee; Venture Capitalist and Consultant
Sheryle J. Bolton
Trustee; Consultant
Thomas J. Devine
Trustee; Consultant
Keith R. Fox
Trustee; President, Exeter Capital
Management Corporation
David S. Lee*
Vice President and Trustee
Douglas M. Loudon*
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 W. Lear
Honorary Trustee; Executive-in-Residence,
Columbia University Graduate School of Business
Robert G. Stone, Jr.
Honorary Trustee; Chairman of the
Board and Director, Kirby Corporation
Donald E. Hall*
Vice President
Jerard K. Hartman*
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.
20
<PAGE>
Investment products and services
- --------------------------------
<TABLE>
<S> <C>
The Scudder Family of Funds Income
Money market Scudder Emerging Markets Income Fund
Scudder Cash Investment Trust Scudder Global Bond 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 Zero Coupon 2000 Fund
Tax free+ Growth
Scudder California Tax Free Fund* Scudder Capital Growth Fund
Scudder High Yield Tax Free Fund Scudder Development Fund
Scudder Limited Term Tax Free Fund Scudder Global Fund
Scudder Managed Municipal Bonds Scudder Global Small Company Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Gold Fund
Scudder Massachusetts Tax Free Fund* Scudder Greater Europe Growth Fund
Scudder Medium Term Tax Free Fund Scudder International Fund
Scudder New York Tax Free Fund* Scudder Latin America Fund
Scudder Ohio Tax Free Fund* Scudder Pacific Opportunities Fund
Scudder Pennsylvania Tax Free Fund* Scudder Quality Growth Fund
Growth and Income Scudder Small Company Value 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
401(k) Plans Money Purchase Pension Plans
------------------------------------------------------------------------------------------------------------------------
Closed-end Funds#
The Argentina Fund, Inc. Scudder New Europe Fund, Inc.
The Brazil Fund, Inc. Scudder World Income Opportunities Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc. Institutional Cash Management
The Latin America Dollar Income Fund, Inc. Scudder Institutional Fund, Inc.
Montgomery Street Income Securities, Inc. Scudder Fund, Inc.
Scudder New Asia 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>
21
<PAGE>
How to contact Scudder
- ----------------------
<TABLE>
<S> <C>
Account Service and Information: Please address all correspondence to:
Scudder Investor The Scudder Funds
For existing account Relations P.O. Box 2291
service and transactions 1-800-225-5163 Boston, Massachusetts
02107-2291
For personalized information Scudder Automated
about your Scudder accounts; Information Line (SAIL)
exchanges and redemptions; or 1-800-343-2890
information on any Scudder fund
Investment Information: Or Stop by a Scudder Funds Center:
To receive information about Scudder Investor Many shareholders enjoy the personal, one-on-one
the Scudder funds, for Relations service of the Scudder Funds Centers. Check for a
additional applications and 1-800-225-2470 Funds Center near you--they can be found in the
prospectuses, or for following cities:
investment questions
For establishing 401(k) and Scudder Defined Boca Raton New York
403(b) plans Contribution Boston Portland, OR
Services Chicago San Diego
1-800-323-6105 Cincinnati San Francisco
Los Angeles Scottsdale
For information on Scudder Treasurers Trust(TM), an For information on Scudder Institutional Funds*, funds
institutional cash management service for corporations, designed to meet the broad investment management and
non-profit organizations and trusts which utilizes service needs of banks and other institutions, call:
certain portfolios of Scudder Fund, Inc.* ($100,000 1-800-854-8525.
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.
</TABLE>
22
<PAGE>
Scudder
Value
Fund
Fund Profile
August 1, 1995
<PAGE>
SCUDDER VALUE FUND
-------------------------------------------------------------------------------
1. What Is The Fund's Objective?
Scudder Value Fund seeks long-term growth of capital.
-------------------------------------------------------------------------------
2. What Does The Fund Invest In?
The Fund invests in stocks that Scudder believes are
undervalued and have the potential to increase in value
over time.
* At least 80% of the Fund's assets are invested in
common stocks, preferred stocks, and securities that
may be converted into common stocks. While the Fund
focuses on the stocks of medium- and large-sized U.S.
companies, the stocks of similar foreign companies may
also be considered.
* Scudder's value approach to stock investing begins with
extensive analysis of securities through
technologically-supported proprietary research. The
Fund seeks to identify those stocks that in the opinion
of Scudder: 1) are undervalued in the marketplace
relative to expected future earnings and dividends and
2) present attractive valuations relative to other
securities.
-------------------------------------------------------------------------------
3. What Are The Risks Of Investing In The Fund?
Investment in undervalued stocks carries the risk that
their prices may not rise to a level reflective of
Scudder's valuation. In addition, movements of the stock
market will affect the Fund's share price, which may vary
from day to day. Other risk factors are that the value of
your investment may decline as a result of declines in the
overall stock market or in the types of securities held in
the Fund, and that in rising markets the types of stocks
emphasized in Scudder Value Fund may underperform other
sectors of the stock market.
-------------------------------------------------------------------------------
4. For Whom Is This Fund Appropriate?
You may wish to consider this Fund if you are seeking
capital growth and:
* plan to hold your investment for several years,
* can tolerate fluctuations in share price,
* have or plan to have other investments for the benefit
of diversification, and
* understand the risks of stock market investing.
<PAGE>
-------------------------------------------------------------------------------
5. What Are The Fund's Expenses And Fees?
There are two kinds of expenses that a shareholder may
incur, directly or indirectly, by investing in a mutual
fund. These types of expenses, as they relate to Scudder
Value Fund, are:
Shareholder transaction expenses -- fees charged directly
to your account for various transactions. Please note that
there is a $5 service fee if you request redemption
proceeds via wire.
Sales Commission None
Distribution Reinvestment Fee None
Redemption Fee None
Exchange Fee None
Annual Fund operating expenses
(after expense maintenance) --
fees paid by the Fund before it distributes its net
investment income, expressed as a percentage of the Fund's
average daily net assets. Figures below are for the fiscal
year ended September 30, 1994, during which Scudder
maintained the total annualized expenses of the Fund at
not more than 1.25% of average daily net assets. Had
Scudder not done so, expenses would have amounted to
1.61%, including 0.70% for management fees. Scudder will
continue this expense maintenance until January 31, 1996.
Investment management fee 0.34%
12b-1 fees None
Other expenses 0.91%
-----
Total Fund operating expenses 1.25%
=====
Example: Assuming a 5% annual return and redemption at the
end of each period, the total expenses relating to a
$1,000 investment would be:
One Year $13
Three Years $40
Five Years $69
Ten Years $151
This example assumes reinvestment of all dividends and
distributions and that the total Fund operating expenses
listed above remain the same each year. This example
should not be considered a representation of past or
future expenses or return. Actual Fund expenses and return
vary from year to year and may be higher or lower than
those shown.
<PAGE>
-------------------------------------------------------------------------------
6. How Has The Fund Performed Historically?
This chart shows how the Fund has performed since it
commenced operations on December 31, 1992. You should be
aware that all performance is historical, assumes
reinvestment of all distributions and is not indicative of
future results. Total return and principal value will
fluctuate.
(BAR CHART TITLE)
Total returns for years ended December 31:
(BAR CHART DATA)
--------------------------------
1993 11.60%
--------------------------------
1994 1.65%
--------------------------------
The Fund's Average Annual Total Return
for the period ended June 30, 1995
One Year Life of Fund
------------------------------
24.65% 12.67%
-------------------------------------------------------------------------------
7. Who Manages The Fund?
The Fund's investment adviser is Scudder, Stevens & Clark,
Inc., a leading provider of U.S. and international
investment management for clients throughout the world.
-------------------------------------------------------------------------------
8. How Can I Invest?
To make it easy for you to open an account, you may invest
by mail, phone, fax, or in person. The minimum initial
investment is only $1,000. Thereafter, additional
investments may be made for as little as $100. You may
also exchange shares free of charge within the Scudder
Family of Funds.
-------------------------------------------------------------------------------
9. How Can I Redeem Shares?
You may redeem shares at the current share price on any
business day by telephone, fax, or mail.
-------------------------------------------------------------------------------
10. When Are Distributions Made?
Distributions are planned for November or December. You
may elect to receive distributions in cash or have them
reinvested in additional shares of the Fund.
<PAGE>
11. What Services Does Scudder Provide?
As a shareholder, you'll enjoy:
* professional service from representatives who can answer your questions
and execute your transactions
* automated toll-free touchtone access to account information, share
prices and yields, and to perform transactions
* Scudder's quarterly shareholder newsletter, At the Helm
* regular, informative reports about the performance of your Fund
Scudder wants you to make informed investment decisions. This Fund Profile
contains key information about Scudder Value Fund. More details appear in the
Fund's accompanying prospectus. Please read it carefully before you invest. If
you have any questions, please call 1-800-225-2470.
<PAGE>
Scudder
Value
Fund
Fund Profile
October 1, 1995
<PAGE>
Scudder Value Fund
1. What Is The Fund's Objective?
Scudder Value Fund seeks long-term growth of capital.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
2. What Does The Fund Invest In?
The Fund invests in stocks that Scudder believes are
undervalued and have the potential to increase in value
over time.
o At least 80% of the Fund's assets are invested in
common stocks, preferred stocks, and securities that
may be converted into common stocks. While the Fund
focuses on the stocks of medium- and large-sized U.S.
companies, the stocks of similar foreign companies may
also be considered.
o Scudder's value approach to stock investing begins with
extensive analysis of securities through
technologically-supported proprietary research. The
Fund seeks to identify those stocks that in the opinion
of Scudder: 1) are undervalued in the marketplace
relative to expected future earnings and dividends and
2) present attractive valuations relative to other
securities.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
3. What Are The Risks Of Investing In The Fund?
Investment in undervalued stocks carries the risk that
their prices may not rise to a level reflective of
Scudder's valuation. In addition, movements of the stock
market will affect the Fund's share price, which may vary
from day to day. Other risk factors are that the value of
your investment may decline as a result of declines in the
overall stock market or in the types of securities held in
the Fund, and that in rising markets the types of stocks
emphasized in Scudder Value Fund may underperform other
sectors of the stock market.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
4. For Whom Is This Fund Appropriate?
You may wish to consider this Fund if you are seeking
capital growth and:
o plan to hold your investment for several years,
o can tolerate fluctuations in share price,
o have or plan to have other investments for the benefit
of diversification, and
o understand the risks of stock market investing.
<PAGE>
5. What Are The Fund's Expenses And Fees?
There are two kinds of expenses that a shareholder may
incur, directly or indirectly, by investing in a mutual
fund. These types of expenses, as they relate to Scudder
Value Fund, are:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Shareholder transaction expenses -- fees charged Annual Fund operating expenses
directly to your account for various transactions. (after expense maintenance) --
fees paid by the Fund before it distributes its net
investment income, expressed as a percentage of the
Fund's average daily net assets. Figures below are for
Sales Commission None the fiscal year ended September 30, 1994, during which
Scudder maintained the total annualized expenses of the
Commissions to Reinvest Fund at not more than 1.25% of average daily net
Dividends None assets. Had Scudder not done so, expenses would have
amounted to 1.61%, including 0.70% for management fees.
Redemption Fee None Scudder will continue this expense maintenance until
January 31, 1996.
Exchange Fee None
Investment management fee 0.34%
12b-1 fees None
Other expenses 0.91%
Total Fund operating expenses 1.25%
Example: Assuming a 5% annual return and One Year $13
redemption atthe end of each period, the
total expenses relating to Three Years $40
a $1,000 investment would be:
Five Years $69
Ten Years $151
</TABLE>
This example assumes reinvestment of all dividends and
distributions and that the total Fund operating expenses
listed above remain the same each year. This example
should not be considered a representation of past or
future expenses or return. Actual Fund expenses and return
vary from year to year and may be higher or lower than
those shown. Please note that there is a $5 service fee if
you request redemption proceeds via wire.
<PAGE>
6. How Has The Fund Performed Historically?
This chart shows how the Fund has performed since it
commenced operations on December 31, 1992, assuming
reinvestment of all distributions. Performance is
historical and may not be indicative of future results.
Total return and principal value will fluctuate.
Total returns for years ended December 31:
1993 11.60%
1994 1.65%
The Fund's Average Annual Total Return
for the period ended September 30, 1995
One Year 23.62%
Life of Fund 13.15%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
7. Who Manages The Fund?
The Fund's investment adviser is Scudder, Stevens & Clark,
Inc., a leading provider of U.S. and international
investment management for clients throughout the world.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
8. How Can I Invest?
To make it easy for you to open an account, you may invest
by mail, phone, fax, or in person. The minimum initial
investment is only $1,000. Thereafter, additional
investments may be made for as little as $100. You may
also exchange shares free of charge within the Scudder
Family of Funds.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
9. How Can I Redeem Shares?
You may redeem shares at the current share price on any
business day by telephone, fax, or mail.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
10. When Are Distributions Made?
The Fund typically makes distributions in November or
December. You may elect to receive distributions in cash
or have them reinvested in additional shares of the Fund.
<PAGE>
11. What Services Does Scudder Provide?
As a shareholder, you'll enjoy:
o professional service from representatives who can answer your questions
and execute your transactions
o automated toll-free touchtone access to account information, share
prices and yields, and to perform transactions
o Scudder's quarterly shareholder newsletter, At the Helm
o regular, informative reports about the performance of your Fund
Scudder wants you to make informed investment decisions. This Fund Profile
contains key information about Scudder Value Fund. More details appear in the
Fund's accompanying prospectus. Please read it carefully before you invest. If
you have any questions, please call 1-800-225-2470.
103-9-105
<PAGE>
Scudder
Value
Fund
Fund Profile
January 1, 1996
<PAGE>
1. What Is The Fund's Objective?
Scudder Value Fund seeks long-term growth of capital.
2. What Does The Fund Invest In?
The Fund invests in stocks that Scudder believes are
undervalued and have the potential to increase in value
over time.
- At least 80% of the Fund's assets are invested in
common stocks, preferred stocks, and securities that
may be converted into common stocks. While the Fund
focuses on the stocks of medium- and large-sized U.S.
companies, the stocks of similar foreign companies may
also be considered.
- Scudder's value approach to stock investing begins
with extensive analysis of securities through
technologically-supported proprietary research. The
Fund seeks to identify those stocks that in the opinion
of Scudder: 1) are undervalued in the marketplace
relative to expected future earnings and dividends and
2) present attractive valuations relative to other
securities.
3. What Are The Risks Of Investing In The Fund?
Investment in undervalued stocks carries the risk that
their prices may not rise to a level reflective of
Scudder's valuation. In addition, movements of the stock
market will affect the Fund's share price, which may vary
from day to day. Other risk factors are that the value of
your investment may decline as a result of declines in the
overall stock market or in the types of securities held in
the Fund, and that in rising markets the types of stocks
emphasized in Scudder Value Fund may underperform other
sectors of the stock market.
4. For Whom Is This Fund Appropriate?
You may wish to consider this Fund if you are seeking
capital growth and:
- plan to hold your investment for several years,
- can tolerate fluctuations in share price,
- have or plan to have other investments for the benefit
of diversification, and
- understand the risks of stock market investing.
<PAGE>
5. What Are The Fund's Expenses And Fees?
There are two kinds of expenses that a shareholder may
incur, directly or indirectly, by investing in a mutual
fund. These types of expenses, as they relate to Scudder
Value Fund, are:
<TABLE>
<S> <C>
Shareholder transaction expenses -- Annual Fund operating expenses
fees charged directly to your account (after expense maintenance) --
for various transactions. fees paid by the Fund before it
distributes its net investment income,
expressed as a percentage of the Fund's
Sales Commission None average daily net assets. Figures below
are for the fiscal year ended September
Commissions to Reinvest 30, 1994, during which Scudder maintained
Dividends None the total annualized expenses of the Fund
at not more than 1.25% of average daily
Redemption Fee None net assets. Had Scudder not done so,
expenses would have amounted to 1.61%,
Exchange Fee None including 0.70% for management fees.
Scudder will continue this expense
maintenance until January 31, 1996.
Investment management fee 0.34%
12b-1 fees None
Other expenses 0.91%
----
Total Fund operating expenses 1.25%
====
Example: Assuming a 5% annual return and One Year $13
redemption at the end of each period, the Three Years $40
total expenses relating to a $1,000 Five Years $69
investment would be: Ten Years $151
</TABLE>
This example assumes reinvestment of all dividends and
distributions and that the total Fund operating expenses
listed above remain the same each year. This example
should not be considered a representation of past or
future expenses or return. Actual Fund expenses and return
vary from year to year and may be higher or lower than
those shown. Please note that there is a $5 service fee if
you request redemption proceeds via wire.
<PAGE>
6. How Has The Fund Performed Historically?
This chart shows how the Fund has performed since it
commenced operations on December 31, 1992, assuming
reinvestment of all distributions. Performance is
historical and may not be indicative of future results.
Total return and principal value will fluctuate.
Total returns for years
ended December 31:
1993 11.6%
1994 1.65%
1995 30.17%
One Year Life of Fund
-------- ------------
The Fund's Average Annual Total Return
for the period ended December 31, 1995 30.17% 14.38%
7. Who Manages The Fund?
The Fund's investment adviser is Scudder, Stevens & Clark,
Inc., a leading provider of U.S. and international
investment management for clients throughout the world.
8. How Can I Invest?
To make it easy for you to open an account, you may invest
by mail, phone, fax, or in person. The minimum initial
investment is only $1,000. Thereafter, additional
investments may be made for as little as $100. You may
also exchange shares free of charge within the Scudder
Family of Funds.
9. How Can I Redeem Shares?
You may redeem shares at the current share price on any
business day by telephone, fax, or mail.
10. When Are Distributions Made?
The Fund typically makes dividends and capital gains
distributions, if any, in December. You may elect to
receive distributions in cash or have them reinvested in
additional shares of the Fund.
<PAGE>
11. What Services Does Scudder Provide?
- professional service from representatives who can answer your questions
and execute your transactions
- automated toll-free touchtone access to account information, share
prices and yields, and to perform transactions
- Scudder's quarterly shareholder newsletter, At the Helm
- regular, informative reports about the performance of your Fund
Scudder wants you to make informed investment decisions. This Fund Profile
contains key information about Scudder Value Fund. More details appear in the
Fund's accompanying prospectus. Please read it carefully before you invest. If
you have any questions, please call 1-800-225-2470.
<PAGE>
This prospectus sets forth concisely the information about Scudder Value Fund, a
series of Scudder Equity Trust, an open-end management investment company, that
a prospective investor should know before investing. Please retain it for future
reference.
If you require more detailed information, a combined Statement of Additional
Information dated February 1, 1996, as amended from time to time, may be
obtained without charge by writing Scudder Investor Services, Inc., Two
International Place, Boston, MA 02110-4103 or calling 1-800-225-2470. The
Statement, which is incorporated by reference into this prospectus, has been
filed with the Securities and Exchange Commission.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Contents--see page 4.
Scudder
Value
Fund
Prospectus
February 1, 1996
A pure no-load(TM) (no sales charges) mutual fund which seeks long-term growth
of capital through investment in undervalued equity securities.
<PAGE>
Expense information
How to compare a Scudder pure no-load(TM) fund
This information is designed to help you understand the various costs and
expenses of investing in Scudder Value Fund (the "Fund"). By reviewing this
table and those in other mutual funds' prospectuses, you can compare the Fund's
fees and expenses with those of other funds. With Scudder's pure no-load(TM)
funds, you pay no commissions to purchase or redeem shares, or to exchange from
one fund to another. As a result, all of your investment goes to work for you.
1) Shareholder transaction expenses: Expenses charged directly to your
individual account in the Fund for various transactions.
Sales commissions to purchase shares (sales load) NONE
Commissions to reinvest dividends NONE
Redemption fees NONE*
Fees to exchange shares NONE
2) Annual Fund operating expenses: Expenses paid by the Fund before it
distributes its net investment income, expressed as a percentage of the
Fund's average daily net assets for the fiscal year ended September 30,
1995.
Investment management fee(after waiver) 0.51%**
12b-1 fees NONE
Other expenses 0.74%
-----
Total Fund operating expenses 1.25%**
=====
Example
Based on the level of total Fund operating expenses listed above, the total
expenses relating to a $1,000 investment, assuming a 5% annual return and
redemption at the end of each period, are listed below. Investors do not pay
these expenses directly; they are paid by the Fund before it distributes its
net investment income to shareholders. (As noted above, the Fund has no
redemption fees of any kind.)
<TABLE>
<CAPTION>
<C> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$13 $40 $69 $151
</TABLE>
See "Fund organization--Investment adviser" for further information about the
investment management fee. This example assumes reinvestment of all dividends
and distributions and that the percentage amounts listed under "Annual Fund
operating expenses" remain the same each year. This example should not be
considered a representation of past or future expenses or return. Actual Fund
expenses and return vary from year to year and may be higher or lower than
those shown.
* You may redeem by writing or calling the Fund. If you wish to receive your
redemption proceeds via wire, there is a $5 wire service fee. For
additional information, please refer to "Transaction information--Redeeming
shares."
** Until July 31, 1996, the Adviser has agreed to waive a portion of its fee
to the extent necessary so that the total annualized expenses of the Fund
do not exceed 1.25% of average daily net assets. If the Adviser had not
agreed to waive a portion of its fee so that the total annualized expenses
of the Fund did not exceed 1.25% from October 1, 1994 to September 30,
1995, Fund expenses would have been: investment management fee 0.70%, other
expenses 0.74% and total operating expenses 1.44% for the fiscal year ended
September 30, 1995. To the extent that expenses fall below 1.25% during the
fiscal year, the Adviser reserves the right to recoup, during the fiscal
year incurred, amounts waived during the period, but only to the extent
that the Fund's expenses do not exceed 1.25%.
2
<PAGE>
Financial highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the audited financial
statements.
If you would like more detailed information concerning the Fund's performance, a
complete portfolio listing and audited financial statements are available in the
Fund's Annual Report dated September 30, 1995 and may be obtained without charge
by writing or calling Scudder Investor Services, Inc.
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 31, 1992
YEARS ENDED SEPTEMBER 30, (COMMENCEMENT
---------------------------- OF OPERATIONS) TO
1995 1994 SEPTEMBER 30, 1993
---------------------------- -------------------
<S> <C> <C> <C>
Net asset value, beginning of period ................................... $13.08 $13.38 $12.00
------ ------ ------
Income from investment operations:
Net investment income (a) .......................................... .18 .13 .10
Net realized and unrealized gain on investments .................... 2.86 .11 1.28
------ ------ ------
Total from investment operations ....................................... 3.04 .24 1.38
------ ------ ------
Less distributions from:
Net investment income .............................................. (.12) (.11) --
Net realized gains on investment transactions ...................... (.13) (.43) --
------ ------ ------
Total distributions .................................................... (.25) (.54) --
------ ------ ------
Net asset value, end of period ......................................... $15.87 $13.08 $13.38
====== ====== ======
TOTAL RETURN (%) ....................................................... 23.62 1.88 11.50**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) ................................. 68 35 29
Ratio of operating expenses, net to average daily net assets (%) (a) ... 1.25 1.25 1.25*
Ratio of net investment income to average daily net assets (%) ......... 1.57 1.16 1.56*
Portfolio turnover rate (%) ............................................ 98.2 74.6 60.8*
(a) Reflects a per share amount of management fee and
other fees not imposed .......................................... $ .02 $ .04 $ .06
Operating expense ratio including expenses
reimbursed, management fee and other expenses
not imposed (%) ................................................. 1.44 1.61 2.16*
<FN>
* Annualized
** Not annualized
</FN>
</TABLE>
3
<PAGE>
A message from Scudder's chairman
Scudder, Stevens & Clark, Inc., investment adviser to the Scudder Family of
Funds, was founded in 1919. We offered America's first no-load mutual fund in
1928. Today, we manage in excess of $100 billion for many private accounts and
over 50 mutual fund portfolios. We manage the mutual funds in a special program
for the American Association of Retired Persons, as well as the fund options
available through Scudder Horizon Plan, a tax-advantaged variable annuity. We
also advise The Japan Fund and nine closed-end funds that invest in countries
around the world.
The Scudder Family of Funds is designed to make investing easy and less costly.
It includes money market, tax free, income and growth funds as well as IRAs,
401(k)s, Keoghs and other retirement plans.
Services available to all shareholders include toll-free access to the
professional service representatives of Scudder Investor Relations, easy
exchange among funds, shareholder reports, informative newsletters and the
walk-in convenience of Scudder Funds Centers.
All Scudder mutual funds are pure no-load(TM). This means you pay no commissions
to purchase or redeem your shares or to exchange from one fund to another. There
are no "12b-1" fees either, which many other funds now charge to support their
marketing efforts. All of your investment goes to work for you. We look forward
to welcoming you as a shareholder.
/s/Daniel Pierce
Scudder Value Fund
Investment objective
* long-term growth of capital through investment in undervalued equity
securities
Investment characteristics
* a portfolio composed primarily of equity securities that are considered
undervalued relative to current and estimated future earnings and dividends
* a highly disciplined investment management process incorporating both
traditional fundamental research and modern quantitative techniques
* a focus on medium- to large-sized companies
* daily liquidity at current net asset value
Contents
Investment objective and policies 5
Why invest in the Fund? 6
Additional information about policies
and investments 6
Distribution and performance information 9
Fund organization 10
Transaction information 11
Purchases 12
Exchanges and redemptions 13
Shareholder benefits 17
Trustees and Officers 20
Investment products and services 21
How to contact Scudder 22
4
<PAGE>
Investment objective and policies
Scudder Value Fund (the "Fund"), a diversified series of Scudder Equity Trust,
seeks long-term growth of capital through investment in undervalued equity
securities. The Fund invests in the securities of companies that, in the opinion
of its investment adviser, Scudder, Stevens & Clark, Inc. (the "Adviser"), are
undervalued in the marketplace in relation to current and estimated future
earnings and dividends. These companies generally sell at price-earnings ratios
below the market average, as defined by the Standard & Poor's 500 Composite
Price Index.
The Fund invests at least 80% of its assets in equity securities, which consist
of common stocks, preferred stocks and securities convertible into common
stocks. The Fund changes its portfolio securities for long-term investment
considerations and not for trading purposes.
Except as otherwise indicated, the Fund's investment objective and policies are
not fundamental and may be changed without a vote of shareholders. Shareholders
will receive written notice of any changes in the Fund's objective. If there is
a change in investment objective, shareholders should consider whether the Fund
remains an appropriate investment in light of their then current financial
position and needs. There can be no assurance that the Fund's objective will be
met.
Investments
The Fund invests primarily in the equity securities of medium- to large-sized
domestic companies with annual revenues or market capitalization of at least
$600 million. The Adviser uses in-depth fundamental research and a proprietary
computerized quantitative model to identify companies that are currently
undervalued in relation to current and estimated future earnings and dividends.
The investment process also involves an assessment of business risk, including
the Adviser's analysis of the strength of a company's balance sheet, the
accounting practices a company follows, the volatility of a company's earnings
over time, and the vulnerability of earnings to changes in external factors,
such as the general economy, the competitive environment, governmental action,
and technological change.
The current share price or other valuation measures of these companies may not
reflect their business potential because investors may perform incomplete
analyses, have limited time horizons, or allow emotions to influence their
investment decisions. Other similar factors can also influence short-term market
behavior. The Adviser's quantitative approach is designed to help avoid these
pitfalls.
While a broad range of investments are considered, only those that, in the
Adviser's opinion, are selling at comparatively large discounts to intrinsic
value will be purchased for the Fund. It is anticipated that the prices of the
Fund's investments will rise as a result of both earnings growth and rising
price-earnings ratios over time.
While the Fund emphasizes U.S. investments, it can invest its assets in
securities of foreign companies which meet the same criteria applicable to
domestic investments. The Fund may invest up to 20% of its total assets in debt
obligations, including zero coupon securities and may enter into repurchase
agreements. In addition, the Fund may engage in strategic transactions. See
"Additional information about policies and investments" for more information
about these investment techniques.
From time to time, for temporary defensive or emergency purposes, the Fund may
invest a portion of its assets in cash and cash equivalents when the Adviser
deems such a position advisable in light of economic or market conditions.
5
<PAGE>
Why invest in the Fund?
Scudder Value Fund provides investors with convenient, low-cost access to a
diversified portfolio of stocks believed to be undervalued by the Adviser. The
Fund invests predominantly in the equity securities of financially sound U.S.
companies. These companies tend to have below-market price-earnings ratios yet,
in the opinion of the Adviser, will reward investors with above-average
appreciation over time.
The Fund is distinctive in the manner in which it combines systematic valuation
techniques with intensive, traditional fundamental research. The Adviser's
proprietary computer-based valuation model was developed and tested over several
years before being first implemented in 1987. In addition to identifying
undervalued securities, the quantitative model also provides the discipline
required to sell appreciated securities as their prices rise to reflect their
earnings potential. The model relies on the Adviser's independent equity
research effort for estimates of future earnings and dividend growth and
proprietary quality ratings. The Adviser maintains one of the largest equity
research departments in the industry and has done so for more than 60 years. The
Adviser oversees in excess of $400 million in institutional assets using this
price-sensitive approach.
The Fund is appropriate for investors who understand the risks of stock market
investing. Although the Fund emphasizes securities of companies the Adviser
believes are undervalued, movements of the stock market will affect the Fund's
share price.
While the Fund may invest in a broad range of industries, it is not, by itself,
a complete investment program. Nonetheless, it can serve as a core component of
an investment program that includes money market, bond and specialized equity
investments. Moreover, growth portfolios and value portfolios generally do not
move in tandem, so adding the Fund to your portfolio of growth stocks or growth
mutual funds should increase diversification and reduce investment risk.
In addition, the Fund offers all the benefits of the Scudder Family of Funds.
Scudder, Stevens & Clark, Inc. manages a diverse family of pure no-load(TM)
funds and provides a wide range of services to help investors meet their
investment needs. Please refer to "Investment products and services" for
additional information.
Additional information about policies and investments
Investment restrictions
The Fund has adopted certain fundamental policies which may not be changed
without a vote of shareholders and which are designed to maintain the
portfolio's diversity and reduce investment risk.
The Fund may not borrow money except as a temporary measure for extraordinary or
emergency purposes and may not make loans except through the lending of
portfolio securities, the purchase of debt securities or through repurchase
agreements.
As a matter of nonfundamental policy, the Fund may not invest more than 10% of
its total assets, in the aggregate, in securities which are not readily
marketable, in restricted securities and repurchase agreements maturing in more
than seven days. A complete description of these and other policies and
restrictions is contained under "Investment Restrictions" in the Fund's combined
Statement of Additional Information.
Debt securities
Consistent with the Fund's investment objective of long-term capital growth, the
Fund may purchase investment-grade debt securities, which are those rated Aaa,
Aa, A or Baa by Moody's Investors Service, Inc. ("Moody's"), or AAA, AA, A or
BBB by Standard & Poor's ("S&P") or, if unrated, of equivalent quality as
6
<PAGE>
determined by the Adviser. The Fund may also purchase debt securities which are
rated below investment- grade. Capital appreciation in such debt securities may
arise from a favorable change in relative interest rate levels, or in the
creditworthiness of issuers. Receipt of income from debt securities is
incidental to the Fund's objective of long-term growth of capital. (See "Risk
factors.")
Repurchase agreements
As a means of earning income for periods as short as overnight, the Fund may
enter into repurchase agreements with selected banks and broker/dealers. Under a
repurchase agreement, the Fund acquires securities, subject to the seller's
agreement to repurchase at a specified time and price.
Convertible securities
The Fund may invest in convertible securities (bonds, notes, debentures,
preferred stocks and other securities convertible into common stocks) that may
offer higher income than the common stocks into which they are convertible. The
convertible securities in which the Fund may invest include fixed-income or zero
coupon debt securities, which may be converted or exchanged at a stated or
determinable exchange ratio into underlying shares of common stock. Prior to
their conversion, convertible securities may have characteristics similar to
nonconvertible debt securities.
Foreign securities
While the Fund generally emphasizes investments in companies domiciled in the
U.S., it may invest in listed and unlisted foreign securities that meet the same
criteria as the Fund's domestic holdings. The Fund may invest in foreign
securities when the anticipated performance of foreign securities is believed by
the Adviser to offer more potential than domestic alternatives in keeping with
the investment objective of the Fund.
Strategic Transactions and derivatives
The Fund may, but is not required to, utilize various other investment
strategies as described below to hedge various market risks (such as interest
rates, currency exchange rates, and broad or specific equity or fixed-income
market movements), to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio or to enhance potential gain. These
strategies may be executed through the use of derivative contracts. Such
strategies are generally accepted as a part of modern portfolio management and
are regularly utilized by many mutual funds and other institutional investors.
Techniques and instruments may change over time as new instruments and
strategies are developed or regulatory changes occur.
In the course of pursuing these investment strategies, the Fund may purchase and
sell exchange-listed and over-the-counter put and call options on securities,
equity and fixed-income indices and other financial instruments, purchase and
sell financial futures contracts and options thereon, enter into various
interest rate transactions such as swaps, caps, floors or collars, and enter
into various currency transactions such as currency forward contracts, currency
futures contracts, currency swaps or options on currencies or currency futures
(collectively, all the above are called "Strategic Transactions").
Strategic Transactions may be used without limit to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for the Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio, or to establish a position in the
derivatives markets as a temporary substitute for purchasing or selling
particular securities. Some Strategic Transactions may also be used to
7
<PAGE>
Additional information about policies and investments (cont'd)
enhance potential gain although no more than 5% of the Fund's assets will be
committed to Strategic Transactions entered into for non-hedging purposes. Any
or all of these investment techniques may be used at any time and in any
combination, and there is no particular strategy that dictates the use of one
technique rather than another, as use of any Strategic Transaction is a function
of numerous variables including market conditions. The ability of the Fund to
utilize these Strategic Transactions successfully will depend on the Adviser's
ability to predict pertinent market movements, which cannot be assured. The Fund
will comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. Strategic Transactions involving
financial futures and options thereon will be purchased, sold or entered into
only for bona fide hedging, risk management or portfolio management purposes and
not for speculative purposes. Please refer to "Risk factors--Strategic
Transactions and derivatives" for more information.
Risk factors
The Fund's risks are determined by the nature of the securities held and the
portfolio management strategies used by the Adviser. The following are
descriptions of certain risks related to the investments and techniques that the
Fund may use from time to time.
Debt securities. The Fund may invest up to 20% of its net assets in debt
securities, including securities which are rated below investment- grade or, if
unrated, are considered by the Adviser to be equivalent to below
investment-grade debt securities (commonly referred to as "junk bonds"). The
lower the ratings of such debt securities, the greater their risks render them
like equity securities. The Fund will invest no more than 10% of its net assets
in securities rated B or lower by Moody's or S&P, and may not invest more than
5% of its net assets in securities rated C by Moody's or D by S&P, which may be
in default with respect to payment of principal or interest. Also,
longer-maturity bonds tend to fluctuate more in price as interest rates change
than do short-term bonds, providing both opportunity and risk.
Zero coupon bonds, which do not pay interest until maturity, and pay-in-kind
securities, which pay interest in the form of additional securities, may be more
speculative than debt securities which pay income periodically in cash.
Repurchase agreements. If a seller under a repurchase agreement becomes
insolvent, the Fund's right to dispose of the securities may be restricted. In
the event of the commencement of bankruptcy or insolvency proceedings of the
seller of the securities before repurchase of the securities under a repurchase
agreement, the Fund may encounter delay and incur costs including a decline in
value of the securities before being able to sell the securities.
Convertible securities. While convertible securities generally offer lower
yields than nonconvertible debt securities of similar quality, their prices may
reflect changes in the value of the underlying common stock. Convertible
securities entail less credit risk than the issuer's common stock.
Illiquid investments. The absence of a trading market can make it difficult to
ascertain a market value for illiquid investments. Disposing of illiquid
investments may involve time-consuming negotiation and legal expenses, and it
may be difficult or impossible for the Fund to sell them promptly at an
acceptable price.
Foreign securities. Investments in foreign securities involve special
considerations, due to more limited information, higher brokerage costs and
different accounting standards. They may also entail certain risks, such as
possible imposition of dividend or interest withholding or confiscatory taxes,
possible currency blockages or transfer restrictions, expropriation,
nationalization or other adverse political or economic developments and the
8
<PAGE>
difficulty of enforcing obligations in other countries. Foreign securities may
be less liquid and more volatile than comparable domestic securities, and there
is less government regulation of stock exchanges, brokers, listed companies and
banks than in the U.S. Purchases of foreign securities are usually made in
foreign currencies and, as a result, the Fund may incur currency conversion
costs and may be affected favorably or unfavorably by changes in the value of
foreign currencies against the U.S. dollar.
Strategic Transactions and derivatives. Strategic Transactions, including
derivative contracts, have risks associated with them including possible default
by the other party to the transaction, illiquidity and, to the extent the
Adviser's view as to certain market movements is incorrect, the risk that the
use of such Strategic Transactions could result in losses greater than if they
had not been used. Use of put and call options may result in losses to the Fund,
force the sale or purchase of portfolio securities at inopportune times or for
prices higher than (in the case of put options) or lower than (in the case of
call options) current market values, limit the amount of appreciation the Fund
can realize on its investments or cause the Fund to hold a security it might
otherwise sell. The use of currency transactions can result in the Fund
incurring losses as a result of a number of factors including the imposition of
exchange controls, suspension of settlements or the inability to deliver or
receive a specified currency. The use of options and futures transactions
entails certain other risks. In particular, the variable degree of correlation
between price movements of futures contracts and price movements in the related
portfolio position of the Fund creates the possibility that losses on the
hedging instrument may be greater than gains in the value of the Fund's
position. In addition, futures and options markets may not be liquid in all
circumstances and certain over-the-counter options may have no markets. As a
result, in certain markets, the Fund might not be able to close out a
transaction without incurring substantial losses, if at all. Although the use of
futures contracts and options transactions for hedging should tend to minimize
the risk of loss due to a decline in the value of the hedged position, at the
same time they tend to limit any potential gain which might result from an
increase in value of such position. Finally, the daily variation margin
requirements for futures contracts would create a greater ongoing potential
financial risk than would purchases of options, where the exposure is limited to
the cost of the initial premium. Losses resulting from the use of Strategic
Transactions would reduce net asset value, and possibly income, and such losses
can be greater than if the Strategic Transactions had not been utilized. The
Strategic Transactions that the Fund may use and some of their risks are
described more fully in the Fund's combined Statement of Additional Information.
Distribution and performance information
Dividends and capital gains distributions
The Fund intends to distribute any dividends from its net investment income and
net realized capital gains after utilization of capital loss carryforwards, if
any, annually in December to prevent application of federal excise tax, although
an additional distribution may be made if required, at a later date. Any
dividends or capital gains distributions declared in October, November or
December with a record date in such a month and paid the following January will
be treated by shareholders for federal income tax purposes as if received on
December 31 of the calendar year declared. According to preference, shareholders
may receive distributions in cash or have them reinvested in additional shares
of the Fund. If an investment is in the form of a retirement plan, all dividends
and capital gains distributions must be reinvested into the shareholder's
account.
9
<PAGE>
Distribution and performance information (cont'd)
Generally, dividends from net investment income are taxable to shareholders as
ordinary income. Long-term capital gains distributions, if any, are taxable as
long-term capital gains regardless of the length of time shareholders have owned
their shares. Short-term capital gains and any other taxable income
distributions are taxable as ordinary income. A portion of such dividends from
net investment income may qualify for the dividends-received deduction for
corporations.
The Fund sends detailed tax information about the amount and type of its
distributions to shareholders by January 31 of the following year.
Performance information
From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature or shareholder reports. All performance figures
are historical, show the performance of a hypothetical investment and are not
intended to indicate future performance. "Total return" is the change in value
of an investment in the Fund for a specified period. The "average annual total
return" of the Fund is the average annual compound rate of return of an
investment in the Fund assuming the investment has been held for one year and
the life of the Fund, as of a stated ending date. "Cumulative total return"
represents the cumulative change in value of an investment in the Fund for
various periods. All types of total return calculations assume that all
dividends and capital gains distributions during the period were reinvested in
shares of the Fund. "Capital change" measures return from capital, including
reinvestment of any capital gains distributions but does not include the
reinvestment of dividends. Performance will vary based upon, among other things,
changes in market conditions and the level of the Fund's expenses.
Fund organization
Scudder Value Fund is a diversified series of Scudder Equity Trust (the
"Trust"), an open-end management investment company registered under the
Investment Company Act of 1940 (the "1940 Act"). The Trust's predecessor was
organized as a Delaware corporation in May 1966. The Trust was reorganized as a
Massachusetts business trust in October 1985.
The Fund's activities are supervised by the Trust's Board of Trustees.
Shareholders have one vote for each share held on matters on which they are
entitled to vote. The Trust is not required and has no current intention of
holding annual shareholder meetings, although special meetings may be called for
purposes such as electing or removing Trustees, changing fundamental investment
policies or approving an investment management contract. Shareholders will be
assisted in communicating with other shareholders in connection with removing a
Trustee as if Section 16(c) of the 1940 Act were applicable.
Investment adviser
The Fund retains the investment management firm of Scudder, Stevens & Clark,
Inc., a Delaware corporation, to manage its daily investment and business
affairs subject to the policies established by the Board of Trustees. The
Trustees have overall responsibility for the management of the Fund under
Massachusetts law.
The Fund pays the Adviser an annual fee of 0.70% of the Fund's average daily net
assets. The Adviser has agreed to maintain the annualized expenses of the Fund
at not more than 1.25% of the average daily net assets of the Fund until July
31, 1996. For the fiscal year ended September 30, 1995, the Adviser took action
to reduce the Fund's total expenses and as a result received an investment
management fee of 0.51% of the Fund's average daily net assets.
10
<PAGE>
The fee is payable monthly, provided that the Fund will make such interim
payments as may be requested by the Adviser not to exceed 75% of the amount of
the fee then accrued on the books of the Fund and unpaid.
All the Fund's expenses are paid out of gross investment income. Shareholders
pay no direct charges or fees for investment or administrative services.
Scudder, Stevens & Clark, Inc. is located at Two International Place, Boston,
Massachusetts.
Transfer agent
Scudder Service Corporation, P.O. Box 2291, Boston, Massachusetts 02107-2291, a
subsidiary of the Adviser, is the transfer, shareholder servicing and
dividend-paying agent for the Fund.
Underwriter
Scudder Investor Services, Inc., a subsidiary of the Adviser, is the Fund's
principal underwriter. Scudder Investor Services, Inc. confirms, as agent, all
purchases of shares of the Fund. Scudder Investor Relations is a telephone
information service provided by Scudder Investor Services, Inc.
Custodian
State Street Bank and Trust Company is the Fund's custodian.
Fund accounting agent
Scudder Fund Accounting Corporation, a subsidiary of the Adviser, is responsible
for determining the daily net asset value per share and maintaining the general
accounting records of the Fund.
Transaction information
Purchasing shares
Purchases are executed at the next calculated net asset value per share after
the Fund's transfer agent in Boston receives the purchase request in good order.
Purchases are made in full and fractional shares. (See "Share price.")
By check. If you purchase shares with a check that does not clear, your purchase
will be canceled and you will be subject to any losses or fees incurred in the
transaction. Checks must be drawn on or payable through a U.S. bank. If you
purchase shares by check and redeem them within seven business days of purchase,
the Fund may hold redemption proceeds until the purchase check has cleared. If
you purchase shares by federal funds wire, you may avoid this delay. Redemption
or exchange requests by telephone prior to the expiration of the seven-day
period will not be accepted.
By wire. To open a new account by wire, first call Scudder at 1-800-225-5163 to
obtain an account number. A representative will instruct you to send a
completed, signed application to the transfer agent in Boston. Accounts cannot
be opened without a completed, signed application and a Scudder fund account
number. Contact your bank to arrange a wire transfer to:
The Scudder Funds
State Street Bank and Trust Company
Boston, MA 02101
ABA Number 011000028
DDA Account 9903-5552
Your wire instructions must also include:
- -- the name of the fund in which the money is to be invested,
- -- the account number of the fund, and
- -- the name(s) of the account holder(s).
The account will be established once the application and money order are
received in good order.
You may also make additional investments of $100 or more to your existing
account by wire.
By telephone order. Existing shareholders may purchase shares at a certain day's
price by calling 1-800-225-5163 before the close of regular trading on the New
York Stock Exchange (the "Exchange"), normally 4 p.m. eastern time, on
(Continued on page 14)
11
<PAGE>
Purchases
Opening Minimum initial investment: $1,000; IRAs $500
an account Group retirement plans (401(k), 403(b), etc.) have similar
or lower minimums. See appropriate plan literature.
<TABLE>
<CAPTION>
<C> <C>
Make checks payable o By Mail Send your completed and signed application and check
to "The Scudder
Funds" by regular mail to: or by express, registered,
or certified mail to:
The Scudder Funds Scudder Shareholder Services
P.O. Box 2291 Center
Boston, MA 42 Longwater Drive
02107-2291 Norwell, MA
02061-1612
o By Wire Please see Transaction information--Purchasing shares-- By
wire following these tables for details, including the ABA wire
transfer number. Then call 1-800-225-5163 for instructions.
o In Person Visit one of our Funds Centers to complete your application with the help
of a Scudder representative. Funds Center locations are listed under
Shareholder benefits.
-----------------------------------------------------------------------------------------------------------------------
Purchasing Minimum additional investment: $100; IRAs $50
additional shares Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums. See appropriate
plan literature.
Make checks o By Mail Send a check with a Scudder investment slip, or with a letter of
payable to "The instruction including your account number and the complete Fund name, to
Scudder Funds." the appropriate address listed above.
o By Wire Please see Transaction information--Purchasing shares-- By wire following these
tables for details, including the ABA wire transfer number.
o In Person Visit one of our Funds Centers to make an additional investment in your Scudder fund
account. Funds Center locations are listed under Shareholder benefits.
o By Telephone Please see Transaction information--Purchasing shares-- By
AutoBuy or By telephone order for more details.
o By Automatic You may arrange to make investments on a regular basis through automatic
Investment Plan deductions from your bank checking account. Please call 1-800-225-5163
($50 minimum) for more information and an enrollment form.
12
<PAGE>
Exchanges and redemptions
Exchanging shares Minimum investments: $1,000 to establish a new
account; $100 to exchange among existing accounts
o By Telephone To speak with a service representative, call 1-800-225-5163 from 8 a.m. to 8 p.m.
eastern time or to access SAIL(TM), Scudder's Automated Information Line, call 1-800-343-2890
(24 hours a day).
o By Mail Print or type your instructions and include:
or Fax - the name of the Fund and the account number you are exchanging from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to exchange;
- the name of the Fund you are exchanging into; and
- your signature(s) as it appears on your account and a daytime telephone
number.
Send your instructions
by regular mail to: or by express, registered, or by fax to:
or certified mail to:
The Scudder Funds Scudder Shareholder Services 1-800-821-6234
P.O. Box 2291 Center
Boston, MA 02107-2291 42 Longwater Drive
Norwell, MA
02061-1612
-----------------------------------------------------------------------------------------------------------------------
Redeeming shares o By Telephone To speak with a service representative, call 1-800-225-5163 from 8 a.m. to 8 p.m.
eastern time or to access SAIL(TM), Scudder's Automated Information Line, call
1-800-343-2890 (24 hours a day). You may have redemption proceeds sent to your
predesignated bank account, or redemption proceeds of up to $100,000 sent to your
address of record.
o By Mail Send your instructions for redemption to the appropriate address or fax number
or Fax above and include:
- the name of the Fund and account number you are redeeming from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to redeem; and
- your signature(s) as it appears on your account and a daytime telephone number.
A signature guarantee is required for redemptions over $50,000. See Transaction
information--Redeeming shares following these tables.
o By Automatic You may arrange to receive automatic cash payments periodically. Call
Withdrawal Plan 1-800-225-5163 for more information and an enrollment form.
13
<PAGE>
Transaction information (cont'd)
(Continued from page 11)
that day. Orders must be for $10,000 or more and cannot be for an amount greater
than four times the value of your account at the time the order is placed. A
confirmation with complete purchase information is sent shortly after your order
is received. You must include with your payment the order number given at the
time the order is placed. If payment by check or wire is not received within
three business days, the order is subject to cancellation and the shareholder
will be responsible for any loss to the Fund resulting from this cancellation.
Telephone orders are not available for shares held in Scudder IRA accounts and
most other Scudder retirement plan accounts.
By "AutoBuy." If you elected "AutoBuy" for your account, you can call toll-free
to purchase shares. The money will be automatically transferred from your
predesignated bank checking account. Your bank must be a member of the Automated
Clearing House for you to use this service. If you did not elect "AutoBuy," call
1-800-225-5163 for more information.
To purchase additional shares, call 1-800-225-5163. Purchases must be for at
least $250 but not more than $250,000. Proceeds in the amount of your purchase
will be transferred from your bank checking account in two or three business
days following your call. For requests received by the close of regular trading
on the Exchange, shares will be purchased at the net asset value per share
calculated at the close of trading on the day of your call. "AutoBuy" requests
received after the close of regular trading on the Exchange will begin their
processing and be purchased at the net asset value calculated the following
business day.
If you purchase shares by "AutoBuy" and redeem them within seven days of the
purchase, the Fund may hold the redemption proceeds for a period of up to seven
business days. If you purchase shares and there are insufficient funds in your
bank account, the purchase will be canceled and you will be subject to any
losses or fees incurred in the transaction. "AutoBuy" transactions are not
available for Scudder IRA accounts and most other retirement plan accounts.
By exchange. Your new account will have the same registration and address as
your existing account.
The exchange requirements for corporations, other organizations, trusts,
fiduciaries, agents, institutional investors and retirement plans may be
different from those for regular accounts. Please call 1-800-225-5163 for more
information, including information about the transfer of special account
features.
You can also make exchanges among your Scudder fund accounts on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.
Redeeming shares
The Fund allows you to redeem shares (i.e., sell them back to the Fund) without
redemption fees.
By telephone. This is the quickest and easiest way to sell Fund shares. If you
elected telephone redemption to your bank on your application, you can call to
request that federal funds be sent to your authorized bank account. If you did
not elect telephone redemption to your bank on your application, call
1-800-225-5163 for more information.
Redemption proceeds will be wired to your bank unless otherwise requested. If
your bank cannot receive federal reserve wires, redemption proceeds will be
mailed to your bank. There will be a $5 charge for all wire redemptions.
You can also make redemptions from your Scudder fund account on SAIL, the
Scudder Automated Information Line, by calling 1-800-343-2890.
If you open an account by wire, you cannot redeem shares by telephone until the
Fund's transfer agent has received your completed and signed application.
14
<PAGE>
Telephone redemption is not available for shares held in Scudder IRA accounts
and most other Scudder retirement plan accounts. In the event that you are
unable to reach the Fund by telephone, you should write to the Fund; see "How to
contact Scudder" for the address.
By "AutoSell." If you elected "AutoSell" for your account, you can call
toll-free to redeem shares. The money will be automatically transferred to your
predesignated bank checking account. Your bank must be a member of the Automated
Clearing House for you to use this service. If you did not elect "AutoSell,"
call 1-800-225-5163 for more information.
To redeem shares, call 1-800-225-5163. Redemptions must be for at least $250.
