Filed electronically with the Securities and
Exchange Commission on April 30, 1997.
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. 81
_____
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 33
______
Scudder Investment Trust
------------------------
(Exact Name of Registrant as Specified in Charter)
Two International Place, Boston, MA 02110
-----------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (617) 295-2567
Thomas F. McDonough
Scudder, Stevens & Clark, Inc.
Two International Place, Boston, MA 02110
-----------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
immediately upon filing pursuant to paragraph (b)
------
X on May 1, 1997 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.
------
The Registrant has filed a declaration registering an indefinite amount of
securities pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended. The Registrant filed the notice required by Rule 24f-2 for its most
recent fiscal year on February 27, 1997.
<PAGE>
SCUDDER INVESTMENT TRUST
SCUDDER GROWTH AND INCOME FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
---------------------------
PART A
- ------
<TABLE>
<CAPTION>
<S> <C> <C>
Item No. Item Caption Prospectus Caption
-------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information
4. General Description of INVESTMENT OBJECTIVE AND POLICIES
Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
FUND ORGANIZATION
5. Management of the Fund A MESSAGE FROM SCUDDER'S CHAIRMAN
FUND ORGANIZATION--Investment adviser and Transfer agent
TRUSTEES AND OFFICERS
SHAREHOLDER BENEFITS--A team approach to investing
5A. Management Discussion of NOT APPLICABLE
Fund Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION-- Dividends and capital
Securities gains distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax Information
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder Automated Information Line,
Dividend reinvestment plan, T.D.D. service for the
hearing impaired
HOW TO CONTACT SCUDDER
7. Purchase of Securities PURCHASES
Being Offered FUND ORGANIZATION--Underwriter
TRANSACTION INFORMATION--Purchasing shares, Share price, Processing
time, Minimum balances, Third party transactions
SHAREHOLDER BENEFITS--Dividend reinvestment plan
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
8. Redemption or Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax identification
number, Minimum balances
9. Pending Legal Proceedings NOT APPLICABLE
Cross Reference-Page 1
<PAGE>
SCUDDER GROWTH AND INCOME FUND
CROSS-REFERENCE SHEET
(continued)
PART B
- ------
Caption in Statement of
Item No. Item Caption Additional Information
-------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and History FUND ORGANIZATION
13. Investment Objectives and THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
Policies PORTFOLIO TRANSACTIONS--Portfolio turnover
14. Management of the Fund INVESTMENT ADVISER
TRUSTEES AND OFFICERS
REMUNERATION
15. Control Persons and Principal TRUSTEES AND OFFICERS
Holders of Securities
16. Investment Advisory and Other INVESTMENT ADVISER
Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts and Other Information
17. Brokerage Allocation and Other PORTFOLIO TRANSACTIONS--Brokerage, Portfolio Turnover
Practices
18. Capital Stock and Other FUND ORGANIZATION
Securities DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
19. Purchase, Redemption and PURCHASES
Pricing of Securities Being EXCHANGES AND REDEMPTIONS
Offered FEATURES AND SERVICES OFFERED BY THE FUND--Dividend and Capital
Gain Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of Performance Data PERFORMANCE INFORMATION
23. Financial Statements FINANCIAL STATEMENTS
Cross Reference-Page 2
<PAGE>
SCUDDER INVESTMENT TRUST
SCUDDER LARGE COMPANY GROWTH FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
---------------------------
PART A
- ------
Item No. Item Caption Prospectus Caption
-------- ------------ ------------------
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information DISTRIBUTION AND FINANCIAL INFORMATION
4. General Description of INVESTMENT OBJECTIVE AND POLICIES
Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
FUND ORGANIZATION
5. Management of the Fund FINANCIAL HIGHLIGHTS
A MESSAGE FROM SCUDDER'S CHAIRMAN
FUND ORGANIZATION--Investment adviser and Transfer agent
TRUSTEES AND OFFICERS
5A. Management Discussion of SHAREHOLDER BENEFITS--A team approach to investing
Fund Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION-- Dividends and capital
Securities gains distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax information
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder Automated Information Line,
Dividend reinvestment plan, T.D.D. service for the
hearing impaired
HOW TO CONTACT SCUDDER
7. Purchase of Securities PURCHASES
Being Offered FUND ORGANIZATION--Underwriter
TRANSACTION INFORMATION--Purchasing shares, Share price, Processing
time, Minimum balances, Third party transactions
SHAREHOLDER BENEFITS--Dividend reinvestment plan
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
INVESTMENT PRODUCTS AND SERVICES
8. Redemption or Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax identification
number and Minimum balances
9. Pending Legal Proceedings NOT APPLICABLE
Cross Reference-Page 3
<PAGE>
SCUDDER LARGE COMPANY GROWTH FUND
CROSS-REFERENCE SHEET
(continued)
PART B
- ------
Caption in Statement of
Item No. Item Caption Additional Information
-------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and History FUND ORGANIZATION
13. Investment Objectives and THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
Policies PORTFOLIO TRANSACTIONS--Portfolio turnover
14. Management of the Fund INVESTMENT ADVISER
TRUSTEES AND OFFICERS
REMUNERATION
15. Control Persons and Principal TRUSTEES AND OFFICERS
Holders of Securities
16. Investment Advisory and Other INVESTMENT ADVISER
Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts and Other Information
17. Brokerage Allocation and Other PORTFOLIO TRANSACTIONS--Brokerage commissions
Practices
18. Capital Stock and Other FUND ORGANIZATION
Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
19. Purchase, Redemption and PURCHASES
Pricing of Securities Being EXCHANGES AND REDEMPTIONS
Offered FEATURES AND SERVICES OFFERED BY THE FUND-- Dividend and Capital
Gain Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of Performance Data PERFORMANCE INFORMATION
23. Financial Statements FINANCIAL STATEMENTS
Cross Reference-Page 4
<PAGE>
SCUDDER INVESTMENT TRUST
SCUDDER CLASSIC GROWTH FUND
CROSS-REFERENCE SHEET
Items Required By Form N-1A
PART A
Item No. Item Caption Prospectus Caption
1. Cover Page COVER PAGE
2. Synopsis EXPENSE INFORMATION
3. Condensed Financial FINANCIAL HIGHLIGHTS
Information
4. General Description of INVESTMENT OBJECTIVES AND POLICIES
Registrant WHY INVEST IN THE FUND?
ADDITIONAL INFORMATION ABOUT POLICIES AND INVESTMENTS
FUND ORGANIZATION
5. Management of the Fund A MESSAGE FROM SCUDDER'S CHAIRMAN
FUND ORGANIZATION--Investment adviser and Transfer agent
TRUSTEES AND OFFICERS
SHAREHOLDER BENEFITS--A team approach to investing
5A. Management Discussion of NOT APPLICABLE
Fund Performance
6. Capital Stock and Other DISTRIBUTION AND PERFORMANCE INFORMATION-- Dividends and capital
Securities gains distributions
FUND ORGANIZATION
TRANSACTION INFORMATION--Tax information
SHAREHOLDER BENEFITS--SAIL(TM)--Scudder Automated Information Line,
Dividend reinvestment plan, T.D.D. service for the
hearing impaired
HOW TO CONTACT SCUDDER
7. Purchase of Securities PURCHASES
Being Offered FUND ORGANIZATION--Underwriter
TRANSACTION INFORMATION--Purchasing shares, Share price, Processing
time, Minimum balances, Third party transactions
SHAREHOLDER BENEFITS--Dividend reinvestment plan
SCUDDER TAX-ADVANTAGED RETIREMENT PLANS
8. Redemption or Repurchase EXCHANGES AND REDEMPTIONS
TRANSACTION INFORMATION--Redeeming shares, Tax identification
number, Minimum balances
9. Pending Legal Proceedings NOT APPLICABLE
Cross Reference-Page 5
<PAGE>
SCUDDER CLASSIC GROWTH FUND
CROSS-REFERENCE SHEET
(continued)
PART B
- ------
Caption in Statement of
Item No. Item Caption Additional Information
-------- ------------ ----------------------
10. Cover Page COVER PAGE
11. Table of Contents TABLE OF CONTENTS
12. General Information and History FUND ORGANIZATION
13. Investment Objectives and THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
Policies PORTFOLIO TRANSACTIONS--Portfolio turnover
14. Management of the Fund INVESTMENT ADVISER
TRUSTEES AND OFFICERS
REMUNERATION
15. Control Persons and Principal TRUSTEES AND OFFICERS
Holders of Securities
16. Investment Advisory and Other INVESTMENT ADVISER
Services DISTRIBUTOR
ADDITIONAL INFORMATION--Experts and Other Information
17. Brokerage Allocation and Other PORTFOLIO TRANSACTIONS--Brokerage, Portfolio Turnover
Practices
18. Capital Stock and Other FUND ORGANIZATION
Securities DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
19. Purchase, Redemption and PURCHASES
Pricing of Securities Being EXCHANGES AND REDEMPTIONS
Offered FEATURES AND SERVICES OFFERED BY THE FUND-- Dividend and Capital
Gain Distribution Options
SPECIAL PLAN ACCOUNTS
NET ASSET VALUE
20. Tax Status DIVIDENDS
TAXES
21. Underwriters DISTRIBUTOR
22. Calculation of Performance Data PERFORMANCE INFORMATION
23. Financial Statements FINANCIAL STATEMENTS
</TABLE>
Cross Reference-Page 6
<PAGE>
[Image] Scudder Growth and Income Fund Profile [Image]
- ---------------------------------------------------------------------------
The fund profile, a supplement to the full prospectus, is designed as
an easy-to-read summary of fund risks, fees, and objectives. You can
click on any question to link to the Fund's prospectus and get more
information on that topic. Or, if you wish, you can proceed directly
to the Fund's prospectus. Once you have read the prospectus and
considered your investment goals, you can proceed to a Scudder Funds
application.
----------------------------------------------------------------------
Fund Profile
April 1, 1997
----------------------------------------------------------------------
1. What Are The Fund's Objectives?
Scudder Growth and Income Fund seeks long-term growth of capital,
current income and growth of income.
2. What Does The Fund Invest In?
The Fund invests primarily in common stocks, preferred stocks and
securities convertible into common stocks of companies which offer the
prospect for growth of earnings while paying current dividends. Over
time, continued growth of earnings tends to lead to higher dividends
and enhancement of capital value. The Fund generally emphasizes
investments in U.S. companies, although it may invest in foreign
securities that meet the same criteria as the Fund's domestic
holdings.
3. What Are The Risks Of Investing In The Fund?
Movements of the stock market will affect the Fund's share price,
which is likely to vary from day to day. The value of your investment
may decline as a result of declines in the overall stock market or in
the types of securities held in the Fund. In rising markets, the types
of stocks emphasized in the Fund may underperform other sectors of the
stock market. You incur principal risk when you invest because your
shares, when sold, may be worth more or less than what you paid for
them.
4. For Whom Is This Fund Appropriate?
You may wish to consider this Fund if you are seeking long-term growth
of capital combined with the potential for current income and:
o plan to hold your investment for several years,
o can tolerate fluctuations in share price,
o have or plan to have other investments for the benefit of
diversification, and
o understand the risks of stock market investing.
5. What Are The Fund's Expenses And Fees?
There are two kinds of expenses that a shareholder may incur, directly
or indirectly, by investing in a mutual fund. These types of expenses,
as they relate to Scudder Growth and Income Fund, are:
Shareholder transaction expenses --
Expenses charged directly to your account for various transactions.
