Filed with the Securities and Exchange Commission on April 18, 1995.
File No. 2-13628
File No. 811-43
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. 73
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 25
Scudder Investment 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 May 1, 1995 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 filed the notice required by Rule 24f-2 for its
most recent fiscal year on February 28, 1995.
<PAGE>
SCUDDER INVESTMENT TRUST
SCUDDER GROWTH AND INCOME FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
PART A
Item No. Item Caption Prospectus Caption
- -------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information
4. General Description of INVESTMENT OBJECTIVE AND POLICIES
Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND
INVESTMENTS
FUND ORGANIZATION
5. Management of the Fund FINANCIAL HIGHLIGHTS
A MESSAGE FROM SCUDDER'S CHAIRMAN
FUND ORGANIZATION--Investment adviser and
Transfer agent
TRUSTEES AND OFFICERS
SHAREHOLDER BENEFITS--A team approach to
investing
5A. Management Discussion NOT APPLICABLE
of Fund Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION--
Securities Dividends and capital gains distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax Information
SHAREHOLDER BENEFITS--SAIL(tm)--Scudder
Automated Information Line, Dividend
reinvestment plan, T.D.D. service for the
hearing impaired
HOW TO CONTACT SCUDDER
7. Purchase of Securities PURCHASES
Being Offered FUND ORGANIZATION--Underwriter
TRANSACTION INFORMATION--Purchasing shares,
Share price, Processing time, Minimum
balances, Third party transactions
SHAREHOLDER BENEFITS--Dividend reinvestment
plan
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
INVESTMENT PRODUCTS AND SERVICES
8. Redemption or EXCHANGES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION--Redeeming shares,
Tax identification number, Minimum balances
9. Pending Legal NOT APPLICABLE
Proceedings
Cross Reference - Page 1
<PAGE>
SCUDDER GROWTH AND INCOME FUND
CROSS-REFERENCE SHEET
(continued)
PART B
Caption in Statement of
Item No. Item Caption Additional Information
- -------- ------------ -----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and FUND ORGANIZATION
History
13. Investment Objectives THE FUND'S INVESTMENT OBJECTIVE AND
and Policies POLICIES
PORTFOLIO TRANSACTIONS--Portfolio turnover
14. Management of the Fund INVESTMENT ADVISER
TRUSTEES AND OFFICERS
REMUNERATION
15. Control Persons and TRUSTEES AND OFFICERS
Principal Holders of
Securities
16. Investment Advisory and INVESTMENT ADVISER
Other Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts and Other
Information
17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage
and Other Practices
18. Capital Stock and Other FUND ORGANIZATION
Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
19. Purchase, Redemption PURCHASES
and Pricing of EXCHANGES AND REDEMPTIONS
Securities Being FEATURES AND SERVICES OFFERED BY THE FUND--
Offered Distribution Plans
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance Data
23. Financial Statements FINANCIAL STATEMENTS
Cross Reference - Page 2
<PAGE>
SCUDDER INVESTMENT TRUST
SCUDDER QUALITY GROWTH FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
PART A
Item No. Item Caption Prospectus Caption
- -------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information DISTRIBUTION AND FINANCIAL INFORMATION
4. General Description of INVESTMENT OBJECTIVE AND POLICIES
Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND
INVESTMENTS
FUND ORGANIZATION
5. Management of the Fund FINANCIAL HIGHLIGHTS
A MESSAGE FROM SCUDDER'S CHAIRMAN
FUND ORGANIZATION--Investment adviser and
Transfer agent
TRUSTEES AND OFFICERS
5A. Management Discussion SHAREHOLDER BENEFITS--A team approach to
of Fund Performance investing
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION--
Securities Dividends and capital gains distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax information
SHAREHOLDER BENEFITS--SAIL(tm)--Scudder
Automated Information Line, Dividend
reinvestment plan, T.D.D. service for the
hearing impaired
HOW TO CONTACT SCUDDER
7. Purchase of Securities PURCHASES
Being Offered FUND ORGANIZATION--Underwriter
TRANSACTION INFORMATION--Purchasing shares,
Share price, Processing time, Minimum
balances, Third party transactions
SHAREHOLDER BENEFITS--Dividend reinvestment
plan
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
INVESTMENT PRODUCTS AND SERVICES
8. Redemption or EXCHANGES AND REDEMPTIONS
Repurchase TRANSACTION INFORMATION--Redeeming shares,
Tax identification number and Minimum
balances
9. Pending Legal NOT APPLICABLE
Proceedings
Cross Reference - Page 3
<PAGE>
SCUDDER QUALITY GROWTH FUND
CROSS-REFERENCE SHEET
(continued)
PART B
Caption in Statement of
Item No. Item Caption Additional Information
- -------- ------------ -----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and FUND ORGANIZATION
History
13. Investment Objectives THE FUND'S INVESTMENT OBJECTIVE AND
and Policies POLICIES
PORTFOLIO TRANSACTIONS--Portfolio turnover
14. Management of the Fund INVESTMENT ADVISER
TRUSTEES AND OFFICERS
REMUNERATION
15. Control Persons and TRUSTEES AND OFFICERS
Principal Holders of
Securities
16. Investment Advisory and INVESTMENT ADVISER
Other Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts and Other
Information
17. Brokerage Allocation PORTFOLIO TRANSACTIONS--Brokerage
and Other Practices commissions
18. Capital Stock and Other FUND ORGANIZATION
Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
19. Purchase, Redemption PURCHASES
and Pricing of EXCHANGES AND REDEMPTIONS
Securities Being FEATURES AND SERVICES OFFERED BY THE FUND--
Offered Distribution Plans
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of PERFORMANCE INFORMATION
Performance Data
23. Financial Statements FINANCIAL STATEMENTS
Cross Reference - Page 4
<PAGE>
This prospectus sets forth concisely the information about Scudder Growth and
Income Fund, a series of Scudder Investment 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 Statement of Additional Information
dated May 1, 1995 , 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 Growth and Income Fund
Prospectus
May 1, 1995
A pure no-load(tm) (no sales charges) mutual fund seeking long-term growth of
capital, current income, and growth of income.
<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 Growth and Income 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 year ended December 31, 1994 .
Investment management fee 0.53 %**
12b-1 fees NONE
Other expenses 0.32%
-------
Total Fund operating expenses 0.85% **
========
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
- -------- -------- -------- --------
$ 9 $27 $47 $105
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
redemption proceeds via wire, there is a $5 wire service fee. For
additional information, please refer to "Transaction information-Redeeming
shares."
** These fees reflect the fees which would have been payable for the fiscal
year ended December 31, 1994 under the Investment Management
Agreement dated August 9, 1994.
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 December 31, 1994 and may be obtained without charge
by writing or calling Scudder Investor Services, Inc.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------------------------------------
1994 1993(b) 1992 1991 1990 1989 1988 1987 1986 1985
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ... $17.24 $16.20 $15.76 $12.77 $14.14 $13.18 $12.31 $15.02 $15.35 $11.90
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income ... .49 .49 .57 .57 .65 .67 .60 .68 .67 .59
Net realized and
unrealized gain
(loss) on investment
transactions .......... (.05) 2.01 .90 2.97 (1.01) 2.75 .86 (.07) 1.96 3.44
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations .............. .44 2.50 1.47 3.54 (.36) 3.42 1.46 .61 2.63 4.03
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions from:
Net investment
income ................ (.51) (.45) (.53) (.55) (.67) (.69) (.59) (.68) (.68) (.58)
Net realized gains on
investment
transactions .......... (.91) (1.01) (.50) -- (.34) (1.77) -- (2.64) (2.28) --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions ...... (1.42) (1.46) (1.03) (.55) (1.01) (2.46) (.59) (3.32) (2.96) (.58)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period ........... $16.26 $17.24 $16.20 $15.76 $12.77 $14.14 $13.18 $12.31 $15.02 $15.35
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%) ......... 2.60 15.59 9.57 28.16 (2.33) 26.36 12.01 3.50 18.27 34.55
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
period ($ millions) ..... 1,992 1,624 1,166 723 491 490 402 392 385 302
Ratio of operating
expenses to average
net assets (%) (a) ...... .86 .86 .94 .97 .95 .87 .92 .89 .83 .84
Ratio of net investment
income to average
net assets (%) ......... 2.98 2.93 3.60 4.03 5.03 4.47 4.63 4.24 4.19 4.35
Portfolio turnover
rate (%) ............... 42.3 35.5 27.5 44.7 64.7 76.6 47.6 59.5 45.3 73.3
<FN>
(a) The Adviser did not impose a portion of its management fee amounting to $.02 per share for the year ended December 31, 1992.
If all expenses, including the management fee not imposed, had been incurred by the Fund, the annualized ratio of expenses
to average net assets for such year would have been 1.08% and the total return would have been lower. This ratio includes
costs associated with the acquisition of certain assets of Niagara Share Corporation on July 27, 1992, exclusive of these
charges the ratio would have been .92%.
(b) Effective January 1, 1993, 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 $90 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 Growth and Income Fund
Investment objective
* long-term growth of capital, current income and growth of income
Investment characteristics
* an actively managed portfolio consisting primarily of common stocks and
securities convertible into common stocks
* an emphasis on companies with good prospects for earnings growth over time
* opportunity to share in the long-term growth of the U.S. stock market as
well as 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 11
Purchases 12
Exchanges and redemptions 13
Transaction information 14
Shareholder benefits 17
Trustees and Officers 20
Investment products and services 21
How to contact Scudder 22
4
<PAGE>
Investment objective and policies
Scudder Growth and Income Fund (the "Fund"), a diversified series of
Scudder Investment Trust, seeks long-term growth of capital, current income and
growth of income. The Fund invests primarily in common stocks, preferred stocks,
and securities convertible into common stocks of companies which offer the
prospect for growth of earnings while paying current dividends. Over time,
continued growth of earnings tends to lead to higher dividends and enhancement
of capital value. The Fund allocates its investments among different industries
and companies, and adjusts its portfolio securities for 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 attempts to achieve its investment objective by investing primarily in
dividend-paying common stocks, preferred stocks and securities convertible into
common stocks. The Fund may also purchase such securities which do not pay
current dividends but which offer prospects for growth of capital and future
income. Convertible securities (which may be current coupon or zero coupon
securities) are bonds, notes, debentures, preferred stocks and other securities
which may be converted or exchanged at a stated or determinable exchange ratio
into underlying shares of common stock. The Fund may also invest in
nonconvertible preferred stocks consistent with the Fund's objective. From time
to time, for temporary defensive purposes, when the Fund's investment adviser
feels such a position is advisable in light of economic or market conditions,
the Fund may invest a portion of its assets in cash and cash equivalents. The
Fund may invest in foreign securities. It may also invest in repurchase
agreements and may engage in strategic transaction s. More
information about investment techniques is provided under "Additional
information about policies and investments."
The Fund's share price fluctuates with changes in interest rates and market
conditions. These fluctuations may cause the value of shares to be higher or
lower than when purchased.
Why invest in the Fund?
The Fund seeks to provide participation in the long-term growth of the economy
through the investment returns offered by common stocks and securities
convertible into common stocks. It maintains a diversified portfolio consisting
primarily of common stocks, preferred stocks and convertible securities of
companies with long-standing records of earnings growth. These companies, many
of which are mainstays of the domestic U.S. economy, offer prospects for future
growth of earnings and profits, and therefore may offer investors attractive
long-term investment opportunities. This strategy, with an emphasis on income,
may be more appropriate for the conservative portions of your equity portfolio.
In addition, the Fund offers all the benefits of the Scudder Family of Funds.
Scudder, Stevens & Clark, Inc. (the "Adviser") 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
The Fund is designed for long-term investors who can accept moderate stock
market risk. In return for accepting stock market risk, you may earn a greater
return on your investment than from a money market or an income fund, but
experience less risk than from a portfolio of more speculative equity
securities.
Annual Capital Changes *
<TABLE>
<CAPTION>
Standard & Poor's
Scudder Growth and Income Fund 500 Stock Index
Net Asset Capital Gains Capital Price Capital
December 31 Value/Share Dividends Distributions Change Level Change
----------- ----------- --------- ------------- ------ ----- ------
<C> <C> <C> <C> <C> <C> <C>
1985 $ 15.35 211
1986 15.02 $ 0.68 $ 2.28 +13.39% 242 +14.69%
1987 12.31 0.68 2.64 -0.66 247 +2.07
1988 13.18 0.59 +7.07 278 +12.55
1989 14.14 0.69 1.77 +20.84 353 +26.99
1990 12.77 0.67 0.34 -7.32 330 -6.52
1991 15.76 0.55 +23.41 417 +26.36
1992 16.20 0.53 0.50 +6.04 436 +4.46
1993 17.24 0.45 1.01 +12.67 466 +6.88
1994 16.26 0.51 0.91 -0.43 459 -1.50
</TABLE>
Growth of a $10,000 investment
<TABLE>
<CAPTION>
Standard & Poor's
Scudder Growth and Income Fund 500 Stock Index
Total Return Total Return
Periods Ended Value of Initial Average Value of Initial Average
December 31, 1994 $10,000 Investment Cumulative Annual $10,000 Investment Cumulative Annual
- ----------------- ------------------ ---------- ------ ------------------ ---------- ------
<C> <C> <C> <C> <C> <C> <C>
One Year $10,260 +2.60% +2.60% $10,132 +1.32% +1.32%
Five Years 16,265 +62.65 +10.22 15,174 +51.74 +8.69
Ten Years 37,924 +279.24 +14.26 38,334 +283.34 +14.37
</TABLE>
The Standard & Poor's 500 Stock Index is an unmanaged index of 500 industrial,
transportation, utility and financial companies which is 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.
"Growth of a $10,000 investment" includes reinvestment of dividends and capital
gain distributions, if any. * For definition of "capital change" please see
"Distribution and performance information ." The investment return and
principal value of the Fund's shares represent past performance and will vary
due to market conditions, and the shares may be worth more or less at redemption
than at original purchase.
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.
In addition, as a matter of nonfundamental policy, the Fund may not invest more
than 10% of its net assets in securities which are not readily
marketable, restricted securities and repurchase agreements maturing in
more than seven days. The Fund may not invest more than 5% of its total assets
in restricted securities.
A complete description of these and other policies and restrictions is contained
under "Investment Restrictions" in the Fund's Statement of Additional
Information.
Securities lending
The Fund may lend portfolio securities to registered broker/dealers as a
means of increasing its income. These loans may not exceed 33 1/3% of the
Fund's total assets taken at market value. Loans of portfolio securities will be
secured continuously by collateral consisting of U.S. Government securities or
fixed-income obligations that are maintained at all times in an amount at least
equal to the current market value of the loaned securities. The Fund will earn
any interest or dividends paid on the loaned securities and may share with the
borrower some of the income received on the collateral for the loan or will be
paid a premium for the loan.
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 Fund may invest in convertible securities which 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 securitie s, 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
both nonconvertible debt securities and equity 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 the foreign securities is
believed by the Adviser to offer more return potential than domestic
alternatives in keeping with the investment objective of the Fund. The Fund may
enter into forward foreign currency exchange contracts in connection with the
purchase and sale of securities denominated in a foreign currency.
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.
7
<PAGE>
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.
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.
Securities lending. From time to time the Fund may lend its portfolio securities
to registered broker/dealers as described above. The risks of lending portfolio
securities, as with other extensions of secured credit, consist of possible
delays in receiving additional collateral or in the recovery of the securities
or possible loss of rights in the collateral should the borrower fail
financially. Loans will be made to registered broker/dealers deemed by the
Adviser to be of good standing and will not be made unless, in the judgment of
the Adviser, the consideration to be earned from such loans would justify the
risk.
Zero coupon securities. Zero coupon securities are subject to greater market
value fluctuations from changing interest rates than debt obligations of
comparable maturities that make current cash distributions of interest.
8
<PAGE>
Repurchase agreements. If the seller under a repurchase agreement becomes
insolvent, the Fund's right to dispose of the securities may be restricted,
or the value of the securities may decline before the Fund is able to dispose
of them . In the event of the commencement of bankruptcy or insolvency
proceedings with respect to 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 the 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.
Foreign securities. Investments in foreign securities involve special
considerations due to limited information, higher brokerage costs, different
accounting standards, thinner trading markets as compared to domestic markets
and the likely impact of foreign taxes on the yield from debt securities. They
may also entail other risks, such as the possibility of one or more of
the following: imposition of dividend or interest withholding or confiscatory
taxes; currency blockages or transfer restrictions; expropriation,
nationalization or other adverse political or economic developments; less
government supervision and regulation of securities exchanges, brokers and
listed companies; and the difficulty of enforcing obligations in other
countries. 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.
Further, it may be more difficult for the Fund's agents to keep currently
informed about corporate actions 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., increasing the risk of delayed
settlements of portfolio transactions or loss of certificates for portfolio
securities. The Fund's ability and decisions to purchase and sell portfolio
securities may be affected by laws or regulations relating to the convertibility
and repatriation of assets.
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
9
<PAGE>
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 Statement of Additional Information.
Distribution and performance information
Dividends and capital gains distributions
The Fund intends to distribute dividends from its net investment income
quarterly in April, July, October and December. The Fund intends to distribute
net realized capital gains after utilization of capital loss carryforwards, if
any, in November or December although an additional distribution may be
made within three months of the Fund's fiscal year end, if necessary. 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
shares. Short-term capital gains and any other taxable income distributions are
taxable as ordinary income. A portion of dividends from ordinary income may
qualify for the dividends-received deduction for corporations.
The Fund sends detailed tax information to its shareholders about the amount and
type of its distributions 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. 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.
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<PAGE>
Fund organization
Scudder Growth and Income Fund is a diversified series of Scudder Investment
Trust (the "Trust"), an open-end management investment company registered under
the Investment Company Act of 1940 (the "1940 Act"). The Trust, formerly known
as Scudder Growth and Income Fund, was organized as a Massachusetts business
trust in September 1984 and on December 31, 1984 assumed the business of its
predecessor, which was organized as a Massachusetts corporation in May 1929. On
November 13, 1984, the predecessor fund changed its name from Scudder Common
Stock Fund, Inc. to Scudder Growth and Income Fund and its investment objective
and policies from those of a growth fund to those stated in the section
"Investment objective and policies."
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.
The Adviser receives an investment management fee for these services equal, on
an annual basis, to 0.60% of the first $500 million of average daily net assets,
0.55% of such assets in excess of $500 million, 0.50% of such assets in excess
of $1 billion and 0.475% of such assets in excess of $1.5 billion. The fee is
graduated so that increases in the Fund's net assets may result in a lower
annual fee rate and decreases in the Fund's net assets may result in a higher
annual fee rate. 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.
Prior to August 9, 1994, the Adviser received on an annual basis, an investment
management fee for its services equal to 0.65% of the first $200 million of
average daily net assets, 0.60% of such assets in excess of $200 million, 0.55%
of such assets in excess of $400 million and 0.50% of such assets in excess of
$900 million.
For the fiscal year ended December 31, 1994 , the Adviser received an
investment management fee of 0.54 % of the Fund's average daily net assets
on an annual basis.
All of 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
wholly-owned subsidiary of the Adviser, is the transfer, shareholder servicing
and dividend-paying agent for the Fund.
Underwriter
Scudder Investor Services, Inc., a wholly-owned subsidiary of the Adviser, is
the Fund's principal underwriter. Scudder Investor Services, Inc. confirms, as
agent, all purchases of shares of the
(Continued on page 14)
11
<PAGE>
Purchases
Opening an account
Minimum initial investment: $1,000; IRAs $500
Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums.
See appropriate plan literature.
Make checks payable to "The Scudder Funds."
* By Mail
Send your completed and signed application and check
by regular mail to: or by express, registered,
or certified mail to:
The Scudder Funds The Scudder Funds
P.O. Box 2291 1099 Hingham Street
Boston, MA Rockland, MA
02107-2291 02370-1052
* 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.
* 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 additional shares
Minimum additional investment: $100; IRAs $50
Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums.
See appropriate plan literature.
Make checks payable to "The Scudder Funds."
* By Mail
Send a check with a Scudder investment slip, or with a letter of instruction
including your account number and the complete Fund name, to the appropriate
address listed above.
* By Wire
Please see Transaction information-Purchasing shares- By wire
following these tables for details, including the ABA wire transfer number.
