Filed with the Securities and Exchange Commission on February 24, 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. 72
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 24
Scudder Investment Trust
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(Exact Name of Registrant as Specified in Charter)
Two International Place, Boston, MA 02110
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(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
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(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 March 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 or about December 29, 1994.
<PAGE>
SCUDDER QUALITY GROWTH FUND
Calculation of Registration Fee under the Securities Act of 1933
Proposed
Proposed Maximum
Amount Maximum Aggregate Amount of
Being Offering Price Offering Price Registration
Registered Per Share (1) (1,2) Fee (2)
---------- -------------- -------------- ------------
Shares of
Beneficial
Interest,
$.01 Par Value of 846,800 $15.24 $290,093 $100.03
Scudder Quality
Growth Fund
This Post-Effective Amendment No. 72 seeks to register 846,800 additional
shares of beneficial interest under the Securities Act of 1933.
(1) Computed under Rule 457(d) on the basis of the net asset value per
share of registrant's shares of beneficial interest at the close of
business on February 10, 1995. The above calculation shall not be
deemed a representation as to the actual offering price.
(2) Calculated pursuant to Rule 24e-2 under the Investment Company Act of
1940.
(a) Total number of shares redeemed during
previous fiscal year 2,723,546
(b) Total number of shares included in (a)
previously used under Rule 24e-2 this fiscal -0-
year
(c) Total number of shares included in (a)
previously used under Rule 24f-2(c) this 1,895,781
fiscal year
(d) Total number of shares included in (a) being
used to reduce maximum aggregate offering 827,765
price in this Post-Effective Amendment
<PAGE>
SCUDDER INVESTMENT TRUST
SCUDDER GROWTH AND INCOME FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
<TABLE>
<CAPTION>
PART A
Item No. Item Caption Prospectus Caption
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<C> <C> <C>
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed FINANCIAL HIGHLIGHTS
Financial DISTRIBUTION AND PERFORMANCE
Information INFORMATION
4. General INVESTMENT OBJECTIVE AND POLICIES
Description of WHY INVEST IN THE FUND?
Registrant ADDITIONAL INFORMATION ABOUT POLICIES
AND INVESTMENTS
FUND ORGANIZATION
5. Management of the FINANCIAL HIGHLIGHTS
Fund A MESSAGE FROM SCUDDER'S CHAIRMAN
FUND ORGANIZATION--Investment adviser
and Transfer agent
TRUSTEES AND OFFICERS
5A. Management SHAREHOLDER BENEFITS--A team approach
Discussion of Fund to investing
Performance
6. Capital Stock and DISTRIBUTION AND PERFORMANCE
Other Securities INFORMATION--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 PURCHASES
Securities Being FUND ORGANIZATION--Underwriter
Offered 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
</TABLE>
SCUDDER GROWTH AND INCOME FUND
CROSS-REFERENCE SHEET
(continued)
<TABLE>
<CAPTION>
PART B
Caption in Statement of
Item No. Item Caption Additional Information
- -------- ------------ ------------------------
<C> <C> <C>
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General FUND ORGANIZATION
Information and
History
13. Investment THE FUND'S INVESTMENT OBJECTIVE AND
Objectives and POLICIES
Policies PORTFOLIO TRANSACTIONS--Portfolio
turnover
14. Management of the INVESTMENT ADVISER
Fund TRUSTEES AND OFFICERS
REMUNERATION
15. Control Persons TRUSTEES AND OFFICERS
and Principal
Holders of
Securities
16. Investment INVESTMENT ADVISER
Advisory and Other DISTRIBUTOR
Services ADDITIONAL INFORMATION--Experts and
Other Information
17. Brokerage PORTFOLIO TRANSACTIONS--Brokerage
Allocation and
Other Practices
18. Capital Stock and FUND ORGANIZATION
Other Securities DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS
19. Purchase, PURCHASES
Redemption and EXCHANGES AND REDEMPTIONS
Pricing of FEATURES AND SERVICES OFFERED BY THE
Securities Being FUND--Dividend Reinvestment Plan
Offered 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 FINANCIAL STATEMENTS
Statements
</TABLE>
SCUDDER INVESTMENT TRUST
SCUDDER QUALITY GROWTH FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
<TABLE>
<CAPTION>
PART A
Item No. Item Caption Prospectus Caption
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<C> <C> <C>
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed FINANCIAL HIGHLIGHTS
Financial DISTRIBUTION AND FINANCIAL INFORMATION
Information
4. General INVESTMENT OBJECTIVE AND POLICIES
Description of WHY INVEST IN THE FUND?
Registrant ADDITIONAL INFORMATION ABOUT POLICIES
AND INVESTMENTS
FUND ORGANIZATION
5. Management of the FINANCIAL HIGHLIGHTS
Fund A MESSAGE FROM SCUDDER'S CHAIRMAN
FUND ORGANIZATION--Investment adviser
and Transfer agent
TRUSTEES AND OFFICERS
5A. Management SHAREHOLDER BENEFITS--A team approach
Discussion of Fund to investing
Performance
6. Capital Stock and DISTRIBUTION AND PERFORMANCE
Other Securities INFORMATION--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 PURCHASES
Securities Being FUND ORGANIZATION--Underwriter
Offered 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
</TABLE>
SCUDDER QUALITY GROWTH FUND
CROSS-REFERENCE SHEET
(continued)
<TABLE>
<CAPTION>
PART B
Caption in Statement of
Item No. Item Caption Additional Information
- -------- ------------ ------------------------
<C> <C> <C>
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General FUND ORGANIZATION
Information and
History
13. Investment THE FUND'S INVESTMENT OBJECTIVE AND
Objectives and POLICIES
Policies PORTFOLIO TRANSACTIONS--Portfolio
turnover
14. Management of the INVESTMENT ADVISER
Fund TRUSTEES AND OFFICERS
REMUNERATION
15. Control Persons TRUSTEES AND OFFICERS
and Principal
Holders of
Securities
16. Investment INVESTMENT ADVISER
Advisory and Other DISTRIBUTOR
Services ADDITIONAL INFORMATION--Experts and
Other Information
17. Brokerage PORTFOLIO TRANSACTIONS--Brokerage
Allocation and commissions
Other Practices
18. Capital Stock and FUND ORGANIZATION
Other Securities DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS
19. Purchase, PURCHASES
Redemption and EXCHANGES AND REDEMPTIONS
Pricing of FEATURES AND SERVICES OFFERED BY THE
Securities Being FUND--Distribution Plans
Offered 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 FINANCIAL STATEMENTS
Statements
</TABLE>
<PAGE>
This prospectus sets forth concisely the information about Scudder Quality
Growth 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 March 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.
Scudder Quality Growth Fund
Prospectus
March 1, 1995
A pure no-load(tm) (no sales charges) mutual fund which seeks long-term
growth of capital through investment primarily in the equity securities of
seasoned, financially-strong U.S. growth companies.
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 Quality Growth Fund (the "Fund"). By
reviewing this table and those in other mutual funds' prospectuses, you can
compare the Fund's fees and expenses with those of other funds. With
Scudder's pure no-load(tm) funds, you pay no commissions to purchase or
redeem shares, or to exchange from one fund to another. As a result, all of
your investment goes to work for you.
1) Shareholder transaction expenses: Expenses charged directly to your
individual account in the Fund for various transactions.
Sales commissions to purchase shares (sales load) NONE
Commissions to reinvest dividends NONE
Redemption fees NONE*
Fees to exchange shares NONE
2) Annual Fund operating expenses (after expense maintenance): Expenses
paid by the Fund before it distributes its net investment income,
expressed as a percentage of the Fund's average daily net assets for
the fiscal year ended October 31, 1994 .
Investment management fee 0.70%
12b-1 fees NONE
Other expenses 0.55 %
-----------
Total Fund operating expenses 1.25 %**
===========
Example
Based on the level of total Fund operating expenses listed above, the total
expenses relating to a $1,000 investment, assuming a 5% annual return and
redemption at the end of each period, are listed below. Investors do not
pay these expenses directly; they are paid by the Fund before it
distributes its net investment income to shareholders. (As noted above, the
Fund has no redemption fees of any kind.)
1 Year 3 Years 5 Years 10 Years
------- ------- ------- -------
$ 13 $ 40 $ 69 $ 151
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."
** Until February 29, 1996 , the Adviser has agreed to maintain the
total annualized expenses of the Fund at not more than 1.25% of
average daily net assets of the Fund. If the Adviser had not
decided to maintain the Fund's expenses, the total annualized expenses
of the Fund would have amounted to 1.25% (of which 0.70% would have
consisted of investment management fees) .
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 October 31, 1994 and may be
obtained without charge by writing or calling Scudder Investor Services,
Inc.
<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>
For the Period
May 15, 1991
(commencement
Years Ended October 31, of operations)
----------------------------- to October 31,
1994 1993 1992 1991
----------------------------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period . . . . . . . . . . . $16.42 $15.30 $13.65 $12.00
Income from investment operations:
Net investment income (a) . . . . . . . . . . . . . . . . .16 .06 .02 .03
Net realized and unrealized gain (loss) on investments . (.09) 1.09 1.68 1.62
------ ------ ------ ------
Total from investment operations . . . . . . . . . . . . . .07 1.15 1.70 1.65
------ ------ ------ ------
Less distributions from:
Net investment income . . . . . . . . . . . . . . . . . . (.08) (.03) (.03) --
Net realized gains on investment transactions . . . . . (.24) -- (.02) --
------ ------ ------ ------
Total distributions . . . . . . . . . . . . . . . . . . . . (.32) (.03) (.05) --
------ ------ ------ ------
Net asset value, end of period . . . . . . . . . . . . . . $16.17 $16.42 $15.30 $13.65
====== ====== ====== ======
TOTAL RETURN (%) . . . . . . . . . . . . . . . . . . . . . .39 7.49 12.47 13.75**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) . . . . . . . . . . 113 126 101 30
Ratio of operating expenses net, to average daily
net assets (%) (a) . . . . . . . . . . . . . . . . . . . 1.25 1.20 1.25 1.25*
Ratio of net investment income to average daily net
assets (%) . . . . . . . . . . . . . . . . . . . . . . . .96 .39 .24 .83*
Portfolio turnover rate (%) . . . . . . . . . . . . . . . 119.7 111.4 27.4 11.5*
(a) Reflects a per share amount of expenses, exclusive of
management fees, reimbursed by the Adviser of . . . . $ -- $ -- $ -- $ .01
Reflects a per share amount of management fee not
imposed by the Adviser of . . . . . . . . . . . . . $ -- $ -- $ .01 $ .02
Operating expense ratio including expenses
reimbursed, management fee and other expenses
not imposed (%) . . . . . . . . . . . . . . . . . . -- -- 1.40 2.67*
* Annualized
** Not annualized
</TABLE>
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 Quality Growth Fund
Investment objective
* long-term growth of capital through investment primarily in the equity
securities of seasoned, financially-strong U.S. growth companies
Investment characteristics
* emphasis on medium- to large-sized domestic companies with prospects
for maintaining greater than average growth in earnings, cash flow or
assets over time
* focus on companies in strong financial positions
* opportunity to share in the long-term growth of the stock market
* daily liquidity at current net asset value
Contents
Investment objective and policies 5
Why invest in the Fund? 6
Additional information about policies and investments 7
Purchases 10
Exchanges and redemptions 11
Distribution and performance information 12
Fund organization 12
Transaction information 13
Shareholder benefits 16
Trustees and Officers 19
Investment products and services 20
How to contact Scudder 21
Investment objective and policies
Scudder Quality Growth Fund (the "Fund"), a diversified series of
Scudder Investment Trust, seeks to provide long-term growth of capital
through investment primarily in the equity securities of seasoned,
financially-strong U.S. growth companies. Although current income is an
incidental consideration, many of the Fund's securities should provide
regular dividends which are expected to grow over time.
The Fund's equity investments consist of common stocks, preferred stocks
and securities convertible into common stocks of companies which are of
above-average financial quality and offer the prospect for above-average
growth in earnings, cash flow or assets relative to the overall market as
defined by the Standard & Poor's 500 Composite Price Index (S&P 500). The
prospect for above-average growth in assets is evaluated in terms of the
potential future earnings such growth in assets can produce.
The Fund allocates its investments among different industries and
companies, and adjusts its portfolio securities based on long-term
investment considerations as opposed to short-term trading. While the Fund
emphasizes U.S. investments, it can commit a portion of assets to the
equity securities of foreign growth companies which meet the criteria
applicable to domestic investments.
Except as otherwise indicated, the Fund's investment objective and policies
are not fundamental and may be changed without a vote of shareholders.
Shareholders will receive written notice of any changes in the Fund's
objective. If there is a change in investment objective, shareholders
should consider whether the Fund remains an appropriate investment in light
of their then current financial position and needs. There can be no
assurance that the Fund's objective will be met.
Investments
The Fund invests primarily in the equity securities issued by medium- to
large-sized domestic companies that offer above-average appreciation
potential. In seeking such investments, the Fund's investment adviser,
Scudder, Stevens & Clark, Inc. (the "Adviser"), invests in companies with
the following characteristics:
* companies that have exhibited above-average growth rates over an
extended period with prospects for maintaining greater than average
rates of growth in earnings, cash flow or assets in the future;
* companies that are in a strong financial position with high credit
standings and profitability;
* companies with important business franchises, leading products or
dominant marketing and distribution systems;
* companies guided by experienced, motivated management;
* companies with at least five years' operating history and annual
revenues of $200 million or more and market capitalization of at least
$300 million; and
* companies selling at attractive prices relative to potential growth in
earnings, cash flow or assets.
The Adviser utilizes a combination of qualitative and quantitative research
techniques to identify companies that have above-average quality and growth
characteristics and that are deemed to be selling at attractive market
valuations. In-depth fundamental research is used to evaluate various
aspects of corporate performance, with a particular focus on consistency of
results, long-term growth prospects and financial strength. Quantitative
valuation models are designed to help determine which growth companies
offer the best values at a given point in time. From time to time, for
temporary defensive or emergency purposes, the Fund may invest a portion of
its assets in cash and cash equivalents when the Adviser deems such a
position advisable in light of economic or market conditions. The Fund also
may invest in foreign securities, repurchase agreements, and may engage in
strategic transactions.
Quality
The Fund invests at least 65% of its total assets in the equity securities
of seasoned, financially-strong U.S. growth companies which are considered
to be of above-average financial quality. The common stocks issued by these
companies qualify, at the time of purchase, for one of the three highest
equity ranking categories (A+, A or A-) of Standard & Poor's ("S&P")
or, if not ranked by S&P, are judged to be of comparable quality by the
Adviser. S&P assigns earnings and dividends rankings to corporations based
on a number of factors, including stability and growth of earnings and
dividends. Rankings by S&P are not an appraisal of a company's
creditworthiness, as is true for S&P's debt security ratings, nor are these
rankings intended as a forecast of future stock market performance. In
addition to using S&P rankings of earnings and dividends of common stocks,
the Adviser conducts its own analysis of a company's history, current
financial position and earnings prospects.
When assessing financial quality, the Adviser weighs four elements of
business risk. These factors are the Adviser's assessment of the strength
of a company's balance sheet, the accounting practices a company follows,
the volatility of a company's earnings over time and the vulnerability of
earnings to changes in external factors, such as the general economy, the
competitive environment, governmental action and technological change.
More information about investment techniques is provided under "Additional
information about policies and investments."
Why invest in the Fund?
The Fund provides investors with convenient and low-cost access to a
diversified equity portfolio involving seasoned, financially-strong U.S.
growth companies. The Fund's investment strategy is to acquire the equity
securities of well-managed large- and medium-sized companies, primarily
located in the U.S., which have established records of above-average
earnings growth and are judged to have potential for the future. The
Adviser believes that companies with relatively consistent and
above-average rates of growth will be rewarded by the market with higher
stock prices over time and investment returns in excess of the market as a
whole. Also, while the business results of such companies will be affected
by slowdowns in economic growth, they should be less affected by adverse
business conditions than more leveraged or cyclical companies.
The Fund is only appropriate for those investors who understand and can
accept the risks of stock market investing. While the Fund emphasizes the
securities of companies with above-average growth and quality
characteristics, movements in the overall stock market will affect the
Fund's price. The Adviser, however, attempts to lessen the effects of stock
market fluctuation through portfolio diversification and disciplined
security selection. The Adviser has been involved in quality growth
investing for over 20 years. Institutional assets managed by the Adviser
using a quality growth investment approach exceeded $ billion as of
December 31, 1994 .
While the Fund is broadly diversified, it does not, in itself, represent a
complete investment program. Nonetheless, because of its emphasis on
quality growth companies, the Fund may be appropriate as a core equity
component of an investment portfolio containing money market, bond and more
specialized equity investments.
In addition, the Fund offers all the benefits of the Scudder Family of
Funds. Scudder, Stevens & Clark, Inc. manages a diverse family of pure
no-load(tm) funds and provides a wide range of services to help investors
meet their investment needs. Please refer to "Investment products and
services" for additional information.
Additional information about policies and investments
Investment restrictions
The Fund has adopted certain fundamental policies which may not be changed
without a vote of shareholders and which are designed to reduce the Fund's
investment risk. The Fund may not make loans except through the lending of
portfolio securities, the purchase of debt securities or through repurchase
agreements and may not borrow money except as a temporary measure for
extraordinary or emergency purposes.
In addition, as a matter of nonfundamental policy, the Fund may not invest
more than 10% of its net assets, in the aggregate, in securities which are
not readily marketable, in restricted securities and
repurchase agreements maturing in more than seven days. The Fund may
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 "The Fund's Investment Objective and Policies" in the
Fund's Statement of Additional Information.