Proceeds in the amount of your redemption will be transferred to your bank
checking account in two or three business days following your call. For requests
received by the close of regular trading on the Exchange, shares will be
redeemed at the net asset value per share calculated at the close of trading on
the day of your call. "AutoSell" requests received after the close of regular
trading on the Exchange will begin their processing and be redeemed at the net
asset value calculated the following business day.
"AutoSell" transactions are not available for Scudder IRA accounts and most
other retirement plan accounts.
Signature guarantees. For your protection and to prevent fraudulent redemptions,
on written redemption requests in excess of $50,000 we require an original
signature and an original signature guarantee for each person in whose name the
account is registered. (The Fund reserves the right, however, to require a
signature guarantee for all redemptions.) You can obtain a signature guarantee
from most banks, credit unions or savings associations, or from broker/dealers,
municipal securities broker/dealers, government securities broker/dealers,
national securities exchanges, registered securities associations or clearing
agencies deemed eligible by the Securities and Exchange Commission. Signature
guarantees by notaries public are not acceptable. Redemption requirements for
corporations, other organizations, trusts, fiduciaries, agents, institutional
investors and retirement plans may be different from those for regular accounts.
For more information, please call 1-800-225-5163.
Telephone transactions
Shareholders automatically receive the ability to exchange by telephone and the
right to redeem by telephone up to $50,000 to their address of record.
Shareholders also may, by telephone, request that redemption proceeds be sent to
a predesignated bank account. The Fund uses procedures designed to give
reasonable assurance that telephone instructions are genuine, including
recording telephone calls, testing a caller's identity and sending written
confirmation of telephone transactions. If the Fund does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Fund will not be liable for acting upon instructions
communicated by telephone that it reasonably believes to be genuine.
Share price
Purchases and redemptions, including exchanges, are made at net asset value.
Scudder Fund Accounting Corporation determines net asset value per share as of
the close of regular trading on the Exchange, normally 4 p.m. eastern time, on
each day the Exchange is open for trading. Net asset value per share is
calculated by dividing the value of total Fund assets, less all liabilities, by
the total number of shares outstanding.
Processing time
All purchase and redemption requests received in good order by the Fund's
transfer agent in Boston by the close of regular trading on the Exchange
15
<PAGE>
Transaction information (cont'd)
are executed at the net asset value per share calculated at the close of regular
trading that day.
Purchase and redemption requests received after the close of regular trading on
the Exchange will be executed the following business day.
If you wish to make a purchase of $500,000 or more, you should notify Scudder
Investor Relations by calling 1-800-225-5163.
The Fund will normally send your redemption proceeds within one business day
following the redemption request, but may take up to seven business days (or
longer in the case of shares recently purchased by check).
Short-term trading
Purchases and sales should be made for long-term investment purposes only. The
Fund and Scudder Investor Services, Inc. each reserves the right to restrict
purchases of Fund shares (including exchanges) when a pattern of frequent
purchases and sales made in response to short-term fluctuations in the Fund's
share price appears evident.
Tax information
A redemption of shares, including an exchange into another Scudder fund, is a
sale of shares and may result in a gain or loss for income tax purposes.
Tax identification number
Be sure to complete the Tax Identification Number section of the Fund's
application when you open an account. Federal tax law requires the Fund to
withhold 31% of taxable dividends, capital gains distributions and redemption
and exchange proceeds from accounts (other than those of certain exempt payees)
without a certified Social Security or tax identification number and certain
other certified information or upon notification from the IRS or a broker that
withholding is required. The Fund reserves the right to reject new account
applications without a certified Social Security or tax identification number.
The Fund also reserves the right, following 30 days' notice, to redeem all
shares in accounts without a certified Social Security or tax identification
number. A shareholder may avoid involuntary redemption by providing the Fund
with a tax identification number during the 30-day notice period.
Minimum balances
Shareholders should maintain a share balance worth at least $1,000, which amount
may be changed by the Board of Trustees. Scudder retirement plans have similar
or lower minimum share balance requirements. The Fund reserves the right,
following 60 days' written notice to shareholders, to redeem all shares in
sub-minimum accounts, including accounts of new investors, where a reduction in
value has occurred due to a redemption or exchange out of the account.
Reductions in value that result solely from market activity will not trigger an
involuntary redemption. The Fund will mail the proceeds of the redeemed account
to the shareholder. The shareholder may restore the share balance to $1,000 or
more during the 60-day notice period and must maintain it at no lower than that
minimum to avoid involuntary redemption.
Third party transactions
If purchases and redemptions of Fund shares are arranged and settlement is made
at an investor's election through a member of the National Association of
Securities Dealers, Inc., other than Scudder Investor Services, Inc., that
member may, at its discretion, charge a fee for that service.
Redemption-in-kind
The Fund reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase order by making
payment in whole or in part in readily marketable securities chosen by the Fund
and valued as they are for purposes of computing the Fund's net asset value (a
16
<PAGE>
redemption-in-kind). If payment is made in securities, a shareholder may incur
transaction expenses in converting these securities to cash. The Trust has
elected, however, to be governed by Rule 18f-1 under the 1940 Act, as a result
of which the Fund is obligated to redeem shares, with respect to any one
shareholder during any 90-day period, solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Fund at the beginning of the
period.
Shareholder benefits
Experienced professional management
Scudder, Stevens & Clark, Inc., one of the nation's most experienced investment
management firms, actively manages your Scudder fund investment. Professional
management is an important advantage for investors who do not have the time or
expertise to invest directly in individual securities.
A team approach to investing
Scudder Value 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. Scudder believes its team approach benefits
Fund investors by bringing together many disciplines and leveraging Scudder's
extensive resources.
Lead Portfolio Manager Donald E. Hall has had responsibility for the Fund's
day-to-day management since its inception in 1992. Mr. Hall, who has 13 years of
experience in the value style of investing, joined Scudder in 1982. William J.
Wallace, Portfolio Manager, has been a member of the Fund's team since 1992 and
has 15 years of investment experience.
SAIL(TM)--Scudder Automated Information Line
For personalized account information including fund prices, yields and account
balances, to perform transactions in existing Scudder fund accounts, or to
obtain information on any Scudder fund, shareholders can call Scudder's
Automated Information Line (SAIL) at 1-800-343-2890, 24 hours a day. During
periods of extreme economic or market changes, or other conditions, it may be
difficult for you to effect telephone transactions in your account. In such an
event you should write to the Fund; please see "How to contact Scudder" for the
address.
Investment flexibility
Scudder offers toll-free telephone exchange between funds at current net asset
value. You can move your investments among money market, income, growth,
tax-free and growth and income funds with a simple toll-free call or, if you
prefer, by sending your instructions through the mail or by fax. Telephone and
fax redemptions and exchanges are subject to termination and their terms are
subject to change at any time by the Fund or the transfer agent. In some cases,
the transfer agent or Scudder Investor Services, Inc. may impose additional
conditions on telephone transactions.
Dividend reinvestment plan
You may have dividends and distributions automatically reinvested in additional
Fund shares. Please call 1-800-225-5163 to request this feature.
Shareholder statements
You receive a detailed account statement every time you purchase or redeem
shares. All of your statements should be retained to help you keep track of
account activity and the cost of shares for tax purposes.
17
<PAGE>
Shareholder benefits (cont'd)
Shareholder reports
In addition to account statements, you receive periodic shareholder reports
highlighting relevant information, including investment results and a review of
portfolio changes.
To reduce the volume of mail you receive, only one copy of most Fund reports,
such as the Fund's Annual Report, may be mailed to your household (same surname,
same address). Please call 1-800-225-5163 if you wish to receive additional
shareholder reports.
Newsletters
Four times a year, Scudder sends you At the Helm, an informative newsletter
covering economic and investment developments, service enhancements and other
topics of interest to Scudder fund investors.
Scudder Funds Centers
As a convenience to shareholders who like to conduct business in person, Scudder
Investor Services, Inc. maintains Funds Centers in Boca Raton, Boston, Chicago,
Cincinnati, Los Angeles, New York, Portland (OR), San Diego, San Francisco and
Scottsdale.
T.D.D. service for the hearing impaired
Scudder's full range of investor information and shareholder services is
available to hearing impaired investors through a toll-free T.D.D. (Telephone
Device for the Deaf) service. If you have access to a T.D.D., call
1-800-543-7916 for investment information or specific account questions and
transactions.
18
<PAGE>
Scudder tax-advantaged retirement plans
Scudder offers a variety of tax-advantaged retirement plans for individuals,
businesses and non-profit organizations. These flexible plans are designed for
use with the Scudder Family of Funds (except Scudder tax-free funds, which are
inappropriate for such plans). Scudder Funds offer a broad range of investment
objectives and can be used to seek almost any investment goal. Using Scudder's
retirement plans can help shareholders save on current taxes while building
their retirement savings.
* Scudder No-Fee IRAs. These retirement plans allow a maximum annual
contribution of $2,000 per person for anyone with earned income. Many
people can deduct all or part of their contributions from their taxable
income, and all investment earnings accrue on a tax deferred basis. The
Scudder No-Fee IRA charges no annual custodial fee.
* 401(k) Plans. 401(k) plans allow employers and employees to make
tax-deductible retirement contributions. Scudder offers a full service
program that includes recordkeeping, prototype plan, employee
communications and trustee services, as well as investment options.
* Profit Sharing and Money Purchase Pension Plans. These plans allow
corporations, partnerships and people who are self-employed to make
annual, tax-deductible contributions of up to $30,000 for each person
covered by the plans. Plans may be adopted individually or paired to
maximize contributions. These are sometimes known as Keogh plans.
* 403(b) Plans. Retirement plans for tax-exempt organizations and school
systems to which employers and employees may both contribute.
* SEP-IRAs. Easily administered retirement plans for small businesses and
self-employed individuals. The maximum annual contribution to SEP-IRA
accounts is adjusted each year for inflation.
* Scudder Horizon Plan. A no-load variable annuity that lets you build
assets by deferring taxes on your investment earnings. You can start with
$2,500 or more.
Scudder Trust Company (an affiliate of the Adviser) is Trustee or Custodian for
some of these plans and is paid an annual fee for some of the above retirement
plans. For information about establishing a Scudder No-Fee IRA, SEP-IRA, Profit
Sharing Plan, Money Purchase Pension Plan or a Scudder Horizon Plan, please call
1-800-225-2470. For information about 401(k)s or 403(b)s please call
1-800-323-6105. To effect transactions in existing IRA, SEP-IRA, Profit Sharing
or Pension Plan accounts, call 1-800-225-5163.
The variable annuity contract is provided by Charter National Life Insurance
Company (in New York State, Intramerica Life Insurance Company [S 1802]). The
contract is offered by Scudder Insurance Agency, Inc. (in New York State, Nevada
and Montana, Scudder Insurance Agency of New York, Inc.). CNL, Inc. is the
Principal Underwriter. Scudder Horizon Plan is not available in all states.
19
<PAGE>
Trustees and Officers
Daniel Pierce*
President and Trustee
Paul Bancroft III
Trustee; Venture Capitalist and Consultant
Sheryle J. Bolton
Trustee; Consultant
Thomas J. Devine
Trustee; Consultant
Keith R. Fox
Trustee; President, Exeter Capital
Management Corporation
David S. Lee*
Vice President and Trustee
Douglas M. Loudon*
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 W. Lear
Honorary Trustee; Executive-in-Residence,
Columbia University Graduate School of Business
Robert G. Stone, Jr.
Honorary Trustee; Chairman of the Board
and Director, Kirby Corporation
Donald E. Hall*
Vice President
Jerard K. Hartman*
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.
20
<PAGE>
Investment products and services
The Scudder Family of Funds Income
Money market Scudder Emerging Markets Income Fund
Scudder Cash Investment Trust Scudder Global Bond 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 Zero Coupon 2000 Fund
Tax free+ Growth
Scudder California Tax Free Fund* Scudder Capital Growth Fund
Scudder High Yield Tax Free Fund Scudder Development Fund
Scudder Limited Term Tax Free Fund Scudder Global Fund
Scudder Managed Municipal Bonds Scudder Global Small Company Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Gold Fund
Scudder Massachusetts Tax Free Fund* Scudder Greater Europe Growth Fund
Scudder Medium Term Tax Free Fund Scudder International Fund
Scudder New York Tax Free Fund* Scudder Latin America Fund
Scudder Ohio Tax Free Fund* Scudder Pacific Opportunities Fund
Scudder Pennsylvania Tax Free Fund* Scudder Quality Growth Fund
Growth and Income Scudder Small Company Value 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
401(k) Plans Money Purchase Pension Plans
------------------------------------------------------------------------------------------------------------------------
Closed-end Funds#
The Argentina Fund, Inc. Scudder New Europe Fund, Inc.
The Brazil Fund, Inc. Scudder World Income Opportunities Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc. Institutional Cash Management
The Latin America Dollar Income Fund, Inc. Scudder Institutional Fund, Inc.
Montgomery Street Income Securities, Inc. Scudder Fund, Inc.
Scudder New Asia 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.
21
<PAGE>
How to contact Scudder
Account Service and Information: Please address all correspondence to:
For existing account service Scudder Investor Relations The Scudder Funds
and transactions 1-800-225-5163 P.O. Box 2291
Boston, Massachusetts
02107-2291
For personalized information Scudder Automated
about your Scudder accounts; Information Line (SAIL)
exchanges and redemptions; or 1-800-343-2890
information on any Scudder
fund
Investment Information: Or Stop by a Scudder Funds Center:
To receive information about Scudder Investor Relations Many shareholders enjoy the personal, one-on-one
the Scudder funds, for 1-800-225-2470 service of the Scudder Funds Centers. Check for a
additional applications and Funds Center near you--they can be found in the
prospectuses, or for following cities:
investment questions
For establishing 401(k) and Scudder Defined Boca Raton New York
403(b) plans Contribution Services Boston Portland, OR
1-800-323-6105 Chicago San Diego
Cincinnati San Francisco
Los Angeles Scottsdale
For information on Scudder Treasurers Trust(TM), an For information on Scudder Institutional Funds*, funds
institutional cash management service for corporations, designed to meet the broad investment management and
non-profit organizations and trusts which utilizes service needs of banks and other institutions, call:
certain portfolios of Scudder Fund, Inc.* ($100,000 1-800-854-8525.
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.
22
</TABLE>
<PAGE>
SCUDDER CAPITAL GROWTH FUND
A Pure No-Load(TM) (No Sales Charges) Diversified Mutual Fund
which Seeks to Maximize Long-Term Capital Growth
and
SCUDDER VALUE FUND
A Pure No-Load(TM) (No Sales Charges) Diversified Mutual Fund
which Seeks Long-Term Growth of Capital through
Investment in Undervalued Equity Securities
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
February 1, 1996
- --------------------------------------------------------------------------------
This combined Statement of Additional Information is not a prospectus
and should be read in conjunction with the prospectuses of Scudder Capital
Growth Fund and Scudder Value Fund each dated February 1, 1996, as amended from
time to time, copies of which may be obtained without charge by writing to
Scudder Investor Services, Inc., Two International Place, Boston, Massachusetts
02110-4103.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES.........................................................................1
General Investment Objective and Policies of Scudder Capital Growth Fund.....................................1
General Investment Objective and Policies of Scudder Value Fund..............................................1
Investments and Investment Techniques........................................................................3
Investment Restrictions.....................................................................................13
Other Investment Policies...................................................................................14
PURCHASES............................................................................................................15
Additional Information About Opening An Account.............................................................15
Additional Information About Making Subsequent Investments..................................................16
Additional Information About Making Subsequent Investments by AutoBuy.......................................16
Checks......................................................................................................17
Wire Transfer of Federal Funds..............................................................................17
Share Price.................................................................................................17
Share Certificates..........................................................................................17
Other Information...........................................................................................17
EXCHANGES AND REDEMPTIONS............................................................................................18
Exchanges...................................................................................................18
Redemption by Telephone.....................................................................................19
Redemption By AutoSell......................................................................................19
Redemption by Mail or Fax...................................................................................20
Redemption-in-Kind..........................................................................................20
Other Information...........................................................................................20
FEATURES AND SERVICES OFFERED BY THE FUNDS...........................................................................21
The Pure No-Load(TM) Concept................................................................................21
Dividend and Capital Gain Distribution Options..............................................................22
Diversification.............................................................................................23
Scudder Funds Centers.......................................................................................23
Reports to Shareholders.....................................................................................23
Transaction Summaries.......................................................................................23
THE SCUDDER FAMILY OF FUNDS..........................................................................................23
SPECIAL PLAN ACCOUNTS................................................................................................26
Scudder Retirement Plans: Profit-Sharing and Money Purchase Pension Plans for
Corporations and Self-Employed Individuals.............................................................27
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for Corporations and
Self-Employed Individuals..............................................................................27
Scudder IRA: Individual Retirement Account.................................................................27
Scudder 403(b) Plan.........................................................................................28
Automatic Withdrawal Plan...................................................................................28
Group or Salary Deduction Plan..............................................................................29
Automatic Investment Plan...................................................................................29
Uniform Transfers/Gifts to Minors Act.......................................................................29
Scudder Trust Company.......................................................................................29
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS............................................................................30
PERFORMANCE INFORMATION..............................................................................................30
Average Annual Total Return.................................................................................30
Cumulative Total Return.....................................................................................31
Total Return................................................................................................32
Capital Change..............................................................................................32
i
<PAGE>
TABLE OF CONTENTS (continued)
Page
ORGANIZATION OF THE FUNDS............................................................................................36
INVESTMENT ADVISER...................................................................................................38
Personal Investments by Employees of the Adviser............................................................40
TRUSTEES AND OFFICERS................................................................................................41
REMUNERATION.........................................................................................................43
DISTRIBUTOR..........................................................................................................44
TAXES................................................................................................................44
PORTFOLIO TRANSACTIONS...............................................................................................48
Brokerage Commissions.......................................................................................48
Portfolio Turnover..........................................................................................49
NET ASSET VALUE......................................................................................................49
ADDITIONAL INFORMATION...............................................................................................50
Experts.....................................................................................................50
Shareholder Indemnification.................................................................................50
Other Information...........................................................................................50
FINANCIAL STATEMENTS.................................................................................................51
APPENDIX
</TABLE>
ii
<PAGE>
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES
(See"Investment objective and policies" and "Additional information
about policies and investments" in the Funds' prospectuses.)
Scudder Capital Growth Fund and Scudder Value Fund (each a "Fund,"
collectively, the "Funds") are diversified series of Scudder Equity Trust (the
"Trust"), a pure no-load(TM), open-end, management investment company organized
as a Massachusetts business trust.
General Investment Objective and Policies of Scudder Capital Growth Fund
Scudder Capital Growth Fund ("Capital Growth Fund") seeks to maximize
long-term growth of capital through a broad and flexible investment program. The
Fund seeks to achieve its objective by investing: (i) in marketable securities,
principally common stocks; (ii) up to 20% of its net assets in debt securities
where capital appreciation from debt securities is expected to exceed the
capital appreciation available from common stocks; and (iii) for temporary
defensive purposes, during periods when market or economic conditions may
warrant, in debt securities and short-term indebtedness. The Fund may also
invest in preferred stocks consistent with its objective. The securities in
which the Fund may invest are described under "Investment objective and
policies" in the Fund's prospectus.
Investments in common stocks have a wide range of characteristics, and
management of the Fund believes that opportunity for long-term growth of capital
may be found in all sectors of the market for publicly traded equity securities.
Thus the search for equity investments for the Fund may encompass any sector of
the market and companies of all sizes. It is a fundamental policy of the Fund,
which may not be changed without approval of a majority of the Fund's
outstanding shares, that the Fund will not concentrate its investments in any
particular industry. However, the Fund reserves the right to invest up to 25% of
its total assets (taken at market value) in any one industry. The use of this
tactic is, in the opinion of management, consistent with the Fund's flexible
approach of seeking to maximize long-term growth of capital.
The Fund may purchase, for capital appreciation, investment-grade debt
securities including zero coupon bonds. Investment-grade debt securities are
those rated Aaa, Aa, A or Baa by Moody's Investors Service, Inc. ("Moody's"), or
AAA, AA, A or BBB by Standard & Poor's ("S&P") or, if unrated, of equivalent
quality as determined by the Fund's investment adviser, Scudder, Stevens &
Clark, Inc. (the "Adviser"). Moody's considers bonds it rates Baa to have
speculative elements as well as investment-grade characteristics.
The Fund may also purchase debt securities which are rated below
investment-grade (that is, rated below Baa by Moody's or below BBB by S&P), and
unrated securities of comparable quality in the Adviser's judgment, which
usually entail greater risk (including the possibility of default or bankruptcy
of the issuers of such securities), generally involve greater volatility of
price and risk of principal and income, and may be less liquid and more
difficult to value than securities in the higher rating categories. The Fund may
invest up to 10% of its net assets in securities rated B or lower by Moody's or
S&P and may invest in securities which are rated as low as C by Moody's or D by
S&P. Securities rated B or lower involve a high degree of speculation with
respect to the payment of principal and interest and those securities rated C or
D may be in default with respect to payment of principal or interest.
(See "High Yield, High Risk Securities.")
Changes in portfolio securities are made on the basis of investment
considerations and it is against the policy of management to make changes for
trading purposes.
The objective of the Fund is not fundamental and may be changed by the
Trustees without a vote of shareholders. The Fund cannot guarantee a gain or
eliminate the risk of loss. The net asset value of the Fund's shares will
increase or decrease with changes in the market price of the Fund's investments
and there is no assurance that the Fund's objective will be achieved.
General Investment Objective and Policies of Scudder Value Fund
Scudder Value Fund ("Value Fund") seeks long-term growth of capital
through investment in undervalued equity securities. This objective is not
fundamental and may be changed by the Trustees without a shareholder vote. The
Fund seeks to achieve its objective by investing in the equity securities of
companies that, in the opinion of its Adviser, are undervalued in the
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marketplace in relation to current and estimated future earnings and dividends.
These companies generally sell at price-earnings ratios below the market
average, as defined by the Standard & Poor's 500 Composite Price Index (S&P
500). The securities in which the Fund may invest are described under
"Investment objective and policies" in the Fund's prospectus.
The Fund invests at least 80% of its assets in equity securities
consisting of common stocks, preferred stocks and securities convertible into
common stocks. The Fund changes its portfolio securities for long-term
investment considerations and not for trading purposes.
The Fund invests primarily in the equity securities of medium-to-large
size domestic companies with annual revenues or market capitalization of at
least $600 million. The Adviser uses in-depth fundamental research and a
proprietary computerized quantitative model to identify companies that are
currently undervalued in relation to current and estimated future earnings and
dividends. The investment process also involves an assessment of business risk,
including the Adviser's analysis of the strength of a company's balance sheet,
the accounting practices a company follows, the volatility of a company's
earnings over time, and the vulnerability of earnings to changes in external
factors, such as the general economy, the competitive environment, governmental
action and technological change.
While a broad range of investments are considered, only those that, in
the Adviser's opinion, are selling at comparatively large discounts to intrinsic
value will be purchased for the Fund. It is anticipated that the prices of the
Fund's investments will rise as a result of both earnings growth and rising
price-earnings ratios over time.
Value investing, as measured by the Wilshire Large Company Value
Index--a well-known source of value-oriented portfolio returns--has provided an
average annual return of ___% for the ten-year period ended September 30, 1995.
This compares to a 12.37% return for the S&P 500, 14.14% for the Lipper Growth
Fund Average, and 13.62% for the Lipper Growth and Income Fund Average over the
same period. Using active investment management, the Fund hopes to outperform
passive indices. The performance of the indices is not representative of the
performance of the Fund or the future performance of the Fund. The indices do
not bear the transaction and other costs that the Fund will bear.
While the Fund emphasizes U.S. investments, it can invest in securities
of foreign companies that meet the same criteria applicable to domestic
investments if the performance of foreign securities is believed by the Adviser
to offer more potential than domestic investments.
For capital appreciation, the Fund may use up to 20% of its assets to
purchase debt securities, including zero coupon bonds. Investment-grade debt
securities are those rated Aaa, Aa, A or Baa by Moody's, or AAA, AA, A or BBB by
S&P or, if unrated, of equivalent quality as determined by the Adviser.
The Fund may also purchase debt securities which are rated below
investment-grade (that is, rated below Baa by Moody's or below BBB by S&P) and
unrated securities of equivalent quality as determined by the Adviser, which
usually entail greater risk (including the possibility of default or bankruptcy
of the issues of such securities), generally involve greater volatility of price
and risk of principal and income, and may be less liquid and more difficult to
value than securities in the higher rating categories. The Fund may invest up to
20% of its net assets in such securities ("high yield/high risk securities") but
will invest no more than 10% of its net assets in securities rated B or lower by
Moody's or S&P and may not invest more than 5% of its net assets in securities
which are rated C by Moody's or D by S&P or of equivalent quality as determined
by the Adviser. Securities rated C or D may be in default with respect to
payment of principal or interest. Also, longer maturity bonds tend to fluctuate
more in price as interest rates change than do short-term bonds, providing both
opportunity and risk. (See "High Yield, High Risk Securities.")
The objective of the Fund is not fundamental and may be changed by the
Trustees without a vote of shareholders. The Fund cannot guarantee a gain or
eliminate the risk of loss. The net asset value of the Fund's shares will
increase or decrease with changes in the market price of the Fund's investments,
and there is no assurance that the Fund's objective will be achieved.
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Investments and Investment Techniques
Foreign Securities. While the Funds generally emphasize investments in companies
domiciled in the U.S., they may invest in listed and unlisted foreign securities
of the same types as the domestic securities in which they may invest, when the
anticipated performance of foreign securities is believed by the Adviser to
offer more potential than domestic alternatives, in keeping with the investment
objectives of the Funds.
Investors should recognize that investing in foreign securities
involves certain special considerations, including those set forth below, which
are not typically associated with investing in U.S. securities and which may
favorably or unfavorably affect the Funds' performance. As foreign companies are
not generally subject to uniform accounting, auditing and financial reporting
standards, practices and requirements comparable to those applicable to domestic
companies, there may be less publicly available information about a foreign
company than about a domestic company. Many foreign stock markets, while growing
in volume of trading activity, have substantially less volume than the New York
Stock Exchange (the "Exchange") and securities of some foreign companies are
less liquid and more volatile than securities of domestic companies. Similarly,
volume and liquidity in most foreign bond markets are less than the volume and
liquidity in the U.S. and at times, volatility of price can be greater than in
the U.S. Further, foreign markets have different clearance and settlement
procedures and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when assets of the Funds are uninvested and no return is
earned thereon. The inability of the Funds to make intended security purchases
due to settlement problems could cause the Funds to miss attractive investment
opportunities. Inability to dispose of portfolio securities due to settlement
problems either could result in losses to the Funds due to subsequent declines
in value of the portfolio security or, if the Funds have entered into a contract
to sell the security, could result in possible liability to the purchaser. Fixed
commissions on some foreign stock exchanges are generally higher than negotiated
commissions on U.S. exchanges although the Funds will endeavor to achieve the
most favorable net results on their portfolio transactions. Further, the Funds
may encounter difficulties or be unable to pursue legal remedies and obtain
judgments in foreign courts. There is generally less government supervision and
regulation of business and industry practices, stock exchanges, brokers and
listed companies than in the U.S. It may be more difficult for the Funds' agents
to keep currently informed about corporate actions such as stock dividends or
other matters which may affect the prices of portfolio securities.
Communications between the U.S. and foreign countries may be less reliable than
within the U.S. thereby increasing the risk of delayed settlements of portfolio
transactions or loss of certificates for portfolio securities. Delivery of
securities without payment is required in some foreign markets. In addition,
with respect to certain foreign countries, there is the possibility of
nationalization, expropriation, the imposition of withholding or confiscatory
taxes, political, social, or economic instability, or diplomatic developments
which could affect U.S. investments in those countries. Investments in foreign
securities may also entail certain risks, such as possible currency blockages or
transfer restrictions, and the difficulty of enforcing rights in other
countries. Moreover, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resource self-sufficiency and
balance of payments position.
These considerations generally are more of a concern in developing
countries. For example, the possibility of revolution and the dependence on
foreign economic assistance may be greater in those countries than in developed
countries. The management of the Funds seeks to mitigate the risks associated
with these considerations through diversification and active professional
management. Although investments in companies domiciled in developing countries
may be subject to potentially greater risks than investments in developed
countries, the Funds will not invest in any securities of issuers located in
developing countries if the securities, in the judgment of the Adviser, are
speculative.
Investments in foreign securities usually will involve currencies of
foreign countries. Moreover, the Funds may temporarily hold funds in bank
deposits in foreign currencies during the completion of investment programs and
the value of the assets for the Funds, as measured in U.S. dollars, may be
affected favorably or unfavorably by changes in foreign currency exchange rates
and exchange control regulations, and the Funds may incur costs in connection
with conversions between various currencies. Although the Funds value their
assets daily in terms of U.S. dollars, the Funds do not intend to convert their
holdings of foreign currencies, if any, into U.S. dollars on a daily basis. The
Funds may do so from time to time, and investors should be aware of the costs of
currency conversion. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference (the "spread")
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Funds at one rate,
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while offering a lesser rate of exchange should the Funds desire to resell that
currency to the dealer. The Funds will conduct their foreign currency exchange
transactions, if any, either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market or through forward foreign
currency exchange contracts.
To the extent that the Funds invest in foreign securities, each Fund's
share price could reflect the movements of both the different stock and bond
markets in which it is invested and the currencies in which the investments are
denominated: the strength or weakness of the U.S. dollar against foreign
currencies could account for part of each Fund's investment performance.
High Yield, High Risk Securities. Below investment-grade securities (rated below
Baa by Moody's and below BBB by S&P) or unrated securities of equivalent quality
in the Adviser's judgment, carry a high degree of risk (including the
possibility of default or bankruptcy of the issuers of such securities),
generally involve greater volatility of price and risk of principal and income,
may be less liquid and more difficult to value than securities in the higher
ratings categories and are considered speculative. The lower the ratings of such
debt securities the greater their risks render them like equity securities. See
the Appendix to this Statement of Additional Information for a more complete
description of the ratings assigned by ratings organizations and their
respective characteristics.
Each Fund may invest up to 20% of its net assets in debt securities
rated below investment-grade but will invest no more than 10% of its net assets
in securities rated B or lower by Moody's or by S&P.
An economic downturn could disrupt the high yield market and impair the
ability of issuers to repay principal and interest. Also, an increase in
interest rates could adversely affect the value of such obligations held by the
Funds. Prices and yields of high yield securities will fluctuate over time and
may affect each Fund's net asset value. In addition, investments in high yield
zero coupon or pay-in-kind bonds, rather than income-bearing high yield
securities, may be more speculative and may be subject to greater fluctuations
in value due to changes in interest rates.
The trading market for high yield securities may be thin to the extent
that there is no established retail secondary market or because of a decline in
the value of such securities. A thin trading market may limit the ability of a
Fund to accurately value high yield securities in the Fund's portfolio and to
dispose of those securities. Adverse publicity and investor perceptions may
decrease the value and liquidity of high yield securities. These securities may
also involve special registration responsibilities, liabilities and costs.
Credit quality in the high-yield securities market can change suddenly
and unexpectedly and even recently issued credit ratings may not fully reflect
the actual risks posed by a particular high-yield security. For these reasons,
it is the policy of the Adviser not to rely exclusively on ratings issued by
established credit rating agencies, but to supplement such ratings with its own
independent and on-going review of credit quality. The achievement of each
Fund's investment objective may be more dependent on the Adviser's credit
analysis than is the case for higher quality bonds. Should the rating of a
portfolio security be downgraded the Adviser will determine whether it is in the
best interest of a Fund to retain or dispose of the security.
Prices for below investment-grade securities may be affected by
legislative and regulatory developments. For example, federal rules require
savings and loan institutions to gradually reduce their holdings of this type of
security. Also, Congress has from time to time considered legislation which
would restrict or eliminate the corporate tax deduction for interest payments in
these securities and regulate corporate restructurings. Such legislation may
significantly depress the prices of outstanding securities of this type. For
more information regarding tax issues related to high yield securities see
"TAXES."
Convertible Securities. The Funds may each invest in convertible securities,
that is, bonds, notes, debentures, preferred stocks and other securities which
are convertible into common stock. Investments in convertible securities can
provide an opportunity for capital appreciation and/or income through interest
and dividend payments by virtue of their conversion or exchange features. The
Funds will limit their purchases of convertible securities to debt securities
convertible into common stocks.
The convertible securities in which the Funds may invest are either
fixed income or zero coupon debt securities which may be converted or exchanged
at a stated or determinable exchange ratio into underlying shares of common
stock. The exchange ratio for any particular convertible security may be
adjusted from time to time due to stock splits, dividends, spin-offs, other
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corporate distributions or scheduled changes in the exchange ratio. Convertible
debt securities and convertible preferred stocks, until converted, have general
characteristics similar to both debt and equity securities. Although to a lesser
extent than with debt securities generally, the market value of convertible
securities tends to decline as interest rates increase and, conversely, tends to
increase as interest rates decline. In addition, because of the conversion or
exchange feature, the market value of convertible securities typically changes
as the market value of the underlying common stocks changes, and, therefore,
also tends to follow movements in the general market for equity securities. A
unique feature of convertible securities is that as the market price of the
underlying common stock declines, convertible securities tend to trade
increasingly on a yield basis, and so may not experience market value declines
to the same extent as the underlying common stock. When the market price of the
underlying common stock increases, the prices of the convertible securities tend
to rise as a reflection of the value of the underlying common stock, although
typically not as much as the underlying common stock. While no securities
investments are without risk, investments in convertible securities generally
entail less risk than investments in common stock of the same issuer.
As debt securities, convertible securities are investments which
provide for a stream of income (or in the case of zero coupon securities,
accretion of income) with generally higher yields than common stocks. Of course,
like all debt securities, there can be no assurance of income or principal
payments because the issuers of the convertible securities may default on their
obligations. Convertible securities generally offer lower yields than
non-convertible securities of similar quality because of their conversion or
exchange features.
Convertible securities generally are subordinated to other similar but
non-convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock, of the
same issuer. However, because of the subordination feature, convertible bonds
and convertible preferred stock typically have lower ratings than similar
non-convertible securities.
Convertible securities may be issued as fixed income obligations that
pay current income or as zero coupon notes and bonds, including Liquid Yield
Option Notes ("LYONs"). Zero coupon securities pay no cash income and are sold
at substantial discounts from their value at maturity. When held to maturity,
their entire income, which consists of accretion of discount, comes from the
difference between the purchase price and their value at maturity. Zero coupon
convertible securities offer the opportunity for capital appreciation as
increases (or decreases) in market value of such securities closely follows the
movements in the market value of the underlying common stock. Zero coupon
convertible securities are generally expected to be less volatile than the
underlying common stocks as they are usually issued with short to medium length
maturities (15 years or less) and are issued with options and/or redemption
features exercisable by the holder of the obligation entitling the holder to
redeem the obligation and receive a defined cash payment.
Illiquid and Restricted Securities. Each Fund may occasionally purchase
securities other than in the open market. While such purchases may often offer
attractive opportunities for investment not otherwise available on the open
market, the securities so purchased are often "restricted securities", i.e.,
securities which cannot be sold to the public without registration under the
Securities Act of 1933 or the availability of an exemption from registration
(such as Rules 144 or 144A), or which are "not readily marketable" because they
are subject to other legal or contractual delays in or restrictions on resale.
The absence of a trading market can make it difficult to ascertain a
market value for illiquid investments. Disposing of illiquid investments may
involve time-consuming negotiation and legal expenses, and it may be difficult
or impossible for the Fund to sell them promptly at an acceptable price. The
Fund may have to bear the extra expense of registering such securities for
resale and the risk of substantial delay in effecting such registration. Also
market quotations are less readily available. The judgment of the Adviser may at
times play a greater role in valuing these securities than in the case of
unrestricted securities.
Generally speaking, restricted securities may be sold only to qualified
institutional buyers, or in a privately negotiated transaction to a limited
number of purchasers, or in limited quantities after they have been held for a
specified period of time and other conditions are met pursuant to an exemption
from registration, or in a public offering for which a registration statement is
in effect under the Securities Act of 1933. The Funds may be deemed to be an
"underwriter" for purposes of the Securities Act of 1933 when selling restricted
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securities to the public, and in such event the Fund may be liable to purchasers
of such securities if the registration statement prepared by the issuer, or the
prospectus forming a part of it, is materially inaccurate or misleading.
Each Fund will not invest more than 10% of its total assets in
securities which are not readily marketable, the disposition of which is
restricted under Federal securities laws or in repurchase agreements not
terminable within seven days.
Repurchase Agreements. Each Fund may enter into repurchase agreements with any
member bank of the Federal Reserve System or any broker/dealer which is
recognized as a reporting government securities dealer if the creditworthiness
of the bank or broker/dealer has been determined by the Adviser to be at least
equal to that of issuers of commercial paper rated within the two highest grades
assigned by Moody's or by S&P.
A repurchase agreement provides a means for a Fund to earn income on
funds for periods as short as overnight. It is an arrangement under which a Fund
acquires a debt security ("Obligation") and the seller agrees, at the time of
sale, to repurchase the Obligation at a specified time and price. Obligations
subject to a repurchase agreement are held in a segregated account and the value
of such Obligations kept at least equal to the repurchase price on a daily
basis. The repurchase price may be higher than the purchase price, the
difference being income to the Fund, or the purchase and repurchase prices may
be the same, with interest at a stated rate due to the Fund together with the
repurchase price upon repurchase. In either case, the income to the Fund is
unrelated to the interest rate on the Obligation subject to the repurchase
agreement. Obligations will be held by the Fund's custodian or in the Federal
Reserve Book Entry system.
For purposes of the Investment Company Act of 1940, as amended (the
"1940 Act"), a repurchase agreement is deemed to be a loan from a Fund to the
seller of the Obligation subject to the repurchase agreement and is therefore
subject to that Fund's investment restriction applicable to loans. It is not
clear whether a court would consider the Obligation purchased by a Fund subject
to a repurchase agreement as being owned by the Fund or as being collateral for
a loan by the Fund to the seller. In the event of the commencement of bankruptcy
or insolvency proceedings with respect to the seller of the Obligation before
repurchase of the Obligation under a repurchase agreement, a Fund may encounter
delay and incur costs before being able to sell the security. Delays may involve
loss of interest or decline in price of the Obligation. If the court
characterizes the transaction as a loan and the Fund has not perfected a
security interest in the Obligation, the Fund may be required to return the
Obligation to the seller's estate and be treated as an unsecured creditor of the
seller. As an unsecured creditor, the Fund would risk losing some or all of the
principal and income involved in the transaction. As with any unsecured debt
instrument purchased for the Fund, the Adviser seeks to minimize the risk of
loss through repurchase agreements by analyzing the creditworthiness of the
obligor, in this case the seller of the Obligation. Apart from the risk of
bankruptcy or insolvency proceedings, there is also the risk that the seller may
fail to repurchase the Obligation, in which case the Fund may incur a loss if
the proceeds to the Fund of the sale to a third party are less than the
repurchase price. However, if the market value of the Obligation subject to the
repurchase agreement becomes less than the repurchase price (including
interest), the Fund involved will direct the seller of the Obligation to deliver
additional securities so that the market value of all securities subject to the
repurchase agreement will equal or exceed the repurchase price. It is possible
that the Fund will be unsuccessful in seeking to impose on the seller a
contractual obligation to deliver additional securities.
Strategic Transactions and Derivatives. Each Fund may, but is not required to,
utilize various other investment strategies as described below to hedge various
market risks (such as interest rates, currency exchange rates, and broad or
specific equity or fixed-income market movements), to manage the effective
maturity or duration of fixed-income securities of a Fund's portfolio, or to
enhance potential gain. These strategies may be executed through the use of
derivative contracts. Such strategies are generally accepted as a part of modern
portfolio management and are regularly utilized by many mutual funds and other
institutional investors. Techniques and instruments may change over time as new
instruments and strategies are developed or regulatory changes occur.
In the course of pursuing these investment strategies, a Fund may
purchase and sell exchange-listed and over-the-counter put and call options on
securities, equity and fixed-income indices and other financial instruments,
purchase and sell financial futures contracts and options thereon, enter into
various interest rate transactions such as swaps, caps, floors or collars, and
enter into various currency transactions such as currency forward contracts,
currency futures contracts, currency swaps or options on currencies or currency
futures (collectively, all the above are called "Strategic Transactions").
Strategic Transactions may be used without limit to attempt to protect against
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possible changes in the market value of securities held in or to be purchased
for a Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect a Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of fixed-income
securities in a Fund's portfolio, or to establish a position in the derivatives
markets as a temporary substitute for purchasing or selling particular
securities. Some Strategic Transactions may also be used to enhance potential
gain although no more than 5% of a Fund's assets will be committed to Strategic
Transactions entered into for non-hedging purposes. Any or all of these
investment techniques may be used at any time and in any combination, and there
is no particular strategy that dictates the use of one technique rather than
another, as use of any Strategic Transaction is a function of numerous variables
including market conditions. The ability of a Fund to utilize these Strategic
Transactions successfully will depend on the Adviser's ability to predict
pertinent market movements, which cannot be assured. Each Fund will comply with
applicable regulatory requirements when implementing these strategies,
techniques and instruments. Strategic Transactions involving financial futures
and options thereon will be purchased, sold or entered into only for bona fide
hedging, risk management or portfolio management purposes and not for
speculative purposes.
Strategic Transactions, including derivative contracts, have risks
associated with them including possible default by the other party to the
transaction, illiquidity and, to the extent the Adviser's view as to certain
market movements is incorrect, the risk that the use of such Strategic
Transactions could result in losses greater than if they had not been used. Use
of put and call options may result in losses to a Fund, force the sale or
purchase of portfolio securities at inopportune times or for prices higher than
(in the case of put options) or lower than (in the case of call options) current
market values, limit the amount of appreciation a Fund can realize on its
investments or cause a Fund to hold a security it might otherwise sell. The use
of currency transactions can result in a Fund incurring losses as a result of a
number of factors including the imposition of exchange controls, suspension of
settlements, or the inability to deliver or receive a specified currency. The
use of options and futures transactions entails certain other risks. In
particular, the variable degree of correlation between price movements of
futures contracts and price movements in the related portfolio position of a
Fund creates the possibility that losses on the hedging instrument may be
greater than gains in the value of a Fund's position. In addition, futures and
options markets may not be liquid in all circumstances and certain
over-the-counter options may have no markets. As a result, in certain markets, a
Fund might not be able to close out a transaction without incurring substantial
losses, if at all. Although the use of futures and options transactions for
hedging should tend to minimize the risk of loss due to a decline in the value
of the hedged position, at the same time they tend to limit any potential gain
which might result from an increase in value of such position. Finally, the
daily variation margin requirements for futures contracts would create a greater
ongoing potential financial risk than would purchases of options, where the
exposure is limited to the cost of the initial premium. Losses resulting from
the use of Strategic Transactions would reduce net asset value, and possibly
income, and such losses can be greater than if the Strategic Transactions had
not been utilized.
General Characteristics of Options. Put options and call options typically have
similar structural characteristics and operational mechanics regardless of the
underlying instrument on which they are purchased or sold. Thus, the following
general discussion relates to each of the particular types of options discussed
in greater detail below. In addition, many Strategic Transactions involving
options require segregation of Fund assets in special accounts, as described
below under "Use of Segregated and Other Special Accounts."
A put option gives the purchaser of the option, upon payment of a
premium, the right to sell, and the writer the obligation to buy, the underlying
security, commodity, index, currency or other instrument at the exercise price.
For instance, a Fund's purchase of a put option on a security might be designed
to protect its holdings in the underlying instrument (or, in some cases, a
similar instrument) against a substantial decline in the market value by giving
a Fund the right to sell such instrument at the option exercise price. A call
option, upon payment of a premium, gives the purchaser of the option the right
to buy, and the seller the obligation to sell, the underlying instrument at the
exercise price. A Fund's purchase of a call option on a security, financial
future, index, currency or other instrument might be intended to protect a Fund
against an increase in the price of the underlying instrument that it intends to
purchase in the future by fixing the price at which it may purchase such
instrument. An American style put or call option may be exercised at any time
during the option period while a European style put or call option may be
exercised only upon expiration or during a fixed period prior thereto. Each Fund
is authorized to purchase and sell exchange listed options and over-the-counter
options ("OTC options"). Exchange listed options are issued by a regulated
intermediary such as the Options Clearing Corporation ("OCC"), which guarantees
the performance of the obligations of the parties to such options. The
discussion below uses the OCC as an example, but is also applicable to other
financial intermediaries.
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With certain exceptions, OCC issued and exchange listed options
generally settle by physical delivery of the underlying security or currency,
although in the future cash settlement may become available. Index options and
Eurodollar instruments are cash settled for the net amount, if any, by which the
option is "in-the-money" (i.e., where the value of the underlying instrument
exceeds, in the case of a call option, or is less than, in the case of a put
option, the exercise price of the option) at the time the option is exercised.
Frequently, rather than taking or making delivery of the underlying instrument
through the process of exercising the option, listed options are closed by
entering into offsetting purchase or sale transactions that do not result in
ownership of the new option.
A Fund's ability to close out its position as a purchaser or seller of
an OCC or exchange listed put or call option is dependent, in part, upon the
liquidity of the option market. Among the possible reasons for the absence of a
liquid option market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange; (iii)
trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities including
reaching daily price limits; (iv) interruption of the normal operations of the
OCC or an exchange; (v) inadequacy of the facilities of an exchange or OCC to
handle current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. Each
Fund will only sell OTC options (other than OTC currency options) that are
subject to a buy-back provision permitting a Fund to require the Counterparty to
sell the option back to a Fund at a formula price within seven days. Each Fund
expects generally to enter into OTC options that have cash settlement
provisions, although it is not required to do so.
Unless the parties provide for it, there is no central clearing or
guaranty function in an OTC option. As a result, if the Counterparty fails to
make or take delivery of the security, currency or other instrument underlying
an OTC option it has entered into with the Fund or fails to make a cash
settlement payment due in accordance with the terms of that option, a Fund will
lose any premium it paid for the option as well as any anticipated benefit of
the transaction. Accordingly, the Adviser must assess the creditworthiness of
each such Counterparty or any guarantor or credit enhancement of the
Counterparty's credit to determine the likelihood that the terms of the OTC
option will be satisfied. Each Fund will engage in OTC option transactions only
with U.S. government securities dealers recognized by the Federal Reserve Bank
of New York as "primary dealers" or broker/dealers, domestic or foreign banks or
other financial institutions which have received (or the guarantors of the
obligation of which have received) a short-term credit rating of A-1 from S&P or
P-1 from Moody's or an equivalent rating from any nationally recognized
statistical rating organization ("NRSRO") or, in the case of OTC currency
transactions, are determined to be of equivalent credit quality by the Adviser.
The staff of the Securities and Exchange Commission ("SEC") currently takes the
position that OTC options purchased by a Fund, and portfolio securities
"covering" the amount of a Fund's obligation pursuant to an OTC option sold by
it (the cost of the sell-back plus the in-the-money amount, if any) are
illiquid, and are subject to each Fund's limitation on investing no more than
10% of its assets in illiquid securities.
If a Fund sells a call option, the premium that it receives may serve
as a partial hedge, to the extent of the option premium, against a decrease in
the value of the underlying securities or instruments in its portfolio or will
increase a Fund's income. The sale of put options can also provide income.
Each Fund may purchase and sell call options on securities including
U.S. Treasury and agency securities, mortgage-backed securities, corporate debt
securities, equity securities (including convertible securities) and Eurodollar
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instruments that are traded on U.S. and foreign securities exchanges and in the
over-the-counter markets, and on securities indices, currencies and futures
contracts. All calls sold by a Fund must be "covered" (i.e., the Fund must own
the securities or futures contract subject to the call) or must meet the asset
segregation requirements described below as long as the call is outstanding.
Even though a Fund will receive the option premium to help protect it against
loss, a call sold by a Fund exposes that Fund during the term of the option to
possible loss of opportunity to realize appreciation in the market price of the
underlying security or instrument and may require that Fund to hold a security
or instrument which it might otherwise have sold.
Each Fund may purchase and sell put options on securities including
U.S. Treasury and agency securities, mortgage-backed securities, corporate debt
securities, equity securities (including convertible securities) and Eurodollar
instruments (whether or not it holds the above securities in its portfolio), and
on securities, indices, currencies and futures contracts other than futures on
individual corporate debt and individual equity securities. Each Fund will not
sell put options if, as a result, more than 50% of a Fund's assets would be
required to be segregated to cover its potential obligations under such put
options other than those with respect to futures and options thereon. In selling
put options, there is a risk that a Fund may be required to buy the underlying
security at a disadvantageous price above the market price.
General Characteristics of Futures. Each Fund may enter into financial futures
contracts or purchase or sell put and call options on such futures as a hedge
against anticipated interest rate, currency or equity market changes, for
duration management and for risk management purposes. Futures are generally
bought and sold on the commodities exchanges where they are listed with payment
of initial and variation margin as described below. The sale of a futures
contract creates a firm obligation by a Fund, as seller, to deliver to the buyer
the specific type of financial instrument called for in the contract at a
specific future time for a specified price (or, with respect to index futures
and Eurodollar instruments, the net cash amount). Options on futures contracts
are similar to options on securities except that an option on a futures contract
gives the purchaser the right in return for the premium paid to assume a
position in a futures contract and obligates the seller to deliver such
position.
Each Fund's use of financial futures and options thereon will in all
cases be consistent with applicable regulatory requirements and in particular
the rules and regulations of the Commodity Futures Trading Commission and will
be entered into only for bona fide hedging, risk management (including duration
management) or other portfolio management purposes. Typically, maintaining a
futures contract or selling an option thereon requires a Fund to deposit with a
financial intermediary as security for its obligations an amount of cash or
other specified assets (initial margin) which initially is typically 1% to 10%
of the face amount of the contract (but may be higher in some circumstances).
Additional cash or assets (variation margin) may be required to be deposited
thereafter on a daily basis as the mark to market value of the contract
fluctuates. The purchase of an option on financial futures involves payment of a
premium for the option without any further obligation on the part of a Fund. If
a Fund exercises an option on a futures contract it will be obligated to post
initial margin (and potential subsequent variation margin) for the resulting
futures position just as it would for any position. Futures contracts and
options thereon are generally settled by entering into an offsetting transaction
but there can be no assurance that the position can be offset prior to
settlement at an advantageous price, nor that delivery will occur.
Each Fund will not enter into a futures contract or related option
(except for closing transactions) if, immediately thereafter, the sum of the
amount of its initial margin and premiums on open futures contracts and options
thereon would exceed 5% of that Fund's total assets (taken at current value);
however, in the case of an option that is in-the-money at the time of the
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation. The segregation requirements with respect to futures contracts and
options thereon are described below.
Options on Securities Indices and Other Financial Indices. Each Fund also may
purchase and sell call and put options on securities indices and other financial
indices and in so doing can achieve many of the same objectives it would achieve
through the sale or purchase of options on individual securities or other
instruments. Options on securities indices and other financial indices are
similar to options on a security or other instrument except that, rather than
settling by physical delivery of the underlying instrument, they settle by cash
settlement, i.e., an option on an index gives the holder the right to receive,
upon exercise of the option, an amount of cash if the closing level of the index
upon which the option is based exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option (except if, in the case
of an OTC option, physical delivery is specified). This amount of cash is equal
to the excess of the closing price of the index over the exercise price of the
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option, which also may be multiplied by a formula value. The seller of the
option is obligated, in return for the premium received, to make delivery of
this amount. The gain or loss on an option on an index depends on price
movements in the instruments making up the market, market segment, industry or
other composite on which the underlying index is based, rather than price
movements in individual securities, as is the case with respect to options on
securities.