* 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.
* By Telephone
You may purchase additional shares in an amount of $10,000 or more. Please
call 1-800-225-5163 for more details.
* By Automatic Investment Plan ($50 minimum)
You may arrange to make investments on a regular basis through automatic
deductions from your bank checking account. Please call 1-800-225-5163 for
more information and an enrollment form.
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<PAGE>
Exchanges and redemptions
Exchanging shares
Minimum investments: $1,000 to establish a new account; $100 to exchange among
existing accounts
* By Tele phone
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).
* By Mail or Fax
Print or type your instructions and include:
- 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
tele phone number.
Send your instructions
by regular mail to: or by express, registered, or by fax to:
or certified mail to:
The Scudder Funds The Scudder Funds 1-800-821-6234
P.O. Box 2291 1099 Hingham Street
Boston, MA 02107-2291 Rockland, MA 02370-1052
Redeeming shares
* By Tele phone
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.
* By Mail or Fax
Send your instructions for redemption to the appropriate address or fax
number 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
tele phone number.
A signature guarantee is required for redemptions over $50,000. See
Transaction information-Redeeming shares following these tables.
* By Automatic Withdrawal Plan
You may arrange to receive automatic cash payments periodically if the
value of your account is $10,000 or more. Call 1-800-225-5163 for more
information and an enrollment form.
13
<PAGE>
Transaction information
(continued from page 11)
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.
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 cancel ed 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, which may take up to seven business days. 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 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 seven business days, the order will be canceled 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 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.
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<PAGE>
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.
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, a wholly-owned subsidiary of the
Adviser, 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.
15
<PAGE>
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 redemption proceeds within one business day
following the redemption request, but may take up to seven 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
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
16
<PAGE>
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 Growth and Income 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 Stated and abroad. Scudder
believes its team approach benefits Fund investors by bringing together many
disciplines and leveraging Scudder's extensive resources.
Lead Portfolio Manager Robert T. Hoffman has had responsibility for setting the
Fund's stock investing strategy and overseeing the Fund's day-to-day operations
since 1991. Mr. Hoffman, who joined Scudder in 1990 as a portfolio manager, has
11 years of experience in the investment industry, including several
years of pension fund management experience. Kathleen T. Millard, Portfolio
Manager, has been involved in the investment industry since 1983 and has worked
as a portfolio manager since 1986. Ms. Millard, who joined the team and Scudder
in 1991, focuses on strategy and stock selection. Benjamin W. Thorndike,
Portfolio Manager, is the Fund's chief analyst and strategist for convertible
securities. Mr. Thorndike, who has 16 years of investment experience,
joined Scudder in 1983 as a portfolio manager and the Fund in 1986.
SAIL(tm)-Scudder Automated Information Line
For touchtone access to account information, prices and yields, or to perform
transactions in existing Scudder fund accounts, shareholders can call Scudder's
Automated Information Line (SAIL) at 1-800-343-2890. 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 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
Henry P. Becton, Jr.
Trustee; President and General Manager, WGBH Educational Foundation
Dudley H. Ladd*
Trustee
George M. Lovejoy, Jr.
Trustee; Chairman Emeritus, Meredith & Grew, Incorporated
Wesley W. Marple, Jr.
Trustee; Professor of Business Administration, Northeastern University
Juris Padegs*
Trustee
Jean C. Tempel
Trustee; Director, and Executive Vice President, Safeguard
Scientifics, Inc.
Bruce F. Beaty*
Vice President
Jerard K. Hartman*
Vice President
Robert T. Hoffman*
Vice President
Thomas W. Joseph*
Vice President
David S. Lee*
Vice President
Douglas M. Loudon*
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
Coleen Downs Dinneen*
Assistant Secretary
* Scudder, Stevens & Clark, Inc.
20
<PAGE>
Investment products and services
The Scudder Family of Funds
Money market
Scudder Cash Investment Trust
Scudder U.S. Treasury Money Fund
Tax free money market+
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax free+
Scudder California Tax Free Fund*
Scudder High Yield Tax Free Fund
Scudder Limited Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder Massachusetts Limited Term Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder Medium Term Tax Free Fund
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
Growth and Income
Scudder Balanced Fund
Scudder Growth and Income Fund
Income
Scudder Emerging Markets Income Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder International Bond Fund
Scudder Short Term Bond Fund
Scudder Short Term Global Income Fund
Scudder Zero Coupon 2000 Fund
Growth
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 Latin America Fund
Scudder Pacific Opportunities Fund
Scudder Quality Growth Fund
Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
IRAs
Keogh Plans
Scudder Horizon Plan*+++ (a variable annuity)
401(k) Plans
403(b) Plans
SEP-IRAs
Profit Sharing and Money Purchase Pension Plans
Closed-end Funds#
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities Fund, Inc.
Institutional Cash Management
Scudder Institutional Fund, Inc.
Scudder Fund, Inc.
Scudder Treasurers Trust(tm)++
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +A portion of the income from the tax-free funds may
be subject to federal, state and local taxes. *Not available in all states. +++A
no-load variable annuity contract provided by Charter National Life Insurance
Company and its affiliate, offered by Scudder's insurance agencies,
1-800-225-2470. #These funds, advised by Scudder, Stevens & Clark, Inc., are
traded on various stock exchanges. ++For information on Scudder Treasurers
Trust(tm), an institutional cash management service that utilizes certain
portfolios of Scudder Fund, Inc. ($100,000 minimum), call: 1-800-541-7703.
21
<PAGE>
How to contact Scudder
Account Service and Information:
For existing account service and transactions
Scudder Investor Relations
1-800-225-5163
For account updates, prices, yields, exchanges and redemptions
Scudder Automated Information Line (SAIL)
1-800-343-2890
Investment Information:
To receive information about the Scudder funds, for additional
applications and prospectuses, or for investment questions
Scudder Investor Relations
1-800-225-2470
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services
1-800-323-6105
Please address all correspondence to:
The Scudder Funds
P.O. Box 2291
Boston, Massachusetts
02107-2291
Or Stop by a Scudder Funds Center:
Many shareholders enjoy the personal, one-on-one service of the Scudder
Funds Centers. Check for a Funds Center near you--they can be found in
the following cities:
Boca Raton
Boston
Chicago
Cincinnati
Los Angeles
New York
Portland, OR
San Diego
San Francisco
Scottsdale
For information on Scudder Treasurers Trust(tm), an institutional cash
management service for corporations, non-profit organizations and trusts which
utilizes certain portfolios of Scudder Fund, Inc.* ($100,000 minimum), call:
1-800-541-7703.
For information on Scudder Institutional Funds*, funds designed to meet the
broad investment management and service needs of banks and other institutions,
call: 1-800-854-8525.
Scudder Investor Relations and Scudder Funds Centers are services
provided through Scudder Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a
prospectus with more complete information, including management fees and
expenses. Please read it carefully before you invest or send money.
22
<PAGE>
SCUDDER GROWTH AND INCOME FUND
A Pure No-Load(TM) (No Sales Charges) Diversified
Mutual Fund Seeking Long-Term Growth of
Capital, Current Income and
Growth of Income
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1995
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the prospectus of Scudder Growth and Income Fund
dated May 1, 1995 , as amended from time to time, a copy 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 FUND'S INVESTMENT OBJECTIVE AND POLICIES..........................................................................1
General Investment Objective and Policies....................................................................1
Investment Restrictions.....................................................................................11
PURCHASES............................................................................................................13
Additional Information About Opening An Account.............................................................13
Additional Information About Making Subsequent Investments..................................................14
Checks......................................................................................................14
Wire Transfer of Federal Funds..............................................................................14
Share Price.................................................................................................14
Share Certificates..........................................................................................15
Other Information...........................................................................................15
EXCHANGES AND REDEMPTIONS............................................................................................15
Exchanges...................................................................................................15
Redemption by Telephone.....................................................................................16
Redemption by Mail or Fax...................................................................................17
Redemption-In-Kind..........................................................................................17
Other Information...........................................................................................17
FEATURES AND SERVICES OFFERED BY THE FUND............................................................................18
The Pure No-Load(TM) Concept................................................................................18
Distribution Plans..........................................................................................19
Diversification.............................................................................................20
Scudder Funds Centers.......................................................................................20
Reports to Shareholders.....................................................................................20
Transaction Summaries.......................................................................................20
THE SCUDDER FAMILY OF FUNDS..........................................................................................20
SPECIAL PLAN ACCOUNTS................................................................................................24
Scudder Retirement Plans: Profit-Sharing and Money Purchase Pension Plans for Corporations and
Self-Employed Individuals..............................................................................24
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for Corporations and Self-Employed Individuals.........24
Scudder IRA: Individual Retirement Account.................................................................24
Scudder 403(b) Plan.........................................................................................25
Automatic Withdrawal Plan...................................................................................25
Group or Salary Deduction Plan..............................................................................26
Automatic Investment Plan...................................................................................26
Uniform Transfers/Gifts to Minors Act.......................................................................26
Scudder Trust Company.......................................................................................26
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS............................................................................27
PERFORMANCE INFORMATION..............................................................................................27
Average Annual Total Return.................................................................................27
Cumulative Total Return.....................................................................................28
Total Return................................................................................................28
Capital Change..............................................................................................28
Comparison of Fund Performance..............................................................................29
FUND ORGANIZATION....................................................................................................32
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS (continued)
Page
<S> <C>
INVESTMENT ADVISER...................................................................................................33
Personal Investments by Employees of the Adviser............................................................36
TRUSTEES AND OFFICERS................................................................................................36
REMUNERATION.........................................................................................................38
DISTRIBUTOR..........................................................................................................39
TAXES................................................................................................................40
PORTFOLIO TRANSACTIONS...............................................................................................44
Brokerage...................................................................................................44
Portfolio Turnover..........................................................................................45
NET ASSET VALUE......................................................................................................45
ADDITIONAL INFORMATION...............................................................................................46
Experts.....................................................................................................46
Shareholder Indemnification.................................................................................46
Other Information...........................................................................................46
FINANCIAL STATEMENTS.................................................................................................47
</TABLE>
ii
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
(See "Investment objectives and policies" and
"Additional information about policies and
investments" in the Fund's prospectus.)
General Investment Objective and Policies
Scudder Growth and Income Fund (the "Fund"), a series of Scudder
Investment Trust (the "Trust"), is a pure no-load(TM), diversified, open-end
management investment company which continuously offers and redeems its shares.
It is a company of the type commonly known as a mutual fund.
The Fund seeks long-term growth of capital, current income and growth
of income.
The Fund invests primarily in common stocks, preferred stocks and
securities convertible into common stocks of companies which offer the prospect
for growth of earnings while paying current dividends. Over time, continued
growth of earnings tends to lead to higher dividends and enhancement of capital
value. The Fund allocates its investments among different industries and
companies and adjusts portfolio securities for investment considerations
and not for trading purposes.
The Fund attempts to achieve its investment objective by investing
primarily in dividend-paying common stocks, preferred stocks and securities
convertible into common stocks. The Fund may also purchase such securities which
do not pay current dividends but which offer prospects for growth of capital and
future income. From time to time, for temporary defensive purposes, the Fund may
invest a portion of its assets in cash or debt securities, when the Fund's
investment adviser, Scudder, Stevens & Clark, Inc. (the "Adviser"), deems
such a position advisable in light of economic or market conditions.
The Adviser believes that a fund investing in these kinds of securities
can perform well whether a growth or value investment style is in favor and that
the Fund's dividend strategy can improve its performance in down markets. The
Adviser believes these characteristics can help a shareholder feel comfortable
holding on to the Fund for the long run, despite short-term changes in the
investment climate.
When evaluating a security for purchase or sale, the Adviser may
consider a security's dividend yield relative to the average dividend yield of
the Standard & Poor's 500 Index.
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 prices of the Fund's investments and there is no assurance that the
Fund's objective will be achieved. Except as otherwise noted, the Fund's
investment objective and policies may be changed by the Trustees without a vote
of the shareholders.
Convertible Securities. The Fund may invest in convertible securities; that is,
bonds, notes, debentures, preferred stocks, and other securities which are
convertible into common stocks. Investments in convertible securities may
provide income through interest and dividend payments and/or an opportunity for
capital appreciation by virtue of their conversion or exchange features.
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. The exchange ratio for any particular convertible security may be
adjusted from time to time due to stock splits, dividends, spin-offs, other
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
<PAGE>
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 issue 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 follow the
movements in the market value of the underlying common stock. Zero coupon
convertible securities generally are expected to be less volatile than the
underlying common stocks as they usually are issued with shorter 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.
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 the foreign securities
is believed by the Adviser to offer more potential than domestic alternatives in
keeping with the investment objective of the Fund.
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 Fund's performance. As foreign companies are
not generally subject to uniform accounting and 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 Fund are uninvested and no return is earned
thereon. The inability of the Fund to make intended security purchases due to
settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of portfolio securities due to settlement
problems either could result in losses to the Fund due to subsequent declines in
value of the portfolio security or, if the Fund has 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 Fund will endeavor to achieve the
most favorable net results on its portfolio transactions. Further, the Fund may
encounter difficulties or be unable to pursue legal remedies and obtain
judgments in foreign courts. There is generally less government supervision and
2
<PAGE>
regulation of business and industry practices, stock exchanges, brokers and
listed companies than in the U.S. It may be more difficult for the Fund's 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., thus increasing the risk of delayed settlements of portfolio
transactions or loss of certificates for portfolio securities. 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 these countries than in developed
countries. The management of the Fund 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 Fund 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 Fund may temporarily hold funds in bank
deposits in foreign currencies during the completion of investment programs and
the value of these assets for the Fund 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 Fund may incur costs in connection with
conversions between various currencies. Although the Fund values its assets
daily in terms of U.S. dollars, it does not intend to convert its holdings of
foreign currencies, if any, into U.S. dollars on a daily basis. It 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 Fund at one rate
while offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer. The Fund will conduct its 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. (See "Currency Transactions" for more information.)
To the extent that the Fund invests in foreign securities, the 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 that Fund's investment performance.
Lending of Portfolio Securities. The Fund may seek to increase its income by
lending portfolio securities. Such loans may be made to registered
broker/dealers and are required to be secured continuously by collateral in
cash, U.S. Government Securities and high grade debt obligations maintained on a
current basis at an amount at least equal to the market value and accrued
interest of the securities loaned. The Fund has the right to call a loan and
obtain the securities loaned on no more than five days' notice. During the
existence of a loan, the Fund will continue to receive the equivalent of any
distributions paid by the issuer on the securities loaned and will also receive
compensation based on investment of the collateral. As with other extensions of
credit there are risks of delay in recovery or even loss of rights in the
collateral should the borrower of the securities fail financially. However, the
loans will be made only to firms deemed by the Adviser to be of good standing.
The value of the securities loaned will not exceed 33(1)/(3)% of the value of
the Fund's total assets at the time any loan is made.
Repurchase Agreements. The Fund may enter into repurchase agreements with any
member bank of the Federal Reserve System and 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
as high as that of other obligations the Fund may purchase or to be at least
equal to that of issuers of commercial paper rated within the two highest grades
assigned by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's
("S&P").
3
<PAGE>
A repurchase agreement provides a means for the Fund to earn income on
funds for periods as short as overnight. It is an arrangement under which the
Fund acquires a 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 on repurchase. In either case, the income to the Fund is
unrelated to the interest rate on the Obligation itself. 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 the Fund to the
seller of the Obligation subject to the repurchase agreement and is therefore
subject to the Fund's investment restriction applicable to loans. It is not
clear whether a court would consider the Obligation purchased by the 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, the Fund may encounter delay and incur costs before being able to
sell the security. Delays may result in 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 be at
the risk of 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 its sale of the
securities underlying the repurchase agreement to a third party are less than
the repurchase price. To protect against such potential loss, if the market
value (including interest) of the Obligation subject to the repurchase agreement
becomes less than the repurchase price (including interest), the Fund will
direct the seller of the Obligation to deliver additional securities so that the
market value (including interest) 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 enforce the seller's contractual
obligation to deliver additional securities.
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 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 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
4
<PAGE>
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.
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 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, the 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 the 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. The Fund's purchase of a call option on a
security, financial future, index, currency or other instrument might be
intended to protect the 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. The 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.
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.
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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.
The 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. The
Fund will only sell OTC options (other than OTC currency options) that are
subject to a buy-back provision permitting the Fund to require the Counterparty
to sell the option back to the Fund at a formula price within seven days. The
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, the 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. The 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 SEC currently takes the position that
OTC options purchased by the Fund, and portfolio securities "covering" the
amount of the 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 the Fund's limitation on investing no more than 10% of its assets in
illiquid securities.
If the 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 the Fund's income. The sale of put options can also provide income.
The 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
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 the 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.
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Even though the Fund will receive the option premium to help protect it against
loss, a call sold by the Fund exposes the 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 the Fund to hold a security or
instrument which it might otherwise have sold.
The 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. The Fund will not
sell put options if, as a result, more than 50% of the 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 the Fund may be required to buy the underlying
security at a disadvantageous price above the market price.
General Characteristics of Futures. The 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 the 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.
The 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 the 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 the Fund.
If the 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.
The 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 the 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. The 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
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
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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. The 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. The 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.
The 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 the 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.
The 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.
The 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 the Fund has or in which the Fund expects
to have portfolio exposure.
To reduce the effect of currency fluctuations on the value of existing
or anticipated holdings of portfolio securities, the Fund may also engage in
proxy hedging. Proxy hedging is often used when the currency to which the 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 the 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 the 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"),
the 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 the 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 the Fund is engaging in proxy hedging. If the
Fund enters into a currency hedging transaction, the 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 the 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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<PAGE>
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. The 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 the 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 the
Fund may enter are interest rate, currency and index swaps and the purchase or
sale of related caps, floors and collars. The 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 the Fund anticipates purchasing at a later date. The 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 the Fund may be obligated to pay.
Interest rate swaps involve the exchange by the 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.
The 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 the 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 Fund 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 Fund 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, the 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. The 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 Fund
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.
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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
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 the 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 Fund segregate liquid ,
high grade assets with its custodian to the extent Fund obligations are not
otherwise "covered" through ownership of the underlying security, financial
instrument or currency. In general, either the full amount of any obligation by
the 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 the
Fund will require the 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 the Fund on an index will require the 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 the Fund requires the Fund to segregate
liquid, high grade assets equal to the exercise price.
Except when the 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 the Fund to buy or sell
currency will generally require the Fund to hold an amount of that currency or
liquid securities denominated in that currency equal to the Fund's obligations
or to segregate liquid , high grade assets equal to the amount of the
Fund's obligation.
OTC options entered into by the 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 the
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 the 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 the Fund sells a call option on an index at a time when the in-the-money
amount exceeds the exercise price, the 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 the Fund other than those
above generally settle with physical delivery, or with an election of either
physical delivery or cash settlement and the 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, the 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, the 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 the Fund's net obligation,
if any.
Strategic Transactions may be covered by other means when consistent
with applicable regulatory policies. The Fund may also enter into offsetting
transactions so that its combined position, coupled with any segregated assets,
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equals its net outstanding obligation in related options and Strategic
Transactions. For example, the 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 the Fund. Moreover, instead of segregating assets if the 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.
The Fund's activities involving Strategic Transactions may be limited
by the requirements of Subchapter M of the Internal Revenue Code for
qualification as a regulated investment company. (See "TAXES.")
Investment Restrictions
Unless specified to the contrary, the following restrictions may not be
changed without the approval of a majority of the outstanding voting securities
of the Fund involved 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 voting securities present at a meeting, if the holders of more than
50% of the outstanding voting securities of the Fund are present or represented
by proxy; or (2) more than 50% of the outstanding voting securities of the Fund.
Any investment restrictions herein which involve a maximum percentage
of securities or assets shall not be considered to be violated unless an excess
over the percentage occurs immediately after, and is caused by, an acquisition
or encumbrance of securities or assets of, or borrowings by, a Fund. The Fund is
under no restriction as to the amount of portfolio securities which may be
bought or sold.
As a matter of fundamental policy, the Fund may not:
1. with respect to 75% of its total assets taken at market value
purchase more than 10% of the 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. 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;
4. act as 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;
5. 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;
6. 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
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7. 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 in 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).