Portfolio turnover rate
Recent economic and market conditions have necessitated more active
trading, resulting in a higher portfolio turnover rate for the Fund. A
higher rate involves greater transaction costs to the Fund and may result
in the realization of net capital gains, which would be taxable to
shareholders when distributed.
Convertible securities
The Fund may invest in convertible securities (bonds, notes, debentures,
preferred stocks and other securities convertible into common stocks) 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 securities which may be converted
or exchanged at a stated or determinable exchange ratio into underlying
shares of common stock. Prior to their conversion, convertible securities
may have characteristics similar to both nonconvertible debt
securities and equity securities .
Foreign securities
In addition to investments in companies domiciled in the U.S., the Fund may
invest a portion of its assets in listed and unlisted foreign securities of
the same type as the domestic securities in which it is permitted to
invest. The Fund may invest outside of the U.S. when the anticipated
performance of foreign securities is believed by the Adviser to offer more
return potential than domestic alternatives in keeping with the investment
objective of the Fund.
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.
Strategic Transactions and derivatives
The Fund may, but is not required to, utilize various other investment
strategies as described below to hedge various market risks (such as
interest rates, currency exchange rates, and broad or specific equity or
fixed-income market movements), to manage the effective maturity or
duration of fixed-income securities in the Fund's portfolio or to enhance
potential gain. These strategies may be executed through the use of
derivative contracts. Such strategies are generally accepted as a
part of modern portfolio management and are regularly utilized by many
mutual funds and other institutional investors. Techniques and instruments
may change over time as new instruments and strategies are developed or
regulatory changes occur.
In the course of pursuing these investment strategies, the Fund may
purchase and sell exchange-listed and over-the-counter put and call options
on securities, equity and fixed-income indices and other financial
instruments, purchase and sell financial futures contracts and options
thereon, enter into various interest rate transactions such as swaps, caps,
floors or collars, and enter into various currency transactions such as
currency forward contracts, currency futures contracts, currency swaps or
options on currencies or currency futures (collectively, all the above are
called "Strategic Transactions").
Strategic Transactions may be used without limit to attempt to
protect against possible changes in the market value of securities held in
or to be purchased for the Fund's portfolio resulting from securities
markets or currency exchange rate fluctuations, to protect the Fund's
unrealized gains in the value of its portfolio securities, to facilitate
the sale of such securities for investment purposes, to manage the
effective maturity or duration of fixed-income securities in the Fund's
portfolio, or to establish a position in the derivatives markets as a
temporary substitute for purchasing or selling particular securities. Some
Strategic Transactions may also be used to 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.
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. Convertible securities purchased by the Fund must be rated
investment-grade, or if unrated, judged of equivalent quality by the
Adviser. Investment-grade convertible securities are rated Aaa, Aa, A or
Baa by Moody's Investors Service, Inc. ("Moody's"), or AAA, AA, A or BBB by
S&P. Moody's considers securities it rates Baa to have speculative elements
as well as investment-grade characteristics.
Foreign securities. Investing in foreign securities involves considerations
not typically found in investing in U.S. markets. These considerations,
which may favorably or unfavorably affect the Fund's performance, include
changes in exchange rates and exchange rate controls (which may include
suspension of the ability to transfer currency from a given country), costs
incurred in conversions between currencies, non-negotiable brokerage
commissions, less publicly available information, different accounting
standards, lower trading volume and greater market volatility, the
difficulty of enforcing obligations in other countries, less securities
regulation, different tax provisions (including withholding on dividends
and interest paid to the Fund), war, expropriation, political and social
instability and diplomatic developments. Further, the settlement period of
securities transactions in foreign markets may be longer than in domestic
markets. 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 Adviser seeks to mitigate the risks associated
with these considerations through diversification and active professional
management.
Repurchase agreements. If the seller under a repurchase agreement becomes
insolvent, the Fund's right to dispose of the securities may be restricted.
In the event of the commencement of bankruptcy or insolvency proceedings,
with respect to the seller of the security under a repurchase agreement,
the Fund may encounter delay and incur costs before being able to sell the
security. Also, if a seller defaults, the value of such securities may
decline before the Fund is able to dispose of them.
Strategic Transactions and derivatives . Strategic Transactions,
including derivative contracts , have risks associated with them
including possible default by the other party to the transaction,
illiquidity and, to the extent the Adviser's view as to certain market
movements is incorrect, the risk that the use of such Strategic
Transactions could result in losses greater than if they had not been used.
Use of put and call options may result in losses to the Fund, force the
sale or purchase of portfolio securities at inopportune times or for prices
higher than (in the case of put options) or lower than (in the case of call
options) current market values, limit the amount of appreciation the Fund
can realize on its investments or cause the Fund to hold a security it
might otherwise sell. The use of currency transactions can result in the
Fund incurring losses as a result of a number of factors including the
imposition of exchange controls, suspension of settlements or the inability
to deliver or receive a specified currency. The use of options and futures
transactions entails certain other risks. In particular, the variable
degree of correlation between price movements of futures contracts and
price movements in the related portfolio position of the Fund creates the
possibility that losses on the hedging instrument may be greater than gains
in the value of the Fund's position. In addition, futures and options
markets may not be liquid in all circumstances and certain over-the-counter
options may have no markets. As a result, in certain markets, the Fund
might not be able to close out a transaction without incurring substantial
losses, if at all. Although the use of futures contracts and options
transactions for hedging should tend to minimize the risk of loss due to a
decline in the value of the hedged position, at the same time they tend to
limit any potential gain which might result from an increase in value of
such position. Finally, the daily variation margin requirements for futures
contracts would create a greater ongoing potential financial risk than
would purchases of options, where the exposure is limited to the cost of
the initial premium. Losses resulting from the use of Strategic
Transactions would reduce net asset value, and possibly income, and such
losses can be greater than if the Strategic Transactions had not been
utilized. The Strategic Transactions that the Fund may use and some of
their risks are described more fully in the Fund's Statement of Additional
Information.
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.
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, or by fax to:
registered, or
certified mail to:
The Scudder Funds The Scudder Funds 1-800-821-6234
P.O. Box 2291 1099 Hingham Street
Boston, MA Rockland, MA
02107-2291 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.
Distribution and performance information
Dividends and capital gains distributions
The Fund intends to distribute any dividends from its ordinary income and
any net realized capital gains after utilization of capital loss
carryforwards, if any, in December. An additional distribution may be made
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 the
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 ordinary income are taxable to investors as
ordinary income. Long-term capital gains distributions, if any, are taxable
as long-term capital gains regardless of the length of time shareholders
have owned their shares. Short-term capital gains and any other taxable
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 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 and the life of the Fund. "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.
Fund organization
Scudder Quality Growth 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.
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 policies or approving an investment management contract.
Shareholders will be assisted in communicating with other shareholders in
connection with removing a Trustee as if Section 16(c) of the 1940 Act were
applicable.
Investment adviser
The Fund retains the investment management firm of Scudder, Stevens &
Clark, Inc., a Delaware corporation, to manage its daily investment and
business affairs subject to the policies established by the Board of
Trustees. The Trustees have overall responsibility for the management of
the Fund under Massachusetts law.
The management fee payable to the Adviser under its Investment Management
Agreement is equal to an annual rate of 0.70% of the Fund's average daily
net assets.
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.
The Adviser has agreed not to impose all or a portion of its investment
management fee and to take other action, to the extent necessary, to
maintain the annualized expenses of the Fund at not more than 1.25% of
average daily net assets of the Fund until February 29, 1996 . For
the fiscal year ended October 31, 1994 , the Adviser received an
investment management fee of 0.70% 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 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.
Transaction information
Purchasing shares
Purchases are executed at the next calculated net asset value per share
after the Fund's transfer agent in Boston receives the purchase request in
good order. Purchases are made in full and fractional shares. (See "Share
price.")
By check. If you purchase shares with a check that does not clear, your
purchase will be 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 cancel ed 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.
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.
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.
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.
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 current market value of total assets, less all liabilities,
by the total number of shares outstanding.
Processing time
All purchase and redemption requests received in good order by the Fund's
transfer agent in Boston by the close of regular trading on the Exchange
are executed at the net asset value per share calculated at the close of
regular trading that day.
Purchase and redemption requests received after the close of regular
trading on the Exchange will be executed the following business day.
If you wish to make a purchase of $500,000 or more, you should notify
Scudder Investor Relations by calling 1-800-225-5163.
The Fund will normally send your redemption proceeds within one business
day following the redemption request, but may take up to seven 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 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 Quality Growth Fund is managed by a team of Scudder investment
professionals who each play an important role in the Fund's management
process. Team members work together to develop investment strategies
and select securities for the Fund's portfolio. They are supported by
Scudder's large staff of economists, research analysts, traders and other
investment specialists who work in Scudder's offices across the
United States and abroad. Scudder believes our team approach benefits
Scudder Quality Growth Fund investors by bringing together many disciplines
and leveraging Scudder's extensive resources.
Lead Portfolio Manager Bruce F. Beaty assumed responsibility for the
Fund's day-to-day management and investment strategies in January 1995.
Mr. Beaty, who has been a portfolio manager at Scudder since joining the
firm in 1991, specializes in the quality growth discipline of investing.
Prior to joining Scudder in 1991, Mr. Beaty spent 11 years in the
securities brokerage business. Michael K. Shields, Portfolio Manager,
joined the Fund and Scudder in 1992 and has 13 years of experience in
finance and banking.
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.
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.
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(tm)). 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.
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, 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.
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.
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.
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.
<PAGE>
SCUDDER QUALITY GROWTH FUND
A Pure No-Load(tm) (No Sales Charges) Diversified Mutual Fund Seeking
Long-Term Growth of Capital through Investment Primarily in Equity
Securities of Seasoned, Financially-Strong U.S. Growth Companies.
STATEMENT OF ADDITIONAL INFORMATION
March 1, 1995
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the prospectus for Scudder Quality Growth Fund
dated March 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 .
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE FUND'S INVESTMENT OBJECTIVE AND POLICIES 1
General Investment Objective and Policies 1
Investment Restrictions 11
PURCHASES 14
Additional Information About Opening an Account 14
Additional Information About Making Subsequent Investments 14
Checks 14
Wire Transfer of Federal Funds 15
Share Price 15
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 18
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 24
Purchase Pension Plans for Corporations and Self-Employed
Individuals
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for 24
Corporations and Self-Employed Individuals
Scudder IRA: Individual Retirement Account 24
Scudder 403(b) Plan 25
Automatic Withdrawal Plan 26
Group or Salary Deduction Plan 26
Automatic Investment Plan 26
Uniform Transfers/Gifts to Minors Act 27
Scudder Trust Company 27
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS 27
PERFORMANCE INFORMATION 27
Average Annual Total Return 27
Cumulative Total Return 28
Total Return 29
Capital Change 29
Performance Indices 29
Comparison of Fund Performance 29
FUND ORGANIZATION 32
INVESTMENT ADVISER 33
TRUSTEES AND OFFICERS 36
REMUNERATION 38
DISTRIBUTOR 39
TAXES 40
PORTFOLIO TRANSACTIONS 43
Brokerage Commissions 43
Portfolio Turnover 44
NET ASSET VALUE 45
ADDITIONAL INFORMATION 46
Experts 46
Shareholder Indemnification 46
Other Information 46
FINANCIAL STATEMENTS 47
APPENDIX
</TABLE>
THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
(See "Investment objective and policies" and "Additional
information about policies and investments" in the Fund's prospectus.)
General Investment Objective and Policies
Scudder Quality Growth Fund (the "Fund"), a diversified series of
Scudder Investment Trust (the "Trust"), seeks to provide long-term growth
of capital through investment primarily in the equity securities of
seasoned, financially-strong U.S. growth companies. Although current income
is an incidental consideration, many of the Fund's securities should
provide regular dividends which are expected to grow over time.
The Fund's equity investments consist of common stocks, preferred stocks
and securities convertible into common stocks of companies which are of
above-average financial quality and offer the prospect for above-average
growth in earnings, cash flow or assets relative to the overall market as
defined by the Standard & Poor's 500 Composite Price Index ("S&P 500"). The
prospect for above-average growth in assets is evaluated in terms of the
potential future earnings such growth in assets can produce.
The Fund allocates its investments among different industries and
companies, and adjusts its portfolio securities based on long-term
investment considerations as opposed to short-term trading. While the Fund
emphasizes U.S. investments, it can commit a portion of assets to the
equity securities of foreign growth companies which meet the criteria
applicable to domestic investments.
Except as otherwise indicated, the Fund's investment objective and policies
are not fundamental and may be changed without a vote of shareholders.
Shareholders will receive written notice of any changes in the Fund's
objective. If there is a change in investment objective, shareholders
should consider whether the Fund remains an appropriate investment in light
of their then current financial position and needs. There can be no
assurance that the Fund's objective will be met.
Investments. The Fund invests primarily in the equity securities issued by
medium- to large-sized domestic companies that offer above-average
appreciation potential. In seeking such investments, the Fund's investment
adviser, Scudder, Stevens & Clark, Inc. (the "Adviser"), invests in
companies with the following characteristics:
* companies that have exhibited above-average growth rates over an
extended period with prospects for maintaining greater than average
rates of growth in earnings, cash flow or assets in the future;
* companies that are in a strong financial position with high credit
standings and profitability;
* companies with important business franchises, leading products or
dominant marketing and distribution systems;
* companies guided by experienced, motivated management;
* companies with at least five years' operating history and annual
revenues of $200 million or more and market capitalization of at least
$300 million; and
* companies selling at attractive prices relative to potential growth in
earnings, cash flow or assets.
The Adviser utilizes a combination of qualitative and quantitative research
techniques to identify companies that have above-average quality and growth
characteristics and that are deemed to be selling at attractive market
valuations. In-depth fundamental research is used to evaluate various
aspects of corporate performance, with a particular focus on consistency of
results, long-term growth prospects and financial strength. Quantitative
valuation models are designed to help determine which growth companies
offer the best values at a given point in time. From time to time, for
temporary defensive or emergency purposes, the Fund may invest a portion of
its assets in cash and cash equivalents when the Adviser deems such a
position advisable in light of economic or market conditions. The Fund also
may invest in foreign securities, repurchase agreements, and may engage in
strategic transactions.
Quality. The Fund invests at least 65% of its total assets in the equity
securities of seasoned, financially-strong U.S. growth companies which are
considered to be of above-average financial quality. The common stocks
issued by these companies qualify, at the time of purchase, for one of the
three highest equity ranking categories (A+, A or A-) of Standard & Poor's
("S&P") or, if not ranked by S&P, are judged to be of comparable quality by
the Adviser. S&P assigns earnings and dividends rankings to corporations
based on a number of factors, including stability and growth of earnings
and dividends. Rankings by S&P are not an appraisal of a company's
creditworthiness, as is true for S&P's debt security ratings, nor are these
rankings intended as a forecast of future stock market performance. In
addition to using S&P rankings of earnings and dividends of common stocks,
the Adviser conducts its own analysis of a company's history, current
financial position and earnings prospects. (See "APPENDIX--Standard &
Poor's Earnings and Dividend Rankings for Common Stocks.")
When assessing financial quality, the Adviser weighs four elements of
business risk. These factors are the Adviser's assessment of the strength
of a company's balance sheet, the accounting practices a company follows,
the volatility of a company's earnings over time and the vulnerability of
earnings to changes in external factors, such as the general economy, the
competitive environment, governmental action and technological change.
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 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 nonconvertible securities of similar quality because of their
conversion or exchange features.
Convertible securities are generally 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 nonconvertible 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 follows the movements in the market value of the
underlying common stock. Zero coupon convertible securities are generally
expected to be less volatile than the underlying common stocks as they are
usually issued with short to medium length maturities (15 years or less)
and are issued with options and/or redemption features exercisable by the
holder of the obligation entitling the holder to redeem the obligation and
receive a defined cash payment.
Foreign Securities. 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, 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 is
less than 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 a possible liability to the purchaser. Payment for
securities without delivery may be required in certain foreign markets.
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 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 expropriation or
confiscatory taxation, political or social instability, or diplomatic
developments which could affect U.S. investments in those 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. The management of the Fund seeks to mitigate
the risks associated with the foregoing considerations through
diversification and continuous professional management.
Because investments in foreign securities will usually involve currencies
of foreign countries, and because the Fund may hold foreign currencies and
forward foreign currency exchange contracts ("forward contracts"), futures
contracts and options on futures contracts on foreign currencies, the value
of the assets of 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 into U.S. dollars on a daily basis. It will
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 either on a spot (i.e., cash) basis
at the spot rate prevailing in the foreign currency exchange market, or
through entering into forward contracts (or options thereon) to purchase or
sell foreign currencies. (See "Strategic Transactions and
Derivatives " below.)
Repurchase Agreements. The Fund may enter into repurchase agreements with
any member bank of the Federal Reserve System and any broker/dealer
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 S&P or Moody's Investors
Service, Inc. ("Moody's").
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 date of 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 cause 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 from repurchase agreements by analyzing the
creditworthiness of the obligor, in this case the seller of the Obligation.
Apart from the risk of bankruptcy or insolvency proceedings, there is also
the risk that the seller may fail to repurchase the Obligation, in which
case the Fund may incur a loss if the proceeds to the Fund of the sale to a
third party are less than the repurchase price. 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 impose on the seller a 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 fixed-income securities
in the Fund's portfolio, or to enhance potential gain. These strategies
may be executed through the use of derivative contracts . Such
strategies are generally accepted as a part of modern portfolio
management and are regularly utilized by many mutual funds and other
institutional investors. Techniques and instruments may change over time as
new instruments and strategies are developed or regulatory changes occur.