Currency Transactions. Each Fund may engage in currency transactions with
Counterparties in order to hedge the value of portfolio holdings denominated in
particular currencies against fluctuations in relative value. Currency
transactions include forward currency contracts, exchange listed currency
futures, exchange listed and OTC options on currencies, and currency swaps. A
forward currency contract involves a privately negotiated obligation to purchase
or sell (with delivery generally required) a specific currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. A currency swap is
an agreement to exchange cash flows based on the notional difference among two
or more currencies and operates similarly to an interest rate swap, which is
described below. Each Fund may enter into currency transactions with
Counterparties which have received (or the guarantors of the obligations which
have received) a credit rating of A-1 or P-1 by S&P or Moody's, respectively, or
that have an equivalent rating from a NRSRO or are determined to be of
equivalent credit quality by the Adviser.
Each Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is entering into a currency transaction with
respect to specific assets or liabilities of a Fund, which will generally arise
in connection with the purchase or sale of its portfolio securities or the
receipt of income therefrom. Position hedging is entering into a currency
transaction with respect to portfolio security positions denominated or
generally quoted in that currency.
Each Fund will not enter into a transaction to hedge currency exposure
to an extent greater, after netting all transactions intended wholly or
partially to offset other transactions, than the aggregate market value (at the
time of entering into the transaction) of the securities held in its portfolio
that are denominated or generally quoted in or currently convertible into such
currency, other than with respect to proxy hedging or cross hedging as described
below.
Each Fund may also cross-hedge currencies by entering into transactions
to purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which that Fund has or in which that Fund
expects to have portfolio exposure.
To reduce the effect of currency fluctuations on the value of existing
or anticipated holdings of portfolio securities, each Fund may also engage in
proxy hedging. Proxy hedging is often used when the currency to which a Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar. Proxy
hedging entails entering into a commitment or option to sell a currency whose
changes in value are generally considered to be correlated to a currency or
currencies in which some or all of a Fund's portfolio securities are or are
expected to be denominated, in exchange for U.S. dollars. The amount of the
commitment or option would not exceed the value of that Fund's securities
denominated in correlated currencies. For example, if the Adviser considers that
the Austrian schilling is correlated to the German deutschemark (the "D-mark"),
a Fund holds securities denominated in schillings and the Adviser believes that
the value of schillings will decline against the U.S. dollar, the Adviser may
enter into a commitment or option to sell D-marks and buy dollars. Currency
hedging involves some of the same risks and considerations as other transactions
with similar instruments. Currency transactions can result in losses to a Fund
if the currency being hedged fluctuates in value to a degree or in a direction
that is not anticipated. Further, there is the risk that the perceived
correlation between various currencies may not be present or may not be present
during the particular time that a Fund is engaging in proxy hedging. If a Fund
enters into a currency hedging transaction, that Fund will comply with the asset
segregation requirements described below.
Risks of Currency Transactions. Currency transactions are subject to risks
different from those of other portfolio transactions. Because currency control
is of great importance to the issuing governments and influences economic
planning and policy, purchases and sales of currency and related instruments can
be negatively affected by government exchange controls, blockages, and
manipulations or exchange restrictions imposed by governments. These can result
in losses to a Fund if it is unable to deliver or receive currency or funds in
settlement of obligations and could also cause hedges it has entered into to be
rendered useless, resulting in full currency exposure as well as incurring
transaction costs. Buyers and sellers of currency futures are subject to the
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same risks that apply to the use of futures generally. Further, settlement of a
currency futures contract for the purchase of most currencies must occur at a
bank based in the issuing nation. Trading options on currency futures is
relatively new, and the ability to establish and close out positions on such
options is subject to the maintenance of a liquid market which may not always be
available. Currency exchange rates may fluctuate based on factors extrinsic to
that country's economy.
Combined Transactions. Each Fund may enter into multiple transactions, including
multiple options transactions, multiple futures transactions, multiple currency
transactions (including forward currency contracts) and multiple interest rate
transactions and any combination of futures, options, currency and interest rate
transactions ("component" transactions), instead of a single Strategic
Transaction, as part of a single or combined strategy when, in the opinion of
the Adviser, it is in the best interests of a Fund to do so. A combined
transaction will usually contain elements of risk that are present in each of
its component transactions. Although combined transactions are normally entered
into based on the Adviser's judgment that the combined strategies will reduce
risk or otherwise more effectively achieve the desired portfolio management
goal, it is possible that the combination will instead increase such risks or
hinder achievement of the portfolio management objective.
Swaps, Caps, Floors and Collars. Among the Strategic Transactions into which
each Fund may enter are interest rate, currency and index swaps and the purchase
or sale of related caps, floors and collars. Each Fund expects to enter into
these transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities a Fund anticipates purchasing at a later
date. Each Fund intends to use these transactions as hedges and not as
speculative investments and will not sell interest rate caps or floors where it
does not own securities or other instruments providing the income stream a Fund
may be obligated to pay. Interest rate swaps involve the exchange by a Fund with
another party of their respective commitments to pay or receive interest, e.g.,
an exchange of floating rate payments for fixed rate payments with respect to a
notional amount of principal. A currency swap is an agreement to exchange cash
flows on a notional amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash flows on
a notional amount based on changes in the values of the reference indices. The
purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling such cap to the extent that a specified
index exceeds a predetermined interest rate or amount. The purchase of a floor
entitles the purchaser to receive payments on a notional principal amount from
the party selling such floor to the extent that a specified index falls below a
predetermined interest rate or amount. A collar is a combination of a cap and a
floor that preserves a certain return within a predetermined range of interest
rates or values.
Each Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with a Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as these swaps, caps,
floors and collars are entered into for good faith hedging purposes, the Adviser
and the Funds believe such obligations do not constitute senior securities under
the 1940 Act and, accordingly, will not treat them as being subject to its
borrowing restrictions. The Funds will not enter into any swap, cap, floor or
collar transaction unless, at the time of entering into such transaction, the
unsecured long-term debt of the Counterparty, combined with any credit
enhancements, is rated at least A by S&P or Moody's or has an equivalent rating
from a NRSRO or is determined to be of equivalent credit quality by the Adviser.
If there is a default by the Counterparty, a Fund may have contractual remedies
pursuant to the agreements related to the transaction. The swap market has grown
substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid.
Caps, floors and collars are more recent innovations for which standardized
documentation has not yet been fully developed and, accordingly, they are less
liquid than swaps.
Eurodollar Instruments. Each Fund may make investments in Eurodollar
instruments. Eurodollar instruments are U.S. dollar-denominated futures
contracts or options thereon which are linked to the London Interbank Offered
Rate ("LIBOR"), although foreign currency-denominated instruments are available
from time to time. Eurodollar futures contracts enable purchasers to obtain a
fixed rate for the lending of funds and sellers to obtain a fixed rate for
borrowings. The Funds might use Eurodollar futures contracts and options thereon
to hedge against changes in LIBOR, to which many interest rate swaps and fixed
income instruments are linked.
Risks of Strategic Transactions Outside the U.S. When conducted outside the
U.S., Strategic Transactions may not be regulated as rigorously as in the U.S.,
may not involve a clearing mechanism and related guarantees, and are subject to
the risk of governmental actions affecting trading in, or the prices of, foreign
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securities, currencies and other instruments. The value of such positions also
could be adversely affected by: (i) other complex foreign political, legal and
economic factors, (ii) lesser availability than in the U.S. of data on which to
make trading decisions, (iii) delays in a Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the U.S., (iv)
the imposition of different exercise and settlement terms and procedures and
margin requirements than in the U.S., and (v) lower trading volume and
liquidity.
Use of Segregated and Other Special Accounts. Many Strategic Transactions, in
addition to other requirements, require that the Funds segregate liquid high
grade assets with their custodian to the extent that obligations of the Funds
are not otherwise "covered" through ownership of the underlying security,
financial instrument or currency. In general, either the full amount of any
obligation by a Fund to pay or deliver securities or assets must be covered at
all times by the securities, instruments or currency required to be delivered,
or, subject to any regulatory restrictions, an amount of cash or liquid high
grade securities at least equal to the current amount of the obligation must be
segregated with the custodian. The segregated assets cannot be sold or
transferred unless equivalent assets are substituted in their place or it is no
longer necessary to segregate them. For example, a call option written by a Fund
will require that Fund to hold the securities subject to the call (or securities
convertible into the needed securities without additional consideration) or to
segregate liquid high-grade securities sufficient to purchase and deliver the
securities if the call is exercised. A call option sold by a Fund on an index
will require that Fund to own portfolio securities which correlate with the
index or to segregate liquid high grade assets equal to the excess of the index
value over the exercise price on a current basis. A put option written by a Fund
requires that Fund to segregate liquid, high grade assets equal to the exercise
price.
Except when a Fund enters into a forward contract for the purchase or
sale of a security denominated in a particular currency, which requires no
segregation, a currency contract which obligates a Fund to buy or sell currency
will generally require that Fund to hold an amount of that currency or liquid
securities denominated in that currency equal to that Fund's obligations or to
segregate liquid high grade assets equal to the amount of that Fund's
obligation.
OTC options entered into by a Fund, including those on securities,
currency, financial instruments or indices and OCC issued and exchange listed
index options, will generally provide for cash settlement. As a result, when a
Fund sells these instruments it will only segregate an amount of assets equal to
its accrued net obligations, as there is no requirement for payment or delivery
of amounts in excess of the net amount. These amounts will equal 100% of the
exercise price in the case of a non cash-settled put, the same as an OCC
guaranteed listed option sold by a Fund, or the in-the-money amount plus any
sell-back formula amount in the case of a cash-settled put or call. In addition,
when a Fund sells a call option on an index at a time when the in-the-money
amount exceeds the exercise price, that Fund will segregate, until the option
expires or is closed out, cash or cash equivalents equal in value to such
excess. OCC issued and exchange listed options sold by a Fund other than those
above generally settle with physical delivery, or with an election of either
physical delivery or cash settlement and that Fund will segregate an amount of
assets equal to the full value of the option. OTC options settling with physical
delivery, or with an election of either physical delivery or cash settlement
will be treated the same as other options settling with physical delivery.
In the case of a futures contract or an option thereon, a Fund must
deposit initial margin and possible daily variation margin in addition to
segregating assets sufficient to meet its obligation to purchase or provide
securities or currencies, or to pay the amount owed at the expiration of an
index-based futures contract. Such assets may consist of cash, cash equivalents,
liquid debt or equity securities or other acceptable assets.
With respect to swaps, a Fund will accrue the net amount of the excess,
if any, of its obligations over its entitlements with respect to each swap on a
daily basis and will segregate an amount of cash or liquid high grade securities
having a value equal to the accrued excess. Caps, floors and collars require
segregation of assets with a value equal to a Fund's net obligation, if any.
Strategic Transactions may be covered by other means when consistent
with applicable regulatory policies. Each Fund may also enter into offsetting
transactions so that its combined position, coupled with any segregated assets,
equals its net outstanding obligation in related options and Strategic
Transactions. For example, a Fund could purchase a put option if the strike
price of that option is the same or higher than the strike price of a put option
sold by that Fund. Moreover, instead of segregating assets if a Fund held a
futures or forward contract, it could purchase a put option on the same futures
or forward contract with a strike price as high or higher than the price of the
contract held. Other Strategic Transactions may also be offset in combinations.
If the offsetting transaction terminates at the time of or after the primary
transaction no segregation is required, but if it terminates prior to such time,
assets equal to any remaining obligation would need to be segregated.
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Each Fund's activities involving Strategic Transactions may be limited
by the requirements of Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), for qualification as a regulated investment company. (See
"TAXES.")
Investment Restrictions
Unless specified to the contrary, the following restrictions are
fundamental policies of each Fund and may not be changed without the approval of
a majority of the outstanding voting securities of that Fund which, under the
1940 Act and the rules thereunder and as used in this Statement of Additional
Information, means the lesser of (1) 67% or more of the shares of the Fund
present at a meeting if the holders of more than 50% of the outstanding shares
of the Fund are present in person or represented by proxy; or (2) more than 50%
of the outstanding shares of the Fund.
As a matter of fundamental policy, each Fund may not:
(1) with respect to 75% of its total assets, taken at market
value, purchase more than 10% of the outstanding voting
securities of any one issuer or invest more than 5% of the
value of its total assets in the securities of any one issuer,
except obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and except
securities of other investment companies;
(2) borrow money, except as a temporary measure for extraordinary
or emergency purposes or except in connection with reverse
repurchase agreements; provided that the Fund maintains asset
coverage of 300% for all borrowings;
(3) act as an underwriter of securities issued by others, except
to the extent that it may be deemed an underwriter in
connection with the disposition of portfolio securities of
the Fund;
(4) make loans to other persons, except (a) loans of portfolio
securities, and (b) to the extent the entry into repurchase
agreements and the purchase of debt securities in accordance
with its investment objective and investment policies may be
deemed to be loans;
(5) issue senior securities, except as appropriate to evidence
indebtedness which it is permitted to incur, and except for
shares of the separate classes or series of the Trust,
provided that collateral arrangements with respect to
currency-related contracts, futures contracts, options or
other permitted investments, including deposits of initial and
variation margin, are not considered to be the issuance of
senior securities for purposes of this restriction; and
(6) purchase any securities which would cause more than 25% of the
market value of its total assets at the time of such purchase
to be invested in the securities of one or more issuers having
their principal business activities in the same industry,
provided that there is no limitation with respect to
investments in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities (for the
purposes of this restriction, telephone companies are
considered to be in a separate industry from gas and electric
public utilities, and wholly-owned finance companies are
considered to be in the industry of their parents if their
activities are primarily related to financing the activities
of their parents).
In addition, as a matter of fundamental policy, Capital Growth Fund may
not:
(1) purchase or sell real estate (except that the Fund may invest
in (i) securities of companies which deal in real estate or
mortgages, and (ii) securities secured by real estate or
interests therein, and that the Fund reserves freedom of
action to hold and to sell real estate acquired as a result of
the Fund's ownership of securities); and
(2) purchase or sell physical commodities or contracts relating to
physical commodities.
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In addition, as a matter of fundamental policy, Value Fund may not:
(1) purchase or sell real estate (except that the Fund may invest
in (i) securities of companies which deal in real estate or
mortgages, and (ii) securities secured by real estate or
interests therein, and that the Fund reserves freedom of
action to hold and to sell real estate acquired as a result of
the Fund's ownership of securities); or purchase or sell
physical commodities or contracts relating to physical
commodities.
Other Investment Policies
The Trustees of the Trust have voluntarily adopted certain policies and
restrictions which are observed in the conduct of each Fund's affairs. These
represent intentions of the Trustees based upon current circumstances. They
differ from fundamental investment policies in that they may be changed or
amended by action of the Trustees without requiring prior notice to or approval
of shareholders.
As a matter of nonfundamental policy, each Fund may not:
(a) purchase or retain securities of any open-end investment company,
or securities of closed-end investment companies except by
purchase in the open market where no commission or profit to a
sponsor or dealer results from such purchases, or except when
such purchase, though not made in the open market, is part of a
plan of merger, consolidation, reorganization or acquisition of
assets; in any event the Fund may not purchase more than 3% of
the outstanding voting securities of another investment company,
may not invest more than 5% of its assets in another investment
company, and may not invest more than 10% of its assets in other
investment companies;
(b) pledge, mortgage or hypothecate its assets in excess, together
with permitted borrowings, of 1/3 of its total assets;
(c) purchase or retain securities of an issuer any of whose officers,
directors, trustees or security holders is an officer, director
or trustee of the Fund or a member, officer, director or trustee
of the investment adviser of the Fund if one or more of such
individuals owns beneficially more than one-half of one percent
(1/2%) of the outstanding shares or securities or both (taken at
market value) of such issuer and such individuals owning more
than one-half of one percent (1/2%) of such shares or securities
together own beneficially more than 5% of such shares or
securities or both;
(d) purchase securities on margin or make short sales, unless, by
virtue of its ownership of other securities, it has the right to
obtain securities equivalent in kind and amount to the securities
sold and, if the right is conditional, the sale is made upon the
same conditions, except in connection with arbitrage
transactions, and except that the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and
sales of securities;
(e) invest more than 10% of its total assets in securities which are
not readily marketable, the disposition of which is restricted
under federal securities laws, or in repurchase agreements not
terminable within seven days, and the Fund will not invest more
than 10% of its total assets in restricted securities; Capital
Growth Fund has no current intention of investing more than 5% of
its assets in repurchase agreements;
(f) purchase securities of any issuer with a record of less than
three years continuous operations, including predecessors, except
U.S. Government securities, securities of such issuers which are
rated by at least one nationally recognized statistical rating
organization, municipal obligations and obligations issued or
guaranteed by any foreign government or its agencies or
instrumentalities, if such purchase would cause the investments
of the Fund in all such issuers to exceed 5% of the total assets
of the Fund taken at market value;
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(g) buy options on securities or financial instruments, unless the
aggregate premiums paid on all such options held by the Fund at
any time do not exceed 20% of its net assets; or sell put options
on securities if, as a result, the aggregate value of the
obligations underlying such put options would exceed 50% of the
Fund's net assets;
(h) enter into futures contracts or purchase options thereon unless
immediately after the purchase, the value of the aggregate
initial margin with respect to all futures contracts entered into
on behalf of the Fund and the premiums paid for options on
futures contracts does not exceed 5% of the fair market value of
the Fund's total assets; provided that in the case of an option
that is in-the-money at the time of purchase, the in-the-money
amount may be excluded in computing the 5% limit;
(i) invest in oil, gas or other mineral leases, or exploration or
development programs (although it may invest in issuers which own
or invest in such interests);
(j) borrow money, including reverse repurchase agreements, in excess
of 5% of its total assets (taken at market value) except for
temporary or emergency purposes or borrow other than from banks;
(k) purchase warrants if as a result warrants taken at the lower of
cost or market value would represent more than 5% of the value of
the Fund's total net assets or more than 2% of its net assets in
warrants that are not listed on the New York or American Stock
Exchanges or on an exchange with comparable listing requirements
(for this purpose, warrants attached to securities will be deemed
to have no value);
(l) purchase or sell real estate limited partnership interests; or
(m) make securities loans if the value of such securities loaned
exceeds 30% of the value of the Fund's total assets at the time
any loan is made; all loans of portfolio securities will be fully
collateralized and marked to market daily. Each Fund has no
current intention of making loans of portfolio securities that
would amount to greater than 5% of its total assets.
In addition, as a matter of nonfundamental policy, Capital Growth Fund
may not:
(1) invest more than 20% of its net assets in debt securities
(including convertible securities), and not more than 10% of its
net assets in those rated B or lower by Moody's or S&P and may
invest in securities rated D by S&P.
If a percentage restriction on investment or utilization of assets as
set forth under "Investment Restrictions" and "Other Investment Policies" above
is adhered to at the time an investment is made, a later change in percentage
resulting from changes in the value or the total cost of a Fund's assets will
not be considered a violation of the restriction.
In addition, other nonfundamental policies may be established from time
to time by the Funds' Trustees and would not require the approval of
shareholders.
PURCHASES
(See "Purchases" and "Transaction information" in the Funds'
prospectuses.)
Additional Information About Opening An Account
Clients having a regular investment counsel account with the Adviser or
its affiliates and members of their immediate families, officers and employees
of the Adviser or of any affiliated organization and their immediate families,
members of the National Association of Securities Dealers, Inc. ("NASD") and
banks may, if they prefer, subscribe initially for at least $1,000 of Fund
shares through Scudder Investor Services, Inc. (the "Distributor") by letter,
fax, or telephone.
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<PAGE>
Shareholders of other Scudder funds who have submitted an account
application and have certified a tax identification number, clients having a
regular investment counsel account with the Adviser or its affiliates and
members of their immediate families, officers and employees of the Adviser or of
any affiliated organization and their immediate families, members of the NASD
and banks may open an account by wire. These investors must call 1-800-225-5163
to get an account number. During the call, the investor will be asked to
indicate the Fund name, amount to be wired ($1,000 minimum), name of bank or
trust company from which the wire will be sent, the exact registration of the
new account, the tax identification or Social Security number, address and
telephone number. The investor must then call the bank to arrange a wire
transfer to The Scudder Funds, State Street Bank and Trust Company, Boston, MA
02110, ABA Number 011000028, DDA Account Number 9903-5552. The investor must
give the Scudder fund name, account name and the new account number. Finally,
the investor must send the completed and signed application to the Fund
promptly.
The minimum initial purchase amount may be less than $1,000 under
certain special plan accounts.
Additional Information About Making Subsequent Investments
Subsequent purchase orders for $10,000 or more and for an amount not
greater than four times the value of the shareholder's account may be placed by
telephone, fax, etc. by established shareholders (except by Scudder Individual
Retirement Account (IRA), Scudder Horizon Plan, Scudder Profit Sharing and Money
Purchase Pension Plans, Scudder 401(k) and Scudder 403(b) Plan holders), members
of the NASD, and banks. Orders placed in this manner may be directed to any
office of the Distributor listed in each Fund's prospectus. A confirmation of
the purchase will be mailed out promptly following receipt of a request to buy.
Federal regulations require that payment be received within three business days.
If payment is not received within that time, the order is subject to
cancelation. In the event of such cancelation or cancelation at the purchaser's
request, the purchaser will be responsible for any loss incurred by a Fund or
the principal underwriter by reason of such cancelation. If the purchaser is a
shareholder, the Trust shall have the authority, as agent of the shareholder, to
redeem shares in the account in order to reimburse the relevant Fund or the
principal underwriter for the loss incurred. Net losses on such transactions
which are not recovered from the purchaser will be absorbed by the principal
underwriter. Any net profit on the liquidation of unpaid shares will accrue to
the relevant Fund.
Additional Information About Making Subsequent Investments by AutoBuy
Shareholders, whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and who have elected to participate
in the AutoBuy program, may purchase shares of the Fund by telephone. Through
this service shareholders may purchase up to $50,000 but not less than $250. To
purchase shares by AutoBuy, shareholders should call before 4 p.m. eastern time.
Proceeds in the amount of your purchase will be transferred from your bank
checking account two or three business days following your call. For requests
received by the close of regular trading on the Exchange, shares will be
purchased at the net asset value per share calculated at the close of trading on
the day of your call. AutoBuy requests received after the close of regular
trading on the Exchange will begin their processing and be purchased at the net
asset value calculated the following business day. If you purchase shares by
AutoBuy and redeem them within seven days of the purchase, the Fund may hold the
redemption proceeds for a period of up to seven business days. If you purchase
shares and there are insufficient funds in your bank account the purchase will
be canceled and you will be subject to any losses or fees incurred in the
transaction. Auto Buy transactions are not available for Scudder IRA accounts
and most other retirement plan accounts.
In order to request purchases by AutoBuy, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account from which the purchase payment will be debited.
New investors wishing to establish AutoBuy may so indicate on the application.
Existing shareholders who wish to add AutoBuy to their account may do so by
completing an AutoBuy Enrollment Form. After sending in an enrollment form
shareholders should allow for 15 days for this service to be available.
The Fund employs procedures, including recording telephone calls,
testing a caller's identity, and sending written confirmation of telephone
transactions, designed to give reasonable assurance that instructions
communicated by telephone are genuine. and to discourage fraud. To the extent
that the Fund does not follow such procedures, it may be liable for losses due
to unauthorized or fraudulent telephone instructions. The Fund will not be
liable for acting upon instructions communicated by telephone that it reasonably
believes to be genuine.
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<PAGE>
Checks
A certified check is not necessary, but checks are accepted subject
to collection at full face value in U.S. funds and must be drawn on, or payable
through, a U.S. bank.
If shares are purchased by a check which proves to be uncollectible,
the Trust reserves the right to cancel the purchase immediately and the
purchaser will be responsible for any loss incurred by a Fund or the principal
underwriter by reason of such cancellation. If the purchaser is a shareholder,
the Trust will have the authority, as agent of the shareholder, to redeem shares
in the account in order to reimburse a Fund or the principal underwriter for the
loss incurred. Investors whose orders have been canceled may be prohibited from
or restricted in placing future orders in any of the Scudder funds.
Wire Transfer of Federal Funds
To obtain the net asset value determined as of the close of regular
trading on the Exchange (normally 4 p.m. eastern time) on a selected day, your
bank must forward federal funds by wire transfer and provide the required
account information so as to be available to the Fund prior to 4 p.m.
The bank sending an investor's federal funds by bank wire may charge
for the service. Presently the Distributor pays a fee for receipt by State
Street Bank and Trust Company (the "Custodian") of "wired funds," but the right
to charge investors for this service is reserved.
Boston banks are closed on certain holidays although the Exchange may
be open. These holidays include: Martin Luther King, Jr. Day (the 3rd Monday in
January), Columbus Day (the 2nd Monday in October) and Veterans Day (November
11). Investors are not able to purchase shares by wiring federal funds on such
holidays because the Custodian is not open to receive such federal funds on
behalf of a Fund.
Share Price
Purchases will be filled without sales charge at the net asset value
next computed after receipt of the application in good order. Net asset value
normally will be computed as of the close of regular trading on each day during
which the Exchange is open for trading. Orders received after the close of
regular trading on the Exchange will be executed at the next business day's net
asset value. If the order has been placed by a member of the NASD, other than
the Distributor, it is the responsibility of that member broker, rather than the
Fund, to forward the purchase order to the Fund's transfer agent in Boston by
the close of regular trading on the Exchange.
Share Certificates
Due to the desire of Trust management to afford ease of redemption,
certificates will not be issued to indicate ownership in the Funds. With respect
to Capital Growth Fund, share certificates now in a shareholder's possession may
be sent to the Trust's transfer agent, Scudder Service Corporation (the
"Transfer Agent"), for cancellation and credit to such shareholder's account.
Shareholders who prefer may hold the certificates in their possession until they
wish to exchange or redeem such shares. See "Purchases" and "Exchanges and
redemptions" in Capital Growth Fund's prospectus.
Other Information
If purchases or redemptions of the Funds' shares are arranged and
settlement is made at the investor's election through a member of the NASD,
other than the Distributor, that member may, at its discretion, charge a fee for
that service. The Trustees and Scudder Investor Services, Inc., the Trust's
principal underwriter, each has the right to limit the amount of purchases by,
and to refuse to sell to, any person. The Trustees and the Distributor each may
suspend or terminate the offering of shares of either Fund at any time.
The Tax Identification Number section of the Funds' application must be
completed when opening an account. Applications and purchase orders without a
certified tax identification number and certain other certified information
17
<PAGE>
(e.g., from exempt investors, certification of exempt status) may be returned to
the investor if a certified tax identification number and certain other required
certificates are not supplied.
The Trust may issue shares of either Fund at net asset value in
connection with any merger or consolidation with, or acquisition of the assets
of, any investment company or personal holding company, subject to the
requirements of the 1940 Act.
EXCHANGES AND REDEMPTIONS
(See "Exchanges and redemptions" and "Transaction information"
in the Funds' prospectuses.)
Exchanges
Exchanges are comprised of a redemption from one Scudder fund and a
purchase into another Scudder fund. The purchase side of the exchange either may
be an additional investment into an existing account or may involve opening a
new account in the other fund. When an exchange involves a new account, the new
account will be established with the same registration, tax identification
number, address, telephone redemption option, "Scudder Automated Information
Line" (SAIL) transaction authorization and dividend option as the existing
account. Other features will not carry over automatically to the new account.
Exchanges to a new fund account must be for a minimum of $1,000. When an
exchange represents an additional investment into an existing account, the
account receiving the exchange proceeds must have identical registration,
address, and account options/features as the account of origin. Exchanges into
an existing account must be for $100 or more. If the account receiving the
exchange proceeds is to be different in any respect, the exchange request must
be in writing and must contain an original signature guarantee as described
under "Transaction Information--Signature guarantees" in the Funds'
prospectuses.
Exchange orders received before the close of regular trading on the
Exchange on any business day ordinarily will be executed at the respective net
asset values determined on that day. Exchange orders received after the close of
regular trading on the Exchange will be executed on the following business day.
Investors may also request, at no extra charge, to have exchanges
automatically executed on a predetermined schedule from one Scudder fund to an
existing account in another Scudder fund at current net asset value through
Scudder's Automatic Exchange Program. Exchanges must be for a minimum of $50.
Shareholders may add this free feature over the phone or in writing. Automatic
Exchanges will continue until the shareholder requests by telephone or in
writing to have the feature removed, or until the originating account is
depleted. The Trust and the Transfer Agent each reserves the right to suspend or
terminate the privilege of the Automatic Exchange Program at any time.
There is no charge to the shareholder for any exchange described above.
An exchange into another Scudder fund is a redemption of shares, and therefore
may result in tax consequences (gain or loss) to the shareholder, and the
proceeds of such an exchange may be subject to backup withholding. (See
"TAXES.")
Investors currently receive the exchange privilege, including exchange
by telephone, automatically without having to elect it. The Trust employs
procedures, including recording telephone calls, testing a caller's identity,
and sending written confirmation of telephone transactions, designed to give
reasonable assurance that instructions communicated by telephone are genuine,
and to discourage fraud. To the extent that the Trust does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Trust will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine. The Trust and the Transfer Agent each reserves the right to suspend or
terminate the privilege of exchanging by telephone or fax at any time.
The Scudder funds into which investors may make an exchange are listed
under "THE SCUDDER FAMILY OF FUNDS" herein. Before making an exchange,
shareholders should obtain from the Distributor a prospectus of the Scudder fund
into which the exchange is being contemplated.
Scudder retirement plans may have different exchange requirements.
Please refer to appropriate plan literature.
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<PAGE>
Redemption by Telephone
Shareholders currently receive the right, automatically without having
to elect it, to redeem by telephone up to $50,000 and have the proceeds mailed
to their address of record. Shareholders may request to have the proceeds mailed
or wired to their pre-designated bank account. In order to request redemptions
by telephone, shareholders must have completed and returned to the Transfer
Agent the application, including the designation of a bank account to which the
redemption proceeds are to be sent.
(a) NEW INVESTORS wishing to establish telephone redemption to a
predesignated bank account must complete the appropriate section
on the application.
(b) EXISTING SHAREHOLDERS (except those who are Scudder IRA, Scudder
Pension and Profit-Sharing, Scudder 401(k) and Scudder 403(b)
Planholders) who wish to establish telephone redemption to a
predesignated bank account or who want to change the bank account
previously designated to receive redemption payments should
either return a Telephone Redemption Option Form (available upon
request) or send a letter identifying the account and specifying
the exact information to be changed. The letter must be signed
exactly as the shareholder's name(s) appears on the account. An
original signature and an original signature guarantee are
required for each person in whose name the account is registered.
Telephone redemption is not available with respect to shares
represented by share certificates for the Capital Growth Fund or shares held in
certain retirement accounts for both Funds.
If a request for redemption to a shareholder's bank account is made by
telephone or fax, payment will be by Federal Reserve bank wire to the bank
account designated on the application, unless a request is made that the
redemption check be mailed to the designated bank account. There will be a $5
charge for all wire redemptions.
Note: Investors designating a savings bank to receive their telephone
redemption proceeds are advised that if the savings bank is not a participant in
the Federal Reserve System, redemption proceeds must be wired through a
commercial bank which is a correspondent of the savings bank. As this may delay
receipt by the shareholder's account, it is suggested that investors wishing to
use a savings bank discuss wire procedures with their bank and submit any
special wire transfer information with the telephone redemption authorization.
If appropriate wire information is not supplied, redemption proceeds will be
mailed to the designated bank.
Each Fund employs procedures, including recording telephone calls,
testing a caller's identity, and sending written confirmation of telephone
transactions, designed to give reasonable assurance that instructions
communicated by telephone are genuine, and to discourage fraud. To the extent
that a Fund does not follow such procedures, it may be liable for losses due to
unauthorized or fraudulent telephone instructions. A Fund will not be liable for
acting upon instructions communicated by telephone that it reasonably believes
to be genuine.
Redemption requests by telephone (technically a repurchase by agreement
between the Fund and the shareholder) of shares purchased by check will not be
accepted until the purchase check has cleared which may take up to seven
business days.
Redemption By AutoSell
Shareholders, whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and who have elected to participate
in the AutoSell program may sell shares of the Fund by telephone. To sell shares
by AutoSell, shareholders should call before 4 p.m. eastern time. Redemptions
must be for at least $250. Proceeds in the amount of your redemption will be
transferred to your bank checking account two or three business days following
your call. For requests received by the close of regular trading on the
Exchange, shares will be redeemed at the net asset value per share calculated at
the close of trading on the day of your call. AutoSell requests received after
the close of regular trading on the Exchange will begin their processing and be
redeemed at the net asset value calculated the following business day. AutoSell
transactions are not available for Scudder IRA accounts and most other
retirement plan accounts.
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<PAGE>
In order to request redemptions by AutoSell, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account from which the purchase payment will be debited.
New investors wishing to establish AutoSell may so indicate on the application.
Existing shareholders who wish to add AutoSell to their account may do so by
completing an AutoSell Enrollment Form. After sending in an enrollment form,
shareholders should allow for 15 days for this service to be available.
The Fund employs procedures, including recording telephone calls,
testing a caller's identity, and sending written confirmation of telephone
transactions, designed to give reasonable assurance that instructions
communicated by telephone are genuine, and to discourage fraud. To the extent
that the Fund does not follow such procedures, it may be liable for losses due
to unauthorized or fraudulent telephone instructions. The Fund will not be
liable for acting upon instructions communicated by telephone that it reasonably
believes to be genuine.
Redemption by Mail or Fax
Any existing share certificates for the Capital Growth Fund
representing shares being redeemed must accompany a request for redemption and
be duly endorsed or accompanied by a proper stock assignment form with signature
guaranteed as explained in that Fund's prospectus.
In order to ensure proper authorization before redeeming shares, the
Transfer Agent may request additional documents such as, but not limited to,
stock powers, trust instruments, certificates of death, appointments as
executor, certificates of corporate authority and waivers of tax (required in
some states when settling estates).
It is suggested that shareholders holding certificated shares or shares
registered in other than individual names contact the Transfer Agent prior to
redemptions to ensure that all necessary documents accompany the request. When
shares are held in the name of a corporation, trust, fiduciary agent, attorney
or partnership, the Transfer Agent requires, in addition to the stock power,
certified evidence of authority to sign. These procedures are for the protection
of shareholders and should be followed to ensure prompt payment. Redemption
requests must not be conditional as to date or price of the redemption. Proceeds
of a redemption will be sent within five business days after receipt by the
Transfer Agent of a request for redemption that complies with the above
requirements. Delays of more than seven days of payment for shares tendered for
repurchase or redemption may result but only until the purchase check has
cleared.
The requirements for IRA redemptions are different from those for
regular accounts. For more information call 1-800-225-5163.
Redemption-in-Kind
The Trust reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption or repurchase order by
making payment in whole or in part in readily marketable securities chosen by a
Fund and valued as they are for purposes of computing a Fund's net asset value
(a redemption-in-kind). If payment is made in securities, a shareholder may
incur transaction expenses in converting these securities into cash. The Trust
has elected, however, to be governed by Rule 18f-1 under the 1940 Act as a
result of which a Fund is obligated to redeem shares, with respect to any one
shareholder during any 90 day period, solely in cash up to the lesser of
$250,000 or 1% of the net asset value of that Fund at the beginning of the
period.
Other Information
Clients, officers or employees of the Adviser or of an affiliated
organization, and members of such clients', officers' or employees' immediate
families, banks and members of the NASD may direct redemption requests to the
Trust through Scudder Investor Services, Inc. at Two International Place,
Boston, Massachusetts 02110-4103 by letter, fax, TWX, or telephone. A two-part
confirmation will be mailed out promptly after receipt of the request. A written
request in good order as described above and any certificates with a proper
original signature guarantee(s), as described in the Funds' prospectuses under
"Transaction information--Signature guarantees", should be sent with a copy of
the invoice to Scudder Service Corporation, Confirmed Processing Department, Two
International Place, Boston, Massachusetts 02110-4103. Failure to deliver shares
or required documents (see above) by the settlement date may result in
cancellation of the trade and the shareholder will be responsible for any loss
incurred by a Fund or the principal underwriter by reason of such cancellation.
The Trust shall have the authority, as agent of the shareholder, to redeem
20
<PAGE>
shares in the account to reimburse a Fund or the principal underwriter for the
loss incurred. Net losses on such transactions which are not recovered from the
shareholder will be absorbed by the principal underwriter. Any net gains so
resulting will accrue to a Fund. For this group, repurchases will be carried out
at the net asset value next computed after such repurchase requests have been
received. The arrangements described in this paragraph for repurchasing shares
are discretionary and may be discontinued at any time.
If a shareholder redeems all shares in the account after the record
date of a dividend, the shareholder will receive in addition to the net asset
value thereof, all declared but unpaid dividends thereon. The value of shares
redeemed or repurchased may be more or less than the shareholder's cost
depending on the net asset value at the time of redemption or repurchase. The
Funds do not impose a redemption or repurchase charge, although a wire charge
may be applicable for redemption proceeds wired to an investor's bank account.
Redemption of shares, including an exchange into another Scudder fund, may
result in tax consequences (gain or loss) to the shareholder and the proceeds of
such redemptions may be subject to backup withholding. (See "TAXES.")
Shareholders who wish to redeem shares from Special Plan Accounts
should contact the employer, trustee or custodian of the Plan for the
requirements.
The Trust's Declaration of Trust provides that the determination of net
asset value may be suspended and a shareholder's right to redeem shares and to
receive payments may be suspended at times during which a) the Exchange is
closed, other than customary weekend and holiday closings, (b) trading on the
Exchange is restricted, (c) an emergency exists as a result of which disposal by
the Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, or (d) a governmental body having jurisdiction over the Trust may, by
order, permit such a suspension for the protection of the Fund's shareholders;
provided that applicable rules and regulations of the SEC (or any succeeding
governmental authority) shall govern as to whether the conditions prescribed in
(b), (c) or (d) exist.
If transactions at any time reduce a shareholder's account balance in
the Fund to below $1,000 in value, the Trust may notify the shareholder that,
unless the account balance is brought up to at least $1,000, the Trust will
redeem all shares in the Fund and close the account by making payment to the
shareholder. The shareholder has sixty days to bring the account balance up to
$1,000 before any action will be taken by the Trust. No transfer from an
existing account to a new Scudder fund account should be for less than $1,000;
otherwise the new account may be redeemed as described above. (This policy
applies to accounts of new shareholders but does not apply to certain Special
Plan Accounts.) The Trustees have the authority to change the minimum account
size.
FEATURES AND SERVICES OFFERED BY THE FUNDS
(See "Shareholder benefits" in the Funds' prospectuses.)
The Pure No-Load(TM) Concept
Investors are encouraged to be aware of the full ramifications of
mutual fund fee structures, and of how Scudder distinguishes its funds from the
vast majority of mutual funds available today. The primary distinction is
between load and no-load funds.
Load funds generally are defined as mutual funds that charge a fee for
the sale and distribution of fund shares. There are three types of loads:
front-end loads, back-end loads, and asset-based 12b-1 fees. 12b-1 fees are
distribution-related fees charged against fund assets and are distinct from
service fees, which are charged for personal services and/or maintenance of
shareholder accounts. Asset-based sales charges and service fees are typically
paid pursuant to distribution plans adopted under 12b-1 under the 1940 Act.
A front-end load is a sales charge, which can be as high as 8.50% of
the amount invested. A back-end load is a contingent deferred sales charge,
which can be as high as 8.50% of either the amount invested or redeemed. The
maximum front-end or back-end load varies, and depends upon whether or not a
fund also charges a 12b-1 fee and/or a service fee or offers investors various
sales-related services such as dividend reinvestment. The maximum charge for a
12b-1 fee is 0.75% of a fund's average annual net assets, and the maximum charge
for a service fee is 0.25% of a fund's average annual net assets.
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<PAGE>
A no-load fund does not charge a front-end or back-end load, but can
charge a small 12b-1 fee and/or service fee against fund assets. Under the NASD
Rules of Fair Practice, a mutual fund can call itself a "no-load" fund only if
the 12b-1 fee and/or service fee does not exceed 0.25% of a fund's average
annual net assets.
Because Scudder funds do not pay any asset-based sales charges or
service fees, Scudder developed and trademarked the phrase pure no-load(TM) to
distinguish Scudder funds from other no-load mutual funds. Scudder pioneered the
no-load concept when it created the nation's first no-load fund in 1928, and
later developed the nation's first family of no-load mutual funds.
The following chart shows the potential long-term advantage of
investing $10,000 in a Scudder pure no-load fund over investing the same amount
in a load fund that collects an 8.50% front-end load, a load fund that collects
only a 0.75% 12b-1 and/or service fee, and a no-load fund charging only a 0.25%
12b-1 and/or service fee. The hypothetical figures in the chart show the value
of an account assuming a constant 10% rate of return over the time periods
indicated and reinvestment of dividends and distributions.
<TABLE>
<S> <C> <C> <C> <C>
Scudder Load Fund with 0.75% No-Load Fund with
YEARS Pure No-Load(TM)Fund 8.50% Load Fund 12b-1 Fee 0.25% 12b-1 Fee
----- -------------------- --------------- --------- ---------------
10 $25,937 $23,733 $24,222 $25,354
15 41,772 38,222 37,698 40,371
20 67,275 61,557 58,672 64,282
</TABLE>
Investors are encouraged to review the fee tables on page 2 of each
Fund's prospectus for more specific information about the rates at which
management fees and other expenses are assessed.
Dividend and Capital Gain Distribution Options
Investors have freedom to choose whether to receive cash or to reinvest
any dividends from net investment income or distributions from realized capital
gains in additional shares of a Fund. A change of instructions for the method of
payment must be received by the Transfer Agent at least five days prior to a
dividend record date. Shareholders also may change their dividend option either
by calling 1-800-225-5163 or by sending written instructions to the Transfer
Agent. Please include your account number with your written request. See "How to
contact Scudder" in the prospectus for the address.
Reinvestment is usually made at the closing net asset value determined
on the business day following the record date. Investors may leave standing
instructions with the Transfer Agent designating their option for either
reinvestment or cash distribution of any income dividends or capital gains
distributions. If no election is made, dividends and distributions will be
invested in additional shares of a Fund.
Investors may also have dividends and distributions automatically
deposited in their predesignated bank account through Scudder's
DistributionsDirect Program. Shareholders who elect to participate in the
DistributionsDirect Program, and whose predesignated checking account of record
is with a member bank of the Automated Clearing House Network (ACH) can have
income and capital gain distributions automatically deposited to their personal
bank account usually within three business days after the Fund pays its
distribution. A DistributionsDirect request form can be obtained by calling
1-800-225-5163. Confirmation statements will be mailed to shareholders as
notification that distributions have been deposited.
Investors choosing to participate in Scudder's Automatic Withdrawal
Plan must reinvest any dividends or capital gains. For most retirement plan
accounts, the reinvestment of dividends and capital gains is also required.
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<PAGE>
Diversification
Your investment in each Fund represents an interest in a large,
diversified portfolio of carefully selected securities. Diversification may
protect you against the possible risks associated with concentrating in fewer
securities.
Scudder Funds Centers
Investors may visit any of the Fund Centers maintained by the
Distributor listed in the Funds' prospectuses. The Centers are designed to
provide individuals with services during any business day. Investors may pick up
literature or obtain assistance with opening an account, adding monies or
special options to existing accounts, making exchanges within the Scudder Family
of Funds, redeeming shares or opening retirement plans. Checks should not be
mailed to the Centers but should be mailed to "The Scudder Funds" at the address
listed under "How to contact Scudder" in the prospectuses.
Reports to Shareholders
The Trust issues shareholders unaudited semiannual financial statements
and annual financial statements audited by independent accountants, including a
list of investments held and statements of assets and liabilities, operations,
changes in net assets and financial highlights. The Trust presently intends to
distribute to shareholders informal quarterly reports during the intervening
quarters, containing a statement of the investments of the Funds.
Transaction Summaries
Annual summaries of all transactions in each Fund account are available
to shareholders. The summaries may be obtained by calling 1-800-225-5163.
THE SCUDDER FAMILY OF FUNDS
(See "Investment products and services" in the
Fund's prospectus.)
The Scudder Family of Funds is America's first family of mutual funds
and the nation's oldest family of no-load mutual funds. To assist investors in
choosing a Scudder fund, descriptions of the Scudder funds' objectives follow.
Initial purchases in each Scudder fund must be at least $1,000 or $500 in the
case of IRAs. Subsequent purchases must be for $100 or more. Minimum investments
for special plan accounts may be lower.
MONEY MARKET
Scudder Cash Investment Trust ("SCIT") seeks to maintain the stability
of capital, and consistent therewith, to maintain the liquidity of
capital and to provide current income through investment in a
supervised portfolio of short-term debt securities. SCIT intends to
seek to maintain a constant net asset value of $1.00 per share,
although in certain circumstances this may not be possible.
Scudder U.S. Treasury Money Fund seeks to provide safety, liquidity and
stability of capital and consistent therewith to provide current income
through investment in a supervised portfolio of U.S. Government and
U.S. Government guaranteed obligations with maturities of not more than
762 calendar days. The Fund intends to seek to maintain a constant net
asset value of $1.00 per share, although in certain circumstances this
may not be possible.
INCOME
Scudder Emerging Markets Income Fund seeks to provide high current
income and, secondarily, long-term capital appreciation through
investments primarily in high-yielding debt securities issued in
emerging markets.
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Scudder Global Bond Fund seeks to provide total return with an emphasis
on current income by investing primarily in high-grade bonds
denominated in foreign currencies and the U.S. dollar. As a secondary
objective, the Fund will seek capital appreciation.
Scudder GNMA Fund seeks to provide investors with high current income
from a portfolio of high-quality GNMA securities.
Scudder Income Fund seeks to earn a high level of income consistent
with the prudent investment of capital through a flexible investment
program emphasizing high-grade bonds.
Scudder International Bond Fund seeks to provide income from a
portfolio of high-grade bonds denominated in foreign currencies. As a
secondary objective, the Fund seeks protection and possible enhancement
of principal value by actively managing currency, bond market and
maturity exposure and by security selection.
Scudder Short Term Bond Fund seeks to provide a higher and more stable
level of income than is normally provided by money market investments,
and more price stability than investments in intermediate- and
long-term bonds.
Scudder Zero Coupon 2000 Fund seeks to provide as high an investment
return over a selected period as is consistent with the minimization of
reinvestment risks through investments primarily in zero coupon
securities.
TAX FREE MONEY MARKET
Scudder Tax Free Money Fund ("STFMF") is designed to provide investors
with income exempt from regular federal income tax while seeking
stability of principal. STFMF seeks to maintain a constant net asset
value of $1.00 per share, although in certain circumstances this may
not be possible.
Scudder California Tax Free Money Fund* is designed to provide
California taxpayers income exempt from California state and regular
federal income taxes, and seeks stability of capital and the
maintenance of a constant net asset value of $1.00 per share, although
in certain circumstances this may not be possible.
Scudder New York Tax Free Money Fund* is designed to provide New York
taxpayers income exempt from New York state, New York City and regular
federal income taxes, and seeks stability of capital and the
maintenance of a constant net asset value of $1.00 per share, although
in certain circumstances this may not be possible.
TAX FREE
Scudder High Yield Tax Free Fund seeks to provide high income which is
exempt from regular federal income tax by investing in investment-grade
municipal securities.
Scudder Limited Term Tax Free Fund seeks to provide as high a level of
income exempt from regular federal income tax as is consistent with a
high degree of principal stability.
Scudder Managed Municipal Bonds seeks to provide income which is exempt
from regular federal income tax primarily through investments in
long-term municipal securities with an emphasis on high quality.
Scudder Medium Term Tax Free Fund seeks to provide a high level of
income free from regular federal income taxes and to limit principal
fluctuation by investing in high-grade municipal securities of
intermediate maturities.
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
24
<PAGE>
Scudder California Tax Free Fund* seeks to provide income exempt from
both California and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
California state, municipal and local government obligations.
Scudder Massachusetts Limited Term Tax Free Fund* seeks to provide as
high a level of income exempt from Massachusetts personal and regular
federal income tax as is consistent with a high degree of principal
stability.
Scudder Massachusetts Tax Free Fund* seeks to provide income exempt
from both Massachusetts and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
Massachusetts state, municipal and local government obligations.
Scudder New York Tax Free Fund* seeks to provide income exempt from New
York state, New York City and regular federal income taxes through the
professional and efficient management of a portfolio consisting of
investments in New York state, municipal and local government
obligations.
Scudder Ohio Tax Free Fund* seeks to provide income exempt from both
Ohio and regular federal income taxes through the professional and
efficient management of a portfolio consisting of Ohio state, municipal
and local government obligations.
Scudder Pennsylvania Tax Free Fund* seeks to provide income exempt from
both Pennsylvania and regular federal income taxes through a portfolio
consisting of Pennsylvania state, municipal and local government
obligations.
GROWTH AND INCOME
Scudder Balanced Fund seeks to provide a balance of growth and income,
as well as long-term preservation of capital, from a diversified
portfolio of equity and fixed income securities.
Scudder Growth and Income Fund seeks to provide long-term growth of
capital, current income, and growth of income through a portfolio
invested primarily in common stocks and convertible securities by
companies which offer the prospect of growth of earnings while paying
current dividends.
GROWTH
Scudder Capital Growth Fund seeks to maximize long-term growth of
capital through a broad and flexible investment program emphasizing
common stocks.
Scudder Development Fund seeks to achieve long-term growth of capital
primarily through investments in marketable securities, principally
common stocks, of relatively small or little-known companies which in
the opinion of management have promise of expanding their size and
profitability or of gaining increased market recognition for their
securities, or both.
Scudder Global Fund seeks long-term growth of capital primarily through
a diversified portfolio of marketable equity securities selected on a
worldwide basis. It may also invest in debt securities of U.S. and
foreign issuers. Income is an incidental consideration.
Scudder Global Small Company Fund seeks above-average capital
appreciation over the long term by investing primarily in the equity
securities of small companies located throughout the world.
Scudder Gold Fund seeks maximum return (principal change and income)
consistent with investing in a portfolio of gold-related equity
securities and gold.
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
25
<PAGE>
Scudder Greater Europe Growth Fund seeks long-term growth of capital
through investments primarily in the equity securities of European
companies.
Scudder International Fund seeks long-term growth of capital through
investment principally in a diversified portfolio of marketable equity
securities selected primarily to permit participation in non-U.S.
companies and economies with prospects for growth. It also invests in
fixed-income securities of foreign governments and companies, with a
view toward total investment return.
Scudder Latin America Fund seeks to provide long-term capital
appreciation through investment primarily in the securities of Latin
American issuers.
Scudder Pacific Opportunities Fund seeks long-term growth of capital
through investment primarily in the equity securities of Pacific Basin
companies, excluding Japan.
Scudder Quality Growth Fund seeks to provide long-term growth of
capital through investment primarily in the equity securities of
seasoned, financially strong U.S. growth companies.
Scudder Small Company Value Fund invests for long-term growth of
capital by seeking out undervalued stocks of small U.S. companies.