The Fund has undertaken that if the Fund obtains an exemptive order of
the SEC which would permit the taking of action in contravention of any policy
which may not be changed without a shareholder vote, the Fund will not take such
action unless either (i) the applicable exemptive order permits the taking of
such action without a shareholder vote or (ii) the staff of the SEC has issued
to the Fund a "no action" or interpretive letter to the effect that the Fund may
proceed without a shareholder vote.
As a matter of nonfundamental policy, the 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 net 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 7 days, and the Fund will not invest more
than 5% of its total assets in restricted securities;
(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;
(g) purchase more than 10% of the voting securities of any one
issuer, except securities issued by the U.S. Government, its
agencies or instrumentalities;
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(h) 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;
(i) 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;
(j) 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);
(k) borrow money including reverse repurchase
agreement s, in excess of 5% of its total assets
( taken at market value ) except for temporary or
emergency purposes, or borrow other than from banks;
(l) 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);
(m) make securities loans if the value of such securities loaned
exceeds 33(1)/(3)% 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; and
(n) purchase or sell real estate limited partnership interests.
PURCHASES
(See "Purchases" and "Transaction information" in the
Fund's prospectus.)
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, TWX or telephone.
Shareholders of other Scudder funds who have submitted an account
application and have a certified taxpayer 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 taxpayer 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
02101, ABA Number 011000028, DDA Account Number 9903-5552. The investor must
give the Scudder fund name, account name and new account number. Finally, the
investor must send the completed and signed application to the Fund promptly.
The minimum initial purchase amount is less than $1,000 under certain
special plan accounts.
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<PAGE>
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 members of the NASD, by banks, and by established
shareholders [except by Scudder Individual Retirement Account (IRA), Scudder
Profit Sharing and Money Purchase Pension Plans, and Scudder 401(k) and Scudder
403(b) Plan holders]. Orders placed in this manner may be directed to any office
of the Distributor listed in the Fund's prospectus. A two-part invoice of the
purchase will be mailed out promptly following receipt of a request to buy.
Payment should be attached to a copy of the invoice for proper identification.
Federal regulations require that payment be received within seven business days.
If payment is not received within that time, the shares may be canceled. In the
event of such cancellation or cancellation at the purchaser's request, the
purchaser will be responsible for any loss incurred by the Fund or the principal
underwriter by reason of such cancellation. If the purchaser is a shareholder,
the Fund shall have the authority, as agent of the shareholder, to redeem shares
in the account in order to reimburse the 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 Fund.
Checks
A certified check is not necessary but checks are only 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 of the Fund 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 the Trust 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 the 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 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 the close of regular trading on the Exchange
(normally 4 p.m ., eastern time).
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 the 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 the Exchange on
each day during which the Exchange is open for trading. Orders received after
the close of regular trading on the Exchange will receive the next 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.
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<PAGE>
Share Certificates
Due to the desire of the Trust's management to afford ease of
redemption, certificates will not be issued to indicate ownership in the Fund.
Share certificates now in a shareholder's possession may be sent to 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
"Redeeming shares" in the Fund's prospectus.)
Other Information
If purchases or redemptions of Fund 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 Board of Trustees and the Distributor, 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 may suspend or
terminate the offering of shares of the Fund at any time.
The Tax Identification Number section of the application must be
completed when opening an account. Applications and purchase orders without a
certified tax identification number and certain other certified information
(e.g., from exempt organizations, certification of exempt status) will be
returned to the investor.
The Trust may issue shares of the Fund at net asset value in connection
with any merger or consolidation with, or acquisition of the assets of, any
investment company (or series thereof) or personal holding company, subject to
the requirements of the 1940 Act.
EXCHANGES AND REDEMPTIONS
(See "Exchanges and redemptions" and "Transaction information" in
the Fund's prospectus.)
Exchanges
Exchanges are comprised of a redemption from one Scudder fund and a
purchase into another Scudder fund. The purchase side of the exchange may be
either an additional investment into an existing account or may involve opening
a new account in another 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) and dividend option as the existing account. Other features will
not carry over automatically to the new account. Exchanges into 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, tax identification number,
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 different in any respect, the exchange request must be in
writing and must contain an original signature guarantee as described under
"Transaction information--Redeeming shares--Signature guarantee" in the Fund's
prospectus.
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 value 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 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 phone or in writing to have the feature removed, or
until the originating account is depleted. The Corporation and the Transfer
Agent each reserves the right to suspend or terminate the privilege of the
Automatic Exchange Program at any time.
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<PAGE>
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 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 a prospectus of the Scudder fund into which the
exchange is being contemplated from the Distributor.
Scudder retirement plans may have different exchange requirements.
Please refer to appropriate plan literature.
Redemption by Telephone
Shareholders currently receive the right, automatically without having
to elect it, to redeem by telephone up to $50,000 to their address of record.
Shareholders may also request by telephone to have the proceeds mailed or wired
to their pre-designated bank account. In order to request wire 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) plan holders) who wish to establish telephone
redemption to a predesignated bank account or who want to
change the bank account previously designated to receive
redemption proceeds 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 or shares held in retirement accounts.
If a request for redemption to a shareholder's bank account is made by
telephone or fax, payment will be made 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 $5.00
charge for all wire redemptions.
Note: Investors designating that a savings bank 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 banks 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.
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<PAGE>
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.
Redemption requests by telephone (technically a repurchase by agreement
between the Trust 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 Mail or Fax
Any existing share certificates representing shares being redeemed must
accompany a request for redemption and be duly endorsed or accompanied by a
proper stock assignment form with signature(s) guaranteed as explained in the
Fund's prospectus.
In order to ensure proper authorization before redeeming shares, the
Transfer Agent may request additional documents such as, but not restricted 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 share certificates 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 in payment of more than seven days 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 please 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
the Trust 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 into cash. The
Fund has elected, however, to be governed by Rule 18f-1 under the 1940 Act as a
result of which the Trust 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.
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 repurchase requests to the
Trust through the Distributor at Two International Place, Boston, Massachusetts
02110-4103 by letter, fax or telephone. A two-part confirmation will be mailed
out promptly after receipt of the redemption request. A written request in good
order as described above and any certificates with a proper signature
guarantee(s), as described in the Fund's prospectus under "Transaction
information--Redeeming shares--Signature guarantee", 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 the Fund or the principal underwriter by reason of such
cancellation. The Trust will have the authority, as agent of the shareholder, to
17
<PAGE>
redeem shares in the account in order to reimburse the 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 the 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
Trust does 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 determination of net asset value may be suspended at times and a
shareholder's right to redeem shares and to receive payment 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 Trust 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 Fund may by order permit such a suspension for the
protection of the Trust's shareholders; provided that applicable rules and
regulations of the SEC (or any succeeding governmental authority) will 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 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 Fund. No transfer from an existing account to a
new fund account may be for less than $1,000 or the new account will 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 FUND
(See "Shareholder benefits" in the Fund's
prospectus.)
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
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<PAGE>
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.
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
National Association of Securities Dealers 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>
<CAPTION>
YEARS Scudder 8.50% Load Fund Load Fund with 0.75% No-Load Fund with
Pure No-Load(TM)Fund 12b-1 Fee 0.25% 12b-1 Fee
<S> <C> <C> <C> <C>
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 the
Fund's prospectus for more specific information about the rates at which
management fees and other expenses are assessed.
Distribution Plans
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 the 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 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 p rospectus for the address.
Reinvestment is usually made at the closing net asset value determined
on the 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 the Fund.
Investors may also have dividends and distributions automatically
deposited to their predesignated bank account through Scudder's
DistributionsDirect Program. Shareholders who elect to participate in the
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<PAGE>
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.
Investors choosing to participate in Scudder's Automatic Investment
Withdrawal Plan must reinvest any dividends or capital gains. For most
retirement plan accounts, the reinvestment of dividends and capital gains is
also required.
Diversification
Your investment 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 or
in a specific market sector.
Scudder Funds Centers
Investors may visit any of the Fund Centers maintained by Scudder
Investor Services, Inc. The Centers are designed to provide individuals with
services during any business day. Investors may pick up literature or find
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 to
"The Scudder Funds" at the address listed under "How to Contact Scudder" in the
Prospectus.
Reports to Shareholders
The Trust issues shareholders financial statements examined by
independent accountants on a semi-annual basis and audited annually. These
include a list of investments held and statements of assets and liabilities,
operations, changes in net assets and supplementary information. The Fund
presently intends to distribute to shareholders informal quarterly reports
during the intervening quarters, containing a summary of the Fund's performance
and portfolio holdings.
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
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<PAGE>
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.
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 Short Term Global Income Fund seeks to provide high current
income from a portfolio of high-grade money market instruments and
short-term bonds denominated in foreign currencies and the U.S. dollar.
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.
- --------------------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
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<PAGE>
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.
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.
- --------------------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
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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.
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 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
23
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Scudder Service Representative; easy telephone exchanges into Scudder money
market, tax free, income, and growth 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 Fund's prospectus.)
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 the 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.
Scudder Retirement Plans: Profit-Sharing and Money Purchase
Pension Plans for Corporations and Self-Employed Individuals
Shares of the 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 Internal
Revenue 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 Internal Revenue Code.
Scudder 401(k): Cash or Deferred Profit-Sharing Plan
for Corporations and Self-Employed Individuals
Shares of the 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 the Fund may be purchased as the underlying investment for an
Individual Retirement Account which meets the requirements of Section 408(a) of
the Internal Revenue 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.
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<PAGE>
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.)
Value of IRA at Age 65
Assuming $2,000 Deductible Annual Contribution
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
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.)
Value of a Non-IRA Account at
Age 65 Assuming $1,380 Annual Contributions
(post tax, $2,000 pretax) and a 31% Tax Bracket
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
Scudder 403(b) Plan
Shares of the Fund may also be purchased as the underlying investment
for tax sheltered annuity plans under the provisions of Section 403(b)(7) of the
Internal Revenue Code. In general, employees of tax-exempt organizations
described in Section 501(c)(3) of the Internal Revenue 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 the 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,
25
<PAGE>
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 the Fund's prospectus. Any such requests must
be received by the Fund's 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 the Fund under the Plan have been liquidated or
upon receipt by the Trust of notice of death of the shareholder.
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 (AIP). 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 the 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.
26
<PAGE>
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
(See Distribution and performance
information--Dividends and capital gains
distributions" in the Fund's prospectus.)
The 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.
The Fund may follow the practice of distributing the entire excess of net
realized long-term capital gains over net realized short-term capital losses.
However, the Fund may retain all or part of such gain for reinvestment, after
paying the related federal taxes for which shareholders may then be able to
claim a credit against their federal tax liability. If the Fund does not
distribute the amount of capital gain and/or net investment income
required to be distributed by an excise tax provision of the Internal Revenue
Code, the Fund may be subject to that excise tax. In certain circumstances, the
Fund may determine that it is in the interest of shareholders to distribute less
than the required amount. (See "TAXES.")
The Fund intends to distribute investment company taxable income,
exclusive of net short-term capital gains in excess of net long-term capital
losses, in April, July, October and December each year. Distributions of net
capital gains realized during each fiscal year will be made annually before the
end of the Fund's fiscal year on December 31. Additional distributions,
including distributions of net short-term capital gains in excess of net
long-term capital losses, may be made within three months of the Fund's fiscal
year end, if necessary.
Both types of distributions will be made in shares of the Fund and
confirmations will be mailed to each shareholder unless a shareholder has
elected to receive cash, in which case a check will be sent.
PERFORMANCE INFORMATION
(See "Distribution and performance information--Performance
information" in the Fund's prospectus.)
From time to time, quotations of the Fund's performance may be included
in advertisements, sales literature or reports to shareholders or prospective
investors. These performance figures are calculated in the following manners:
Average Annual Total Return
Average annual total return is the average annual compound rate of
return for periods of one year, five years and ten years (or such shorter
periods as may be applicable dating from the commencement of the Fund's
operations under its current investment objective), all ended on the last day of
a recent calendar quarter. Average annual total return quotations reflect
changes in the price of the Fund's 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 finding 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.
27
<PAGE>
Average Annual Total Return for periods ended December 31, 1994
One Year Five Years Ten Years
-------- ----------------- ---------
2.60% 10.22% 14.26%
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 the Fund will vary based on changes in market conditions and
the level of the 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 a Fund's shares and
assume that all dividends and capital gains distributions during the period were
reinvested in Fund shares. Cumulative total return is calculated by finding the
cumulative rates of a 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.
Cumulative Total Return for periods ended December 31, 1994
One Year Five Years Ten Years
-------- ----------------- ---------
2.60% 62.65% 279.24%
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.
Quotations of the Fund's performance are based on historical earnings,
show the performance of a hypothetical investment and are not intended to
indicate future performance of the Fund. An investor's shares when redeemed may
be worth more or less than their original cost. Performance of the Fund will
vary based on changes in market conditions and the level of the Fund's expenses.
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<PAGE>
Because some of the Fund's investments are denominated in foreign
currencies, the strength or weakness of the U.S. dollar against these currencies
may account for part of the Fund's investment performance. Historical
information on the value of the dollar versus foreign currencies may be used
from time to time in advertisements concerning the Fund. Such historical
information is not indicative of future performance.
Comparison of Fund 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 the 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, the 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, this 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, the 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 and
officers of the Fund, the Fund's 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
Fund. 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 Fund 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 Fund. The
description may include a "risk/return spectrum" which compares the Fund 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
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 Fund 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,
29
<PAGE>
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.
Evaluation of Fund performance or other relevant statistical
information made by independent sources may also be used in advertisements
concerning the Fund, including reprints of, or selections from, editorials or
articles about this Fund. Sources for Fund performance information and articles
about the Fund may 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.
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.
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<PAGE>
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.
Ned Davis Research, an independent research and brokerage firm that specializes
in quantitative research and publishes quarterly statistics pertaining to the
investment industry.
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.
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.
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<PAGE>
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.
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.
FUND ORGANIZATION
(See "Fund organization" in the Fund's
prospectus.)
The Fund is a series of Scudder Investment Trust, a Massachusetts
business trust established under a Declaration of Trust dated September 20,
1984, as amended. The name of the Trust was changed on May 15, 1991 from Scudder
Growth and Income Fund. The other series of the Trust is Scudder Quality Growth
Fund.
On November 4, 1987, the par value of the shares of beneficial interest
of the Trust was changed from no par value to $0.01 par value per share. The
Trust's authorized capital consists of an unlimited number of shares of
beneficial interest of $0.01 par value, all of which are of one class and have
equal rights as to voting, dividends and liquidation. The Trustees have the
authority to issue two or more series of shares and to designate the relative
rights and preferences as between the different series. All shares issued and
outstanding will be fully paid and non-assessable by the Trust and redeemable as
described in this Statement of Additional Information and in the Fund's
prospectus.
The assets of the 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 the 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 the
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 the Trust or any series, 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.
Shares of the 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 other series.
The Trustees, in their discretion, may authorize the division of shares
of the Fund (or shares of a series) into different classes, permitting shares of
different classes to be distributed by different methods. Although shareholders
32
<PAGE>
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 the Fund first
to obtain an exemptive order of the SEC), nor of changing the method of
distribution of shares of the Fund.
The Declaration of Trust provides that obligations of the Trust are not
binding upon the Trustees individually but only upon the property of the Trust,
that the Trustees and officers will not be liable for errors of judgment or
mistakes of fact or law and that the Trust will indemnify its 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 Trust. 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.
INVESTMENT ADVISER
(See "Fund organization--Investment adviser" in the
Fund's prospectus.)
Scudder, Stevens & Clark, Inc., an investment counsel firm, acts as
investment adviser to the Fund. This organization is one of the most experienced
investment management firms in the United States. 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 Scudder 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
Development Fund, 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 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 for 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 the Fund and also for other
clients advised by the Adviser. Investment decisions for the Fund and other
clients are made with a view toward 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
33
<PAGE>
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 the Fund. Purchase and sale orders for the Fund may be
combined with those of other clients of the Adviser in the interest of achieving
the most favorable net results to the Fund.
The Investment Management Agreement (the "Agreement") between the
Trust, on behalf of the Fund, and the Adviser was last approved by the Trustees
of the Trust on August 9, 1994 and by the shareholders of the Fund on
November 13, 1990. The Agreement is dated August 9, 1994 and will
continue in effect until September 30, 1995 and from year to year
thereafter only if its continuance is approved annually by the vote of a
majority of those Trustees who are not parties to such Agreement or interested
persons of the Adviser or the Fund, cast in person at a meeting called for the
purpose of voting on such approval, and by a majority vote either of the Fund's
Trustees or of the outstanding voting securities of the Fund. The Agreement 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 its
assignment.
Under the Agreement, the Adviser provides the Fund with continuing
investment management for the Fund's portfolio consistent with the Fund's
investment objectives, policies and restrictions and determines what securities
shall be purchased for the portfolio of the Fund, what 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 Fund's Declaration of
Trust and By-Laws, the 1940 Act and the Code and to the Fund's investment
objectives, policies and restrictions and subject, further, to such policies and
instructions as the Trustees of the Trust may from time to time establish. The
Adviser also advises and assists the officers of the Trust 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 the Fund.
The Adviser also renders significant administrative services (not
otherwise provided by third parties) necessary for the 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
Fund (such as the Fund's 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 Fund's federal, state
and local tax returns; preparing and filing the Fund's 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 Fund under applicable federal and state securities
laws; maintaining the Fund's books and records to the extent not otherwise
maintained by a third party; assisting in establishing accounting policies of
the Fund; assisting in the resolution of accounting and legal issues;
establishing and monitoring the Fund's operating budget; processing the payment
of the Fund's bills; assisting the Fund in, and otherwise arranging for, the
payment of distributions and dividends; and otherwise assisting the Fund in the
conduct of its business, subject to the direction and control of the Trustees.
The Adviser pays the compensation and expenses (except those for
attending Board and Committee meetings outside New York, New York and Boston,
Massachusetts) of all Trustees, officers and executive employees of the Trust
affiliated with the Adviser and makes available, without expense to the Trust,
the services of such Trustees, officers and employees of the Adviser as may duly
be elected officers or Trustees of the Trust, subject to their individual
consent to serve and to any limitations imposed by law, and provides the Trust's
office space and facilities.
For the Adviser's services, effective August 9, 1994, the Fund pays the
Adviser an annual fee of 0.60 of 1% on the first $500 million of the Fund's
average daily net assets, 0.55 of 1% of such assets in excess of $500 million,
0.50 of 1% of such assets in excess of $1 billion and 0.475 of 1% of such assets
in excess of $1.5 billion. The fee is 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.
From August 10, 1993 to August 8, 1994 the Fund paid the Adviser an
annual fee equal to 0.65 of 1% on the first $200 million of the Fund's
average daily net assets, 0.60 of 1% on the next $200 million of such assets and
0.55 of 1% on the next $500 million of the Fund's average daily net assets, and
0.50 of such assets in excess of $900 million, payable monthly, provided the
34
<PAGE>
Fund made such interim payments as 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 years ended December 31, 1994 , 1993 and
1992 , the Fund was charged by the Adviser aggregate fees pursuant to its
then effective investment advisory agreement of $9,941,300 ,
$7,981,719 and $4,043,611 , respectively. The Adviser waived
approximately $1.3 million of management fees otherwise payable to it in 1992 by
the Fund. The $1.3 million resulted from the one-time assumption of
substantially all of the Niagara Share Corporation's ("Niagara") severance plan
liability by the Fund during the Fund's acquisition of certain assets of
Niagara. Net assets as of December 31, 1994 were $1,991,703,186 .
Under the Agreement the Fund is responsible for all of its other
expenses including organizational costs, fees and expenses incurred in
connection with membership in investment company organizations; brokers'
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 stock certificates and any other expenses
including clerical expenses of issue, redemption or repurchase of shares; the
expenses of and the fees for registering or qualifying securities for sale; the
fees and expenses of Trustees, officers and employees of the Trust 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 Fund
may arrange to have third parties assume all or part of the expenses of sale,
underwriting and distribution of shares of the Fund. The Fund is also
responsible for its 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.
The Agreement expressly provides that the Adviser shall not be required
to pay a pricing agent of the Fund for portfolio pricing services, if any.