In the course of pursuing these investment strategies, the Fund may
purchase and sell exchange-listed and over-the-counter put and call options
on securities, equity and fixed-income indices and other financial
instruments, purchase and sell financial futures contracts and options
thereon, enter into various interest rate transactions such as swaps, caps,
floors or collars, and enter into various currency transactions such as
currency forward contracts, currency futures contracts, currency swaps or
options on currencies or currency futures (collectively, all the above are
called "Strategic Transactions"). Strategic Transactions may be used
without limit to attempt to protect against possible changes in the
market value of securities held in or to be purchased for the Fund's
portfolio resulting from securities markets or currency exchange rate
fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for
investment purposes, to manage the effective maturity or duration of fixed-
income securities in the Fund's portfolio, or to establish a position in
the derivatives markets as a temporary substitute for purchasing or selling
particular securities. Some Strategic Transactions may also be used to
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.
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. 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 U.S. Securities and Exchange Commission
(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. 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
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 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.
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, 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 are
fundamental policies and may not be changed without the approval of "a
majority of the outstanding voting securities" of the Fund which, under the
1940 Act and the rules thereunder and as used in this Statement of
Additional Information, means the lesser of (1) 67% or more of the shares
of the Fund present at a meeting if the holders of more than 50% of the
outstanding shares of the Fund are present in person or represented by
proxy; or (2) more than 50% of the outstanding shares of the Fund.
Nonfundamental policies of the Fund may be modified by the Fund's Trustees
without a vote of shareholders.
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,
the 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 an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the
disposition of portfolio securities of the Fund;
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
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).
Other Investment Policies. The Trustees of the Fund voluntarily adopted
policies and restrictions which are observed in the conduct of the Fund's
affairs. These represent intentions of the Trustees based upon current
circumstances. They differ from fundamental investment policies in that
they may be changed or amended by action of the Trustees without prior
notice to or approval of shareholders.
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 seven 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;
(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, however, 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 agreements, in excess of 5%
of its total assets (taken at market value) except for temporary or
emergency purposes, or borrow other than from banks;
(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
30% of the value of the Fund's total assets at the time any loan is
made; all loans of portfolio securities will be fully collateralized
and marked to market daily. The Fund has no current intention of
making loans of portfolio securities that would amount to greater than
5% of the Fund's total assets; 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 tax identification number, clients having
a regular investment counsel account with the Adviser or its affiliates and
members of their immediate families, officers and employees of the Adviser
or of any affiliated organization and their immediate families, members of
the NASD and banks may open an account by wire. These investors must call
1-800-225-5163 to get an account number. During the call, the investor
will be asked to indicate the Fund name, amount to be wired ($1,000
minimum), name of bank or trust company from which the wire will be sent,
the exact registration of the new account, the tax identification or Social
Security number, address and telephone number. The investor must then call
the bank to arrange a wire transfer to The Scudder Funds, State
Street Bank and Trust Company, Boston, MA 02110, ABA Number 011000028,
DDA Account Number 9903-5552 . The investor must give the Scudder fund
name, account name and 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.
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, 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 Trust 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 Fund or the principal underwriter by reason of such cancellation. If
the purchaser is a shareholder, the Trust will have the authority, as agent
of the shareholder, to redeem shares in the account in order to reimburse
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 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.
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.
Share Certificates
Due to the desire of Trust management to afford ease of redemption,
certificates will not be issued to indicate ownership in the Fund.
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 each may
suspend or terminate the offering of shares of the Fund at any time.
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 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 SAIL ("Scudder
Automated Information Line"), 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 a
signature guarantee as described under "Transaction information--Redeeming
shares--Signature guarantees" 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 respective net
asset values determined on that day. Exchange orders received after the
close 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 Trust and the Transfer Agent each reserves the right to
suspend or terminate the privilege of the Automatic Exchange Program at any
time.
No commission is charged to the shareholder for any exchange described
above. An exchange into another Scudder fund is a redemption of shares,
and therefore may result in tax consequences (gain or loss) to the
shareholder and the proceeds of such an exchange may be subject to backup
withholding. (See "TAXES.")
Investors currently receive the exchange privilege, including exchange by
telephone, automatically without having to elect it. The Trust employs
procedures, including recording telephone calls, testing a caller's
identity, and sending written confirmation of telephone transactions,
designed to give reasonable assurance that instructions communicated by
telephone are genuine, and to discourage fraud. To the extent that the
Trust does not follow such procedures, it may be liable for losses due to
unauthorized or fraudulent telephone instructions. The Trust will not be
liable for acting upon instructions communicated by telephone that it
reasonably believes to be genuine. The Trust and the Transfer Agent each
reserves the right to suspend or terminate the privilege of exchanging by
telephone or fax at any time.
The Scudder funds into which investors may make an exchange are listed
under "THE SCUDDER FAMILY OF FUNDS" herein. Before making an exchange,
shareholders should obtain 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.
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 up to $50,000 to their address of record. Shareholders
may also request to have the proceeds mailed or wired to their pre-
designated bank account. In order to request redemptions by telephone,
shareholders must have completed and returned to the Transfer Agent the
application, including the designation of a bank account to which the
redemption proceeds are to be sent.
(a) NEW INVESTORS wishing to establish telephone redemption to a pre-
designated 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 pre-
designated bank account or who want to change the bank account
previously designated to receive redemption payments should either
return a Telephone Redemption Option Form (available upon request) or
send a letter identifying the account and specifying the exact
information to be changed. The letter must be signed exactly as the
shareholder's name(s) appear 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 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.
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 by Mail or Fax
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 shares registered in other than
individual names contact the Transfer Agent prior to any 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 of payment for shares tendered for repurchase or redemption may result
but only until the purchase check has cleared.
The requirements for IRA redemptions are different from those of regular
accounts. For more information call 1-800-225-5163.
Redemption-In-Kind
The Trust reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase order by
making payment in whole or in part in readily marketable securities chosen
by 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
into cash. The Trust, on behalf of the Fund, has elected, however, to be
governed by Rule 18f-1 under the 1940 Act as a result of which the Fund is
obligated to redeem shares, with respect to any one shareholder during any
90 day period, solely in cash up to the lesser of $250,000 or 1% of the net
asset value of the Fund at the beginning of the period.
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 Fund through the Distributor at Two International
Place , Boston, Massachusetts 02110- 4103 by letter, fax, TWX, or
telephone. A two-part confirmation will be mailed out promptly after
receipt of the 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 guarantees", should be sent with a copy of the
invoice to Scudder Service Corporation, Confirmed Processing Department,
Two International Place , Boston, Massachusetts 02110- 4103 .
Failure to deliver shares or required documents (see above) by the
settlement date may result in cancellation of the trade and the shareholder
will be responsible for any loss incurred by the Fund or the principal
underwriter by reason of such cancellation. 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. 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 Fund 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 Trust's Declaration of Trust provides that 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 Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund
fairly to determine the value of its net assets, or (d) the SEC may by
order permit a suspension of the right of redemption or a postponement of
the date of payment of redemption provided that applicable rules and
regulations of the SEC (or any succeeding governmental authority) shall
govern as to whether the conditions prescribed in (b), (c) or (d) exist.
If transactions at any time reduce a shareholder's account balance in the
Fund to below $1,000 in value, the Trust may notify the shareholder that,
unless the account balance is brought up to at least $1,000, the Trust will
redeem all shares and close the account by making payment to the
shareholder. The shareholder has sixty days to bring the account balance
up to $1,000 before any action will be taken by the Trust. (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 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>
Scudder Load Fund No-Load Fund
Pure No- 8.50% Load with 0.75% with 0.25%
YEARS Load(tm) Fund Fund 12b-1 Fee 12b-1 Fee
----- ------------- ---- --------- ---------
<C> <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 in writing 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 request. See "How to contact Scudder" in the Prospectus
for the address. Shareholders who have authorized telephone transactions
may change their dividend option by calling 1-800-225-5163.
Reinvestment is usually made at the closing net asset value determined on
the business day following the record date. Investors may leave standing
instructions with the Transfer Agent designating their option for either
reinvestment or cash distribution of any income dividends or capital gains
distributions. If no election is made, dividends and distributions will be
invested in additional shares of 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
DistributionsDirect Program, and whose predesignated checking account of
record is with a member bank of the Automated Clearing House Network (ACH)
can have income and capital gain distributions automatically deposited to
their personal bank account usually within three business days after the
Fund pays its distribution. A DistributionsDirect request form can be
obtained by calling 1-800-225-5163. Confirmation statements will be mailed
to shareholders as notification that distributions have been deposited.
Investors choosing to participate in Scudder's Automatic 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
An investment in the Fund represents an interest in a large, diversified
portfolio of carefully selected securities. Diversification may protect
the shareholder 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 the Distributor
and listed in the Fund's prospectus. The Centers are designed to provide
individuals with services during any business day. Investors may pick up
literature or obtain assistance with opening an account, adding monies or
special options to existing accounts, making exchanges within the Scudder
Family of Funds, redeeming shares or opening retirement plans. Checks
should not be mailed to the Centers but to "The Scudder Funds" at the
address listed under "How to contact Scudder" in the Prospectus.
Reports to Shareholders
The Fund issues shareholders financial statements examined by independent
accountants on a semiannual 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 for the
Fund. 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 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.
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.
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.
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
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 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.
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
<TABLE>
<CAPTION>
Starting
Age of Annual Rate
of Return
Contributions 5% 10% 15%
- ------------- ---- ---- ----
<S> <C> <C> <C>
25 $253,680 $973,704 $4,091,908
35 139,522 361,887 999,914
45 69,439 126,005 235,620
55 26,414 35,062 46,699
</TABLE>
This next table shows how much individuals would accumulate in non-IRA
accounts by age 65 if they start with $2,000 in pretax earned income at the
beginning of each year (which is $1,380 after taxes are paid), assuming
average annual returns of 5, 10 and 15%. (At withdrawal, a portion of the
accumulation in this table will be taxable.)
Value of a Non-IRA Account at
Age 65 Assuming $1,380 Annual Contributions
(post tax, $2,000 pretax) and a 31% Tax Bracket
<TABLE>
<CAPTION>
Starting
Age of Annual Rate
of Return
Contributions 5% 10% 15%
- ------------- ---- ---- ----
<S> <C> <C> <C>
25 $119,318 $287,021 $741,431
35 73,094 136,868 267,697
45 40,166 59,821 90,764
55 16,709 20,286 24,681
</TABLE>
Scudder 403(b) Plan
Shares of 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, 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.
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, if it appears to be in the best interest of the
Fund and its shareholders, 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 ordinary
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 in
December each year. The Fund intends to declare in December any net
realized capital gains resulting from its investment activity. The Fund
intends to distribute the December dividends and capital gains either in
December or in the following January. Any dividends or capital gains
distributions declared in October, November or December with a record date
in 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. Additional distributions 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), 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 computing the average annual compound
rates of return of a hypothetical investment over such periods according to
the following formula (average annual total return is then expressed as a
percentage):
T = (ERV/P)^1/n - 1
Where:
T = average annual total return
P = a hypothetical initial investment of $1,000
n = number of years
ERV = ending redeemable value: ERV is the value, at
the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
Average Annual Total Return for the periods ended October 31, 1994
One Year Life of the
Fund (1)
0.39 % 9.76 %
(1) For the period from May 15, 1991, commencement of operations.
If the Adviser had not maintained the Fund's expenses, the average
annual total return for one year and the life of the Fund would have been
approximately 0.39% and 9.67%, respectively.
As described above, average annual total return is based on historical
earnings and is not intended to indicate future performance. Average
annual total return for 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
computing the cumulative rates of return of a hypothetical investment over
such periods, according to the following formula (cumulative total return
is then expressed as a percentage):
C = (ERV/P)-1
Where:
C = Cumulative total return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value: ERV is the value, at
the end of the applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
Cumulative Total Return for the periods ended October 31, 1994
One Year Life of the
Fund (1)
0.39 % 38.04 %
(1) For the period from May 15, 1991, commencement of operations.
If the Adviser had not maintained the Fund's expenses, the cumulative
total return for one year and the life of the Fund would have been
approximately 0.39% and 37.61%, respectively.
Total Return
Total return is the rate of return on an investment for a specified period
of time calculated in the same manner as cumulative total return.
Capital Change
Capital change measures the return from invested capital including
reinvested capital gains distributions. Capital change does not
include the reinvestment of income dividends.
Quotations of the Fund's performance are based on historical earnings and
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.
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.
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.
Performance Indices
The Fund's performance will, from time to time, be compared to the
percentage changes of unmanaged performance indices. Such indices will
include the Dow Jones Industrial Average ("DJIA"), S&P 500 and the
Consumer Price Index ("CPI"). The DJIA and S&P 500 are unmanaged indices
widely regarded as representative of the equity market in general. The CPI
is a commonly used measure of inflation.
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, the 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, 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.
The Frank Russell Company, a West-Coast investment management firm that
periodically evaluates international stock markets and compares foreign
equity market performance to U.S. stock market performance.
Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds investing internationally.
IBC/Donoghue's Money Fund Report, a weekly publication of the Donoghue
Organization, Inc., of Holliston, Massachusetts, reporting on the
performance of the nation's money market funds, summarizing money market
fund activity and including certain averages as performance benchmarks,
specifically "Donoghue's Money Fund Average," and "Donoghue's Government
Money Fund Average."
Ibbotson Associates, Inc., a company specializing in investment research
and data.
Investment Company Data, Inc., an independent organization which provides
performance ranking information for broad classes of mutual funds.
Investor's Daily, a daily newspaper that features financial, economic, and
business news.
Kiplinger's Personal Finance Magazine, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a
weekly publication of industry-wide mutual fund averages by type of fund.
Money, a monthly magazine that from time to time features both specific
funds and the mutual fund industry as a whole.
Morgan Stanley International, an integrated investment banking firm that
compiles statistical information.
Mutual Fund Values, a biweekly Morningstar, Inc. publication that provides
ratings of mutual funds based on fund performance, risk and portfolio
characteristics.
The New York Times, a nationally distributed newspaper which regularly
covers financial news.
The No-Load Fund Investor, a monthly newsletter, published by Sheldon
Jacobs, that includes mutual fund performance data and recommendations for
the mutual fund investor.
No-Load Fund*X, a monthly newsletter, published by DAL Investment Company,
Inc., that reports on mutual fund performance, rates funds and discusses
investment strategies for the mutual fund investor.
Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.
Personal Investor, a monthly investment advisory publication that includes
a "Mutual Funds Outlook" section reporting on mutual fund performance
measures, yields, indices and portfolio holdings.
Smart Money, a national personal finance magazine published monthly by Dow
Jones and Company, Inc. and The Hearst Corporation. Focus is placed on
ideas for investing, spending and saving.
Success, a monthly magazine targeted to the world of entrepreneurs and
growing business, often featuring mutual fund performance data.
United Mutual Fund Selector, a semi-monthly investment newsletter,
published by Babson United Investment Advisors, that includes mutual fund
performance data and reviews of mutual fund portfolios and investment
strategies.
USA Today, a leading national daily newspaper .
U.S. News and World Report, a national business weekly that periodically
reports mutual fund performance data.
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, effective May 15, 1991, from
Scudder Growth and Income Fund.
The Trust's authorized capital consists of an unlimited number of shares of
beneficial interest, par value $0.01 per share. The Trust's shares are
currently divided into two series, Scudder Quality Growth Fund and Scudder
Growth and Income Fund. The Trustees of the Trust have the authority to
issue additional series of shares. Each share of each Fund has equal
rights with each other share of that Fund as to voting, dividends and
liquidation. All shares issued and outstanding will be fully paid and
nonassessable by the Trust, and redeemable as described in this Statement
of Additional Information and in each 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 that
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.
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 of different classes of a series would have an interest in the
same portfolio of assets, shareholders of any subsequently created classes
may bear different expenses in connection with different methods of
distribution of their classes. 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 Fund are not
binding upon the Trustees individually but only upon the property of the
Fund, that the Trustees and officers will not be liable for errors of
judgment or mistakes of fact or law, and that the Fund 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 Fund except if it is determined in the manner provided in
the Declaration of Trust that they have not acted in good faith in the
reasonable belief that their actions were in the best interests of the
Fund. 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 U.S. It was established in
1919 and pioneered the practice of providing investment counsel to
individual clients on a fee basis. In 1928 it introduced the first no-load
mutual fund to the public. In 1953 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 of over $11 billion and
includes the AARP Growth Trust, AARP Income Trust, AARP Tax Free Income
Trust and AARP Cash Investment Funds.
International Investment Experience. The Adviser has been a leader in
international investment management for over forty years. In addition to
Scudder International Fund, Inc., which was incorporated in Canada in 1953
as the first foreign investment company registered with the SEC , the
Adviser's investment company clients include Scudder Global Income Fund,
and Scudder Short Term Global Income Fund, which invest worldwide,
Scudder Greater Europe Growth Fund, which invests primarily in the
equity securities of European companies , Scudder International Bond
Fund, which invests internationally, Scudder Latin America Fund, which
invests in Latin American issuers, and The Japan Fund, Inc., which invests
primarily in securities of Japanese companies. The Adviser also manages
the assets of eight New York Stock Exchange traded closed-end
investment companies investing in foreign securities: The Argentina Fund,
Inc., The Brazil Fund, Inc., The First Iberian Fund, Inc., The Korea Fund,
Inc., The Latin America Dollar Income Fund, Inc., Scudder New Asia Fund,
Inc., Scudder New Europe Fund, Inc., and Scudder World Income
Opportunities Fund, Inc. Assets of the Adviser's international
investment company clients totaled more than $ billion as of
December 31, 1994 .
The Adviser utilizes its international investment experience when
evaluating foreign accounting practices such as those which may be used by
the issuers of the foreign securities in which the Fund may invest.
The Adviser maintains a large research department, which conducts
continuous studies of the factors that affect the position of various
industries, companies and individual securities. In this work, the Adviser
utilizes certain reports and statistics from a wide variety of sources,
including brokers and dealers who may execute portfolio transactions for
the Fund and other clients of the Adviser, but conclusions are based
primarily on investigations and critical analyses by its own research
specialists.