Scudder Value Fund seeks long-term growth of capital through investment
in undervalued equity securities.
The Japan Fund, Inc. seeks capital appreciation through investment in
Japanese securities, primarily in common stocks of Japanese companies.
The net asset values of most Scudder Funds can be found daily in the
"Mutual Funds" section of The Wall Street Journal under "Scudder Funds," and in
other leading newspapers throughout the country. Investors will notice the net
asset value and offering price are the same, reflecting the fact that no sales
commission or "load" is charged on the sale of shares of the Scudder Funds. The
latest seven-day yields for the money-market funds can be found every Monday and
Thursday in the "Money-Market Funds" section of The Wall Street Journal. This
information also may be obtained by calling the Scudder Automated Information
Line (SAIL) at 1-800-343-2890.
The Scudder Family of Funds offers many conveniences and services,
including: active professional investment management; broad and diversified
investment portfolios; pure no-load funds with no commissions to purchase or
redeem shares or Rule 12b-1 distribution fees; individual attention from a
service representative of Scudder Investor Relations; easy telephone exchanges
into other Scudder funds; shares redeemable at net asset value at any time.
SPECIAL PLAN ACCOUNTS
(See "Scudder tax-advantaged retirement plans," "Purchases--By Automatic
Investment Plan" and "Exchanges and redemptions--By Automatic Withdrawal
Plan" in the Funds' prospectuses.)
Detailed information on any Scudder investment plan, including the
applicable charges, minimum investment requirements and disclosures made
pursuant to Internal Revenue Service (the "IRS") requirements, may be obtained
by contacting Scudder Investor Services, Inc., Two International Place, Boston,
Massachusetts 02110-4103 or by calling toll free, 1-800-225-2470. It is
advisable for an investor considering the funding of the investment plans
described below to consult with an attorney or other investment or tax adviser
with respect to the suitability requirements and tax aspects thereof.
Shares of each Fund may also be a permitted investment under profit
sharing and pension plans and IRA's other than those offered by the Fund's
distributor depending on the provisions of the relevant plan or IRA.
None of the plans assures a profit or guarantees protection against
depreciation, especially in declining markets.
26
<PAGE>
Scudder Retirement Plans: Profit-Sharing and Money Purchase
Pension Plans for Corporations and Self-Employed Individuals
Shares of each Fund may be purchased as the investment medium under a
plan in the form of a Scudder Profit-Sharing Plan (including a version of the
Plan which includes a cash-or-deferred feature) or a Scudder Money Purchase
Pension Plan (jointly referred to as the Scudder Retirement Plans) adopted by a
corporation, a self-employed individual or a group of self-employed individuals
(including sole proprietorships and partnerships), or other qualifying
organization. Each of these forms was approved by the IRS as a prototype. The
IRS's approval of an employer's plan under Section 401(a) of the Code will be
greatly facilitated if it is in such approved form. Under certain circumstances,
the IRS will assume that a plan, adopted in this form, after special notice to
any employees, meets the requirements of Section 401(a) of the Code.
Scudder 401(k): Cash or Deferred Profit-Sharing Plan
for Corporations and Self-Employed Individuals
Shares of each Fund may be purchased as the investment medium under a
plan in the form of a Scudder 401(k) Plan adopted by a corporation, a
self-employed individual or a group of self-employed individuals (including sole
proprietors and partnerships), or other qualifying organization. This plan has
been approved as a prototype by the IRS.
Scudder IRA: Individual Retirement Account
Shares of each Fund may be purchased as the underlying investment for
an Individual Retirement Account which meets the requirements of Section 408(a)
of the Code.
A single individual who is not an active participant in an
employer-maintained retirement plan, a simplified employee pension plan, or a
tax-deferred annuity program (a "qualified plan"), and a married individual who
is not an active participant in a qualified plan and whose spouse is also not an
active participant in a qualified plan, are eligible to make tax deductible
contributions of up to $2,000 to an IRA prior to the year such individual
attains age 70 1/2. In addition, certain individuals who are active participants
in qualified plans (or who have spouses who are active participants) are also
eligible to make tax-deductible contributions to an IRA; the annual amount, if
any, of the contribution which such an individual will be eligible to deduct
will be determined by the amount of his, her, or their adjusted gross income for
the year. Whenever the adjusted gross income limitation prohibits an individual
from contributing what would otherwise be the maximum tax-deductible
contribution he or she could make, the individual will be eligible to contribute
the difference to an IRA in the form of nondeductible contributions.
An eligible individual may contribute as much as $2,000 of qualified
income (earned income or, under certain circumstances, alimony) to an IRA each
year (up to $2,250 for married couples if one spouse has earned income of no
more than $250). All income and capital gains derived from IRA investments are
reinvested and compound tax-deferred until distributed. Such tax-deferred
compounding can lead to substantial retirement savings.
The table below shows how much individuals would accumulate in a fully
tax-deductible IRA by age 65 (before any distributions) if they contribute
$2,000 at the beginning of each year, assuming average annual returns of 5, 10,
and 15%. (At withdrawal, accumulations in this table will be taxable.)
27
<PAGE>
<TABLE>
<CAPTION>
Value of IRA at Age 65
Assuming $2,000 Deductible Annual Contribution
<S> <C> <C> <C>
- ---------------------------- ------------------------- -------------------------- -------------------------
Starting
Age of Annual Rate of Return
------------------------------------------------------------------------------
Contributions 5% 10% 15%
- ---------------------------- ------------------------- -------------------------- -------------------------
25 $253,680 $973,704 $4,091,908
35 139,522 361,887 999,914
45 69,439 126,005 235,620
55 26,414 35,062 46,699
</TABLE>
This next table shows how much individuals would accumulate in non-IRA
accounts by age 65 if they start with $2,000 in pretax earned income at the
beginning of each year (which is $1,380 after taxes are paid), assuming average
annual returns of 5, 10 and 15%. (At withdrawal, a portion of the accumulation
in this table will be taxable.)
<TABLE>
<CAPTION>
Value of a Non-IRA Account at
Age 65 Assuming $1,380 Annual Contributions
(post tax, $2,000 pretax) and a 31% Tax Bracket
<S> <C> <C> <C>
- ---------------------------- ------------------------- -------------------------- -------------------------
Starting
Age of Annual Rate of Return
------------------------------------------------------------------------------
Contributions 5% 10% 15%
- ---------------------------- ------------------------- -------------------------- -------------------------
25 $119,318 $287,021 $741,431
35 73,094 136,868 267,697
45 40,166 59,821 90,764
55 16,709 20,286 24,681
</TABLE>
Scudder 403(b) Plan
Shares of each Fund may also be purchased as the underlying investment
for tax sheltered annuity plans under the provisions of Section 403(b)(7) of the
Code. In general, employees of tax-exempt organizations described in Section
501(c)(3) of the Code (such as hospitals, churches, religious, scientific, or
literary organizations and educational institutions) or a public school system
are eligible to participate in a 403(b) plan.
Automatic Withdrawal Plan
Non-retirement plan shareholders who currently own or purchase $10,000
or more of shares of a Fund may establish an Automatic Withdrawal Plan. The
investor can then receive monthly, quarterly or periodic redemptions from his or
her account for any designated amount of $50 or more. Payments are mailed at the
end of each month. The check amounts may be based on the redemption of a fixed
dollar amount, fixed share amount, percent of account value or declining
balance. The Plan provides for income dividends and capital gains distributions,
if any, to be reinvested in additional shares. Shares are then liquidated as
necessary to provide for withdrawal payments. Since the withdrawals are in
amounts selected by the investor and have no relationship to yield or income,
payments received cannot be considered as yield or income on the investment and
the resulting liquidations may deplete or possibly extinguish the initial
investment. Requests for increases in withdrawal amounts or to change payee must
be submitted in writing, signed exactly as the account is registered and contain
signature guarantee(s) as described under "Transaction information--Redeeming
shares--Signature guarantees" in each Fund's prospectus. Any such requests must
be received by the Funds' transfer agent by the 15th of the month in which such
change is to take effect. An Automatic Withdrawal Plan may be terminated at any
time by the shareholder, the Trust or its agent on written notice, and will be
terminated when all shares of a Fund under the Plan have been liquidated or upon
receipt by the Trust of notice of death of the shareholder.
28
<PAGE>
An Automatic Withdrawal Plan request form can be obtained by calling
1-800-225-5163.
Group or Salary Deduction Plan
An investor may join a Group or Salary Deduction Plan where
satisfactory arrangements have been made with Scudder Investor Services, Inc.
for forwarding regular investments through a single source. The minimum annual
investment is $240 per investor which may be made in monthly, quarterly,
semiannual or annual payments. The minimum monthly deposit per investor is $20.
Except for trustees or custodian fees for certain retirement plans, at present
there is no separate charge for maintaining group or salary deduction plans;
however, the Trust and its agents reserve the right to establish a maintenance
charge in the future depending on the services required by the investor.
The Trust reserves the right, after notice has been given to the
shareholder, to redeem and close a shareholder's account in the event that the
shareholder ceases participating in the group plan prior to investment of $1,000
per individual or in the event of a redemption which occurs prior to the
accumulation of that amount or which reduces the account value to less than
$1,000 and the account value is not increased to $1,000 within a reasonable time
after notification. An investor in a plan who has not purchased shares for six
months shall be presumed to have stopped making payments under the plan.
Automatic Investment Plan
Shareholders may arrange to make periodic investments through automatic
deductions from checking accounts by completing the appropriate form and
providing the necessary documentation to establish this service. The minimum
investment is $50.
The Automatic Investment Plan involves an investment strategy called
dollar cost averaging. Dollar cost averaging is a method of investing whereby a
specific dollar amount is invested at regular intervals. By investing the same
dollar amount each period, when shares are priced low the investor will purchase
more shares than when the share price is higher. Over a period of time this
investment approach may allow the investor to reduce the average price of the
shares purchased. However, this investment approach does not assure a profit or
protect against loss. This type of regular investment program may be suitable
for various investment goals such as, but not limited to, college planning or
saving for a home.
Uniform Transfers/Gifts to Minors Act
Grandparents, parents or other donors may set up custodian accounts for
minors. The minimum initial investment is $1,000 unless the donor agrees to
continue to make regular share purchases for the account through Scudder's
Automatic Investment Plan. In this case, the minimum initial investment is $500.
The Trust reserves the right, after notice has been given to the
shareholder and custodian, to redeem and close a shareholder's account in the
event that regular investments to the account cease before the $1,000 minimum is
reached.
Scudder Trust Company
Annual service fees are paid by each Fund to Scudder Trust Company, an
affiliate of the Adviser, for certain retirement plan accounts and are included
in the fees paid to the Transfer Agent.
29
<PAGE>
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
(See "Distribution and performance information--Dividends and
capital gains distributions" in the Funds' prospectuses.)
Each Fund intends to follow the practice of distributing substantially
all of its investment company taxable income, which includes any excess of net
realized short-term capital gains over net realized long-term capital losses. A
Fund may follow the practice of distributing the entire excess of net realized
long-term capital gains over net realized short-term capital losses. If it
appears to be in the best interest of a Fund and its shareholders, a Fund may
retain all or part of such gain for reinvestment after paying the related
federal income taxes which shareholders may then claim as a credit on their
returns. (See "TAXES.") If a Fund does not distribute the amount of capital gain
and/or ordinary income required to be distributed by an excise tax provision of
the Code, a Fund may be subject to that excise tax. (See "TAXES.") In certain
circumstances, a Fund may determine that it is in the interest of shareholders
to distribute less than the required amount.
The Funds intend to declare in December any net realized capital gains
resulting from its investment activity and any dividend from investment company
taxable income. The Funds intend to distribute the December dividends and
capital gains either in December or in the following January. Any dividends or
capital gains distributions declared in October, November, or December with a
record date in that month and paid during the following January will be treated
by shareholders for federal income tax purposes as if received on December 31 of
the calendar year declared. If a shareholder has elected to reinvest any
dividends and/or other distributions, such distributions will be made in shares
of that Fund and confirmations will be mailed to each shareholder. If a
shareholder has chosen to receive cash, a check will be sent.
PERFORMANCE INFORMATION
(See "Distribution and performance information--Performance
information" in the Funds' prospectuses.)
From time to time, quotations of the Funds' performance may be included
in advertisements, sales literature or reports to shareholders or prospective
investors. These performance figures are calculated in the following manner:
Average Annual Total Return
Average annual total return is the average annual compound rate of
return for the periods of one year, five years and ten years (or such shorter
periods as may be applicable dating from the commencement of a Fund's
operations), all ended on the last day of a recent calendar quarter. Average
annual total return quotations reflect changes in the price of the Funds' shares
and assume that all dividends and capital gains distributions during the
respective periods were reinvested in Fund shares. Average annual total return
is calculated by computing the average annual compound rates of return of a
hypothetical investment over such periods, according to the following formula
(average annual total return is then expressed as a percentage):
T = (ERV/P)^(1/n) - 1
Where:
T = Average Annual Total Return
P = a hypothetical initial investment of $1,000
n = number of years
ERV = ending redeemable value: ERV is the value,
at the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
30
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Return for the periods ended September 30, 1995
<S> <C> <C> <C>
One year Five years Ten years
-------- ---------- ---------
Capital Growth Fund 21.96% 18.19% 14.93%
One year Life of Fund^(1)
-------- ----------------
Value Fund 23.62%* 13.15%*
</TABLE>
(1) For the period beginning December 31, 1992 (commencement of operations).
* The Adviser maintained Fund expenses for the period December 31, 1992
through September 30, 1993 and for the two fiscal years ended September 30,
1995. The Average Annual Total Return for one year and for the life of the
Fund, had the Adviser not maintained Fund expenses, would have been
approximately ___% and ___%, respectively.
As described above, average annual total return is based on historical
earnings and is not intended to indicate future performance. Average annual
total return for a Fund will vary based on changes in market conditions and the
level of a Fund's expenses.
In connection with communicating its average annual total return to
current or prospective shareholders, the Fund also may compare these figures to
the performance of other mutual funds tracked by mutual fund rating services or
to unmanaged indices which may assume reinvestment of dividends but generally do
not reflect deductions for administrative and management costs.
Cumulative Total Return
Cumulative total return is the cumulative rate of return on a
hypothetical initial investment of $1,000 for a specified period. Cumulative
total return quotations reflect changes in the price of the Funds' shares and
assume that all dividends and capital gains distributions during the period were
reinvested in Fund shares. Cumulative total return is calculated by computing
the cumulative rates of return of a hypothetical investment over such periods,
according to the following formula (cumulative total return is then expressed as
a percentage):
C = (ERV/P) - 1
Where:
C = Cumulative Total Return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value: ERV is the value, at
the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
31
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return for the periods ended September 30, 1995
<S> <C> <C> <C>
One year Five years Ten years
-------- ---------- ---------
Capital Growth Fund 21.96% 130.60% 302.05%
One year Life of Fund (1)
-------- ----------------
Value Fund 23.62%* 40.43%*
</TABLE>
(1) For the period beginning December 31, 1992 (commencement of operations).
* The Adviser maintained Fund expenses for the period December 31, 1992
through September 30, 1993 and for the two fiscal years ended September 30,
1995. The Cumulative Total Return for one year and for the life of the
Fund, had the Adviser not maintained Fund expenses, would have been
approximately ___% and ___%, respectively.
Total Return
Total return is the rate of return on an investment for a specified
period of time calculated in the same manner as cumulative total return.
Capital Change
Capital change measures the return from invested capital including
reinvested capital gains distributions. Capital change does not include the
reinvestment of income dividends.
From time to time, in advertisements, sales literature, and reports to
shareholders or prospective investors, figures relating to the growth in the
total net assets of a Fund apart from capital appreciation will be cited, as an
update to the information in this section, including, but not limited to: net
cash flow, net subscriptions, gross subscriptions, net asset growth, net account
growth, and subscription rates. Capital appreciation generally will be covered
by marketing literature as part of the Funds' performance data.
These figures can be described in the following manner:
Net cash flow is gross subscriptions minus gross redemptions for a
particular time period. Net cash flow is a negative number when redemptions
exceed subscriptions.
Net subscriptions is any positive net cash flow.
Gross subscriptions are the sum of all the individual subscriptions
over a specified period of time. It should be noted that subscriptions include
distributions reinvested at the shareholders' request.
In the period from September 30, 1994, to September 30, 1995, Capital
Growth Fund went from 93,315 accounts to 84,417 accounts and Value Fund went
from 3,926 accounts to 6,953 accounts. During the same period, net assets for
Capital Growth Fund went from $1.338 billion to $1.491 billion and from $35.099
million to $68.1 million for Value Fund. In this period, gross subscriptions for
the Capital Growth Fund and Value Fund were $245.2 million and $49.2 million,
respectively.
Net asset growth is any positive outcome of the following: gross
subscriptions less gross redemptions plus any capital change due to the
fluctuating prices of the securities in a Fund. Basically, therefore, it is net
cash flow plus any capital change where the outcome of that summation is
positive. The formula is:
Net Asset Growth = Gross Subscriptions - Gross Redemptions + Capital
Change
32
<PAGE>
Net account growth is the total number of accounts in a Fund at one
point in time minus the total number of accounts at an earlier point in time
where the outcome of the calculation is positive. This is a quick way of
describing what is in fact a more complicated process of adding new accounts
even as some old accounts are closing. If new accounts open faster than old
accounts close, there is net account growth. This growth can also be expressed
as a percentage.
The net subscription rate is described as a matter of those new net
assets not due to capital change. Specifically, the net subscription rate is the
net cash flow divided by the average asset size of a Fund for the period in
question, expressed as a percentage.
The gross subscription rate can also be similarly described. In fact,
the formula would follow the pattern for the net subscription rate, but uses a
gross figure instead of a net figure. Gross subscriptions would be substituted
for net cash flow in a simple variation on the same basic idea.
Comparison of Portfolio Performanceof Portfolio Performance
A comparison of the quoted non-standard performance offered for various
investments is valid only if performance is calculated in the same manner. Since
there are different methods of calculating performance, investors should
consider the effects of the methods used to calculate performance when comparing
performance of a Fund with performance quoted with respect to other investment
companies or types of investments.
In connection with communicating its performance to current or
prospective shareholders, a Fund also may compare these figures to the
performance of unmanaged indices which may assume reinvestment of dividends or
interest but generally do not reflect deductions for administrative and
management costs. Examples include, but are not limited to the Dow Jones
Industrial Average, the Consumer Price Index, Standard & Poor's 500 Composite
Stock Price Index (S&P 500), the NASDAQ OTC Composite Index, the NASDAQ
Industrials Index, the Russell 2000 Index, and statistics published by the Small
Business Administration.
From time to time, in advertising and marketing literature, a Fund's
performance may be compared to the performance of broad groups of mutual funds
with similar investment goals, as tracked by independent organizations such as,
Investment Company Data, Inc. ("ICD"), Lipper Analytical Services, Inc.
("Lipper"), CDA Investment Technologies, Inc. ("CDA"), Morningstar, Inc., Value
Line Mutual Fund Survey and other independent organizations. When these
organizations' tracking results are used, a Fund will be compared to the
appropriate fund category, that is, by fund objective and portfolio holdings, or
to the appropriate volatility grouping, where volatility is a measure of a
fund's risk. For instance, a Scudder growth fund will be compared to funds in
the growth fund category; a Scudder income fund will be compared to funds in the
income fund category; and so on. Scudder funds (except for money market funds)
may also be compared to funds with similar volatility, as measured statistically
by independent organizations.
From time to time, in marketing and other Fund literature,
(Trustees)(Directors) and officers of the Funds, the Funds' portfolio manager,
or members of the portfolio management team may be depicted and quoted to give
prospective and current shareholders a better sense of the outlook and approach
of those who manage the Funds. In addition, the amount of assets that the
Adviser has under management in various geographical areas may be quoted in
advertising and marketing materials.
The Funds may be advertised as an investment choice in Scudder's
college planning program. The description may contain illustrations of projected
future college costs based on assumed rates of inflation and examples of
hypothetical fund performance, calculated as described above.
Statistical and other information, as provided by the Social Security
Administration, may be used in marketing materials pertaining to retirement
planning in order to estimate future payouts of social security benefits.
Estimates may be used on demographic and economic data.
Marketing and other Fund literature may include a description of the
potential risks and rewards associated with an investment in the Funds. The
description may include a "risk/return spectrum" which compares the Funds to
other Scudder funds or broad categories of funds, such as money market, bond or
equity funds, in terms of potential risks and returns. Money market funds are
33
<PAGE>
designed to maintain a constant $1.00 share price and have a fluctuating yield.
Share price, yield and total return of a bond fund will fluctuate. The share
price and return of an equity fund also will fluctuate. The description may also
compare the Funds to bank products, such as certificates of deposit. Unlike
mutual funds, certificates of deposit are insured up to $100,000 by the U.S.
government and offer a fixed rate of return.
Because bank products guarantee the principal value of an investment
and money market funds seek stability of principal, these investments are
considered to be less risky than investments in either bond or equity funds,
which may involve the loss of principal. However, all long-term investments,
including investments in bank products, may be subject to inflation risk, which
is the risk of erosion of the value of an investment as prices increase over a
long time period. The risks/returns associated with an investment in bond or
equity funds depend upon many factors. For bond funds these factors include, but
are not limited to, a fund's overall investment objective, the average portfolio
maturity, credit quality of the securities held, and interest rate movements.
For equity funds, factors include a fund's overall investment objective, the
types of equity securities held and the financial position of the issuers of the
securities. The risks/returns associated with an investment in international
bond or equity funds also will depend upon currency exchange rate fluctuation.
A risk/return spectrum generally will position the various investment
categories in the following order: bank products, money market funds, bond funds
and equity funds. Shorter-term bond funds generally are considered less risky
and offer the potential for less return than longer-term bond funds. The same is
true of domestic bond funds relative to international bond funds, and bond funds
that purchase higher quality securities relative to bond funds that purchase
lower quality securities. Growth and income equity funds are generally
considered to be less risky and offer the potential for less return than growth
funds. In addition, international equity funds usually are considered more risky
than domestic equity funds but generally offer the potential for greater return.
Risk/return spectrums also may depict funds that invest in both
domestic and foreign securities or a combination of bond and equity securities.
Scudder's Theme: Build Create Provide. Marketing and fund literature may refer
to Scudder's theme: "Build Create Provide." This theme intends to encapsulate
the composition of a sound investment philosophy, one through which Scudder can
help provide investors appropriate avenues for pursuing dreams. Individuals
recognize the need to build investment plans that are suitable and directed at
achieving one's financial goals. The desired result from planning and a
long-term commitment to it is the ability to build wealth over time. While there
are no guarantees in the pursuit of wealth through investing, Scudder believes
that a sound investment plan can enhance one's ability to achieve financial
goals that are clearly defined and appropriately approached. Wealth, while a
relative term, may be defined as the freedom to provide for those interests
which you hold most important -- your family, future, and/or your community.
Evaluation of Fund performance or other relevant statistical
information made by independent sources may also be used in advertisements
concerning the Funds, including reprints of, or selections from, editorials or
articles about these Funds. Sources for Fund performance information and
articles about the Funds include the following:
American Association of Individual Investors' Journal, a monthly publication of
the AAII that includes articles on investment analysis techniques.
Asian Wall Street Journal, a weekly Asian newspaper that often reviews U.S.
mutual funds investing internationally.
Banxquote, an on-line source of national averages for leading money market and
bank CD interest rates, published on a weekly basis by Masterfund, Inc. of
Wilmington, Delaware.
Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.
Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds investing abroad.
34
<PAGE>
CDA Investment Technologies, Inc., an organization which provides performance
and ranking information through examining the dollar results of hypothetical
mutual fund investments and comparing these results against appropriate market
indices.
Consumer Digest, a monthly business/financial magazine that includes a "Money
Watch" section featuring financial news.
Financial Times, Europe's business newspaper, which features from time to time
articles on international or country-specific funds.
Financial World, a general business/financial magazine that includes a "Market
Watch" department reporting on activities in the mutual fund industry.
Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.
The Frank Russell Company, a West-Coast investment management firm that
periodically evaluates international stock markets and compares foreign equity
market performance to U.S. stock market performance.
Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds investing internationally.
IBC/Donoghue's Money Fund Report, a weekly publication of the Donoghue
Organization, Inc., of Holliston, Massachusetts, reporting on the performance of
the nation's money market funds, summarizing money market fund activity and
including certain averages as performance benchmarks, specifically "Donoghue's
Money Fund Average," and "Donoghue's Government Money Fund Average."
Ibbotson Associates, Inc., a company specializing in investment research and
data.
Investment Company Data, Inc., an independent organization which provides
performance ranking information for broad classes of mutual funds.
Investor's Daily, a daily newspaper that features financial, economic, and
business news.
Kiplinger's Personal Finance Magazine, a monthly investment advisory publication
that periodically features the performance of a variety of securities.
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a weekly
publication of industry-wide mutual fund averages by type of fund.
Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.
Morgan Stanley International, an integrated investment banking firm that
compiles statistical information.
Mutual Fund Values, a biweekly Morningstar, Inc. publication that provides
ratings of mutual funds based on fund performance, risk and portfolio
characteristics.
The New York Times, a nationally distributed newspaper which regularly covers
financial news.
The No-Load Fund Investor, a monthly newsletter, published by Sheldon Jacobs,
that includes mutual fund performance data and recommendations for the mutual
fund investor.
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<PAGE>
No-Load Fund*X, a monthly newsletter, published by DAL Investment Company, Inc.,
that reports on mutual fund performance, rates funds and discusses investment
strategies for the mutual fund investor.
Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.
Personal Investor, a monthly investment advisory publication that includes a
"Mutual Funds Outlook" section reporting on mutual fund performance measures,
yields, indices and portfolio holdings.
Smart Money, a national personal finance magazine published monthly by Dow
Jones and Company, Inc. and The Hearst Corporation. Focus is placed on ideas
for investing, spending and saving.
Success, a monthly magazine targeted to the world of entrepreneurs and growing
business, often featuring mutual fund performance data.
United Mutual Fund Selector, a semi-monthly investment newsletter, published by
Babson United Investment Advisors, that includes mutual fund performance data
and reviews of mutual fund portfolios and investment strategies.
USA Today, a leading national daily newspaper.
U.S. News and World Report, a national business weekly that periodically
reports mutual fund performance data.
Value Line Mutual Fund Survey, an independent organization that provides
biweekly performance and other information on mutual funds.
The Wall Street Journal, a Dow Jones and Company, Inc. newspaper which
regularly covers financial news.
Wiesenberger Investment Companies Services, an annual compendium of information
about mutual funds and other investment companies, including comparative data on
funds' backgrounds, management policies, salient features, management results,
income and dividend records and price ranges.
Working Woman, a monthly publication that features a "Financial Workshop"
section reporting on the mutual fund/financial industry.
Worth, a national publication put out 10 times per year by Capital Publishing
Company, a subsidiary of Fidelity Investments. Focus is placed on personal
financial journalism.
ORGANIZATION OF THE FUNDS
(See "Fund organization" in the Funds' prospectuses.)
The Funds are separate series of Scudder Equity Trust. Scudder Equity
Trust, formerly Scudder Capital Growth Fund, is a Massachusetts business trust
established under a Declaration of Trust dated October 16, 1985, as amended. The
Trust's authorized capital consists of an unlimited number of shares of
beneficial interest, par value $0.01 per share. The Trustees have the authority
to issue additional series of shares. If more than one series of shares were
issued and a series were unable to meet its obligations, the remaining series
might have to assume the unsatisfied obligations of that series. All shares of
Scudder Capital Growth Fund and Scudder Value Fund are of one class and have
equal rights as to voting, dividends and liquidation. All shares issued and
outstanding will be fully paid and nonassessable by the Trust, and redeemable as
described in this Statement of Additional Information and in the Funds'
prospectuses.
The Trustees, in their discretion, may authorize the division of shares
of a Fund (or shares of a series) into different classes, permitting shares of
different classes to be distributed by different methods. Although shareholders
of different classes of a series would have an interest in the same portfolio of
assets, shareholders of different classes may bear different expenses in
connection with different methods of distribution. The Trustees have no present
intention of taking the action necessary to effect the division of shares into
separate classes (which under present regulations would require a Fund first to
obtain an exemptive order of the SEC), nor of changing the method of
distribution of shares of a Fund.
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<PAGE>
Currently, the assets of Scudder Equity Trust received for the issue or
sale of the shares of each series and all income, earnings, profits and proceeds
thereof, subject only to the rights of creditors, are specifically allocated to
such series and constitute the underlying assets of such series. The underlying
assets of each series are segregated on the books of account, and are to be
charged with the liabilities in respect to such series and with a proportionate
share of the general liabilities of Scudder Equity Trust. If a series were
unable to meet its obligations, the assets of all other series may in some
circumstances be available to creditors for that purpose, in which case the
assets of such other series could be used to meet liabilities which are not
otherwise properly chargeable to them. Expenses with respect to any two or more
series are to be allocated in proportion to the asset value of the respective
series except where allocations of direct expenses can otherwise be fairly made.
The officers of Scudder Equity Trust, subject to the general supervision of the
Trustees, have the power to determine which liabilities are allocable to a given
series, or which are general or allocable to two or more series. In the event of
the dissolution or liquidation of Scudder Equity Trust, the holders of the
shares of any series are entitled to receive as a class the underlying assets of
such shares available for distribution to shareholders.
The Trust's predecessor was organized in 1966 as a Delaware corporation
under the name "Scudder Duo-Vest Inc." as a closed-end, diversified dual-purpose
investment company. Effective April 1, 1982, its original dual-purpose nature
was terminated and it became an open-end investment company with only one class
of shares outstanding. At a Special Meeting of Shareholders held May 18, 1982,
the shareholders voted to amend the investment objective to seek to maximize
long-term growth of capital and to change the name of the corporation to
"Scudder Capital Growth Fund, Inc." ("SCGF, Inc."). The fiscal year end of SCGF,
Inc. was changed from March 31 to September 30 by action of its Directors on May
18, 1982. Effective as of September 30, 1982, Scudder Special Fund, Inc. was
merged into SCGF, Inc. In October 1985, the Fund's form of organization was
changed to a Massachusetts business trust upon approval of the shareholders.
Shares of Scudder Equity Trust entitle their holders to one vote per
share; however, separate votes are taken by each series on matters affecting an
individual series. For example, a change in investment policy for a series would
be voted upon only by shareholders of the series involved. Additionally,
approval of the investment advisory agreement is a matter to be determined
separately by each series. Approval by the shareholders of one series is
effective as to that series whether or not enough votes are received from the
shareholders of the other series to approve such agreement as to the other
series.
The Trust has a Declaration of Trust which provides that obligations of
a Fund are not binding upon the Trustees individually but only upon the property
of that Fund, that the Trustees and officers will not be liable for errors of
judgment or mistakes of fact or law, and that a Fund involved will indemnify the
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with the
Trust, except if it is determined in the manner provided in the Declaration of
Trust that they have not acted in good faith in the reasonable belief that their
actions were in the best interests of the Fund involved. However, nothing in the
Declaration of Trust protects or indemnifies a Trustee or officer against any
liability to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office.
No series of the Trust shall be liable for the obligations of any other
series.
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<PAGE>
INVESTMENT ADVISER
(See "Fund organization--Investment adviser" in the Funds'
prospectuses.)
Scudder, Stevens & Clark, Inc., an investment counsel firm, acts as
investment adviser to each Fund. This organization is one of the most
experienced investment management firms in the U.S. It was established in 1919
and pioneered the practice of providing investment counsel to individual clients
on a fee basis. In 1928 it introduced the first no-load mutual fund to the
public. In 1953, the Adviser introduced Scudder International Fund, Inc. the
first mutual fund available in the U.S. investing internationally in securities
of issuers in several foreign countries. The firm reorganized from a partnership
to a corporation on June 28, 1985.
The principal source of the Adviser's income is professional fees
received from providing continuous investment advice, and the firm derives no
income from brokerage or underwriting of securities. Today, it provides
investment counsel for many individuals and institutions, including insurance
companies, colleges, industrial corporations, and financial and banking
organizations. In addition, it manages Montgomery Street Income Securities,
Inc., Scudder California Tax Free Trust, Scudder Cash Investment Trust, Scudder
Equity Trust, Scudder Fund, Inc., Scudder Funds Trust, Scudder Global Fund,
Inc., Scudder GNMA Fund, Scudder Portfolio Trust, Scudder Institutional Fund,
Inc., Scudder International Fund, Inc., Scudder Investment Trust, Scudder
Municipal Trust, Scudder Mutual Funds, Inc., Scudder New Asia Fund, Inc.,
Scudder New Europe Fund, Inc., Scudder Securities Trust, Scudder State Tax Free
Trust, Scudder Tax Free Money Fund, Scudder Tax Free Trust, Scudder U.S.
Treasury Money Fund, Scudder Variable Life Investment Fund, Scudder World Income
Opportunities Fund, Inc., The Argentina Fund, Inc., The Brazil Fund, Inc., The
First Iberian Fund, Inc., The Korea Fund, Inc., The Japan Fund, Inc. and The
Latin America Dollar Income Fund, Inc. Some of the foregoing companies or trusts
have two or more series.
The Adviser also provides investment advisory services to the mutual
funds which comprise the AARP Investment Program from Scudder. The AARP
Investment Program from Scudder has assets over $11 billion and includes the
AARP Growth Trust, AARP Income Trust, AARP Tax Free Income Trust and AARP Cash
Investment Funds.
The Adviser maintains a large research department, which conducts
ongoing studies of the factors that affect the position of various industries,
companies and individual securities. In this work, the Adviser utilizes certain
reports and statistics from a wide variety of sources, including brokers and
dealers who may execute portfolio transactions for the Fund and other clients of
the Adviser, but conclusions are based primarily on investigations and critical
analyses by its own research specialists.
Certain investments may be appropriate for more than one Fund and also
for other clients advised by the Adviser. Investment decisions for a Fund and
other clients are made with a view to achieving their respective investment
objectives and after consideration of such factors as their current holdings,
availability of cash for investment and the size of their investments generally.
Frequently, a particular security may be bought or sold for only one client or
in different amounts and at different times for more than one but less than all
clients. Likewise, a particular security may be bought for one or more clients
when one or more other clients are selling the security. In addition, purchases
or sales of the same security may be made for two or more clients on the same
date. In such event, such transactions will be allocated among the clients in a
manner believed by the Adviser to be equitable to each. In some cases, this
procedure could have an adverse effect on the price or amount of the securities
purchased or sold by a Fund. Purchase and sale orders for a Fund may be combined
with those of other clients of the Adviser in the interest of the most favorable
net results to a Fund.
The Investment Management Agreement between the Trust, on behalf of
Capital Growth Fund, and the Adviser was last approved by the Trustees on
September 6, 1995 and by the Fund's shareholders on December 13, 1990. The
Investment Management Agreement between the Trust, on behalf of Value Fund, and
the Adviser was last approved by the Trustees on September 6, 1995 and by the
initial shareholders of the Fund on December 30, 1992. The Capital Growth Fund
Agreement dated December 14, 1990 and the Value Fund Agreement dated December
28, 1992 (collectively, the "Agreements") will continue in effect until
September 30, 1996 and from year to year thereafter only if their continuance is
approved annually by the vote of a majority of those Trustees who are not
parties to such Agreements or interested persons of the Adviser or the Trust,
cast in person at a meeting called for the purpose of voting on such approval,
and either by vote of the Trustees or by a majority of the outstanding voting
38
<PAGE>
securities of that Fund. The Agreements may be terminated at any time without
payment of penalty by either party on sixty days' written notice, and
automatically terminates in the event of their assignment.
Under each Agreement, the Adviser regularly provides a Fund with
continuing investment management for the Fund's portfolio consistent with the
Fund's investment objective, policies and restrictions and determines which
securities shall be purchased for the portfolio of that Fund, which portfolio
securities shall be held or sold by the Fund, and what portion of the Fund's
assets shall be held uninvested, subject always to the provisions of the
Declaration of Trust and By-Laws, of the 1940 Act and the Code, and to the
Fund's investment objective, policies and restrictions, and subject, further, to
such policies and instructions as the Trustees may from time to time establish.
The Adviser also advises and assists the officers of a Fund in taking such steps
as are necessary or appropriate to carry out the decisions of its Trustees and
the appropriate committees of the Trustees regarding the conduct of the business
of a Fund.
The Adviser pays the compensation and expenses (except those for
attending Board and Committee meetings outside New York, New York or Boston,
Massachusetts) of all Trustees, officers and executive employees of the Trust
affiliated with the Adviser and makes available, without expense to the Funds,
the services of the Adviser's directors, officers, and employees as may duly be
elected officers, subject to their individual consent to serve and to any
limitations imposed by law, and provides the Trust's office space and facilities
and provides investment advisory, research and statistical facilities and all
clerical services relating to research, statistical and investment work.
For the Adviser's services, Capital Growth Fund pays the Adviser a fee
equal to 0.75 of 1% on the first $500 million of average daily net assets; 0.65
of 1% on the next $500 million of such assets; and 0.60 of 1% on assets in
excess of $1 billion, payable monthly, provided the Fund will make such interim
payments as may be requested by the Adviser not to exceed 75% of the amount of
the fee then accrued on the books of the Fund and unpaid.
For the fiscal years ended September 30, 1993, 1994 and 1995, Capital
Growth Fund incurred aggregate fees pursuant to its then effective investment
advisory agreement of $8,539,125, $9,199,315 and $9,118,015, respectively.
For the Adviser's services, Value Fund pays the Adviser an annual fee
equal to 0.70% of average daily net assets, payable monthly, provided the Fund
will make such interim payments as may be requested by the Adviser not to exceed
75% of the amount of the fee then accrued on the books of the Fund and unpaid.
For the period December 31, 1992 (commencement of operations) to September 30,
1993 and for the fiscal year ended September 30, 1994, the Adviser did not
impose a portion of its management fees amounting to $29,834 and $119,841,
respectively and the amounts imposed amounted to $17,827 and $112,125,
respectively. The Adviser has voluntarily agreed to waive management fees or
reimburse the Fund to the extent necessary so that the total annualized expenses
of the Fund do not exceed 1.25% of the average daily net assets until July 31,
1996. The Adviser retains the ability to be repaid by the Fund if expenses fall
below the specified limit prior to the end of the fiscal year. These expense
limitation arrangements can decrease the Fund's expenses and improve its
performance. During the fiscal year ended September 30, 1995, these agreements
resulted in a reduction of management fees paid by the Fund of $95,355. For the
fiscal year ended September 30, 1995, the Adviser imposed a portion of its
management fee amounting to $257,942.
Under each Agreement a Fund is responsible for all of its other
expenses including broker's commissions; legal, auditing and accounting
expenses; the calculation of net asset value; taxes and governmental fees; the
fees and expenses of the Transfer Agent; the cost of preparing share
certificates or any other expenses including clerical expenses of issue, sale,
underwriting, distribution, redemption or repurchase of shares; the expenses of
and the fees for registering or qualifying securities for sale; fees and
expenses incurred in connection with membership in investment company
organizations; the fees and expenses of the Trustees, officers and employees of
the Fund who are not affiliated with the Adviser; the cost of printing and
distributing reports and notices to shareholders; and the fees and disbursements
of custodians. The Trust may arrange to have third parties assume all or part of
the expenses of sale, underwriting and distribution of shares of the Funds. The
Funds are also responsible for expenses incurred in connection with litigation,
proceedings and claims and the legal obligation it may have to indemnify its
officers and Trustees with respect thereto. Each Agreement expressly provides
that the Adviser shall not be required to pay a pricing agent of any Fund for
portfolio pricing services, if any.
Each Agreement requires the Adviser to reimburse the Funds for annual
expenses in excess of the lowest applicable expense limitation imposed by the
states in which a Fund is at the time offering its shares for sale, although no
payments are required to be made by the Adviser pursuant to this reimbursement
provision in excess of the annual fee paid by a Fund to the Adviser. Management
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<PAGE>
has been advised that, while some states have eliminated expense limitations and
others may do so in the future, the lowest of such limitations is presently 2
1/2% of such net assets up to $30 million, 2% of the next $70 million of such
net assets and 1 1/2% of such net assets in excess of that amount. Certain
expenses such as brokerage commissions, taxes, extraordinary expenses and
interest are excluded from such limitation. For the fiscal years ended September
30, 1993, 1994 and 1995, such expenses for Capital Growth Fund equaled 0.96%,
0.97% and 0.98%, respectively, of the Fund's average net assets. For the period
December 31, 1992 (commencement of operations) to September 30, 1993 and the
fiscal years ended September 30, 1994 and 1995, such expenses for Value Fund
equaled 1.25% of the Fund's average net assets. If reimbursement is required, it
will be made as promptly as practicable after the end of the Funds' fiscal year.
However, no fee payment will be made to the Adviser during any fiscal year which
will cause year-to-date expenses to exceed the cumulative pro-rata expense
limitation at the time of such payment.
The Adviser renders significant administrative services (not otherwise
provided by third parties) necessary for a Fund's operations as an open-end
investment company including, but not limited to, preparing reports and notices
to the Trustees and shareholders; supervising, negotiating contractual
arrangements with, and monitoring various third-party service providers to the
Funds (such as the Funds' transfer agent, pricing agents, custodian, accountants
and others); preparing and making filings with the SEC and other regulatory
agencies; assisting in the preparation and filing of the Funds' federal, state
and local tax returns; preparing and filing the Funds' federal excise tax
returns; assisting with investor and public relations matters; monitoring the
valuation of securities and the calculation of net asset value, monitoring the
registration of shares of the Funds under applicable federal and state
securities laws; maintaining the Funds' books and records to the extent not
otherwise maintained by a third party; assisting in establishing accounting
policies of the Funds; assisting in the resolution of accounting and legal
issues; establishing and monitoring the Funds' operating budget; processing the
payment of the Funds' bills; assisting the Funds in, and otherwise arranging
for, the payment of distributions and dividends and otherwise assisting the
Funds in the conduct of its business, subject to the direction and control of
the Trustees.
Each Agreement also provides that the Trust and a Fund may use any name
derived from the name "Scudder, Stevens & Clark" only as long as that Agreement
or any extension, renewal or amendment thereof remains in effect.
In reviewing the terms of each Agreement and in discussions with the
Adviser concerning each Agreement, Trustees who are not "interested persons" of
the Trust are represented by independent counsel at the Funds' expense.
Each Agreement provides that the Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by a Fund in
connection with matters to which each Agreement relates, except a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of the
Adviser in the performance of its duties or from reckless disregard by the
Adviser of its obligations and duties under the Agreements.
Officers and employees of the Adviser from time to time may have
transactions with various banks, including the Funds' custodian bank. It is the
Adviser's opinion that the terms and conditions of those transactions were not
influenced by existing or potential custodial or other Fund relationships.
None of the officers or Trustees of the Trust may have dealings with a
Fund as principals in the purchase or sale of securities, except as individual
subscribers or holders of shares of a Fund.
Personal Investments by Employees of the Adviser
Employees of the Adviser are permitted to make personal securities
transactions, subject to requirements and restrictions set forth in the
Adviser's Code of Ethics. The Code of Ethics contains provisions and
requirements designed to identify and address certain conflicts of interest
between personal investment activities and the interests of investment advisory
clients such as the Funds. Among other things, the Code of Ethics, which
generally complies with standards recommended by the Investment Company
Institute's Advisory Group on Personal Investing, prohibits certain types of
transactions absent prior approval, imposes time periods during which personal
transactions may not be made in certain securities, and requires the submission
of duplicate broker confirmations and monthly reporting of securities
transactions. Additional restrictions apply to portfolio managers, traders,
research analysts and others involved in the investment advisory process.
Exceptions to these and other provisions of the Code of Ethics may be granted in
particular circumstances after review by appropriate personnel.
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<PAGE>
<TABLE>
<CAPTION>
TRUSTEES AND OFFICERS
<S> <C> <C> <C>
Position with
Underwriter,
Name Position Principal Scudder Investor
and Address with Trust Occupation** Services, Inc.
- ----------- ---------- ------------ --------------
Daniel Pierce*#+ President and Chairman of the Board and Vice President,
Trustee Managing Director of Scudder, Assistant Treasurer and
Stevens & Clark, Inc. Director
Paul Bancroft III Trustee Venture Capitalist and --
1120 Cheston Lane Consultant; Retired President
Queenstown, MD and Chief Executive Officer of
Bessemer Securities Corporation
Sheryle J. Bolton Trustee Consultant --
20 Hilltop Road
Waccabue, NY 10597
Thomas J. Devine Trustee Consultant --
641 Lexington Avenue
New York, NY
Keith R. Fox Trustee President, Exeter Capital --
10 East 53rd Street Management Corporation
New York, NY 10022
David S. Lee*+ Vice President and Managing Director of Scudder, President, Assistant
Trustee Stevens and Clark, Inc. Treasurer and Director
Douglas M. Loudon*++ Vice President and Managing Director of Scudder, Senior Vice President
Trustee Stevens and Clark, Inc.
Wilson Nolen Trustee Consultant, June 1989 to --
1120 Fifth Avenue present, Corporate Vice
New York, NY President of Becton, Dickinson &
Company (manufacturer of medical
and scientific products), from
1973 to June 1989
Juris Padegs*++# Vice President and Managing Director of Scudder, Vice President and
Trustee Stevens and Clark, Inc. Director
Gordon Shillinglaw Trustee Professor Emeritus of --
196 Villard Avenue Accounting, Columbia University
Hastings-on-Hudson, NY Graduate School of Business
Robert W. Lear Honorary Trustee Executive-in-Residence Columbia --
429 Silvermine Road University Graduate School of
New Canaan, CT Business
41
<PAGE>
Position with
Underwriter,
Name Position Principal Scudder Investor
and Address with Trust Occupation** Services, Inc.
- ----------- ---------- ------------ --------------
Robert G. Stone, Jr. Honorary Trustee Chairman of the Board and --
405 Lexington Avenue Director, Kirby Corporation
39th Floor (marine transportation, diesel
New York, NY 10174 repair and property and casualty
insurance in Puerto Rico)
Donald E. Hall@ Vice President Managing Director of Scudder, --
Stevens and Clark, Inc.
Jerard K. Hartman++ Vice President Managing Director of Scudder, --
Stevens and Clark, Inc.
Thomas W. Joseph+ Vice President Principal of Scudder, Stevens & Vice President,
Clark, Inc. Director, Treasurer,
and Assistant Clerk
Kathleen T. Millard++ Vice President Principal of Scudder, Stevens & --
Clark, Inc.
Thomas F. McDonough+ Vice President, Principal of Scudder, Stevens & Clerk
Secretary and Clark, Inc.
Assistant Treasurer
Pamela A. McGrath+ Vice President and Managing Director of Scudder, --
Treasurer Stevens & Clark, Inc.
Edward J. O'Connell ++ Vice President and Principal of Scudder, Stevens & Assistant Treasurer
Assistant Treasurer Clark, Inc.
Kathryn L. Quirk++ Vice President, Managing Director of Scudder, Vice President
Secretary and Stevens and Clark, Inc.
Assistant Secretary
Coleen Downs Dinneen+ Assistant Secretary Vice President of Scudder, Assistant Clerk
Stevens & Clark, Inc.
</TABLE>
* Messrs. Lee, Loudon, Padegs and Pierce are considered by the Trust and
its counsel to be persons who are "interested persons" of the Adviser
or of the Trust (within the meaning of the 1940 Act).
** Unless otherwise stated, all the Trustees and officers have been
associated with their respective companies for more than five years,
but not necessarily in the same capacity.
# Messrs. Padegs and Pierce are members of the Executive Committee,
which may exercise all of the powers of the Trustees when they are not
in session.
+ Address: Two International Place, Boston, Massachusetts
++ Address: 345 Park Avenue, New York, New York
@ Address: 333 South Hope Street, Los Angeles, California
As of December 31, 1995 all Trustees and officers of the Trust as a
group owned beneficially (as that term is defined in Section 13(d) under the
Securities and Exchange Act of 1934) _________ shares, or ____% of the shares of
Capital Growth Fund.
As of December 31, 1995 all Trustees and officers of the Trust as a
group owned beneficially (as that term is defined in Section 13(d) under the
Securities and Exchange Act of 1934) ______ shares, or ____% of the shares of
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Value Fund. Certain accounts for which the Adviser acts as investment adviser
owned ______ shares in the aggregate of Value Fund, or _____% of the outstanding
shares on _______, 1995. The Adviser may be deemed to be the beneficial owner of
such shares but disclaims any beneficial ownership in such shares.
To the best of the Trust's knowledge, as of December 31, 1995 no person
owned beneficially more than 5% of a Fund's outstanding shares.
The Trustees and officers of the Trust also serve in similar capacities
with other Scudder funds.
REMUNERATION
Several of the officers and Trustees of the Trust may be officers or
employees of the Adviser, the Distributor, the Transfer Agent, Scudder Trust
Company or Scudder Fund Accounting Corporation, from whom they receive
compensation, as a result of which they may be deemed to participate in the fees
paid by the Trust. The Funds pay no direct remuneration to any officer of the
Trust. However, each of the Trustees who is not affiliated with the Adviser will
be paid by the Trust. Each of these unaffiliated Trustees receives an annual
Trustee's fee of $4,000 plus $400 for attending each Trustees' meeting, audit
committee meeting or meeting held for the purpose of considering arrangements
between the Fund and the Adviser or any of its affiliates. Each unaffiliated
Trustee also receives $150 per committee meeting attended other than those set
forth above. For the fiscal year ended September 30, 1995, Capital Growth Fund
paid such Trustees $42,609 and Value Fund paid such Trustees $43,076.
The following Compensation Table provides, in tabular form, the following data:
Column (1): all Trustees who receive compensation from the Trust.
Column (2): aggregate compensation received by a Trustee from all the series of
the Trust.
Columns (3) and (4): pension or retirement benefits accrued or proposed be paid
by the Trust.
Scudder Equity Trust does not pay its Trustees such benefits.
Column (5): total compensation received by a Trustee from the Trust, plus
compensation received from all funds for which a Trustee serves in a fund
complex. The total number of funds from which a Trustee receives such
compensation is also provided.
<TABLE>
<CAPTION>
Compensation Table
for the year ended December 31, 1995
===================== ============================== ==================== ===================== =========================
(1) (2) (3) (4) (5)
Aggregate Compensation from
Scudder Equity Trust
(consisting of two Funds: Pension or Total Compensation From
Scudder Capital Growth Fund Retirement Estimated Annual Scudder Equity Trust
Name of Person, and Scudder Value Fund) Benefits Accrued Benefits Upon and Fund Complex
Position Expenses As Part of Fund Retirement Paid to Trustee
===================== ============================== ==================== ===================== =========================
<S> <C> <C> <C> <C>
Paul Bancroft III, $17,200 N/A N/A $142,067
Trustee (15 funds)
Thomas J. Devine, $17,200 N/A N/A $146,267
Trustee (17 funds)
Sheryle J. Bolton, $1,686 N/A N/A $5,501
Trustee (7 funds)
Keith R. Fox, $1,686 N/A N/A $1,686
Trustee (2 funds)
Wilson Nolen, $16,400 N/A N/A $148,342
Trustee (16 funds)
Gordon Shillinglaw, $18,000 N/A N/A $102,097
Trustee (15 funds)
Robert G. Stone, Jr., $15,534 N/A N/A $137,514
Honorary Trustee (15 funds)
</TABLE>
43
<PAGE>
DISTRIBUTOR
The Trust has an underwriting agreement with Scudder Investor Services,
Inc. (the "Distributor"), a Massachusetts corporation, which is a subsidiary of
the Adviser. This underwriting agreement dated May 1, 1987 will remain in effect
until September 30, 1996 and from year to year thereafter only if its
continuance is approved annually by a majority of the Trustees who are not
parties to such agreement or interested persons of any such party and either by
vote of a majority of the Trustees or a majority of the outstanding voting
securities of the Trust. The underwriting agreement was last approved by the
Trustees on September 6, 1995.