The Adviser has agreed in the Agreement to reimburse the Fund for
annual expenses in excess of the lowest applicable expense limitation imposed by
any state in which the Trust is at the time offering Fund 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 the Fund to the
Adviser. Management has been advised that the lowest such limitation is
presently either 2 1/2% of average daily net assets up to $30,000,000, 2% of the
next $70,000,000 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 limitations. For the
years ended December 31, 1994 , 1993 and 1992 , expenses
subject to an expense limitation equaled 0.86% , 0.86% , and
0.94% , respectively, of the average net assets of the Fund. If
reimbursement is required, it will be made as promptly as practicable after the
end of the Fund's 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. No
reimbursements have ever been required to be paid by the Adviser to the Fund.
On July 27, 1992, the Fund acquired certain assets with a fair value of
$208,411,296 (including unrealized appreciation of $52,317,307) from Niagara, a
closed-end investment company, in a tax free exchange for 13,249,287 shares of
the Fund and the assumption by the Fund of substantially all of Niagara's
severance plan liability of $1,300,000. The Fund and its shareholders did not
bear the economic burden of the assumption of such Niagara liability because the
Adviser waived approximately $1,300,000 of management fees otherwise payable to
it in 1992 by the Fund. In addition to the severance plan liability, costs of
$207,541 were incurred by the Fund as a result of the acquisition. These costs,
which were borne by the Fund are included as Fund expenses for the year ended
December 31, 1992.
The Agreement also provides that the Fund may use any name derived from
the name "Scudder, Stevens & Clark" only as long as the Agreement extension or
any renewal or amendment thereof remains in effect.
In reviewing the terms of the Agreement and in discussions with the
Adviser concerning such Agreement, the Trustees of the Trust who are not
"interested persons" of the Trust have been represented by independent counsel
at the Fund's expense. Dechert Price & Rhoads acts as general counsel for the
Trust.
The Agreement provides that the Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with matters to which the Agreement relates, except a loss resulting
35
<PAGE>
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 Agreement.
Officers and employees of the Adviser from time to time may have
transactions with various banks, including the Fund's custodian bank. It is the
Adviser's opinion that the terms and conditions of those transactions which have
occurred 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
the Trust as principals in the purchase or sale of securities, except as
individual subscribers or holders of shares of the Trust.
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 Fund. 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.
TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>
Position with Underwriter, Scudder
Name and Address Position with Fund Principal Occupation** Investor Services, Inc.
- ---------------- ------------------ ------------------------- ---------------------------------------
<S> <C> <C> <C>
Daniel Pierce+*= President and Trustee Chairman of the Board and Vice President, Director and
Managing Director Assistant Treasurer
of Scudder, Stevens &
Clark, Inc.
Henry P. Becton, Jr. Trustee President and General --
125 Western Avenue Manager, WGBH Educational
Allston, MA Foundation
Dudley H. Ladd+*= Trustee Managing Director of Senior Vice President
Scudder, Stevens & and Director
Clark, Inc.
George M. Lovejoy, Jr.= Trustee Chairman Emeritus, --
160 Federal Street Meredith & Grew,
Boston, MA Incorporated (a real
estate service company)
Wesley W. Marple, Jr. = Trustee Professor of Business --
413 Hayden Hall Administration
360 Huntington Ave. Northeastern University,
Boston, MA College of Business
Administration
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
Position with Underwriter, Scudder
Name and Address Position with Fund Principal Occupation** Investor Services, Inc.
- ---------------- ------------------ ------------------------- ---------------------------------------
<S> <C> <C> <C>
Juris Padegs#* Trustee Managing Director of Vice President and Director
Scudder, Stevens &
Clark, Inc.
Jean C. Tempel Trustee Director, Executive Vice --
Ten Post Office Square President and Manager,
Suite 1325 Safeguard Scientifics, Inc.
Boston, MA 02109
Bruce F. Beaty# Vice President Principal of Scudder, --
Stevens & Clark, Inc.
Jerard K. Hartman# Vice President Managing Director of --
Scudder, Stevens &
Clark, Inc.
Robert T. Hoffman# Vice President Managing Director of --
Scudder, Stevens &
Clark, Inc.
Thomas W. Joseph+ Vice President Principal of Scudder, Vice President, Director,
Stevens & Clark, Inc. Treasurer and Assistant Clerk
David S. Lee+ Vice President Managing Director of President, Director and Assistant
Scudder, Stevens & Treasurer
Clark, Inc.
Douglas M. Loudon# Vice President Managing Director of --
Scudder, Stevens &
Clark, Inc.
Thomas F. McDonough+ Vice President, Principal of Scudder, Clerk
Secretary and Stevens & Clark, Inc.
Assistant Treasurer
Pamela A. McGrath+ Vice President Principal of Scudder, --
and Treasurer Stevens & Clark, Inc.
Edward J. O'Connell# Vice President Principal of Scudder, Assistant Treasurer
and Assistant Stevens & Clark, Inc.
Treasurer
Coleen Downs Dinneen+ Assistant Secretary Vice President of Assistant Clerk
Scudder, Stevens &
Clark, Inc.
</TABLE>
* Messrs. Ladd, Padegs and Pierce are considered by the Fund and its
counsel to be persons who are "interested persons" of the Adviser or
of the Fund (within the meaning of the Investment Company Act of
1940, as amended).
** Unless otherwise stated, all the officers and directors have been
associated with their respective companies for more than five years,
but not necessarily in the same capacity.
37
<PAGE>
= Messrs. Ladd, Lovejoy and Pierce and Marple are members of the
Executive Committee, which has the power to declare dividends from
ordinary income and distributions of realized capital gains to the
same extent as the Board is so empowered.
+ Address: Two International Place, Boston, Massachusetts
# Address: 345 Park Avenue, New York, New York
As of March 31, 1995 , all Trustees and officers of the Fund as a
group owned beneficially (as that term is defined in Section 13(d) of the
Securities Exchange Act of 1934) less than 1% of the Fund.
To the best of the Fund's knowledge, as of March 31, 1995 no
person owned beneficially more than 5% of the Fund's outstanding shares.
The Trustees and officers of the Fund 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 or of the Distributor, the Transfer Agent or Scudder
Trust Company, from whom they receive compensation, as a result of which they
may be deemed to participate in the fees paid by the Trust. The Fund pays no
direct remuneration to any officer of the Trust. However, each of the Trust's
Trustees who is not affiliated with the Adviser will be compensated for all
expenses relating to Trust business (specifically including travel expenses
relating to Trust business). Each of these unaffiliated Trustees receives an
annual Trustee's fee of $4,000 plus $300 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 $100 per committee meeting attended other
than those set forth above. For the fiscal year ended December 31,
1994 , such fees totaled $38,348 .
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 series of the
Scudder Investment Trust, which is comprised of Scudder Growth and Income Fund
and Scudder Quality Growth Fund.
Columns (3) and (4) Pension or retirement benefits accrued or proposed to be
paid by the Trust. Scudder Investment Trust does not pay its Trustees such
benefits.
Column (5) Total compensation received by a Trustee from Scudder Growth and
Income Fund and Scudder Quality Growth Fund, plus compensation received from all
funds managed by Scudder for which a Trustee serves. The total number of funds
from which a Trustee receives such compensation is also provided in column (5).
38
<PAGE>
<TABLE>
<CAPTION>
Compensation Table
for the year ended December 31, 1994
====================================================================================================================
(1) (2) (3) (4) (5)
Aggregate Compensation from Pension or
Registrant (consisting of Retirement Estimated Total Compensation
two funds: Scudder Growth Benefits Accrued Annual Benefits From Registrant
Name of Person, and Income Fund and Scudder As Part of Fund Upon Retirement and Fund Complex
Position Quality Growth Fund) Expenses Paid to Trustee
====================================================================================================================
<S> <C> <C> <C> <C>
Henry P. Becton, Jr. $ 18,600 N/A N/A $ 90,598
Trustee (15 funds)
Amey A. DeFriez $ 14,900 N/A N/A $ 79,726
Retired Trustee as of (15 funds)
October 1, 1994
George M. Lovejoy, Jr. $ 18,800 N/A N/A $ 117,450
Trustee (12 funds)
Wesley W. Marple, Jr. $ 18,700 N/A N/A $ 95,694
Trustee (15 funds)
Jean C. Tempel $ 3,800 N/A N/A $ 15,968
Trustee (15 funds)
</TABLE>
DISTRIBUTOR
The Fund has an underwriting agreement with Scudder Investor Services,
Inc. (the "Distributor"), a Massachusetts corporation, which is a wholly-owned
subsidiary of the Adviser. The Fund's underwriting agreement dated September 10,
1985 will remain in effect until September 30, 1995 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 Board of Trustees or a majority of
the outstanding voting securities of the Fund. The underwriting agreement was
approved by the Trustees on August 9, 1994.
Under the underwriting agreement, the Fund is responsible for: the
payment of all fees and expenses in connection with the preparation and filing
with the Commission of its registration statement and prospectus and any
amendments and supplements thereto; the registration and qualification of shares
for sale in the various states, including registering the Fund as a
broker/dealer in various states, as required; the fees and expenses of
preparing, printing and mailing prospectuses annually to existing shareholders
(see below for expenses relating to prospectuses paid by the Distributor),
notices, proxy statements, reports or other communications to shareholders of
the Fund; the cost of printing and mailing confirmations of purchases of shares
and the prospectuses accompanying such confirmations; any issuance taxes and/or
any initial transfer taxes; a portion of shareholder toll-free telephone charges
and expenses of customer 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 the 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 the 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 Fund 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
expenses of any activity which is primarily intended to result in the sale of
shares issued by the Fund, unless a Rule 12b-1 plan is in effect which provides
that each Fund shall bear some or all of such expenses.
39
<PAGE>
NOTE: Although the Trust currently has no 12b-1 Plan and the Trustees
have no current intention of adopting one, the Fund will also pay those
fees and expenses permitted to be paid or assumed by the Trust pursuant
to a 12b-1 Plan, if any, adopted by the Trust, notwithstanding any
other provision to the contrary in the underwriting agreement.
As agent, the Distributor currently offers the Fund's shares 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 the Fund.
TAXES
(See "Fund organization--Dividends and capital gains
distributions" and "Transaction information--Tax information
and Tax identification number" in the Fund's prospectus.)
The 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 since its inception. It intends to continue to qualify for such treatment.
Such qualification does not involve governmental supervision or management of
investment practices or policy.
As a regulated investment company qualifying under Subchapter M of the
Code, the Fund is required to distribute to its shareholders at least 90 percent
of its investment company taxable income (including net short-term capital gain)
and is not generally 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.
The Fund is subject to a 4% nondeductible excise tax on amounts
required to be but not distributed under a prescribed formula. The formula
requires the Fund to distribute to shareholders during a calendar year an amount
equal to at least 98% of the 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) 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. Investment companies with taxable years ending
on November 30 or December 31 may make an irrevocable election to measure the
required capital gain distribution using their actual taxable year, and the Fund
will consider making such an election.
The Fund's investment company taxable income includes dividends,
interest and net short-term capital gains in excess of net long-term capital
losses, less expenses. Net realized capital gains for a fiscal year are computed
by taking into account any capital loss carryforward of the Fund.
If any net realized long-term capital gains in excess of net realized
short-term capital losses are retained by the Fund for reinvestment, requiring
federal income taxes to be paid thereon by the Fund, the 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 federal income taxes paid by
the Fund on such gains as a credit against personal federal income tax
liabilities and will be entitled to increase the adjusted tax basis of Fund
shares by the difference between a pro rata share of such gains and the
individual tax credit. If the Fund makes such an election, it may not be treated
as having met the excise tax distribution requirement.
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 the Fund's gross income. To the extent that such dividends
constitute a portion of the Fund's gross income, a portion of the income
distributions of the Fund may be eligible for the deduction for dividends
received by corporations. Shareholders will be informed of the portion of
dividends which so qualify. The dividends-received deduction is reduced to the
extent the shares of the Fund, with respect to which the dividends are received,
are treated as debt-financed under federal income tax law and is eliminated if
either those shares or the shares of the Fund are deemed to have been held by
the Fund or the shareholder, as the case may be, for less than 46 days.
40
<PAGE>
Distributions of the excess of net long-term capital gains over net
short-term capital losses are taxable to shareholders as long-term capital
gains, regardless of the length of time the shares of the 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 distributions of
long-term capital gains during such six-month period.
Distributions of investment company taxable income and net realized
capital gains will be taxable as described above, whether received 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 in cash, must be reported by each
shareholder on his or her federal income tax return. Dividends and capital gains
distributions declared in October, November or December and payable to
shareholders of record in such a month will be deemed to have been received by
shareholders on December 31 if paid during January of the following year.
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 of up to $2,000
or, if less, the amount of the individual's earned income 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
contributions will not be taxable. Also, annual 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 the Fund result in a reduction in the net asset value
of the 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 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 the Fund invests in stock of certain foreign investment companies
the 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 the 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, the 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
41
<PAGE>
and gain on dispositions as ordinary income which is not subject to a fund level
tax when distributed to shareholders as a dividend. Alternatively, the 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 on portfolio stock)
written or purchased by the Fund will be subject to tax under Section 1234 of
the Code. In general, no loss is recognized by the 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 the Fund's holding
period for the option and, in the case of an exercise of the option, on the
Fund's holding period for the underlying security. 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 substantially
identical security in the Fund's portfolio. If the Fund writes a call option, 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 a short-term capital gain or loss. If
a call option is exercised, any resulting gain or loss is short-term or
long-term capital gain or loss depending on the holding period of the underlying
security. The exercise of a put option written by the Fund is not a taxable
transaction for the Fund.
Many futures and forward contracts entered into by the Fund and all
listed nonequity options written or purchased by the Fund (including covered
call options written on debt securities and options purchased or written on
futures contracts) 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 will be treated as 60% long-term and 40%
short-term capital gain or loss, and on the last trading day of the Fund's
fiscal year (and generally, on October 31 for purposes of the 4% excise tax),
all outstanding Section 1256 positions will be marked to market (i.e., treated
as if such positions were closed out 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 or loss. 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
Fund's portfolio.
Subchapter M of the Code requires that the Fund realize less than 30%
of its annual gross income from the sale or other disposition of stock,
securities and certain options, futures and forward contracts held for less than
three months. Options, futures and forward activities of the 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 the Fund may engage in may be
limited.
Positions of the 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 the 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 stock or securities and conversion of short-term capital losses into
long-term capital losses. An exception to these straddle rules exists for any
"qualified covered call options" on stock written by the Fund.
Positions of the Fund which consist of at least one position not
governed by Section 1256 and at least one futures or forward contract or
nonequity option governed by Section 1256 which substantially diminishes the
Fund's risk of loss with respect to such other position will 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 and futures 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 the Fund accrues receivables
or liabilities denominated in a foreign currency and the
time the 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 contracts and the date of disposition
42
<PAGE>
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 the Fund's investment company taxable income to be distributed to its
shareholders as ordinary income.
A portion of the difference between the issue price of zero coupon
securities and their face value ("original issue discount") is considered to be
income to the Fund each year, even though the Fund will not receive cash
interest payments from these securities. This original issue discount (imputed
income) will comprise a part of the investment company taxable income of the
Fund which must be distributed to shareholders in order to maintain the
qualification of the Fund as a regulated investment company and to avoid federal
income tax at the level of the Fund. Shareholders will be subject to income tax
on such original issue discount, whether or not they elect to receive their
distributions in cash.
The 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
non-exempt 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 the
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 additional shares, will be reduced by the amounts required to be
withheld.
Shareholders of the Fund may be subject to state and local taxes on
distributions received from the Fund and on redemptions of the Fund's shares.
Each distribution is accompanied by a brief explanation of the form and
character of the distribution. In January of each year the Fund issues to each
shareholder a statement of the federal income tax status of all distributions.
The Fund is organized as a Massachusetts business trust and is not
liable for any income or franchise tax in the Commonwealth of Massachusetts,
provided that the Fund continues to be treated as a regulated investment company
under Subchapter M of 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 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.
Dividend and interest income received by the Fund from sources outside
the U.S. may be subject to withholding and other taxes imposed by such foreign
jurisdictions. Tax conventions between certain countries and the U.S. may reduce
or eliminate these foreign taxes, however, and foreign countries generally do
not impose taxes on capital gains respecting investments by foreign investors.
Shareholders should consult their tax advisers about the application of
the provisions of tax law in light of their particular tax situations.
43
<PAGE>
PORTFOLIO TRANSACTIONS
Brokerage
To the maximum extent feasible the Adviser places orders for portfolio
transactions through the Distributor which in turn places orders on behalf of
the Fund with other broker/dealers. The Distributor receives no commissions,
fees or other remuneration from the Fund 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 the Fund's portfolio is to obtain the most favorable
net results taking into account such factors as price, commission (negotiable in
the case of U.S. national securities exchange transactions) where applicable,
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 the 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 Fund's 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 the 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 Fund for
appraisal purposes or who supply research, market and statistical information to
the Fund. The term "research, market and statistical information" includes
advice as to the value of securities; the advisability of investing in,
purchasing or selling securities; the availability of securities or purchasers
or sellers of securities; and 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 the Fund to pay a brokerage commission 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 does
not place orders with broker/dealers on the basis that the broker/dealer has or
has not sold shares of the Fund. 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 through the Custodian and a credit against the
custodian fee due to State Street Bank equal to one-half of the commission on
any such transaction will be given on any such transaction. Except for
implementing the policy stated above, there is no intention to place portfolio
transactions with particular broker/dealers or groups thereof.
Although certain research, market and statistical information from
broker/dealers may be useful to the Fund and to the Adviser, it is the opinion
of the Adviser that such information only supplements its 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 the Fund and not all such information is used by
the Adviser in connection with the 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 the Fund.
In the fiscal years ended December 31, 1994 , 1993 and
1992 , the Fund paid brokerage commissions of $2,365,678 ,
$1,929,340 and $1,109,920 , respectively. In the fiscal year ended
December 31, 1994 , the Fund paid brokerage commissions of $2,229,178
(94.23 % 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 $1,385,083,507 (94.17 % 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.
44
<PAGE>
The Trustees of the Fund review from time to time whether the recapture
for the benefit of the Fund of some portion of the brokerage commissions or
similar fees paid by the Fund on portfolio transactions is legally permissible
and advisable. Within the past three years no such recapture has been effected.
Portfolio Turnover
The Fund's average annual portfolio turnover rates, 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 December 31, 1994 , and 1993 were 42.3 % and
35.5 %, respectively. Purchases and sales are made for the Fund's
portfolio whenever necessary, in management's opinion, to meet the Fund's
objective.
NET ASSET VALUE
The net asset value of shares of the 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.
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 Fund'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 the 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.
45
<PAGE>
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 the Fund included in the Prospectus and the
financial statements incorporated by reference in this Statement of Additional
Information have been audited by Coopers & Lybrand L.L.P. , One Post
Office Square, Boston, MA 02109, independent accountants, and are included or
incorporated by reference in the Prospectus and this Statement of Additional
Information, in reliance upon the accompanying report of said firm, which report
is given upon their authority as experts in accounting and auditing.
Shareholder Indemnification
The Fund 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 Fund. The Declaration of Trust contains an express
disclaimer of shareholder liability in connection with the Fund property or the
acts, obligations or affairs of the Fund. The Declaration of Trust also provides
for indemnification out of the Fund property of any shareholder held personally
liable for the claims and liabilities to which a shareholder may become subject
by reason of being or having been a shareholder. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its obligations.
Other Information
The CUSIP number of the Fund is 811167-10-5.
The Fund has a fiscal year ending December 31.
Many of the investment changes in the Fund will be made at prices
different from those prevailing at the time they may be reflected in a regular
report to shareholders of the Fund. These transactions will reflect investment
decisions made by the Adviser in light of the Fund's investment objectives and
policies, its other portfolio holdings and tax considerations, and should not be
construed as recommendations for similar action by other investors.
Portfolio securities of the Fund are held separately pursuant to a
custodian agreement, by the Fund's custodian, State Street Bank and Trust
Company, 225 Franklin Street, Boston, Massachusetts 02110.
The law firm of Dechert Price & Rhoads is counsel to the Fund.