Sales Commission None
Commissions to Reinvest Dividends None
Redemption Fee None
Exchange Fee None
Annual Fund operating expenses --
Expenses paid by the Fund before it distributes its net investment
income, expressed as a percentage of the Fund's average daily net
assets. Figures below are for the fiscal year ended December 31,
1995, restated to reflect what expenses the Fund would have paid for
the fiscal year under the Investment Management Agreement dated
August 8, 1995, if the agreement had been in effect for the entire
fiscal year.
Investment management fee 0.51%
12b-1 fees None
Other expenses 0.28%
-----
Total Fund operating expenses 0.79%
=====
Example:
Assuming a 5% annual return and redemption at the end of each
period, the total expenses relating to a $1,000 investment would be:
1 Year 3 Years 5 Years 10 Years
$8 $25 $44 $98
This example assumes reinvestment of all dividends and distributions
and that the total Fund operating expenses listed above remain the
same each year. This example should not be considered a representation
of past or future expenses or return. Actual Fund expenses and return
vary from year to year and may be higher or lower than those shown.
Please note that there is a $5 service fee if you request redemption
proceeds via wire.
6. How Has The Fund Performed Historically?
This chart shows how the Fund has performed over the past ten years,
assuming reinvestment of all distributions. Performance is historical
and may not be indicative of future results. Total return and
principal value will fluctuate.
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE.
BAR CHART TITLE: Total returns for years ended December 31:
BAR CHART DATA: 1987 3.50%
1988 12.01
1989 26.36
1990 -2.33
1991 28.16
1992 9.57
1993 15.59
1994 2.60
1995 31.18
1996 22.18
The Fund's Average Annual Total Return
for the period ended March 31, 1997
One Year 18.67%
Five Years 16.49%
Ten Years 13.09%
7. Who Manages The Fund?
The Fund's investment adviser is Scudder, Stevens & Clark, Inc., a
leading provider of U.S. and international investment management for
clients throughout the world. The Fund is managed by a team of Scudder
investment professionals, who each play an important role in the
Fund's management process.
Lead Portfolio Manager Robert T. Hoffman has had responsibility for
setting the Fund's stock investing strategy and overseeing the Fund's
day-to-day operations since 1991. Mr. Hoffman, who joined Scudder in
1990 as a portfolio manager, has 12 years of experience in the
investment industry, including several years of pension fund
management experience. Kathleen T. Millard, Portfolio Manager, has
been involved in the investment industry since 1983 and has worked as
a portfolio manager since 1986. Ms. Millard, who joined the team and
Scudder in 1991, focuses on strategy and stock selection. Benjamin W.
Thorndike, Portfolio Manager, is the Fund's chief analyst and
strategist for convertible securities. Mr. Thorndike, who has 17 years
of investment experience, joined Scudder in 1983 as a portfolio
manager and the Fund in 1986. Lori Ensinger, Portfolio Manager, joined
the Fund in 1996 and focuses on stock selection and investment
strategy. Ms. Ensinger has worked in the investment industry since
1983 and at Scudder since 1993. G. Todd Silva, Portfolio Manager, has
focused on stock selection and investment strategy since joining the
Fund in 1996. Mr. Silva, who joined Scudder in 1993, has over six
years of investment experience.
8. How Can I Invest?
To make it easy for you to open an account, you may invest by mail,
phone, fax, or in person. The minimum initial investment is $2,500
($1,000 for IRAs), except that shareholders may open a regular account
with a minimum of $1,000 if an investment program of $100/month is
established. A shareholder with a non-fiduciary account who maintains
an account balance of less than $2,500 without establishing an
investment program, may be assessed an annual fee of $10.00, payable
to the Fund. You may also exchange Fund shares free of charge within
the Scudder Family of Funds.
9. How Can I Redeem Shares?
You may redeem shares at the current share price on any business day
by telephone, fax, or mail.
10. When Are Distributions Made?
The Fund typically makes dividend distributions in April, July,
October, and December. Capital gain distributions, if any, will be
made in November or December. You may elect to receive distributions
in cash or have them reinvested in additional shares of the Fund.
Generally, dividends from net investment income are taxable to
shareholders as ordinary income. Long-term capital gains
distributions, if any, are taxable as long-term capital gains
regardless of the length of time shareholders have owned shares.
Short-term capital gains and any other taxable income distributions
are taxable as ordinary income. A portion of dividends from ordinary
income may qualify for the dividends-received deduction for
corporations.
11. What Services Does Scudder Provide?
As a shareholder, you'll enjoy:
o professional service from representatives who can answer your
questions and execute your transactions
o automated toll-free touchtone access to account information,
share prices and yields, and to perform transactions
o Scudder's quarterly shareholder newsletter, Scudder Perspectives
o regular, informative reports about the performance of your Fund
[Image]
----------------------------------------------------------------------
[Image]Scudder wants you to make informed investment decisions. This
Fund Profile contains key information about the Fund. If you would
like more information before you invest, please consult the Fund's
accompanying prospectus. For details about the Fund's holdings or
recent investment strategies, please review the Fund's most recent
annual or semiannual report. The reports are free and may be ordered
by calling 1-800-225-2470.
----------------------------------------------------------------------
Contact Scudder
<PAGE>
[Image] Scudder Growth and Income Fund Profile [Image]
- ---------------------------------------------------------------------------
The fund profile, a supplement to the full prospectus, is designed as
an easy-to-read summary of fund risks, fees, and objectives. You can
click on any question to link to the Fund's prospectus and get more
information on that topic. Or, if you wish, you can proceed directly
to the Fund's prospectus. Once you have read the prospectus and
considered your investment goals, you can proceed to a Scudder Funds
application.
----------------------------------------------------------------------
Fund Profile
October 1, 1996
----------------------------------------------------------------------
1. What Are The Fund's Objectives?
Scudder Growth and Income Fund seeks long-term growth of capital,
current income and growth of income.
2. What Does The Fund Invest In?
The Fund invests primarily in common stocks, preferred stocks and
securities convertible into common stocks of companies which offer the
prospect for growth of earnings while paying current dividends. Over
time, continued growth of earnings tends to lead to higher dividends
and enhancement of capital value. The Fund generally emphasizes
investments in U.S. companies, although it may invest in foreign
securities that meet the same criteria as the Fund's domestic
holdings.
3. What Are The Risks Of Investing In The Fund?
Movements of the stock market will affect the Fund's share price,
which is likely to vary from day to day. The value of your investment
may decline as a result of declines in the overall stock market or in
the types of securities held in the Fund. In rising markets, the types
of stocks emphasized in the Fund may underperform other sectors of the
stock market. You incur principal risk when you invest because your
shares, when sold, may be worth more or less than what you paid for
them.
4. For Whom Is This Fund Appropriate?
You may wish to consider this Fund if you are seeking long-term growth
of capital combined with the potential for current income and:
o plan to hold your investment for several years,
o can tolerate fluctuations in share price,
o have or plan to have other investments for the benefit of
diversification, and
o understand the risks of stock market investing.
5. What Are The Fund's Expenses And Fees?
There are two kinds of expenses that a shareholder may incur, directly
or indirectly, by investing in a mutual fund. These types of expenses,
as they relate to Scudder Growth and Income Fund, are:
Shareholder transaction expenses --
Expenses charged directly to your account for various transactions.
Sales Commission None
Commissions to Reinvest Dividends None
Redemption Fee None
Exchange Fee None
Annual Fund operating expenses --
Expenses paid by the Fund before it distributes its net investment
income, expressed as a percentage of the Fund's average daily net
assets. Figures below are for the fiscal year ended December 31,
1995, restated to reflect what expenses the Fund would have paid for
the fiscal year under the Investment Management Agreement dated
August 8, 1995, if the agreement had been in effect for the entire
fiscal year.
Investment management fee 0.51%
12b-1 fees None
Other expenses 0.28%
------
Total Fund operating expenses 0.79%
====
Example:
Assuming a 5% annual return and redemption at the end of each
period, the total expenses relating to a $1,000 investment would be:
1 Year 3 Years 5 Years 10 Years
$8 $25 $44 $98
This example assumes reinvestment of all dividends and distributions
and that the total Fund operating expenses listed above remain the
same each year. This example should not be considered a representation
of past or future expenses or return. Actual Fund expenses and return
vary from year to year and may be higher or lower than those shown.
Please note that there is a $5 service fee if you request redemption
proceeds via wire.
6. How Has The Fund Performed Historically?
This chart shows how the Fund has performed over the past ten years,
assuming reinvestment of all distributions. Performance is historical
and may not be indicative of future results. Total return and
principal value will fluctuate.
The printed document contains a bar chart here.
Bar Chart Title: Total returns for years ended December 31:
Bar Chart Data: 1986 18.27%
1987 3.50
1988 12.01
1989 26.36
1990 -2.33
1991 28.16
1992 9.57
1993 15.59
1994 2.60
1995 31.18
The Fund's Average Annual Total Return
for the period ended September 30, 1996
One Year 20.13%
Five Years 15.79
Ten Years 13.93
7. Who Manages The Fund?
The Fund's investment adviser is Scudder, Stevens & Clark, Inc., a
leading provider of U.S. and international investment management for
clients throughout the world. The Fund is managed by a team of Scudder
investment professionals, who each play an important role in the
Fund's management process.
Lead Portfolio Manager Robert T. Hoffman has had responsibility for
setting the Fund's stock investing strategy and overseeing the Fund's
day-to-day operations since 1991. Mr. Hoffman, who joined Scudder in
1990 as a portfolio manager, has 12 years of experience in the
investment industry, including several years of pension fund
management experience. Kathleen T. Millard, Portfolio Manager, has
been involved in the investment industry since 1983 and has worked as
a portfolio manager since 1986. Ms. Millard, who joined the team and
Scudder in 1991, focuses on strategy and stock selection. Benjamin W.
Thorndike, Portfolio Manager, is the Fund's chief analyst and
strategist for convertible securities. Mr. Thorndike, who has 17 years
of investment experience, joined Scudder in 1983 as a portfolio
manager and the Fund in 1986. Lori Ensinger, Portfolio Manager, joined
the Fund in 1996 and focuses on stock selection and investment
strategy. Ms. Ensinger has worked in the investment industry since
1983 and at Scudder since 1993. G. Todd Silva, Portfolio Manager, has
focused on stock selection and investment strategy since joining the
Fund in 1996. Mr. Silva, who joined Scudder in 1993, has over six
years of investment experience.
8. How Can I Invest?
To make it easy for you to open an account, you may invest by mail,
phone, fax, or in person. The current minimum initial investment is
$1,000 ($500 for IRA's). Effective January 1, 1997, the minimum
initial investment will be $2,500 ($1,000 for IRA's), except that
shareholders may open a regular account with a minimum of $1,000 if an
investment program of $100/month is established. After January 1,
1997, a shareholder who maintains an account balance of less than
$2,500 without establishing an investment program, may be assessed an
annual fee of $10.00, payable to the Fund. You may also exchange Fund
shares free of charge within the Scudder Family of Funds.
9. How Can I Redeem Shares?
You may redeem shares at the current share price on any business day
by telephone, fax, or mail.
10. When Are Distributions Made?
The Fund typically makes dividend distributions in April, July,
October, and December. Capital gain distributions, if any, will be
made in November or December. You may elect to receive distributions
in cash or have them reinvested in additional shares of the Fund.
Generally, dividends from net investment income are taxable to
shareholders as ordinary income. Long-term capital gains
distributions, if any, are taxable as long-term capital gains
regardless of the length of time shareholders have owned shares.
Short-term capital gains and any other taxable income distributions
are taxable as ordinary income. A portion of dividends from ordinary
income may qualify for the dividends-received deduction for
corporations.