Under the principal underwriting agreement, the Trust is responsible
for: the payment of all fees and expenses in connection with the preparation and
filing with the SEC of the Trust's registration statement and prospectuses and
any amendments and supplements thereto; the registration and qualification of
shares for sale in the various states, including registering the Trust or a Fund
as a broker/dealer in various states, as required; the fees and expenses of
preparing, printing and mailing prospectuses (see below for expenses relating to
prospectuses paid by the Distributor), notices, proxy statements, reports or
other communications (including newsletters) to shareholders of a Fund; the cost
of printing and mailing confirmations of purchases of shares and the
prospectuses accompanying such confirmations; any issuance taxes or any initial
transfer taxes; a portion of shareholder toll-free telephone charges and
expenses of service representatives; the cost of wiring funds for share
purchases and redemptions (unless paid by the shareholder who initiates the
transaction); the cost of printing and postage of business reply envelopes; and
a portion of the cost of computer terminals used by both a Fund and the
Distributor.
The Distributor will pay for printing and distributing prospectuses or
reports prepared for its use in connection with the offering of a Fund's shares
to the public and preparing, printing and mailing any other literature or
advertising in connection with the offering of shares of the Funds to the
public. The Distributor will pay all fees and expenses in connection with its
qualification and registration as a broker or dealer under federal and state
laws, a portion of the cost of toll-free telephone service and expenses of
service representatives, a portion of the cost of computer terminals, and of any
activity which is primarily intended to result in the sale of the Fund's shares.
Note: Although each Fund currently has no 12b-1 Plan and shareholder
approval would be required in order to adopt one, the underwriting
agreement provides that a Fund will also pay those fees and expenses
permitted to be paid or assumed by a Fund pursuant to a 12b-1 Plan, if
any, adopted by a Fund, notwithstanding any other provision to the
contrary in the underwriting agreement and a Fund or a third party will
pay those fees and expenses not specifically allocated to the
Distributor in the underwriting agreement.
As agent, the Distributor currently offers shares of a Fund on a
continuous basis to investors in all states. The underwriting agreement provides
that the Distributor accepts orders for shares at net asset value as no sales
commission or load is charged the investor. The Distributor has made no firm
commitment to acquire shares of a Fund.
TAXES
(See "Distribution and performance information--Dividends and capital gains
distributions" and "Transaction information--Tax information and Tax
identification number" in the Funds' prospectuses.)
Each Fund has elected to be treated as a regulated investment company
under Subchapter M of the Code or a predecessor statute and has qualified as
such from its inception. Each Fund intends to continue to qualify for such
treatment. Such qualification does not involve governmental supervision of
management or investment practices or policies.
A regulated investment company qualifying under Subchapter M of the
Code is required to distribute to its shareholders at least 90% of its
investment company taxable income (including net short-term capital gain in
excess of net long-term capital loss) and generally is not subject to federal
income tax to the extent that it distributes annually its investment company
taxable income and net realized capital gains in the manner required under the
Code.
Investment company taxable income generally is made up of dividends,
interest, and net short-term capital gains in excess of net long-term capital
losses, less expenses. Net capital gains (the excess of net long-term capital
44
<PAGE>
gain over net short-term capital loss) are computed by taking into account any
capital loss carryforward of a Fund. Presently, each Fund has no capital loss
carryforward.
Each Fund is subject to a 4% nondeductible excise tax on amounts
required to be but not distributed under a prescribed formula. The formula
requires payment to shareholders during a calendar year of distributions at
least equal to the sum of 98% of a Fund's ordinary income for the calendar year,
at least 98% of the excess of its capital gains over capital losses (adjusted
for certain ordinary losses as prescribed in the Code) realized during the
one-year period ending October 31 during such year, and all ordinary income and
capital gains for prior years that were not previously distributed.
Distributions of investment company taxable income are taxable to
shareholders as ordinary income.
Dividends from domestic corporations are expected to comprise a
substantial part of each Fund's gross income. To the extent that such dividends
constitute a portion of each Fund's gross income, a portion of the income
distributions of a Fund may be eligible for the dividends received deduction for
corporations. Shareholders will be informed of the portion of dividends which so
qualify. The dividends-received deduction is reduced to the extent the shares
with respect to which the dividends are received are treated as debt-financed
under the federal income tax law and is eliminated if the shares are deemed to
have been held for less than 46 days.
Distributions of net capital gains are taxable to shareholders as
long-term capital gain, regardless of the length of time the shares of a Fund
have been held by such shareholders. Such distributions are not eligible for the
dividends received deduction. Any loss realized upon the redemption of shares
held at the time of redemption for six months or less will be treated as a
long-term capital loss to the extent of any amounts treated as long-term capital
gain distributions during such six-month period.
If any net capital gains are retained by a Fund for reinvestment,
requiring federal income taxes to be paid thereon by that Fund, each Fund
intends to elect to treat such capital gains as having been distributed to
shareholders. As a result, each shareholder will report such capital gains as
long-term capital gains, will be able to claim a relative share of the federal
income taxes paid by a Fund on such gains as a credit against personal federal
income tax liabilities, and will be entitled to increase the adjusted tax basis
on Fund shares by the difference between a pro-rata share of such gains and the
individual tax credit. However, retention of such gains by a Fund may cause the
Fund to be liable for an excise tax on all or a portion of those gains.
Distributions of investment company taxable income and net realized
capital gains will be taxable as described above, whether made in shares or in
cash. Shareholders electing to receive distributions in the form of additional
shares will have a cost basis for federal income tax purposes in each share so
received equal to the net asset value of a share on the reinvestment date.
All distributions of investment company taxable income and net realized
capital gains, whether received in shares or cash, must be reported by each
shareholder on his or her federal income tax return. Dividends declared in
October, November or December with a record date in such a month and paid during
the following January will be treated by shareholders for federal income tax
purposes as if received on December 31 of the calendar year declared.
Redemptions of shares, including exchanges for shares of another Scudder fund,
may result in tax consequences (gain or loss) to the shareholder and are also
subject to these reporting requirements.
An individual may make a deductible IRA contribution for any taxable
year only if (i) neither the individual nor his or her spouse (unless filing
separate returns) is an active participant in an employer's retirement plan, or
(ii) the individual (and his or her spouse, if applicable) has an adjusted gross
income below a certain level ($40,050 for married individuals filing a joint
return, with a phase-out of the deduction for adjusted gross income between
$40,050 and $50,000; $25,050 for a single individual, with a phase-out for
adjusted gross income between $25,050 and $35,000). However, an individual not
permitted to make a deductible contribution to an IRA for any such taxable year
may nonetheless make nondeductible contributions up to $2,000 to an IRA (up to
$2,250 to IRAs for an individual and his or her nonearning spouse) for that
year. There are special rules for determining how withdrawals are to be taxed if
an IRA contains both deductible and nondeductible amounts. In general, a
proportionate amount of each withdrawal will be deemed to be made from
nondeductible contributions; amounts treated as a return of nondeductible
45
<PAGE>
contributions will not be taxable. Also, contributions may be made to a spousal
IRA even if the spouse has earnings in a given year, if the spouse elects to be
treated as having no earnings (for IRA contribution purposes) for the year.
Distributions by a Fund result in a reduction in the net asset value of
that Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares just prior to a distribution. The price of shares purchased at
that time includes the amount of the forthcoming distribution. Those purchasing
just prior to a distribution will then receive a partial return of capital upon
the distribution, which will nevertheless be taxable to them.
If a Fund invests in stock of certain foreign investment companies,
that Fund may be subject to U.S. federal income taxation on a portion of any
"excess distribution" with respect to, or gain from the disposition of, such
stock. The tax would be determined by allocating such distribution or gain
ratably to each day of the Fund's holding period for the stock. The distribution
or gain so allocated to any taxable year of the Fund, other than the taxable
year of the excess distribution or disposition, would be taxed to the Fund at
the highest ordinary income rate in effect for such year, and the tax would be
further increased by an interest charge to reflect the value of the tax deferral
deemed to have resulted from the ownership of the foreign company's stock. Any
amount of distribution or gain allocated to the taxable year of the distribution
or disposition would be included in the Fund's investment company taxable income
and, accordingly, would not be taxable to the Fund to the extent distributed by
the Fund as a dividend to its shareholders.
Proposed regulations have been issued which may allow a Fund to make an
election to mark to market its shares of these foreign investment companies in
lieu of being subject to U.S. federal income taxation. At the end of each
taxable year to which the election applies, a Fund would report as ordinary
income the amount by which the fair market value of the foreign company's stock
exceeds the Fund's adjusted basis in these shares. No mark to market losses may
be recognized. The effect of the election would be to treat excess distributions
and gain on dispositions as ordinary income which is not subject to a fund level
tax when distributed to shareholders as a dividend. Alternatively, a Fund may
elect to include as income and gain its share of the ordinary earnings and net
capital gain of certain foreign investment companies in lieu of being taxed in
the manner described above.
Equity options (including covered call options written on portfolio
stock) and over-the-counter options on debt securities written or purchased by
the Fund will be subject to tax under Section 1234 of the Code. In general, no
loss will be recognized by a Fund upon payment of a premium in connection with
the purchase of a put or call option. The character of any gain or loss
recognized (i.e. long-term or short-term) will generally depend, in the case of
a lapse or sale of the option, on a Fund's holding period for the option, and in
the case of the exercise of a put option, on a Fund's holding period for the
underlying property. The purchase of a put option may constitute a short sale
for federal income tax purposes, causing an adjustment in the holding period of
the underlying security or a substantially identical security in a Fund's
portfolio.
If a Fund writes a covered call option on portfolio stock, no gain is
recognized upon its receipt of a premium. If the option lapses or is closed out,
any gain or loss is treated as short-term capital gain or loss. If the option is
exercised, the character of the gain or loss depends on the holding period of
the underlying stock.
Positions of a Fund which consist of at least one stock and at least
one stock option or other position with respect to a related security which
substantially diminishes a Fund's risk of loss with respect to such stock could
be treated as a "straddle" which is governed by Section 1092 of the Code, the
operation of which may cause deferral of losses, adjustments in the holding
periods of stocks or securities and conversion of short-term capital losses into
long-term capital losses. An exception to these straddle rules exists for
certain "qualified covered call options" on stock written by a Fund.
Many or all futures and forward contracts entered into by a Fund and
many or all listed nonequity options written or purchased by a Fund (including
options on debt securities, options on futures contracts, options on foreign
currencies and options on securities indices) will be governed by Section 1256
of the Code. Absent a tax election to the contrary, gain or loss attributable to
the lapse, exercise or closing out of any such position generally will be
treated as 60% long-term and 40% short-term capital gain or loss, and on the
last day of the Funds' fiscal year (as well as on October 31 for purposes of the
4% excise tax), all outstanding Section 1256 positions will be marked to market
46
<PAGE>
(i.e. treated as if such positions were sold at their closing price on such
day), with any resulting gain or loss recognized as 60% long-term and 40%
short-term capital gain or loss. Under Section 988 of the Code, discussed below,
foreign currency gain or loss from foreign currency-related forward contracts,
certain futures and options, and similar financial instruments entered into or
acquired by the Fund will be treated as ordinary income. Under certain
circumstances, entry into a futures contract to sell a security may constitute a
short sale for federal income tax purposes, causing an adjustment in the holding
period of the underlying security or a substantially identical security in the
relevant Fund's portfolio.
Subchapter M of the Code requires that a Fund realize less than 30% of
its annual gross income from the sale or other disposition of stock or
securities held for less than three months and from options, futures and forward
contracts (not including certain foreign currency options, futures and forward
contracts) and certain foreign currencies held less than three months. Options,
futures and forward activities of a Fund may increase the amount of gains
realized by the Fund that are subject to the 30% limitation. Accordingly, the
amount of such activities that each Fund may engage in may be limited.
Positions of a Fund which consist of at least one position not governed
by Section 1256 and at least one futures or forward contract or nonequity option
or other position governed by Section 1256 which substantially diminishes a
Fund's risk of loss with respect to such other position may be treated as a
"mixed straddle." Although mixed straddles are subject to the straddle rules of
Section 1092 of the Code, certain tax elections exist for them which reduce or
eliminate the operation of these rules. The Fund will monitor its transactions
in options, futures and forward contracts and may make certain tax elections in
connection with these investments.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time a Fund accrues receivables or
liabilities denominated in a foreign currency and the time a Fund actually
collects such receivables or pays such liabilities generally are treated as
ordinary income or ordinary loss. Similarly, on disposition of debt securities
denominated in a foreign currency and on disposition of certain futures
contracts, forward contracts and options, gains or losses attributable to
fluctuations in the value of foreign currency between the date of acquisition of
the security or contract and the date of disposition are also treated as
ordinary gain or loss. These gains or losses, referred to under the Code as
"Section 988" gains or losses, may increase or decrease the amount of a Fund's
investment company taxable income to be distributed to its shareholders as
ordinary income.
Each Fund will be required to report to the IRS all distributions of
taxable income and capital gains as well as gross proceeds from the redemption
or exchange of Fund shares, except in the case of certain exempt shareholders.
Under the backup withholding provisions of Section 3406 of the Code
distributions of taxable income and capital gains and proceeds from the
redemption or exchange of the shares of a regulated investment company may be
subject to withholding of federal income tax at the rate of 31% in the case of
nonexempt shareholders who fail to furnish the investment company with their
taxpayer identification numbers and with required certifications regarding their
status under the federal income tax law. Withholding may also be required if a
Fund is notified by the IRS or a broker that the taxpayer identification number
furnished by the shareholder is incorrect or that the shareholder has previously
failed to report interest or dividend income. If the withholding provisions are
applicable, any such distributions and proceeds, whether taken in cash or
reinvested in shares, will be reduced by the amounts required to be withheld.
Shareholders may be subject to state and local taxes on distributions
received from a Fund and on redemptions of each Fund's shares. Each distribution
is accompanied by a brief explanation of the form and character of the
distribution. By January 31 of each year the Fund issues to each shareholder a
statement of the federal income tax status of all distributions.
The Trust is organized as a Massachusetts business trust. Neither the
Trust nor a Fund is expected to be liable for any income or franchise tax in the
Commonwealth of Massachusetts, provided that each Fund qualifies as a regulated
investment company under the Code.
The foregoing discussion of U.S. federal income tax law relates solely to
the application of that law to U.S. persons, i.e., U.S. citizens and residents
and U.S. corporations, partnerships, trusts and estates. Each shareholder who is
not a U.S. person should consider the U.S. and foreign tax consequences of
ownership of shares of the Fund, including the possibility that such a
shareholder may be subject to a U.S. withholding tax at a rate of 30% (or at a
47
<PAGE>
lower rate under an applicable income tax treaty) on amounts constituting
ordinary income received by him or her, where such amounts are treated as income
from U.S. sources under the Code.
Shareholders should consult their tax advisers about the application of
the provisions of tax law described in this statement of additional information
in light of their particular tax situations.
PORTFOLIO TRANSACTIONS
Brokerage Commissions
To the maximum extent feasible the Adviser places orders for portfolio
transactions for each Fund through the Distributor which in turn places orders
on behalf of a Fund with other brokers and dealers. The Distributor receives no
commission, fees or other remuneration for this service. Allocation of brokerage
is supervised by the Adviser.
The primary objective of the Adviser in placing orders for the purchase
and sale of securities for a Fund is to obtain the most favorable net results,
taking into account such factors as price, commission where applicable
(negotiable in the case of U.S. national securities exchange transactions), size
of order, difficulty of execution and skill required of the executing
broker/dealer. The Adviser seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) through the familiarity of
the Distributor with commissions charged on comparable transactions, as well as
by comparing commissions paid by a Fund to reported commissions paid by others.
The Adviser reviews on a routine basis commission rates, execution and
settlement services performed, making internal and external comparisons.
The Funds' purchases and sales of fixed-income securities are generally
placed by the Adviser with primary market makers for these securities on a net
basis, without any brokerage commission being paid by a Fund. Trading does,
however, involve transaction costs. Transactions with dealers serving as primary
market makers reflect the spread between the bid and asked prices. Purchases of
underwritten issues may be made, which will include an underwriting fee paid to
the underwriter.
When it can be done consistently with the policy of obtaining the most
favorable net results, it is the Adviser's practice to place such orders with
broker/dealers who supply market quotations to the custodian of the Trust for
appraisal purposes, or who supply research, market and statistical information
to a Fund or the Adviser. The term "research, market and statistical
information" includes advice as to the value of securities, the advisability of
investing in, purchasing or selling securities, and the availability of
securities or purchasers or sellers of securities, and furnishing analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts. The Adviser is not
authorized when placing portfolio transactions for a Fund to pay a brokerage
commission (to the extent applicable) in excess of that which another broker
might charge for executing the same transaction solely on account of the receipt
of research, market or statistical information. The Adviser will not place
orders with broker/dealers on the basis that the broker/dealer has or has not
sold shares of a Fund. Except for implementing the policy stated above, there is
no intention to place portfolio transactions with particular brokers or dealers
or groups thereof. In effecting transactions in over-the-counter securities,
orders are placed with the principal market makers for the security being traded
unless, after exercising care, it appears that more favorable results are
available elsewhere.
Subject also to obtaining the most favorable net results, the Adviser
may place brokerage transactions with Bear, Stearns & Co. A credit against the
custodian fee due to State Street Bank and Trust Company equal to one-half of
the commission on any such transaction will be given on any such transaction.
Although certain research, market and statistical information from
broker/dealers may be useful to a Fund and to the Adviser, it is the opinion of
the Adviser that such information is only supplementary to the Adviser's own
research effort since the information must still be analyzed, weighed, and
reviewed by the Adviser's staff. Such information may be useful to the Adviser
in providing services to clients other than a Fund, and not all such information
is used by the Adviser in connection with a Fund. Conversely, such information
provided to the Adviser by broker/dealers through whom other clients of the
Adviser effect securities transactions may be useful to the Adviser in providing
services to a Fund.
48
<PAGE>
In the fiscal years ended September 30, 1993, 1994 and 1995, Capital
Growth Fund paid brokerage commissions of $2,522,135, $2,242,087 and $_____,
respectively. In the fiscal year ended September 30, 1995, the Fund paid
brokerage commissions of $____ (___% of the total brokerage commissions),
resulting from orders placed, consistent with the policy of seeking to obtain
the most favorable net results, for transactions placed with brokers and dealers
who provided supplementary research, market and statistical information to the
Trust or Adviser. The amount of such transactions aggregated $____ (___% of all
brokerage transactions). The balance of such brokerage was not allocated to any
particular broker or dealer or with regard to the above-mentioned or any other
special factors.
For the fiscal years ended September 30, 1993, 1994 and 1995, Value
Fund paid brokerage commissions of $62,324.54, $78,912 and $______,
respectively. For the fiscal year ended September 30, 1995, the Fund paid
brokerage commissions of $_____ (___% of the total brokerage commissions),
resulting from orders placed consistent with the policy of seeking to obtain the
most favorable net results for transactions placed with brokers and dealers who
provided supplementary research, market and statistical information to the Trust
or Adviser. The amount of such transactions aggregated $_____ (___% of all
brokerage transactions). The balance of such brokerage was not allocated to any
particular broker or dealer or with regard to the above-mentioned or any other
special factors.
The Trustees review from time to time whether the recapture for the
benefit of a Fund of some portion of the brokerage commissions or similar fees
paid by a Fund on portfolio transactions is legally permissible and advisable.
To date no such recapture has been effected.
Portfolio Turnover
Capital Growth Fund's average annual portfolio turnover rate, i.e. the
ratio of the lesser of sales or purchases to the monthly average value of the
portfolio (excluding from both the numerator and the denominator all securities
with maturities at the time of acquisition of one year or less), for the fiscal
years ended September 30, 1994 and 1995 was 75.8% and 153.6%, respectively. For
the fiscal years ended September 30, 1994 and 1995, Value Fund had an annualized
portfolio turnover rate of 74.6% and 98.2%, respectively. Higher levels of
activity by the Funds result in higher transaction costs and may also result in
taxes on realized capital gains to be borne by the Funds' shareholders.
Purchases and sales are made for a Fund whenever necessary, in management's
opinion, to meet the Funds' objectives.
NET ASSET VALUE
The net asset value of shares of each Fund is computed as of the close
of regular trading on the Exchange on each day the Exchange is open for trading.
The Exchange is scheduled to be closed on the following holidays: New Year's
Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas. Net asset value per share is determined by dividing
the value of the total assets of the Fund, less all liabilities, by the total
number of shares outstanding.
An exchange-traded equity security is valued at its most recent sale
price. Lacking any sales, the security is valued at the calculated mean between
the most recent bid quotation and the most recent asked quotation (the
"Calculated Mean"). Lacking a Calculated Mean, the security is valued at the
most recent bid quotation. An equity security which is traded on the National
Association of Securities Dealers Automated Quotation ("NASDAQ") system is
valued at its most recent sale price. Lacking any sales, the security is valued
at the high or "inside" bid quotation. The value of an equity security not
quoted on the NASDAQ System, but traded in another over-the-counter market, is
its most recent sale price. Lacking any sales, the security is valued at the
Calculated Mean. Lacking a Calculated Mean, the security is valued at the most
recent bid quotation.
Debt securities, other than short-term securities, are valued at prices
supplied by the Fund's pricing agent(s) which reflect broker/dealer supplied
valuations and electronic data processing techniques. Short-term securities with
remaining maturities of sixty days or less are valued by the amortized cost
method, which the Board believes approximates market value. If it is not
possible to value a particular debt security pursuant to these valuation
methods, the value of such security is the most recent bid quotation supplied by
a bona fide marketmaker. If it is not possible to value a particular debt
security pursuant to the above methods, the Adviser may calculate the price of
that debt security, subject to limitations established by the Board.
49
<PAGE>
An exchange traded options contract on securities, currencies, futures
and other financial instruments is valued at its most recent sale price on such
exchange. Lacking any sales, the options contract is valued at the Calculated
Mean. Lacking any Calculated Mean, the options contract is valued at the most
recent bid quotation in the case of a purchased options contract, or the most
recent asked quotation in the case of a written options contract. An options
contract on securities, currencies and other financial instruments traded
over-the-counter is valued at the most recent bid quotation in the case of a
purchased options contract and at the most recent asked quotation in the case of
a written options contract. Futures contracts are valued at the most recent
settlement price. Foreign currency exchange forward contracts are valued at the
value of the underlying currency at the prevailing exchange rate.
If a security is traded on more than one exchange, or upon one or more
exchanges and in the over-the-counter market, quotations are taken from the
market in which the security is traded most extensively.
If, in the opinion of the Trust's Valuation Committee, the value of a
portfolio asset as determined in accordance with these procedures does not
represent the fair market value of the portfolio asset, the value of the
portfolio asset is taken to be an amount which, in the opinion of the Valuation
Committee, represents fair market value on the basis of all available
information. The value of other portfolio holdings owned by a Fund is determined
in a manner which, in the discretion of the Valuation Committee most fairly
reflects fair market value of the property on the valuation date.
Following the valuations of securities or other portfolio assets in
terms of the currency in which the market quotation used is expressed ("Local
Currency"), the value of these portfolio assets in terms of U.S. dollars is
calculated by converting the Local Currency into U.S. dollars at the prevailing
currency exchange rate on the valuation date.
ADDITIONAL INFORMATION
Experts
The Financial Highlights of each Fund included in the Funds'
prospectuses and the Financial Statements incorporated by reference in this
Statement of Additional Information have been so included or incorporated by
reference in reliance on the report of Coopers & Lybrand, L.L.P., One Post
Office Square, Boston, Massachusetts 02109, independent accountants, and given
on the authority of that firm as experts in accounting and auditing.
Shareholder Indemnification
The Trust is an organization of the type commonly known as a
"Massachusetts business trust". Under Massachusetts law, shareholders of such a
trust may, under certain circumstances, be held personally liable as partners
for the obligations of the Trust. The Declaration of Trust contains an express
disclaimer of shareholder liability in connection with a Fund's property or the
acts, obligations or affairs of a Fund. The Declaration of Trust also provides
for indemnification out of a Fund's property of any shareholder of a Fund held
personally liable for the claims and liabilities to which a shareholder may
become subject by reason of being or having been a shareholder of a Fund. Thus,
the risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which a Fund itself would be unable to
meet its obligations.
Other Information
Many of the investment changes in a Fund will be made at prices
different from those prevailing at the time they may be reflected in regular
reports to shareholders of a Fund. These transactions will reflect investment
decisions made by the Adviser in light of the objectives and policies of a Fund,
and other factors, such as its other portfolio holdings and tax considerations
should not be construed as recommendations for similar action by other
investors.
The name "Scudder Equity Trust" is the designation of the Trustees for
the time being under a Declaration of Trust dated October 16, 1985, as amended,
and all persons dealing with a Fund must look solely to the property of a Fund
for the enforcement of any claims against a Fund as neither the Trustees,
officers, agents, shareholders nor other series of the Trust assumes any
personal liability for obligations entered into on behalf of a Fund. Upon the
initial purchase of shares of a Fund, the shareholder agrees to be bound by the
Trust's Declaration of Trust, as amended from time to time. The Declaration of
50
<PAGE>
Trust is on file at the Massachusetts Secretary of State's Office in Boston,
Massachusetts. All persons dealing with the Fund must look only to the assets of
the Fund for the enforcement of any claims against a Fund as no other series of
the Trust assumes any liabilities for obligations entered into on behalf of a
Fund.
The CUSIP number of Capital Growth Fund is 81114T-10-9.
The CUSIP number of Value Fund is 811114T-20-8.
Each Fund has a fiscal year end of September 30.
The Trust employs State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110 as custodian for each Fund.
Scudder Fund Accounting Corporation, Two International Place, Boston,
Massachusetts 02110-4103, a subsidiary of the Adviser, computes net asset values
for the Funds. Each Fund pays Scudder Fund Accounting Corporation an annual fee
equal to 0.025% of the first $150 million of average daily net assets, 0.0075%
of such assets in excess of $150 million and 0.0045% of such assets in excess of
$1 billion, plus holding and transaction charges for this service.
Scudder Service Corporation ("Service Corporation"), P.O. Box 2291,
Boston, Massachusetts 02107-2291, a subsidiary of the Adviser, is the transfer,
dividend disbursing and shareholder service agent for each Fund. Service
Corporation also provides subaccounting and recordkeeping services for
shareholder accounts in certain retirement and employee benefit plans. Each Fund
pays Service Corporation a fee for each account maintained for a participant of
$17.55 which is $8.05 for its services as transfer and dividend paying agent and
$9.50 for its services as shareholder service agent. For the fiscal year ended
September 30, 1995, Capital Growth Fund and Value Fund incurred annual fees of
$2,650,164 and $125,734, respectively. Please refer to "How to contact Scudder"
in each Fund's prospectus or call 1-800-225-5163 for specific mailing
instructions regarding your investment.
The Funds' prospectuses and this Statement of Additional Information
omit certain information contained in the Registration Statement which the Trust
has filed with the SEC under the Securities Act of 1933 and reference is hereby
made to the Registration Statement for further information with respect to the
Fund and the securities offered hereby. The Registration Statement is available
for inspection by the public at the SEC in Washington, D.C.
This Statement of Additional Information combines the information of
both Scudder Capital Growth Fund and Scudder Value Fund. Each Fund, through its
individual prospectus, offers only its own shares, yet it is possible that one
Fund might become liable for a misstatement regarding the other Fund. The
Trustees of each Fund have considered this, and have approved the use of a
combined Statement of Additional Information.
Costs of $44,657 incurred by Value Fund in conjunction with its
organization are amortized over the five year period beginning December 31,
1992.
FINANCIAL STATEMENTS
Capital Growth Fund
The financial statements, including the investment portfolio of Capital
Growth Fund, together with the Report of Independent Accountants, Financial
Highlights, and notes to financial statements are incorporated by reference and
attached hereto in the Annual Report to Shareholders of the Fund dated September
30, 1995, and are hereby deemed to be part of this Statement of Additional
Information.
Value Fund
The financial statements, including the investment portfolio of Value
Fund together with the Report of Independent Accountants, Financial Highlights
and notes to financial statements are incorporated by reference and attached
hereto in the Annual Report to Shareholders of the Fund dated September 30,
1995, and are hereby deemed to be part of this Statement of Additional
Information.
51
<PAGE>
APPENDIX
The following is a description of the ratings given by Moody's and
Standard & Poor's to corporate and municipal bonds.
Ratings of Municipal and Corporate Bonds
Standard & Poor's:
Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong. Debt rated AA has a very
strong capacity to pay interest and repay principal and differs from the highest
rated issues only in small degree. Debt rated A has a strong capacity to pay
interest and repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than debt in
higher rated categories. Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the least degree of speculation and C the highest. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major exposures to adverse conditions.
Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating. Debt rated B has a greater
vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay interest and repay
principal. The B rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB- rating.
Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal in the event of
adverse business, financial, or economic conditions. It is not likely to have
the capacity to pay interest and repay principal. The CCC rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating. The rating CC typically is applied to debt subordinated
to senior debt that is assigned an actual or implied CCC rating. The rating C
typically is applied to debt subordinated to senior debt which is assigned an
actual or implied CCC- debt rating. The C rating may be used to cover a
situation where a bankruptcy petition has been filed, but debt service payments
are continued. The rating C1 is reserved for income bonds on which no interest
is being paid. Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period had not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
Moody's:
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues. Bonds which are rated Aa are
judged to be of high quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks appear
somewhat larger than in Aaa securities. Bonds which are rated A possess many
favorable investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future.
52
<PAGE>
Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. Bonds which are rated Ba are
judged to have speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during other good and bad times over
the future. Uncertainty of position characterizes bonds in this class. Bonds
which are rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest. Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
<PAGE>
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
Annual Report
September 30, 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>
SCUDDER CAPITAL GROWTH FUND
IN BRIEF
* Scudder Capital Growth Fund returned a strong 21.96% for the 12 months
ended September 30, 1995, based on a $3.38 per share increase in net asset
value and a $0.73 per share capital gain distribution.
* The Fund adjusted its approach to pursuing capital appreciation during the
year, focusing on those stocks believed to be undervalued on the basis of
such analytical measures as price-to-cash-flow and price-to-earnings.
* The Fund's high concentrations of the past few years in such sectors as
communications, media, and retail were reduced during the year due to
valuation concerns and the uncertain prospects for continued earnings
growth in the months ahead.
* Holdings were also reduced in areas where earnings currently are strong but
stock prices are particularly sensitive to earnings disappointments, as is
the case with many technology stocks.
CONTENTS
2 In Brief
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
9 Investment Portfolio
16 Financial Statements
19 Financial Highlights
20 Notes to Financial Statements
26 Report of Independent Accountants
27 Tax Information
29 Officers and Trustees
30 Investment Products
and Services
31 How to Contact
Scudder
2
<PAGE>
LETTER FROM THE FUND'S PRESIDENT
Dear Shareholders,
Falling interest rates, strong earnings growth, and a weak dollar
combined to create a favorable environment for the U.S. stock market in recent
months. Stock prices rallied sharply, and Scudder Capital Growth Fund returned
24.36% in the first nine months of 1995 and 21.96% for its full fiscal year.
As you know, the Fund adjusted its investment approach during the year
to include a greater emphasis on undervalued companies that historically have
provided above-average returns. A value-oriented approach is an attractive
strategy in any environment. However, after such impressive gains in stock
prices this year, we would not be surprised to see some correction related to
the potential for an economic slowdown. We believe that the long-term outlook
for U.S. equities remains favorable, characterized by low inflation, low
interest rates, and strong though slowing profit growth.
I would like to take this opportunity to announce the addition of Lois
Friedman to the Scudder Capital Growth Fund portfolio management team. Lois is a
Vice President of Scudder, Stevens & Clark, Inc. and a member of Scudder's
Global Equity Group. She joined Scudder in 1994 as a healthcare analyst,
covering the industry on a global basis. Prior to joining Scudder, she worked at
Putnam Investments, following the healthcare, restaurant, and supermarket
industries.
If you have questions about the Fund or your investments, please call a
Scudder Investor Relations representative at 1-800-225-2470. Page 31 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 September 30, 1995
- -----------------------------------------------------------------
Growth of a $10,000 Investment
- -----------------------------------------------------------------
Scudder Capital Growth Fund
- ----------------------------------------
Total Return
Period Growth --------------
Ended of Average
9/30/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $12,196 21.96% 21.96%
5 Year $23,060 130.60% 18.19%
10 Year $40,205 302.05% 14.93%
S&P 500 Index
- --------------------------------------
Total Return
Period Growth --------------
Ended of Average
9/30/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $12,975 29.75% 29.75%
5 Year $22,143 121.43% 17.22%
10 Year $44,259 342.59% 16.03%
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
- ----------------------
85 $10,000
86 $12,846
87 $17,860
88 $16,858
89 $24,284
90 $17,435
91 $25,428
92 $26,856
93 $34,600
94 $32,967
95 $40,205
S&P 500 Index
Year Amount
- ----------------------
85 $10,000
86 $13,174
87 $18,894
88 $16,558
89 $22,023
90 $19,988
91 $26,217
92 $29,114
93 $32,900
94 $34,112
95 $44,259
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>
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
--------------------------------------------------------------------------------
Net Asset Value... $17.17 $20.41 $16.10 $22.30 $14.77 $19.30 $19.12 $23.06 $19.54 $22.92
Income Dividends.. $ .23 $ .23 $ .20 $ .07 $ .16 $ .37 $ .22 $ .10 $ -- $ --
Capital Gains
Distributions..... $ 1.88 $ 2.46 $ 2.38 $ .55 $ 1.45 $ 1.35 $ .98 $ 1.25 $ 2.62 $ .73
Fund Total
Return (%)........ 28.46 39.03 -5.61 44.05 -28.20 45.85 5.61 28.83 -4.72 21.96
Index Total
Return (%)........ 31.74 43.42 -12.39 32.95 -9.24 31.09 11.04 12.97 3.68 29.75
</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 September 30, 1995
- ---------------------------------------------------------------------------
Diversification
- ---------------------------------------------------------------------------
Equity Securities 97% The Fund has remained near
Fixed Income Securities 1% fully invested, given the
Cash Equivalents 2% dramatic rise in the U.S.
---- stock prices this year.
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Sectors (Excludes Cash Equivalents and Debt)
- --------------------------------------------------------------------------
Financial 17%
Manufacturing 11%
Health 11% With the increasing likelihood
Consumer Staples 11% of an economic slowdown in 1996,
Energy 8% we have focused on traditional
Consumer Discretionary 8% growth sectors at the expense
Communications 8% of economically sensitive stocks.
Durables 6%
Service Industries 5%
Other 15%
----
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. Columbia/HCA Healthcare Corp.
Leading hospital management company
2. American Telephone & Telegraph Co.
Telecommunication services and business systems
3. Philip Morris Companies Inc.
Tobacco, food products and brewing
4. Aetna Life & Casualty Co.
Multiline insurance company
5. Exxon Corp.
International energy company
6. Bankers Trust New York Corp.
Commercial banking
7. RJR Nabisco Holdings Corp.
Manufacturer of tobacco and food products
8. Boeing Co.
Manufacturer of jet airplanes
9. Dillard Department Stores, Inc.
Department stores in southwest U.S.
10. Lockheed Martin Corp.
Manufacturer of aircraft, missiles and space equipment
Many of the Fund's ten largest holdings are companies that have
restructured or whose stocks are currently out of favor.
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
<PAGE>
SCUDDER CAPITAL GROWTH FUND
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
We are pleased to report a healthy 21.96% total return for Scudder
Capital Growth Fund during the 12 months ended September 30, 1995. The Fund's
net asset value rose $3.38 per share during the year to $22.92 at the end of
September, reflecting the strong rise in U.S. equity securities in 1995. Also
included in the return was a $0.73 per share capital gain distribution. For the
same time period the unmanaged S&P 500 Index returned 29.75%. While strong, the
Fund's return for the 12-month period lagged that of the S&P 500 largely due to
weak performance among its communications, media, gaming, and retail holdings in
late 1994 and early 1995.
In recent months, the stock market environment in the United States has
been influenced primarily by two factors: interest rates and earnings growth.
The fear of inflation all but disappeared this year, enabling interest rates to
decline. The Federal Reserve furthered this trend by lowering the federal funds
rate by 0.25% in July after a series of rate hikes in 1994 and early '95. Lower
rates have allowed companies to reduce their borrowing costs and increase their
investment in plants and equipment. Stock prices have risen sharply. On the
other hand, moderating growth in some pockets of the economy, the recent rise in
the value of the dollar (which impacts the earnings of U.S. companies that sell
or operate overseas), and heightened earnings expectations have made many stock
prices vulnerable to earnings disappointments.
Valuation and Profits Outlook
Prompts Change in Sector Allocation
While earnings have yet to show real signs of weakness, we believe the
slowing economy will eventually take its toll, and that earnings will
increasingly be revised downward over the next 12 months. Adding to the pressure
on earnings are deflationary forces such as improved technologies and increased
global competition, which have made price increases difficult or impossible and
have squeezed profit margins for manufacturers and retailers. As a result, we
trimmed areas where current valuations and earnings prospects no longer
supported overweighting. With the proceeds from these sales, the Fund bought
attractively valued stocks that we believe are less likely to suffer when
earnings turn down, as well as those we think will continue to produce strong
earnings growth despite a slowdown in economic activity. Recent purchases
include stocks in the financial, tobacco, aerospace, consumer staples, and
healthcare sectors.
6
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
So far the results of these changes have been positive. After lagging the S&P
500 in the first half of the fiscal year, the Fund has been an outperformer for
the six months ended September 30, 1995, with a 20.25% total return versus
18.25% for the unmanaged index.
The Fund's Sector Allocation Has Changed
Dramatically Over The Year
(Five Largest Sector Weightings Then and Now)
------------------------------------- ---------------------------------
9/30/94 9/30/95
------------------------------------- ---------------------------------
Consumer Discretionary 21% Financial 17%
------------------------------------- ---------------------------------
Media 20% Manufacturing 11%
------------------------------------- ---------------------------------
Communications 13% Health 11%
------------------------------------- ---------------------------------
Technology 9% Consumer Staples 11%
------------------------------------- ---------------------------------
Financial 8% Energy 8%
------------------------------------- ---------------------------------
Focusing on Undervalued Stocks
When selecting stocks for purchase, we have utilized traditional
valuation measures such as price-to-book, price-to-earnings, and
price-to-cash-flow, viewed against the industry in which a company operates and
against the stock's historic valuations. In addition, we look for companies
whose earnings are depressed, but whose prospects for future earnings growth are
good. Right now, these companies are hard to find. At this late stage in the
economic cycle, many companies are over-earning their historic averages and are
also overvalued -- but there are exceptions. Recent purchases include
BankAmerica Corp. and Liz Claiborne, which we think will excel despite a
less-than-rosy outlook for the retail sector as a whole; and Columbia
Healthcare, a stock that is reasonably valued and yet has the potential to
continue generating strong earnings gains through the acquisition of hospitals.
Additionally, we favored select insurance companies such as Aetna Life &
Casualty, due to the potential cost savings that could arise from restructuring
in that sector. Similarly, we purchased Lockheed Martin in the aerospace sector,
7
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
because the company's recent merger with Martin Marietta has produced
substantial cost savings and freed cash for such things as stock buybacks.
When considering stocks for sale we have looked for extremes in
valuation, as in the case of Microsoft, which was trading at 40 times earnings
when we sold it. Overall, the Fund's technology weighting declined in recent
months from 9.0% of equity at the start of the period to 4.5% on September 30 --
despite a compelling case for the industry's long-term growth. After a very
strong run-up this year, we believe many technology stocks fully reflect their
near-term potential and are vulnerable to earnings disappointments. Of course,
there are exceptions here, too. Hewlett Packard, for example, has not enjoyed
the price gains of other stocks, yet the company displays the potential for
continued strong earnings growth.
Looking Ahead
Given the likelihood of an economic slowdown sometime in 1996, we
believe the Fund's defensive leaning, with its focus on companies that are
undervalued and thus less susceptible to earnings disappointments, is
appropriate. Moreover, our selection of traditionally less volatile growth
stocks (such as those in the consumer staples, healthcare, and financial service
sectors) should provide positive returns for the portfolio regardless of a
slowdown in economic activity. While the portfolio has been structured to
generate positive returns in a slowing economy, we have been careful to avoid
placing too large an emphasis on one sector over another. At this point, it is
still too early to tell which sectors will produce the best returns in the
months ahead.
Thank you for your continued interest in Scudder Capital Growth 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 supportd 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 intensive 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 eight years of experience as an equity
analyst.
8
<PAGE>
INVESTMENT PORTFOLIO as of September 30, 1995
<TABLE>
<CAPTION>
% OF PRINCIPAL MARKET
PORTFOLIO AMOUNT ($) VALUE ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1.0% REPURCHASE AGREEMENT
14,335,000 Repurchase Agreement with UBS Securities
Inc. dated 9/29/95 at 6.05% to be
repurchased at $14,342,227 on 10/2/95,
collateralized by a $9,685,000
U.S. Treasury Note, 11.25%, 2/15/15
(Cost $14,335,000) . . . . . . . . . . . . . . . . 14,335,000
-----------
1.0% COMMERCIAL PAPER
FINANCIAL
OTHER FINANCIAL COMPANIES 15,000,000 Deutsche Bank Financial Inc., 5.75%, 10/10/95
(Cost $14,978,437) . . . . . . . . . . . . . . . . 14,978,437
-----------
1.0% FOREIGN BONDS - U.S. $ Denominated
2,500,000 Argentine Republic Step-Up Series L,
5%, 3/31/23 . . . . . . . . . . . . . . . . . . . 1,212,500
3,750,000 Argentine Republic Floating Rate Note,
6.81%, 3/31/05 . . . . . . . . . . . . . . . . . . 2,325,000
750,000 Federative Republic of Brazil Variable Rate
Par Bond, 4.25%, 4/15/24 . . . . . . . . . . . . . 363,750
593,750 Federative Republic of Brazil IDU,
Floating Rate Bond, 6.69%, 1/1/01. . . . . . . . . 503,203
2,125,000 Federative Republic of Brazil Floating Rate
Note, 7.25%, 4/15/06 . . . . . . . . . . . . . . . 1,413,125
2,000,000 Federative Republic of Brazil Floating Rate
Conversion Bond, 7.31%, 4/15/12. . . . . . . . . . 1,153,740
1,560,600 Federative Republic of Brazil Variable Rate
Conversion Bond "C", 6%, 4/15/14. . . . . . . . . . 829,069
250,000 Republic of Bulgaria Interest Arrears Floating
Rate Bond, 6.75%, 7/28/11 . . . . . . . . . . . . . 112,812
500,000 Republic of Bulgaria Floating Rate Note,
Tranche A, 6.75%, 7/28/24 . . . . . . . . . . . . . 253,750
2,042,972 Republic of Ecuador Global Floating Rate Bond,
4.28%, 2/27/15. . . . . . . . . . . . . . . . . . . 658,859
975,000 Republic of Ecuador Global Floating Rate Bond,
6.81%, 2/28/25. . . . . . . . . . . . . . . . . . . 477,750
1,500,000 Republic of Panama Floating Rate Note,
7.25%, 5/10/02. . . . . . . . . . . . . . . . . . . 1,211,250
2,625,000 Republic of Poland Floating Rate Step-Up Note,
3.25%, 10/27/14 . . . . . . . . . . . . . . . . . . 1,660,312
1,250,000 Republic of Poland Global Discount Floating
Rate Note, 7.13%, 10/27/24 . . . . . . . . . . . . 967,187
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
9
<PAGE>
SCUDDER CAPITAL GROWTH FUND
<TABLE>
<CAPTION>
% OF PRINCIPAL MARKET
PORTFOLIO AMOUNT ($) VALUE ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1,500,000 Republic of Venezuela Collateralized Fixed
Rate Par Bond (Detachable Oil Price
Indexed Value Recovery Warrants),
Series A, 6.75%, 3/31/20 . . . . . . . . . . . . . 766,874
750,000 Republic of Venezuela Floating Rate Debt
Conversion Bond Series DL, 6.81%, 12/18/07 . . . . 377,813
1,000,000 United Mexican States Collateralized Fixed
Rate Par Bond (Detachable Oil Price
Indexed Value Recovery Rights),
Series A, 6.25%, 12/31/19 . . . . . . . . . . . . 608,750
1,500,000 United Mexican States Collateralized Fixed
Rate Par Bond (Detachable Oil Price
Indexed Value Recovery Rights),
Series B, 6.25%, 12/31/19 . . . . . . . . . . . . 913,125
-----------
Total Foreign Bonds - U.S.$ Denominated
(Cost $15,305,970) . . . . . . . . . . . . . . . . 15,808,869
-----------
0.0% FOREIGN BONDS - Non-U.S. $ Denominated
MXP 1,380,000 United Mexican States Treasury Bill, 12/28/95
(Cost $198,212) . . . . . . . . . . . . . . . . 198,897
-----------
1.4% CONVERTIBLE BOND
CONSUMER DISCRETIONARY 0.3%
DEPARTMENT & CHAIN STORES 4,000,000 Federated Department Stores, Inc.