The name "Scudder Growth and Income Fund" is the designation of the
Trust for the time being under a Declaration of Trust dated September 20, 1984,
as amended from time to time, and all persons dealing with the Fund must look
solely to the property of the Fund for the enforcement of any claims against the
Fund as neither the Trustees, officers, agents, shareholders nor other series of
the Trust assume any personal liability for obligations entered into on behalf
of the Fund. No other series of the Trust assumes any liabilities for
obligations entered into on behalf of the Fund. Upon the initial purchase of
shares, the shareholder agrees to be bound by the Fund's Declaration of Trust,
as amended from time to time. The Declaration of Trust is on file at the
Massachusetts Secretary of State's Office in Boston, Massachusetts.
Scudder Fund Accounting Corporation, Two International Place, Boston,
Massachusetts, 02110-4103, a wholly-owned subsidiary of the Adviser, computes
net asset value for the Fund. The Fund pays Scudder Fund Accounting Corporation
46
<PAGE>
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, 0.0045% of such assets
in excess of $1 billion, plus holding and transaction charges for this service.
Scudder Service Corporation (the "Service Corporation"), P.O. Box 2291,
Boston, Massachusetts 02107-2291, a wholly-owned subsidiary of the Adviser, is
the transfer, dividend-paying and shareholder service agent for the Fund and
also provides subaccounting and recordkeeping services for shareholder accounts
in certain retirement and employee benefit plans. The Fund pays Service
Corporation an annual fee of $20.40 for each account maintained for a
participant which is $10.03 for its services as transfer and dividend disbursing
agent and $10.37 for its services as shareholder service agent. Prior to October
1, 1989, Scudder Service Corporation acted solely as shareholder service agent
for the Fund. Included in services to shareholders was $3,952,719 ,
$2,763,521 and $1,926,639, charged to the Fund by Scudder Service Corporation
during the fiscal years ended December 31, 1994 , 1993 and 1992,
respectively, of which $374,385 was unpaid at December 31, 1994 .
The Fund's prospectus and this Statement of Additional Information omit
certain information contained in the Registration Statement and its amendments
which the Fund 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 and its amendments, are available for inspection by the public at the
SEC in Washington, D.C.
FINANCIAL STATEMENTS
The financial statements, including the investment portfolio, of
Scudder Growth and Income Fund, together with the Report of Independent
Accountants, Financial Highlights and notes to financial statements are
incorporated by reference and attached hereto on pages 9 through
26 inclusive in the Annual Report to the Shareholders of the Fund dated
December 31, 1994 and are hereby deemed to be a part of this Statement of
Additional Information.
47
<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 Growth and Income Fund
Annual Report
December 31, 1994
* A fund with a conservative, income-oriented approach to common stock
investing. Offers opportunities for long-term growth of capital,
current income, and growth of income.
* A pure no-load(tm) fund with no commissions to buy, sell, or exchange
shares.
CONTENTS
2 Highlights
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
HIGHLIGHTS
* For the year ended December 31, 1994, Scudder Growth and Income Fund's
total return was 2.6%, outpacing the 1.3% return of the unmanaged
Standard & Poor's 500 Index and the -0.94% average return of the 347
Growth and Income funds tracked by Lipper Analytical Services, Inc.
* The Fund benefited from its holdings of manufacturing stocks,
including chemical, paper, and forest product companies, which
generally outperformed the market during the year.
* The Fund also increased its investments in the healthcare sector, as
legislative concerns abated and companies adapted to a more
cost-conscious, competitive environment.
2
<PAGE>
LETTER FROM THE FUND'S PRESIDENT
Dear Shareholders,
The world's financial markets were shaken repeatedly in 1994 by a
variety of events. Rising global interest rates, losses for investors in
highly leveraged derivatives, and unsettling global developments all
combined to create a challenging environment for stock and bond investors.
Masking the market volatility, however, many broad indexes ended the year
little changed.
The events of the past year have put a new face on an old challenge
for stock funds: to provide shareholders with long-term returns that
compensate for the risks inherent in equity investments. For some
investors, the temptation is strong to move from stocks to bonds now that
U.S. Treasuries yield between 6% and 8% if held to maturity. At times like
these, it is useful to remember that stocks historically have outperformed
fixed-income investments over longer periods -- a trend not likely altered
by one year of poor performance. Even so, the global expansion currently
underway will include additional episodes of difficult adjustment. A sound
investment plan that can weather market storms is therefore more important
than ever. Experience has shown us that maintaining a diversified portfolio
and a regular program of investing can help smooth out overall performance
in the long term.
In the coming year, we expect a combination of factors, including
central bank tightening efforts, to keep the world economy and inflation on
a moderate course. Meanwhile, corporate profits continue to grow and
business investment is at an all-time high, which should translate into
expanded economic capacity down the road. These developments ultimately
should be viewed as favorable for the financial markets, and we expect
investors to begin focusing on positive long-term fundamentals rather than
short-term uncertainties.
If you have questions about your Fund or your investments, please
contact 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 Growth and Income Fund to help meet your investment needs.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Growth and Income Fund
3
<PAGE>
Scudder Growth and Income Fund
Performance Update as of December 31, 1994
- -----------------------------------------------------------------
Growth of a $10,000 Investment
- -----------------------------------------------------------------
Scudder Growth and Income Fund
- ----------------------------------------
Total Return
Period Growth -------------
Ended of Average
12/31/94 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $10,260 2.60% 2.60%
5 Year $16,265 62.65% 10.22%
10 Year $37,924 279.24% 14.26%
S&P 500 Index
- --------------------------------------
Total Return
Period Growth -------------
Ended of Average
12/31/94 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $10,132 1.32% 1.32%
5 Year $15,174 51.74% 8.69%
10 Year $38,334 283.34% 14.37%
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 December 31
Scudder Growth and Income Fund
Year Amount
- ----------------------
84 10000
85 13455
86 15917
87 16474
88 18453
89 23316
90 22773
91 29186
92 31978
93 36964
94 37924
S&P 500 Index
Year Amount
- ----------------------
84 10000
85 13173
86 15631
87 16452
88 19185
89 25263
90 24479
91 31937
92 34370
93 37834
94 38334
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 December 31
- ----------------------------------
<TABLE>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
---------------------------------------------------------------------------------
Net Asset Value... $15.35 $15.02 $12.31 $13.18 $14.14 $12.77 $15.76 $16.20 $17.24 $16.26
Income Dividends.. $ .58 $ .68 $ .68 $ .59 $ .69 $ .67 $ .55 $ .53 $ .45 $ .51
Capital Gains
Distributions..... $ -- $ 2.28 $ 2.64 $ -- $ 1.77 $ .34 $ -- $ .50 $ 1.01 $ .91
Fund Total
Return (%)........ 34.55 18.27 3.50 12.01 26.36 -2.33 28.16 9.57 15.59 2.60
Index Total
Return (%)........ 31.73 18.66 5.25 16.56 31.63 -3.11 30.40 7.61 10.06 1.32
</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 December 31, 1994
- ---------------------------------------------------------------------------
Diversification
- ---------------------------------------------------------------------------
Common and
Preferred Stocks 90% The Fund's strategy focuses on
Convertible Stocks 5% securities with potential for price
Convertible Bonds 3% appreciation and above-average dividend
Cash Equivalents 2% yields versus the overall market.
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Sectors (Excludes 2% Cash Equivalents)
- --------------------------------------------------------------------------
Manufacturing 18% The Fund benefitted from holdings in
Financial 17% manufacturing stocks, including chemical,
Health 14% paper, and forest product companies.
Consumer Staples 11%
Energy 11%
Durables 7%
Communications 6%
Utilities 4%
Consumer Discretionary 4%
Other 8%
----
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. Eli Lilly Co.
Leading pharmaceutical company
2. United Technologies Corp.
Aerospace, climate control systems and elevators
3. Baxter International Inc.
Manufacturer and distributor of hospital
and laboratory products and services
4. Alltel Corp.
Telecommunications and data processing services
5. Halliburton Co.
Oil well services
6. Xerox Corp.
Manufacturer of copiers and duplicators
7. Warner-Lambert Co.
Drugs, toiletries and food products
8. First Bank System Inc.
Commercial banking in Minnesota and the northcentral U.S.
9. TRW Inc.
Defense electronics, automotive parts and systems
10. H.J. Heinz Co.
Major manufacturer of processed foods
We identified several attractively priced healthcare companies that
we believe were adapting to the more challenging environment for
this industry.
For more complete details about the Fund's Investment Portfolio,
see page 9.
A monthly Investment Portfolio Summary is available upon request.
5
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
On the surface, 1994 looked relatively unremarkable, with the
unmanaged Standard & Poor's 500 Index virtually unchanged for the year. In
actuality, the S&P's 12-month total return of 1.3% incorporated no less
than six rallies and corrections that ranged between 4% and 8%, leaving
many investors exhausted by the year's market volatility.
We are pleased to report that Scudder Growth and Income Fund emerged
relatively unscathed within this environment. The Fund ended the year with
a total return of 2.6%, which includes price change plus income and capital
gain distributions. Over the past three, five, and 10 years, the Fund
reported average annual total returns of 9.12%, 10.22% and 14.26%,
respectively, versus 6.27%, 8.69%, and 14.37% for the S&P 500.
A Strategy Emphasizing Competitive Performance During Market Ups and Downs
The Fund's long-term success is the product of a disciplined strategy
that seeks to produce competitive returns in varying market conditions.
Achieving this goal means not only taking advantage of market upswings but,
as we were largely able to do in 1994, avoiding trouble when the overall
trend of stock prices is flat or negative. Specifically, we compare a
stock's current dividend yield to its past dividend yield and to that of
the market overall, selecting those stocks with comparatively above-average
yields that we believe offer the best prospects for appreciation over time.
During much of the year, manufacturing stocks significantly benefited
the Fund (18% of the portfolio, excluding cash equivalents, versus 13% of
the S&P 500), including chemical, paper, and forest product companies.
These stocks generally outperformed the market during the first part of the
year, reflecting the strong pace of U.S. economic activity. Expectations of
sharply higher earnings for commodity goods producers propelled prices of
holdings such as Dow Chemical, Federal Paperboard, and Lyondell
Petrochemical higher.
Healthcare holdings, which we significantly increased in the second
quarter, also contributed to the year's positive total return. This long
downtrodden sector continued to underperform the market through last spring
because of well-publicized concerns over healthcare reform, managed care,
and falling drug prices. We identified several attractively priced
6
<PAGE>
companies that we believed were adapting to the more challenging
environment. As a result, the Fund's exposure to the group doubled by the
summer, bringing it to 12% compared with 9% for the S&P. By midyear, the
prices of healthcare stocks began to improve. The industry's evolution
included a major wave of consolidations, such as Eli Lilly's acquisition of
the pharmacy benefit-management division of McKesson, and American Home
Products' purchase of American Cyanamid. The portfolio benefited not only
from its investments in these two acquisition targets but also from
holdings such as Warner Lambert and Schering Plough, which moved higher in
anticipation of additional mergers.
Higher Oil Prices Boost Energy Stocks
Energy and food stocks were lesser but still important contributors to
Fund performance early in the year. The portfolio particularly benefited
from stocks sensitive to changes in oil prices, which moved sharply higher
in the spring. Such holdings included Murphy Oil and Louisiana Land &
Exploration. Lyondell Petrochemical also fared well as pricing for ethylene
improved. Our attraction to food stocks was driven chiefly by overly
depressed share prices as a result of an extremely competitive industry
environment.
After the successes of the first nine months, the transition into the
fourth quarter was less rewarding. Many of the strategies that helped us in
the first part of the year did not work as well as the year drew to a
close. Indeed, manufacturing stocks, the biggest positive contributor in
the first nine months, provided the most disappointing performance later in
the year. As the Federal Reserve raised short-term interest rates again in
November, investors began to fear for the economic expansion. Earnings
expectations were re-evaluated lower, and commodity goods stocks
experienced a year-end downturn.
Energy stocks also reversed course near the end of the year due to
weak oil and natural gas prices and concerns that the improving environment
for petrochemicals would be short-lived. We were also on the wrong side of
an industry consolidation when one of our stock holdings, Quaker Oats,
7
<PAGE>
turned from being a rumored "acquiree" to an acquirer. After announcing its
purchase of Snapple, Quaker Oats dropped sharply from its September highs.
Looking Ahead
The challenging investment environment in 1994 seems likely to
continue into the new year. We believe well-positioned manufacturing
companies will prosper in the current environment of moderate global
growth, and we intend to maintain the Fund's exposure to this group. We are
also preserving our substantial position in financial stocks, as the
potential for stable or even declining interest rates during the second
half of 1995 should provide a much-needed lift to this group.
We expect to continue to tilt the Fund towards non-cyclical stocks,
including those in the food, beverage, tobacco, and healthcare industries.
In addition to significantly increasing our healthcare exposure earlier in
1994, we have more recently increased the portfolio's weighting in consumer
staples. Many of these stocks have been out of favor and are now
compellingly cheap. Among this group, we have focused on companies that are
actively pursuing new strategies to succeed in this era of intense
competition, including Philip Morris, Heinz, and Tambrands.
Our aim in managing your Fund is to participate during periods of
rising equity prices, while attempting to shield the portfolio from
negative market periods. In 1994, the latter proved to be the case, and we
are pleased to have helped investors avoid many of the stock market's
unpleasant surprises. While 1995 appears to offer its own challenges, we
believe our disciplined investment approach should continue to provide
exposure to the long-term benefits of the equity markets.
Sincerely,
Your Portfolio Management Team
/s/Robert T. Hoffman /s/Kathleen T. Millard
Robert T. Hoffman Kathleen T. Millard
/s/Benjamin W. Thorndike
Benjamin W. Thorndike
Scudder Growth and Income Fund:
A Team Approach to Investing
Scudder Growth and Income 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. They are supported by
Scudder's large staff of economists, research analysts, traders, and other
investment specialists who work in our 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 Robert T. Hoffman has had responsibility for
setting the Fund's stock investing strategy and overseeing the Fund's
day-to-day operations since he joined Scudder in 1991. Rob has 10 years of
experience in the investment industry and also heads up the portfolio
management team for AARP Growth and Income Fund. Kathleen T. Millard,
Portfolio Manager, has been involved in the investment industry since 1983
and at Scudder since 1991. Kathleen focuses on strategy and stock
selection, a role she also plays for AARP Growth and Income Fund. Benjamin
W. Thorndike, Portfolio Manager, is the Fund's chief analyst and strategist
for convertible securities. Ben, who has 15 years of investment experience,
joined Scudder and the Fund in 1986 and also is a Portfolio Manager for
AARP Growth and Income Fund.
8
<PAGE>
INVESTMENT PORTFOLIO as of December 31, 1994
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
------------------------------------------------------------------------------
1.9% REPURCHASE AGREEMENT
------------------------------------------------------------------------------
37,604,000 Repurchase Agreement with Donaldson,
Lufkin & Jenrette dated 12/30/94 at 5.875%
to be repurchased on 1/3/95 at $37,628,547
collateralized by a $39,207,000 U.S. Treasury
Bill, 6/29/95 (Cost $37,604,000) . . . . . . . . 37,604,000
----------
------------------------------------------------------------------------------
0.5% CORPORATE BONDS
------------------------------------------------------------------------------
FINANCIAL
3,125,000 Equitable Companies, Inc., 6.125%, 12/15/24 . . . 2,796,875
5,500,000 Siemens Capital Corp., with warrants,
8%, 6/24/02 . . . . . . . . . . . . . . . . . . 6,957,500
----------
TOTAL CORPORATE BONDS (Cost $10,302,934) . . . . . 9,754,375
----------
------------------------------------------------------------------------------
2.7% CONVERTIBLE BONDS
------------------------------------------------------------------------------
CONSUMER DISCRETIONARY 0.1%
Department & Chain Stores 2,363,000 Home Depot, Inc., 4.5%, 2/15/97 . . . . . . . . . 2,823,785
----------
HEALTH 0.1%
Health Industry Services 1,800,000 Hillhaven Corp., 7.75%, 11/1/02 . . . . . . . . . 2,304,000
----------
FINANCIAL 1.2%
Banks 0.9% 8,250,000 Banco Nacional de Mexico, 7%, 12/15/99 . . . . . . 6,558,750
8,095,000 Credit Suisse, 4.875%, 11/19/02 . . . . . . . . . 10,725,875
----------
17,284,625
----------
Other Financial Companies 0.3% 4,560,000 First Financial Management, 5%, 12/15/99 . . . . 4,810,800
1,809,000 Jardine Strategic Holdings, 7.5%, 5/7/49 . . . . 2,062,260
----------
6,873,060
----------
MEDIA 0.2%
Broadcasting &
Entertainment 8,000,000 Time Warner Inc., Zero Coupon Liquid
Yield Option Note, 6/22/13 . . . . . . . . . . 2,840,000
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
<TABLE>
SCUDDER GROWTH AND INCOME FUND
=====================================================================================================================
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TECHNOLOGY 0.3%
Electronic Data Processing 0.2% 7,500,000 Silicon Graphics Inc., 11/5/13 . . . . . . . . . 4,031,250
----------
Precision Instruments 0.1% 1,500,000 Thermo Instruments Systems Inc.,
6.625%, 8/15/01 . . . . . . . . . . . . . . . . 2,670,000
----------
CONSTRUCTION 0.3%
Homebuilding 9,300,000 Empresa ICA Sociedad Controladora S.A.,
5%, 3/15/04 . . . . . . . . . . . . . . . . . . 5,859,000
----------
TRANSPORTATION 0.5%
Airlines 13,600,000 Delta Air Lines, Inc., 3.23%, 6/15/03 . . . . . . 9,554,000
----------
TOTAL CONVERTIBLE BONDS (Cost $58,550,083) . . . . 54,239,720
----------
5.1% CONVERTIBLE PREFERRED STOCKS
Shares
---------------------------------------------------------------------------------
HEALTH 1.2%
Health Industry Services 948,400 FHP International Corp. "A" . . . . . . . . . . . 23,235,800
----------
SERVICE INDUSTRIES 0.9%
EDP Services 330,100 General Motors Corp., Series C, Cum. $3.25
(convertible into GM "E") . . . . . . . . . . . 18,939,488
----------
DURABLES 1.0%
Automobiles 215,800 Ford Motor Co., Series A, Cum. $4.20 . . . . . . 19,853,600
----------
MANUFACTURING 0.9%
Containers & Paper 0.5% 293,200 Boise Cascade Corp. "E", Cum $1.79 . . . . . . . 7,806,450
60,100 Boise Cascade Corp. "G", Cum $1.58 . . . . . . . 1,434,888
----------
9,241,338
----------
Industrial Specialty 0.4% 181,000 Corning Inc. . . . . . . . . . . . . . . . . . . 8,461,750
----------
TECHNOLOGY 0.2%
Electronic Data Processing 50,000 Ceridian Corp., 5.5% . . . . . . . . . . . . . . 3,150,000
----------
ENERGY 0.4%
Oil & Gas Production 180,500 Parker & Parsley Capital Corp. . . . . . . . . . 7,987,125
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
=========================================================================================================================
<CAPTION>
% of Market
Portfolio Shares Value ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
METALS AND MINERALS 0.5%
Precious Metals 500,000 Freeport McMoRan Copper & Gold, Inc.,
Cum. $1.25 . . . . . . . . . . . . . . . . . . 10,375,000
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $95,089,290) . . . . . . . . . . . . . . 101,244,101
------------
0.3% PREFERRED STOCKS
COMMUNICATIONS
Telephone/Communications 120,000 Philippine Long Distance Telephone Co.