11. What Services Does Scudder Provide?
As a shareholder, you'll enjoy:
o professional service from representatives who can answer your
questions and execute your transactions
o automated toll-free touchtone access to account information,
share prices and yields, and to perform transactions
o Scudder's quarterly shareholder newsletter, Scudder Perspectives
o regular, informative reports about the performance of your Fund
[Image]
----------------------------------------------------------------------
[Image]Scudder wants you to make informed investment decisions. This
Fund Profile contains key information about the Fund. If you would
like more information before you invest, please consult the Fund's
accompanying prospectus. For details about the Fund's holdings or
recent investment strategies, please review the Fund's most recent
annual or semiannual report. The reports are free and may be ordered
by calling 1-800-225-2470.
----------------------------------------------------------------------
Contact Scudder
<PAGE>
Scudder Growth and Income Fund
Fund Profile
July 1, 1996
<PAGE>
SCUDDER GROWTH AND INCOME FUND?
1. What Are The Fund's Objectives?
Scudder Growth and Income Fund seeks long-term growth of
capital, current income, and growth of income.
----------------------------------------------------------
2. What Does The Fund Invest In?
The Fund invests primarily in stocks and securities
convertible into stocks of companies which offer the
prospect for growth of earnings while paying current
dividends. Over time, continued growth of earnings tends
to lead to higher dividends and enhancement of capital
value.
The Fund generally emphasizes investments in U.S.
companies, although it may invest in foreign securities
that meet the same criteria as the Fund's domestic
holdings.
----------------------------------------------------------
3. What Are The Risks Of Investing In The Fund?
Movements of the stock market will affect the Fund's share
price, which is likely to vary from day to day. The value
of your investment may decline as a result of declines in
the overall stock market or in the types of securities
held in the Fund. In rising markets, the types of stocks
emphasized in the Fund may underperform other sectors of
the stock market.
----------------------------------------------------------
4. For Whom Is This Fund Appropriate?
You may wish to consider this Fund if you are seeking
long-term growth of capital combined with the potential
for current income and:
o plan to hold your investment for several years,
o can tolerate fluctuations in share price,
o have or plan to have other investments for the benefit
of diversification, and
o understand the risks of stock market investing.
<PAGE>
5. What Are The Fund's Expenses And Fees?
There are two kinds of expenses that a shareholder may
incur, directly or indirectly, by investing in a mutual
fund. These types of expenses, as they relate to Scudder
Growth and Income Fund, are:
Shareholder transaction expenses --
fees charged directly to your account for
various transactions.
Sales Commission None
Commissions to Reinvest Dividends None
Redemption Fee None
Exchange Fee None
Annual Fund operating expenses --
fees paid by the Fund before it distributes its net
investment income, expressed as a percentage of the
Fund's average daily net assets. Figures below are
for the fiscal year ended December 31, 1995, restated
to reflect what expenses the Fund would have paid for
the fiscal year under the Investment Management
Agreement dated August 8, 1995, if the agreement had
been in effect for the entire fiscal year.
Investment management fee 0.51%
12b-1 fees None
Other expenses 0.28%
-----
Total Fund operating expenses 0.79%
=====
Example:
Assuming a 5% annual return and redemption at the end
of each period, the total expenses relating to a
$1,000 investment would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$8 $25 $44 $98
This example assumes reinvestment of all dividends and
distributions and that the total Fund operating expenses
listed above remain the same each year. This example
should not be considered a representation of past or
future expenses or return. Actual Fund expenses and return
vary from year to year and may be higher or lower than
those shown. Please note that there is a $5 service fee if
you request redemption proceeds via wire.
<PAGE>
6. How Has The Fund Performed Historically?
This chart shows how the Fund has performed over the past
ten years, assuming reinvestment of all distributions.
Performance is historical and may not be indicative of
future results. Total return and principal value will
fluctuate.
Total returns for years ended December 31:
------------------------------------------
1986 18.27%
1987 3.50%
1988 12.01%
1989 26.36%
1990 -2.33%
1991 28.16%
1992 9.57%
1993 15.59%
1994 2.60%
1995 31.18%
The Fund's Average Annual Total Return
for the period ended June 30, 1996
---------------------------
One Year 23.78%
Five Years 16.82%
Ten Years 12.74%
---------------------------
---------------------------------------------------------
7. Who Manages The Fund?
The Fund's investment adviser is Scudder, Stevens & Clark,
Inc., a leading provider of U.S. and international
investment management for clients throughout the world.
----------------------------------------------------------
8. How Can I Invest?
To make it easy for you to open an account, you may invest
by mail, phone, fax, or in person. The minimum initial
investment is only $1,000. Thereafter, additional
investments may be made for as little as $100. You may
also exchange shares free of charge within the Scudder
Family of Funds.
----------------------------------------------------------
9. How Can I Redeem Shares?
You may redeem shares at the current share price on any
business day by telephone, fax, or mail.
----------------------------------------------------------
10. When Are Distributions Made?
The Fund typically makes dividend distributions in April,
July, October, and December. Capital gain distributions,
if any, will be made in November or December. You may
elect to receive distributions in cash or have them
reinvested in additional shares of the Fund.
<PAGE>
11. What Services Does Scudder Provide?
As a shareholder, you'll enjoy:
o professional service from representatives who can answer your
questions and execute your transactions
o automated toll-free touchtone access to account information, share
prices and yields, and to perform transactions
o Scudder's quarterly shareholder newsletter, Perspectives
o regular, informative reports about the performance of your Fund
Scudder wants you to make informed investment decisions. This Fund Profile
contains key information about Scudder Growth and Income Fund. More details
appear in the Fund's accompanying prospectus. Please read it carefully before
you invest. If you have any questions, please call 1-800-225-2470.
<PAGE>
Scudder Growth and Income Fund
Fund Profile
May 1, 1996
<PAGE>
Scudder Growth and Income Fund
- -------------------------------------------------------------------------------
1. What Are The Fund's Objectives?
Scudder Growth and Income Fund seeks long-term growth of
capital, current income, and growth of income.
---------------------------------------------------------
2. What Does The Fund Invest In?
The Fund invests primarily in stocks and securities
convertible into stocks of companies which offer the
prospect for growth of earnings while paying current
dividends. Over time, continued growth of earnings tends
to lead to higher dividends and enhancement of capital
value.
The Fund generally emphasizes investments in U.S.
companies, although it may invest in foreign securities
that meet the same criteria as the Fund's domestic
holdings.
---------------------------------------------------------
3. What Are The Risks Of Investing In The Fund?
Movements of the stock market will affect the Fund's share
price, which is likely to vary from day to day. The value
of your investment may decline as a result of declines in
the overall stock market or in the types of securities
held in the Fund. In rising markets, the types of stocks
emphasized in the Fund may underperform other sectors of
the stock market.
---------------------------------------------------------
4. For Whom Is This Fund Appropriate?
You may wish to consider this Fund if you are seeking
long-term growth of capital combined with the potential
for current income and:
o plan to hold your investment for several years,
o can tolerate fluctuations in share price,
o have or plan to have other investments for the benefit
of diversification, and
o understand the risks of stock market investing.
<PAGE>
5. What Are The Fund's Expenses And Fees?
There are two kinds of expenses that a shareholder may
incur, directly or indirectly, by investing in a mutual
fund. These types of expenses, as they relate to Scudder
Growth and Income Fund, are:
<TABLE>
<CAPTION>
<C> <C>
Shareholder transaction expenses -- fees Annual Fund operating expenses --
charged directly to your account for fees paid by the Fund before it
various transactions. distributes its net investment income,
expressed as a percentage of the Fund's
average daily net assets. Figures below
Sales Commission None are for the fiscal year ended December
Commissions to Reinvest 31, 1995, restated to reflect what
Dividends None expenses the Fund would have paid for the
Redemption Fee None fiscal year under the Investment
Exchange Fee None Management Agreement dated August 8,
1995, if the agreement had been in effect
for the entire fiscal year.
Investment management fee 0.51%
12b-1 fees None
Other expenses 0.28%
-----
Total Fund operating expenses 0.79%
=====
Example: Assuming a 5% annual return and One Year $8
redemption at the end of each period, the Three Years $25
total expenses relating to a $1,000 Five Years $44
investment would be: Ten Years $ 98
</TABLE>
This example assumes reinvestment of all dividends and
distributions and that the total Fund operating expenses
listed above remain the same each year. This example
should not be considered a representation of past or
future expenses or return. Actual Fund expenses and return
vary from year to year and may be higher or lower than
those shown. Please note that there is a $5 service fee if
you request redemption proceeds via wire.
<PAGE>
6. How Has The Fund Performed Historically?
This chart shows how the Fund has performed over the past
ten years, assuming reinvestment of all distributions.
Performance is historical and may not be indicative of
future results. Total return and principal value will
fluctuate.
Total returns for years ended December 31:
------------------------------------------
1986 18.27
1987 3.50
1988 12.01
1989 26.36
1990 -2.33
1991 28.16
1992 9.57
1993 15.59
1994 2.60
1995 31.18
The Fund's Average Annual Total Return
for the period ended March 31, 1996
---------------------------
One Year 30.84%
Five Year 15.93%
Ten Years 12.96%
---------------------------
---------------------------------------------------------
7. Who Manages The Fund?
The Fund's investment adviser is Scudder, Stevens & Clark,
Inc., a leading provider of U.S. and international
investment management for clients throughout the world.
---------------------------------------------------------
8. How Can I Invest?
To make it easy for you to open an account, you may invest
by mail, phone, fax, or in person. The minimum initial
investment is only $1,000. Thereafter, additional
investments may be made for as little as $100. You may
also exchange shares free of charge within the Scudder
Family of Funds.
---------------------------------------------------------
9. How Can I Redeem Shares?
You may redeem shares at the current share price on any
business day by telephone, fax, or mail.
---------------------------------------------------------
10. When Are Distributions Made?
The Fund typically makes dividend distributions in April,
July, October, and December. Capital gain distributions,
if any, will be made in November or December. You may
elect to receive distributions in cash or have them
reinvested in additional shares of the Fund.
<PAGE>
11. What Services Does Scudder Provide?
As a shareholder, you'll enjoy:
o professional service from representatives who can answer your
questions and execute your transactions
o automated toll-free touchtone access to account information, share
prices and yields, and to perform transactions
o Scudder's quarterly shareholder newsletter, Perspectives
o regular, informative reports about the performance of your Fund
Scudder wants you to make informed investment decisions. This Fund Profile
contains key information about Scudder Growth and Income Fund. More details
appear in the Fund's accompanying prospectus. Please read it carefully before
you invest. If you have any questions, please call 1-800-225-2470.
<PAGE>
This prospectus sets forth concisely the information about Scudder Growth and
Income Fund, a series of Scudder Investment Trust, an open-end management
investment company, that a prospective investor should know before investing.
Please retain it for future reference.
If you require more detailed information, a Statement of Additional Information
dated May 1, 1997, 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 and is available along with other related materials on the SEC's
Internet Web Site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Contents--see page 4.
NOT FDIC- MAY LOSE VALUE
INSURED NO BANK GUARANTEE
Scudder
Growth and
Income Fund
Prospectus
May 1, 1997
A pure no-load(TM) (no sales charges) mutual fund seeking long-term growth of
capital, current income, and growth of income.