debenture, 5%, 10/1/03 . . . . . . . . . . . . . . 4,080,000
-----------
SERVICE INDUSTRIES 1.1%
MISCELLANEOUS COMMERCIAL
SERVICES 37,000,000 ADT Operations Inc. LYON, 7/6/10 . . . . . . . . . . 16,187,500
-----------
Total Convertible Bonds (Cost $18,937,425) . . . . . 20,267,500
-----------
0.3% PREFERRED STOCKS
<CAPTION>
SHARES
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCIAL
BANKS 40,000 First Nationwide Bank, non-cum. 11.5%
(Cost $4,040,000) . . . . . . . . . . . . . . . . 4,440,000
-----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
10
<PAGE>
INVESTMENT PORTFOLIO
<TABLE>
<CAPTION>
% OF MARKET
PORTFOLIO SHARES VALUE ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
95.3% COMMON STOCKS
CONSUMER DISCRETIONARY 7.6%
APPAREL & SHOES 1.4% 799,700 Liz Claiborne Inc. . . . . . . . . . . . . . . . . . 20,192,425
-----------
DEPARTMENT & CHAIN STORES 4.8% 134,200 Dayton Hudson Corp. . . . . . . . . . . . . . . . . 10,182,425
688,400 Dillard Department Stores, Inc. "A" . . . . . . . . 21,942,750
186,000 Federated Department Stores, Inc.* . . . . . . . . 5,277,750
315,600 J.C. Penney Co., Inc. . . . . . . . . . . . . . . . 15,661,650
266,700 May Department Stores . . . . . . . . . . . . . . . 11,668,125
280,000 Wal-Mart Stores Inc. . . . . . . . . . . . . . . . . 6,965,000
-----------
71,697,700
-----------
HOTELS & CASINOS 1.0% 618,500 Carnival Corp., Class A . . . . . . . . . . . . . . 14,844,000
-----------
RECREATIONAL PRODUCTS 0.4% 257,500 Acclaim Entertainment Inc.* . . . . . . . . . . . . 6,630,625
-----------
CONSUMER STAPLES 10.3%
ALCOHOL & TOBACCO 5.0% 293,600 Anheuser Busch Companies, Inc. . . . . . . . . . . . 18,313,300
394,600 Philip Morris Companies Inc. . . . . . . . . . . . . 32,949,100
710,100 RJR Nabisco Holdings Corp. . . . . . . . . . . . . . 22,989,488
-----------
74,251,888
-----------
FOOD & BEVERAGE 4.5% 245,600 Albertson's Inc. . . . . . . . . . . . . . . . . . . 8,381,100
341,600 American Stores Co. . . . . . . . . . . . . . . . . 9,692,900
377,000 ConAgra Inc. . . . . . . . . . . . . . . . . . . . . 14,938,625
250,500 General Mills, Inc. . . . . . . . . . . . . . . . . . 13,965,375
81,200 Hershey Foods Corp. . . . . . . . . . . . . . . . . . 5,227,250
300,900 PepsiCo Inc. . . . . . . . . . . . . . . . . . . . . . 15,345,900
-----------
67,551,150
-----------
PACKAGE GOODS/COSMETICS 0.8% 164,600 Clorox Co. . . . . . . . . . . . . . . . . . . . . . . 11,748,325
-----------
HEALTH 10.7%
BIOTECHNOLOGY 0.8% 200,000 Biogen Inc.* . . . . . . . . . . . . . . . . . . . . . 12,000,000
-----------
HOSPITAL MANAGEMENT 2.4% 735,500 Columbia/HCA Healthcare Corp. . . . . . . . . . . . . 35,763,687
-----------
MEDICAL SUPPLY & SPECIALTY 1.2% 235,700 Becton, Dickinson & Co. . . . . . . . . . . . . . . 14,819,637
121,400 Bergen Brunswig Corp. "A". . . . . . . . . . . . . . . 2,594,925
-----------
17,414,562
-----------
PHARMACEUTICALS 6.3% 184,100 American Home Products Corp. . . . . . . . . . . . . . 15,625,487
413,100 BioChem Pharma, Inc.*. . . . . . . . . . . . . . . . . 13,167,562
281,500 Carter-Wallace Inc. . . . . . . . . . . . . . . . . . 3,518,750
159,900 Eli Lilly Co. . . . . . . . . . . . . . . . . . . . . 14,371,013
280,000 Merck & Co. Inc. . . . . . . . . . . . . . . . . . . . 15,680,000
309,900 Schering-Plough Corp. . . . . . . . . . . . . . . . . 15,959,850
315,400 SmithKline Beecham PLC (ADR) . . . . . . . . . . . . . 15,967,125
-----------
94,289,787
-----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
11
<PAGE>
SCUDDER CAPITAL GROWTH FUND
<TABLE>
<CAPTION>
% OF MARKET
PORTFOLIO SHARES VALUE ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMMUNICATIONS 7.4%
CELLULAR TELEPHONE 0.6% 240,755 Associated Group, Inc. "A"* . . . . . . . . . . . . 4,995,666
178,455 Associated Group, Inc. "B"* . . . . . . . . . . . . 3,702,941
-----------
8,698,607
-----------
TELEPHONE/COMMUNICATIONS 6.8% 540,500 American Telephone & Telegraph Co. . . . . . . . . . 35,537,875
146,900 Bell Atlantic Corp. . . . . . . . . . . . . . . . . 9,015,987
302,200 Century Telephone Enterprises . . . . . . . . . . . 9,179,325
356,500 GTE Corp. . . . . . . . . . . . . . . . . . . . . . 13,992,625
553,000 MCI Communications Corp. . . . . . . . . . . . . . . 14,412,563
282,500 Sprint Corp. . . . . . . . . . . . . . . . . . . . . 9,887,500
383,000 Tele Danmark A/S (ADR) . . . . . . . . . . . . . . . 9,910,125
-----------
101,936,000
-----------
FINANCIAL 16.3%
BANKS 4.8% 123,600 BankAmerica Corp. . . . . . . . . . . . . . . . . . 7,400,550
363,900 Bankers Trust New York Corp. . . . . . . . . . . . . 25,563,975
236,000 Citicorp . . . . . . . . . . . . . . . . . . . . . . 16,697,000
238,600 Golden West Financial Corp. . . . . . . . . . . . . 12,049,300
342,100 PNC Bank Corp. . . . . . . . . . . . . . . . . . . . 9,536,038
-----------
71,246,863
-----------
INSURANCE 8.2% 404,500 Aetna Life & Casualty Co. . . . . . . . . . . . . . 29,680,187
382,100 Allstate Corp. . . . . . . . . . . . . . . . . . . . 13,516,787
222,900 American International Group, Inc. . . . . . . . . . 18,946,500
262,500 EXEL, Ltd. . . . . . . . . . . . . . . . . . . . . . 15,257,813
99,000 General Re Corp. . . . . . . . . . . . . . . . . . . 14,949,000
114,500 Liberty Corp. . . . . . . . . . . . . . . . . . . . 3,721,250
179,600 MBIA Inc. . . . . . . . . . . . . . . . . . . . . . 12,661,800
194,800 PMI Group, Inc. . . . . . . . . . . . . . . . . . . 9,228,650
85,700 UNUM Corp. . . . . . . . . . . . . . . . . . . . . . 4,520,675
-----------
122,482,662
-----------
OTHER FINANCIAL COMPANIES 3.3% 205,200 Federal National Mortgage Association . . . . . . . 21,238,200
173,700 Salomon Inc. . . . . . . . . . . . . . . . . . . . . 6,644,025
401,800 Student Loan Marketing Association . . . . . . . . . 21,697,200
-----------
49,579,425
-----------
MEDIA 3.0%
BROADCASTING &
ENTERTAINMENT 1.8% 321,500 Time Warner Inc. . . . . . . . . . . . . . . . . . . 12,779,625
288,174 Viacom Inc. "B"* . . . . . . . . . . . . . . . . . . 14,336,657
-----------
27,116,282
-----------
CABLE TELEVISION 0.8% 575,950 Comcast Corp. "A" . . . . . . . . . . . . . . . . . 11,519,000
-----------
PRINT MEDIA 0.4% 218,100 Times Mirror Co. "A" . . . . . . . . . . . . . . . . 6,270,375
-----------
SERVICE INDUSTRIES 3.3%
EDP SERVICES 1.1% 190,500 Automatic Data Processing, Inc. . . . . . . . . . . 12,977,812
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
12
<PAGE>
INVESTMENT PORTFOLIO
<TABLE>
<CAPTION>
% OF MARKET
PORTFOLIO SHARES VALUE ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
83,700 General Motors Corp. "E" . . . . . . . . . . . . . . 3,808,350
-----------
16,786,162
-----------
INVESTMENT 0.7% 184,700 Franklin Resources Inc. . . . . . . . . . . . . . . 10,643,337
-----------
MISCELLANEOUS CONSUMER
SERVICES 1.0% 395,300 H & R Block Inc. . . . . . . . . . . . . . . . . . 15,021,400
-----------
PRINTING/PUBLISHING 0.5% 144,700 Reuters Holdings PLC "B" (ADR) . . . . . . . . . . . 7,651,013
-----------
DURABLES 5.8%
AEROSPACE 5.0% 220,000 Aviall, Inc. . . . . . . . . . . . . . . . . . . . 1,897,500
336,000 Boeing Co. . . . . . . . . . . . . . . . . . . . . 22,932,000
326,700 Lockheed Martin Corp. . . . . . . . . . . . . . . . 21,929,738
792,000 Rohr Industries Inc.* . . . . . . . . . . . . . . . 12,870,000
172,600 United Technologies Corp. . . . . . . . . . . . . . 15,253,525
-----------
74,882,763
-----------
AUTOMOBILES 0.8% 256,300 General Motors Corp. . . . . . . . . . . . . . . . 12,014,062
-----------
MANUFACTURING 11.0%
CHEMICALS 3.2% 191,700 B.F. Goodrich Co., Inc. . . . . . . . . . . . . . . 12,628,238
183,300 Dow Chemical Co. . . . . . . . . . . . . . . . . . 13,655,850
108,800 E.I. du Pont de Nemours & Co. . . . . . . . . . . . 7,480,000
535,600 Praxair Inc. . . . . . . . . . . . . . . . . . . . 14,327,300
-----------
48,091,388
-----------
CONTAINERS & PAPER 2.9% 232,600 International Paper Co. . . . . . . . . . . . . . . 9,769,200
468,800 James River Corp. of Virginia . . . . . . . . . . . 15,001,600
278,600 Kimberly-Clark Corp. . . . . . . . . . . . . . . . 18,701,025
-----------
43,471,825
-----------
DIVERSIFIED MANUFACTURING 3.2% 396,700 Canadian Pacific Ltd. . . . . . . . . . . . . . . . 6,347,200
289,300 General Electric Co. . . . . . . . . . . . . . . . . 18,442,875
83,500 Honeywell, Inc. . . . . . . . . . . . . . . . . . . 3,580,063
59,700 Olin Corp. . . . . . . . . . . . . . . . . . . . . . 4,104,375
142,000 Textron, Inc. . . . . . . . . . . . . . . . . . . . 9,691,500
104,550 Thermo Electron Corp.* . . . . . . . . . . . . . . 4,848,506
-----------
47,014,519
-----------
ELECTRICAL PRODUCTS 0.9% 263,700 Philips NV (New York shares) . . . . . . . . . . . . 12,855,375
-----------
SPECIALTY CHEMICALS 0.8% 301,600 Betz Laboratories Inc. . . . . . . . . . . . . . . . 12,327,900
-----------
TECHNOLOGY 4.3%
EDP PERIPHERALS 0.2% 222,900 Intergraph Corp.* . . . . . . . . . . . . . . . . . 2,702,663
-----------
ELECTRONIC COMPONENTS/
DISTRIBUTORS 0.7% 120,000 AMP Inc. . . . . . . . . . . . . . . . . . . . . . . 4,620,000
102,900 Avnet, Inc. . . . . . . . . . . . . . . . . . . . . 5,312,212
118 Samsung Electronics Co., Ltd. (b)* . . . . . . . . 28,128
-----------
9,960,340
-----------
ELECTRONIC DATA PROCESSING 1.9% 118,800 Compaq Computers Corp.* . . . . . . . . . . . . . . 5,746,950
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
13
<PAGE>
SCUDDER CAPITAL GROWTH FUND
<TABLE>
<CAPTION>
% OF MARKET
PORTFOLIO SHARES VALUE ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
160,000 Digital Equipment Corp.* . . . . . . . . . . . . . . 7,300,000
88,200 Hewlett-Packard Co. . . . . . . . . . . . . . . . . 7,353,675
77,700 International Business Machines Corp. . . . . . . . 7,332,938
-----------
27,733,563
-----------
MILITARY ELECTRONICS 0.7% 187,300 Loral Corp. . . . . . . . . . . . . . . . . . . . . 10,676,100
-----------
OFFICE/PLANT AUTOMATION 0.6% 150,800 Cabletron Systems Inc.* . . . . . . . . . . . . . . 9,933,950
-----------
PRECISION INSTRUMENTS 0.2% 103,500 Perkin-Elmer Corp. . . . . . . . . . . . . . . . . . 3,687,188
-----------
ENERGY 8.0%
ENGINEERING 0.4% 175,800 Foster Wheeler Corp. . . . . . . . . . . . . . . . . 6,218,925
-----------
OIL & GAS PRODUCTION 0.7% 230,500 Triton Energy Corp. . . . . . . . . . . . . . . . . 11,150,438
-----------
OIL COMPANIES 5.4% 115,800 Amoco Corp. . . . . . . . . . . . . . . . . . . . . 7,425,675
200,000 Chevron Corp. . . . . . . . . . . . . . . . . . . . 9,725,000
392,600 Exxon Corp. . . . . . . . . . . . . . . . . . . . . 28,365,350
147,900 Mobil Corp. . . . . . . . . . . . . . . . . . . . . 14,734,538
34,000 Royal Dutch Petroleum Co. . . . . . . . . . . . . . 4,178,272
26,000 Royal Dutch Petroleum Co. (New York shares) . . . . 3,191,500
706,200 YPF SA "D" (ADR) . . . . . . . . . . . . . . . . . . 12,711,600
-----------
80,331,935
-----------
OIL/GAS TRANSMISSION 0.5% 214,400 Enron Corp. . . . . . . . . . . . . . . . . . . . . 7,182,400
-----------
OILFIELD
SERVICES/EQUIPMENT 1.0% 492,500 Baker Hughes, Inc. . . . . . . . . . . . . . . . . 10,034,688
69,600 Schlumberger Ltd. . . . . . . . . . . . . . . . . . 4,541,400
-----------
14,576,088
-----------
METALS & MINERALS 1.7%
STEEL & METALS 425,600 Freeport McMoRan Copper & Gold, Inc. "A" . . . . . . 10,906,000
27,500 Nucor Corp. . . . . . . . . . . . . . . . . . . . . 1,230,625
224,100 Reynolds Metals Co. . . . . . . . . . . . . . . . . 12,941,775
-----------
25,078,400
-----------
CONSTRUCTION 0.6%
FOREST PRODUCTS 346,500 Louisiana-Pacific Corp. . . . . . . . . . . . . . . 8,359,313
-----------
TRANSPORTATION 1.3%
AIRLINES 0.4% 86,000 AMR Corp.* . . . . . . . . . . . . . . . . . . . . . 6,202,750
-----------
RAILROADS 0.9% 201,500 Consolidated Rail Corp. . . . . . . . . . . . . . . 13,853,125
-----------
UTILITIES 4.0%
ELECTRIC UTILITIES 9,999,992 Companhia Energetica de Minas Gerais (pfd.) . . . . 223,493
386,200 Destec Energy Inc.* . . . . . . . . . . . . . . . . 5,793,000
120,000 Korea Electric Power Co. . . . . . . . . . . . . . . 4,514,449
333,300 PacifiCorp . . . . . . . . . . . . . . . . . . . . . 6,332,700
1,023,800 PowerGen PLC . . . . . . . . . . . . . . . . . . . . 8,920,810
533,000 Public Service Co. of New Mexico* . . . . . . . . . 8,727,875
334,400 Southern Company . . . . . . . . . . . . . . . . . . 7,900,200
120,000 TNP Enterprises Inc. . . . . . . . . . . . . . . . 2,130,000
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
14
<PAGE>
INVESTMENT PORTFOLIO
<TABLE>
<CAPTION>
MARKET
SHARES VALUE ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
171,100 Texas Utilities Co., Inc. . . . . . . . . . . . . . 5,967,113
319,700 Unicom Corp. . . . . . . . . . . . . . . . . . . . . 9,670,925
-------------
60,180,565
-------------
Total Common Stocks
(Cost $1,281,927,331) . . . . . . . . . . . . . . 1,423,820,850
-------------
- -------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0%
(Cost $1,349,722,375) (a) . . . . . . . . . . . . 1,493,849,553
-------------
-------------
</TABLE>
(a) The cost for federal income tax purposes was $1,352,520,012. At
September 30, 1995, net unrealized appreciation for all securities based on
tax cost was $141,329,541. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market
value over tax cost of $155,503,056 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost
over market value of $14,173,515.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Trustees. The cost of these securities at September 30, 1995 aggregated
$12,935. See Note A of the Notes to Financial Statements.
* Non-income producing security.
At September 30, 1995, outstanding written call options were as follows
(Note A):
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION STRIKE MARKET
CONTRACTS DATE PRICE VALUE ($)
-----------------------------------------------
<S> <C> <C> <C> <C>
S&P 500 Index . . . . . . . . 1,000 Oct. 95 555 3,087,500
S&P 500 Index . . . . . . . . 2,000 Oct. 95 570 3,800,000
S&P 500 Index . . . . . . . . 2,000 Nov. 95 575 3,325,000
S&P 500 Index . . . . . . . . 1,000 Nov. 95 580 1,500,000
----------
Total outstanding written options (Premiums received $9,993,236). . . 11,712,500
----------
----------
</TABLE>
Transactions in written call options during the year ended September 30,
1995 were as follows:
<TABLE>
<CAPTION>
PREMIUMS
NUMBER OF CONTRACTS RECEIVED ($)
--------------------------------------
<S> <C> <C>
Outstanding at
September 30, 1994 . . . . . . . . . -- --
Contracts written . . . . . . . . . 24,000 26,479,814
Contracts closed . . . . . . . . . (17,500) (16,410,456)
Contracts expired . . . . . . . . . (500) (76,122)
--------------------------------------
Outstanding at
September 30, 1995 . . . . . . . . . 6,000 9,993,236
----- ----------
----- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
15
<PAGE>
SCUDDER CAPITAL GROWTH FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS
Investments, at market (identified cost $1,349,722,375)
(Note A)............................................. $ 1,493,849,553
Cash......................................................... 371
Receivables:
Investments sold..................................... 81,545,920
Dividends and interest............................... 3,541,455
Fund shares sold..................................... 738,057
Other assets................................................. 6,146
--------------
Total assets................................. 1,579,681,502
LIABILITIES
Payables:
Investments purchased................................ $74,367,439
Fund shares redeemed................................. 558,202
Accrued management fee (Note C)...................... 824,204
Other accrued expenses (Note C)...................... 549,793
Written options, at market (premiums
received $9,993,236) (Note A)................ 11,712,500
-----------
Total liabilities............................ 88,012,138
--------------
Net assets, at market value.................................. $1,491,669,364
--------------
--------------
NET ASSETS
Net assets consist of:
Unrealized appreciation (depreciation) on:
Investments.................................. $ 144,127,178
Written Options.............................. (1,719,264)
Foreign currency related transactions........ (19,590)
Accumulated net realized gain........................ 225,320,575
Shares of beneficial interest........................ 650,789
Additional paid-in capital........................... 1,123,309,676
--------------
Net assets, at market value.................................. $1,491,669,364
--------------
--------------
Net asset value, offering and redemption price per
share ($1,491,669,364 DIVIDED BY 65,078,938
outstanding shares of beneficial interest,
$.01 par value, unlimited number of shares authorized)....... $22.92
------
------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
16
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of $295,631)........ $ 18,582,279
Interest..................................................... 3,107,159
------------
21,689,438
Expenses:
Management fee (Note C)...................................... $ 9,118,015
Services to shareholders (Note C)............................ 3,080,572
Custodian and accounting fees (Note C)....................... 413,975
Trustees' fees (Note C)...................................... 42,609
Reports to shareholders...................................... 413,706
Auditing..................................................... 48,638
State registration........................................... 33,175
Legal........................................................ 17,643
Other........................................................ 72,858 13,241,191
------------ ------------
Net investment income........................................ 8,448,247
------------
Net realized and unrealized gain (loss) on
investment transactions
Net realized gain (loss) from:
Investments.......................................... 248,304,942
Options.............................................. (15,247,243)
Foreign currency related transactions................ (104,594) 232,953,105
------------
Net unrealized appreciation (depreciation) during
the period on:
Investments.......................................... 34,582,456
Written Options...................................... (1,719,264)
Foreign currency related transactions................ (19,590) 32,843,602
------------ ------------
Net gain on investment transactions.......................... 265,796,707
------------
Net increase in net assets resulting from operations......... $274,244,954
------------
------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
17
<PAGE>
SCUDDER CAPITAL GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Years Ended September 30,
----------------------------
INCREASE (DECREASE) IN NET ASSETS 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss)................................ $ 8,448,247 $ (1,586,189)
Net realized gain from investment transactions.............. 232,953,105 82,893,794
Net unrealized appreciation (depreciation) on
investment transactions during the period........... 32,843,602 (146,799,743)
------------- --------------
Net increase (decrease) in net assets
resulting from operations........................... 274,244,954 (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................................... 198,066,318 406,188,595
Net asset value of shares issued to
shareholders in reinvestment of
distributions....................................... 47,065,999 150,450,426
Cost of shares redeemed..................................... (317,084,600) (383,278,397)
-------------- --------------
Net increase (decrease) in net assets from
Fund share transactions............................. (71,952,283) 173,360,624
-------------- --------------
Increase (decrease) in net assets........................... 153,367,852 (49,053,737)
Net assets at beginning of period........................... 1,338,301,512 1,387,355,249
-------------- --------------
Net assets at end of period (including
accumulated net investment loss of
$59,464 in 1994).................................... $1,491,669,364 $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................................................. 9,981,199 19,506,116
Shares issued to shareholders in reinvestment
of distributions.................................... 2,577,547 7,147,289
Shares redeemed............................................. (15,955,799) (18,349,351)
-------------- --------------
Net increase (decrease) in Fund shares...................... (3,397,053) 8,304,054
-------------- --------------
Shares outstanding at end of period......................... 65,078,938 68,475,991
-------------- --------------
-------------- --------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
18
<PAGE>
FINANCIAL HIGHLIGHTS
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------------------------------------------------------------------------------
1995 1994 1993(b) 1992 1991 1990 1989 1988 1987 1986
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <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
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income (loss) . . . . . .13 (.02) .06 .12 .20 .30(a) .21 .09 .16 .26
Net realized and
unrealized gain (loss)
on investment
transactions . . . . . . 3.98 (.88) 5.23 .90 6.05 (6.22) 6.61 (1.82) 5.77 3.67
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations . . . . . . . 4.11 (.90) 5.29 1.02 6.25 (5.92) 6.82 (1.73) 5.93 3.93
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions from:
Net investment
income . . . . . . . . . -- -- (.10) (.22) (.37) (.16) (.07) (.20) (.23) (.23)
Net realized gains
on investment
transactions . . . . . . (.73) (2.62) (1.25) (.98) (1.35) (1.45) (.55) (2.38) (2.46) (1.88)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions. . . . . . . (.73) (2.62) (1.35) (1.20) (1.72) (1.61) (.62) (2.58) (2.69) (2.11)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period . . . . . . . . $22.92 $19.54 $23.06 $19.12 $19.30 $14.77 $22.30 $16.10 $20.41 $17.17
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Return (%) . . . . . . . . 21.96 (4.72) 28.83 5.61 45.85 (28.20) 44.05 (5.61) 39.03 28.46
Ratios and
Supplemental Data
Net assets, end of
period ($ millions) . . . . . 1,492 1,338 1,387 1,054 1,058 712 1,013 491 583 414
Ratio of operating
expenses to average
net assets (%). . . . . . . . .98 .97 .96 .98 1.04 .94 .88 .95 .88 .84
Ratio of net
investment income
(loss) to average
net assets (%). . . . . . . . .62 (.12) .22 .57 1.24 1.56 1.22 .63 .86 1.50
Portfolio turnover
rate (%). . . . . . . . . . . 153.6 75.8 92.2 92.4 93.2 87.9 55.7 48.5 58.2 55.8
</TABLE>
(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.
19
<PAGE>
SCUDDER CAPITAL GROWTH FUND
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 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 $28,128 (less than .01% of net assets) and have been noted
in the investment portfolio as of September 30, 1995.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 and wrote call options on
other financial instruments 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 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
21
<PAGE>
SCUDDER CAPITAL GROWTH FUND
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:
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(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.
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
23
<PAGE>
SCUDDER CAPITAL GROWTH FUND
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, 1995, purchases and sales of investment
securities (excluding short-term investments) aggregated $2,042,293,094 and
$2,182,986,483, respectively.
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 year ended September 30, 1995, the fee
pursuant to the Agreement amounted to $9,118,015 which was equivalent to an
annual effective rate of 0.67% of the Fund's average daily net assets.
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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 $2,650,164 charged to the
Fund by SSC for the year ended September 30, 1995, of which $292,229 is
unpaid at September 30, 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 year ended September 30,
1995, the amount charged to the Fund by SFAC aggregated $152,460, of which
$28,581 is unpaid at September 30, 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 year ended September 30, 1995, Trustees' fees aggregated $42,609.
25
<PAGE>
SCUDDER CAPITAL GROWTH FUND
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, 1995, 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, 1995 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, 1995, 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 6, 1995
26
<PAGE>
TAX INFORMATION
The Fund paid distributions of $.575 per share from long-term capital gains
during its taxable year ended September 30, 1995. Pursuant to section 852 of
the Internal Revenue Code, the Fund designates $181,100,000 as capital gain
dividends for the year ended September 30, 1995.
Pursuant to section 854 of the Internal Revenue Code, the Fund designates
$15,681,157 as dividends eligible for the dividends received deduction for
corporations for the year ended September 30, 1995.
27
<PAGE>
(This page intentionally left blank.)
28
<PAGE>
OFFICERS AND TRUSTEES
Daniel Pierce*
President and Trustee
Paul Bancroft III
Trustee; Venture Capitalist and Consultant
Thomas J. Devine
Trustee; Consultant
David S. Lee*
Vice President and Trustee
Douglas M. Loudon*
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.
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
Jerard K. Hartman*
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.
29
<PAGE>
<TABLE>
INVESTMENT PRODUCTS AND SERVICES
The Scudder Family of Funds
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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 Small Company Value Fund
Scudder Growth and Income Fund Scudder Value 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 Treasurers Trust(TM)++
Scudder Fund, Inc.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +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.
30
<PAGE>
HOW TO CONTACT SCUDDER
<TABLE>
<S> <C>
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
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 Trea- For information on Scudder
surers Trust,(TM) an institutional Institutional Funds,* funds
cash management service for designed to meet the broad
corporations, non-profit organiza- investment management
tions and trusts that uses certain and service needs of banks
portfolios of Scudder Fund, Inc.* and other institutions, call
($100,00 minimum), call 1-800-854-8525.
1-800-541-7703.
-------------------------------------------------------------------------------------------------------------
</TABLE>
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.
31
<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 37 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.
<PAGE>
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
Scudder
Value Fund
Annual Report
September 30, 1995
o For investors seeking long-term growth of capital through investment
in undervalued equity securities.
o A pure no-load(TM) fund with no commissions to buy, sell, or exchange
shares.
<PAGE>
SCUDDER VALUE FUND
CONTENTS
2 In Brief
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
9 Investment Portfolio
14 Financial Statements
17 Financial Highlights
18 Notes to Financial Statements
24 Report of Independent Accountants
25 Tax Information
25 Officers and Trustees
26 Investment Products and Services
27 How to Contact Scudder
IN BRIEF
o Scudder Value Fund provided a 23.62% total return for the 12-month
period ended September 30, 1995, aided by strong performance from many
of its financial, healthcare, and technology holdings.
o Declining interest rates, gains in corporate earnings, and strong
investor demand for equity mutual funds propelled the U.S. stock
market to new highs during the Fund's fiscal year.
o The Fund's net assets nearly doubled during the year, from $35.1
million to $68.1 million, reflecting stock price appreciation and over
3,000 new shareholder accounts.
o The Fund continues to employ a rigorous value-oriented approach to
stock selection, emphasizing below-average price/earnings ratios
combined with positive momentum in earnings revisions.
2
<PAGE>
LETTER FROM THE FUND'S PRESIDENT
Dear Shareholders,
Scudder Value Fund had a great year, with net assets nearly doubling
from $35.1 to $68.1 million. This increase reflected a net cash inflow of $22
million and a strong stock market. Stock prices rallied sharply in 1995 after a
lackluster 1994, propelled by a confluence of positive economic and
market-related factors. Moreover, stock market corrections in this period have
been few and unusually mild. Given this environment, we are pleased with the
solid performance of Scudder Value Fund, which returned 23.62% for the fiscal
year just ended.
After such impressive stock market gains -- and given the late stage of
the economic cycle -- some market correction would be natural. This might be
precipitated by growing investor recognition that a mild slowdown in economic
activity next year, resulting from the lack of corporate pricing power and a
reduction in consumer spending, is likely. With its focus on undervalued
securities, Scudder Value Fund should provide relatively strong returns in such
an environment, because historically the Fund's investments have been less
sensitive to earnings disappointments than stocks with higher multiples. Despite
near-term uncertainties, it is important to keep in mind that the longer-term
outlook for U.S. equities is favorable, characterized by low inflation, low
interest rates, and strong profit growth.
We would also like to take this opportunity to announce that on October
6, 1995, we introduced another value-oriented fund to the Scudder family of
funds: Scudder Small Company Value Fund. The difference between this new fund
and Scudder Value Fund is that its investment focus will be on small companies.
Further, its investment approach will rely heavily on a proprietary quantitative
discipline. For more information about Scudder Small Company Value Fund and
other investment products and services, see page 26. If you have questions about
Scudder Value Fund, please call a Scudder Investor Relations representative at
1-800-225-2470.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Value Fund
3
<PAGE>
Scudder Value Fund
Performance Update as of September 30, 1995
- -----------------------------------------------------------------
Growth of a $10,000 Investment
- -----------------------------------------------------------------
Scudder Value Fund
- ----------------------------------------
Total Return
Period Growth --------------
Ended of Average
9/30/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $12,362 23.62% 23.62%
Life of
Fund* $14,043 40.43% 13.15%
S&P 500 Index
- --------------------------------------
Total Return
Period Growth --------------
Ended of Average
9/30/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $12,975 29.75% 29.75%
Life of
Fund* $14,473 44.73% 14.43%
*The Fund commenced operations on December 31, 1992.
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Scudder Value Fund
Year Amount
- ----------------------
12/92* $10,000
3/93 $10,933
9/93 $11,150
3/94 $10,830
9/94 $11,360
3/95 $12,070
9/95 $14,043
S&P 500 Index
Year Amount
- ----------------------
12/92* $10,000
3/93 $10,437
9/93 $10,758
3/94 $10,590
9/94 $11,155
3/95 $12,239
9/95 $14,473
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>
1993* 1994 1995
-------------------------
Net Asset Value... $13.38 $13.08 $15.87
Income Dividends.. -- .11 .12
Capital Gains
Distributions..... -- .43 .13
Fund Total
Return (%)........ 11.50 1.88 23.62
Index Total
Return (%)........ 7.56 3.68 29.75
</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.
If the Adviser had not maintained the Fund's expenses, the average annual
total return for the one year and life of Fund periods would have been
lower.
4
<PAGE>
Portfolio Summary as of September 30, 1995
- ---------------------------------------------------------------------------
Diversification
- ---------------------------------------------------------------------------
Equity Securities 100% The Fund's cash position was
==== eliminated in the third quarter of
1995, after months of strong inflows
had built it up to nearly 20%.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Sectors
- --------------------------------------------------------------------------
Financial 21%
Manufacturing 14%
Technology 13% The Fund's holdings in the
Energy 9% financial, technology, and
Communications 7% healthcare sectors contributed
Health 6% greatly to the Fund's strong
Consumer Staples 6% total return.
Consumer Discretionary 5%
Utilities 5%
Other 14%
----
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. Philips NV.
Manufacturer of electrical equipment
2. Sterling Software Inc.
Computer software products
3. Tele Danmark A/S
Telecommunication services
4. Intel Corp.
Semiconductor memory circuits
5. TRW Inc.
Defense electronics, automotive parts and systems
6. Destec Energy Inc.
Non-utility producer of cogeneration and coal gasification power
7. Philip Morris Companies Inc.
Tobacco, food products and brewing
8. Sara Lee Corp.
Processed foods maker
9. Allstate Corp.
Property, liability and life insurance company
10. Acclaim Entertainment Inc.
Developer of video game cartridges
The 36.4% gain in Destec Energy during the year was particularly
gratifying, given its -54.5% return in fiscal 1994.
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
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
Thanks to declining interest rates, rising profits, and strong demand
by mutual fund investors, U.S. stock returns exceeded virtually everyone's
expectations during the 12 months ended September 30, 1995. For the 12-month
period, Scudder Value Fund returned 23.62%, based on a $2.79 increase in net
asset value to $15.87 at the end of September and $0.25 per share in income and
capital gain distributions. This compares with a 29.75% total return for the
unmanaged S&P 500 Index and 25.87% on average for the 550 growth funds tracked
by Lipper Analytical Services.
The average U.S. stock in the Fund was up 30% for the 12-month period.
The difference between this return and the return for the total portfolio is
explained by the Fund's cash position and the underperformance of some foreign
holdings. We expect the impact of neither to be as significant going forward.
For the year ended September 30, U.S. stocks outperformed foreign stocks in
general by one of the largest margins ever. We believe that foreign stocks have
some catching up to do and that the Fund's 18% position in foreign holdings will
likely boost returns in the future. The Fund's cash position, as high as 20% of
the portfolio during the period, reflected the fact that strong inflows doubled
the Fund's size over the course of the fiscal year. Typically, we seek to use
such flows to the Fund's advantage by adding to existing holdings during market
dips. However, there were no significant roll-backs in the market during the
period. The monthly string of advances through September without a meaningful
decline was the longest in some forty years. It is unlikely we will experience a
similar combination -- a doubling of the Fund's assets under management and such
persistently higher markets -- in the near future.
Financial Stocks Provide Largest Gains
As mentioned, the U.S. stocks in the Fund generally performed well, led
by holdings in the financial sector, our most significant weighting. The Fund's
sector emphasis contrasts with that of most growth-oriented funds, whose
superior performance for the year was largely due to heavy exposure to the
spectacularly performing technology sector. Financial companies may lack the
excitement of the latest new software company, but the stock returns of the
financial sector over the last 12 months were exciting -- up 42% on average. The
performance of the Fund's financial stocks (21% of portfolio holdings as of
September 30) supports an underlying tenet of our investment strategy: Strong
returns can be produced by relatively staid companies if their stocks are
sufficiently undervalued.
6
<PAGE>
Included among the better-performing financial stocks were Dean Witter,
Discover and Co. and Student Loan Marketing Association (Sallie Mae). A year
ago, Dean Witter, Discover shares were trading at seven times what the company
was likely to earn in 1995, and Student Loan Marketing was under a cloud
associated with losing market share to a government direct loan program. Dean
Witter, Discover (up 50%) saw continued strength in both of its businesses this
year: credit cards and brokerage. With proposals to limit government gaining
steam in Congress, Sallie Mae shares appreciated 64% over the last year and
still sell at only 12 times 1995's estimate.
Drug stocks were also good performers during the period, and the Fund's
most important pharmaceutical position, Eli Lilly, outperformed the group as a
whole. Investors grew to appreciate the wisdom of the company's strategic
alliances and restructurings as a means to focus on "disease management" versus
merely treating symptoms.
Technology was clearly the strongest-performing market group. Important
contributors to the Fund in this area were Intel and Texas Instruments. Other
outperforming holdings included airlines and utilities. Leading the Fund's
utility holdings was the turnaround in Destec Energy, which was gratifying,
given that it was one of the poorest performers last year. Lagging groups
included the Fund's steel, auto-related, and non-U.S. holdings. Shares of steel
stocks were reduced during the period due to declining earnings expectations. We
believe the Fund's auto-related and foreign holdings still offer excellent
value.
Looking Forward
The Fund's primary selection tool is a rigorous valuation discipline.
Stocks attractively ranked by our valuation model typically have below-average
price/earnings ratios. A secondary criterion is the direction of earnings
estimate revisions. A company must demonstrate that an improvement in earnings
revisions is under way or clearly imminent before its stocks can pass our
"directional" screen.
Financial stocks, especially insurance stocks, continue to enjoy the
best valuations among companies with positive earnings revisions. Despite strong
performance this past year, the financial stocks held in the Fund are still
selling at large P/E discounts to the market and have solid earnings prospects
that are not solely dependent on falling interest rates.
7
<PAGE>
The technology sector is controversial in that while strong upward
earnings revisions are occurring, stock prices reflect the sector's positive
outlook. Our conservative valuation discipline dictates extreme selectivity.
Technology is inherently a volatile group, and emotional selling could very well
surface in the coming months, providing some buying opportunities for the Fund.
For the time being, we are content with holdings such as Intel (at 12 times 1996
earnings) and IBM (at less than 8 times). These multiples appear to reflect more
skepticism than enthusiasm.
Some of the more recent additions to the Fund and their 1996 estimated
earnings multiples are as follows:
P/E (based on est. '96 EPS)
Champion International 5x
Royal Caribbean Cruises 9x
Bergen Brunswig 11x
Allstate 9x
These multiples compare favorably with a P/E of 17x for the S&P 500 Index, based
on our 1996 earnings estimates.
Our outlook for a mild slowdown in economic activity may lead to some
temporary stock market disappointment. However, we believe this Fund's value
approach, which is reflected in a broad list of holdings with average- to
above-average growth prospects and priced at modest relative valuations,
positions the Fund well for such an environment.
Sincerely,
Your Portfolio Management Team
/s/Donald E. Hall /s/William J. Wallace
Donald E. Hall William J. Wallace
Scudder Value Fund: A Team Approach to Investing
Scudder Value 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 Donald E. Hall has had responsibility for Scudder
Value Fund's day-to-day management since its inception in 1992. Don, who joined
Scudder in 1982, has 12 years of experience in the value style of investing.
William J. Wallace, Portfolio Manager, has been a member of Scudder Value Fund's
team since 1992 and has 14 years of investment experience.
8
<PAGE>
<PAGE>
INVESTMENT PORTFOLIO as of September 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
-------------------------------------------------------------------------
0.6% CONVERTIBLE BONDS
-------------------------------------------------------------------------
MEDIA
Cable Television 1,250,000 Rogers Communications Inc., LYON, 5/20/13
(Cost $499,855)........................ 426,563
------------
-------------------------------------------------------------------------
0.5% CONVERTIBLE PREFERRED STOCKS
-------------------------------------------------------------------------
Shares
-------------------------------------------------------------------------
FINANCIAL
Other Financial Companies 12,200 California Federal Bank "A" Non#Cum. 7.75%
(Cost $ 253,627)....................... 295,850
------------
-------------------------------------------------------------------------
98.9% COMMON STOCKS
-------------------------------------------------------------------------
CONSUMER DISCRETIONARY 5.6%
Department & Chain Stores 1.7% 10,000 J.C. Penney Co., Inc. .................. 496,250
35,000 Price/Costco Inc.* ..................... 599,375
------------
1,095,625
------------
Hotels & Casinos 1.7% 9,100 Carnival Corp., Class A ................ 218,400
36,300 Royal Caribbean Cruises Ltd. ........... 880,275
------------
1,098,675
------------
Recreational Products 2.2% 57,600 Acclaim Entertainment Inc.* ............ 1,483,200
------------
CONSUMER STAPLES 5.6%
Alcohol & Tobacco 2.7% 21,500 Philip Morris Companies Inc. ........... 1,795,250
------------
Food & Beverage 2.9% 10,400 ConAgra Inc. ........................... 412,100
50,400 Sara Lee Corp. ......................... 1,499,400
------------
1,911,500
------------
HEALTH 6.0%
Biotechnology 0.2% 4,810 Guidant Corp. .......................... 140,692
------------
Hospital Management 0.8% 30,400 Tenet Healthcare Corp.* ................ 528,200
------------
Medical Supply & Specialty 1.1% 33,900 Bergen Brunswig Corp. "A" .............. 724,612
------------
Pharmaceutical 3.9% 10,000 Astra AB "A" (Free) .................... 358,428
26,700 BioChem Pharma, Inc.* .................. 851,062
12,422 Eli Lilly Co. .......................... 1,116,427
4,900 Schering#Plough Corp. .................. 252,350
------------
2,578,267
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
---
9
<PAGE>
SCUDDER VALUE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% of Market
Portfolio Shares Value ($)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMUNICATIONS 6.9%
Telephone/Communications 48,100 Century Telephone Enterprises ............... 1,461,037
13,600 Sprint Corp. ................................ 476,000
80,600 Tele Danmark A/S (ADR) ...................... 2,085,525
17,500 Telefonos de Mexico S.A. de C.V. "L" (ADR) .. 555,625
-----------
4,578,187
-----------
FINANCIAL 20.5%
Banks 8.3% 6,000 BankAmerica Corp. ........................... 359,250
6,800 Bankers Trust New York Corp. ................ 477,700
12,000 Chemical Banking Corp. ...................... 730,500
7,600 J.P. Morgan & Co., Inc. ..................... 588,050
25,300 Mellon Bank Corp. ........................... 1,129,013
9,200 NBD Bancorp, Inc. ........................... 351,900
22,800 Norwest Corp. ............................... 746,700
27,800 State Street Boston Corp. ................... 1,112,000
-----------
5,495,113
-----------
Insurance 8.9% 26,800 AMBAC Inc. .................................. 1,179,200
42,100 Allstate Corp. .............................. 1,489,287
9,800 EXEL, Ltd. .................................. 569,625
2,300 MBIA Inc. ................................... 162,150
41,200 PartnerRe Holdings Ltd. ..................... 1,019,700
27,400 UNUM Corp. .................................. 1,445,350
-----------
5,865,312
-----------
Other Financial Companies 2.6% 9,400 Federal National Mortgage Association ....... 972,900
14,100 Student Loan Marketing Association .......... 761,400
-----------
1,734,300
-----------
Real Estate 0.7% 13,900 Meditrust SBI (REIT) ........................ 481,288
-----------
MEDIA 0.2%
Cable Television 13,909 Rogers Communications Inc. "B"* ............. 137,129
-----------
SERVICE INDUSTRIES 3.8%
Environmental Services 1.2% 87,600 Laidlaw Inc. Class B ........................ 766,500
-----------
Investment 0.7% 7,900 Dean Witter, Discover & Co. ................. 444,375
-----------
Miscellaneous Consumer
Services 0.4% 6,700 H & R Block Inc. ............................ 254,600
-----------
Printing/Publishing 1.5% 30,700 Deluxe Corp. ................................ 1,016,937
-----------
DURABLES 4.5%
Aerospace 1.6% 3,749 Lockheed Corp. .............................. 251,652
-----------
8,800 United Technologies Corp. ................... 777,700
-----------
1,029,352
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ----
10
<PAGE>
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% of Market
Portfolio Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Automobiles 1.4% 2,000 Chrysler Corp. ............................. 106,000
7,600 Ford Motor Co. ............................. 236,550
12,700 Magna International, Inc. "A" .............. 573,088
-----------
915,638
-----------
Tires 1.5% 42,600 Cooper Tire & Rubber Co. ................... 1,033,050
-----------
MANUFACTURING 13.9%
Chemicals 1.7% 23,100 Sigma#Aldrich Corp. ........................ 1,120,350
-----------
Containers & Paper 1.5% 18,500 Champion International Corp. ............... 996,687
-----------
Diversified Manufacturing 3.4% 27,000 Canadian Pacific Ltd. ...................... 431,936
24,700 TRW Inc. ................................... 1,837,063
-----------
2,268,999
-----------
Electrical Products 4.2% 8,600 Mabuchi Motor Co., Ltd. .................... 507,900
46,800 Philips NV (New York shares) ............... 2,281,500
-----------
2,789,400
-----------
Industrial Specialty 2.6% 1,000 Schindler Holdings AG (PC) ................. 886,870
78,800 Wandel & Goltermann Technologies, Inc.* .... 807,700
-----------
1,694,570
-----------
Specialty Chemical 0.5% 7,900 Betz Laboratories Inc. ..................... 322,912
-----------
TECHNOLOGY 13.3%
Computer Software 3.2% 46,400 Sterling Software Inc.* .................... 2,111,200
-----------
EDP Peripherals 1.3% 71,300 Intergraph Corp.* .......................... 864,513
-----------
Electronic Data Processing 0.6% 4,300 International Business Machines Corp. ...... 405,813
-----------
Office/Plant Automation 2.0% 18,900 Cisco Systems, Inc.* ....................... 1,304,100
-----------
Semiconductors 6.2% 21,800 Atmel Corp.* ............................... 735,750
34,400 Intel Corp. ................................ 2,068,300
16,400 Texas Instruments Inc. ..................... 1,309,950
-----------
4,114,000
-----------
ENERGY 8.7%
Engineering 1.3% 7,400 VA Technologie AG .......................... 852,132
-----------
Oil & Gas Production 0.5% 9,600 Imperial Oil Ltd. .......................... 357,600
-----------
Oil Companies 6.9% 5,300 Amoco Corp. ................................ 339,862
9,900 Exxon Corp. ................................ 715,275
12,900 Mobil Corp. ................................ 1,285,163
23,100 Repsol SA (ADR) ............................ 733,425
10,803 Total SA (ADR) ............................. 325,440
64,400 YPF SA "D" (ADR) ........................... 1,159,200
-----------
4,558,365
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
----
11
<PAGE>
SCUDDER VALUE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% of Market
Portfolio Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
METALS & MINERALS 1.6%
Steel & Metals 23,500 Allegheny Ludlum Corp. ..................... 478,812
12,200 Nucor Corp. ................................ 545,950
-----------
1,024,762
-----------
CONSTRUCTION 0.4%
Forest Products 11,900 Louisiana#Pacific Corp. .................... 287,088
-----------
TRANSPORTATION 3.3%
Airlines 3.1% 10,700 AMR Corp.* ................................. 771,738
46,100 America West Airlines, Inc.* ............... 714,550
17,500 ValueJet Airlines Inc.* .................... 570,938
-----------
2,057,226
-----------
Marine Transportation 0.2% 5,800 Teekay Shipping Corp.* ..................... 139,200
-----------
UTILITIES 4.6%
Electric Utilities 121,700 Destec Energy Inc.* ........................ 1,825,500
25,200 Public Service Co. of New Mexico* .......... 412,650
31,100 TNP Enterprises Inc. ....................... 552,025
9,200 Unicom Corp. ............................... 278,300
-----------
3,068,475
-----------
TOTAL COMMON STOCKS
(Cost $57,739,574) ........................ 65,445,194
-----------
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO # 100.0%
(Cost $58,493,056) (a) .................... 66,167,607
===========
<FN>
(a) The cost for federal income tax purposes was $58,482,598. At September 30, 1995, net unrealized appreciation
for all securities based on tax cost was $7,685,009. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of market value over tax cost of $8,870,957 and aggregate gross
unrealized depreciation for all securities in which there was an excess of tax cost over market value of
$1,185,948.
* Non#income producing security.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ----
12
<PAGE>
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
- ------------------------------------------------------------------------------------------------
At September 30, 1995, outstanding written call options were as follows (Note A):
<CAPTION>
NUMBER OF EXPIRATION STRIKE MARKET
CONTRACTS DATE PRICE VALUE ($)
------------------------------------------------------------
<S> <C> <C> <C> <C>
S&P 500 Index ............. 200 Oct. 95 590 75,000
------
Total outstanding written options (Premiums received $91,897) ............ 75,000
======
</TABLE>
<TABLE>
Transactions in written call options during the year ended September 30, 1995 were:
<CAPTION>
PREMIUMS
NUMBER OF CONTRACTS RECEIVED ($)
-----------------------------------------------
<S> <C> <C>
Outstanding at
September 30, 1994 .................. -- --
Contracts written ................... 1,825 1,178,993
Contracts expired ................... (100) (15,224)
Contracts closed ................... (1,265) (1,030,403)
Contracts exercised ................. (260) (41,469)
-----------------------------------------------
Outstanding at
September 30, 1995 .................. 200 91,897
=== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
----
13
<PAGE>
SCUDDER VALUE FUND
FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
---------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
---------------------------------------------------
<TABLE>
SEPTEMBER 30, 1995
------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $58,493,056)
(Note A) ........................................ $ 66,167,607
Cash ................................................ 568
Receivables:
Investments sold ................................ 7,649,738
Dividends and interest .......................... 89,340
Fund shares sold ................................ 66,233
Deferred organization expense (Note A) .............. 24,853
------------
Total assets ................................ 73,998,339
LIABILITIES
Payables:
Investments purchased ........................... $ 109,193
Fund shares redeemed ............................ 55,283
Note payable (Note D) ........................... 5,592,000
Interest payable on note (Note D) .............. 2,718
Accrued management fee (Note C) ................. 31,923
Other accrued expenses (Note C) ................. 57,810
Written options, at market (premiums
received $91,897) (Note A) .................. 75,000
-----------
Total liabilities ........................... 5,923,927
------------
Net assets, at market value ......................... $ 68,074,412
============
NET ASSETS
Net assets consist of:
Undistributed net investment income ............. $ 102,110
Unrealized appreciation on:
Investments ................................. 7,674,551
Options ..................................... 16,897
Accumulated net realized gain ................... 2,557,715
Shares of beneficial interest ................... 42,884
Additional paid#in capital ...................... 57,680,255
------------
Net assets, at market value ......................... $ 68,074,412
============
NET ASSET VALUE, offering and redemption price per
share ($68,074,412 / 4,288,446 outstanding
shares of beneficial interest, $.01 par value,
unlimited number of shares authorized) ......... $ 15.87
=======
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ----
14
<PAGE>
FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
- --------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------
<TABLE>
YEAR ENDED SEPTEMBER 30, 1995
- --------------------------------------------------
<S> <C>
INVESTMENT INCOME
Income:
Dividends ....................................... $ 1,010,746
Interest ........................................ 411,465
-----------
1,422,211
Expenses:
Management fee (Note C) ......................... $ 257,942
Services to shareholders (Note C) ............... 152,097
Custodian and accounting fees (Note C)........... 56,129
Trustees' fees (Note C) ......................... 43,076
Reports to shareholders ......................... 35,499
Registration .................................... 22,984
Auditing ........................................ 26,258
Legal ........................................... 12,243
Amortization of organization expense (Note A) ... 8,932
Interest expense (Note D) ....................... 2,718
Other ........................................... 13,064 630,942
-----------------------
Net investment income ........................... 791,269
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments ................................. 3,810,528
Options ..................................... (1,381,331)
Futures ..................................... 338,400 2,767,597
----------
Net unrealized appreciation during the period on:
Investments ................................. 7,347,398
Options ..................................... 16,897 7,364,295
-----------------------
Net gain on investment transactions ............. 10,131,892
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS................................ $ 10,923,161
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
----
15
<PAGE>
SCUDDER VALUE FUND
- -------------------------------------------------------------------------------
----------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
----------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-----------------------------
INCREASE (DECREASE) IN NET ASSETS 1995 1994
-----------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income .............................. $ 791,269 $ 384,856
Net realized gain from investment
transactions ................................... 2,767,597 486,834
Net unrealized appreciation (depreciation) on
investment transactions during the period ...... 7,364,295 (213,830)
------------ ------------
Net increase in net assets resulting from
operations ..................................... 10,923,161 657,860
------------ ------------
Distributions to shareholders from:
Net investment income ($.12 and $.11
per share, respectively) ....................... (309,372) (271,039)
------------ ------------
Net realized gains ($.13 and $.43
per share, respectively) ....................... (336,274) (1,059,888)
------------ ------------
Fund share transactions:
Proceeds from shares sold .......................... 48,559,462 17,585,449
Net asset value of shares issued to
shareholders in reinvestment of distributions .. 599,884 1,279,362
Cost of shares redeemed ............................ (26,461,130) (11,604,314)
------------ ------------
Net increase in net assets from Fund share
transactions ................................... 22,698,216 7,260,497
INCREASE IN NET ASSETS ............................. 32,975,731 6,587,430
Net assets at beginning of period .................. 35,098,681 28,511,251
NET ASSETS AT END OF PERIOD (including
undistributed net investment income of
$102,110 and $314,180, respectively) ........... $ 68,074,412 $ 35,098,681
============ ============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period .......... 2,683,720 2,131,497
------------ ------------
Shares sold ........................................ 3,327,977 1,354,224
Shares issued to shareholders in
reinvestment of distributions .................. 47,124 99,950
Shares redeemed .................................... (1,770,375) (901,951)
------------ ------------
Net increase in Fund shares ........................ 1,604,726 552,223
------------ ------------
Shares outstanding at end of period ................ 4,288,446 2,683,720
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
- ----
16
<PAGE>
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 31, 1992
YEARS ENDED SEPTEMBER 30, (COMMENCEMENT
---------------------------- OF OPERATIONS) TO
1995 1994 SEPTEMBER 30, 1993
---------------------------- -------------------
<S> <C> <C> <C>
Net asset value, beginning of period ................................... $13.08 $13.38 $12.00
------ ------ ------
Income from investment operations:
Net investment income (a) .......................................... .18 .13 .10
Net realized and unrealized gain on investments .................... 2.86 .11 1.28
------ ------ ------
Total from investment operations ....................................... 3.04 .24 1.38
------ ------ ------
Less distributions from:
Net investment income .............................................. (.12) (.11) --
Net realized gains on investment transactions ...................... (.13) (.43) --
------ ------ ------
Total distributions .................................................... (.25) (.54) --
------ ------ ------
Net asset value, end of period ......................................... $15.87 $13.08 $13.38
====== ====== ======
TOTAL RETURN (%) ....................................................... 23.62 1.88 11.50**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) ................................. 68 35 29
Ratio of operating expenses, net to average daily net assets (%) (a) ... 1.25 1.25 1.25*
Ratio of net investment income to average daily net assets (%) ......... 1.57 1.16 1.56*
Portfolio turnover rate (%) ............................................ 98.2 74.6 60.8*
(a) Reflects a per share amount of management fee and
other fees not imposed .......................................... $ .02 $ .04 $ .06
Operating expense ratio including expenses
reimbursed, management fee and other expenses
not imposed (%) ................................................. 1.44 1.61 2.16*
<FN>
* Annualized
** Not annualized
</FN>
</TABLE>
----
17
<PAGE>
SCUDDER VALUE FUND NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- -------------------------------------------------------------------------------
Scudder Value 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.
- ----
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
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 wrote call
options on financial instruments 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 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
----
19
<PAGE>
SCUDDER VALUE FUND
- -------------------------------------------------------------------------------
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.
FUTURES CONTRACTS. A futures contract is an agreement between a buyer
or seller and an established futures exchange or its clearinghouse in
which the buyer or seller agrees to take or make a delivery of a
specific amount of an item at a specified price on a specific date
(settlement date). During the period, the Fund purchased securities
index futures as a temporary substitute for purchasing selected
investments.
Upon entering into a futures contract, the Fund is required to deposit
with a financial intermediary an amount ("initial margin") equal to a
certain percentage of the face value indicated in the futures contract.
Subsequent payments ("variation margin") are made or received by the
Fund each day, dependent on the daily fluctuations in the value of the
underlying security, and are recorded for financial reporting purposes
as unrealized gains or losses by the Fund. When entering into a closing
transaction, the Fund will realize a gain or loss equal to the
difference between the value of the futures contract to sell and the
futures contract to buy. Futures contracts are valued at the most
recent settlement price.
Certain risks may arise upon entering into futures contracts including
the risk that an illiquid secondary market will limit the Fund's
ability to close out a futures contract prior to the settlement date
and that a change in the value of a futures contract may not correlate
exactly with changes in the value of the securities or currencies
hedged. When utilizing futures contracts to hedge, the Fund gives up
the opportunity to profit from favorable price movements in the hedged
positions during the term of the contract.
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.
- ----
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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.
In addition, from November 1, 1994 through September 30, 1995, the Fund
incurred approximately $136,302 of net long-term capital losses which
the Fund intends to elect to defer and treat as arising in the fiscal
year ended September 30, 1996.
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.
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 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.
ORGANIZATION COSTS. Costs incurred by the Fund in connection with its
organization and initial registration of shares have been deferred and
are being amortized on a straight-line basis over a five-year period.
Other. Investment security transactions are accounted for on a
trade-date basis. Dividend income and distributions to shareholders
are recorded on the ex-dividend date. Interest income is recorded on an
accrual basis. Original issue discounts are accreted for both tax and
financial reporting purposes.