TOTAL PREFERRED STOCKS (Cost $6,000,000) . . . 6,495,000
------------
89.5% COMMON STOCKS
CONSUMER DISCRETIONARY 3.8%
Department &
Chain Stores 521,000 Edison Brothers Stores, Inc. . . . . . . . . . 9,638,500
390,200 J.C. Penney Co., Inc. . . . . . . . . . . . . . 17,412,675
1,103,200 Rite Aid Corp. . . . . . . . . . . . . . . . . 25,787,300
499,300 Sears, Roebuck & Co. . . . . . . . . . . . . . 22,967,800
------------
75,806,275
------------
CONSUMER STAPLES 10.9%
Alcohol & Tobacco 3.4% 515,800 American Brands Inc. . . . . . . . . . . . . . 19,342,500
436,600 Anheuser Busch Companies, Inc. . . . . . . . . 22,212,025
440,000 Philip Morris Companies Inc. . . . . . . . . . 25,300,000
------------
66,854,525
------------
Consumer Specialties 0.2% 277,000 A.T. Cross Co. "A" . . . . . . . . . . . . . . 3,774,125
------------
Food & Beverage 4.0% 520,000 General Mills, Inc. . . . . . . . . . . . . . . 29,640,000
973,100 H.J. Heinz Co. . . . . . . . . . . . . . . . . 35,761,425
463,400 Quaker Oats Co. . . . . . . . . . . . . . . . . 14,249,550
------------
79,650,975
------------
Package Goods/
Cosmetics 3.3% 488,000 Avon Products Inc. . . . . . . . . . . . . . . 29,158,000
184,400 Clorox Co. . . . . . . . . . . . . . . . . . . 10,856,550
675,000 Tambrands Inc. . . . . . . . . . . . . . . . . 26,071,875
------------
66,086,425
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
SCUDDER GROWTH AND INCOME FUND
================================================================================================================
<CAPTION>
% of Market
Portfolio Shares Value ($)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HEALTH 12.7%
Health Industry Services 0.3% 182,400 McKesson Corp. . . . . . . . . . . . . 5,950,800
-----------
Pharmaceuticals 12.4% 418,000 American Home Products Corp. . . . . . 26,229,500
1,587,100 Baxter International Inc. . . . . . . . 44,835,575
404,300 Bristol-Myers Squibb Co. . . . . . . . 23,398,863
731,600 Carter-Wallace Inc. . . . . . . . . . . 9,510,800
779,300 Eli Lilly Co. . . . . . . . . . . . . . 51,141,563
438,000 Schering-Plough Corp. . . . . . . . . 32,412,000
358,300 SmithKline Beecham PLC (ADR) . . . . . . 12,271,775
488,700 Warner-Lambert Co. . . . . . . . . . . . 37,629,900
744,100 Zeneca Group PLC . . . . . . . . . . . . 10,229,919
-----------
247,659,895
-----------
COMMUNICATIONS 5.3%
Telephone/
Communications 1,334,400 Alltel Corp. . . . . . . . . . . . . . 40,198,800
382,600 Compania Telefonica Nacional de Espana
SA (ADR) . . . . . . . . . . . . . . 13,438,825
199,800 Compania de Telefonos de Chile,
SA (ADR) . . . . . . . . . . . . . . 15,734,250
885,240 Hong Kong Telecommunications Ltd. (ADR). 16,930,215
438,000 Tele Danmark A/S "B" (ADR) * . . . . . 11,169,000
79,900 Telecom Argentina S.A. "B" (ADR) . . . . 4,134,825
92,400 Telefonica de Argentina (ADR) . . . . . 4,897,200
-----------
106,503,115
-----------
FINANCIAL 14.9%
Banks 7.6% 235,000 AmSouth Bancorp. . . . . . . . . . . . 6,051,250
72,050 Argentaria Corporacion Bancaria
de Espana 67 . . . . . . . . . . . . . 2,553,567
704,700 Chemical Banking Corp. . . . . . . . . . 25,281,113
807,600 CoreStates Financial Corp. . . . . . . . 20,997,600
542,500 Corporacion Bancaria de Espana (ADR) . . 9,697,188
1,131,100 First Bank System Inc. . . . . . . . . 37,609,075
441,600 J.P. Morgan & Co., Inc. . . . . . . . 24,729,600
257,400 Summit Bancorporation . . . . . . . . . 4,987,125
38,777 Swiss Bank Corp. (Bearer) . . . . . . 10,720,796
1,077 Swiss Bank Corp. Warrants* (Bearer)
(expire 6/30/95) . . . . . . . . . . 12,955
353,300 Wilmington Trust Corp. . . . . . . . . 8,037,575
-----------
150,677,844
-----------
Insurance 2.2% 594,100 EXEL, Ltd. . . . . . . . . . . . . . . 23,466,950
604,000 Lincoln National Corp. . . . . . . . . 21,140,000
-----------
44,606,950
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
===========================================================================================================
<CAPTION>
% of Market
Portfolio Shares Value ($)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Other Financial Companies 1.8% 1,104,900 Great Western Financial Corp. . . . . . 17,678,400
31,500 Security Capital Industrial Trust . . . 535,500
547,400 Student Loan Marketing Association . . . 17,790,500
-----------
36,004,400
-----------
Real Estate 3.3% 87,200 Avalon Properties, Inc. . . . . . . . . 2,005,600
338,500 Camden Property Trust (REIT) . . . . . . 8,420,188
73,800 Charles E. Smith Residential
Realty, Inc. . . . . . . . . . . . . 1,872,675
28,100 Equity Residential Properties Trust
(REIT) . . . . . . . . . . . . . . . . 843,000
275,000 General Growth Properties, Inc.
(REIT) . . . . . . . . . . . . . . . . 6,221,875
248,600 Health Care Property Investment Inc.
(REIT) . . . . . . . . . . . . . . . . 7,489,075
31,400 Mark Centers Trust (REIT) . . . . . . . 404,275
138,300 McArthur/Glen Realty Corp. (REIT) . . 2,281,950
468,400 Meditrust SBI (REIT) . . . . . . . . . 14,169,100
342,400 Nationwide Health Properties Inc.
(REIT) . . . . . . . . . . . . . . . . 12,240,800
61,900 Post Properties Inc. (REIT) . . . . . . 1,949,850
451,300 Southwestern Properties Trust (REIT) . . 5,528,425
65,700 Vornado Realty Trust (REIT) . . . . . . 2,356,988
-----------
65,783,801
-----------
SERVICE INDUSTRIES 1.8%
Commercial Services 0.5% 440,000 Fleming Companies Inc. . . . . . . . . 10,230,000
-----------
Consumer Services 0.7% 373,200 H & R Block Inc. . . . . . . . . . . . 13,855,050
-----------
Printing/Publishing 0.6% 453,600 Deluxe Corp. . . . . . . . . . . . . . 12,020,400
DURABLES 6.3% -----------
Aerospace 5.0% 398,400 AAR Corp. . . . . . . . . . . . . . . . 5,328,600
285,100 Lockheed Corp. . . . . . . . . . . . . 20,705,388
729,400 Rockwell International Corp. . . . . . 26,076,050
70,000 Thiokol Corp. . . . . . . . . . . . . . 1,951,250
739,100 United Technologies Corp. . . . . . . . 46,470,913
-----------
100,532,201
-----------
Automobiles 1.3% 687,500 Dana Corp. . . . . . . . . . . . . . . 16,070,313
195,300 Eaton Corp. . . . . . . . . . . . . . . 9,667,350
-----------
25,737,663
-----------
MANUFACTURING 17.2%
Chemicals 4.3% 293,900 Dow Chemical Co. . . . . . . . . . . . 19,764,775
470,000 E.I. du Pont de Nemours & Co. . . . . . 26,437,500
1,007,200 Lyondell Petrochemical Co. . . . . . . . 26,061,300
449,100 Union Carbide Corp. . . . . . . . . . . 13,192,313
-----------
85,455,888
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
<TABLE>
SCUDDER GROWTH AND INCOME FUND
===========================================================================================================
<CAPTION>
% of Market
Portfolio Shares Value ($)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Containers & Paper 2.7% 659,000 Federal Paper Board Co., Inc. . . . . . 19,111,000
580,800 Kimberly Clark de Mexico S.A. "A" . . . 6,806,159
33,900 Kimberly Clark de Mexico S.A.
"A" (ADR) . . . . . . . . . . . . . . 788,175
524,300 Kimberly-Clark Corp. . . . . . . . . . 26,477,150
-----------
53,182,484
-----------
Diversified Manufacturing 2.7% 680,700 Dresser Industries Inc. . . . . . . . . 12,848,213
93,100 Saint Joe Paper Co. . . . . . . . . . 5,050,675
555,100 TRW Inc. . . . . . . . . . . . . . . . 36,636,600
-----------
54,535,488
-----------
Electrical Products 1.1% 345,600 Thomas & Betts Corp. . . . . . . . . . 23,198,400
-----------
Machinery/Components/
Controls 1.5% 475,900 Parker-Hannifin Group . . . . . . . . . 21,653,450
239,300 Timken Co. . . . . . . . . . . . . . . 8,435,325
-----------
30,088,775
-----------
Office Equipment/Supplies 1.9% 380,300 Xerox Corp. . . . . . . . . . . . . . . 37,649,700
-----------
Specialty Chemicals 3.0% 180,000 ARCO Chemical Co. . . . . . . . . . . . 7,920,000
613,800 Betz Laboratories Inc. . . . . . . . . 27,160,650
358,600 Petrolite Corp. . . . . . . . . . . . 9,323,600
591,600 Witco Corp. . . . . . . . . . . . . . 14,568,150
-----------
58,972,400
-----------
TECHNOLOGY 0.5%
Military Electronics 241,300 E-Systems, Inc. . . . . . . . . . . . . 10,044,113
-----------
ENERGY 10.1%
Engineering 1.4% 1,100,900 McDermott International Inc. . . . . . 27,247,275
-----------
Oil & Gas Production 0.8% 217,500 Louisiana Land & Exploration Co. . . . 7,911,563
387,500 Pacific Enterprises . . . . . . . . . . 8,234,375
-----------
16,145,938
-----------
Oil Companies 6.0% 375,700 Exxon Corp. . . . . . . . . . . . . . . 22,823,775
268,900 Murphy Oil Corp. . . . . . . . . . . . . 11,428,250
480,100 Pennzoil Co. . . . . . . . . . . . . . 21,184,413
301,800 Repsol SA (ADR) . . . . . . . . . . . . 8,224,050
97,100 Royal Dutch Petroleum Co.
(New York shares) . . . . . . . . . 10,438,250
234,250 Societe Nationale Elf Aquitaine . . . . 16,486,533
206,222 Total SA "B" . . . . . . . . . . . . . . 11,977,170
3,411 Total SA (ADR) . . . . . . . . . . . . . 100,625
785,000 YPF SA "D" (ADR) . . . . . . . . . . . . 16,779,375
-----------
119,442,441
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
===============================================================================================================
<CAPTION>
% of Market
Portfolio Shares Value ($)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Oilfield Services/
Equipment 1.9% 1,151,100 Halliburton Co. . . . . . . . . . . . . 38,130,188
-------------
METALS AND MINERALS 1.0%
Precious Metals 0.4% 365,000 De Beers Consolidated Mines Ltd. (ADR) 8,531,875
-------------
Steel & Metals 0.6% 285,190 Freeport McMoRan Copper &
Gold, Inc. "A" . . . . . . . . . . . 6,060,288
104,900 Reynolds Metals Co. . . . . . . . . . 5,074,538
-------------
11,134,826
-------------
TRANSPORTATION 0.7%
Marine Transportation 0.3% 282,700 Alexander & Baldwin Inc. . . . . . . . 6,290,075
-------------
Railroads 0.4% 120,100 Norfolk Southern Corp. . . . . . . . . 7,281,063
-------------
UTILITIES 4.3%
Electric Utilities 698,600 CINergy Corp. . . . . . . . . . . . . . 16,329,764
227,600 CMS Energy Corp. . . . . . . . . . . . 5,206,350
953,700 Centerior Energy Corp. . . . . . . . . 8,464,088
2,332,800 China Light & Power Co., Ltd. (ADR) . . 9,797,760
196,080 Empresa Nacional de Electricidad
SA (ADR) . . . . . . . . . . . . . . 7,941,240
174,000 Empresa Nacional de Electricidad SA . . 7,085,584
136,000 PacifiCorp . . . . . . . . . . . . . . 2,465,000
461,700 Pacific Gas & Electric Co. . . . . . . 11,253,938
13,600 Southern Company . . . . . . . . . . . 272,000
747,900 Unicom Corp. . . . . . . . . . . . . . . 17,949,600
-------------
86,765,324
-------------
TOTAL COMMON STOCKS (Cost $1,632,388,017) 1,785,830,697
-------------
- ----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100%
(Cost $1,839,934,324) (a) . . . . . . . . 1,995,167,893
=============
<FN>
(a) The cost for federal income tax purposes was $1,838,433,009. At December 31, 1994, net
unrealized appreciation for all securities based on tax cost was $156,734,884. This consisted
of aggregate gross unrealized appreciation for all securities in which there was an excess of
market value over tax cost of $209,422,035 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of $52,687,151.
* Nonincome producing security.
Transactions in written call options on indices during the year ended December 31, 1994 were:
PREMIUMS
NUMBER OF CONTRACTS RECEIVED ($)
----------------------------------------------------------
Outstanding at December 31, 1993. . -- --
Contracts written . . . . . . . 6,500 1,327,278
Contracts closed . . . . . . . (2,500) (710,479)
Contracts expired . . . . . . . (4,000) (616,799)
----------------------------------------------------------
Outstanding at December 31, 1994 -- --
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
<TABLE>
SCUDDER GROWTH AND INCOME FUND
FINANCIAL STATEMENTS
=============================================================================================
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
- ---------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at market (identified cost 1,839,934,324)
(Note A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,995,167,893
Collateral held for securities loaned (Note A) . . . . . . . . . . . . . . 107,958,800
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 957
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . 8,078,897
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,815,758
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,154,132
Foreign taxes recoverable . . . . . . . . . . . . . . . . . . . . . . . . 294,906
--------------
Total assets 2,132,471,343
LIABILITIES
Payables:
Collateral on securities loaned (Note A) . . . . . . . 107,958,800
Investments purchased . . . . . . . . . . . . . . . . 24,037,863
Fund share redeemed . . . . . . . . . . . . . . . . 7,217,515
Accrued management fee (Note C) . . . . . . . . . . . 879,173
Other accrued expenses (Note C) . . . . . . . . . . . 674,806
-----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 140,768,157
--------------
Net assets, at market value . . . . . . . . . . . . . . . . . . . . . . . $1,991,703,186
==============
NET ASSETS
Net assets consist of:
Undistributed net investment income . . . . . . . . . . . . . . . . . . . $ 2,585,428
Unrealized appreciation on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155,233,569
Foreign currency related transactions . . . . . . . . . . . . . . . . . 15,254
Accumulated net realized gain . . . . . . . . . . . . . . . . . . . . . . 12,634,994
Shares of beneficial interest . . . . . . . . . . . . . . . . . . . . . . 1,224,550
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . 1,820,009,391
--------------
Net assets, at market value . . . . . . . . . . . . . . . . . . . . . . . $1,991,703,186
==============
NET ASSET VALUE, offering and redemption price
per share ($1,991,703,186 -:- 122,454,972
shares of capital stock outstanding, $.01 par
value, unlimited number of shares authorized) . . . . . . . . . . . . . . $16.26
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
- ------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of withholding taxes of $1,308,158) . . . . . . . $63,180,209
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,709,950
------------
70,890,159
Expenses:
Management fee (Note C) . . . . . . . . . . . . . . . . . . . . $ 9,941,300
Services to shareholders (Note C) . . . . . . . . . . . . . . . 4,568,994
Trustees' fees (Note C) . . . . . . . . . . . . . . . . . . . . 38,348
Custodian and Accounting fees (Note C) . . . . . . . . . . . . . 375,218
Reports to shareholders . . . . . . . . . . . . . . . . . . . . 510,777
Auditing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,320
Legal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,359
State registration . . . . . . . . . . . . . . . . . . . . . . . 70,898
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218,813 15,806,027
------------ ------------
Net investment income . . . . . . . . . . . . . . . . . . . . . 55,084,132
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain from:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 109,806,159
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . 614,232
Foreign currency related transactions . . . . . . . . . . . . . 57,933 110,478,324
------------
Net unrealized appreciation (depreciation) during
the period on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . (124,889,147)
Foreign currency related transactions . . . . . . . . . . . . . 14,318 (124,874,829)
------------ ------------
Net loss on investment transactions . . . . . . . . . . . . . . (14,396,505)
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 40,687,627
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
<TABLE>
SCUDDER GROWTH AND INCOME FUND
========================================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
INCREASE (DECREASE) IN NET ASSETS 1994 1993
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income . . . . . . . . . . . . . . . . . . . $ 55,084,132 $ 41,637,348
Net realized gain from investment
transactions . . . . . . . . . . . . . . . . . . . . . . . 110,478,324 92,568,085
Net unrealized appreciation (depreciation) on
investment transactions during the period . . . . . . . . (124,874,829) 70,874,326
-------------- --------------
Net increase in net assets resulting
from operations . . . . . . . . . . . . . . . . . . . . . 40,687,627 205,079,759
-------------- --------------
Distributions to shareholders:
From net investment income ($.51 and $.45
per share, respectively) . . . . . . . . . . . . . . . . (55,549,751) (38,326,003)
-------------- --------------
From net realized gains from
investment transactions ($.91 and $1.01 per share,
respectively) . . . . . . . . . . . . . . . . . . . . . . (104,186,389) (89,879,431)
-------------- --------------
Fund share transactions:
Proceeds from shares sold . . . . . . . . . . . . . . . . . 660,899,843 529,361,632
Net asset value of shares issued to
shareholders in reinvestment of distributions . . . . . . 141,532,779 112,277,088
Cost of shares redeemed . . . . . . . . . . . . . . . . . (315,194,390) (260,587,818)
-------------- --------------
Net increase in net assets from Fund
share transactions . . . . . . . . . . . . . . . . . . . 487,238,232 381,050,902
-------------- --------------
INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . 368,189,719 457,925,227
Net assets at beginning of period . . . . . . . . . . . . . 1,623,513,467 1,165,588,240
-------------- --------------
NET ASSETS AT END OF PERIOD (including
undistributed net investment income
of $2,585,428 and $3,273,577, respectively) . . . . . . . $1,991,703,186 $1,623,513,467
============== ==============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period . . . . . . . . . 94,183,009 71,952,913
-------------- --------------
Shares sold 38,072,976 30,928,769
Shares issued to shareholders in reinvestment
of distributions . . . . . . . . . . . . . . . . . . . . . 8,384,211 6,514,045
Shares redeemed (18,185,224) (15,212,718)
-------------- --------------
Net increase in Fund shares . . . . . . . . . . . . . . . . 28,271,963 22,230,096
-------------- --------------
Shares outstanding at end of period . . . . . . . . . . . . 122,454,972 94,183,009
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD AND OTHER PERFORMANCE
INFORMATION DERIVED FROM THE FINANCIAL STATEMENTS.
<CAPTION>
Years Ended December 31,
------------------------------------------------------------------------------------
1994 1993(b) 1992 1991 1990 1989 1988 1987 1986 1985
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ... $17.24 $16.20 $15.76 $12.77 $14.14 $13.18 $12.31 $15.02 $15.35 $11.90
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income ... .49 .49 .57 .57 .65 .67 .60 .68 .67 .59
Net realized and
unrealized gain
(loss) on investment
transactions .......... (.05) 2.01 .90 2.97 (1.01) 2.75 .86 (.07) 1.96 3.44
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations .............. .44 2.50 1.47 3.54 (.36) 3.42 1.46 .61 2.63 4.03
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions from:
Net investment
income ................ (.51) (.45) (.53) (.55) (.67) (.69) (.59) (.68) (.68) (.58)
Net realized gains on
investment
transactions .......... (.91) (1.01) (.50) -- (.34) (1.77) -- (2.64) (2.28) --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions ...... (1.42) (1.46) (1.03) (.55) (1.01) (2.46) (.59) (3.32) (2.96) (.58)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period ........... $16.26 $17.24 $16.20 $15.76 $12.77 $14.14 $13.18 $12.31 $15.02 $15.35
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%) ......... 2.60 15.59 9.57 28.16 (2.33) 26.36 12.01 3.50 18.27 34.55
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
period ($ millions) ..... 1,992 1,624 1,166 723 491 490 402 392 385 302
Ratio of operating
expenses to average
net assets (%) (a) ...... .86 .86 .94 .97 .95 .87 .92 .89 .83 .84
Ratio of net investment
income to average
net assets (%) ......... 2.98 2.93 3.60 4.03 5.03 4.47 4.63 4.24 4.19 4.35
Portfolio turnover
rate (%) ............... 42.3 35.5 27.5 44.7 64.7 76.6 47.6 59.5 45.3 73.3
<FN>
(a) The Adviser did not impose a portion of its management fee amounting to $.02 per share for the year ended December 31, 1992.