Certain investments may be appropriate for 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 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 Scudder Quality Growth Fund, and the Adviser was last approved by
the Trustees on August 9, 1994 and by a majority of the Fund's
shareholders on May 12, 1992 . The Agreement is dated May 9, 1991
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 Trust, cast in person at a meeting
called for the purpose of voting on such approval, and by a majority vote
either of the 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 which
securities shall be purchased for the portfolio of the Fund, which
portfolio securities shall be held or sold by the Fund, and what portion of
the Fund's assets will be held uninvested, subject always to the provisions
of the Trust's Declaration of Trust and By-Laws, the 1940 Act and the
Internal Revenue Code of 1986 and to the Fund's investment objectives,
policies and restrictions, and subject, further, to such policies and
instructions as the Trustees may from time to time establish. The Adviser
also advises and assists the officers of the Fund in taking such steps as
are necessary or appropriate to carry out the decisions of its Trustees and
the appropriate committees of the Trustees regarding the conduct of the
business of 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 Fund, 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 Fund's office space and facilities. For these services,
the Fund is charged by the Adviser a fee equal to approximately 0.70 of 1%
of the Fund's average daily net assets. The fee is payable monthly,
provided the Fund will make such interim payments as may be requested by
Scudder not to exceed 75% of the amount of the fee then accrued on the
books of the Fund and unpaid. The Adviser has agreed, until February
29, 1996 , to maintain the total annualized expenses of the Fund at no
more than 1.25% of average daily net assets of the Fund. For the period
May 15, 1991 (commencement of operations) to October 31, 1991, the Adviser
did not impose any of its management fee amounting to $45,290. For the
fiscal year ended October 31, 1994, the Adviser imposed fees
amounting to $802,235, and the portion not imposed amounted to
$3,897 .
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;
payment for portfolio pricing services to a pricing agent, if any; 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 issuance, 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 Trust 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 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 Fund is at the time offering its shares for sale,
although no payments are required to be made by the Adviser pursuant to
this reimbursement provision in excess of the annual fee paid by the Fund
to the Adviser. Management has been advised that the lowest such
limitation is presently 2 1/2% of average daily net assets up to $30
million, 2% of the next $70 million of such net assets and 1 1/2% of such
net assets in excess of that amount. Certain expenses such as brokerage
commissions, taxes, extraordinary expenses and interest are excluded from
such limitations, and other expenses may be excluded from time to time. 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.
The Agreement also provides that the Trust and the Fund may use any name
derived from the name "Scudder, Stevens & Clark" only as long as the
Agreement or any extension, any renewal or amendment thereof remains in
effect.
In reviewing the terms of the Agreement and in discussions with the Adviser
concerning such Agreement, Trustees who are not "interested persons" of the
Trust have been represented by independent counsel Ropes & Gray at the
Fund's expense.
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 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 engage in
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
Fund as principals in the purchase or sale of securities, except as
individual subscribers or holders of shares of the Fund.
TRUSTEES AND OFFICERS
Position with
Underwriter,
Name Position Principal Scudder
and Address with Trust Occupation** Investor
Services,
Inc.
Daniel Pierce+*= President Chairman of the Director,
and Trustee Board and Managing Vice
Director of President and
Scudder, Stevens & Assistant
Clark, Inc. Treasurer
Henry P. Becton, Trustee President and --
Jr. General Manager,
WGBH WGBH Educational
125 Western Avenue Foundation
Allston, MA
Dudley H. Ladd+*= Trustee Managing Director Director and
of Scudder, Senior Vice
Stevens & Clark, President
Inc.
George M. Lovejoy, Trustee Chairman Emeritus, --
Jr.= Meredith & Grew,
160 Federal Street Incorporated (a
Boston, MA real estate
service company)
Wesley W. Marple, Trustee Professor of --
Jr. = Business
413 Hayden Hall Administration
360 Huntington Ave. Northeastern
Boston, MA 02115 University,
College of
Business
Administration
Juris Padegs#* Trustee Managing Director Director and
of Scudder, Vice
Stevens & Clark, President
Inc.
Jean C. Tempel Trustee Director, --
Ten Post Office Executive Vice
Square President and
Suite 1325 Manager, Safeguard
Boston, MA 02109 Scientifics, Inc.
Bruce F. Beaty Vice Principal of --
President Scudder, Stevens &
Clark, Inc.
Jerard K. Hartman# Vice Managing Director --
President of Scudder,
Stevens & Clark,
Inc.
Robert T. Hoffman# Vice Managing Director --
President of Scudder,
Stevens & Clark,
Inc.
Thomas W. Vice Principal of Director,
Joseph + President Scudder, Stevens & Vice
Clark, Inc. President,
Treasurer and
Assistant
Clerk
David S. Vice Managing Director President,
Lee + President of Scudder, Assistant
Stevens & Clark, Treasure and
Inc. Director
Douglas M. Loudon# Vice Managing Director Senior Vice
President of Scudder, President
Stevens & Clark,
Inc.
Thomas F. Vice Principal of Clerk
McDonough + President, Scudder, Stevens &
Secretary Clark, Inc.
and
Assistant
Treasurer
Pamela A. Vice Principal of --
McGrath + President Scudder, Stevens &
and Clark, Inc.
Treasurer
Edward J. Vice Principal of Assistant
O'Connell# President Scudder, Stevens & Treasurer
and Clark, Inc.
Assistant
Treasurer
Coleen Downs Assistant Vice President of Assistant
Dinneen + Secretary Scudder, Stevens & Clerk
Clark, Inc.
Certain accounts for which the Adviser acts as investment adviser
owned shares in the aggregate, or % of the outstanding shares
on January 31, 1995 . The Adviser may be deemed to be the beneficial
owner of such shares but disclaims any beneficial ownership in such shares.
As of January 31, 1995 , all Trustees and officers of the Trust as a
group owned beneficially (as the term is defined in Section 13(a) under the
Securities Exchange Act of 1934) shares, or % of the shares
of the Fund outstanding on such date.
To the best of the Trust's knowledge, as of January 31, 1995 , no
person owned beneficially more than 5% of the Fund's shares except as
stated above.
* Messrs. Ladd, Padegs and Pierce are considered by the Trust and
its counsel to be persons who are "interested persons" of the
Adviser or of the Trust (within the meaning of the 1940 Act, as
amended).
** Unless otherwise stated, all the officers and Trustees have been
associated with their respective companies for more than five
years, but not necessarily in the same capacity.
= Messrs. Ladd, Lovejoy, 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
The Trustees and officers of the Trust also serve in similar capacities for
other Scudder funds.
REMUNERATION
Several of the officers and Trustees of the Trust may be officers or
employees of the Adviser, the Distributor, the Transfer Agent, 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 Fund. The Fund
pays no direct remuneration to any officer of the Trust. However, each of
the Trustees who is not affiliated with the Adviser will be paid by the
Fund. 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 discussing the investment
procedures of the Fund or 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 October 31, 1994 , the Trustees' fees
amounted to $ 37,257 .
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 Trust - 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).
<TABLE>
Compensation Table
for the year ended December 31, 1994
<S> <C> <C> <C> <C>
(1) (2) (3) (4) (5)
Aggregate
Compensation from
Scudder Total
Investment Trust Compensation
(consisting of Pension or From Scudder
two funds: Retirement Estimated Investment
Scudder Growth Benefits Annual Trust and
and Income Fund Accrued As Benefits Fund Complex
Name of Person, and Scudder Part of Fund Upon Paid to
Position Quality Growth Expenses Retirement Trustee
Fund)
Henry P. Becton, $18,600 N/A N/A $ 90,598
Jr. (15 funds)
Trustee
George M. $18,800 N/A N/A $ 117,450
Lovejoy, Jr. (12 funds)
Trustee
Wesley W. $18,700 N/A N/A $ 95,694
Marple, Jr. (15 funds)
Trustee
Jean C. Tempel $3,800 N/A N/A $ 15,076
Trustee (14 funds)
</TABLE>
DISTRIBUTOR
The Trust has an underwriting agreement with Scudder Investor Services,
Inc. (the "Distributor"), a Massachusetts corporation, which is a
wholly-owned subsidiary of the Adviser. The Trust'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 Trustees or a majority of the outstanding voting securities
of the Trust. The underwriting agreement was last approved by the Trustees
on August 9, 1994 .
Under the principal underwriting agreement, the Fund is responsible for:
the payment of all fees and expenses in connection with the preparation and
filing with the SEC 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 Trust or
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 shareholder 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 shareholder 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 the Fund shall
bear some or all of such expenses.
Note: Although the Fund 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 Fund pursuant to a 12b-1
Plan, if any, adopted by the Fund, 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 in which shares of the Fund may
from time to time be registered or where permitted by applicable law. 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 "Distribution and performance information--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 Internal Revenue Code of 1986, as amended (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 gains) and is not generally subject to federal income tax to the
extent that it annually distributes its investment company taxable income
and net realized capital gains in the manner required under the Code.
The Fund will be subject to a 4% nondeductible excise tax on amounts
required to be but not distributed under a prescribed formula. The formula
requires payment to shareholders during a calendar year of distributions
representing an amount equal to the sum of 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 as
prescribed in the Code) realized during the one-year period ending October
31 during such year, and all ordinary income and capital gains for prior
years that were not previously distributed.
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 on 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 the shares are deemed to have been held for less than 46
days.
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 a 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 will allow the Fund to make an
election to mark-to-market its shares of these foreign investment companies
in lieu of being taxed in the manner described above. At the end of each
taxable year to which the election applies, the Fund will include in its
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. Distributions and gain on dispositions of such
stock will be treated as ordinary income distributable to shareholders
rather than being subject to a fund level tax. The Fund intends to make
this election if it is determined to be appropriate and in the best
interest of the shareholders.
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 in respect of investments by
foreign investors.
Equity options written by the Fund (covered call options on portfolio
stock) will be subject to tax under Section 1234 of the Code. 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 stock.
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 generally 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, 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 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 interest or other
receivables or accrues expenses or other 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 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 series of 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.
Shareholders should consult their tax advisers about the application of the
provisions of tax law in light of their particular tax situations.
PORTFOLIO TRANSACTIONS
Brokerage Commissions
To the maximum extent feasible the Adviser places orders for portfolio
transactions for the Fund through the Distributor, which in turn places
orders on behalf of the Fund with other brokers and dealers. The
Distributor receives no commission, 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 brokers and 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, and 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 (to the extent applicable) in excess of
that which another broker might have charged for executing the same
transaction solely on account of the receipt of research, market or
statistical information. The Adviser does not place orders with brokers or
dealers on the basis that the broker or 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 otherwise.
Although certain research, market and statistical information from brokers
and dealers can be useful to the Fund and to the Adviser, it is the opinion
of the Adviser that such information will only supplement the Adviser's own
research effort since the information must still be analyzed, weighed, and
reviewed by the Adviser's staff. Such information may be useful to the
Adviser in providing services to clients other than 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 brokers and 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 October 31, 1994, 1993 and 1992 , the Fund
paid brokerage commissions of $302,266, $287,198 and $85,311.68,
respectively. In the fiscal year ended October 31, 1994 , the Fund paid
brokerage commissions of $264,999 (88 % 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 $201,061,798 (84 % of all brokerage
transactions). The balance of such brokerage was not allocated to any
particular broker or dealer or with regard to the above-mentioned or any
other special factors.
The Trustees of the Trust intend to 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.
Portfolio Turnover
The Fund's average annual portfolio turnover rate, i.e. the ratio of the
lesser of sales or purchases to the monthly average value of the portfolio
(excluding from both the numerator and the denominator all securities with
maturities at the time of acquisition of one year or less), for the fiscal
year s ended October 31, 1994 and 1993 was 119.7% and
111.4%, respectively . A higher rate involves greater brokerage and
transaction expenses to the Fund and may result in the realization of net
capital gains, which would be taxable to shareholders when distributed.
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.
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 so included or incorporated by reference
in reliance on the report of Coopers & Lybrand L.L.P. , independent
accountants, given on the authority of that firm as experts in accounting
and auditing.
Shareholder Indemnification
The Trust is an organization of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a trust
may, under certain circumstances, be held personally liable as partners for
the obligations of the Trust. The Declaration of Trust contains an express
disclaimer of shareholder liability in connection with the Trust property
or the acts, obligations or affairs of the Trust. The Declaration of Trust
also provides for indemnification out of the Trust 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
Trust itself would be unable to meet its obligations.
Other Information
The CUSIP number of the Fund is 811167-20-4.
The Fund has a fiscal year ending October 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 Fund's investment adviser in light of the objective
and policies of the Fund and other factors such as its other portfolio
holdings and tax considerations and should not be construed as
recommendations for similar action by other investors.
The name "Scudder Investment Trust" is the designation of the Trustees 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 Trust must look
solely to the property of the Trust for the enforcement of any claims
against the Trust as neither the Trustees, officers, agents nor
shareholders assume any personal liability for obligations entered into on
behalf of the Trust. Upon the initial purchase of shares, the shareholder
agrees to the bound by the Trust'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. All persons dealing
with the Fund must look only to the assets of the Fund for the enforcement
of any claims against the Fund as no other series of the Trust assumes any
liabilities for obligations entered into on behalf of the Fund.
Costs of $49,774 incurred by the Fund in conjunction with its organization
are amortized over the five year period beginning May 15, 1991.
Portfolio securities of the Fund are held separately pursuant to a
custodian agreement, by the Trust'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.
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 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 ("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 $17.55 for each account maintained for
a participant. For the fiscal period ending October 31, 1994 ,
Service Corporation's fee amounted to $278,448 . Please call 1-
800-225-5163 for specific mailing instructions regarding your investment.
The Fund's prospectus and this Statement of Additional Information omit
certain information contained in the Registration Statement which the Trust
has filed with the Commission 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.
This Registration Statement is available for inspection by the public at
the SEC in Washington, D.C.
FINANCIAL STATEMENTS
The financial statements, including the investment portfolio, of Scudder
Quality Growth Fund, together with the Report of Independent Accountants,
and Financial Highlights, are incorporated by reference and attached hereto
on pages 9 through 22 , inclusive, in the Annual Report to the
Shareholders of the Fund dated October 31, 1994 , and are hereby
deemed to be a part of this Statement of Additional Information.
APPENDIX
Standard & Poor's Earnings and Dividend Rankings for Common Stocks
The investment process involves assessment of various factors--such as
product and industry position, corporate resources and financial policy--
with results that make some common stocks more highly esteemed than others.
In this assessment, Standard & Poor believes that earnings and
dividend performance is the end result of the interplay of these factors
and that, over the long run, the record of this performance has a
considerable bearing on relative quality. The rankings, however, do not
pretend to reflect all of the factors, tangible or intangible, that bear on
stock quality.
Relative quality of bonds or other debt, that is, degrees of protection for
principal and interest, called creditworthiness, cannot be applied to
common stocks, and therefore rankings are not to be confused with bond
quality ratings which are arrived at by a necessarily different approach.
Growth and stability of earnings and dividends are deemed key elements in
establishing Standard & Poor's earnings and dividend rankings for common
stocks, which are designed to capsulize the nature of this record in a
single symbol. It should be noted, however, that the process also takes
into consideration certain adjustments and modifications deemed desirable
in establishing such rankings.
The point of departure in arriving at these rankings is a computerized
scoring system based on per-share earnings and dividend records of the most
recent ten years--a period deemed long enough to measure significant time
segments of secular growth, to capture indications of basic change in trend
as they develop, and to encompass the full peak-to-peak range of the
business cycle. Basic scores are computed for earnings and dividends, then
adjusted as indicated by a set of predetermined modifiers for growth,
stability within long-term trend, and cyclicality. Adjusted scores for
earnings and dividends are then combined to yield a final score.
Further, the ranking system makes allowance for the fact that, in general,
corporate size imparts certain recognized advantages from an investment
standpoint. Conversely, minimum size limits (in terms of corporate sales
volume) are set for the various rankings, but the system provides for
making exceptions where the score reflects an outstanding earnings-dividend
record.
The final score for each stock is measured against a scoring matrix
determined by analysis of the scores of a large and representative sample
of stocks. The range of scores in the array of this sample has been
aligned with the following ladder of rankings:
A+ Highest B+ Average C Lowest
A High B Below Average D In Reorganization
A- Above Average B- Lower
NR signifies no ranking because of insufficient data or because the stock
is not amenable to the ranking process.
The positions as determined above may be modified in some instances by
special considerations, such as natural disasters, massive strikes, and
non-recurring accounting adjustments.
A ranking is not a forecast of future market price performance, but is
basically an appraisal of past performance of earnings and dividends, and
relative current standing. These rankings must not be used as market
recommendations; a high-score stock may at times be so overpriced as to
justify its sale, while a low-score stock may be attractively priced for
purchase. Rankings based upon earnings and dividend records are no
substitute for complete analysis. They cannot take into account potential
effects of management changes, internal company policies not yet fully
reflected in the earnings and dividend record, public relations standing,
recent competitive shifts, and a host of other factors that may be relevant
to investment status and decision.
<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 Quality Growth Fund
Annual Report
October 31, 1994
* A fund seeking long-term growth of capital through investment
primarily in the equity securities of seasoned, financially-strong
U.S. growth companies.
* A pure no-load(tm) fund with no commissions to buy, sell, or exchange
shares.
SCUDDER QUALITY GROWTH FUND
CONTENTS
2 Highlights
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
9 Investment Portfolio
14 Financial Statements
17 Financial Highlights
18 Notes to Financial Statements
21 Report of Independent Accountants
22 Tax Information
25 Officers and Trustees
26 Investment Products and Services
27 How to Contact Scudder
HIGHLIGHTS
* Declining stock prices in the United States affected Scudder Quality
Growth Fund's performance during the fiscal year ended October 31,
1994.