----
21
<PAGE>
SCUDDER VALUE FUND
- --------------------------------------------------------------------------------
B. PURCHASES AND SALES OF SECURITIES
- --------------------------------------------------------------------------------
During the year ended September 30, 1995, purchases and sales of
investment securities (excluding short-term investments) aggregated
$65,934,349 and $43,629,606, respectively.
The aggregate face value of futures contracts opened and closed during
the year ended September 30, 1995 was $14,768,600.
C. RELATED PARTIES
- --------------------------------------------------------------------------------
Under the Fund's Investment Management Agreement (the "Agreement") with
Scudder, Stevens & Clark, Inc. (the "Adviser"), the Fund pays the
Adviser a fee equal to an annual rate of 0.70% of the Fund's average
daily net assets, computed and accrued daily and payable monthly. As
manager of the assets of the Fund, the Adviser directs the investments
of the Fund in accordance with its investment 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 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. In addition, the Adviser has agreed not
to impose all or a portion of its management fee until January 31, 1996
in order to maintain the annualized expenses of the Fund at not more
than 1.25% of average daily net assets. For the year ended September
30, 1995, the Adviser did not impose a portion of its management fee
amounting to $95,355, and the amount imposed amounted to $257,942.
Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the
Adviser, is the transfer, dividend paying and shareholder service agent
for the Fund. For the year ended September 30, 1995, the amount charged
to the Fund by SSC aggregated $125,734, of which $14,964 is unpaid at
September 30, 1995.
Effective October 24, 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 year ended September 30, 1995, the amount charged to the
- ----
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Fund by SFAC aggregated $35,363, of which $6,250 is unpaid at September
30, 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 year ended September 30, 1995,
Trustees' fees aggregated $43,076.
D. SHORT-TERM DEBT
- ------------------------------------------------------------------------
During the year ended September 30, 1995, the Fund borrowed an amount
from a bank at the existing prime rate. The arrangement with the
bank allows the Fund to borrow a maximum amount based on the Fund's net
asset value. Borrowings outstanding at the end of the period amounted
to $5,592,000.
During the year ended September 30, 1995, the weighted average
outstanding daily balance of bank loans (based on the number of
days the loans were outstanding) was $5,592,000 with a weighted average
interest rate of 8.75%. Interest expense for the year ended September
30, 1995 was $2,718 (less than $.01 per share).
----
23
<PAGE>
SCUDDER VALUE FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE TRUSTEES OF SCUDDER EQUITY TRUST AND THE SHAREHOLDERS OF SCUDDER
VALUE FUND:
We have audited the accompanying statement of assets and liabilities of
Scudder Value Fund, including the investment portfolio, as of September
30, 1995, 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 two years in the period then ended and for the period December
31, 1992 (commencement of operations) to September 30, 1993. 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, 1995 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 Value Fund as of September 30, 1995, 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 two years in the period then ended
and for the period December 31, 1992 (commencement of operations) to
September 30, 1993, in conformity with generally accepted accounting
principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
November 3, 1995
- ----
24
<PAGE>
TAX INFORMATION
Pursuant to section 854 of the Internal Revenue Code, the Fund designates
$780,043 as dividends eligible for the dividends received deduction for
corporations for the year ended September 30, 1995.
OFFICERS AND TRUSTESS
Daniel Pierce*
President and Trustee
Paul Bancroft III
Trustee; Venture Capitalist and Consultant
Thomas J. Devine
Trustee; Consultant
David S. Lee*
Vice President and Trustee
Douglas M. Loudon*
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.
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
Jerard K. Hartman*
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
<PAGE>
INVESTMENT PRODUTS AND SERVICES
<TABLE>
<CAPTION>
The Scudder Family of Funds
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<C> <C>
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 Small Company Value Fund
Scudder Growth and Income Fund Scudder Value 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 Treasurers Trust(TM)++
Scudder Fund, Inc.
-----------------------------------------------------------------------------------------------------------------
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +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
<PAGE>
HOW TO CONTACT SCUDDER
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
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
non-profit organizations and service needs of banks and
trusts that uses certain portfolios other institutions, call
of Scudder Fund, Inc.* ($100,000 1-800-854-8525.
minimum), call 1-800-541-7703.
-------------------------------------------------------------------------------------------------------------
</TABLE>
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
<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 37 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.
<PAGE>
SCUDDER EQUITY TRUST
PART C. OTHER INFORMATION
<TABLE>
<S> <C> <C>
Item 24. Financial Statements and Exhibits
a. Financial Statements
Included in Part A of this Registration Statement:
For Scudder Capital Growth Fund:
Financial Highlights for the ten fiscal years ended September 30, 1994.
For Scudder Value Fund:
Financial Highlights for the period December 31, 1992 (commencement of operations) to
September 30, 1994 and for the two fiscal years ended September 30, 1995.
Included in Part B of this Registration Statement:
For Scudder Capital Growth Fund:
Investment Portfolio as of September 30, 1995
Statement of Assets and Liabilities as of September 30, 1995
Statement of Operations for the fiscal year ended September 30, 1995
Statements of Changes in Net Assets for the two fiscal years ended September 30, 1995
Financial Highlights for the ten fiscal years ended September 30, 1995
Notes to Financial Statements
Report of Independent Accountants
For Scudder Value Fund:
Investment Portfolio as of September 30, 1995
Statement of Assets and Liabilities as of September 30, 1995
Statement of Operations for the fiscal year ended September 30, 1995
Statements of Changes in Net Assets for the two fiscal years ended September 30, 1995
Financial Highlights for the period December 31, 1992 (commencement of operations) to
September 30, 1993 and for the two fiscal years ended September 30, 1995
Notes to Financial Statements
Report of Independent Accountants
Statements, schedules and historical information other than those listed above have been omitted since they
are either not applicable or are not required.
b. Exhibits:
1. (a) Amended and Restated Declaration of Trust dated March 17, 1988.
(Incorporated by reference to Exhibit 1(a) to Post-Effective
Amendment No. 12 to this Registration Statement.)
(b) Establishment and Designation of Series dated December 15, 1986.
(Incorporated by reference to Exhibit 1(b) to Post-Effective
Amendment No. 10 to this Registration Statement.)
Part C - Page 1
<PAGE>
(c) Amended Establishment and Designation of Series dated May 4, 1987.
(Incorporated by reference to Exhibit 1(c) to Post-Effective
Amendment No. 11 to this Registration Statement.)
(d) Certificate of Amendment dated December 13, 1990.
(Incorporated by reference to Exhibit 1(d) to Post-Effective
Amendment No. 15 to this Registration Statement.)
(e) Establishment and Designation of Series dated October 6, 1992.
(Incorporated by reference to Exhibit 1(e) to Post-Effective
Amendment No. 16 to this Registration Statement.)
2. (a) By-Laws as of October 16, 1985.
(Incorporated by reference to Exhibit 2(a) to Post-Effective
Amendment No. 8 to this Registration Statement.)
(b) Amendment to the By-Laws of Registrant as amended through December
9, 1985.
(Incorporated by reference to Exhibit 2(b) to Post-Effective
Amendment No. 8 to this Registration Statement.)
(c) Amendment to the Registrant's By-Laws dated December 12, 1991.
(Incorporated by reference to Exhibit 2(c) to Post-Effective
Amendment No. 16 to this Registration Statement.)
(d) Amendment to the Registrant's By-Laws dated September 17, 1992.
(Incorporated by reference to Exhibit 2(d) to Post-Effective
Amendment No. 16 to this Registration Statement.)
3. Inapplicable.
4. Specimen certificate representing shares of beneficial interest
($.01 par value).
(Incorporated by reference to Exhibit 4 to Post-Effective Amendment
No. 12 to this Registration Statement.)
5. (a) Investment Advisory Agreement between the Registrant (on behalf of
Scudder Capital Growth Fund) and Scudder, Stevens & Clark Ltd. dated
March 31, 1986.
(Incorporated by reference to Exhibit 5 to Post-Effective Amendment
No. 9 to this Registration Statement.)
(b) Investment Advisory Agreement between the Registrant (on behalf of
Scudder Equity Income Fund) and Scudder, Stevens & Clark Ltd. dated
May 1, 1987.
(Incorporated by reference to Exhibit 5(b) to Post-Effective
Amendment No. 12 to this Registration Statement.)
(c) Investment Management Agreement between Scudder Capital Growth Fund
and Scudder, Stevens & Clark, Inc. dated December 14, 1990.
(Incorporated by reference to Exhibit 5(c) to Post-Effective
Amendment No. 15 to this Registration Statement.)
Part C - Page 2
<PAGE>
(d) Investment Management Agreement between the Registrant (on behalf of
Scudder Value Fund) and Scudder, Stevens & Clark, Inc. dated
December 28, 1992.
(Incorporated by reference to Exhibit 5(d) to Post-Effective
Amendment No. 20 to this Registration Statement.)
6. Underwriting Agreement between the Registrant and Scudder Fund
Distributors, Inc. dated May 1, 1987.
(Incorporated by reference to Exhibit 6(a) to Post-Effective
Amendment No. 12 to this Registration Statement.)
7. Inapplicable.
8. (a)(1) Custodian Agreement between the Registrant and State Street Bank and
Trust Company dated October 1, 1982.
(Incorporated by reference to Exhibit 8(a)(1) to Post-Effective
Amendment No. 6 to this Registration Statement.)
(a)(2) Fee schedule for Exhibit 8(a)(l).
(Incorporated by reference to Exhibit 8(a)(2) to Post-Effective
Amendment No. 12 to this Registration Statement.)
(a)(3) Amendment to Custodian Contract dated March 31, 1986.
(Incorporated by reference to Exhibit 8(a)(3) to Post-Effective
Amendment No. 9 to this Registration Statement.)
(a)(4) Amendment to Custodian Contract dated September 14, 1987.
(Incorporated by reference to Exhibit 8(a)(4) to Post-Effective
Amendment No. 12 to this Registration Statement.)
(a)(5) Amendment to Custodian Contract dated September 16, 1988.
(Incorporated by reference to Exhibit 8(a)(5) to Post-Effective
Amendment No. 12 to this Registration Statement.)
(a)(6) Amendment to Custodian Contract dated December 13, 1990.
(Incorporated by reference to Exhibit 8(a)(6) to Post-Effective
Amendment No. 15 to this Registration Statement.)
(a)(7) Fee schedule for Exhibit 8(a)(1) is filed herein.
(Incorporated by reference to Exhibit 8(a)(7) to Post-Effective
Amendment No. 22 to this Registration Statement.)
(b)(1) Agency Agreement between State Street Bank and Trust Company and The
Bank of New York, London office dated January 1, 1979.
(Incorporated by reference to Exhibit 9(c)(1) to Amendment No. 2 to
Registration Statement on Form N-2.)
(b)(2) Fee schedule for Exhibit 8(c)(1).
(Incorporated by reference to Exhibit 9(c)(2) to Amendment No. 2 to
Registration Statement on Form N-2.)
(c)(1) Subcustody Agreement between State Street Bank and the Chase
Manhattan Bank, N.A. dated September 1, 1986.
(Incorporated by reference to Exhibit 8(c)(1) to Post-Effective
Amendment No. 10 to this Registration Statement.)
Part C - Page 3
<PAGE>
9. (a)(1) Transfer Agency and Service Agreement between the Registrant and
Scudder Service Corporation dated October 2, 1989.
(Incorporated by reference to Exhibit 9(a)(1) to Post-Effective
Amendment No. 13 to this Registration Statement.)
(a)(2) Fee schedule for Exhibit 9(a)(1).
(Incorporated by reference to Exhibit 9(a)(2) to Post-Effective
Amendment No. 14 to this Registration Statement.)
(a)(3) Form of revised fee schedule for Exhibit 9(a)(1) is filed herein.
(b)(1) Compass Service Agreement between the Registrant and Scudder Trust
Company dated January 1, 1990.
(Incorporated by reference to Exhibit 9(b)(1) to Post-Effective
Amendment No. 14 to this Registration Statement.)
(b)(2) Fee Schedule for Exhibit 9(b)(1).
(Incorporated by reference to Exhibit 9(b)(2) to Post-Effective
Amendment No. 14 to this Registration Statement.)
(b)(3) Form of COMPASS Service Agreement between Scudder Trust Company and
the Registrant dated October 1, 1995 is filed herein.
(c) Shareholder Services Agreement between the Registrant and Charles
Schwab & Co., Inc. dated June 1, 1990.
(Incorporated by reference to Exhibit 9(c) to Post-Effective
Amendment No. 14 to this Registration Statement.)
(c)(1) Service Agreement between Copeland Associates, Inc. and Scudder
Service Corporation (on behalf of Scudder Equity Trust) dated June
8, 1995 is filed herein.
(d) Inapplicable.
(e)(1) Fund Accounting Services Agreement between the Registrant, on behalf
of Scudder Capital Growth Fund, and Scudder Fund Accounting
Corporation dated October 19, 1994 is filed herein.
(Incorporated by reference to Exhibit 9(e)(1) to Post-Effective
Amendment No. 22 to this Registration Statement.)
(e)(2) Fund Accounting Services Agreement between the Registrant, on behalf
of Scudder Value Fund, and Scudder Fund Accounting Corporation dated
October 24, 1994 is filed herein.
(Incorporated by reference to Exhibit 9(e)(2) to Post-Effective
Amendment No. 22 to this Registration Statement.)
(f) Form of a Special Servicing Agreement between the Registrant, on
behalf of Scudder Capital Growth Fund and Scudder Value Fund, and
Scudder Prime Fund is filed herein.
(Incorporated by reference to Exhibit 9(f) to Post-Effective
Amendment No. 22 to this Registration Statement.)
10. Opinion of Counsel is filed herein.
11. Consent of Independent Accountants is filed herein.
Part C - Page 4
<PAGE>
12. Inapplicable.
13. Inapplicable.
14. (a) Scudder Flexi-Plan for Corporations and Self-Employed Individuals.
(Incorporated by reference to Exhibit 14(a) to Post-Effective
Amendment No. 12 to this Registration Statement.)
(b) Scudder Individual Retirement Plan.
(Incorporated by reference to Exhibit 14(b) to Post-Effective
Amendment No. 12 to this Registration Statement.)
(c) SEP-IRA.
(Incorporated by reference to Exhibit 14(c) to Post-Effective
Amendment No. 12 to this Registration Statement.)
(d) Scudder Funds 403(b) Plan.
(Incorporated by reference to Exhibit 14(d) to Post-Effective
Amendment No. 12 to this Registration Statement.)
(e) Scudder Cash or Deferred Profit Sharing Plan under Section 401(k).
(Incorporated by reference to Exhibit 14(e) to Post-Effective
Amendment No. 12 to this Registration Statement.)
15. Inapplicable.
16. Schedule for Computation of Performance Quotation.
(Incorporated by reference to Exhibit 16 to Post-Effective Amendment
No. 13 to this Registration Statement.)
17. Financial Data Schedules are filed herein.
Item 25. Persons Controlled by or Under Common Control with Registrant.
None
Item 26. Number of Holders of Securities (as of January 15, 1996).
(1) (2)
Title of Class Number of Record Shareholders
-------------- -----------------------------
Scudder Capital Growth Fund 84,221
shares of beneficial interest
($.01 par value)
Scudder Value Fund 7,513
shares of beneficial interest
($.01 par value)
Item 27. Indemnification.
A policy of insurance covering Scudder, Stevens & Clark, Inc., its affiliates including Scudder Investor
Services, Inc., and all of the registered investment companies advised by Scudder, Stevens & Clark, Inc.
insures the Registrant's trustees and officers and others against liability arising by reason of an alleged
breach of duty caused by any negligent act, error or accidental omission in the scope of their duties.
Part C - Page 5
<PAGE>
Article IV, Sections 4.1 - 4.3 of the Registrant's Declaration of Trust states as follows:
Section 4.1. No Personal Liability of Shareholders, Trustees, Etc.
No Shareholder shall be subject to any personal liability whatsoever to any Person in connection with Trust
Property or the acts, obligations or affairs of the Trust. No Trustee, officer, employee or agent of the
Trust shall be subject to any personal liability whatsoever to any Person, other than to the Trust or its
Shareholders, in connection with Trust Property or the affairs of the Trust, save only that arising from bad
faith, willful misfeasance, gross negligence or reckless disregard of his duties with respect to such
Person; and all such Persons shall look solely to the Trust Property for satisfaction of claims of any
nature arising in connection with the affairs of the Trust. If any Shareholder, Trustee, officer, employee,
or agent, as such, of the Trust, is made a party to any suit or proceeding to enforce any such liability of
the Trust, he shall not, on account thereof, be held to any personal liability. The Trust shall indemnify
and hold each Shareholder harmless from and against all claims and liabilities, to which such Shareholder
may become subject by reason of his being or having been a Shareholder, and shall reimburse such Shareholder
for all legal and other expenses reasonably incurred by him in connection with any such claim or liability.
The indemnification and reimbursement required by the preceding sentence shall be made only out of the
assets of the one or more Series of which the shareholder who is entitled to indemnification or
reimbursement was a shareholder at the time the act or event occurred which gave rise to the claim against
or liability of said shareholder. The rights accruing to a Shareholder under this Section 4.1 shall not
impair any other right to which such Shareholder may be lawfully entitled, nor shall anything herein
contained restrict the right of the Trust to indemnify or reimburse a Shareholder in any appropriate
situation even though not specifically provided herein.
Section 4.2. Non-Liability of Trustees, Etc. No Trustee, officer, employee or agent of the Trust shall be
liable to the Trust, its Shareholders, or to any Shareholder, Trustee, officer, employee, or agent thereof
for any action or failure to act (including without limitation the failure to compel in any way any former
or acting Trustee to redress any breach of trust) except for his own bad faith, willful misfeasance, gross
negligence or reckless disregard of the duties involved in the conduct of his office.
Section 4.3. Mandatory Indemnification. (a) Subject to the exceptions and limitations contained in
paragraph (b) below:
(i) every person who is, or has been, a Trustee or officer of the Trust shall be indemnified by
the Trust to the fullest extent permitted by law against all liability and against all expenses reasonably
incurred or paid by him in connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been a Trustee or officer and against
amounts paid or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall apply to all claims, actions,
suits or proceedings (civil, criminal, administrative or other, including appeals), actual or threatened;
and the words "liability" and "expenses" shall include, without limitation, attorneys' fees, costs,
judgments, amounts paid in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or officer:
(i) against any liability to the Trust, a series thereof, or the Shareholders by reason of a
final adjudication by a court or other body before which a proceeding was brought that he engaged in
willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office;
(ii) with respect to any matter as to which he shall have been finally adjudicated not to have
acted in good faith in the reasonable belief that his action was in the best interest of the Trust;
(iii) in the event of a settlement or other disposition not involving a final adjudication as
provided in paragraph (b)(i) or (b)(ii) resulting in a payment by a Trustee or officer, unless there has
been a determination that such Trustee or officer did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his office:
Part C - Page 6
<PAGE>
(A) by the court or other body approving the settlement or other disposition; or
(B) based upon a review of readily available facts (as opposed to a full trial-type
inquiry) by (x) vote of a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office act on the matter) or
(y) written opinion of independent legal counsel.
(c) The rights of indemnification herein provided may be insured against by policies maintained by the
Trust, shall be severable, shall not affect any other rights to which any Trustee or officer may now or
hereafter be entitled, shall continue as to a person who has ceased to be such Trustee or officer and
shall insure to the benefit of the heirs, executors, administrators and assigns of such a person. Nothing
contained herein shall affect any rights to indemnification to which personnel of the Trust other than
Trustees and officers may be entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any claim, action, suit or proceeding of
the character described in paragraph (a) of this Section 4.3 may be advanced by the Trust prior to final
disposition thereof upon receipt of an undertaking by or on behalf of the recipient to repay such amount
if it is ultimately determined that he is not entitled to indemnification under this Section 4.3, provided
that either:
(i) such undertaking is secured by a surety bond or some other appropriate security
provided by the recipient, or the Trust shall be insured against losses arising out of any
such advances; or
(ii) a majority of the Disinterested Trustees acting on the matter (provided that a
majority of the Disinterested Trustees act on the matter) or an independent legal counsel in a
written opinion shall determine, based upon a review of readily available facts (as opposed to
a full trial-type inquiry), that there is reason to believe that the recipient ultimately will
be found entitled to indemnification.
As used in this Section 4.3, a "Disinterested Trustee" is one who is not (i) an Interested Person of the
Trust (including anyone who has been exempted from being an Interested Person by any rule, regulation or
order of the Commission), or (ii) involved in the claim, action, suit or proceeding.
Item 28. Business or Other Connections of Investment Adviser
The Adviser has stockholders and employees who are denominated officers but do not as such have
corporation-wide responsibilities. Such persons are not considered officers for the purpose of
this Item 28.
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
Stephen R. Beckwith Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Lynn S. Birdsong Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Supervisory Director, The Latin America Income and Appreciation Fund N.V. (investment
company) +
Supervisory Director, The Venezuela High Income Fund N.V. (investment company) xx
Supervisory Director, Scudder Mortgage Fund (investment company) +
Supervisory Director, Scudder Floating Rate Funds for Fannie Mae Mortgage Securities I
& II (investment company) +
Director, Scudder, Stevens & Clark (Luxembourg) S.A. (investment manager) #
Trustee, Scudder Funds Trust (investment company)*
Part C - Page 7
<PAGE>
President & Director, The Latin America Dollar Income Fund, Inc. (investment company)**
President & Director, Scudder World Income Opportunities Fund, Inc. (investment
company)**
Director, Inverlatin Dollar Income Fund, Inc. (investment company) Georgetown, Grand
Cayman, Cayman Islands
Director, ProMexico Fixed Income Dollar Fund, Inc. (investment company) Georgetown,
Grand Cayman, Cayman Islands
Director, Canadian High Income Fund (investment company)#
Director, Hot Growth Companies Fund (investment company)#
Partner, George Birdsong Co., Rye, NY
Nicholas Bratt Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
President & Director, Scudder New Europe Fund, Inc. (investment company)**
President & Director, The Brazil Fund, Inc. (investment company)**
President & Director, The First Iberian Fund, Inc. (investment company)**
President & Director, Scudder International Fund, Inc. (investment company)**
President & Director, Scudder Global Fund, Inc. (Director only on Scudder Global Fund,
a series of Scudder Global Fund, Inc.) (investment company)**
President & Director, The Korea Fund, Inc. (investment company)**
President & Director, Scudder New Asia Fund, Inc. (investment company)**
President, The Argentina Fund, Inc. (investment company)**
Vice President, Scudder, Stevens & Clark Corporation (Delaware) (investment adviser)**
Vice President, Scudder, Stevens & Clark Japan, Inc. (investment adviser)###
Vice President, Scudder, Stevens & Clark of Canada Ltd. (Canadian investment adviser)
Toronto, Ontario, Canada
Vice President, Scudder, Stevens & Clark Overseas Corporationoo
Linda C. Coughlin Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Director, Scudder Investor Services, Inc. (broker/dealer)**
President & Trustee, AARP Cash Investment Funds (investment company)**
President & Trustee, AARP Growth Trust (investment company)**
President & Trustee, AARP Income Trust (investment company)**
President & Trustee, AARP Tax Free Income Trust (investment company)**
Director, SFA, Inc. (advertising agency)*
Margaret D. Hadzima Director, Scudder, Stevens & Clark, Inc. (investment adviser)*
Assistant Treasurer, Scudder Investor Services, Inc. (broker/dealer)*
Jerard K. Hartman Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President, Scudder California Tax Free Trust (investment company)*
Vice President, Scudder Equity Trust (investment company)*
Vice President, Scudder Cash Investment Trust (investment company)*
Vice President, Scudder Global Fund, Inc. (investment company)**
Vice President, Scudder GNMA Fund (investment company)*
Vice President, Scudder Portfolio Trust (investment company)*
Vice President, Scudder International Fund, Inc. (investment company)**
Vice President, Scudder Investment Trust (investment company)*
Vice President, Scudder Municipal Trust (investment company)*
Vice President, Scudder Mutual Funds, Inc. (investment company)**
Vice President, Scudder New Asia Fund, Inc. (investment company)**
Vice President, Scudder New Europe Fund, Inc. (investment company)**
Vice President, Scudder Securities Trust (investment company)*
Vice President, Scudder State Tax Free Trust (investment company)*
Vice President, Scudder Funds Trust (investment company)*
Part C - Page 8
<PAGE>
Vice President, Scudder Tax Free Money Fund (investment company)*
Vice President, Scudder Tax Free Trust (investment company)*
Vice President, Scudder U.S. Treasury Money Fund (investment company)*
Vice President, Scudder Variable Life Investment Fund (investment company)*
Vice President, The Brazil Fund, Inc. (investment company)**
Vice President, The Korea Fund, Inc. (investment company)**
Vice President, The Argentina Fund, Inc. (investment company)**
Vice President & Director, Scudder, Stevens & Clark of Canada, Ltd. (Canadian
investment adviser) Toronto, Ontario, Canada
Vice President, The First Iberian Fund, Inc. (investment company)**
Vice President, The Latin America Dollar Income Fund, Inc. (investment company)**
Vice President, Scudder World Income Opportunities Fund, Inc. (investment company)**
Richard A. Holt Director, Scudder, Stevens & Clark, Inc. (investment adviser)++
Vice President, Scudder Variable Life Investment Fund (investment company)*
Dudley H. Ladd Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Senior Vice President & Director, Scudder Investor Services, Inc. (broker/dealer)*
President & Director, SFA, Inc. (advertising agency)*
Vice President & Trustee, Scudder Cash Investment Trust (investment company)*
Trustee, Scudder Investment Trust (investment company)*
Trustee, Scudder Portfolio Trust (investment company)*
Trustee, Scudder Municipal Trust (investment company)*
Trustee, Scudder State Tax Free Trust (investment company)*
Vice President, Scudder U.S. Treasury Money Fund (investment company)*
Douglas M. Loudon Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President & Trustee, Scudder Equity Trust (investment company)*
Vice President, Scudder Global Fund, Inc. (investment company)**
Vice President, Scudder Investment Trust (investment company)*
Vice President & Director, Scudder Mutual Funds, Inc. (investment company)**
Vice President & Trustee, Scudder Securities Trust (investment company)*
Vice President, AARP Cash Investment Funds (investment company)**
Vice President, AARP Growth Trust (investment company)**
Vice President, AARP Income Trust (investment company)**
Vice President, AARP Tax Free Income Trust (investment company)**
Vice President, Scudder, Stevens & Clark Corporation (Delaware) (investment adviser)**
Senior Vice President, Scudder Investor Services, Inc. (broker/dealer)*
Vice President, Scudder, Stevens & Clark of Canada Ltd. (Canadian investment adviser)
Toronto, Ontario, Canada
Chairman, World Capital Fund (investment company) Luxembourg ##
Managing Director, Kankaku - Scudder Capital Asset Management Corporation (investment
adviser)**
Chairman & Director, Scudder, Stevens & Clark Japan, Inc. (investment adviser)###
President, The Japan Fund, Inc. (investment company)**
Trustee, Scudder, Stevens & Clark Supplemental Retirement Income Plan
Trustee, Scudder, Stevens & Clark Profit Sharing Plan **
Chairman & Director, The World Capital Fund (investment company) Luxembourg
Chairman & Director, Scudder, Stevens & Clark (Luxembourg), S.A., Luxembourg#
Chairman, Canadian High Income Fund (investment company) #
Chairman, Hot Growth Companies Fund (investment company) #
Vice President & Director, Scudder Precious Metals, Inc. xxx
Director, Berkshire Farm & Services for Youth
Board of Governors & President, Investment Counsel Association of America
Part C - Page 9
<PAGE>
John T. Packard Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
President, Montgomery Street Income Securities, Inc. (investment company) o
Director, Scudder Realty Advisors, Inc. (realty investment adviser) x
Juris Padegs Secretary & Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Chairman & Director, The Brazil Fund, Inc. (investment company)**
Vice President & Trustee, Scudder Equity Trust (investment company)*
Chairman & Director, The First Iberian Fund, Inc. (investment company)**
Trustee, Scudder Funds Trust (investment company)*
Vice President & Assistant Secretary, Scudder Global Fund, Inc. (investment company)**
Trustee, Scudder Investment Trust (investment company)*
Vice President, Assistant Secretary & Director, Scudder International Fund, Inc.
(investment company)**
Vice President, The Latin America Dollar Income Fund, Inc. (investment company)**
Trustee, Scudder Municipal Trust (investment company)*
Vice President & Assistant Secretary, Scudder Mutual Funds, Inc. (investment company)**
Vice President & Director, Scudder New Europe Fund, Inc. (investment company)**
Trustee, Scudder State Tax Free Trust (investment company)*
Vice President, Assistant Secretary & Director, Scudder New Asia Fund, Inc. (investment
company)**
Trustee, Scudder Securities Trust (investment company)*
Vice President & Trustee, Scudder Tax Free Money Fund (investment company)*
Trustee, Scudder Tax Free Trust (investment company)*
Chairman & Director, The Korea Fund, Inc. (investment company)**
Vice President & Director, The Argentina Fund, Inc. (investment company)**
Secretary, Scudder, Stevens & Clark of Canada Ltd. (Canadian investment adviser),
Toronto, Ontario, Canada
Vice President & Director, Scudder Realty Advisors, Inc. (realty investment adviser) x
Assistant Secretary, SFA, Inc. (advertising agency)*
Vice President & Director, Scudder Investor Services, Inc. (broker/dealer)**
Assistant Treasurer & Director, Kankaku - Scudder Capital Asset Management (investment
adviser)**
Chairman & Director, Scudder, Stevens & Clark Japan, Inc. (investment adviser)###
Chairman & Director, Scudder, Stevens & Clark Corporation (Delaware) (investment
adviser)**
Chairman & Supervisory Director, Sovereign High Yield Investment Company N.V.
(investment company) +
Director, President Investment Trust Corporation (Joint Venture)***
Vice President, Scudder World Income Opportunities Fund, Inc. (investment company)**
Director, Vice President & Assistant Secretary, Scudder Precious Metals, Inc. xxx
Vice President & Director, Scudder Service Corporation (in-house transfer agent)*
Chairman, Scudder, Stevens & Clark Overseas Corporationoo
Director, Scudder Trust (Cayman) Ltd. (trust services company)xxx
Director, ICI Mutual Insurance Company, Inc., Washington, D.C.
Director, Baltic International USA
Director, Baltic International Airlines (a limited liability company) Riga, Latvia
Daniel Pierce Chairman & Director, Scudder New Europe Fund, Inc. (investment company)**
Trustee, California Tax Free Trust (investment company)*
President & Trustee, Scudder Equity Trust (investment company)**
Director, The First Iberian Fund, Inc. (investment company)**
President & Trustee, Scudder GNMA Fund (investment company)*
Part C - Page 10
<PAGE>
President & Trustee, Scudder Portfolio Trust (investment company)*
President & Trustee, Scudder Funds Trust (investment company)*
President & Director, Scudder Institutional Fund, Inc. (investment company)**
President & Director, Scudder Fund, Inc. (investment company)**
Director, Scudder International Fund, Inc. (investment company)**
President & Trustee, Scudder Investment Trust (investment company)*
Vice President & Trustee, Scudder Municipal Trust (investment company)*
President & Director, Scudder Mutual Funds, Inc. (investment company)**
Director, Scudder New Asia Fund, Inc. (investment company)**
President & Trustee, Scudder Securities Trust (investment company)**
Trustee, Scudder State Tax Free Trust (investment company)*
Vice President & Trustee, Scudder Variable Life Investment Fund (investment company)*
Director, The Brazil Fund, Inc. (until 7/94) (investment company)**
Vice President & Assistant Treasurer, Montgomery Street Income Securities, Inc.
(investment company)o
Vice President & Director, Scudder Global Fund, Inc. (investment company)**
Vice President, Director & Assistant Treasurer, Scudder Investor Services, Inc.
(broker/dealer)*
President & Director, Scudder Service Corporation (in-house transfer agent)*
Chairman & President, Scudder, Stevens & Clark of Canada, Ltd. (Canadian investment
adviser), Toronto, Ontario, Canada
Chairman, Assistant Treasurer & Director, Scudder, Stevens & Clark, Inc. (investment
adviser)**
President & Director, Scudder Precious Metals, Inc. xxx
Chairman & Director, Scudder Global Opportunities Funds (investment company) Luxembourg
Chairman, Scudder, Stevens & Clark, Ltd. (investment adviser) London, England
Director, Scudder Fund Accounting Corporation (in-house fund accounting agent)*
Director, Scudder Realty Holdings Corporation (a real estate holding company)*
Director, Scudder Latin America Investment Trust PLC (investment company)@
Incorporator, Scudder Trust Company (a trust company)+++
Director, Fiduciary Trust Company (banking & trust company) Boston, MA
Director, Fiduciary Company Incorporated (banking & trust company) Boston, MA
Trustee, New England Aquarium, Boston, MA
Cornelia M. Small Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President, Scudder Global Fund, Inc. (investment company)**
Vice President, AARP Cash Investment Funds (investment company)*
Vice President, AARP Growth Trust (investment company)*
Vice President, AARP Income Trust (investment company)*
Vice President, AARP Tax Free Income Trust (investment company)*
Edmond D. Villani President & Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Chairman & Director, Scudder Global Fund, Inc. (investment company)**
Chairman & Director, Scudder International Fund, Inc. (investment company)**
Chairman & Director, Scudder New Asia Fund, Inc. (investment company)**
Trustee, Scudder Securities Trust (investment company)*
Chairman & Director, The Argentina Fund, Inc. (investment company)**
Director, Scudder Realty Advisors, Inc. (realty investment adviser) x
Supervisory Director, Scudder Mortgage Fund (investment company) +
Chairman & Director, The Latin America Dollar Income Fund, Inc. (investment company)**
Director, Scudder, Stevens & Clark Japan, Inc. (investment adviser)###
Chairman & Director, Scudder World Income Opportunities Fund, Inc. (investment
company)**
Part C - Page 11
<PAGE>
Supervisory Director, Scudder Floating Rate Funds for Fannie Mae Mortgage Securities I
& II (investment company)+
Director, The Brazil Fund, Inc. (investment company)**
Director, Indosuez High Yield Bond Fund (investment company) Luxembourg
President & Director, Scudder, Stevens & Clark Overseas Corporationoo
President & Director, Scudder, Stevens & Clark Corporation (Delaware) (investment
adviser)**
Director, IBJ Global Investment Manager S.A., (Luxembourg investment management
company) Luxembourg, Grand-Duchy of Luxembourg
* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
++ Two Prudential Plaza, 180 N. Stetson Avenue, Chicago, IL
+++ 5 Industrial Way, Salem, NH
o 101 California Street, San Francisco, CA
# 11, rue Aldringen, L-1118 Luxembourg, Grand-Duchy of Luxembourg
+ John B. Gorsiraweg 6, Willemstad Curacao, Netherlands Antilles
xx De Ruyterkade 62, P.O. Box 812, Willemstad Curacao, Netherlands Antilles
## 2 Boulevard Royal, Luxembourg
*** B1 2F3F 248 Section 3, Nan King East Road, Taipei, Taiwan
xxx Grand Cayman, Cayman Islands, British West Indies
oo 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
@ c/o Sinclair Hendersen Limited, 23 Cathedral Yard, Exeter, Devon
Item 29. Principal Underwriters.
(a) Scudder California Tax Free Trust
Scudder Cash Investment Trust
Scudder Equity Trust
Scudder Fund, Inc.
Scudder Funds Trust
Scudder Global Fund, Inc.
Scudder GNMA Fund
Scudder Institutional Fund, Inc.
Scudder International Fund, Inc.
Scudder Investment Trust
Scudder Municipal Trust
Scudder Mutual Funds, Inc.
Scudder Portfolio Trust
Scudder Securities Trust
Scudder State Tax Free Trust
Scudder Tax Free Money Fund
Scudder Tax Free Trust
Scudder U.S. Treasury Money Fund
Scudder Variable Life Investment Fund
AARP Cash Investment Funds
AARP Growth Trust
AARP Income Trust
AARP Tax Free Income Trust
The Japan Fund, Inc.
Part C - Page 12
<PAGE>
(b)
(1) (2) (3)
Name and Principal Position and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
---------------- ------------------------------- -----------------------
E. Michael Brown Assistant Treasurer None
Two International Place
Boston, MA 02110
Mark S. Casady Vice President and Director None
Two International Place
Boston, MA 02110
Linda Coughlin Director None
345 Park Avenue
New York, NY 10154
Richard W. Desmond Vice President None
345 Park Avenue
New York, NY 10154
Coleen Downs Dinneen Assistant Clerk Assistant Secretary
Two International Place
Boston, MA 02110
Paul J. Elmlinger Vice President None
345 Park Avenue
New York, NY 10154
Cuyler W. Findlay Senior Vice President None
345 Park Avenue
New York, NY 10154
Margaret D. Hadzima Assistant Treasurer None
Two International Place
Boston, MA 02110
Thomas W. Joseph Vice President, Director, Vice President
Two International Place Treasurer and Assistant Clerk
Boston, MA 02110
Dudley H. Ladd Senior Vice President and None
Two International Place Director
Boston, MA 02110
David S. Lee President, Assistant Vice President and Trustee
Two International Place Treasurer and Director
Boston, MA 02110
Douglas M. Loudon Senior Vice President Vice President and Trustee
345 Park Avenue
New York, NY 10154
Part C - Page 13
<PAGE>
Name and Principal Position and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
---------------- ------------------------------- -----------------------
Thomas F. McDonough Clerk Vice President, Secretary
Two International Place and Assistant Treasurer
Boston, MA 02110
Thomas H. O'Brien Assistant Treasurer None
345 Park Avenue
New York, NY 10154
Edward J. O'Connell Assistant Treasurer Vice President and
345 Park Avenue Assistant Treasurer
New York, NY 10154
Juris Padegs Vice President and Director Vice President and Trustee
345 Park Avenue
New York, NY 10154
Daniel Pierce Vice President, Director President and Trustee
Two International Place and Assistant Treasurer
Boston, MA 02110
Kathryn L. Quirk Vice President Vice President and
345 Park Avenue Secretary
New York, NY 10154
Edmund J. Thimme Vice President and Director None
345 Park Avenue
New York, NY 10154
David B. Watts Assistant Treasurer None
Two International Place
Boston, MA 02110
Linda J. Wondrack Vice President None
Two International Place
Boston, MA 02110
The Underwriter has employees who are denominated officers of an operational area. Such persons do not have
corporation-wide responsibilities and are not considered officers for the purpose of this Item 29.
(c)
(1) (2) (3) (4) (5)
Net Underwriting Compensation on
Name of Principal Discounts and Redemptions Brokerage Other
Underwriter Commissions and Repurchases Commissions Compensation
----------- ----------- --------------- ----------- ------------
Scudder Investor None None None None
Services, Inc.
Item 30. Location of Accounts and Records.
Certain accounts, books and other documents required to be maintained by Section 31(a) of the 1940
Act and the Rules promulgated thereunder are maintained by Scudder, Stevens & Clark, Inc., Two
Part C - Page 14
<PAGE>
International Place, Boston, Massachusetts 02110. Records relating to the duties of the
Registrant's custodian are maintained by State Street Bank and Trust Company, Heritage Drive, North
Quincy, Massachusetts. Records relating to the duties of the Registrant's transfer agent are
maintained by Scudder Service Corporation, Two International Place, Boston, Massachusetts.
Item 31. Management Services.
Inapplicable.
Item 32. Undertakings.
Inapplicable.
Part C - Page 15
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereto duly authorized, in the City of Boston and the
Commonwealth of Massachusetts on the 30th day of January, 1996.
SCUDDER EQUITY TRUST
By /s/Thomas F. McDonough
-------------------------------
Thomas F. McDonough, Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
<C> <C> <C>
SIGNATURE TITLE DATE
- --------- ----- ----
/s/Daniel Pierce
- --------------------------------------
Daniel Pierce* President (Principal Executive January 30, 1996
Officer) and Trustee
/s/Paul Bancroft III
- --------------------------------------
Paul Bancroft III* Trustee January 30, 1996
/s/Sheryle J. Bolton
- --------------------------------------
Sheryle J. Bolton* Trustee January 30, 1996
/s/Thomas J. Devine
- --------------------------------------
Thomas J. Devine* Trustee January 30, 1996
/s/Keith R. Fox
- --------------------------------------
Keith R. Fox* Trustee January 30, 1996
/s/David S. Lee
- --------------------------------------
David S. Lee* Vice President and Trustee January 30, 1996
/s/Douglas M. Loudon
- --------------------------------------
Douglas M. Loudon* Vice President and Trustee January 30, 1996
<PAGE>
SIGNATURE TITLE DATE
- --------- ----- ----
/s/Wilson Nolen
- --------------------------------------
Wilson Nolen* Trustee January 30, 1996
/s/Juris Padegs
- --------------------------------------
Juris Padegs* Vice President and Trustee January 30, 1996
/s/Gordon Shillinglaw
- --------------------------------------
Gordon Shillinglaw* Trustee January 30, 1996
/s/Pamela A. McGrath
- --------------------------------------
Pamela A. McGrath Vice President and Treasurer January 30, 1996
(Principal Financial and Accounting
Officer)
</TABLE>
*By: /s/Thomas F. McDonough
-------------------------
Thomas F. McDonough,
Attorney-in-Fact pursuant to
powers of attorney contained in
the signature pages of
Post-Effective Amendment Nos. 12,
16 and 23 to the Registration
Statement, filed December 2, 1988,
November 2, 1992 and
January 30, 1996, respectively.
2
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereto duly authorized, in the City of Boston and the
Commonwealth of Massachusetts on the 30th day of January, 1996.
SCUDDER EQUITY TRUST
By /s/Thomas F. McDonough
---------------------------------
Thomas F. McDonough, Secretary
Pursuant to the requirements of the Securities Act of 1933, this
amendment to its Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated. By so signing, the
undersigned in her capacity as a trustee or officer, or both, as the case may be
of the Registrant, does hereby appoint David S. Lee, Thomas F. McDonough and
Sheldon A. Jones and each of them, severally, or if more than one acts, a
majority of them, her true and lawful attorney and agent to execute in her name,
place and stead (in such capacity) any and all amendments to the Registration
Statement and any post-effective amendments thereto and all instruments
necessary or desirable in connection therewith, to attest the seal of the
Registrant thereon and to file the same with the Securities and Exchange
Commission. Each of said attorneys and agents shall have power to act with or
without the other and have full power and authority to do and perform in the
name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or advisable to be done in the premises as fully and to all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and approving the act of said attorneys and agents and each of them.
<TABLE>
<CAPTION>
<C> <C> <C>
SIGNATURE TITLE DATE
/s/Sheryle J. Bolton
- --------------------------------------
Sheryle J. Bolton Trustee January 15, 1996
</TABLE>
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this amendment to its Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly
caused this amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereto duly authorized, in the City of Boston and the
Commonwealth of Massachusetts on the 30th day of January, 1996.
SCUDDER EQUITY TRUST
By /s/Thomas F. McDonough
---------------------------------
Thomas F. McDonough, Secretary
Pursuant to the requirements of the Securities Act of 1933, this
amendment to its Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated. By so signing, the
undersigned in his capacity as a trustee or officer, or both, as the case may be
of the Registrant, does hereby appoint David S. Lee, Thomas F. McDonough and
Sheldon A. Jones and each of them, severally, or if more than one acts, a
majority of them, his true and lawful attorney and agent to execute in his name,
place and stead (in such capacity) any and all amendments to the Registration
Statement and any post-effective amendments thereto and all instruments
necessary or desirable in connection therewith, to attest the seal of the
Registrant thereon and to file the same with the Securities and Exchange
Commission. Each of said attorneys and agents shall have power to act with or
without the other and have full power and authority to do and perform in the
name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or advisable to be done in the premises as fully and to all
intents and purposes as the undersigned might or could do in person, hereby
ratifying and approving the act of said attorneys and agents and each of them.
<TABLE>
<CAPTION>
<C> <C> <C>
SIGNATURE TITLE DATE
/s/Keith R. Fox
- --------------------------------------
Keith R. Fox Trustee January 12, 1996
</TABLE>
4
<PAGE>
File No. 2-78724
File No. 811-1444
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 23
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 23
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
SCUDDER EQUITY TRUST
<PAGE>
SCUDDER EQUITY TRUST
EXHIBIT INDEX
Exhibit 9(a)(3)
Exhibit 9(b)(3)
Exhibit 9(c)(1)
Exhibit 10
Exhibit 11
Exhibit 17
Exhibit 9(a)(3)
SCUDDER SERVICE CORPORATION
FEE INFORMATION FOR SERVICES PROVIDED UNDER
TRANSFER AGENCY AND SERVICE AGREEMENT
Scudder Family of Funds
Annual maintenance fee for each account
- ---------------------------------------
1/12th of the annual maintenance fee shall be charged and payable each month. It
will be charged for any account which at any time during the month had a share
balance in the fund. The minimum monthly charge to any portfolio is $1,000.
Money Market Funds $28.90
Monthly Income Funds 25.00
Quarterly Distribution Funds 20.40
Annual Distribution Funds 17.55
Other fees
New Account Set Up $ 5.00 each
Disaster Recovery 0.25 per year
Closed Accounts 1.20 per year
TIN Certificates 0.15 each
TIN Maintenance 0.25 each
Check Writing:
Set Up 5.00 per account
Retail Check Clearance 0.96 per check
Corporate Check Clearance 0.46 per check
Out of pocket expenses shall be reimbursed by the fund to Scudder Service
Corporation or paid directly by the fund. Such expenses include but are not
limited to the following:
Telephone (portion allocable to servicing accounts)
Postage, overnight service or similar services
Stationery and envelopes
Shareholder Statements - printing and postage
Checks - stock supply, printing and postage
Data circuits
Lease and maintenance of S.A.I.L. and Easy Access
Forms
Microfilm and microfiche
Expenses incurred at the specific direction of the fund
Payment
- -------
The above will be billed within the first five (5) business days of each month
and will be paid by wire within five (5) business days of receipt.
On behalf of the Funds listed on
Attachment A: Scudder Service Company
By:_________________________ By:_____________________
David S. Lee Daniel Pierce
Vice President President
Date: October 1, 1995 Date: October 1, 1995
<PAGE>
ATTACHMENT A
TRANSFER AGENCY AND SERVICE AGREEMENT
Money Market Accounts
Scudder California Tax Free Money Fund
Scudder Cash Investment Trust
Scudder New York Tax Free Money Fund
Scudder Tax Free Money Fund
Scudder U.S. Treasury Money Fund
Monthly Income Funds
Scudder California Tax Free Fund
Scudder Global Bond Fund
Scudder GNMA Fund
Scudder High Yield Tax Free Fund
Scudder International Bond 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
Scudder Short Term Bond Fund
Quarterly Distribution Funds
Scudder Balanced Fund
Scudder Growth and Income Fund
Scudder Emerging Markets Income Fund
Scudder Income Fund
Annual Distribution Funds
<TABLE>
<S> <C>
Scudder Capital Growth Fund Scudder Latin America Fund
Scudder Development Fund Scudder Pacific Opportunities Fund
Scudder Global Fund Scudder Quality Growth Fund
Scudder Global Small Company Fund Scudder Small Company Value Fund
Scudder Gold Fund Scudder Value Fund
Scudder Greater Europe Growth Fund Scudder Zero Coupon 2000 Fund
Scudder International Fund
</TABLE>
dated as of October 6, 1995
revised as of December 27, 1995
Exhibit 9(b)(3)
COMPASS AND TRAK 2000 SERVICE AGREEMENT
THIS AGREEMENT is made as of this 1st day of October, 1995, by and between
SCUDDER TRUST COMPANY, a New Hampshire banking corporation ("Trust Company") and
SCUDDER EQUITY TRUST, a Massachusetts business trust (the "Fund").
WITNESSETH:
WHEREAS, Trust Company is engaged in the business of providing certain
recordkeeping and other services; and
WHEREAS, Trust Company and the Fund entered into a "Compass Service
Agreement," dated January 1, 1990 (the "Former Agreement") under which Trust
Company has been providing certain recordkeeping and other services, and Trust
Company also has been performing certain recordkeeping and other services for
the Fund in connection with the TRAK 2000 system; and
WHEREAS, the Fund is engaged in business as an open-end investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, Trust Company is willing to continue to provide to the Fund such
recordkeeping and other services in connection with the COMPASS and TRAK 2000
systems and in addition is willing to provide certain order processing services
as agent for the Fund; and
WHEREAS, Trust Company and the Fund wish to amend, restate and replace the
Former Agreement with this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. Terms of Appointment; Performance of Duties.
1.1. Appointment. Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints Trust Company (i) to act as, and
Trust Company agrees to act as, recordkeeping agent with respect to the
authorized and issued shares of beneficial interest of the Fund ("Shares") or
units representing such Shares ("Units"), and (ii) to act as an agent of the
Fund for the purpose of receiving requests for the purchase and redemption of
Shares or Units (collectively, "Shares") and communicating such requests to the
Fund's transfer agent ("Transfer Agent"), in connection with certain retirement
and employee benefit plans established under the Internal Revenue Code of 1986
including but not limited to defined contribution plans, Section 403(b) plans,
individual retirement accounts and deferred compensation plans (each a "Plan" or
collectively the "Plans"), utilizing the Comprehensive Participant Accounting
Services ("COMPASS") or TRAK 2000 system, and established by plan
administrators, employers, trustees, custodians and other persons (each
individually an "Administrator" or collectively the "Administrators") on behalf
of employers (each individually an "Employer" or collectively the "Employers")
and individuals for certain participants in such Plans (each individually a
"Participant" or collectively the "Participants").
1.2. Recordkeeping. Trust Company agrees that it will perform the following
recordkeeping services in connection with the COMPASS and TRAK 2000 systems in
accordance with procedures established from time to time by agreement between
the Fund and Trust Company. Subject to instructions from the Administrators,
Trust Company shall:
(i) receive from Administrators instructions for the purchase of
Shares of the Fund, confirm compliance with such instructions and, as agent of
the respective Administrators, deliver within a reasonable time such
instructions and any appropriate documentation therefor to the Transfer Agent of
the Fund duly appointed by the Trustees of the Fund (the "Transfer Agent");
(ii) record the purchase by Plans of the appropriate number of Shares
or Units and within a reasonable time allocate such Shares or Units among the
Participants' accounts;
(iii) record dividends and capital gains distributions on behalf of
Participants;
(iv) receive from Administrators instructions for redemption and
repurchase requests and directions, confirm compliance with such instructions
and as agent of the respective Administrators deliver within a reasonable time
such instructions and any appropriate documentation therefor to the Transfer
Agent;
(v) record the redemption or repurchase by Plans of the appropriate
number of Shares or Units and within a reasonable time make the appropriate
adjustments among the Participants' accounts;
(vi) certify to the Fund no less frequently than annually the number
of Participants accounts for which records are maintained hereunder;
(vii) maintain records of account for and advise the Fund and
Administrators and Participants, when appropriate, as to the foregoing;
(viii) maintain all Plan and Participant accounts other than accounts
maintained by the Transfer Agent; and
(ix) maintain and mail administrative reports and Participant
statements.
Procedures applicable to certain of these services may be established
from time to time by agreement between the Fund and Trust Company.