If all expenses, including the management fee not imposed, had been incurred by the Fund, the annualized ratio of expenses
to average net assets for such year would have been 1.08% and the total return would have been lower. This ratio includes
costs associated with the acquisition of certain assets of Niagara Share Corporation on July 27, 1992, exclusive of these
charges the ratio would have been .92%.
(b) Effective January 1, 1993, the Fund discontinued using equalization accounting.
</TABLE>
19
<PAGE>
SCUDDER GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Scudder Growth and Income Fund (the "Fund") is a diversified series of Scudder
Investment 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 a diversified, 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.
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
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
market value, depending on the maturity of the repurchase agreement, is equal
to at least 100.5% of the resale price.
SECURITY LENDING. The Fund may seek to increase its income by lending portfolio
securities. Such loans may be made through the Fund's authorized agent to
registered broker/dealers and are required to be collateralized by cash in an
amount at least equal to the market value plus accrued interest of the
securities loaned. The collateral is invested, and a negotiated percentage of
the interest earned is remitted to the Fund. This income is included as a
component of interest income. At December 31, 1994, the Fund loaned securities
with an aggregate market value of $103,830,213 which represents 5.2% of total
net assets.
OPTIONS. The Fund may write (sell) exchange-listed and over-the-counter call
and put options on securities, indices, currencies and other financial
instruments. When the Fund writes a call, it gives the purchaser of the call
option the right to buy the underlying security or currency at the price
specified in the option (the "exercise price") at any time during the option
period, generally ranging up to nine months. When the Fund writes a put option,
it gives the purchaser of the put option the right to sell the underlying
security or currency to the Fund at the exercise price at any time during the
option period, generally ranging up to nine months.
If the option expires unexercised, the Fund will realize income, in the form of
a capital gain, to the extent of the amount received for the option (the
"premium"). If the option is exercised, a decision over which the Fund has no
control, the Fund must sell the underlying security or currency to the option
holder or purchase the underlying security or currency from the option holder
at the exercise price. Certain options, including options on indices, will
require cash settlement by the Fund if the option is exercised. By writing a
call option, the Fund foregoes, in exchange for the premium less the commission
("net premium"), the opportunity to profit during the option period from an
increase in the market value of the underlying security or currency above the
exercise price. By writing a put option, the Fund, in exchange for the net
premium received, accepts the risk of a decline in the market value of the
underlying security or currency below the exercise price.
21
<PAGE>
SCUDDER GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
The liability representing the Fund's obligation under an exchange traded
written call or put option is valued at the last sale price or, in the absence
of a sale, the mean between the closing bid and asked quotations or at the most
recent asked quotation if no bid and asked quotations are available. Over the
counter written options are valued at the most recent asked quotation.
In addition, the Fund may purchase, singly and in combination, call and put
options on securities, indices, currencies and other financial instruments.
Exchange traded purchased options are valued at the last sales price or, in the
absence of a sale, the mean between the closing bid and asked quotations or at
the most recent bid quotation if no bid and asked quotations are available.
Over-the-counter purchased options are valued at the most recent bid quotation.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and 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.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. In connection with portfolio
purchases and sales of securities denominated in a foreign currency, the Fund
may enter into forward foreign currency exchange contracts ("contracts").
Additionally, the Fund may enter into contracts to hedge certain other foreign
currency denominated assets. Contracts are recorded at market value. Certain
risks may arise upon
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts. Realized and unrealized gains and losses
arising from such transactions are included in net realized and unrealized gain
(loss) from foreign currency related transactions.
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. The
Fund accordingly paid no federal income taxes and no provision for federal
income taxes was required.
DISTRIBUTION OF INCOME AND GAINS. Distributions of net investment income are
made quarterly. 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. 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.
These differences relate primarily to non-taxable distributions and certain
securities sold at a loss. As a result, net investment income 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 specific 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 the accrual basis.
B. PURCHASES AND SALES OF SECURITIES
- --------------------------------------------------------------------------------
For the year ended December 31, 1994, purchases and sales of investment
securities (excluding short-term investments) aggregated $1,139,384,068 and
$744,104,152, respectively.
23
<PAGE>
SCUDDER GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
C. RELATED PARTIES
- --------------------------------------------------------------------------------
On August 9, 1994, the Fund's Board of Trustees approved a new Investment
Management Agreement (the "Management Agreement") with Scudder, Stevens &
Clark, Inc. (the "Adviser"). Under the Management Agreement the Adviser directs
the investments of the Fund in accordance with its investment objective,
policies, and restrictions. The Adviser determines the securities, instruments,
and other contracts relating to investments to be purchased, sold or entered
into by the Fund. In addition to portfolio management services, the Adviser
provides certain administrative services in accordance with the Management
Agreement. The management fee payable under the Management Agreement is equal
to an annual rate of 0.60% on the first $500,000,000 of the Fund's average
daily net assets, 0.55% on the next $500,000,000, 0.50% on the next
$500,000,000, and 0.475% of such net assets in excess of $1,500,000,000,
computed and accrued daily and payable monthly.
Under the Investment Management Agreement between the Fund and the Adviser
which was in effect prior to August 9, 1994 (the "Agreement"), the Fund agreed
to pay to the Adviser a fee equal to an annual rate of 0.65% on the first
$200,000,000 of average daily net assets, 0.60% on the next $200,000,000 of
such net assets, 0.55% on the next $500,000,000 of such net assets, and 0.50%
of such net assets in excess of $900,000,000, computed and accrued daily and
payable monthly. Both Agreements provide that if the Fund's expenses, exclusive
of taxes, interest, and extraordinary expenses, exceed specified limits, such
excess, up to the amount of the management fee, will be paid by the Adviser.
For the year ended December 31, 1994, the fee pursuant to both the Management
Agreement and the Agreement amounted to $9,941,300, which was equivalent to an
annual effective rate of .54% of the Fund's average daily net assets.
Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the Adviser,
is the transfer, dividend paying and shareholder service agent for the Fund.
For the year ended December 31, 1994, the amount charged to the Fund by SSC
aggregated $3,952,719, of which $374,385 is unpaid at December 31, 1994.
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Effective October 1, 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 period ended December 31, 1994, the
amount charged to the Fund by SFAC aggregated $39,116, of which $14,948 is
unpaid at December 31, 1994.
The Fund pays each Trustee not affiliated with the Adviser $4,000 annually,
plus specified amounts for attended board and committee meetings. For the year
ended December 31, 1994, Trustees' fees aggregated $38,348.
25
<PAGE>
SCUDDER GROWTH AND INCOME FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE TRUSTEES OF SCUDDER INVESTMENT TRUST AND THE SHAREHOLDERS OF
SCUDDER GROWTH AND INCOME FUND:
We have audited the accompanying statement of assets and liabilities of Scudder
Growth and Income Fund, including the investment portfolio, as of December 31,
1994, 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
December 31, 1994 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 Growth and Income Fund as of December 31, 1994, 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.
February 3, 1995
26
<PAGE>
TAX INFORMATION
- --------------------------------------------------------------------------------
By now shareholders for whom year-end tax reporting is required by the IRS
should have received their Form 1099-DIV and tax information letter from the
Fund.
The Fund paid distributions of $0.65 per share from net long-term capital gains
during its fiscal year ended December 31, 1994. Pursuant to Section 852 of the
Internal Revenue Code, the Fund designates $78,317,383 as capital gain
dividends for its fiscal year ended December 31, 1994.
For corporate shareholders, 100% of the net investment income and short-term
gain dividends paid during the Fund's year ended December 31, 1994 qualified
for the dividends received deduction.
Please consult a tax adviser if you have questions about federal or state
income tax laws, or on how to prepare your tax returns. If you have specific
questions about your Scudder Fund account, please call a Scudder Service
Representative at 1-800-225-5163.
27
<PAGE>
OFFICERS AND TRUSTEES
Daniel Pierce*
President and Trustee
Henry P. Becton, Jr.
Trustee; President and General Manager, WGBH Educational Foundation
Dudley H. Ladd*
Trustee
George M. Lovejoy, Jr.
Trustee; Chairman Emeritus, Meredith & Grew, Inc.
Wesley W. Marple, Jr.
Trustee; Professor of Business Administration, Northeastern
University
Juris Padegs*
Trustee
Jean C. Tempel
Trustee; Director and Executive Vice President, Safeguard
Scientifics, Inc.
Jerard K. Hartman*
Vice President
Robert T. Hoffman*
Vice President
Thomas W. Joseph*
Vice President
David S. Lee*
Vice President
Douglas M. Loudon*
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
Coleen Downs Dinneen*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
29
<PAGE>
INVESTMENT PRODUCTS AND SERVICES
The Scudder Family of Funds
Money market
Scudder Cash Investment Trust
Scudder U.S. Treasury Money Fund
Tax free money market+
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax free+
Scudder California Tax Free Fund*
Scudder High Yield Tax Free Fund
Scudder Limited Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder Massachusetts Limited Term Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder Medium Term Tax Free Fund
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
Growth and Income
Scudder Balanced Fund
Scudder Growth and Income Fund
Income
Scudder Emerging Markets Income Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder International Bond Fund
Scudder Short Term Bond Fund
Scudder Short Term Global Income Fund
Scudder Zero Coupon 2000 Fund
Growth
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 Latin America Fund
Scudder Pacific Opportunities Fund
Scudder Quality Growth Fund
Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
IRAs
Keogh Plans
Scudder Horizon Plan+++* (a variable annuity)
401(k) Plans
403(b) Plans
SEP-IRAs
Profit Sharing and Money Purchase Pension Plans
Closed-end Funds#
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities Fund, Inc.
Institutional Cash Management
Scudder Institutional Fund, Inc.
Scudder Fund, Inc.
Scudder Treasurers Trust(tm)++
For complete information on any of the above Scudder funds,
including management fees and expenses, call or write for a free
prospectus. Read it carefully before you invest or send money. +A
portion of the income from the tax-free funds may be subject to
federal, state and local taxes. *Not available in all states. +++A
no-load variable annuity contract provided by Charter National Life
Insurance Company and its affiliate, offered by Scudder's insurance
agencies, 1-800-225-2470. #These funds, advised by Scudder, Stevens &
Clark, Inc., are traded on various stock exchanges. ++For information
on Scudder Treasurers Trust(tm), an institutional cash management
service that utilizes certain portfolios of Scudder Fund, Inc.
($100,000 minimum), call: 1-800-541-7703.
30
<PAGE>
HOW TO CONTACT SCUDDER
Account Service and Information
For existing account service and transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163
For account updates, prices, yields, exchanges and redemptions
SCUDDER AUTOMATED INFORMATION LINE (SAIL)
1-800-343-2890
Investment Information
To receive information about the Scudder funds, for additional
applications and prospectuses, or for investment questions
SCUDDER INVESTOR RELATIONS
1-800-225-2470
For establishing 401(k) and 403(b) plans
SCUDDER DEFINED CONTRIBUTION SERVICES
1-800-323-6105
Please address all correspondence to
THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
Many shareholders enjoy the personal, one-on-one service of the
Scudder Funds Centers. Check for a Funds Center near you--they can
be found in the following cities:
Boca Raton
Boston
Chicago
Cincinnati
Los Angeles
New York
Portland, OR
San Diego
San Francisco
Scottsdale
For information on Scudder Treasurers Trust(tm), an institutional cash
management service for corporations, non-profit organizations and
trusts which utilizes certain portfolios of Scudder Fund, Inc.*
($100,000 minimum), call: 1-800-541-7703.
For information on Scudder Institutional Funds,* funds designed to
meet the broad investment management and service needs of banks and
other institutions, call:1-800-854-8525.
Scudder Investor Relations and Scudder Funds Centers are services
provided through Scudder Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive
a prospectus with more complete information,
including management fees and expenses. Please read it carefully
before you invest or send money.
31
<PAGE>
Celebrating 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and F.
Haven Clark, Scudder, Stevens & Clark was the first independent
investment counsel firm in the United States. Since its birth,
Scudder's pioneering spirit and commitment to professional long-term
investment management have helped shape the investment industry. In
1928, we introduced the nation's first no-load mutual fund. Today we
offer 36 pure no load(tm) funds, including the first international
mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and
dedication to research and fundamental investment disciplines have
helped Scudder 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 longstanding 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 INVESTMENT TRUST
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
a. Financial Statements
Included in Part A:
For Scudder Growth and Income Fund:
Financial highlights for the ten fiscal years ended
December 31, 1994
For Scudder Quality Growth Fund:
Financial Highlights for the period May 15, 1991
(commencement of operations) to October 31, 1991 and
for the three fiscal years ended October 31, 1994
(Incorporated by reference to Post-Effective Amendment
No. 72 to the Registration Statement.)
Included in the Part B:
For Scudder Growth and Income Fund:
Investment Portfolio as of December 31, 1994
Statement of Assets and Liabilities as of December 31,
1994
Statement of Operations for the year ended December 31,
1994
Statements of Changes in Net Assets for the two fiscal
years ended December 31, 1994
Financial Highlights for the ten fiscal years ended
December 31, 1994
Notes to Financial Statements
Report of Independent Accountants
For Scudder Quality Growth Fund:
Investment Portfolio as of October 31, 1994
Statement of Assets and Liabilities as of October 31,
1994
Statement of Operations for the year ended October 31,
1994
Statements of Changes in Net Assets for the two fiscal
years ended October 31, 1994
Financial Highlights for the period May 15, 1991
(commencement of operations) to October 31, 1991 and
for the three fiscal years ended October 31, 1994
Notes to Financial Statements
Report of Independent Accountants
(Incorporated by reference to Post-Effective Amendment
No. 72 to the Registration Statement.)
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
All references are to the Registrant's
Registration Statement on Form N-1A filed with
the Securities and Exchange Commission. File
Nos. 2-13628 and 811-43. ("Registration
Statement").
Part C - Page 1
<PAGE>
1. (a)(1) Amended and Restated Declaration of Trust dated
November 4, 1987 is incorporated by reference to
Post-Effective Amendment No. 58 to the
Registration Statement.
(a)(2) Amendment to Amended and Restated Declaration of
Trust dated November 14, 1990 is incorporated by
reference to Post-Effective Amendment No. 61 to
the Registration Statement ("Post-Effective
Amendment No. 61").
(a)(3) Certificate of Amendment of Declaration of Trust
dated February 12, 1991 is incorporated by
reference to Post-Effective Amendment No. 62 to
the Registration Statement ("Post-Effective
Amendment No. 62").
(b) Establishment and Designation of Series of
Shares of Beneficial Interest, $0.01 par value,
with respect to Scudder Growth and Income Fund
and Scudder Quality Growth Fund is incorporated
by reference to Post-Effective Amendment No. 61.
2. (a) By-Laws of the Registrant dated September 20,
1984 are incorporated by reference to
Post-Effective Amendment No. 54 to the
Registration Statement.
(b) Amendment to By-Laws of the Registrant dated
August 13, 1991 is incorporated by reference to
Post-Effective Amendment No. 64 to the
Registration Statement ("Post-Effective
Amendment No. 64").
(c) Amendment to By-Laws of the Registrant dated
November 12, 1991 is incorporated by reference
to Post-Effective Amendment No. 67 to the
Registration Statement.
3. Inapplicable.
4. Specimen certificate representing shares of
beneficial interest with $0.01 par value of
Scudder Growth and Income Fund is incorporated
by reference to Post-Effective Amendment No. 59
to the Registration Statement ("Post-Effective
Amendment No. 59").
5. (a) Investment Management Agreement between the
Registrant (on behalf of Scudder Growth and
Income Fund) and Scudder, Stevens & Clark, Inc.
("Scudder") dated November 14, 1990 is
incorporated by reference to Post-Effective
Amendment No. 61.
(b) Investment Management Agreement between the
Registrant (on behalf of Scudder Quality Growth
Fund) and Scudder dated May 9, 1991 is
incorporated by reference to Post-Effective
Amendment No. 63 to the Registration Statement.
(c) Investment Management Agreement between the
Registrant (on behalf of Scudder Growth and
Income Fund) and Scudder dated August 10, 1993
is incorporated by reference to Post-Effective
Amendment No. 71.
Part C - Page 2
<PAGE>
6. Underwriting Agreement between the Registrant
and Scudder Investor Services, Inc., formerly
Scudder Fund Distributors, Inc., dated September
10, 1985 is incorporated by reference to
Post-Effective Amendment No. 56 to the
Registration Statement.
7. Inapplicable.
8. (a)(1) Custodian Agreement between the Registrant (on
behalf of Scudder Growth and Income Fund) and
State Street Bank and Trust Company ("State
Street Bank") dated December 31, 1984 is
incorporated by reference to Post-Effective
Amendment No. 57 to the Registration Statement
("Post-Effective Amendment No. 57").
(a)(2) Amendment dated April 1, 1985 to the Custodian
Agreement between the Registrant and State
Street Bank is incorporated by reference to
Post-Effective Amendment No. 60 to the
Registration Statement ("Post-Effective
Amendment No. 60").
(a)(3) Amendment dated August 8, 1987 to the Custodian
Agreement between the Registrant and State
Street Bank is incorporated by reference to
Post-Effective Amendment No. 59.
(a)(4) Amendment dated August 9, 1988 to the Custodian
Agreement between the Registrant and State
Street Bank is incorporated by reference to
Post-Effective Amendment No. 59.
(a)(5) Amendment dated July 29, 1991 to the Custodian
Agreement between the Registrant and State
Street Bank is incorporated by reference to Post-
Effective Amendment No. 64.
(a)(6) Custodian fee schedule for Scudder Growth and
Income Fund is incorporated by reference to
Post-Effective Amendment No. 59.
(a)(7) Custodian fee schedule for Scudder Quality
Growth Fund is incorporated by reference to
Post-Effective Amendment No. 64.
(b) Subcustodian Agreement with fee schedule between
State Street Bank and The Bank of New York,
London office, dated December 31, 1978 is
incorporated by reference to Post-Effective
Amendment No. 44 to the Registration Statement.
(c)(1) Subcustodian Agreement between State Street Bank
and The Chase Manhattan Bank, N.A. dated
September 1, 1986 is incorporated by reference
to Post-Effective Amendment No. 57 to the
Registration Statement.
(d) Custodian fee schedule for Scudder Quality
Growth Fund and Scudder Growth and Income Fund
is incorporated by reference to Post-Effective
Amendment No. 72 to the Registration Statement.
9. (a) Transfer Agency and Service Agreement with fee
schedule between the Registrant and Scudder
Service Corporation dated October 2, 1989 is
incorporated by reference to Post-Effective
Amendment No. 60.
Part C - Page 3
<PAGE>
(b) COMPASS Service Agreement and fee schedule with
Scudder Trust Company dated January 1, 1990 is
incorporated by reference to Post-Effective
Amendment No. 60.
(c) Fund Accounting Services Agreement between the
Registrant, on behalf of Scudder Quality Growth
Fund and Scudder Fund Accounting Corporation
dated November 1, 1994 is incorporated by
reference to Post-Effective Amendment No. 72.
(d) Fund Accounting Services Agreement between the
Registrant, on behalf of Scudder Growth and
Income Fund and Scudder Fund Accounting
Corporation dated October 17, 1994 is filed
herein.
(e) Inapplicable.
(f) Shareholder Services Agreement between the
Registrant and Charles Schwab & Co., Inc. dated
June 1, 1990 is incorporated by reference to
Post-Effective Amendment No. 61.
10. Inapplicable.
11. Consent of Independent Accountants is filed
herein.
12. Article 6 Financial Data Schedule is filed
herein.
13. Inapplicable.
14. (a) Scudder Flexi-Plan for Corporations and
Self-Employed Individuals is incorporated by
reference to Scudder Equity Trust,
Post-Effective Amendment No. 12 to its
Registration Statement on Form N-1A [File Nos.
2-78724 and 811-1444] filed on December 2, 1988
("Equity Trust Post-Effective Amendment No.
12").
(b) Scudder Individual Retirement Plan is
incorporated by reference to Equity Trust
Post-Effective Amendment No. 12.
(c) SEP-IRA is incorporated by reference to Equity
Trust Post-Effective Amendment No. 12.
(d) Scudder Funds 403(b) Plan is incorporated by
reference to Equity Trust Post-Effective
Amendment No. 12.