* The Fund's 0.39% total return included $0.075 per share in income
dividends and $0.235 in capital gain distributions, which more than
compensated for the Fund's $0.25 decline in net asset value.
* Since its inception on May 15, 1991, the Fund has provided an average
annual total return of 9.76%.
* The Fund increased its exposure to the healthcare industry by
investing in stocks believed to represent good values, given their
depressed prices.
* Rising interest rates led us to reduce the Fund's exposure to
interest-rate-sensitive financial stocks from 17% last year to about
10% on October 31.
LETTER FROM THE FUND'S PRESIDENT
Dear Shareholders,
In the past 12 months, in an environment of generally low inflation,
many of the world's economies experienced modest growth. Nevertheless,
financial markets were jittery, reflecting investor concern about the
prospects for inflation and rising interest rates in the United States and
elsewhere.
Looking to 1995, we expect higher interest rates to limit economic
growth in the United States to a more sustainable pace. Indeed, if one
considers the historical average life of postwar expansions, the U.S.
expansion is already in its later stages. The U.S. economy may receive a
boost from increased exports, aided by recoveries in Europe and Japan.
Corporate earnings in related industries should improve as a result.
However, in the near term, as investors sort through often-conflicting
economic data, the world's stock markets are likely to remain volatile.
If you have questions about your Fund or your investments, contact a
Scudder Investor Information representative at 1-800-225-2470. Page 27
provides more information on how to contact Scudder. Thank you for choosing
Scudder Quality Growth Fund to help meet your investment needs.
In closing, we would like to take this opportunity to announce that on
October 10, 1994, we introduced Scudder Greater Europe Growth Fund,
designed to invest both in Western and Eastern Europe. For more information
about Scudder Greater Europe Growth Fund and other investment products and
services, see page 26.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Quality Growth Fund
<PAGE>
Scudder Quality Growth Fund
Performance Update as of October 31, 1994
- -----------------------------------------------------------------
Growth of a $10,000 Investment
- ------------------------------------------------------------------
Scudder Quality Growth Fund
- ----------------------------------------
Total Return
Period Growth -------------
Ended of Average
10/31/94 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $10,039 0.39% 0.39%
Life of
Fund* $13,804 38.04% 9.76%
S&P 500 Index
- --------------------------------------
Total Return
Period Growth -------------
Ended of Average
10/31/94 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $10,386 3.86% 3.86%
Life of
Fund* $14,175 41.75% 10.59%
*The Fund commenced operations on May 15, 1991.
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Scudder Quality Growth Fund
Year Amount
- --------------------
5/15/91* 10000
10/91 11375
4/92 11748
10/92 12793
4/93 12628
10/93 13751
4/94 13146
10/94 13804
S&P 500 Index
Year Amount
- --------------------
5/15/91* 10000
10/91 10796
4/92 11586
10/92 11874
4/93 12658
10/93 13648
4/94 13331
10/94 14175
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 October 31
- ----------------------------------
<TABLE>
<S> <C> <C> <C> <C>
1991* 1992 1993 1994
--------------------------------
Net Asset Value... $13.65 $15.30 $16.42 $16.17
Income Dividends.. $ -- $ .03 $ .03 $ .08
Capital Gains
Distributions..... $ -- $ .02 $ -- $ .24
Fund Total
Return (%)........ 13.75 12.47 7.49 .39
Index Total
Return (%)........ 7.88 9.95 14.91 3.86
</TABLE>
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results.
Investment return and principal value will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than when purchased.
If the Adviser had not maintained the Fund's expenses, the average annual
total return for the one year and life of Fund would have been
approximately .39% and 9.67%, respectively.
Scudder Quality Growth Fund
Portfolio Summary as of October 31, 1994
- ---------------------------------------------------------------------------
Diversification
- ---------------------------------------------------------------------------
Equity Securities 100% The Fund remains nearly fully invested
---- in companies with a history of strong
100% earnings growth, high returns on
==== equity, and relatively low debt.
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Sectors
- --------------------------------------------------------------------------
Consumer Staples 15%
Health 13% In looking for ways to profit from
Financial 10% the increasingly global economy, we
Manufacturing 10% have focused on multinational firms
Technology 10% that stand to gain the most from
Energy 9% the opening of new markets and the
Durables 9% crumbling of old barriers.
Communications 7%
Consumer Discretionary 7%
Other 10%
----
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. American Telephone & Telegraph Co.
Telecommunication services and business systems
2. Mellon Bank Corp.
Commercial banking and financial services
3. Eli Lilly Co.
Leading pharmaceutical company
4. General Electric Co.
Leading producer of electrical equipment
5. American Cyanamid Co.
Drugs, medical products and chemicals
6. PepsiCo. Inc.
Soft drinks, snack foods and food services
7. CPC International Inc.
International food processor
8. Home Depot, Inc.
Building supply/home improvement stores
9. Motorola Inc.
Manufacturer of semiconductors and communication products
10. American International Group, Inc.
Major international insurance holding company
The Fund's exposure to the healthcare industry has been incresed as
we felt the stocks represented good value in the light of the
prevailing negative sentiment.
For more complete details about the Fund's Investment Portfolio, see page 9.
A monthly Investment Portfolio Summary is available upon request.
<PAGE>
SCUDDER QUALITY GROWTH FUND
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
Rising interest rates in the United States and elsewhere have created
considerable volatility in the stock and bond markets this year.
Interest-rate-sensitive industries, such as banking and insurance, have
been particularly hard hit, as investors anticipated reduced earnings. But
despite monetary tightening, many stocks, notably those of companies with
overseas operations, have provided modestly positive returns over the past
12 months. While the longer-term outlook for equities is solid, based on
expectations of continued gains in corporate profits, the near-term outlook
remains clouded by the fear of higher inflation and the growing competition
for savings from increasingly higher-yielding fixed-income securities.
Scudder Quality Growth Fund's net asset value (NAV) ended the fiscal
year on October 31, 1994, at $16.17, down modestly from $16.42 at the end
of the previous year. The price decline was due largely to declines in the
prices of the Fund's financial stock holdings. During the fiscal year, the
Fund distributed $0.075 in income dividends and $0.235 in capital gains.
These distributions more than compensated for the decline in price, and the
Fund provided a total return of 0.39% for the 12-month period, compared
with a 3.86% return for the unmanaged Standard and Poor's 500 stock index.
During difficult periods such as these, it is important to remember that
the Fund is managed with a long-term investment horizon for individuals
seeking capital appreciation as a primary objective. Since its inception on
May 15, 1991, the Fund has provided an average annual total return of
9.76%. Page 4 contains additional performance information.
Scudder Quality Growth Fund invests primarily in financially strong
companies with a history of rising earnings and prospects for above-average
growth. While largely a domestic equity fund, a small percentage of the
portfolio's holdings, roughly 5% at present, consists of non-U.S.
companies. In all cases, we look for companies with above-average returns
on equity and below-average debt levels relative to the S&P 500 Index. Such
quantitative measures are supplemented with our assessments of a company's
management and the quality of its earnings.
A Multinational Approach
Much has been written about the increasingly integrated global
economy. We believe the globalization trend is powerful and unstoppable. In
our opinion, multinational firms stand to gain the most from the opening of
new markets and the crumbling of political and economic barriers. As
domestic growth moderates over the next 12 months, growth in Europe should
accelerate. Moreover, continued strength in the developing economies of
Latin America and the Pacific Rim should provide important outlets for
export growth, as well as low-cost manufacturing facilities for U.S.
multinationals.
A number of specific Fund holdings stand to benefit directly from such
trends: consumer companies such as Duracell, Gillette, Pepsico, and Toys
"R" Us; healthcare companies such as Warner Lambert, Johnson & Johnson, and
Schering Plough; communications companies like AT&T, Motorola, L.M.
Ericsson, and Nokia; infrastructure providers such as Fluor, Foster
Wheeler, General Electric, Emerson Electric, and ASEA; and global media
giants like Disney, Time Warner, and Viacom.
In order to compete more effectively in the new global economy, many
companies are rushing to use new technologies that enhance productivity.
This move toward greater operating efficiency has increased the demand for
many technology products produced by such Fund holdings as Intel,
Microsoft, Texas Instruments, Hewlett Packard, Molex, Compaq, and Oracle
Systems.
Increased Enthusiasm For Healthcare Companies
As the fiscal year progressed, it became apparent that the President's
healthcare reform proposal was losing popular support, making passage of
such legislation unlikely. At the same time, many healthcare companies took
action to improve their competitive positions by way of alliances,
acquisitions, and restructurings. While investor sentiment remained
negative for much of the period, we took the opportunity to increase the
Fund's exposure to the healthcare industry by investing in stocks believed
to represent good values, given their depressed prices. The Fund benefited
from the better-than-expected earnings reports of such holdings as Johnson
& Johnson, Abbott Labs, and United Healthcare, as well as from the
acquisition of American Cyanamid and the partial purchase of McKesson by
Eli Lilly.
Capital Spending Led Economic Expansion
Capital spending has been the primary engine of growth in the current
economic recovery. Manufacturing capacity is strained, and both domestic
and foreign companies are building new manufacturing facilities in order to
meet the burgeoning demand for capital equipment. The Fund has a number of
investments in this sector of the economy, including General Electric,
Emerson Electric, Minnesota Mining & Manufacturing, TRW, Caterpillar,
Dover, and Parker-Hannifin.
Economic expansion and higher interest rates led us to reduce the
Fund's exposure to interest-rate-sensitive financial stocks, which in
general performed poorly, from 17% last year to about 10% on October 31.
Holdings that were sold included Chubb, J. P. Morgan, and Northern Trust.
The Fund maintained positions in several financial service stocks, however,
where we believe significant growth opportunities exist, despite higher
rates. This list includes State Street Boston, Mellon Bank, American
International Group, and Federal National Mortgage Association (Fannie
Mae).
Looking Ahead
Our forecast calls for continued growth in real gross domestic product
at roughly a 3% rate over the next year. Corporate profit growth should
moderate but remain healthy with gains of approximately 10% expected for
1995. The relatively good news on profits may not be reflected immediately
in higher stock prices given the current concerns regarding the direction
and level of interest rates and inflation. Even so, we remain committed to
our essential strategy of investing the Fund's assets in stocks, and we
refrain from making short-term market timing decisions under most
conditions. It is our fundamental belief that active market timing is an
ill-advised and costly game.
In conclusion, we plan to maintain the strategy of investing in
companies with strong prospects for profit growth over the next several
years. We believe this approach will continue to provide competitive
returns for long-term investors seeking capital appreciation.
Sincerely,
Your Portfolio Management Team
/s/Howard F. Ward /s/Bruce F. Beaty
Howard F. Ward Bruce F. Beaty
/s/Michael K. Shields
Michael K. Shields
Scudder Quality Growth Fund: A Team Approach to Investing
Scudder Quality Growth Fund is run by a team of Scudder investment
professionals who each play an important role in the Fund's management
process. Team members work closely 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 Scudder Quality Growth Fund
investors by bringing together many disciplines and leveraging Scudder's
extensive resources.
Lead Portfolio Manager Howard F. Ward joined Scudder in 1982 and has
been responsible for Scudder Quality Growth Fund's investment strategy and
daily operation since the Fund was created in 1991. Howard, who has 15
years' experience in stock analysis and investing, specializes in the
quality growth discipline of equity investing and also serves as Lead
Portfolio Manager for Scudder Balanced Fund. Bruce F. Beaty, Portfolio
Manager, contributes expertise in technology, a role he has filled since
the Fund's inception. Bruce joined Scudder in 1991 and has 14 years of
investing experience. Michael K. Shields, Portfolio Manager, focuses on the
Fund's healthcare stocks. Mike joined the Fund and Scudder in 1992 and has
12 years of experience in the financial industry.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO as of October 31, 1994
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
100.0% COMMON STOCKS
--------------------------------------------------------------
CONSUMER DISCRETIONARY 7.0%
Department &
Chain Stores 5.4% 52,666 Home Depot, Inc. . . . . . . . . . . . 2,396,303
20,000 J.C. Penney Co., Inc. . . . . . . . . . 1,012,500
70,200 Wal-Mart Stores Inc. . . . . . . . . . . 1,649,700
25,000 Walgreen Co. . . . . . . . . . . . . . . 1,037,500
----------
6,096,003
----------
Home Furnishings 0.6% 44,000 Shaw Industries Inc. . . . . . . . . . 643,500
----------
Restaurants 0.7% 25,000 McDonald's Corp. . . . . . . . . . . . 718,750
----------
Specialty Retail 0.3% 10,000 Toys "R" Us Inc.* . . . . . . . . . . . 385,000
----------
CONSUMER STAPLES 14.5%
Consumer Electronic &
Photographic Products 1.3% 8,000 Duracell International Inc. . . . . . . 345,000
22,000 Whirlpool Corp. . . . . . . . . . . . . 1,144,000
----------
1,489,000
----------
Food & Beverage 10.2% 32,000 Albertson's Inc. . . . . . . . . . . . 960,000
50,000 CPC International Inc. . . . . . . . . 2,675,000
30,000 ConAgra Inc. . . . . . . . . . . . . . 933,750
25,700 General Mills, Inc. . . . . . . . . . . 1,439,200
10,000 Kellogg Co. . . . . . . . . . . . . . . 587,500
81,000 PepsiCo Inc. . . . . . . . . . . . . . 2,835,000
54,000 Sara Lee Corp. . . . . . . . . . . . . 1,329,750
16,000 Wm. Wrigley Jr. Company . . . . . . . . 722,000
----------
11,482,200
----------
Package Goods/Cosmetics 3.0% 12,000 Colgate-Palmolive Co. . . . . . . . . . 732,000
7,000 Gillette Co. . . . . . . . . . . . . . 520,625
34,000 Procter & Gamble Co. . . . . . . . . . 2,125,000
----------
3,377,625
----------
HEALTH 12.7%
Health Industry Services 1.1% 15,000 U.S. HealthCare, Inc. . . . . . . . . . 708,750
10,000 United Healthcare Corp. . . . . . . . . 527,500
----------
1,236,250
----------
Hospital Management 1.4% 33,000 Columbia/HCA Healthcare Corp. . . . . . 1,373,625
15,000 National Medical Enterprises . . . . . 217,500
----------
1,591,125
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER QUALITY GROWTH FUND
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pharmaceuticals 10.2% 22,400 Abbott Laboratories . . . . . . . . . . 694,400
30,000 American Cyanamid Co. . . . . . . . . . 2,962,500
15,000 Baxter International Inc. . . . . . . . 390,000
51,000 Eli Lilly Co. . . . . . . . . . . . . . 3,162,000
7,000 Johnson & Johnson . . . . . . . . . . . 382,375
27,000 Schering-Plough Corp. . . . . . . . . . 1,923,750
25,500 Warner-Lambert Co. . . . . . . . . . . 1,944,375
----------
11,459,400
----------
COMMUNICATIONS 7.1%
Cellular Telephone 0.3% 12,000 AirTouch Communications, Inc.* . . . . 358,500
----------
Telephone/
Communications 6.8% 24,000 Alltel Corp. . . . . . . . . . . . . . 621,000
75,000 American Telephone & Telegraph Co. . . 4,125,000
13,000 Hong Kong Telecommunications Ltd. (ADR). 276,250
27,000 MCI Communications Corp. . . . . . . . 621,000
61,000 Sprint Corp. . . . . . . . . . . . . . 1,990,125
----------
7,633,375
----------
FINANCIAL 10.2%
Banks 6.1% 20,575 Banc One Corp. . . . . . . . . . . . . 594,103
60,700 Mellon Bank Corp. . . . . . . . . . . . 3,376,438
25,000 National City Corp. . . . . . . . . . . 678,125
47,000 Norwest Corp. . . . . . . . . . . . . . 1,151,500
30,000 State Street Boston Corp. . . . . . . . 1,001,250
----------
6,801,416
----------
Insurance 3.7% 8,000 AMBAC Inc. . . . . . . . . . . . . . . 280,000
24,000 American International Group, Inc. . . . 2,247,000
15,000 EXEL, Ltd. . . . . . . . . . . . . . . 590,625
5,000 General Re Corp. . . . . . . . . . . . 560,000
8,000 MBIA Inc. . . . . . . . . . . . . . . . 433,000
----------
4,110,625
----------
Other Financial Companies 0.4% 6,500 Federal National Mortgage Association. . 494,000
----------
MEDIA 5.7%
Advertising 0.5% 18,000 Interpublic Group of Companies Inc. . . 594,000
----------
Broadcasting &
Entertainment 3.6% 20,000 CBS Inc. . . . . . . . . . . . . . . . 1,197,500
6,500 Capital Cities/ABC Inc. . . . . . . . . 540,313
23,000 Time Warner Inc. . . . . . . . . . . . 816,500
25,000 Turner Broadcasting System Inc. "B" . . 443,750
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
6,000 Viacom Inc. "B"* . . . . . . . . . . . 235,500
21,000 Walt Disney Co. . . . . . . . . . . . 826,875
----------
4,060,438
----------
Cable Television 1.2% 32,000 Comcast Corp. "A" . . . . . . . . . . . 524,000
37,000 Tele-Communications Inc. "A" . . . . . 837,125
----------
1,361,125
----------
Print Media 0.4% 9,000 News Corp. Ltd. (ADR) . . . . . . . . . 439,875
----------
SERVICE INDUSTRIES 3.9%
EDP Services 1.1% 2,000 Automatic Data Processing, Inc. . . . . 116,750
10,000 First Data Corp. . . . . . . . . . . . 501,250
15,000 General Motors Corp. "E" . . . . . . . 549,375
----------
1,167,375
----------
Environmental Services 0.7% 25,000 WMX Technologies Inc. . . . . . . . . 734,375
----------
Investment 1.4% 12,000 Charles Schwab Corp. . . . . . . . . . 426,000
10,000 Dean Witter, Discover & Co. . . . . . 386,250
11,000 Merrill Lynch & Co., Inc. . . . . . . 433,125
5,500 Morgan Stanley Group, Inc. . . . . . . 359,563
----------
1,604,938
----------
Miscellaneous Commercial
Services 0.4% 18,000 Sysco Corp. . . . . . . . . . . . . . 447,750
----------
Printing/Publishing 0.3% 8,000 Reuters Holdings PLC "B" (ADR) . . . . 377,000
----------
DURABLES 8.6%
Aerospace 0.3% 8,000 Boeing Co. . . . . . . . . . . . . . . 351,000
----------
Automobiles 3.4% 37,000 Chrysler Corp. . . . . . . . . . . . . 1,803,750
44,000 Ford Motor Co. . . . . . . . . . . . . 1,298,000
20,000 Magna International, Inc. "A" . . . . 710,000
----------
3,811,750
----------
Construction/Agricultural
Equipment 1.4% 15,000 Caterpillar Inc. . . . . . . . . . . . 896,250
10,000 Deere & Co. . . . . . . . . . . . . . 717,500
----------
1,613,750
----------
Telecommunications
Equipment 3.2% 18,000 DSC Communications Corp.* . . . . . . 553,500
9,000 General Instrument Corp.* . . . . . . 301,500
10,000 L.M. Ericsson Telephone Co. "B" (ADR) . 609,375
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
SCUDDER QUALITY GROWTH FUND
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
9,000 Newbridge Networks Corp.* . . . . . . 248,625
25,000 Nokia Corp. AB (ADR) . . . . . . . . . 1,878,125
----------
3,591,125
----------
Tires 0.3% 14,000 Cooper Tire & Rubber Co. . . . . . . . 344,750
----------
MANUFACTURING 10.2%
Diversified Manufacturing 6.5% 12,000 Dover Corp. . . . . . . . . . . . . . 666,000
15,000 Dresser Industries Inc. . . . . . . . 316,875
64,000 General Electric Co. . . . . . . . . . 3,128,000
35,000 Minnesota Mining & Manufacturing Co. . 1,938,125
13,000 TRW Inc. . . . . . . . . . . . . . . . 926,250
7,000 Thermo Electron Corp.* . . . . . . . . 319,375
----------
7,294,625
----------
Electrical Products 1.9% 13,000 ASEA AB (ADR) . . . . . . . . . . . . . 942,500
20,000 Emerson Electric Co. . . . . . . . . . 1,215,000
----------
2,157,500
----------
Industrial Specialty 0.5% 15,000 Sherwin-Williams Co. . . . . . . . . . 489,375
----------
Machinery/Components/
Controls 1.3% 19,000 Federal-Mogul Corp. . . . . . . . . . . 432,250
22,000 Parker-Hannifin Group . . . . . . . . . 1,028,500
----------
1,460,750
----------
TECHNOLOGY 9.6%
Computer Software 1.5% 15,100 Microsoft Corp.* . . . . . . . . . . . 951,300
10,000 Oracle Systems Corp.* . . . . . . . . . 460,000
5,500 Sybase Inc.* . . . . . . . . . . . . . . 288,063
----------
1,699,363
----------
Diverse Electronic Products 3.8% 13,000 Applied Materials, Inc.* . . . . . . . 676,000
37,000 General Motors Corp. "H" . . . . . . . . 1,332,000
39,000 Motorola Inc. . . . . . . . . . . . . 2,296,125
----------
4,304,125
----------
Electronic Components/
Distributors 0.4% 11,000 Molex Inc. "A" . . . . . . . . . . . . 451,000
----------
Electronic Data Processing 1.4% 20,000 Compaq Computers Corp.* . . . . . . . . 802,500
8,000 Hewlett-Packard Co. . . . . . . . . . 782,000
----------
1,584,500
----------
Office/Plant Automation 0.4% 14,000 Cisco Systems, Inc.* . . . . . . . . . 421,750
----------
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Semiconductors 2.1% 20,000 Intel Corp. . . . . . . . . . . . . . . 1,242,500
14,000 Texas Instruments Inc. . . . . . . . . 1,048,250
-----------
2,290,750
-----------
ENERGY 8.8%
Engineering 1.1% 13,000 Fluor Corp. . . . . . . . . . . . . . . 643,500
17,000 Foster Wheeler Corp. . . . . . . . . . 612,000
-----------
1,255,500
-----------
Oil Companies 5.7% 37,000 Chevron Corp. . . . . . . . . . . . . . 1,665,000
27,000 Exxon Corp. . . . . . . . . . . . . . . 1,697,625
12,000 Mobil Corp. . . . . . . . . . . . . . . 1,032,000
13,000 Royal Dutch Petroleum Co.