<PAGE>
Expense information
How to compare a Scudder pure no-load(TM) fund
This information is designed to help you understand the various costs and
expenses of investing in Scudder Growth and Income Fund (the "Fund"). By
reviewing this table and those in other mutual funds' prospectuses, you can
compare the Fund's fees and expenses with those of other funds. With Scudder's
pure no-load(TM) funds, you pay no commissions to purchase or redeem shares, or
to exchange from one fund to another. As a result, all of your investment goes
to work for you.
1) Shareholder transaction expenses: Expenses charged directly to your
individual account in the Fund for various transactions.
Sales commissions to purchase shares (sales load) NONE
Commissions to reinvest dividends NONE
Redemption fees NONE*
Fees to exchange shares NONE
2) Annual Fund operating expenses: Expenses paid by the Fund before it
distributes its net investment income, expressed as a percentage of the
Fund's average daily net assets for the year ended December 31, 1996.
Investment management fee 0.49%
12b-1 fees NONE
Other expenses 0.29%
----
Total Fund operating expenses 0.78%
====
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
------ ------- ------- --------
$8 $25 $43 $97
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."
2
<PAGE>
Financial highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the audited
financial statements.
If you would like more detailed information concerning the Fund's performance,
a complete portfolio listing and audited financial statements are available in
the Fund's Annual Report dated December 31, 1996 and may be obtained without
charge by writing or calling Scudder Investor Services, Inc.
<TABLE>
<CAPTION>
Years Ended December 31,
1996(d) 1995 1994 1993(b) 1992 1991 1990 1989 1988 1987
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of -------------------------------------------------------------------------------------
period ........................ $20.23 $16.26 $17.24 $16.20 $15.76 $12.77 $14.14 $13.18 $12.31 $15.02
-------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ............ .60 .55 .49 .49 .57 .57 .65 .67 .60 .68
Net realized and unrealized gain
(loss) on investment
transactions .................. 3.84 4.46 (.05) 2.01 .90 2.97 (1.01) 2.75 .86 (.07)
-------------------------------------------------------------------------------------
Total from investment operations.. 4.44 5.01 .44 2.50 1.47 3.54 (.36) 3.42 1.46 .61
-------------------------------------------------------------------------------------
Less distributions from:
Net investment income ............ (.57) (.56) (.51) (.45) (.53) (.55) (.67) (.69) (.59) (.68)
Net realized gains on investment
transactions .................. (.87) (.48) (.91) (1.01) (.50) -- (.34) (1.77) -- (2.64)
-------------------------------------------------------------------------------------
Total distributions .............. (1.44) (1.04) (1.42) (1.46) (1.03) (.55) (1.01) (2.46) (.59) (3.32)
-------------------------------------------------------------------------------------
Net asset value, -------------------------------------------------------------------------------------
end of period ................. $23.23 $20.23 $16.26 $17.24 $16.20 $15.76 $12.77 $14.14 $13.18 $12.31
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
Total Return (%) ................. 22.18 31.18 2.60 15.59 9.57 28.16 (2.33) 26.36 12.01 3.50
Ratios and Supplemental Data
Net assets, end of period
($ millions) .................. 4,186 3,061 1,992 1,624 1,166 723 491 490 402 392
Ratio of operating expenses to
average net assets (%) ........ .78 .80 .86 .86 .94(a) .97 .95 .87 .92 .89
Ratio of net investment income to
average net assets (%) ........ 2.77 3.10 2.98 2.93 3.60 4.03 5.03 4.47 4.63 4.24
Portfolio turnover rate (%) ...... 26.6 26.9 42.3 35.5 27.5 44.7 64.7 76.6 47.6 59.5
Average commission rate .......... $.0572 $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
paid (c)
</TABLE>
(a)The Adviser did not impose a portion of its management fee amounting to
$.02 per share for the year ended December 31, 1992. If all expenses,
including the management fee not imposed, had been incurred by the Fund, the
annualized ratio of expenses to average net assets for such year would have
been 1.08% and the total return would have been lower. This ratio includes
costs associated with the acquisition of certain assets of Niagara Share
Corporation on July 27, 1992; exclusive of these charges the ratio would
have been .92%.
(b)Effective January 1, 1993, the Fund discontinued using equalization
accounting.
(c)Average commission rate paid per share of common and preferred stocks is
calculated for fiscal years beginning on or after September 1, 1995.
(d)Based on monthly average shares outstanding during the period.
3
<PAGE>
A message from Scudder's chairman
Scudder, Stevens & Clark, Inc., investment adviser to the Scudder Family of
Funds, was founded in 1919. We offered America's first no-load mutual fund in
1928. Today, we manage in excess of $115 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.
Daniel Pierce
Scudder Growth and Income Fund
Investment objective
o long-term growth of capital, current income and growth of income
Investment characteristics
o an actively managed portfolio consisting primarily of common stocks and
securities convertible into common stocks
o an emphasis on companies with good prospects for earnings growth over time
o opportunity to share in the long-term growth of the U.S. stock market as
well as stock market risk
Contents
Investment objective and policies 5
Why invest in the Fund? 5
Investment results 6
Additional information about policies and investments 7
Distribution and performance information 10
Fund organization 11
Purchases 12
Exchanges and redemptions 13
Transaction information 14
Shareholder benefits 18
Trustees and Officers 21
Investment products and services 22
How to contact Scudder 23
4
<PAGE>
Investment objective and policies
Scudder Growth and Income Fund (the "Fund"), a diversified series of Scudder
Investment Trust, seeks long-term growth of capital, current income and growth
of income. The Fund invests primarily in common stocks, preferred stocks, and
securities convertible into common stocks of companies which offer the prospect
for growth of earnings while paying current dividends. Over time, continued
growth of earnings tends to lead to higher dividends and enhancement of capital
value. The Fund allocates its investments among different industries and
companies, and adjusts its portfolio securities for investment considerations
and not for trading purposes.
Except as otherwise indicated, the Fund's investment objective and policies are
not fundamental and may be changed without a vote of shareholders. If there is a
change in investment objective, shareholders should consider whether the Fund
remains an appropriate investment in light of their then current financial
position and needs. There can be no assurance that the Fund's objective will be
met.
Investments
The Fund attempts to achieve its investment objective by investing primarily in
dividend-paying common stocks, preferred stocks and securities convertible into
common stocks. The Fund may also purchase such securities which do not pay
current dividends but which offer prospects for growth of capital and future
income. Convertible securities (which may be current coupon or zero coupon
securities) are bonds, notes, debentures, preferred stocks and other securities
which may be converted or exchanged at a stated or determinable exchange ratio
into underlying shares of common stock. The Fund may also invest in
nonconvertible preferred stocks consistent with the Fund's objective. From time
to time, for temporary defensive purposes, when the Fund's investment adviser,
Scudder, Stevens & Clark, Inc. (the "Adviser") feels such a position is
advisable in light of economic or market conditions, the Fund may invest,
without limit, in cash and cash equivalents. It is impossible to predict for how
long such alternative strategies will be utilized. The Fund may invest in
foreign securities and in repurchase agreements. It may also loan securities and
may engage in strategic transactions. More information about investment
techniques is provided under "Additional information about policies and
investments."
The Fund's share price fluctuates with changes in interest rates and market
conditions. These fluctuations may cause the value of shares to be higher or
lower than when purchased.
Why invest in the Fund?
The Fund seeks to provide participation in the long-term growth of the economy
through the potential investment returns offered by common stocks and securities
convertible into common stocks. It maintains a diversified portfolio consisting
primarily of common stocks, preferred stocks and convertible securities of
companies with long-standing records of earnings growth. These companies, many
of which are mainstays of the U.S. economy, offer prospects for future growth of
earnings and profits, and therefore may offer investors attractive long-term
investment opportunities. This strategy, with an emphasis on income, may be more
appropriate for the conservative portions of your equity portfolio.
In addition, the Fund offers all the benefits of the Scudder Family of Funds.
Scudder, Stevens & Clark, Inc. manages a diverse family of pure no-load(TM)
funds and provides a wide range of services to help investors meet their
investment needs. Please refer to "Investment products and services" for
additional information.
5
<PAGE>
Investment results
- --------------------------------------------------------------------------------
The Fund is designed for long-term investors who can accept moderate stock
market risk. In return for accepting stock market risk, you may earn a greater
return on your investment than from a money market or an income fund, but
experience less risk than from a portfolio of more speculative equity
securities.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Annual Capital Changes* Standard & Poor's
Scudder Growth and Income Fund 500 Stock Index
----------------------------------------------------------------- ---------------------------------
Net Asset Capital Gains Capital Price Capital
December 31 Value/Share Dividends Distributions Change Level Change
----------- ----------- --------- ------------- ------ ----- ------
<C> <C> <C> <C> <C> <C> <C>
1987 12.31 0.68 2.64 - 0.66 247 + 2.07
1988 13.18 0.59 -- + 7.07 278 + 12.55
1989 14.14 0.69 1.77 + 20.84 353 + 26.99
1990 12.77 0.67 0.34 - 7.32 330 - 6.52
1991 15.76 0.55 -- + 23.41 417 + 26.36
1992 16.20 0.53 0.50 + 6.04 436 + 4.46
1993 17.24 0.45 1.01 + 12.67 466 + 6.88
1994 16.26 0.51 0.91 - 0.43 459 - 1.50
1995 20.23 0.56 0.48 + 27.42 616 + 34.20
1996 23.23 0.57 0.87 + 19.10 741 + 20.26
-------------------------------------------------------------------------------------------------------------------------
Growth of a $10,000 investment
Standard & Poor's
Scudder Growth and Income Fund 500 Stock Index
--------------------------------------------------------------------- -----------------------------
Total Return Total Return
--------------------------- --------------------
Periods Ended Value of Initial Average Value of Initial Average
December 31, 1996 $10,000 Investment Cumulative Annual $10,000 Investment Cumulative Annual
----------------- ------------------ ---------- ------ ------------------ ---------- ------
One Year $12,218 + 22.18% + 22.18% $12,296 + 22.96% + 22.96%
Five Years 20,825 + 108.25% + 15.80% 20,305 + 103.05% + 15.20%
Ten Years 38,185 + 281.85% + 14.34% 41,485 + 314.85% + 15.28%
</TABLE>
The Standard & Poor's 500 Stock Index is an unmanaged index of 500 industrial,
transportation, utility and financial companies which is widely regarded as
representative of the equity market in general. The Standard & Poor's 500 Stock
Index does not take into account the brokerage and other transaction costs
investors incur when investing directly in stocks on the index. The Fund's
performance reflects actual investment experience, net of all operating
expenses, which are paid from the Fund's gross investment income.
"Growth of a $10,000 investment" includes reinvestment of dividends and capital
gain distributions, if any.
The investment return and principal value of the Fund's shares represent past
performance and will vary due to market conditions, and the shares may be worth
more or less at redemption than at original purchase.
* For definition of "capital change" please see "Distribution and performance
information."
- --------------------------------------------------------------------------------
6
<PAGE>
Additional information about policies and investments
Investment restrictions
The Fund has adopted certain fundamental policies which may not be changed
without a vote of shareholders and which are designed to reduce the Fund's
investment risk.
The Fund may not borrow money except as a temporary measure for extraordinary or
emergency purposes or except in connection with reverse repurchase agreements,
and may not make loans except through the lending of portfolio securities, the
purchase of debt securities or through repurchase agreements.
A complete description of these and other policies and restrictions is contained
under "Investment Restrictions" in the Fund's Statement of Additional
Information.