1.3. Order Processing.
(a) In addition to the recordkeeping to be performed in accordance
with Section 1.02 above, the Fund hereby appoints Trust Company, and Trust
Company agrees to act, as the Fund's agent for the purpose of receiving requests
for the purchase and redemption of Shares or Units and communicating such
requests to the Fund's Transfer Agent, subject to and in accordance with the
terms of this Agreement, and as follows:
(i) Trust Company shall receive from the Plans, Plan
participants, Plan sponsors, authorized Plan committees or Plan trustees,
according to Trust Company's agreement with each Plan, by the close of regular
trading on the New York Stock Exchange (the "Close of Trading") each business
day that the New York Stock Exchange is open for business ("Business Day")
instructions for the purchase and redemption of Shares (together,
"Instructions"). Instructions received by Trust Company after the Close of
Trading on any Business Day shall be treated as received on the next Business
Day.
(ii) In connection with the COMPASS system, Trust Company shall
compute net purchase requests or net redemption requests to the extent
practicable for Shares of the Fund for each Plan based on Instructions received
each Business Day.
(iii) Trust Company shall communicate purchase and redemption
requests for Shares of the Fund, netted to the extent practicable in accordance
with (ii) above in the case of COMPASS ("Orders"), to the Transfer Agent, for
acceptance by the Fund or its agents, in the manner specified herein, and
promptly deliver, or instruct the Plans (or the Plans' trustees as the case may
be) to deliver, appropriate documentation and, in the case of purchase requests,
payment therefor to the Transfer Agent. Orders shall be based solely on
Instructions received by Trust Company from the Plans, Plan participants, Plan
sponsors, authorized Plan committees or Plan trustees.
(b) Trust Company shall maintain adequate records related to, and
advise the Transfer Agent as to, the foregoing, as instructed by the Fund, or by
the Transfer Agent or other person designated to act on the Fund's behalf. To
the extent required under the 1940 Act and rules thereunder, Trust Company
agrees that such records maintained by it hereunder will be preserved,
maintained and made available in accordance with the provisions of the 1940 Act
and rules thereunder, and copies or, if required, originals will be surrendered
promptly to the Fund, Transfer Agent or other person designated to act on the
Fund's behalf, on and in accordance with its request. Records surrendered
hereunder shall be in machine readable form, except to the extent that Trust
Company has maintained such records only in paper form. This provision shall
survive the termination of this Agreement.
(c) Trust Company shall perform its duties hereunder subject to the
terms and conditions of the Fund's current prospectus; the Fund and the Trust
Company may establish such additional procedures for order processing not
inconsistent with the terms of this Agreement as they reasonably determine to be
necessary or advisable from time to time.
(d) Trust Company acknowledges that it is not authorized by the Fund
to register the transfer of the Fund's Shares or to transfer record ownership of
the Fund's Shares, and that only the Transfer Agent is authorized to perform
such activities.
1.4. Agents of Trust Company. Trust Company may engage one or more
individuals, corporations, partnerships, trusts or other entities (including
affiliates of Trust Company) to act as its subcontractor(s) or agent(s)
("Agents") in providing the services contemplated hereunder. Any such Agent
shall be required to comply with the terms of this Agreement applicable to the
performance of such services it is performing as though it were the Trust
Company. Further, the Trust Company shall be solely responsible for, and assumes
all liability for, the actions and inactions of such Agents in connection with
their performance of such services.
2. Fees and Expenses.
2.1. Fees. For performance by Trust Company of services pursuant to this
Agreement, the Fund agrees to pay Trust Company an annual maintenance fee for
each Participant account as set out in the fee schedule, as amended from time to
time. Such fee schedule and out-of-pocket expenses and advances identified under
Section 2.2 below may be changed from time to time by mutual agreement between
the Fund and Trust Company. The parties hereto acknowledge that the fees payable
hereunder are for administrative and recordkeeping services only and do not
constitute payment in any manner for investment advisory or distribution
services.
2.2. Expenses. In addition to the fee paid under Section 2.1 above, the
Fund agrees to reimburse Trust Company for out-of-pocket expenses or advances
incurred by Trust Company for the items set out in the fee schedule. In
addition, any other expenses incurred by Trust Company, at the request or with
the consent of the Fund, will be reimbursed by the Fund. The Fund agrees to pay
all fees and reimbursable expenses promptly. Postage and the cost of materials
for mailing of administrative reports, Participant statements and other mailings
to all Employer accounts or Participants shall be advanced to Trust Company by
the Fund at least two (2) days prior to the mailing date of such materials or
paid within two (2) days of the receipt by the Fund of a bill therefor.
3. Representations and Warranties of Trust Company.
Trust Company represents and warrants to the Fund that:
(i) It is a banking corporation duly organized and existing and in good
standing under the laws of The State of New Hampshire.
(ii) It has the legal power and authority to carry on its business in any
jurisdiction where it does business.
(iii) It is empowered under applicable laws and by its charter and By-Laws
to enter into and perform this Agreement.
(iv) All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
(v) It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
4. Representations and Warranties of the Fund.
The Fund represents and warrants to Trust Company that:
(i) It is a business trust duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts.
(ii) It is empowered under applicable laws and by its Declaration of Trust
and By-Laws to enter into and perform this Agreement.
(iii) All proceedings required by said Declaration of Trust and By-Laws
have been taken to authorize it to enter into and perform this Agreement.
(iv) It is an investment company registered under the 1940 Act.
(v) It makes available its Shares in connection with certain Plans.
(vi) A majority of the Trustees of the Fund who are not interested persons
have made findings to the effect that:
(a) the Agreement is in the best interest of the Fund and its
shareholders;
(b) the services to be performed pursuant to the Agreement are
services required for the operation of the Fund;
(c) Trust Company can provide services the nature and quality of which
are at least equal to those provided by others offering the same or similar
services; and
(d) the fees charged by Trust Company for such services are fair and
reasonable in the light of the usual and customary charges made by others for
services of the same nature and quality.
(vii) A registration statement under the Securities Act of 1933, as amended
(the "33 Act"), has been filed and has become effective, and appropriate state
securities law filings have been made with respect to all Shares of the Fund
being offered for sale. The Fund shall notify Trust Company (i) if such
registration statement or any state securities registration or qualification has
been terminated or a stop order has been entered with respect to the Shares or
(ii) if such registration statement shall have been amended to cover Shares of
any additional Series (as hereinafter defined in Section 8.1).
5. Indemnification.
5.1. By Fund. Trust Company shall not be responsible for, and the Fund
shall indemnify and hold Trust Company harmless from and against, any and all
losses, damages, costs, charges, counsel fees, payments, expenses and
liabilities arising out of or attributable to:
(a) All actions of Trust Company or its agents required to be taken
pursuant to this Agreement, provided that such actions are taken in good faith
and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack of good faith, negligence or
willful misconduct or which arise out of the breach of any representation or
warranty of the Fund hereunder.
(c) The reliance on or use by Trust Company or its agents of
information, records and documents which (i) are received by Trust Company or
its agents and furnished to it by or on behalf of the Fund, and (ii) have been
prepared and/or maintained by the Fund or any other person or firm (except Trust
Company) on behalf of the Fund.
(d) The reliance on or the carrying out by Trust Company or its agents
of any written instructions or requests of the Fund or any person acting on
behalf of the Fund.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations, or the securities laws or
regulations of any state that such Shares be registered in such state, or in
violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such Shares in such
state.
5.2. By Trust Company. Trust Company shall indemnify and hold the Fund
harmless from and against any and all losses, damages, costs, charges, counsel
fees, payments, expenses and liabilities arising out of or attributable to Trust
Company's refusal or failure to comply with the terms of this Agreement, or
which arise out of Trust Company's lack of good faith, negligence or willful
misconduct or which arise out of the breach of any representation or warranty of
Trust Company hereunder.
5.3. Reliance. At any time Trust Company may apply to any officer of the
Fund for instructions, and may consult with legal counsel (which may also be
legal counsel for the Fund) with respect to any matter arising in connection
with the services to be performed by Trust Company under this Agreement, and
Trust Company shall not be liable and shall be indemnified by the Fund for any
action taken or omitted by it in reliance upon such instructions or upon the
opinion of such counsel. Trust Company and its agents shall be protected and
indemnified in acting upon any paper or document furnished by or on behalf of
the Fund, reasonably believed to be genuine and to have been signed by the
proper person or persons, or upon any instruction, information, data, records or
documents provided Trust Company or its agents by telephone, in person,
machine-readable input, telex, CRT data entry or other similar means authorized
by the Fund, and shall not be held to have notice of any change of authority of
any person, until receipt of written notice thereof from the Fund.
5.4. Acts of God. In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God, strikes,
equipment or transmission failure or damage reasonably beyond its control, or
other causes reasonably beyond its control, such party shall not be liable to
the other for any damages resulting from such failure to perform or otherwise
from such causes.
5.5. Procedures. In order that the indemnification provisions contained in
this Article 5 shall apply, upon the assertion of a claim for which either party
may be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
6. Covenants of the Fund and Trust Company.
6.1. Adequate Facilities. Trust Company hereby agrees to establish and
maintain facilities, personnel, and computer and other facilities and procedures
reasonably acceptable to the Fund for safekeeping of records, for the
preparation or use, and for keeping account of, such records, and for order
processing.
6.2. Insurance. Trust Company shall at all times maintain insurance
coverage which is reasonable and customary in light of its duties hereunder and
its other obligations and activities, and shall notify the Fund of any changes
in its insurance coverage unless the Fund is covered by the same policy and such
change is also applicable to the Fund.
6.3. Records. Trust Company shall keep records relating to the services to
be performed hereunder, in the form and manner as it may deem advisable.
6.4. Confidentiality. Trust Company and the Fund agree that all books,
records, information and data pertaining to the business of the other party
which are exchanged or received pursuant to the negotiation or the carrying out
of this Agreement shall remain confidential, and shall not be voluntarily
disclosed to any other person, except as may be required by law.
6.5. Inspection. In case of any requests or demands for the inspection of
the records relating to Plan accounts and Participant accounts with the Fund,
Trust Company will endeavor to notify the Fund and to secure instructions from
an authorized officer of the Fund as to such inspection. Trust Company reserves
the right, however, to exhibit such records to any person whenever it is
reasonably advised by counsel to the Fund that it may be held liable for the
failure to exhibit such records to such person.
6.6. Laws Applicable to Fund. Trust Company acknowledges that the Fund, as
a registered investment company under the 1940 Act, is subject to the provisions
of the 1940 Act and the rules and regulations thereunder, and that the offer and
sale of the Fund's Shares are subject to the provisions of federal and state
laws and regulations applicable to the offer and sale of securities. The Fund
acknowledges that Trust Company is not responsible for the Fund's compliance
with such laws, rules and regulations. If the Fund advises Trust Company that a
procedure of Trust Company related to the discharge of its obligations hereunder
has or may have the effect of causing the Fund to violate any of such laws or
regulations, Trust Company shall use its best efforts to develop an alternative
procedure which does not have such effect.
6.7. Relationship to Plans. Trust Company acknowledges to the Fund that, as
the offeror of COMPASS and TRAK 2000, Trust Company does not act as a plan
administrator or as a fiduciary under the Employee Retirement Income Security
Act of 1974, as amended from time to time, with respect to any Plan. Trust
Company shall not be responsible for determining whether the terms of a
particular Plan or the Shares of the Fund are appropriate for the Plan or
Participant and does not guarantee the performance of the Fund.
7. Termination of Agreement.
This Agreement may be terminated by either party on the last day of the
month next commencing after thirty (30) days written notice to the other party.
Upon termination of this Agreement, the Fund shall pay to Trust Company such
fees and expenses as may be due as of the date of such termination. Should the
Fund exercise its right to terminate this Agreement, Trust Company reserves the
right to charge for any other reasonable expenses associated with such
termination.
8. Additional Series of the Fund.
8.1. Establishment of Series. Shares of the Fund are of a single class;
however, Shares may be divided into additional series ("Series") that may be
established from time to time by action of the Trustees of the Fund. If the
context requires and unless otherwise specifically provided herein, the term
"Fund" as used in this Agreement shall mean in addition each separate Series
currently existing or subsequently created, and the term "Shares" shall mean all
shares of beneficial interest of the Fund, whether of a single class or divided
into separate Series of the Fund currently existing or hereinafter created.
8.2. Notice to Trust Company. In the event that the Fund establishes one or
more or additional Series of Shares in addition to the original Series with
respect to which it desires to have Trust Company render services as
recordkeeping agent under the terms hereof, it shall so notify Trust Company in
writing, and upon the effectiveness of a registration statement under the 33 Act
relating to such Series of Shares and unless Trust Company objects in writing to
providing such services, such Series shall be subject to this Agreement.
8.3. Suspension. In the event that the Fund suspends the offering of Shares
of any one or more Series, it shall so notify Trust Company in writing to such
effect.
9. Assignment.
Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the written consent of the other party. This
Agreement shall inure to the benefit of and be binding upon the parties and
their respective permitted successors and assigns.
10. Amendment.
This Agreement may be amended or modified by a written agreement executed
by both parties.
11. Massachusetts Law to Apply.
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of The Commonwealth of Massachusetts.
12. Entire Agreement.
This Agreement constitutes the entire agreement between the parties hereto.
13. Correspondence.
Trust Company will answer correspondence from Administrators relating to
Plan and Plan participant accounts and such other correspondence as may from
time to time be mutually agreed upon and notify the Fund of any correspondence
which may require an answer from the Fund.
14. Further Actions.
Each party agrees to perform such further acts and execute such further
documents as are necessary to effectuate the purposes hereof.
15. Interpretive Provisions.
In connection with the operation of this Agreement, Trust Company and the
Fund may agree from time to time on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement. Any such interpretive or
additional provisions are to be signed by the parties and annexed hereto, but no
such provisions shall contravene any applicable federal or state law or
regulation and no such interpretive or additional provision shall be deemed to
be an amendment of this Agreement.
16. Miscellaneous.
The name Scudder Equity Trust is the designation of the Trustees for the
time being under a Declaration of Trust dated March 18, 1988, as amended, and
all persons dealing with the Fund must look solely to the Fund property for the
enforcement of any claims against the Fund as neither the Trustees, officers,
agents nor shareholders assume any personal liability for obligations entered
into on behalf of the Fund. No Series of the Fund shall be liable for any claims
against any other Series of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first above
written.
SCUDDER TRUST COMPANY
By: /s/ Dennis M. Cronin, Jr.
Dennis M. Cronin, Jr.
Title: Vice President & Treasurer
SCUDDER EQUITY TRUST
By: /s/ David S. Lee
David S. Lee
Title: Vice President
Exhibit 9(c)(1)
SERVICE AGREEMENT
AGREEMENT made as of the 8th day of June, 1995, by and among COPELAND
ASSOCIATES, INC., a Delaware corporation with its principal office at Two Tower
Center, East Brunswick, New Jersey 08816 ("Service Provider"), SCUDDER SERVICE
CORPORATION, a Massachusetts corporation with its principal office at Two
International Place, Boston, Massachusetts 02110 ("Transfer Agent"), and each of
those registered investment companies listed on Schedule A hereto (the "Scudder
Funds").
WHEREAS the Transfer Agent serves as transfer agent, dividend
disbursing agent and agent in connection with certain other matters for each
Scudder Fund listed on Schedule A hereto, as such Schedule A may be amended from
time to time with the mutual consent of the parties hereto, each of which is an
open-end management investment company registered under the Investment Company
Act of 1940, as amended (the "1940 Act");
WHEREAS Service Provider provides certain administrative and
recordkeeping services to or for the benefit of retirement plans (individually a
"Plan" and collectively the "Plans") that include or propose to include as
investment alternatives certain Scudder Funds through Code Section 403(b)(7)
arrangements ("Custodial Accounts") and The Copeland Companies Retirement Trust
Account (the "Group Trust"), and Service Provider is a transfer agent registered
under the Securities Exchange Act of 1934, as amended;
WHEREAS the services to be provided by Service Provider hereunder will
benefit the Scudder Funds by relieving them of the expense they would incur if
such services were to be provided by the Transfer Agent or its affiliates; and
WHEREAS the Transfer Agent desires to appoint Service Provider as agent
for the Scudder Funds solely with respect to the Group Trust and Custodial
Accounts (the Group Trust and each such Custodial Account), and Service Provider
desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. Terms of Appointment; Duties of the Parties
1.01. Agent for Order Processing. Subject to the terms and conditions
set forth in this Agreement, the Transfer Agent hereby appoints Service Provider
to act as, and Service Provider agrees to act as, agent for the sole purpose of
receiving requests for the purchase and redemption, and communicating to the
Transfer Agent requests for the purchase and redemption, of the authorized and
issued shares of beneficial interest of any Scudder Fund (the "Shares")
purchased, held or redeemed by a Plan. If a Scudder Fund offers two or more
series of Shares, each such series shall be deemed at such time to be a Scudder
Fund, unless otherwise indicated herein.
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1.02. Service Provider. Except as provided specifically herein, Service
Provider shall not be, and shall not hold itself out as, an agent of the
Transfer Agent or any Scudder Fund. Service Provider shall perform the following
functions on behalf of the Plans in accordance with procedures established from
time to time by agreement of the Transfer Agent and Service Provider, and
subject to terms and conditions set forth in each Scudder Fund's current
prospectus.
(a) Receive from the Plans, Plan participants, Plan sponsors,
authorized Plan committees or Plan trustees, according to Service Provider's
agreement with each Plan, by the close of regular trading on the New York Stock
Exchange (the "Close of Trading") each business day that the New York Stock
Exchange is open for business ("Business Day") instructions for the purchase and
redemption of Shares (together, "Instructions");
(b) Based on Instructions received each Business Day, compute net
purchase requests or net redemption requests for Shares for each Scudder Fund
for each Plan (together, "Orders");
(c) Maintain adequate records related to, and advise the Transfer Agent
as to, the foregoing, as instructed by the Transfer Agent. To the extent
required under the 1940 Act and rules thereunder, Service Provider agrees that
such records maintained by it hereunder will be preserved, maintained and made
available in accordance with the provisions of the 1940 Act and rules
thereunder, and copies or, if required, originals will be surrendered promptly
to the Transfer Agent on and in accordance with its request. Records surrendered
hereunder shall be in machine readable form, except to the extent that Service
Provider has maintained such records only in paper form. This provision shall
survive the termination of this Agreement.
1.03. Equipment. Service Provider shall maintain adequate offices,
personnel and computer and other equipment to perform the services contemplated
by this Agreement. Service Provider shall notify the Transfer Agent promptly in
the event that it becomes unable for any reason to perform the services
contemplated by, or any other of its obligations under, this Agreement.
1.04. Insurance. Service Provider shall maintain at all times general
liability and other insurance coverage, including errors and omissions coverage,
that is reasonable and customary in light of its duties hereunder, with limits
of not less than $2 million. Such insurance coverage shall be issued by a
qualified insurance carrier with a Best's rating of at least "A" or with the
highest rating of a nationally recognized statistical rating organization.
Notwithstanding any provision to the contrary herein, no provision of this
Agreement shall relieve an insurer of any obligation to pay to any Scudder Fund,
the Transfer Agent or any affiliate of the Transfer Agent, Service Provider, or
any other insured party any claim that would be a covered claim in the absence
of any provision hereof.
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1.05. Disclosure to Plans. Service Provider shall take all steps
necessary to ensure that the arrangements provided for in this Agreement are
properly disclosed to the Plans.
1.06. Transmission of Information to Service Provider. In accordance
with procedures established from time to time by agreement of the Transfer Agent
and Service Provider, the Transfer Agent shall transmit to Service Provider,
which will act on behalf of the Plans, the following information for each
Scudder Fund, as received by the Transfer Agent from third parties:
(a) Net asset value information as of the Close of Trading each Business
Day, when such information is used to process trades;
(b) Dividend and capital gains distribution information, as it arises, when
such information is used for crediting accounts; and
(c) Daily accrual for interest rate factor (mil rate) information with
respect to Scudder Funds which declare dividends daily, when such information is
used for crediting accounts.
1.07. Transmission of Information to Transfer Agent. Service Provider
shall perform the following services in accordance with procedures established
from time to time by agreement of the Transfer Agent and Service Provider, and
subject to terms and conditions set forth in each Scudder Fund's current
prospectus:
(a) Immediately prior to the Close of Trading each Business
Day, Service Provider shall communicate to itself, as agent of each Scudder Fund
to the extent such Instructions refer to such Scudder Fund, all Instructions
received by acting on behalf of the Plans since the Close of Trading the
preceding Business Day.
(b) Communicate Orders to the Transfer Agent, for acceptance
by the Scudder Funds or their agents, in the manner specified herein, and
promptly deliver, or instruct the Plans (or the Plans' trustees as the case may
be) to deliver, appropriate documentation and in the case of purchase requests,
payment therefor to the Transfer Agent.
(c) Employ its best efforts to communicate Orders to the
Transfer Agent in a prompt and timely manner, so that the Transfer Agent
receives Orders no later than 9:00 PM Boston time each Business Day that the
Instructions on which such Orders are based are received by Service Provider
from a Plan before the Close of Trading. If, however, despite its best efforts,
Service Provider is unable to communicate Orders to the Transfer Agent by such
time on any Business Day, Service Provider in any case shall communicate such
Orders to the Transfer Agent by no later than 9:00 AM Boston time the following
Business Day. Orders shall be based solely on Instructions received by Service
Provider from the Plans, Plan participants, Plan sponsors, authorized Plan
committees or Plan trustees, according to Service Provider's agreement with each
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<PAGE>
Plan, by the Close of Trading each Business Day. Instructions received by
Service Provider after the Close of Trading on any Business Day shall be treated
as received on the next Business Day. Provided that Service Provider complies
with the foregoing terms and conditions, Service Provider will be deemed to be
agent of each Scudder Fund to the extent such Instructions refer to such Scudder
Fund for the sole purpose of receiving Instructions immediately prior to the
Close of Trading each Business Day and communicating Orders based on such
Instructions to the Transfer Agent, all as specified herein, and the Business
Day on which Instructions are received by Service Provider immediately prior to
the Close of Trading will be the Business Day as of which Orders will be deemed
received by the Transfer Agent as a result of such Instructions.
1.08. Representations Regarding Shares. Any representation made by
Service Provider regarding any Shares or Scudder Fund shall be in its capacity
as agent to the Plans and not in its capacity as Service Provider. Service
Provider shall make no representation in any capacity regarding any Shares or
Scudder Fund except as set forth in such Scudder Fund's current prospectus or
current sales literature furnished by such Scudder Fund or by the Transfer
Agent.
1.09. Confidentiality of Information. The parties hereto agree that all
books, records, information and data pertaining to the business of any other
party which are exchanged or received pursuant to the negotiation or the
carrying out of this Agreement shall be kept confidential and shall not be
voluntarily disclosed to any other person other than to the custodian or group
trustee or plan trustee of the relevant Plan or Plans and except as may be
required by law. This provision shall survive the termination of this Agreement.
1.10. Redundancy. Service Provider shall maintain or provide for
redundant facilities and shall maintain or provide for backup files of its
records maintained hereunder and shall store such back-up files in a secure
off-premises location, so that, in the event of a power failure or other
interruption of whatever cause at the location of its records, Service
Provider's records are maintained intact and transactions can be processed at
another location.
1.11. Compliance with Law. Service Provider shall comply with all
federal and state securities laws and regulations thereunder in connection with
its responsibilities under this Agreement.
1.12. Administrative Services. Service Provider shall perform the
administrative and recordkeeping services (the "Administrative Services")
described in Schedule B hereto, as such Schedule B may be amended from time to
time with the mutual consent of the parties hereto, with respect to Shares
purchased, held or redeemed by a Plan. Except as provided specifically in
Section 1.07 hereof, Service Provider shall perform the Administrative Services
as an independent contractor and not as an employee or agent of the Transfer
Agent or any Scudder Fund. Service Provider shall perform the Administrative
Services in accordance with procedures established from time to time by
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<PAGE>
agreement of the Transfer Agent and Service Provider, and subject to terms and
conditions set forth in each Scudder Fund's current prospectus.
1.13. No Impairment of Scudder's Authority. No provision of this
Agreement shall limit in any way the authority of any Scudder Fund or of the
distributor of any Scudder Fund to take such action as it deems appropriate in
connection with matters relating to the operation of such Scudder Fund and the
sale of its shares.
1.14 Authority of Service Provider. Service Provider acknowledges that
it is not authorized by any Scudder Fund to register the transfer of any Scudder
Fund's Shares or to transfer record ownership of any Scudder Fund's Shares, and
that only the Transfer Agent is authorized to perform such activities.
2. Compensation
2.01. Service Provider's Expenses. Service Provider shall bear all
expenses arising out of the performance of the Administrative Services and of
the performance of functions on behalf of the Plans as agent of the Plans.
Service Provider shall not receive from the Transfer Agent (or from any
affiliate of the Transfer Agent) or from any Scudder Fund any monetary
compensation or reimbursement for such expenses; however, under the terms of the
Group Trust or any Custodial Acount, the trustee or custodian thereof may redeem
Scudder Fund shares to pay fees or expenses authorized thereunder or authorized
by a proper instruction, including a continuing instruction.
2.02. Transfer Agent's Expenses. The Transfer Agent shall bear all
expenses of its own hereunder and shall not receive from Service Provider any
monetary compensation or reimbursement for such expenses.
2.03. Fund Expenses. Each Scudder Fund shall bear all expenses of its
own hereunder, including without limitation the cost of registration of its
shares and the cost of preparing its prospectus, proxy materials, periodic
reports to shareholders, and other materials prepared by such Scudder Fund, and
shall not receive from Service Provider any monetary compensation or
reimbursement for such expenses.
2.04. Administrative Fees. In consideration of Service Provider's
performance of the Administrative Services, each Scudder Fund shall pay to
Service Provider the fees (the "Administrative Fees") described in Schedule C
hereto, as such Schedule C may be amended from time to time with the mutual
consent of Service Provider and the applicable Scudder Fund.
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2.05. Calculation and Payment of Fees. The Administrative Fees shall be
due each calendar month from each Scudder Fund for which the Service Provider
performs Administrative Services pursuant to this Agreement. Each Scudder Fund
making a payment for such Administrative Fees for such calendar month shall make
payment within thirty (30) days after the last day of such month. Service
Provider shall have sixty (60) days following receipt of the payment to verify
the amount of the payment and after such time the amount will be considered
final.
3. Representations and Warranties
3.01 Service Provider's Representations. Service Provider represents and
warrants to the Transfer Agent and each Scudder Fund that:
(a) It is a corporation duly organized and validly existing
and in good standing under the laws of the State of Delaware;
(b) It has full power and authority under applicable law to
carry on its business, and is registered or licensed as required, in each
jurisdiction where it conducts its business;
(c) It has full power and authority under applicable law, and
has taken all actions necessary, to enter into and to perform this Agreement;
(d) It is duly registered as a transfer agent under section
17A of the Securities Exchange Act of 1934, as amended ("1934 Act");
(e) It is duly registered as a broker-dealer under section 15
of the 1934 Act; or, if it not so registered, it is not required to be so
registered in order to perform this Agreement, and it undertakes to comply with
any determination by a governmental agency or court of competent jurisdiction
that activities substantially similar to those of the Service Provider hereunder
are such as to require registration as a broker-dealer under the 1934 Act;
(f) It maintains and knows of no reason why it cannot or will
not during the term hereof maintain adequate offices, personnel and computer and
other equipment to perform the services contemplated by this Agreement;
(g) To the best of its knowledge, it will not be a "fiduciary"
of any Plan as such term is defined in section 3 (21) of the Employment
Retirement Income Security Act of 1974, as amended ("ERISA"), and section 4975
of the Internal Revenue Code of 1986, as amended (the "Code"); and
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<PAGE>
(h) To the best of its knowledge, the receipt for the
Administrative Fees by Service Provider will not constitute a "prohibited
transaction" as such term is defined in section 406 of ERISA and section 4975 of
the Code.
3.02. Transfer Agent's Representations. The Transfer Agent represents
and warrants to Service Provider that:
(a) It is a corporation duly organized, validly existing and
in good standing under the laws of The Commonwealth of Massachusetts;
(b) It has full power and authority to carry on its business
in The Commonwealth of Massachusetts;
(c) It has full power and authority under applicable law, and
has taken all actions necessary, to enter into and to perform this Agreement;
(d) It is authorized to appoint Service Provider as agent for
the Scudder Funds for the limited purpose set forth herein; and
(e) It is duly registered as a transfer agent under section
17A of the 1934 Act.
3.03. Fund Representations. Each Scudder Fund represents and warrants
to Service Provider that:
(a) It has full power and authority under applicable law, and
has taken all actions necessary, to enter into and to perform this Agreement;
and
(b) It is duly registered as an investment company under the
1940 Act.
4. Indemnification
4.01. By Transfer Agent. The Transfer Agent shall indemnify and hold
Service Provider, each Scudder Fund, and their directors, trustees, officers and
employees harmless from and against any and all losses, damages, costs, charges,
counsel fees, payments, expenses and liabilities arising out of or attributable
to:
(a) the Transfer Agent's refusal or failure to comply with the
provisions of this Agreement, or
(b) the lack of good faith, negligence or willful misconduct
of the Transfer Agent, or
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(c) the breach of any representation or warranty of the
Transfer Agent hereunder.
4.02. By Funds. Each Scudder Fund shall indemnify and hold the Transfer
Agent, each affiliate of the Transfer Agent, Service Provider, and their
directors, officers and employees harmless from and against any and all losses,
damages, costs, charges, counsel fees, payments, expenses and liabilities
arising out of or attributable to:
(a) such Scudder Fund's refusal or failure to comply with the
provisions of this Agreement, or
(b) the lack of good faith, negligence or willful misconduct
of such Scudder Fund, or
(c) the breach of any representation or warranty of such
Scudder Fund hereunder.
4.03. By Service Provider. Service Provider shall indemnify and hold
the Transfer Agent, each affiliate of the Transfer Agent, each Scudder Fund, and
their directors, trustees, officers and employees harmless from and against any
and all losses, damages, costs, charges, counsel fees, payments, expenses and
liabilities arising out of or attributable to:
(a) Service Provider's refusal or failure to comply with the
provisions of this Agreement or with instructions properly given hereunder
(whether as a result of the acts or omissions of Service Provider or of its
agents or subcontractors), whether it is performing functions on behalf of the
Plans, as Plan Agent, or providing Administrative Services as Service Provider,
or
(b) Service Provider's performance of the Administrative
Services, or
(c) the lack of good faith, negligence or willful misconduct
of Service Provider (or its agents or subcontractors), whether it is performing
functions on behalf of the Plans, as Plan Agent, or providing Administrative
Services as Service Provider, or
(d) the breach of any representation or warranty of Service
Provider hereunder.
4.04. Acts of God. In the event that any party is unable to perform its
obligations under the terms of this Agreement because of acts of God, strikes,
equipment or transmission failure or damage reasonably beyond its control, or
other causes reasonably beyond its control, such party shall not be liable to
any other party for any damages resulting from such failure to perform or
otherwise from such causes.
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4.05. No Consequential Damages. No party to this Agreement shall be
liable to any other party for consequential damages under any provision of this
Agreement.
4.06. Claim Procedure. In order that the indemnification provisions
contained herein shall apply, upon the assertion of a claim or loss for which
any party (the "Indemnitor") may be required to indemnify another party (the
"Indemnitee"), the Indemnitee shall promptly notify the Indemnitor of such
assertion or loss, and shall keep the Indemnitor advised with respect to all
developments concerning any such claim. The Indemnitor shall have the option to
participate at its expense with the Indemnitee in the defense of any such claim.
In the event that there is more than one Indemnitor with respect to any such
claim, the Indemnitors shall agree as to their exercise of this option. The
Indemnitee shall in no case confess any claim or make any compromise in any case
in which the Indemnitor may be required to indemnify it except with the
Indemnitor's prior written consent. The obligations of the Transfer Agent, the
Scudder Funds and Service Provider under this Section 4 shall survive the
termination of this Agreement.
5. Acknowledgements
5.01. Fees Solely for Administrative Services. The parties hereto
acknowledge that the Administrative Fees are for administrative and
recordkeeping services only and do not constitute payment in any manner for
investment advisory or distribution services. The parties acknowledge that
Service Provider also has been providing and will continue to provide certain
services to the Plans as agent of the Plans, which may involve, among other
things, preparing informational or promotional materials that may refer to the
Scudder Funds and responding to telephone inquires from Plan participants. The
parties acknowledge that the provision of such services and any other actions of
Service Provider related to the Scudder Funds and not specifically authorized
herein are outside the scope of this Agreement and will be taken in the capacity
of agent of the Plans.
5.02. Service Provider Acting as Plan Agent. The parties acknowledge
that Service Provider has been selected as agent to the Plans and as a provider
of administrative and recordkeeping services by the Plans, and not by the
Transfer Agent or any Scudder Fund, and that, except as provided specifically in
Section 1.07 hereof, Service Provider will perform the Administrative Services
hereunder as an independent contractor and not as an employee or agent of the
Transfer Agent or any Scudder Fund. The parties acknowledge, further, that
neither the Transfer Agent nor any Scudder Fund undertakes to supervise Service
Provider in the performance of the Administrative Services; that neither the
Transfer Agent nor any Scudder Fund shall be responsible for Service Provider's
performance of the Administrative Services; that neither the Transfer Agent nor
any Scudder Fund shall be responsible for the accuracy of the records maintained
by Service Provider for the Plans; and that neither the Transfer Agent nor any
Scudder Fund shall be responsible for Service Provider's performance of other
functions for the Plans.
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5.03. No Investment Advice. The parties hereto acknowledge that Service
Provider has no duty or obligation under this Agreement to recommend or promote
investment in any of the Scudder Funds, and that none of the services Service
Provider is to provide under this Agreement should be viewed as constituting
investment advice with respect to any Plan's selection of any Scudder Fund as an
investment. The parties hereto further acknowledge that there is nothing in this
Agreement or the services to be provided hereunder that is intended to create
any authority or responsibility that would render any of the parties a
"fiduciary" (within the meaning of Section 3(21) of the ERISA) with respect to
the Group Trust or any Custodial Account.
5.04. Laws Applicable to Funds. Service Provider acknowledges that each
Scudder Fund, as a registered investment company under the 1940 Act, is subject
to the provisions of the 1940 Act and regulations thereunder, and that the offer
and sale of its shares are subject to the provisions of federal and state laws
and regulations applicable to the offer and sale of securities. The Transfer
Agent and each Scudder Fund acknowledges that Service Provider is not
responsible for such Scudder Fund's compliance with such laws and regulations.
If the Transfer Agent or any Scudder Fund advises Service Provider that a
procedure of Service Provider related to the discharge of its obligations
hereunder has or may have the effect of causing the Transfer Agent or any
Scudder Fund to violate any of such laws or regulations, Service Provider shall
develop a mutually agreeable alternative procedure which does not have such
effect.
6. Termination of Agreement
6.01. By Written Notice. This Agreement may be terminated by any
party upon sixty (60) days written notice to each other party.
6.02. By Transfer Agent or Fund. This Agreement may be terminated by
the Transfer Agent or any Scudder Fund immediately upon notice to each other
party in the event that (a) Service Provider becomes unable for any reason to
perform the services contemplated by this Agreement, (b) the performance by
Service Provider of the services contemplated by this Agreement becomes in the
Transfer Agent's reasonable judgment unlawful or ceases to satisfy the Transfer
Agent's reasonable standards and so becomes unacceptable to the Transfer Agent,
(c) the Transfer Agent ceases to be the transfer agent for all the Scudder
Funds, (d) all the Scudder Funds cease to be investment alternatives under all
the Plans, (e) all the Scudder Funds decline to accept any additional purchase
or redemption requests for Shares, the Securities and Exchange Commission issues
any stop order suspending the effectiveness of the registration statements or
prospectuses of all the Scudder Funds, or current prospectuses for all the
Scudder Funds are not on file with the Securities and Exchange Commission as
required by section 10 of the Securities Act of 1933, as amended. To the extent
that any of the events enumerated above occurs with respect to one or more
Scudder Funds, but not with respect to all the Scudder Funds, or that one or
more Scudder Funds, but not all the Scudder Funds, terminates this Agreement, in
lieu of termination of this Agreement the Transfer Agent shall amend Schedule A
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hereto with notice to the other parties to remove the affected Scudder Funds
from such Schedule A. To the extent that any of the events enumerated above
occurs with respect to one or more Plans, but not with respect to all the Plans,
in lieu of termination of this Agreement the Transfer Agent shall amend Schedule
B hereto with notice to the other parties to remove the affected Plans from such
Schedule B.
6.03. By Service Provider. This Agreement may be terminated by Service
Provider immediately upon notice to the other parties in the event that (a) the
Transfer Agent ceases to be the transfer agent for all the Scudder Funds or (b)
all the Scudder Funds cease to be investment alternatives under the Plans.
6.04. Termination Procedures. Upon termination of this Agreement, each
party shall return to each other party all copies of confidential or proprietary
materials or information received from such other party hereunder, other than
materials or information required to be retained by such party under applicable
laws or regulations. This provision shall survive the termination of this
Agreement.
7. Assignment
7.01. Assignment. Neither this Agreement nor any rights or
obligations hereunder may be assigned or delegated by any party without the
written consent of the other parties.
7.02. Successors. This Agreement shall inure to the benefit of and be
binding upon the parties and their respective permitted successors and assigns.
8. Notices
Notices hereunder shall be in writing, shall be delivered personally,
sent by certified mail (return receipt requested), or sent by facsimile machine
in accordance with procedures established by agreement of the Transfer Agent and
Service Provider, and shall be addressed to a party either at its address below
or at a changed address specified by it in a notice to the other parties hereto:
Transfer Agent: SCUDDER SERVICE CORPORATION
Two International Place
Boston, Massachusetts 02110
Attention: Steven J. Towle
Vice President
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Any Scudder Fund: [Name of Scudder Fund]
c/o Scudder Service Corporation
Two International Place
Boston, Massachusetts 02110
Attention: Thomas F. McDonough
Secretary
Service Provider: COPELAND ASSOCIATES, INC.
Two Tower Center
East Brunswick, NJ 08816
Attention: Paul S. Feinberg, Esq.
General Counsel
9. Amendment
Except as otherwise provided herein, this Agreement may be amended or
modified only by a written agreement executed by all the parties; provided that
an amendment solely to add or remove any Scudder Fund as a party to this
Agreement may be made, and shall be valid and binding, by the addition or
removal of the relevant Fund's listing on Schedule A and its signature below
without requiring the other parties' signatures and shall be effective as of the
date of execution, unless any other party objects in writing within thirty (30)
days after receiving notice of such amendment.
10. Massachusetts Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts, without regard to conflicts of laws principles.
11. Entire Agreement
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written. Nothing contained in this Agreement is intended
to convey rights to any third parties, such as Plans, Plan Trustees or Plan
participants.
12. Counterparts
This Agreement may be executed in one or more counterparts, each of
which shall be an original document and all of which together shall be deemed
one and the same instrument.
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13. Limitation of Liability of the Scudder Funds, Trustees and Shareholders
It is understood and expressly stipulated that none of the trustees,
officers, agents, or shareholders of any Scudder Fund shall be personally liable
hereunder. It is understood and acknowledged that all persons dealing with any
Scudder Fund must look solely to the property of such Scudder Fund for the
enforcement of any claims against such Scudder Fund as neither the trustees,
officers, agents or shareholders assume any personal liability for obligations
entered into on behalf of any Scudder Fund. No Scudder Fund shall be liable for
the obligations or liabilities of any other Scudder Fund. No series of any
Scudder Fund, if any, shall be liable for the obligations of any other series.
14. Headings
The headings contained in this Agreement are for purposes of
convenience only and shall not affect the meaning or interpretation of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
SCUDDER SERVICE CORPORATION
By: /s/Steven J. Towle
Name: Steven J. Towle
Title: Vice President
COPELAND ASSOCIATES, INC.
By: /s/ Paul S. Feinberg
Name: Paul S. Feinberg
Title: Senior Vice President
* SIGNATURES OF SCUDDER FUNDS
ON THE FOLLOWING PAGE
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above or below written.
SCUDDER DEVELOPMENT FUND
SCUDDER EQUITY TRUST, on behalf of
Scudder Capital Growth Fund
Scudder Value Fund
SCUDDER GLOBAL FUND, INC., on behalf of
Scudder Global Fund
Scudder Global Small Company Fund
SCUDDER INTERNATIONAL FUND, INC., on behalf of
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder International Fund
SCUDDER INVESTMENT TRUST, on behalf of
Scudder Growth and Income Fund
Scudder Quality Growth Fund
SCUDDER MUTUAL FUNDS, INC., on behalf of
Scudder Gold Fund
SCUDDER PORTFOLIO TRUST, on behalf of
Scudder Balanced Fund
By: /s/ Thomas F. McDonough
Name: Thomas F. McDonough
Title: Secretary
Date: 5/24/95
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Schedule A
LIST OF SCUDDER FUNDS
SCUDDER CAPITAL GROWTH FUND
SCUDDER DEVELOPMENT FUND
SCUDDER GLOBAL FUND
SCUDDER GLOBAL SMALL COMPANY FUND
SCUDDER GOLD FUND
SCUDDER GREATER EUROPE GROWTH FUND*
SCUDDER INTERNATIONAL FUND
SCUDDER PACIFIC OPPORTUNITIES FUND
SCUDDER QUALITY GROWTH FUND
SCUDDER VALUE FUND
SCUDDER GROWTH AND INCOME FUND
SCUDDER BALANCED FUND
On behalf of the Funds listed on Schedule A:
By: /s/ Thomas F. McDonough
Thomas F. McDonough
Date: 5/24/95
- --------
* Service Provider will not receive Administrative Fees for providing
Administrative Services until further notice.
<PAGE>
Schedule B
The Administrative Services
1. Maintain separate adequate records for each Plan reflecting Shares
purchased and redeemed, including dates and prices for all transactions, and
Share balances. To the extent required under the 1940 Act and rules thereunder,
such records shall be preserved, maintained and made available in accordance
with the provisions of such Act and such rules, and copies or, if required,
originals shall be surrendered promptly to the Transfer Agent on and in
accordance with its request. Records surrendered hereunder shall be in machine
readable form, except to the extent that such records have been maintained only
in paper form.
2. Disburse or credit to the Group Trust or Custodial Accounts, and
maintain records of, all proceeds of Share redemptions and distributions not
reinvested in Shares.
3. Ensure and oversee the timely transfer of funds in connection
with Plan accounts with the Scudder Funds.
4. Prepare and deliver to the Group Trust periodic account statements
showing for each Plan the total number of Shares held as of the statement
closing date, purchases and redemptions of Shares during the statement period,
and dividends and other distributions paid during the statement period (whether
paid in case or reinvested in Shares), including dates and prices for all
transactions.
5. On behalf of and as required by the Group Trust or Custodial
Accounts, deliver to Plan participants (or deliver to the Plans for distribution
to Plan participants) prospectuses, proxy materials, periodic reports to
shareholders, and other materials provided by the Transfer Agent or the Scudder
Funds.
6. Receive Instructions from Plan Agent and communicate Orders to the
Transfer Agent as specified in this Agreement.
7. Transmit confirmations of Orders to the Plans.
8. Maintain daily and monthly purchase summaries (expressed in both
Share and dollar amounts) for each Plan.
9. Settle Orders in accordance with the terms of each Scudder
Fund's prospectus.
<PAGE>
10. Transmit to the Transfer Agent, or to any Scudder Fund designated
by the Transfer Agent, such occasional and periodic reports as the Transfer
Agent shall reasonably request from time to time to enable it or such Scudder
Fund to comply with applicable laws and regulations.
2
<PAGE>
Schedule C
The Administrative Fees
The Scudder Funds listed on Schedule A will pay the Service Provider a
monthly fee at an annualized rate of .25 of 1% (25 basis points) of the average
daily account balance during the month for each account registered with Transfer
Agent for which Service Provider performs Administrative Services. If Service
Provider begins or ceases performing Administrative Services during the month,
such fee shall be prorated according to the proportion which such portion of the
month bears to the full month.
Exhibit 10
LAW OFFICES OF
DECHERT PRICE & RHOADS
TEN POST OFFICE SQUARE SOUTH
BOSTON, MA 02109-4603
TELEPHONE: (617) 728-7100
FAX: (617) 426-6567
January 30, 1996
Scudder Equity Trust
Two International Place
Boston, MA 02110
Re: Post-Effective Amendment No. 23 to Registration Statement on Form
N-1A (File No. 2-78724 (the "Registration Statement")
-----------------------------------------------------------------
Gentlemen:
Scudder Equity Trust (the "Trust") is a trust created under a written
Declaration of Trust dated October 16, 1985, and executed and delivered in
Boston, Massachusetts. The Declaration of Trust was most recently amended by an
Amended and Restated Declaration of Trust dated March 17, 1988 (as amended, the
"Declaration of Trust"). The beneficial interest thereunder is represented by
transferable shares with a par value $.01 per share ("Shares"). The Trustees
have the powers set forth in the Declaration of Trust, subject to the terms,
provisions and conditions therein provided.
We are of the opinion that the legal requirements have been complied with
in the creation of the Trust and that said Declaration of Trust is legal and
valid.
Under Article V, Section 5.4 of the Declaration of Trust, the Trustees are
empowered, in their discretion, from time to time, to issue Shares for such
amount and type of consideration, at such time or times and on such terms as the
Trustees may deem best. Under Article V, Section 5.1, it is provided that the
number of Shares authorized to be issued under the Declaration of Trust is
unlimited. Under Article V, Section 5.11, the Trustees may authorize the
division of Shares into two or more series. By written instrument dated December
15, 1986, the Trustees divided the Shares into two series, designated Scudder
Capital Growth Fund and Scudder Equity Income Fund. By written instrument dated
December 12, 1991, the Trustees abolished and dissolved the Scudder Equity
Income Fund series. By written instrument dated October 6, 1992, the Trustees
established and designated an additional series, Scudder Value Fund.
<PAGE>
Scudder Equity Trust
January 30, 1996
Page 2
By votes adopted on December 5 and 6, 1994 and December 5 and 6, 1995 the
Trustees of the Trust authorized the President, or any Vice President, the
Secretary, and the Treasurer, from time to time, to determine the appropriate
number of Shares to be registered, and to register with the Securities and
Exchange Commission, and to issue and sell to the public, such Shares.
We understand that you are about to register under the Securities Act of
1933, 4,431,117 Shares by Post-Effective Amendment No. 23 to the Registration
Statement.
We are of the opinion that all necessary Trust action precedent to the
issue of said 4,431,117 Shares, comprising the Shares covered by Post-Effective
Amendment No. 23 to the Registration Statement, has been duly taken, and that
all such Shares may be legally and validly issued for cash, and when sold will
be fully paid and non-assessable by the Trust upon receipt by the Trust or its
agent of consideration for such Shares in accordance with the terms in the
Registration Statement, subject to compliance with the Securities Act of 1933,
as amended, the Investment Company Act of 1940, as amended, and applicable state
laws regulating the sale of securities.
We consent to your filing this opinion with the Securities and Exchange
Commission as an Exhibit to Post-Effective Amendment No. 23 to the Registration
Statement.
Very truly yours,
/s/Dechert Price & Rhoads
Exhibit 11
Coopers & Lybrand
Coopers
& Lybrand a professional services firm
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Scudder Equity Trust:
We consent to the incorporation by reference in Post-Effective Amendment No. 23
to the Registration Statement of Scudder Equity Trust Fund on Form N-1A, of our
reports dated November 6, 1995 and November 3, 1995, on our audits of the
financial statements and financial highlights of Scudder Capital Growth Fund and
Scudder Value Fund, respectively, which reports are included in the respective
September 30, 1995 Annual Reports to Shareholders, which are incorporated by
reference in the Registration Statement.
We also consent to the reference to our Firm under the caption, "Experts."
/s/ Coopers & Lybrand L.L.P.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
January 29, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Scudder
Capital Growth Fund Annual Report for the fiscal year ended September 30, 1995
and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> SCUDDER CAPITAL GROWTH FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 1,349,722,375
<INVESTMENTS-AT-VALUE> 1,493,849,553
<RECEIVABLES> 85,825,432
<ASSETS-OTHER> 6,146
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,579,681,502
<PAYABLE-FOR-SECURITIES> 74,367,439
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13,644,699
<TOTAL-LIABILITIES> 88,012,138
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,123,309,676
<SHARES-COMMON-STOCK> 650,789
<SHARES-COMMON-PRIOR> 682,858
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 225,320,575
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 142,388,324
<NET-ASSETS> 1,491,669,364
<DIVIDEND-INCOME> 18,582,279
<INTEREST-INCOME> 3,107,159
<OTHER-INCOME> 0
<EXPENSES-NET> 13,241,191
<NET-INVESTMENT-INCOME> 8,448,247
<REALIZED-GAINS-CURRENT> 232,953,105
<APPREC-INCREASE-CURRENT> 32,843,602
<NET-CHANGE-FROM-OPS> 274,244,954
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (48,924,819)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,981,199
<NUMBER-OF-SHARES-REDEEMED> (15,955,799)
<SHARES-REINVESTED> 2,577,547
<NET-CHANGE-IN-ASSETS> 153,367,852
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (59,464)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9,188,015
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13,241,191
<AVERAGE-NET-ASSETS> 1,352,967,930
<PER-SHARE-NAV-BEGIN> 19.54
<PER-SHARE-NII> 0.13
<PER-SHARE-GAIN-APPREC> 3.98
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.73)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 22.92
<EXPENSE-RATIO> 0.98
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the Scudder
Value Fund Annual Report for the fiscal year ended September 30, 1995 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> SCUDDER VALUE FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 58,493,056
<INVESTMENTS-AT-VALUE> 66,167,607
<RECEIVABLES> 7,805,311
<ASSETS-OTHER> 25,421
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 73,998,339
<PAYABLE-FOR-SECURITIES> 109,193
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,814,734
<TOTAL-LIABILITIES> 5,923,927
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 57,680,255
<SHARES-COMMON-STOCK> 42,884
<SHARES-COMMON-PRIOR> 32,565
<ACCUMULATED-NII-CURRENT> 102,110
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,557,715
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,691,448
<NET-ASSETS> 68,074,412
<DIVIDEND-INCOME> 1,010,746
<INTEREST-INCOME> 411,465
<OTHER-INCOME> 0
<EXPENSES-NET> 630,942
<NET-INVESTMENT-INCOME> 791,269
<REALIZED-GAINS-CURRENT> 2,767,597
<APPREC-INCREASE-CURRENT> 7,364,295
<NET-CHANGE-FROM-OPS> 10,131,892
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (309,372)
<DISTRIBUTIONS-OF-GAINS> (336,274)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,327,977
<NUMBER-OF-SHARES-REDEEMED> (1,770,375)
<SHARES-REINVESTED> 47,124
<NET-CHANGE-IN-ASSETS> 32,975,731
<ACCUMULATED-NII-PRIOR> 295,322
<ACCUMULATED-GAINS-PRIOR> 1,135,395
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 257,942
<INTEREST-EXPENSE> 2,718
<GROSS-EXPENSE> 630,942
<AVERAGE-NET-ASSETS> 37,451,701
<PER-SHARE-NAV-BEGIN> 13.08
<PER-SHARE-NII> 0.18
<PER-SHARE-GAIN-APPREC> 2.86
<PER-SHARE-DIVIDEND> (0.12)
<PER-SHARE-DISTRIBUTIONS> (0.13)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.87
<EXPENSE-RATIO> 1.44
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