(New York shares) . . . . . . . . . . 1,514,500
17,000 Unocal Corp. . . . . . . . . . . . . . 497,250
-----------
6,406,375
-----------
Oil/Gas Transmission 1.7% 56,500 Enron Corp. . . . . . . . . . . . . . . 1,829,188
-----------
Oilfield Services/Equipment 0.3% 6,000 Schlumberger Ltd. . . . . . . . . . . . 352,500
-----------
METALS AND MINERALS 1.1%
Steel & Metals 24,000 Allegheny Ludlum Corp. . . . . . . . . 477,000
12,000 Nucor Corp. . . . . . . . . . . . . . . 741,000
-----------
1,218,000
-----------
CONSTRUCTION 0.6%
Forest Products 22,000 Louisiana-Pacific Corp. . . . . . . . 673,748
-----------
TOTAL COMMON STOCKS (Cost $106,216,360). 112,265,069
-----------
- ----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $106,216,360) (a) . . . . . . . 112,265,069
===========
* Nonincome producing security.
(a) The cost for federal income tax purposes was $106,687,997. At October 31, 1994, net unrealized
appreciation for all securities based on tax cost was $5,577,072. This consisted of aggregate
gross unrealized appreciation for all securities in which there was an excess of market value over
tax cost of $8,703,194 and aggregate gross unrealized depreciation for all securities in which
there was an excess of tax cost over market value of $3,126,122.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1994
- ------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $106,216,360)
(Note A) . . . . . . . . . . . . . . . . . . . . . $112,265,069
Cash . . . . . . . . . . . . . . . . . . . . . . . . 683,909
Receivables:
Investments sold . . . . . . . . . . . . . . . . . 7,450,098
Dividends and interest . . . . . . . . . . . . . . 201,375
Fund shares sold . . . . . . . . . . . . . . . . . 104,424
Deferred organization expenses (Note A) . . . . . . . 16,120
------------
Total assets . . . . . . . . . . . . . . . . . 120,720,995
LIABILITIES
Payables:
Investments purchased . . . . . . . . . . . . . . $7,206,304
Fund shares redeemed . . . . . . . . . . . . . . . 93,668
Accrued management fee (Note C) . . . . . . . . . 71,895
Other accrued expenses (Note C) . . . . . . . . . 85,129
---------
Total liabilities . . . . . . . . . . . . . . . 7,456,996
------------
Net assets, at market value . . . . . . . . . . . . . $113,263,999
============
NET ASSETS
Net assets consist of:
Undistributed net investment income (Note D) . . . $ 919,547
Unrealized appreciation on investments . . . . . . 6,048,709
Accumulated net realized gain (Note D) . . . . . . 7,485,388
Shares of beneficial interest . . . . . . . . . . 70,061
Additional paid-in capital . . . . . . . . . . . . 98,740,294
------------
Net assets, at market value . . . . . . . . . . . . . $113,263,999
============
NET ASSET VALUE, offering and redemption price per
share ($113,263,999 / 7,006,138 outstanding
shares of beneficial interest, $.01 par value,
unlimited number of shares authorized) . . . . . . $16.17
======
</TABLE>
The accompanying notes are an integral part of the financial statementst.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- ----------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1994
- ----------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends . . . . . . . . . . . . . . . . . . . . . . . . $ 2,443,660
Interest . . . . . . . . . . . . . . . . . . . . . . . . 115,667
-----------
2,559,327
Expenses:
Management fee (Note C) . . . . . . . . . . . . . . . . . $802,235
Services to shareholders (Note C) . . . . . . . . . . . . 344,650
Trustees' fees (Note C) . . . . . . . . . . . . . . . . . 37,257
Custodian fees . . . . . . . . . . . . . . . . . . . . . 107,976
Reports to shareholders . . . . . . . . . . . . . . . . . 65,715
Auditing . . . . . . . . . . . . . . . . . . . . . . . . 32,455
Legal . . . . . . . . . . . . . . . . . . . . . . . . . . 21,683
Amortization of organization expense (Note A) . . . . . . 9,946
State registration . . . . . . . . . . . . . . . . . . . 15,149
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 7,602 1,444,668
-------- ----------
Net investment income . . . . . . . . . . . . . . . . . . 1,114,659
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain from investments . . . . . . . . . . . 7,612,915
Net unrealized depreciation on investments
during the period . . . . . . . . . . . . . . . . . . (8,282,506)
----------
Net loss on investments . . . . . . . . . . . . . . . . . (669,591)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . $ 445,068
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER QUALITY GROWTH FUND
- -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
YEARS ENDED OCTOBER 31,
-----------------------
INCREASE (DECREASE) IN NET ASSETS 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income . . . . . . . . . . . . . $ 1,114,659 $ 492,864
Net realized gain on investments . . . . . . . 7,612,915 1,909,712
Net unrealized appreciation (depreciation)
on investments during the period . . . . . . (8,282,506) 5,254,400
------------ ------------
Net increase in net assets
resulting from operations . . . . . . . . . 445,068 7,656,976
------------ ------------
Distributions to shareholders from:
Net investment income ($.08 and $.03
per share, respectively) . . . . . . . . . . (573,627) (199,553)
------------ ------------
Net realized gains from investment
transactions ($.24 per share) . . . . . . . (1,793,533) --
------------ ------------
Fund share transactions:
Proceeds from shares sold . . . . . . . . . . . 30,065,461 87,979,349
Net asset value of shares issued to
shareholders in reinvestment of
distributions . . . . . . . . . . . . . . . 2,309,792 190,215
Cost of shares redeemed . . . . . . . . . . . . (43,432,867) (70,355,713)
------------ ------------
Net increase (decrease) in net assets from
Fund share transactions . . . . . . . . . . (11,057,614) 17,813,851
------------ ------------
INCREASE (DECREASE) IN NET ASSETS . . . . . . . (12,979,706) 25,271,274
Net assets at beginning of period . . . . . . . 126,243,705 100,972,431
------------ ------------
NET ASSETS AT END OF PERIOD (including
undistributed net investment income
of $919,547 and $415,551, respectively) . . $113,263,999 $126,243,705
============ ============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period . . . 7,689,455 6,598,066
------------ ------------
Shares sold . . . . . . . . . . . . . . . . . . 1,895,781 5,586,764
Shares issued to shareholders in reinvestment
of distributions . . . . . . . . . . . . . . 144,448 11,742
Shares redeemed . . . . . . . . . . . . . . . . (2,723,546) (4,507,117)
------------ ------------
Net increase (decrease) in Fund shares . . . . (683,317) 1,091,389
------------ ------------
Shares outstanding at end of period . . . . . . 7,006,138 7,689,455
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<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>
For the Period
May 15, 1991
(commencement
Years Ended October 31, of operations)
----------------------------- to October 31,
1994 1993 1992 1991
----------------------------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period . . . . . . . . . . . $16.42 $15.30 $13.65 $12.00
Income from investment operations:
Net investment income (a) . . . . . . . . . . . . . . . . .16 .06 .02 .03
Net realized and unrealized gain (loss) on investments . (.09) 1.09 1.68 1.62
------ ------ ------ ------
Total from investment operations . . . . . . . . . . . . . .07 1.15 1.70 1.65
------ ------ ------ ------
Less distributions from:
Net investment income . . . . . . . . . . . . . . . . . . (.08) (.03) (.03) --
Net realized gains on investment transactions . . . . . (.24) -- (.02) --
------ ------ ------ ------
Total distributions . . . . . . . . . . . . . . . . . . . . (.32) (.03) (.05) --
------ ------ ------ ------
Net asset value, end of period . . . . . . . . . . . . . . $16.17 $16.42 $15.30 $13.65
====== ====== ====== ======
TOTAL RETURN (%) . . . . . . . . . . . . . . . . . . . . . .39 7.49 12.47 13.75**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) . . . . . . . . . . 113 126 101 30
Ratio of operating expenses net, to average daily
net assets (%) (a) . . . . . . . . . . . . . . . . . . . 1.25 1.20 1.25 1.25*
Ratio of net investment income to average daily net
assets (%) . . . . . . . . . . . . . . . . . . . . . . . .96 .39 .24 .83*
Portfolio turnover rate (%) . . . . . . . . . . . . . . . 119.7 111.4 27.4 11.5*
(a) Reflects a per share amount of expenses, exclusive of
management fees, reimbursed by the Adviser of . . . . $ -- $ -- $ -- $ .01
Reflects a per share amount of management fee not
imposed by the Adviser of . . . . . . . . . . . . . $ -- $ -- $ .01 $ .02
Operating expense ratio including expenses
reimbursed, management fee and other expenses
not imposed (%) . . . . . . . . . . . . . . . . . . -- -- 1.40 2.67*
* Annualized
** Not annualized
</TABLE>
<PAGE>
SCUDDER QUALITY GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Scudder Quality Growth 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. Short-term
investments having a maturity of sixty days or less are valued at amortized
cost.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement and the underlying collateral, is equal to at least 100.5% of the
resale price.
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, the Fund paid no federal income taxes and no federal income tax
provision was required.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DISTRIBUTION OF INCOME AND GAINS. Distributions of net investment income are
made annually. During any particular year net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders annually. An additional distribution may be made to the extent
necessary to avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations which may differ from generally accepted accounting principles. The
differences primarily relate to investments in certain securities sold at a
loss. As a result, net investment income (loss) and net realized gain (loss) on
investment transactions for a reporting period may differ significantly from
distributions during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
ORGANIZATION COSTS. Costs incurred by the Fund in connection with its
organization and initial registration of shares have been deferred and are
being amortized on a straight-line basis over a five-year period.
OTHER. Investment security transactions are accounted for on a trade date
basis. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis.
B. PURCHASES AND SALES OF SECURITIES
- --------------------------------------------------------------------------------
For the year ended October 31, 1994, purchases and sales of investment
securities (excluding short-term investments) aggregated $135,183,430 and
$145,753,999, respectively.
C. RELATED PARTIES
- --------------------------------------------------------------------------------
Under the Fund's Investment Management Agreement (the "Agreement") with
Scudder, Stevens & Clark, Inc. (the "Adviser"), the Fund pays the Adviser a fee
equal to an annual rate of 0.70% of the Fund's average daily net assets,
computed and accrued daily and payable monthly. As manager of the assets of the
Fund, the Adviser
<PAGE>
SCUDDER QUALITY GROWTH FUND
- --------------------------------------------------------------------------------
directs the investments of the Fund in accordance with its investment
objectives, policies, and restrictions. The Adviser determines the securities,
instruments, and other contracts relating to investments to be purchased, sold
or entered into by the Fund. In addition to portfolio management services, the
Adviser provides certain administrative services in accordance with the
Agreement. The Agreement provides that if the Fund's expenses, exclusive of
taxes, interest, and extraordinary expenses, exceed specified limits, such
excess, up to the amount of the management fee, will be paid by the Adviser.
In addition, the Adviser has agreed not to impose all or a portion of its
management fee until February 28, 1995 in order to maintain the annualized
expenses of the Fund at not more than 1.25% of average daily net assets. For
the year ended October 31, 1994, the Adviser did not impose a portion of its
fee amounting to $3,897, and the portion imposed amounted to $802,235.
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 October 31, 1994, the amount charged by SSC aggregated
$278,448, of which $22,562 is unpaid at October 31, 1994.
The Fund pays each of its Trustees not affiliated with the Adviser $4,000
annually plus specified amounts for attended board and committee meetings. For
the year ended October 31, 1994, Trustees fees aggregated $37,257.
D. RECLASSIFICATION OF CAPITAL ACCOUNTS
- --------------------------------------------------------------------------------
As required, effective November 1, 1993, the Fund has adopted the provisions of
Statement of Position 93-2 "Determination, Disclosure and Financial Statement
Presentation of Income, Capital Gain and Return of Capital Distributions by
Investment Companies" (SOP). In implementing the SOP, the Fund has reclassified
$35,023 to decrease undistributed net investment income and $35,023 to increase
accumulated net realized gains. These reclassifications, which have no impact
on the net asset value of the Fund, are primarily attributable to certain
differences in the computation of distributable income and capital gains under
federal income tax rules and regulations versus generally accepted accounting
principles. The statement of changes in net assets and financial highlights for
prior periods have not been restated to reflect this change in presentation.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE TRUSTEES OF SCUDDER INVESTMENT TRUST AND THE SHAREHOLDERS OF
SCUDDER QUALITY GROWTH FUND:
We have audited the accompanying statement of assets and liabilities of Scudder
Quality Growth Fund including the investment portfolio, as of October 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 three years in the period then
ended, and for the period May 15, 1991 (commencement of operations) to October
31, 1991. 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
October 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 Quality Growth Fund as of October 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 three years in the period then ended, and for the period May 15, 1991
(commencement of operations) to October 31, 1991 in conformity with generally
accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
December 9, 1994
<PAGE>
SCUDDER QUALITY GROWTH FUND
TAX INFORMATION
- --------------------------------------------------------------------------------
The Fund will mail shareholders IRS Form 1099-Div in late January, summarizing
all taxable distributions paid for 1994.