Securities lending
The Fund may lend portfolio securities to registered broker/dealers as a means
of increasing its income. These loans may not exceed 33 1/3% of the Fund's total
assets taken at market value. Loans of portfolio securities will be secured
continuously by collateral consisting of U.S. Government securities or
fixed-income obligations that are maintained at all times in an amount at least
equal to the current market value of the loaned securities. The Fund will earn
any interest or dividends paid on the loaned securities and may share with the
borrower some of the income received on the collateral for the loan or will be
paid a premium for the loan.
Repurchase agreements
As a means of earning income for periods as short as overnight, the Fund may
enter into repurchase agreements with selected banks and broker/dealers. Under a
repurchase agreement, the Fund acquires securities, subject to the seller's
agreement to repurchase them at a specified time and price.
Convertible securities
The Fund may invest in convertible securities which may offer higher income than
the common stocks into which they are convertible. The convertible securities in
which the Fund may invest include fixed-income or zero coupon debt 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
While the Fund generally emphasizes investments in companies domiciled in the
U.S., it may invest in listed and unlisted foreign securities that meet the same
criteria as the Fund's domestic holdings. The Fund may invest in foreign
securities when the anticipated performance of the foreign securities is
believed by the Adviser to offer more return potential than domestic
alternatives in keeping with the investment objective of the Fund. The Fund may
enter into forward foreign currency exchange contracts in connection with the
purchase and sale of securities denominated in a foreign currency.
Real estate investment trusts
The Fund may purchase real estate investment trusts ("REITs"), which pool
investors' funds for investment primarily in income-producing real estate or
real estate-related loans or interests. REITs can generally be classified as
equity REITs, mortgage REITs and hybrid REITs. Equity REITs, which invest the
majority of their assets directly in real property, derive their income
primarily from rents. Equity REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage REITs, which invest the
majority of their assets in real estate mortgages, derive their income primarily
from interest payments on real estate mortgages in which they are invested.
Hybrid REITs combine the characteristics of both equity REITs and mortgage
REITs.
7
<PAGE>
Additional information about policies and investments (cont'd)
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.
Securities lending. From time to time the Fund may lend its portfolio securities
to registered broker/dealers as described above. The risks of lending portfolio
securities, as with other extensions of secured credit, consist of possible
delays in receiving additional collateral or in the recovery of the securities
or possible loss of rights in the collateral should the borrower fail
financially. Loans will be made to registered broker/dealers deemed by the
8
<PAGE>
Adviser to be of good standing and will not be made unless, in the judgment of
the Adviser, the consideration to be earned from such loans would justify the
risk.
Repurchase agreements. If the seller under a repurchase agreement becomes
insolvent, the Fund's right to dispose of the securities may be restricted, or
the value of the securities may decline before the Fund is able to dispose of
them. In the event of the commencement of bankruptcy or insolvency proceedings
with respect to the seller of the securities before repurchase of the securities
under a repurchase agreement, the Fund may encounter delay and incur costs,
including a decline in the value of the securities, before being able to sell
the securities.
Convertible securities. While convertible securities generally offer lower
yields than nonconvertible debt securities of similar quality, their prices may
reflect changes in the value of the underlying common stock. Convertible
securities entail less credit risk than the issuer's common stock.
Foreign securities. Investments in foreign securities involve special
considerations due to limited information, higher brokerage costs, different
accounting standards, thinner trading markets as compared to domestic markets
and the likely impact of foreign taxes on the yield from debt securities. They
may also entail other risks, such as the possibility of one or more of the
following: imposition of dividend or interest withholding or confiscatory taxes;
currency blockages or transfer restrictions; expropriation, nationalization or
other adverse political or economic developments; less government supervision
and regulation of securities exchanges, brokers and listed companies; and the
difficulty of enforcing obligations in other countries. Purchases of foreign
securities are usually made in foreign currencies and, as a result, the Fund may
incur currency conversion costs and may be affected favorably or unfavorably by
changes in the value of foreign currencies against the U.S. dollar.
Further, it may be more difficult for the Fund's agents to keep currently
informed about corporate actions which may affect the prices of portfolio
securities. Communications between the U.S. and foreign countries may be less
reliable than within the U.S., increasing the risk of delayed settlements of
portfolio transactions or loss of certificates for portfolio securities. The
Fund's ability and decisions to purchase and sell portfolio securities may be
affected by laws or regulations relating to the convertibility of currencies and
repatriation of assets. Some countries restrict the extent to which foreigners
may invest in their securities markets.
Real estate investment trusts. Investment in REITs may subject the Fund to risks
similar to those associated with the direct ownership of real estate (in
addition to securities markets risks). REITs are sensitive to factors such as
changes in real estate values and property taxes, interest rates, cash flow of
underlying real estate assets, supply and demand, and the management skill and
creditworthiness of the issuer. REITs may also be affected by tax and regulatory
requirements.
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
9
<PAGE>
Additional information about policies and investments (cont'd)
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.
Zero coupon securities. Zero coupon securities are subject to greater market
value fluctuations from changing interest rates than debt obligations of
comparable maturities that make current cash distributions of interest.
Illiquid and restricted investments. The absence of a trading market can make it
difficult to ascertain a market value for illiquid and restricted investments.
Disposing of illiquid and restricted investments may involve time-consuming
negotiation and legal expenses, and it may be difficult or impossible for the
Fund to sell them promptly at an acceptable price.
Distribution and performance information
Dividends and capital gains distributions
The Fund intends to distribute any dividends from its net investment income
quarterly in April, July, October and December. The Fund intends to distribute
net realized capital gains after utilization of capital loss carryforwards, if
any, in November or December to prevent application of a federal excise tax. An
additional distribution may be made at a later date, if necessary. Any dividends
or capital gains distributions declared in October, November or December with a
record date in such a month and paid during the following January will be
treated by shareholders for federal income tax purposes as if received on
December 31 of the calendar year declared.
According to preference, shareholders may receive distributions in cash or have
them reinvested in additional shares of the Fund. If an investment is in the
form of a retirement plan, all dividends and capital gains distributions must be
reinvested into the shareholder's account.
Generally, dividends from net investment income are taxable to shareholders as
ordinary income. Long-term capital gains distributions, if any, are taxable as
long-term capital gains regardless of the length of time shareholders have owned
shares. Short-term capital gains and any other taxable income distributions are
taxable as ordinary income. A portion of dividends from ordinary income may
qualify for the dividends-received deduction for corporations.
The Fund sends detailed tax information to its shareholders about the amount and
type of its distributions by January 31 of the following year.
10
<PAGE>
Performance information
From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature or shareholder reports. All performance figures
are historical, show the performance of a hypothetical investment and are not
intended to indicate future performance. "Total return" is the change in value
of an investment in the Fund for a specified period. The "average annual total
return" of the Fund is the average annual compound rate of return of an
investment in the Fund assuming the investment has been held for one year, five
years and ten years as of a stated ending date. "Cumulative total return"
represents the cumulative change in value of an investment in the Fund for
various periods. All types of total return calculations assume that all
dividends and capital gains distributions during the period were reinvested in
shares of the Fund. "Capital change" measures return from capital, including
reinvestment of any capital gains distributions but does not include the
reinvestment of dividends. Performance will vary based upon, among other things,
changes in market conditions and the level of the Fund's expenses.
Fund organization
Scudder Growth and Income Fund is a diversified series of Scudder Investment
Trust (the "Trust"), an open-end management investment company registered under
the Investment Company Act of 1940 (the "1940 Act"). The Trust, formerly known
as Scudder Growth and Income Fund, was organized as a Massachusetts business
trust in September 1984 and on December 31, 1984 assumed the business of its
predecessor, which was organized as a Massachusetts corporation in May 1929.
The Fund's activities are supervised by the Trust's Board of Trustees.
Shareholders have one vote for each share held on matters on which they are
entitled to vote. The Trust is not required to hold and has no current intention
of holding annual shareholder meetings, although special meetings may be called
for purposes such as electing or removing Trustees, changing fundamental
investment policies or approving an investment management contract. Shareholders
will be assisted in communicating with other shareholders in connection with
removing a Trustee as if Section 16(c) of the 1940 Act were applicable.
Investment adviser
The Fund retains the investment management firm of Scudder, Stevens & Clark,
Inc., a Delaware corporation, to manage the Fund's daily investment and business
affairs subject to the policies established by the Board of Trustees. The
Trustees have overall responsibility for the management of the Fund under
Massachusetts law.
The Adviser receives an investment management fee for these services. As of May
1, 1997, the Fund pays the Adviser an annual fee of 0.60% of the first $500
million of average daily net assets, 0.55% of such assets in excess of $500
million, 0.50% of such assets in excess of $1 billion, 0.475% of such assets in
excess of $1.5 billion, 0.45% of such assets in excess of $2 billion, 0.425% of
such assets in excess of $3 billion and 0.405% of such assets in excess of $4.5
billion. The fee is graduated so that increases in the Fund's net assets may
result in a lower annual fee rate and decreases in the Fund's net assets may
result in a higher annual fee rate. The fee is payable monthly, provided that
the Fund will make such interim payments as may be requested by the Adviser not
to exceed 75% of the amount of the fee then accrued on the books of the Fund and
unpaid.
Prior to May 1, 1997, the Fund paid the Adviser an annual fee of 0.60% of the
first $500 million of average daily net assets, 0.55% of such assets in excess
of $500 million, 0.50% of such assets in excess of $1 billion, 0.475% of such
assets in excess of $1.5 billion, 0.45% of such assets in
(Continued on page 14)
11
<PAGE>
Purchases
<TABLE>
<CAPTION>
Opening Minimum initial investment: $2,500; IRAs $1,000
an account Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums.
See appropriate plan literature.
<S> <C> <C> <C>
Make checks o By Mail Send your completed and signed application and check
payable to "The
Scudder Funds." by regular mail to: or by express, registered,
or certified mail to:
The Scudder Funds Scudder Shareholder
P.O. Box 2291 Service Center
Boston, MA 42 Longwater Drive
02107-2291 Norwell, MA
02061-1612
o By Wire Please see Transaction information--Purchasing shares--
By wire for details, including the ABA wire transfer number.
Then call 1-800-225-5163 for instructions.
o In Person Visit one of our Funds Centers to complete your application
with the help of a Scudder representative. Funds Center
locations are listed under Shareholder benefits.
-----------------------------------------------------------------------------------------------------------------------
Purchasing Minimum additional investment: $100; IRAs $50
additional Group retirement plans (401(k), 403(b), etc.) have similar or lower minimums.
shares See appropriate plan literature.
Make checks o By Mail Send a check with a Scudder investment slip, or with a letter of
payable to "The instruction including your account number and the complete
Scudder Funds." Fund name, to the appropriate address listed above.
o By Wire Please see Transaction information--Purchasing shares--
By wire for details, including the ABA wire transfer number.
o In Person Visit one of our Funds Centers to make an additional
investment in your Scudder fund account. Funds Center
locations are listed under Shareholder benefits.
o By Telephone Please see Transaction information--Purchasing shares--
By AutoBuy or By telephone order for more details.
o By Automatic You may arrange to make investments on a regular basis
Investment Plan through automatic deductions from your bank checking
($50 minimum) account. Please call 1-800-225-5163 for more information and
an enrollment form.
</TABLE>
12
<PAGE>
Exchanges and redemptions
<TABLE>
<CAPTION>
Exchanging Minimum investments: $2,500 to establish a new account;
shares $100 to exchange among existing accounts
<S> <C>
o By Telephone To speak with a service representative, call 1-800-225-5163 from
8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day).
o By Mail Print or type your instructions and include:
or Fax - the name of the Fund and the account number you are exchanging from;
- your name(s) and address as they appear on your account;
- the dollar amount or number of shares you wish to exchange;
- the name of the Fund you are exchanging into;
- your signature(s) as it appears on your account; and
- a daytime telephone number.