(e) Scudder Cash or Deferred Profit Sharing Plan
under Section 401(k) is incorporated by
reference to Equity Trust Post-Effective
Amendment No. 12.
15. Inapplicable.
16. Schedule for Computation of Performance
Quotation is incorporated by reference to
Post-Effective Amendment No. 59. Power of
Attorney is incorporated by reference to the
Signature Page of Post-Effective Amendment No.
13 to the Registration Statement filed February
22, 1991.
Part C - Page 4
<PAGE>
Item 25. Persons Controlled by or under Common Control with Registrant.
None
Item 26. Number of Holders of Securities (as of April 1, 1995).
(1) (2)
Title of Class Number of Record Shareholders
-------------- -----------------------------
Shares of beneficial interest
($0.01 par value):
Scudder Growth and Income Fund 138,290
Scudder Quality Growth Fund 10,236
Item 27. Indemnification.
A policy of insurance covering Scudder, Stevens & Clark, Inc. its
subsidiaries 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.
Article IV, Sections 4.1-4.3 of Registrant's Declaration of Trust
provide 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.
Part C - Page 5
<PAGE>
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;
(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 inure 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:
Part C - Page 6
<PAGE>
(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)*
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)**
Part C - Page 7
<PAGE>
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
Corporation oo
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)*
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 Development Fund (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 State Tax Free Trust (investment
company)*
Vice President, Scudder Funds Trust (investment company)*
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)*
Part C - Page 8
<PAGE>
Dudley H. Ladd Director, Scudder, Stevens & Clark, Inc. (investment
adviser)**
Senior Vice President & Director, Scudder Investor
Services, Inc. (broker/dealer)*
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)*
Vice President & Treasurer, SFA, Inc. (advertising
agency)*
Douglas M. Loudon Director, Scudder, Stevens & Clark, Inc. (investment
adviser)**
Vice President & Trustee, Scudder Development Fund
(investment company)*
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, 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
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)**
Trustee, Scudder Development Fund (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)**
Part C - Page 9
<PAGE>
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)**
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 Corporation
oo
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 Development Fund (investment
company)**
President & Trustee, Scudder Equity Trust (investment
company)**
Director, The First Iberian Fund, Inc. (investment
company)**
President & Trustee, Scudder GNMA Fund (investment
company)*
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)**
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)**
Part C - Page 10
<PAGE>
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)**
Trustee, Scudder Development Fund (investment company)*
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)**
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)**
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
Part C - Page 11
<PAGE>
++ 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 Development Fund
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 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.
(b)
(1) (2) (3)
Name and Principal Position and Offices with Positions and Offices
Business Address Scudder Investor Services, Inc. with Registrant
------------------ ------------------------------- ---------------------
Charles S. Boit Assistant Treasurer None
Two International
Place
Boston, MA 02110
Part C - Page 12
<PAGE>
E. Michael Brown Assistant Treasurer 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 and None
345 Park Avenue Director
New York, NY 10154
Thomas W. Joseph Vice President, Director, Vice President
Two International Treasurer and Assistant Clerk
Place
Boston, MA 02110
Dudley H. Ladd Senior Vice President and Trustee
Two International Director
Place
Boston, MA 02110
David S. Lee President, Assistant Vice President
Two International Treasurer and Director
Place
Boston, MA 02110
Douglas M. Loudon Senior Vice President Vice President
345 Park Avenue
New York, NY 10154
Thomas F. McDonough Clerk Vice President,
Two International Secretary & Assistant
Place 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 &
345 Park Avenue Assistant Treasurer
New York, NY 10154
Juris Padegs Vice President and Director Trustee
345 Park Avenue
New York, NY 10154
Daniel Pierce Vice President, Director President & Trustee
Two International and Assistant Treasurer
Place
Boston, MA 02110
Part C - Page 13
<PAGE>
Robert E. Pruyne Assistant Treasurer None
Two International
Place
Boston, MA 02110
Kathryn L. Quirk Vice President None
345 Park Avenue
New York, NY 10154
David B. Watts Assistant Treasurer 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
Name of Underwriting Compensation on
Principal Discounts and Redemptions Brokerage Other
Underwriter Commissions and Repurchases Commissions Compensation
----------- ----------- -------------- ----------- ------------
Scudder Investor None None None None
Services, Inc.
(b)
(1) (2) (3)
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, Two International Place, Boston, MA 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 14
<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 3rd day of
April, 1995.
SCUDDER INVESTMENT TRUST
By /s/Thomas F. McDonough
Thomas F. McDonough, Vice President,
Secretary and Assistant Treasurer
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.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/Daniel Pierce
Daniel Pierce* President (Principal April 3, 1995
Executive Officer) and
Trustee
/s/Henry P. Becton, Jr.
Henry P. Becton, Jr.* Trustee April 3, 1995
/s/Dudley H. Ladd
Dudley H. Ladd* Trustee April 3, 1995
/s/George M. Lovejoy, Jr.
George M. Lovejoy, Jr.* Trustee April 3, 1995
/s/Wesley W. Marple, Jr.
Wesley W. Marple, Jr.* Trustee April 3, 1995
/s/Juris Padegs
Juris Padegs* Trustee April 3, 1995
<PAGE>
/s/Jean C. Tempel
Jean C. Tempel* Trustee April 3, 1995
/s/Pamela A. McGrath
Pamela A. McGrath Treasurer (Principal April 3, 1995
Financial and
Accounting Officer) and
Vice President
*By: /s/Thomas F. McDonough
Thomas F. McDonough**
** Attorney-in-fact pursuant to a power of attorney contained in the
signature page of Post-Effective Amendment No. 61 to the Registration
Statement filed February 22, 1991 and pursuant to a power of attorney
contained in the signature page of Post-Effective Amendment No. 72 to
the Registration Statement filed February 28, 1995.
2
<PAGE>
File No. 2-13628
File No. 811-43
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 73
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 25
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
SCUDDER INVESTMENT TRUST
<PAGE>
SCUDDER INVESTMENT TRUST
EXHIBIT INDEX
Exhibit 9(d)
Exhibit 11
Exhibit 12
EXHIBIT 9(d)
FUND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made on the 17th day of October, 1994 between Scudder
Investment Trust (the "Fund"), on behalf of Scudder Growth and Income Fund
(hereinafter called the "Portfolio"), a registered open-end management
investment company with its principal place of business in Boston,
Massachusetts and Scudder Fund Accounting Corporation, with its principal
place of business in Boston, Massachusetts (hereinafter called "FUND
ACCOUNTING").
WHEREAS, the Portfolio has need for certain accounting services which FUND
ACCOUNTING is willing and able to provide;
NOW THEREFORE in consideration of the mutual promises herein made, the Fund
and FUND ACCOUNTING agree as follows:
Section 1. Duties of FUND ACCOUNTING - General
FUND ACCOUNTING is authorized to act under the terms of this Agreement
as the Portfolio's fund accounting agent, and as such FUND ACCOUNTING
shall:
a. Maintain and preserve all accounts, books, financial records and
other documents as are required of the Fund under Section 31 of
the Investment Company Act of 1940 (the "1940 Act") and Rules
31a-1, 31a-2 and 31a-3 thereunder, applicable federal and state
laws and any other law or administrative rules or procedures
which may be applicable to the Fund on behalf of the Portfolio,
other than those accounts, books and financial records required
to be maintained by the Fund's custodian or transfer agent and/or
books and records maintained by all other service providers
necessary for the Fund to conduct its business as a registered
open-end management investment company. All such books and
records shall be the property of the Fund and shall at all times
during regular business hours be open for inspection by, and
shall be surrendered promptly upon request of, duly authorized
officers of the Fund. All such books and records shall at all
times during regular business hours be open for inspection, upon
request of duly authorized officers of the Fund, by employees or
agents of the Fund and employees and agents of the Securities and
Exchange Commission.
b. Record the current day's trading activity and such other proper
bookkeeping entries as are necessary for determining that day's
net asset value and net income.
c. Render statements or copies of records as from time to time are
reasonably requested by the Fund.
d. Facilitate audits of accounts by the Fund's independent public
accountants or by any other auditors employed or engaged by the
Fund or by any regulatory body with jurisdiction over the Fund.
e. Compute the Portfolio's net asset value per share, and, if
applicable, its public offering price and/or its daily dividend
rates and money market yields, in accordance with Section 3 of
the Agreement and notify the Fund and such other persons as the
Fund may reasonably request of the net asset value per share, the
public offering price and/or its daily dividend rates and money
market yields.
1
<PAGE>
Section 2. Valuation of Securities
Securities shall be valued in accordance with (a) the Fund's
Registration Statement, as amended or supplemented from time to time
(hereinafter referred to as the "Registration Statement"); (b) the
resolutions of the Board of Trustees of the Fund at the time in force
and applicable, as they may from time to time be delivered to FUND
ACCOUNTING, and (c) Proper Instructions from such officers of the Fund
or other persons as are from time to time authorized by the Board of
Trustees of the Fund to give instructions with respect to computation
and determination of the net asset value. FUND ACCOUNTING may use one
or more external pricing services, including broker-dealers, provided
that an appropriate officer of the Fund shall have approved such use
in advance.
Section 3. Computation of Net Asset Value, Public Offering Price, Daily
Dividend Rates and Yields
FUND ACCOUNTING shall compute the Portfolio's net asset value,
including net income, in a manner consistent with the specific
provisions of the Registration Statement. Such computation shall be
made as of the time or times specified in the Registration Statement.
FUND ACCOUNTING shall compute the daily dividend rates and money
market yields, if applicable, in accordance with the methodology set
forth in the Registration Statement.
Section 4. FUND ACCOUNTING's Reliance on Instructions and Advice
In maintaining the Portfolio's books of account and making the
necessary computations FUND ACCOUNTING shall be entitled to receive,
and may rely upon, information furnished it by means of Proper
Instructions, including but not limited to:
a. The manner and amount of accrual of expenses to be recorded on
the books of the Portfolio;
b. The source of quotations to be used for such securities as may
not be available through FUND ACCOUNTING's normal pricing
services;
c. The value to be assigned to any asset for which no price
quotations are readily available;
d. If applicable, the manner of computation of the public offering
price and such other computations as may be necessary;
e. Transactions in portfolio securities;
f. Transactions in shares of beneficial interest.
FUND ACCOUNTING shall be entitled to receive, and shall be entitled to
rely upon, as conclusive proof of any fact or matter required to be
ascertained by it hereunder, a certificate, letter or other instrument
signed by an authorized officer of the Fund or any other person
authorized by the Fund's Board of Trustees.
FUND ACCOUNTING shall be entitled to receive and act upon advice of
Counsel (which may be Counsel for the Fund) at the reasonable expense
of the Portfolio and shall be without liability for any action taken
or thing done in good faith in reliance upon such advice.
2
<PAGE>
FUND ACCOUNTING shall be entitled to receive, and may rely upon,
information received from the Transfer Agent.
Section 5. Proper Instructions
"Proper Instructions" as used herein means any certificate, letter or
other instrument or telephone call reasonably believed by FUND
ACCOUNTING to be genuine and to have been properly made or signed by
any authorized officer of the Fund or person certified to FUND
ACCOUNTING as being authorized by the Board of Trustees. The Fund, on
behalf of the Portfolio, shall cause oral instructions to be confirmed
in writing. Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices as from time
to time agreed to by an authorized officer of the Fund and FUND
ACCOUNTING.
The Fund, on behalf of the Portfolio, agrees to furnish to the
appropriate person(s) within FUND ACCOUNTING a copy of the
Registration Statement as in effect from time to time. FUND
ACCOUNTING may conclusively rely on the Fund's most recently delivered
Registration Statement for all purposes under this Agreement and shall
not be liable to the Portfolio or the Fund in acting in reliance
thereon.
Section 6. Standard of Care and Indemnification
FUND ACCOUNTING shall exercise reasonable care and diligence in the
performance of its duties hereunder. The Fund agrees that FUND
ACCOUNTING shall not be liable under this Agreement for any error of
judgment or mistake of law made in good faith and consistent with the
foregoing standard of care, provided that nothing in this Agreement
shall be deemed to protect or purport to protect FUND ACCOUNTING
against any liability to the Fund, the Portfolio or its shareholders
to which FUND ACCOUNTING would otherwise be subject by reason of
willful misfeasance, bad faith or negligence in the performance of its
duties, or by reason of its reckless disregard of its obligations and
duties hereunder.
The Fund agrees, on behalf of the Portfolio, to indemnify and hold
harmless FUND ACCOUNTING and its employees, agents and nominees from
all taxes, charges, expenses, assessments, claims and liabilities
(including reasonable attorneys' fees) incurred or assessed against
them in connection with the performance of this Agreement, except such
as may arise from their own negligent action, negligent failure to act
or willful misconduct. The foregoing notwithstanding, FUND ACCOUNTING
will in no event be liable for any loss resulting from the acts,
omissions, lack of financial responsibility, or failure to perform the
obligations of any person or organization designated by the Fund to be
the authorized agent of the Portfolio as a party to any transactions.
FUND ACCOUNTING's responsibility for damage or loss with respect to
the Portfolio's records arising from fire, flood, Acts of God,
military power, war, insurrection or nuclear fission, fusion or
radioactivity shall be limited to the use of FUND ACCOUNTING's best
efforts to recover the Portfolio's records determined to be lost,
missing or destroyed.
3
<PAGE>
Section 7. Compensation and FUND ACCOUNTING Expenses
FUND ACCOUNTING shall be paid as compensation for its services
pursuant to this Agreement such compensation as may from time to time
be agreed upon in writing by the two parties. FUND ACCOUNTING shall
be entitled to recover its reasonable telephone, courier or delivery
service, and all other reasonable out-of-pocket, expenses as incurred,
including, without limitation, reasonable attorneys' fees and
reasonable fees for pricing services.
Section 8. Amendment and Termination
This Agreement shall continue in full force and effect until
terminated as hereinafter provided, may be amended at any time by
mutual agreement of the parties hereto and may be terminated by an
instrument in writing delivered or mailed to the other party. Such
termination shall take effect not sooner than ninety (90) days after
the date of delivery or mailing of such notice of termination. Any
termination date is to be no earlier than four months from the
effective date hereof. Upon termination, FUND ACCOUNTING will turn
over to the Fund or its designee and cease to retain in FUND
ACCOUNTING files, records of the calculations of net asset value and
all other records pertaining to its services hereunder; provided,
however, FUND ACCOUNTING in its discretion may make and retain copies
of any and all such records and documents which it determines
appropriate or for its protection.
Section 9. Services Not Exclusive
FUND ACCOUNTING's services pursuant to this Agreement are not to be
deemed to be exclusive, and it is understood that FUND ACCOUNTING may
perform fund accounting services for others. In acting under this
Agreement, FUND ACCOUNTING shall be an independent contractor and not
an agent of the Fund or the Portfolio.
Section 10. Limitation of Liability for Claims
The Fund's Amended and Restated Declaration of Trust, dated November
3, 1987, as amended to date (the "Declaration"), a copy of which,
together with all amendments thereto, is on file in the Office of the
Secretary of State of the Commonwealth of Massachusetts, provides that
the name "Scudder Investment Trust" refers to the Trustees under the
Declaration collectively as trustees and not as individuals or
personally, and that no shareholder of the Fund or the Portfolio, or
Trustee, officer, employee or agent of the Fund shall be subject to
claims against or obligations of the Trust or of the Portfolio to any
extent whatsoever, but that the Trust estate only shall be liable.
FUND ACCOUNTING is expressly put on notice of the limitation of
liability as set forth in the Declaration and FUND ACCOUNTING agrees
that the obligations assumed by the Fund and/or the Portfolio under
this Agreement shall be limited in all cases to the Portfolio and its
assets, and FUND ACCOUNTING shall not seek satisfaction of any such
4
<PAGE>
obligation from the shareholders or any shareholder of the Fund or the
Portfolio or any other series of the Fund, or from any Trustee,
officer, employee or agent of the Fund. FUND ACCOUNTING understands
that the rights and obligations of the Portfolio under the Declaration
are separate and distinct from those of any and all other series of
the Fund.
Section 11. Notices
Any notice shall be sufficiently given when delivered or mailed to the
other party at the address of such party set forth below or to such
other person or at such other address as such party may from time to
time specify in writing to the other party.
If to FUND ACCOUNTING: Scudder Fund Accounting Corporation
Two International Place
Boston, Massachusetts 02110
Attn: Vice President
If to the Fund - Portfolio: Scudder Investment Trust -
Scudder Growth and Income Fund
Two International Place
Boston, Massachusetts 02110
Attn: President, Secretary or Treasurer
Section 12. Miscellaneous
This Agreement may not be assigned by FUND ACCOUNTING without the
consent of the Fund as authorized or approved by resolution of its
Board of Trustees.
In connection with the operation of this Agreement, the Fund and FUND
ACCOUNTING may agree from time to time on such provisions interpretive
of or in addition to the provisions of this Agreement as in their
joint opinions may be consistent with this Agreement. Any such
interpretive or additional provisions shall be in writing, signed by
both parties and annexed hereto, but no such provisions shall be
deemed to be an amendment of this Agreement.
This Agreement shall be governed and construed in accordance with the
laws of the Commonwealth of Massachusetts.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
5
<PAGE>
This Agreement constitutes the entire agreement between the parties
concerning the subject matter hereof, and supersedes any and all prior
understandings.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized and its
seal to be hereunder affixed as of the date first written above.
[SEAL] SCUDDER INVESTMENT TRUST, on behalf of
Scudder Growth and Income Fund
By: /s/Daniel Pierce
President
[SEAL] SCUDDER FUND ACCOUNTING CORPORATION
By: /s/Pamela A. McGrath
Vice President
6
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Scudder Investment Trust:
We consent to the incorporation by reference in Post-Effective Amendment
No. 73 to the Registration Statement of Scudder Investment Trust on Form N-1A,
of our report dated February 3, 1995 on our audit of the financial statements
and financial highlights of Scudder Growth & Income Fund, which report is
included in the Annual Report to Shareholders for the year ended December 31,
1994, which is 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.
April 13, 1995
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Scudder Growth and Income Fund Annual Report for the fiscal year ended
December 31, 1994 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> SCUDDER GROWTH AND INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> DEC-31-1993
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 1,839,934,324
<INVESTMENTS-AT-VALUE> 1,995,167,893
<RECEIVABLES> 29,343,693
<ASSETS-OTHER> 957
<OTHER-ITEMS-ASSETS> 107,958,800
<TOTAL-ASSETS> 2,132,471,343
<PAYABLE-FOR-SECURITIES> 24,037,863
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 116,730,294
<TOTAL-LIABILITIES> 140,768,157
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,821,233,941
<SHARES-COMMON-STOCK> 122,454,972
<SHARES-COMMON-PRIOR> 94,183,009
<ACCUMULATED-NII-CURRENT> 2,585,428
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12,634,994
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 155,248,823
<NET-ASSETS> 1,991,703,186
<DIVIDEND-INCOME> 63,180,209
<INTEREST-INCOME> 7,709,950
<OTHER-INCOME> 0
<EXPENSES-NET> 15,806,027
<NET-INVESTMENT-INCOME> 55,084,132
<REALIZED-GAINS-CURRENT> 110,478,324
<APPREC-INCREASE-CURRENT> (124,874,829)
<NET-CHANGE-FROM-OPS> 40,687,627
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (55,549,751)
<DISTRIBUTIONS-OF-GAINS> (104,186,389)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 38,072,976
<NUMBER-OF-SHARES-REDEEMED> (18,185,224)
<SHARES-REINVESTED> 8,384,211
<NET-CHANGE-IN-ASSETS> 368,189,719
<ACCUMULATED-NII-PRIOR> 3,273,577
<ACCUMULATED-GAINS-PRIOR> 6,226,843
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9,941,300
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 15,806,027
<AVERAGE-NET-ASSETS> 1,848,599,048
<PER-SHARE-NAV-BEGIN> 17.24
<PER-SHARE-NII> 0.49
<PER-SHARE-GAIN-APPREC> (0.05)
<PER-SHARE-DIVIDEND> (0.51)
<PER-SHARE-DISTRIBUTIONS> (0.91)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.26
<EXPENSE-RATIO> 0.86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>