Pursuant to section 852 of the Internal Revenue Code, the Fund designates
$6,688,862 as capital gain dividends for the year ended October 31, 1994.
Pursuant to section 854 of the Internal Revenue Code, the Fund designates
$2,404,512 as dividends eligible for the dividends received deduction for
corporations for the year ended October 31, 1994.
<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, 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.
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
Howard F. Ward*
Vice President
Coleen Downs Dinneen*
Assistant Secretary
* Scudder, Stevens & Clark, Inc.
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.
HOW TO CONTACT SCUDDER
Account Service and Information
For existing account service and transactions
SCUDDER SERVICE CORPORATION
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 INFORMATION
1-800-225-2470
For establishing Keogh, 401(k) and 403(b) plans
SCUDDER GROUP RETIREMENT 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 Information 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.
Celebrating 75 Years of Serving Investors
This year marks the 75th anniversary of the founding of Scudder,
Stevens & Clark, Inc., investment adviser for the Scudder Funds.
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven
Clark, Scudder 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 years ended
December 31, 1993
(Incorporated by reference to Post-Effective Amendment
No. 71 to the Registration Statement.)
For Scudder Quality Growth Fund:
Financial Highlights for the period May 15, 1991
(commencement of operations) to October 31, 1991 and
for the fiscal years ended October 31, 1992, October
31, 1993 and October 31, 1994
Included in the Part B:
For Scudder Growth and Income Fund:
Investment Portfolio as of December 31, 1993
Statement of Assets and Liabilities as of December 31,
1993
Statement of Operations for the year ended December 31,
1993
Statements of Changes in Net Assets for the fiscal
years ended December 31, 1992 and 1993
Financial Highlights for the ten years ended
December 31, 1993
Notes to Financial Statements
Report of Independent Accountants
(Incorporated by reference to Post-Effective Amendment
No. 71 to the Registration Statement.)
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 fiscal
years ended October 31, 1993 and October 31, 1994
Financial Highlights for the period May 15, 1991
(commencement of operations) to October 31, 1991 and
for the fiscal years ended October 31, 1992, October
31, 1993 and October 31,1994
Notes to Financial Statements
Report of Independent Accountants
Statements, schedules and historical information other than
those listed above have been omitted since they are either
not applicable or are not required.
b. Exhibits:
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").
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.
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) Fee schedule for Exhibit 8 (a)(5) is filed
herein.
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.
(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 filed herein.
(d) Account Application Form is filed herein.
(e) 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. Consent of Counsel is filed herein.
11. Consent of Independent Accountants is filed
herein.
12. Inapplicable.
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.
Item 25. Persons Controlled by or under Common Control with Registrant.
None
Item 26. Number of Holders of Securities (as of December 30, 1994).
(1) (2)
Number of Record
Title of Class Shareholders
-------------- ------------
Shares of beneficial interest
($0.01 par value):
Scudder Growth and Income Fund 133,116
Scudder Quality Growth Fund 100,409
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.
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:
(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)**
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)**
Director, 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
Vice President, Scudder, Stevens & Clark Japan, Inc.
Vice President, Scudder, Stevens & Clark of Canada
Ltd. (Canadian investment adviser) Toronto,
Ontario, Canada
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, Scudder Treasurers Trust (until
10/30/90) (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 and 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)**
Richard A. Holt Director, Scudder, Stevens & Clark, Inc. (investment
adviser)++
Vice President, Scudder Variable Life Investment Fund
(investment company)*
Dudley H. Ladd Director, Scudder, Stevens & Clark, Inc. (investment
adviser)**
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, NKK - Scudder Capital Asset
Management Corporation (investment adviser)**
Chairman & Director, Scudder, Stevens & Clark Japan,
Inc.
President, The Japan Fund, Inc. (investment
company)**
Trustee, Scudder, Stevens & Clark Supplemental
Retirement Income Plan
Trustee, Scudder, Stevens & Clark Profit Sharing Plan
**
Chairman & Director, Scudder, Stevens & Clark
(Luxembourg), S.A., Luxembourg#
Director, Berkshire Farm & Services for Youth
Board of Governors, Investment Counsel Association of
America
Chairman, Canadian High Income Fund (investment
company) #
Chairman, Hot Growth Companies Fund (investment
company) #
John T. Packard Director, Scudder, Stevens & Clark, Inc. (investment
adviser)**
President, Montgomery Street Income Securities, Inc.
(investment company) oo
Director, Scudder Realty Advisors, Inc. (realty
investment adviser) x
Director, PSI Star Corporation (manufacturer of
chemical process for etching circuit boards)
Juris Padegs Secretary & Director, Scudder, Stevens & Clark, Inc.
(investment adviser)**
Chairman of the Board & Director, The Brazil Fund,
Inc. (investment company)**
Trustee, Scudder Development Fund (investment
company)*
Trustee & Vice President, Scudder Equity Trust
(investment company)*
Chairman of the Board & Director, The First Iberian
Fund, Inc. (investment company)**
Trustee (Vice President & Assistant Secretary until
3/91), Scudder Funds Trust (investment company)*
Vice President & Assistant Secretary, Scudder Global
Fund, Inc. (investment company)**
Trustee, Scudder Investment Trust (investment
company)*
Vice President, Assistant Secretary & Director,
Scudder International Fund, Inc. (investment
company)**
Vice President, The Latin America Dollar Income Fund,
Inc. (investment company)**
Trustee, Scudder Municipal Trust (investment
company)*
Vice President & Assistant Secretary, Scudder Mutual
Funds, Inc. (investment company)**
Vice President & Director, Scudder New Europe Fund,
Inc. (investment company)**
Trustee, Scudder State Tax Free Trust (investment
company)*
Vice President, Assistant Secretary & Director,
Scudder New Asia Fund, Inc. (investment company)**
Vice President & Trustee, Scudder Tax Free Money Fund
(investment company)*
Trustee, Scudder Tax Free Trust (investment company)*
Chairman of the Board and Director (Vice President
until 4/91), 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, 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, NKK-Scudder Capital Asset
Management (investment adviser)**
Director and Chairman of the Board, Scudder, Stevens
& Clark Japan, Inc.
President & Director, Scudder, Stevens & Clark
Corporation
Supervisory Director, Sovereign High Yield Investment
Company N.V. (investment company) +
Director, President Investment Trust Corporation
(Joint Venture)***
Daniel Pierce Chairman of the Board and 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)*
President & Trustee, Scudder Treasurers Trust (until
10/90) (investment company)*
Vice President & Trustee, Scudder Variable Life
Investment Fund (investment company)*
Director, The Brazil Fund, Inc. (investment
company)**
Vice President & Assistant Treasurer, Montgomery
Street Income Securities, Inc. (investment
company) oo
Vice President and Director, Scudder Global Fund,
Inc. (investment company)**
Vice President, Director & Assistant Treasurer,
Scudder Investor Services, Inc. (broker/dealer)*
Vice President & Director, Scudder Service
Corporation (in-house transfer agent)*
Chairman of the Board & President, Scudder, Stevens &
Clark of Canada, Ltd. (Canadian investment
adviser), Toronto, Ontario, Canada
Chairman of the Board, Assistant Treasurer &
Director, Scudder, Stevens & Clark, Inc.
(investment adviser)**
Director, Scudder, Stevens & Clark, Ltd.
Trustee, Brigham and Women's Hospital (hospital)
Boston, MA
Director, Fiduciary Trust Company (banking & trust
company) Boston, MA
Director, Fiduciary Company Incorporated (banking &
trust company) 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 of the Board & Director, Scudder Global
Fund, Inc. (investment company)**
Chairman of the Board & Director, Scudder
International Fund, Inc. (investment company)**
Chairman of the Board & Director, Scudder New Asia
Fund, Inc. (investment company)**
Chairman of the Board & Director, The Argentina Fund,
Inc. (investment company)**
Director, Scudder Realty Advisors, Inc. (realty
investment adviser) x
Supervisory Director, Scudder Mortgage Fund
(investment company) +
Chairman of the Board & Director, The Latin America
Dollar Income Fund, Inc. (investment company)**
Director, Scudder, Stevens & Clark Japan, Inc.
Chairman of the Board & Director, Scudder World
Income Opportunities Fund, Inc. (investment
company)**
* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
++ 111 East Wacker Drive, Chicago, IL
o Rodney Square North, Wilmington, DE
oo 101 California Street, San Francisco, CA
# 11, rue Aldringen, L-1118 Luxembourg, Grand-Duchy of Luxembourg
+ John B. Gorsiraweg 6, Willemstad Curacao, Netherland Antilles
xx DeRuyterkade 62, P.O. Box 812, Willemstad Curacao, Netherland
Antilles
## 2 Boulevard Royal, Luxembourg
*** B1 2F3F 248 Section 3, Nan King East Road, Taipei, Taiwan
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)
Position and Offices Positions and
Name and Principal with Scudder Investor Offices with
Business Address Services, Inc. Registrant
------------------ --------------------- -------------
Charles S. Boit Assistant Treasurer None
Two International Place
Boston, MA 02110
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 None
345 Park Avenue and
New York, NY 10154 Director
Thomas W. Joseph Vice President, Vice President
Two International Place Director,
Boston, MA 02110 Treasurer and Assistant
Clerk
Dudley H. Ladd Senior Vice President Trustee
Two International Place and
Boston, MA 02110 Director
David S. Lee President, Assistant Vice President
Two International Place Treasurer and Director
Boston, MA 02110
Name and Principal Position and Offices Positions and
Business Address with Offices with Registrant
Scudder Investor
Services, Inc.
Douglas M. Loudon Senior Vice President Vice President
345 Park Avenue
New York, NY 10154
Thomas F. McDonough Clerk Vice President,
Two International Place Secretary & Assistant
Boston, MA 02110 Treasurer
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 Trustee
345 Park Avenue Director
New York, NY 10154
Daniel Pierce Vice President, President & Trustee
Two International Place Director
Boston, MA 02110 and Assistant Treasurer
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
Ronald H. Ransch 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)
Name of Net Compensation on
Principal Underwriting Redemptions and Brokerage Other
Underwriter Discounts and Repurchases Commissions Compensation
----------- Commissions ----------- ------------ ------------
-----------
Scudder None None None None
Investor
Services,
Inc.
Item 30. Location of Accounts and Records.
Certain accounts, books and other documents required to be
maintained by Section 31(a) of the 1940 Act and the Rules
promulgated thereunder are maintained by Scudder, Stevens &
Clark, 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.
<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 21st day of February,
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 February 21, 1995
Executive Officer) and
Trustee
/s/Henry P. Becton, Jr.
Henry P. Becton, Jr.* Trustee February 21, 1995
/s/Dudley H. Ladd
Dudley H. Ladd* Trustee February 21, 1995
/s/George M. Lovejoy, Jr.
George M. Lovejoy, Jr.* Trustee February 21, 1995
/s/Wesley W. Marple, Jr.
Wesley W. Marple, Jr.* Trustee February 21, 1995
/s/Juris Padegs
Juris Padegs* Trustee February 21, 1995
/s/Jean C. Tempel
Jean C. Tempel* Trustee February 21, 1995
/s/Pamela A. McGrath
Pamela A. McGrath Treasurer (Principal February 21, 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 herein.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Boston and the
Commonwealth of Massachusetts on the 30th day of January, 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. By so
signing, the undersigned in her capacity as a director or officer, or both,
as the case may be of the Registrant, does hereby appoint David S. Lee,
Thomas F. McDonough and Sheldon A. Jones and each of them, severally, or if
more than one acts, a majority of them, her true and lawful attorney and
agent to execute in her name, place and stead (in such capacity) any and
all amendments to the Registration Statement and any post-effective
amendments thereto and all instruments necessary or desirable in connection
therewith, to attest the seal of the Registrant thereon and to file the
same with the Securities and Exchange Commission. Each of said attorneys
and agents shall have power to act with or without the other and have full
power and authority to do and perform in the name and on behalf of the
undersigned, in any and all capacities, every act whatsoever necessary or
advisable to be done in the premises as fully and to all intents and
purposes as the undersigned might or could do in person, hereby ratifying
and approving the act of said attorneys and agents and each of them.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/Jean C. Tempel
Jean C. Tempel Trustee January 30, 1995
<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. 72
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 24
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
SCUDDER INVESTMENT TRUST
<PAGE>
SCUDDER INVESTMENT TRUST
EXHIBIT INDEX
Exhibit 8(d)
Exhibit 9(c)
Exhibit 9(d)
Exhibit 10
Exhibit 11
EXHIBIT 8 (d )
STATE STREET BANK AND TRUST COMPANY
CUSTODIAN FEE SCHEDULE
SCUDDER COMPLEX OF FUNDS
(As listed in Schedule A)
I. ADMINISTRATION
CUSTODY SERVICE
Maintain custody of fund assets. Settle portfolio purchases and sales.
Report buy and sell fails. Determine and collect portfolio income. Make
cash disbursements and report cash transactions in local and base currency.
Withhold foreign taxes. File foreign tax reclaims. Monitor corporate
actions. Report portfolio positions.
A. DOMESTIC ASSETS
First $10 Billion .60 Basis Points
Second $10 Billion .55 Basis Points
Third $10 Billion .50 Basis Points
Fourth $10 Billion .40 Basis Points
Over $40 Billion .30 Basis Points
A minimum charge of $6,000 annually will be applied to new funds which do
not reach $100mm within one year from inception. This minimum charge would
begin in the 13th month.
B. GLOBAL ASSETS
<TABLE>
<CAPTION>
Country Grouping
Group A Group B Group C Group D Group E Group F Group G
- ------- ------- ------- ------- ------- ------- -------
<C> <C> <C> <C> <C> <C> <C>
Euroclear Austria Australia Denmark Portugal Indonesia Argentina
Japan Canada Belgium Finland Spain Malaysia Bangladesh
Germany Hong Kong France Philippines Brazil
Netherlands Ireland South Korea Chile
New Zealand Italy Sri Lanka China
Singapore Luxembourg Sweden Columbia
Switzerland Mexico Taiwan Cypress
Norway Greece
Thailand Hungary
U.K. India
Israel
Pakistan
Peru
Turkey
Uruguay
Venezuela
</TABLE>
Holding Charges in Basis Points (Annual Fee)
Group A Group B Group C Group D Group E Group F Group G
- ------- ------- ------- ------- ------- ------- -------
3.5 5.0 6.0 8.0 20.0 25.0 40.0
II. PORTFOLIO TRADES - FOR EACH LINE ITEM PROCESSED
State Street Bank Repos $ 7.00
DTC or Fed Book Entry $l2.00
New York Physical Settlements $15.00
PTC Purchase, Sale Deposit or Withdrawal $16.00
Global Trades
Group A & B Group C Group D Group E & F Group G
----------- ------- ------- ------------ -------
$25 $40 $50 $70 $150
III. OPTIONS
Option charge for each option written or $25.00
closing contract, per issue, per broker
Option expiration charge, per issue, per $15.00
broker
Option exercised charge, per issue, per $15.00
broker
IV. SPECIAL SERVICES
Fees for activities of a non-recurring nature such as fund consolidations
or reorganizations, extraordinary security shipments and the preparation of
special reports will be subject to negotiation. Fees for tax
accounting/recordkeeping for options, financial futures, and other special
items will be negotiated separately.
V. EARNINGS CREDIT
A balance credit equal to 75% of the 90 day CD rate in effect the last
business day of each month will be applied to the Custodian Demand Deposit
Account balance of each fund, net of check redemption service overdrafts,
on a pro-rated basis against the fund's custodian fee, excluding
out-of-pocket expenses. The balance credit will be cumulative and carried
forward each month. Any excess credit remaining at year-end (December 31)
will not be carried forward.
VI. OUT-OF-POCKET EXPENSES
A billing for the recovery of applicable out-of-pocket expenses will be
made as of the end of each month. Out-of-pocket expenses include, but are
not limited to the following:
Telephone Transfer Fees
Wire Charges ($5.00 per wire in and $5.25 Sub-custodian Charges
out)
Postage and Insurance Price Waterhouse Audit Letter
Courier Service Federal Reserve Fee for Return
Check items over $2,500--$4.25
each
Duplicating GNMA Transfer -- $15.00 each
Legal Fees Stamp Duties
Supplies Related to Fund Records Registration Fees
Rush Transfer--$8.00 each
Scudder Complex of Funds STATE STREET BANK & TRUST COMPANY
(as listed in Schedule A)
By /s/Pamela A. McGrath By: /s/Michael L. Williams
Title: Treasurer and Vice President Title: Vice President
Date: August 1, 1994 Date: July 27, 1994
Scudder Complex of Funds
Schedule A
Estimated
Fund Effective Date
---- --------------
Scudder California Tax Free 8/1/94
Scudder Cash Investment Trust 8/1/94
Scudder U.S. Treasury Money 8/1/94
Scudder Limited Term Tax Free 8/1/94
Scudder Mass Limited Term Tax Free 8/1/94
SFI Managed Cash 8/1/94
SFI Managed Federal Securities 8/1/94
SFI Managed Government Securities 8/1/94
SIFI Cash 8/1/94
SIFI Federal 8/1/94
SIFI Government 8/1/94
Scudder Variable Life Balanced 8/1/94
Scudder Variable Life Growth & Income 8/1/94
Scudder Variable Life Capital Growth 8/1/94
Scudder Variable Life International 8/1/94
Scudder Variable Life Bond 8/1/94
Scudder Variable Life Money Market 8/1/94
SFI Managed Tax Free 8/15/94
SIFI Tax Free 8/15/94
Scudder California Tax Free Money 9/15/94
Scudder Growth & Income 9/15/94
SFI Managed Intermediate Government 9/15/94
Scudder Tax Free Money Fund 9/15/94
Scudder New York Tax Free Money 9/15/94
Scudder Ohio Tax Free 10/1/94
Scudder Pennsylvania Tax Free 10/1/94
Scudder GNMA 10/1/94
Scudder Massachusetts Tax Free 10/1/94
Scudder New York Tax Free 10/1/94
Scudder Capital Growth 10/1/94
Scudder Value 10/1/94
Scudder Quality Growth 10/1/94
Scudder Medium Term Tax Free 10/1/94
Scudder Zero Coupon 2000 10/1/94
Scudder High Yield Tax Free 10/15/94
Scudder Managed Municipal Bond 10/15/94
Scudder Balanced 11/1/94
Scudder Income 11/1/94
Scudder Global Fund 1/1/95
Scudder Gold 1/1/95
Short Term Bond 1/1/95
AARP Balanced Stock & Bond 3/1/95
AARP Capital Growth 3/1/95
AARP GNMA 3/1/95
AARP Growth & Income 3/1/95
AARP High Quality Bond 3/1/95
AARP High Quality Money 3/1/95
AARP HQ Tax Free Money 3/1/95
AARP Ins TF General Bond 3/1/95
First Iberian 4/1/95
EXHIBIT 9(c)
FUND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made on the 1st day of November, 1994 between Scudder
Investment Trust (the "Fund"), on behalf of Scudder Quality Growth 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.