Send your instructions
by regular mail to: or by express, registered, or by fax to:
or certified mail to:
The Scudder Funds Scudder Shareholder 1-800-821-6234
P.O. Box 2291 Service Center
Boston, MA 02107-2291 42 Longwater Drive
Norwell, MA
02061-1612
-----------------------------------------------------------------------------------------------------------------------
Redeeming o By Telephone To speak with a service representative, call 1-800-225-5163 from
shares 8 a.m. to 8 p.m. eastern time or to access SAIL(TM), Scudder's Automated
Information Line, call 1-800-343-2890 (24 hours a day). You may have
redemption proceeds sent to your predesignated bank account, or
redemption proceeds of up to $100,000 sent to your address of record.
o By Mail Send your instructions for redemption to the appropriate address or fax
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;
- your signature(s) as it appears on your account; and
- a daytime telephone number.
A signature guarantee is required for redemptions over $100,000.
See Transaction information--Redeeming shares.
o By Automatic You may arrange to receive automatic cash payments periodically.
Withdrawal Call 1-800-225-5163 for more information and an enrollment form.
Plan
</TABLE>
13
<PAGE>
Fund organization (cont'd)
(Continued from page 11)
excess of $2 billion, 0.425% of such assets in excess of $3 billion.
For the fiscal year ended December 31, 1996, the Adviser received an investment
management fee of 0.49% 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
subsidiary of the Adviser, is the transfer, shareholder servicing and
dividend-paying agent for the Fund.
Underwriter
Scudder Investor Services, Inc., a subsidiary of the Adviser, is the Fund's
principal underwriter. Scudder Investor Services, Inc. confirms, as agent, all
purchases of shares of the Fund. Scudder Investor Relations is a telephone
information service provided by Scudder Investor Services, Inc.
Fund accounting agent
Scudder Fund Accounting Corporation, a subsidiary of the Adviser, is responsible
for determining the daily net asset value per share and maintaining the general
accounting records of the Fund.
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 receives the purchase request in good order. Purchases
are made in full and fractional shares. (See "Share price.")
By check. If you purchase shares with a check that does not clear, your purchase
will be canceled and you will be subject to any losses or fees incurred in the
transaction. Checks must be drawn on or payable through a U.S. bank. If you
purchase shares by check and redeem them within seven business days of purchase,
the Fund may hold redemption proceeds until the purchase check has cleared. If
you purchase shares by federal funds wire, you may avoid this delay. Redemption
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. 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.
14
<PAGE>
Orders must be for $10,000 or more and cannot be for an amount greater than four
times the value of your account at the time the order is placed. A confirmation
with complete purchase information is sent shortly after your order is received.
You must include with your payment the order number given at the time the order
is placed. If payment by check or wire is not received within three business
days, the order is subject to cancellation and the shareholder will be
responsible for any loss to the Fund resulting from this cancellation. Telephone
orders are not available for shares held in Scudder IRA accounts and most other
Scudder retirement plan accounts.
By "AutoBuy." If you elected "AutoBuy" for your account, you can call toll-free
to purchase shares. The money will be automatically transferred from your
predesignated bank checking account. Your bank must be a member of the Automated
Clearing House for you to use this service. If you did not elect "AutoBuy," call
1-800-225-5163 for more information.
To purchase additional shares, call 1-800-225-5163. Purchases may not be for
more than $250,000. Proceeds in the amount of your purchase will be transferred
from your bank checking account in two or three business days following your
call. For requests received by the close of regular trading on the Exchange,
shares will be purchased at the net asset value per share calculated at the
close of trading on the day of your call. "AutoBuy" requests received after the
close of regular trading on the Exchange will begin their processing and be
purchased at the net asset value calculated the following business day.
If you purchase shares by "AutoBuy" and redeem them within seven days of the
purchase, the Fund may hold the redemption proceeds for a period of up to seven
business days. If you purchase shares and there are insufficient funds in your
bank account, the purchase will be canceled and you will be subject to any
losses or fees incurred in the transaction. "AutoBuy" transactions are not
available for most retirement plan accounts. However, "AutoBuy" transactions are
available for Scudder IRA 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 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.
15
<PAGE>
Transaction information (cont'd)
In the event that you are unable to reach the Fund by telephone, you should
write to the Fund; see "How to contact Scudder" for the address.
By "AutoSell." If you elected "AutoSell" for your account, you can call
toll-free to redeem shares. The money will be automatically transferred to your
predesignated bank checking account. Your bank must be a member of the Automated
Clearing House for you to use this service.
If you did not elect "AutoSell," call 1-800-225-5163 for more information.
To redeem shares, call 1-800-225-5163. Redemptions must be for at least $250.
Proceeds in the amount of your redemption will be transferred to your bank
checking account in two or three business days following your call. For requests
received by the close of regular trading on the Exchange, shares will be
redeemed at the net asset value per share calculated at the close of trading on
the day of your call. "AutoSell" requests received after the close of regular
trading on the Exchange will begin their processing and be redeemed at the net
asset value calculated the following business day.
"AutoSell" transactions are not available for Scudder IRA accounts and most
other retirement plan accounts.
Signature guarantees. For your protection and to prevent fraudulent redemptions,
on written redemption requests in excess of $100,000 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 SEC. Signature guarantees by notaries public are
not acceptable. Redemption requirements for corporations, other organizations,
trusts, fiduciaries, agents, institutional investors and retirement plans may be
different from those for regular accounts. For more information, please call
1-800-225-5163.
Telephone transactions
Shareholders automatically receive the ability to exchange by telephone and the
right to redeem by telephone up to $100,000 to their address of record.
Shareholders also may, by telephone, request that redemption proceeds be sent to
a predesignated bank account. The Fund uses procedures designed to give
reasonable assurance that telephone instructions are genuine, including
recording telephone calls, testing a caller's identity and sending written
confirmation of telephone transactions. If the Fund does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Fund will not be liable for acting upon instructions
communicated by telephone that it reasonably believes to be genuine.
Share price
Purchases and redemptions, including exchanges, are made at net asset value.
Scudder Fund Accounting Corporation determines net asset value per share as of
the close of regular trading on the Exchange, normally 4 p.m. eastern time, on
each day the Exchange is open for trading.
Net asset value per share is calculated by dividing the value of total Fund
assets, less all liabilities, by the total number of shares outstanding.
Processing time
All purchase and redemption requests must be received in good order by the
Fund's transfer agent. Those requests received by the close of regular trading
on the Exchange are executed at the net asset value per share calculated at the
close of trading that day. Purchase and redemption requests received after the
16
<PAGE>
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 redemption proceeds within one business day
following the redemption request, but may take up to seven business days (or
longer in the case of shares recently purchased by check).
Purchase restrictions
Purchases and sales should be made for long-term investment purposes only. The
Fund and Scudder Investor Services, Inc. each reserves the right to reject
purchases of Fund shares (including exchanges) for any reason including 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 $2,500, which amount
may be changed by the Board of Trustees. Scudder retirement plans and certain
other accounts have similar or lower minimum share balance requirements. A
shareholder may open an account with at least $1,000, if an automatic investment
plan of $100/month is established.
Shareholders who maintain a non-fiduciary account balance of less than $2,500 in
the Fund, without establishing an automatic investment plan, will be assessed an
annual $10.00 per fund charge with the fee to be paid to the Fund. The $10.00
charge will not apply to shareholders with a combined household account balance
in any of the Scudder Funds of $25,000 or more. The Fund reserves the right,
following 60 days' written notice to shareholders, to redeem all shares in
accounts below $250, including accounts of new investors, where a reduction in
value has occurred due to a redemption or exchange out of the account. The Fund
will mail the proceeds of the redeemed account to the shareholder. Reductions in
value that result solely from market activity will not trigger an involuntary
redemption. Retirement accounts and certain other accounts will not be assessed
the $10.00 charge or be subject to automatic liquidation.
Please refer to "Exchanges and Redemptions--Other Information" in the Fund's
Statement of Additional Information for more information.
Third party transactions
If purchases and redemptions of Fund shares are arranged and settlement is made
17
<PAGE>
Transaction information (cont'd)
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 Growth and Income Fund is managed by a team of Scudder investment
professionals, who each play an important role in the Fund's management process.
Team members work together to develop investment strategies and select
securities for the Fund's portfolio. They are supported by Scudder's large staff
of economists, research analysts, traders and other investment specialists who
work in Scudder's offices across the United Stated and abroad. Scudder believes
its team approach benefits Fund investors by bringing together many disciplines
and leveraging Scudder's extensive resources.
Lead Portfolio Manager, Robert T. Hoffman leads a team of investment
professionals responsible for the management of the Fund and other portfolios
managed in a similar fashion. Mr. Hoffman has had responsibility for setting the
Fund's stock investing strategy and overseeing the Fund's day-to-day operations
since 1991. Mr. Hoffman, who joined Scudder in 1990 as a portfolio manager, has
13 years of experience in the investment industry, including several years of
pension fund management experience.
Lori Ensinger, Portfolio Manager joined the portfolio management team in 1993,
and the Fund in 1996. Ms. Ensinger focuses on stock selection and investment
strategy. She has worked as a portfolio manager since 1983, and joined Scudder
in 1993.
Deborah Chaplin, Portfolio Manager, has focused on stock selection and
investment strategy since joining the portfolio management team in 1997. Ms.
Chaplin, who joined Scudder in 1996 has over four years of investment experience
as a securities analyst and portfolio manager. Prior to joining Scudder, Ms.
Chaplin was a research fellow in the Faculty of Letters at Kyoto University,
Japan.
Benjamin W. Thorndike, Portfolio Manager, is the Fund's chief analyst and
strategist for convertible securities. Mr Thorndike, who has 18 years of
investment experience, joined Scudder in 1983 as a portfolio manager, and the
Fund in 1986.
Kathleen T. Millard, Portfolio Manager, has been involved in the investment
industry since 1983 and has worked as a portfolio manager since 1986. Ms.
Millard, who joined the portfolio management team and Scudder in 1991, focuses
on strategy and stock selection.
18
<PAGE>
SAIL(TM)--Scudder Automated Information Line
For personalized account information including fund prices, yields and account
balances, to perform transactions in existing Scudder fund accounts, or to
obtain information on any Scudder fund, shareholders can call Scudder's
Automated Information Line (SAIL) at 1-800-343-2890, 24 hours a day. During
periods of extreme economic or market changes, or other conditions, it may be
difficult for you to effect telephone transactions in your account. In such an
event you should write to the Fund; please see "How to contact Scudder" for the
address.
Investment flexibility
Scudder offers toll-free telephone exchange between funds at current net asset
value. You can move your investments among money market, income, growth,
tax-free and growth and income funds with a simple toll-free call or, if you
prefer, by sending your instructions through the mail or by fax. Telephone and
fax redemptions and exchanges are subject to termination and their terms are
subject to change at any time by the Fund or the transfer agent. In some cases,
the transfer agent or Scudder Investor Services, Inc. may impose additional
conditions on telephone transactions.
Personal Counsel(SM) -- A Managed Fund Portfolio Program
If you would like to receive direct guidance and management of your overall
mutual fund portfolio to help you pursue your investment goals, you may be
interested in Personal Counsel from Scudder. Personal Counsel, a program of
Scudder Investor Services, Inc., a registered investment adviser and a
subsidiary of Scudder, Stevens & Clark, Inc., combines the benefits of a
customized portfolio of pure no-load Scudder Funds with ongoing portfolio
monitoring and individualized service, for an annual fee of generally 1% or less
of assets (with a $1,000 minimum). In addition, it draws upon Scudder's more
than 75-year heritage of providing investment counsel to large corporate and
private clients. If you have $100,000 or more to invest initially and would like
more information about Personal Counsel, please call 1-800-700-0183.
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 Perspectives, 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,
New York and San Francisco.
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.
19
<PAGE>
Scudder tax-advantaged retirement plans
Scudder offers a variety of tax-advantaged retirement plans for individuals,
businesses and non-profit organizations. These flexible plans are designed for
use with the Scudder Family of Funds (except Scudder tax-free funds, which are
inappropriate for such plans). Scudder Funds offer a broad range of investment
objectives and can be used to seek almost any investment goal. Using Scudder's
retirement plans can help shareholders save on current taxes while building
their retirement savings.
o Scudder No-Fee IRAs. These retirement plans allow a maximum annual
contribution of up to $2,000 per person for anyone with earned income (up
to $2,000 per individual for married couples if only one spouse has 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 you no annual custodial fee.
o 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.
o 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. The
Scudder Keogh charges you no annual custodial fee.
o 403(b) Plans. Retirement plans for tax-exempt organizations and school
systems to which employers and employees may both contribute.
o 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. The Scudder SEP-IRA charges
you no annual custodial fee.
o Scudder Horizon Plan. A no-load variable annuity that lets you build
assets by deferring taxes on your investment earnings. You can start
with $2,500 or more.
Scudder Trust Company (an affiliate of the Adviser) is Trustee or Custodian for
some of these plans and is paid an annual fee for some of the above retirement
plans. For information about establishing a Scudder No-Fee IRA, SEP-IRA, Profit
Sharing Plan, Money Purchase Pension Plan or a Scudder Horizon Plan, please call
1-800-225-2470. For information about 401(k)s or 403(b)s please call
1-800-323-6105. To effect transactions in existing IRA, SEP-IRA, Profit Sharing
or Pension Plan accounts, call 1-800-225-5163.
The variable annuity contract is provided by Charter National Life Insurance
Company (in New York State, Intramerica Life Insurance Company [S 1802]). The
contract is offered by Scudder Insurance Agency, Inc. (in New York State, Nevada
and Montana, Scudder Insurance Agency of New York, Inc.). CNL, Inc. is the
Principal Underwriter. Scudder Horizon Plan is not available in all states.
Scudder Investor Relations is a service provided through Scudder Investor
Services, Inc., Distributor.
20
<PAGE>
Trustees and Officers
Daniel Pierce*
President and Trustee
Henry P. Becton, Jr.
Trustee; President and General Manager,
WGBH Educational Foundation
Dudley H. Ladd*
Trustee
George M. Lovejoy, Jr.
Trustee; President and Director,
Fifty Associates
Wesley W. Marple, Jr.
Trustee; Professor of Business Administration,
Northeastern University
Jean C. Tempel
Trustee; General Partner,
TL Ventures
Kathryn L. Quirk*
Trustee
Bruce F. Beaty*
Vice President
William F. Gadsden
Vice President
Jerard K. Hartman*
Vice President
Robert T. Hoffman*
Vice President
Thomas W. Joseph*
Vice President
David S. Lee*
Vice President
Valerie F. Malter*
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
*Scudder, Stevens & Clark, Inc.
21
<PAGE>
Investment products and services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
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 Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund*
Scudder Massachusetts Limited
Term Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund
Retirement Programs
- -------------------
IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan *+++ +++
(a variable annuity)
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.
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. +++Funds within categories are listed in order from
expected least risk to most risk. +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.
22
<PAGE>
How to contact Scudder
Account Service and Information:
For existing account service and transactions
Scudder Investor Relations -- 1-800-225-5163
For 24 hour account information, fund information, exchanges, and an
overview of all the services available to you
Scudder Electronic Account Services -- http://funds.scudder.com
For personalized information about your Scudder accounts, exchanges and
redemptions Scudder Automated Information Line
(SAIL) -- 1-800-343-2890
Investment Information:
For information about the Scudder funds, including additional
applications and prospectuses, or for answers to investment questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services -- 1-800-323-6105
Scudder Brokerage Services:
To receive information about this discount brokerage service and
to obtain an application
Scudder Brokerage Services* -- 1-800-700-0820
Personal Counsel(SM) -- A Managed Fund Portfolio Program:
To receive information about this mutual fund portfolio guidance
and management program
Personal Counsel from Scudder -- 1-800-700-0183
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 Chicago San Francisco
Boston New York
Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA
02061--Member NASD/SIPC.
23
<PAGE>
SCUDDER GROWTH AND INCOME FUND
A Pure No-Load(TM) (No Sales Charges) Diversified
Mutual Fund Seeking Long-Term Growth of
Capital, Current Income and
Growth of Income
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1997
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the prospectus of Scudder Growth and Income Fund dated
May 1, 1997, as amended from time to time, a copy of which may be obtained
without charge by writing to Scudder Investor Services, Inc., Two International
Place, Boston, Massachusetts 02110-4103.
<PAGE>
TABLE OF CONTENTS
PAGE
THE FUND'S INVESTMENT OBJECTIVE AND POLICIES 1
General Investment Objective and Policies 1
Investment Process 1
Investment Restrictions 13
PURCHASES 16
Additional Information About Opening An Account 16
Additional Information About Making Subsequent Investments 16
Additional Information About Making Subsequent Investments by
AutoBuy 16
Checks 17
Wire Transfer of Federal Funds 17
Share Price 17
Share Certificates 18
Other Information 18
EXCHANGES AND REDEMPTIONS 18
Exchanges 18
Redemption by Telephone 19
Redemption by AutoSell 20
Redemption by Mail or Fax 20
Redemption-In-Kind 21
Other Information 21
FEATURES AND SERVICES OFFERED BY THE FUND 22
The Pure No-Load(TM)Concept 22
Internet access 23
Dividend and Capital Gain Distribution Options 24
Diversification 24
Scudder Funds Centers 24
Reports to Shareholders 24
Transaction Summaries 24
THE SCUDDER FAMILY OF FUNDS 25
SPECIAL PLAN ACCOUNTS 29
Scudder Retirement Plans: Profit-Sharing and Money Purchase
Pension Plans for Corporations and Self-Employed Individuals 29
Scudder 401(k): Cash or Deferred Profit-Sharing Plan for
Corporations and Self-Employed Individuals 29
Scudder IRA: Individual Retirement Account 29
Scudder 403(b) Plan 30
Automatic Withdrawal Plan 30
Group or Salary Deduction Plan 31
Automatic Investment Plan 31
Uniform Transfers/Gifts to Minors Act 31
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS 31
PERFORMANCE INFORMATION 32
Average Annual Total Return 32
Cumulative Total Return 33
Total Return 33
Capital Change 33
Comparison of Fund Performance 33
i
<PAGE>
TABLE OF CONTENTS (continued)
PAGE
FUND ORGANIZATION 37
INVESTMENT ADVISER 38
Personal Investments by Employees of the Adviser 41
TRUSTEES AND OFFICERS 41
REMUNERATION 43
Responsibilities of the Board_Board and Committee Meetings 43
Compensation of Officers and Trustees 43
DISTRIBUTOR 44
TAXES 45
PORTFOLIO TRANSACTIONS 49
Brokerage 49
Portfolio Turnover 50
NET ASSET VALUE 50
ADDITIONAL INFORMATION 51
Experts 51
Shareholder Indemnification 51
Other Information 51
FINANCIAL STATEMENTS 52
ii
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE AND POLICIES
(See "Investment objectives and policies" and "Additional information
about policies and investments" in the Fund's prospectus.)
General Investment Objective and Policies
Scudder Growth and Income Fund (the "Fund"), a series of Scudder
Investment Trust (the "Trust"), is a pure no-load(TM), diversified, open-end
management investment company which continuously offers and redeems its shares.
It is a company of the type commonly known as a mutual fund.
The Fund seeks long-term growth of capital, current income and growth of
income.
The Fund invests primarily in common stocks, preferred stocks and
securities convertible into common stocks of companies which offer the prospect
for growth of earnings while paying current dividends. Over time, continued
growth of earnings tends to lead to higher dividends and enhancement of capital
value. The Fund allocates its investments among different industries and
companies and adjusts portfolio securities for investment considerations and not
for trading purposes.
The Fund attempts to achieve its investment objective by investing
primarily in dividend-paying common stocks, preferred stocks and securities
convertible into common stocks. The Fund may purchase securities of real estate
investment trusts ("REITs") and certain mortgage-backed securities. The Fund may
also purchase such securities which do not pay current dividends but which offer
prospects for growth of capital and future income. Convertible securities (which
may be current coupon or zero coupon securities) are bonds, notes, debentures,
preferred stocks and other securities which may be converted or exchanged at a
stated or determinable exchange ratio into underlying shares of common stock.
The Fund may also invest in nonconvertible preferred stocks consistent with the
Fund's objective. From time to time, for temporary defensive purposes, when the
Fund's investment adviser, Scudder, Stevens & Clark, Inc. (the "Adviser") feels
such a position is advisable in light of economic or market conditions, the Fund
may invest a portion of its assets in cash and cash equivalents. The Fund may
invest in foreign securities. It may also invest in repurchase agreements and
loan securities and may engage in strategic transactions.
Investment Process
The Adviser applies a disciplined investment approach for selecting stocks
for the Fund. The first stage of this process involves analyzing the pool of
dividend-paying equity securities, and targeting the stocks that have high
yields relative to the yield of the Standard & Poor 500 Index, a
commonly-accepted benchmark for the U.S. stock market. Also, the Adviser screens
for stocks that have yields at the upper end of the stock's historical yield
range. The Fund's portfolio will invest primarily in established,
dividend-paying U.S. companies, but it may include foreign stocks which meet its
relative yield criteria.
In the Advisor's opinion, this subset of higher-yielding stocks offers
potential for returns that are greater than or equal to the S&P 500, at less
risk than that market index. These favorable risk and return characteristics
exist because the higher dividends offered by these stocks act as a "cushion"
when markets are volatile and because stocks with higher yields tend to sell at
more attractive valuations (e.g., lower price-to-earning ratios and lower
price-to-book ratios).
Once this subset of higher-yielding stocks is identified, the Adviser
conducts fundamental analysis of each company's financial strength,
profitability, projected earnings, sustainability of dividends, and ability of
management. The Fund's portfolio may include stocks which are out of favor in
the market, but which, in the opinion of the Adviser, offer compelling
valuations and potential for long-term appreciation in price and dividends. In
diversifying the Fund's portfolio among different industry sectors, the Adviser
evaluates how each sector reacts to economic factors such as interest rates,
inflation, Gross Domestic Product, and consumer spending. The Fund's portfolio
is constructed by attaining a proper balance of stocks in these sectors based on
the Adviser's economic forecasts.
<PAGE>
The Adviser applies a disciplined criteria for selling stocks in the
Fund's portfolio as well. When the Adviser determines that the relative yield of
a stock declines too far below the yield of the S&P 500, or that the yield is at
the lower end of the stock's historic range, the stock generally is sold from
the Fund's portfolio. Similarly, if the Adviser's fundamental analysis
determines that the stock's dividend is at risk, or that market expectations for
the stock are too high, the stock is targeted for potential sale. In summary,
the Adviser applies disciplined buy and sell criteria, fundamental company and
industry analysis, and economic forecasts in managing the Fund to pursue
long-term price appreciation and income with lower overall volatility than the
market.