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.
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.
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
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 Quality Growth 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.
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 Quality Growth Fund
By: /s/Daniel Pierce
President
[SEAL] SCUDDER FUND ACCOUNTING CORPORATION
By: /s/Pamela A. McGrath
Vice President
The Scudder Funds
Account Application
Mail this application to:
The Scudder Funds
P.O. Box 2291
Boston, MA 02107-2291
STEP 1 SELECT YOUR SCUDDER FUND
Invest in any Scudder Fund with an initial investment of $1,000 or
more per fund. Be sure to read the prospectus before you invest. You
may request an additional prospectus or an IRA application by calling
1-800-225-2470.
Name of Fund (See below for complete fund name.)
____________________________________________
____________________________________________
____________________________________________
____________________________________________
Investment Amount
$__________________________
__________________________
__________________________
Total $___________________
___ By check (Payable to "The Scudder Funds")
or
___ By wire. Call 1-800-225-5163 for instructions.
___ Reinvest dividends
or
___ Mail dividends
or
___ Electronically transfer dividends to my bank, which is an
Automated Clearing House (ACH) member.
<TABLE>
<CAPTION>
FUND NAMES (Please check the box for the funds you selected above.)
Funds Funds Funds
- ----- ----- -----
<C> <C> <C>
Money Market Funds ___ Managed Municipal Bonds Growth Funds
___ Cash Investment Trust ___ Medium Term Tax Free Fund ___ Capital Growth Fund
___ U.S. Treasury Money Fund ___ Tax Free Money Fund ___ Development Fund
Income Funds ___ California Tax Free Fund ___ Global Fund
___ Emerging Markets Income Fund ___ California Tax Free Money Fund ___ Global Small Company Fund
___ GNMA Fund ___ Mass. Limited Term Tax Free Fund ___ Gold Fund
___ Income Fund ___ Massachusetts Tax Free Fund ___ International Fund
___ International Bond Fund ___ New York Tax Free Fund ___ Latin America Fund
___ Short Term Bond Fund ___ New York Tax Free Money Fund ___ Pacific Opportunities Fund
___ Short Term Global Income Fund ___ Ohio Tax Free Fund ___ Quality Growth Fund
___ Zero Coupon 2000 Fund ___ Pennsylvania Tax Free Fund ___ The Japan Fund
Tax Free Funds Growth & Income Funds ___ Value Fund
___ High Yield Tax Free Fund ___ Balanced Fund
___ Limited Term Tax Free Fund ___ Growth and Income Fund
</TABLE>
For Scudder use only.
This portion is used to expedite the processing of your application.
STEP 2 REGISTER YOUR ACCOUNT (Choose one)
___ Individual Account
Name
____________________________________________
Social Security Number-Required
____________________________________________
___ Joint Account
Joint ownership means joint tenants with rights of
survivorship, and not tenants in common, unless otherwise
specified.
Name
____________________________________________
____________________________________________
Social Security Number-Required
____________________________________________
___ Custodial Account (Gift to Minors)
One application is required for each minor.
Custodian's Name (only one)
____________________________________________
Minor's Name
____________________________________________
Minor's Social Security Number - Required
____________________________________________
Minor's State of Residence
____________________________________________
___ Trust, Corporation, Business, or Other
We require a corporate resolution form for corporations
requesting telephone redemption. Call 1-800-225-5163.
Trust/Corporation Name
____________________________________________
____________________________________________
Trustee's Name
____________________________________________
____________________________________________
Trust Date
____________________________________________
Tax ID Number - Required
____________________________________________
STEP 3 PROVIDE YOUR ADDRESS AND OTHER INFORMATION
Address
____________________________________________
____________________________________________
____________________________________________
___ U.S. Citizen
___ Resident Alien
___ Nonresident Alien
If nonresident alien, country of residence for tax purposes
____________________________________________
Occupation _________________________________
Employer ___________________________________
Daytime Phone (___)_________________________
STEP 4 SIGN YOUR NAME (Be sure to read the certification and
authorization section)
Please be sure to sign your name(s)exactly as in Step 2 above. Check
one:
___ Owner
___ Trustee
___ Custodian
___ Other
Signature ______________________________Date __________________
Signature ______________________________Date __________________
Joint Owner/Trustee
STEP 5 SIGN UP FOR CHECKWRITING (An optional service)
Complete the signature card to the right for our free, unlimited
checkwriting service. This service, which is available for the seven
funds listed, lets you write checks in amounts as low as $100 against
your fund holdings. Each check written continues to earn income in the
fund until it clears your account. Your checkbook will be mailed
promptly.
By completing the signature card, you agree to the pertinent rules and
regulations of the State Street Bank and Trust Company. These rules
may be amended from time to time.
Note: Every person registered on the account MUST sign the signature
card, even if only one person will be signing the checks.
STEP 6 ESTABLISH YOUR ACCOUNT FEATURES
You may choose one or all of the following options by checking the
appropriate box and providing the information requested.
Please attach a voided check below for these services.
A. ___ Automatic Investment Plan (AIP): Add to your Scudder Fund
automatically and regularly. Complete below and we'll deduct money
from your bank checking account to purchase additional shares for you.
This Plan involves continuous investment, regardless of share-price
levels, and does not assure a profit or protect against loss in down
markets. (Consider your ability to maintain this Plan during such
times.) Your bank must be an Automated Clearing House (ACH) member.
Investments are to be drawn in the amount of $______ (minimum $50)
around the _______ day of each month, beginning in ____ 199__. This
money should be invested in the Scudder _____________________ Fund.
B. ___ Telephone Redemption to Your Bank: You may call to redeem
Scudder Fund shares and have the proceeds sent to your bank account.
C. ___ AutoBuy/AutoSell: You may call to purchase ($250 min., $50,000
max.) or redeem shares of any Scudder Fund and have your checking
account debited or credited directly. Your bank must be an ACH member.
(GRAPHIC OF A CHECK IS LOCATED HERE TO INDICATE WHERE A VOIDED CHECK
IS SUPPOSED TO BE TAPED)
AUTOMATIC BENEFITS
A. Scudder Automated Information Line (SAIL(tm))
With SAIL you can access information on your Scudder Fund account
24 hours a day, including yields, prices, total returns, account
balances, and transaction information. You can also use SAIL to
make exchanges and redemptions. Call 1-800-343-2890 and follow
the instructions.
B. Telephone Exchange and Redemption
You may exchange among your Scudder Funds or have the proceeds
(up to $50,000) sent directly to your address of record (the
address on your account). Call 1-800-225-5163 from 8:00 a.m. to
6:00 p.m., Monday through Friday, and a Scudder service
representative will be happy to help you.
SIGNATURE CARD
Please indicate the fund(s) for which you are requesting checkwriting
service:
Scudder Cash Investment Trust Scudder Short Term Bond Fund
Scudder CA Tax Free Money Fund Scudder Medium Term Tax Free Fund
Scudder U.S. Treasury Money Fund Scudder Limited Term Tax Free Fund
Scudder NY Tax Free Money Fund Scudder Mass. Limited Term Tax Free Fund
Scudder Tax Free Money Fund
Account Owners (exactly as in Step 2)
Your Name(s)___________________________ ___________________________
Your Signatures (exactly as in Step 2)
1. ___________________________
2. ___________________________
How many signatures are required to sign each check?
___ One ___ All
DID YOU REMEMBER TO...
___ Select your fund and fill in the amount invested?
___ Enclose your check made out to the "Scudder Funds"?
___ Include your social security number in Step 2?
___ Sign the application in Step 4 exactly as registered?
___ Attach a voided check in Step 6?
___ Sign the checkwriting card, if applicable?
CERTIFICATION AND AUTHORIZATION
I certify that I have the authority and legal capacity to purchase
shares of the Scudder Funds and to establish and use any related
privileges. I have received and read the prospectus, and understand
the investment objectives and policies, of each Scudder Fund I have
selected. I agree to be bound by the terms of the prospectus and the
statement of additional information, as each may be amended from time
to time, of each Fund I have selected.
I authorize the Scudder Funds, Scudder Service Corporation or any
successor transfer agent (the "Transfer Agent"), or their affiliates,
to act on any instructions (including telephone instructions)
reasonably believed to be genuine for any of the services described in
this Application (both services that I have requested, such as the
Automatic Investment Plan, Telephone Redemption to Your Bank and
Deposit of Dividends and Capital Gains to Your Bank services, and, if
services are automatic, such as the Scudder Automated Information Line
(SAIL) and Telephone Exchange and Redemption services, services that I
have not declined by notifying the Transfer Agent in writing). The
Scudder Funds employ procedures that are designed to give reasonable
assurance that instructions communicated by telephone are genuine.
These procedures include verifying the identity of each telephone
caller, recording all telephone calls and sending written
confirmations of transactions initiated by telephone. To the extent
that a Scudder Fund does not follow these procedures, it may be held
liable for losses due to unauthorized or fraudulent telephone
instructions. I agree that neither any Scudder Fund, the Transfer
Agent, Scudder Investor Services, nor any of their affiliates or
agents will be held liable for acting on telephone instructions
reasonably believed to be genuine.
I understand that any of the telephone services described in this
Application may be modified, interrupted, suspended or terminated at
any time, without notice.
I certify under penalties of perjury that:
(1) the social security number or tax identification number shown
above in Step 2 is correct and may be used for an account opened for
me by the Scudder Family of Funds; and
(2) I am not subject to backup withholding either because (a) I am an
"exempt foreign person," as defined below, or, (b) if I am not an
"exempt foreign person," the Internal Revenue Service (the "IRS") has
not notified me that I am subject to backup withholding as a result of
failure to report all interest or dividends, or the IRS has notified
me that I am no longer subject to backup withholding.
Cross out item (2) if you are currently subject to backup withholding.
An "exempt foreign person" is a person who is not a citizen or
resident of the United States (or, if married to a U.S. citizen, has
not elected to be treated as a U.S. resident) nor a U.S. corporation,
partnership, estate or trust, and who is not and does not reasonably
expect to be engaged in a U.S. trade or business with respect to which
any gain derived during the calendar year by the account now
established is effectively connected and, in the case of an
individual, has not and reasonably expects not to be present in the
United States for 183 days or more during the current calendar year.
I understand that the terms of this Certifications and Authorizations
section apply to any Scudder Fund investment I make now or in the
future and supersede the terms contained in the same or similar
section of any prior application I have signed. The certifications and
authorizations contained in this section apply to each person who
signs this Application.
I understand that I may choose to receive capital gains distributions
by mail. (Please call 1-800-225-2470 for details.) If I do not choose
this option, any capital gains distribution will be used to purchase
additional shares in my Fund account.
When a check is presented on the authorized signer's(s') personal
checking account established by State Street Bank and Trust Company
("Bank") for payment, the Bank will present the check to the
designated Fund as authority to redeem a sufficient number of shares
in the authorized signer's(s') shareholder account to cover the amount
of the check. The Fund is hereby authorized and directed to accept and
act upon checks presented to it by the Bank and to redeem a sufficient
number of shares for which certificates have not been issued in the
authorized signer's(s') shareholder account and forward the proceeds
of such redemption to the Bank. The authorized signers understand and
agree that shares of the Fund that have been purchased by check and
have been on the books of the Fund for less than seven (7) days will
not be redeemed; checks written for amounts that include such shares
will be returned marked "Uncollected Funds." The authorized signers
further understand and agree that the designated Fund and/or its
agents will not be liable for any loss, expense, or cost arising out
of check redemption. The designated Fund and the Bank reserve the
right to change, modify, or terminate this checking account privilege
at any time.
EXHIBIT 10
LAW OFFICES OF
DECHERT PRICE & RHOADS
TEN POST OFFICE SQUARE SOUTH
BOSTON, MA 02109-4603
TELEPHONE: (617) 728-7100
FAX: (617) 426-6567
February 23, 1995
Scudder Investment Trust, on behalf
of Scudder Quality Growth Fund
Two International Place
Boston, MA 02110
Re: Post-Effective Amendment No. 72 to Registration Statement on Form N-1A
(File No. 2-13628) (the "Registration Statement")
Gentlemen:
Scudder Investment Trust (the "Trust"), formerly Scudder Growth and
Income Fund, is a trust created under a written Declaration of Trust dated
September 20, 1984 and executed and delivered in Boston, Massachusetts,
which Declaration has been subsequently amended by an Amended and Restated
Declaration of Trust dated November 3, 1987 (as further amended, the
"Declaration of Trust"). The Trustees have the powers set forth in the
Declaration of Trust, subject to the terms, provisions and conditions
therein provided.
We are of the opinion that the legal requirements have been complied
with in the creation of the Trust and that said Declaration of Trust is
legal and valid.
Under Article V, Section 5.4 of the Declaration of Trust, the Trustees
are empowered, in their discretion, from time to time, to issue Shares for
such amount and type of consideration, at such time or times and on such
terms as the Trustees may deem best. Under Article V, Section 5.1, it is
provided that the number of Shares authorized to be issued under the
Declaration of Trust is unlimited. Under Article V, Section 5.11, the
Trustees may authorize the division of Shares into two series, designated
Scudder Growth and Income Fund and Scudder Quality Growth Fund.
By votes adopted on November 9, 1993 and November 8, 1994, the
Trustees of the Trust authorized the President, or any Vice President, and
the Secretary, or any Assistant Secretary, from time to time, to determine
the appropriate number of Shares of Scudder Quality Growth Fund to be
registered, to register with the Securities and Exchange Commission, and to
issue and sell to the public, such Shares.
We understand that you are about to register under the Securities Act
of 1933, 846,800 Shares by Post-Effective Amendment No. 72 to the
Registration Statement.
We are of the opinion that all necessary Trust action precedent to the
issue of said 846,800 Shares, comprising the Shares covered by Post-
Effective Amendment No. 72 to the Registration Statement, has been duly
taken, and that all such Shares may be legally and validly issued for cash,
and when sold will be fully paid and non-assessable by the Trust upon
receipt by the Trust or its agent of consideration for such Shares in
accordance with the terms in the Registration Statement, subject to
compliance with the Securities Act of 1933, as amended, the Investment
Company Act of 1940, as amended, and applicable state laws regulating the
sale of securities.
We consent to your filing this opinion with the Securities and
Exchange Commission as an Exhibit to Post-Effective Amendment No. 72 to the
Registration Statement.
Very truly yours,
/S/Dechert Price & Rhoads
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective Amendment
No. 72 to the Registration Statement of Scudder Quality Growth Fund on Form
N-1A, of our report dated December 9, 1994 on our audit of the financial
statements and financial highlights of Scudder Quality Growth Fund, which
report is included in the October 31, 1994 Annual Report to Shareholders,
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.
February 15, 1995
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the
Scudder Quality Growth Fund Annual Report for the fiscal year ended October
31, 1994 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> Scudder Quality Growth Fund
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-01-1993
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 106,216,360
<INVESTMENTS-AT-VALUE> 112,265,069
<RECEIVABLES> 7,450,098
<ASSETS-OTHER> 1,005,828
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 120,720,995
<PAYABLE-FOR-SECURITIES> 7,206,304
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 250,692
<TOTAL-LIABILITIES> 7,456,996
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 7,006,138
<SHARES-COMMON-PRIOR> 7,689,455
<ACCUMULATED-NII-CURRENT> 919,547
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,485,388
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,048,709
<NET-ASSETS> 113,263,999
<DIVIDEND-INCOME> 2,443,660
<INTEREST-INCOME> 115,667
<OTHER-INCOME> 0
<EXPENSES-NET> 1,444,668
<NET-INVESTMENT-INCOME> 1,114,659
<REALIZED-GAINS-CURRENT> 7,612,915
<APPREC-INCREASE-CURRENT> (8,282,506)
<NET-CHANGE-FROM-OPS> 445,068
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 573,627
<DISTRIBUTIONS-OF-GAINS> 1,793,533
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,895,781
<NUMBER-OF-SHARES-REDEEMED> 2,723,546
<SHARES-REINVESTED> 144,448
<NET-CHANGE-IN-ASSETS> (12,979,706)
<ACCUMULATED-NII-PRIOR> 415,551
<ACCUMULATED-GAINS-PRIOR> 1,628,971
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 806,132
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,118,556
<AVERAGE-NET-ASSETS> 115,538,708
<PER-SHARE-NAV-BEGIN> 16.42
<PER-SHARE-NII> 0.16
<PER-SHARE-GAIN-APPREC> (0.09)
<PER-SHARE-DIVIDEND> 0.08
<PER-SHARE-DISTRIBUTIONS> 0.24
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.17
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