The Fund cannot guarantee a gain or eliminate the risk of loss. The net
asset value of the Fund's shares will increase or decrease with changes in the
market prices of the Fund's investments and there is no assurance that the
Fund's objective will be achieved. Except as otherwise noted, the Fund's
investment objective and policies may be changed by the Trustees without a vote
of the shareholders.
Convertible Securities. The Fund may invest in convertible securities; that is,
bonds, notes, debentures, preferred stocks, and other securities which are
convertible into common stocks. Investments in convertible securities may
provide income through interest and dividend payments and/or an opportunity for
capital appreciation by virtue of their conversion or exchange features.
The convertible securities in which the Fund may invest include
fixed-income or zero coupon debt securities which may be converted or exchanged
at a stated or determinable exchange ratio into underlying shares of common
stock. The exchange ratio for any particular convertible security may be
adjusted from time to time due to stock splits, dividends, spin-offs, other
corporate distributions, or scheduled changes in the exchange ratio. Convertible
debt securities and convertible preferred stocks, until converted, have general
characteristics similar to both debt and equity securities. Although to a lesser
extent than with debt securities generally, the market value of convertible
securities tends to decline as interest rates increase and, conversely, tends to
increase as interest rates decline. In addition, because of the conversion or
exchange feature, the market value of convertible securities typically changes
as the market value of the underlying common stocks changes, and, therefore,
also tends to follow movements in the general market for equity securities. A
unique feature of convertible securities is that as the market price of the
underlying common stock declines, convertible securities tend to trade
increasingly on a yield basis and so may not experience market value declines to
the same extent as the underlying common stock. When the market price of the
underlying common stock increases, the prices of the convertible securities tend
to rise as a reflection of the value of the underlying common stock, although
typically not as much as the underlying common stock. While no securities
investments are without risk, investments in convertible securities generally
entail less risk than investments in common stock of the same issuer.
As debt securities, convertible securities are investments which provide
for a stream of income (or in the case of zero coupon securities, accretion of
income) with generally higher yields than common stocks. Of course, like all
debt securities, there can be no assurance of income or principal payments
because the issuers of the convertible securities may default on their
obligations. Convertible securities generally offer lower yields than
non-convertible securities of similar quality because of their conversion or
exchange features.
Convertible securities generally are subordinated to other similar but
non-convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock, of the
same issuer. However, because of the subordination feature, convertible bonds
and convertible preferred stock typically have lower ratings than similar
non-convertible securities.
Convertible securities may be issued as fixed income obligations that pay
current income or as zero coupon notes and bonds, including Liquid Yield Option
Notes (LYONS). Zero coupon securities pay no cash income and are sold at
substantial discounts from their value at maturity. When held to maturity, their
entire income, which consists of accretion of discount, comes from the
difference between the issue price and their value at maturity. Zero coupon
convertible securities offer the opportunity for capital appreciation as
increases (or decreases) in market value of such securities closely follow the
movements in the market value of the underlying common stock. Zero coupon
convertible securities generally are expected to be less volatile than the
2
<PAGE>
underlying common stocks as they usually are issued with shorter maturities (15
years or less) and are issued with options and/or redemption features
exercisable by the holder of the obligation entitling the holder to redeem the
obligation and receive a defined cash payment.
Foreign Securities. While the Fund generally emphasizes investments in companies
domiciled in the U.S., it may invest in listed and unlisted foreign securities
that meet the same criteria as the Fund's domestic holdings. The Fund may invest
in foreign securities when the anticipated performance of the foreign securities
is believed by the Adviser to offer more potential than domestic alternatives in
keeping with the investment objective of the Fund.
Investors should recognize that investing in foreign securities involves
certain special considerations, including those set forth below, which are not
typically associated with investing in U.S. securities and which may favorably
or unfavorably affect the Fund's performance. As foreign companies are not
generally subject to uniform accounting and auditing and financial reporting
standards, practices and requirements comparable to those applicable to domestic
companies, there may be less publicly available information about a foreign
company than about a domestic company. Many foreign stock markets, while growing
in volume of trading activity, have substantially less volume than the New York
Stock Exchange (the "Exchange") and securities of some foreign companies are
less liquid and more volatile than securities of domestic companies. Similarly,
volume and liquidity in most foreign bond markets are less than the volume and
liquidity in the U.S. and at times, volatility of price can be greater than in
the U.S. Further, foreign markets have different clearance and settlement
procedures and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when assets of the Fund are uninvested and no return is earned
thereon. The inability of the Fund to make intended security purchases due to
settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of portfolio securities due to settlement
problems either could result in losses to the Fund due to subsequent declines in
value of the portfolio security or, if the Fund has entered into a contract to
sell the security, could result in possible liability to the purchaser. Fixed
commissions on some foreign stock exchanges are generally higher than negotiated
commissions on U.S. exchanges, although the Fund will endeavor to achieve the
most favorable net results on its portfolio transactions. Further, the Fund may
encounter difficulties or be unable to pursue legal remedies and obtain
judgments in foreign courts. There is generally less government supervision and
regulation of business and industry practices, stock exchanges, brokers and
listed companies than in the U.S. It may be more difficult for the Fund's agents
to keep currently informed about corporate actions such as stock dividends or
other matters which may affect the prices of portfolio securities.
Communications between the U.S. and foreign countries may be less reliable than
within the U.S., thus increasing the risk of delayed settlements of portfolio
transactions or loss of certificates for portfolio securities. In addition, with
respect to certain foreign countries, there is the possibility of
nationalization, expropriation, the imposition of withholding or confiscatory
taxes, political, social, or economic instability or diplomatic developments
which could affect U.S. investments in those countries. Investments in foreign
securities may also entail certain risks, such as possible currency blockages or
transfer restrictions and the difficulty of enforcing rights in other countries.
Moreover, individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position.
These considerations generally are more of a concern in developing
countries. For example, the possibility of revolution and the dependence on
foreign economic assistance may be greater in these countries than in developed
countries. The management of the Fund seeks to mitigate the risks associated
with these considerations through diversification and active professional
management. Although investments in companies domiciled in developing countries
may be subject to potentially greater risks than investments in developed
countries, the Fund will not invest in any securities of issuers located in
developing countries if the securities, in the judgment of the Adviser, are
speculative.
Investments in foreign securities usually will involve currencies of
foreign countries. Moreover, the Fund may temporarily hold funds in bank
deposits in foreign currencies during the completion of investment programs and
the value of these assets for the Fund as measured in U.S. dollars may be
affected favorably or unfavorably by changes in foreign currency exchange rates
and exchange control regulations and the Fund may incur costs in connection with
conversions between various currencies. Although the Fund values its assets
daily in terms of U.S. dollars, it does not intend to convert its holdings of
foreign currencies, if any, into U.S. dollars on a daily basis. It may do so
from time to time and investors should be aware of the costs of currency
3
<PAGE>
conversion. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference (the "spread")
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Fund at one rate
while offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer. The Fund will conduct its foreign currency exchange
transactions, if any, either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign currency exchange market or through forward foreign
currency exchange contracts. (See "Currency Transactions" for more information.)
To the extent that the Fund invests in foreign securities, the Fund's share
price could reflect the movements of both the different stock and bond markets
in which it is invested and the currencies in which the investments are
denominated; the strength or weakness of the U.S. dollar against foreign
currencies could account for part of that Fund's investment performance.
Lending of Portfolio Securities. The Fund may seek to increase its income by
lending portfolio securities. Such loans may be made to registered
broker/dealers and are required to be secured continuously by collateral in
cash, U.S. Government Securities and liquid high grade debt obligations
maintained on a current basis at an amount at least equal to the market value
and accrued interest of the securities loaned. The Fund has the right to call a
loan and obtain the securities loaned on no more than five days' notice. During
the existence of a loan, the Fund will continue to receive the equivalent of any
distributions paid by the issuer on the securities loaned and will also receive
compensation based on investment of the collateral. As with other extensions of
credit there are risks of delay in recovery or even loss of rights in the
collateral should the borrower of the securities fail financially. However, the
loans will be made only to firms deemed by the Adviser to be of good standing.
The value of the securities loaned will not exceed 331/3% of the value of the
Fund's total assets at the time any loan is made.
Repurchase Agreements. The Fund may enter into repurchase agreements with any
member bank of the Federal Reserve System and any broker/dealer which is
recognized as a reporting government securities dealer if the creditworthiness
of the bank or broker/dealer has been determined by the Adviser to be at least
as high as that of other obligations the Fund may purchase or to be at least
equal to that of issuers of commercial paper rated within the two highest grades
assigned by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's ("S&P").
A repurchase agreement provides a means for the Fund to earn income on
funds for periods as short as overnight. It is an arrangement under which the
Fund acquires a security ("Obligation") and the seller agrees, at the time of
sale, to repurchase the Obligation at a specified time and price. Obligations
subject to a repurchase agreement are held in a segregated account and the value
of such obligations kept at least equal to the repurchase price on a daily
basis. The repurchase price may be higher than the purchase price, the
difference being income to the Fund, or the purchase and repurchase prices may
be the same, with interest at a stated rate due to the Fund together with the
repurchase price on repurchase. In either case, the income to the Fund is
unrelated to the interest rate on the Obligation itself. Obligations will be
held by the Fund's custodian or in the Federal Reserve Book Entry System.
For purposes of the Investment Company Act of 1940, as amended (the "1940
Act"), a repurchase agreement is deemed to be a loan from the Fund to the seller
of the Obligation subject to the repurchase agreement and is therefore subject
to the Fund's investment restriction applicable to loans. It is not clear
whether a court would consider the Obligation purchased by the Fund subject to a
repurchase agreement as being owned by the Fund or as being collateral for a
loan by the Fund to the seller. In the event of the commencement of bankruptcy
or insolvency proceedings with respect to the seller of the Obligation before
repurchase of the Obligation under a repurchase agreement, the Fund may
encounter delay and incur costs before being able to sell the security. Delays
may result in loss of interest or decline in price of the Obligation. If the
court characterizes the transaction as a loan and the Fund has not perfected a
security interest in the Obligation, the Fund may be required to return the
Obligation to the seller's estate and be treated as an unsecured creditor of the
seller. As an unsecured creditor, the Fund would be at the risk of losing some
or all of the principal and income involved in the transaction. As with any
unsecured debt instrument purchased for the Fund, the Adviser seeks to minimize
the risk of loss through repurchase agreements by analyzing the creditworthiness
of the obligor, in this case the seller of the Obligation. Apart from the risk
of bankruptcy or insolvency proceedings, there is also the risk that the seller
may fail to repurchase the Obligation, in which case the Fund may incur a loss
if the proceeds to the Fund of its sale of the securities underlying the
repurchase agreement to a third party are less than the repurchase price. To
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protect against such potential loss, if the market value (including interest) of
the Obligation subject to the repurchase agreement becomes less than the
repurchase price (including interest), the Fund will direct the seller of the
Obligation to deliver additional securities so that the market value (including
interest) of all securities subject to the repurchase agreement will equal or
exceed the repurchase price. It is possible that the Fund will be unsuccessful
in seeking to enforce the seller's contractual obligation to deliver additional
securities.
Real Estate Investment Trusts. The Fund may invest in REITs. REITs are sometimes
informally characterized as equity REITs, mortgage REITs and hybrid REITs.
Investment in REITs may subject the Fund to risks associated with the direct
ownership of real estate, such as decreases in real estate values, overbuilding,
increased competition and other risks related to local or general economic
conditions, increases in operating costs and property taxes, changes in zoning
laws, casualty or condemnation losses, possible environmental liabilities,
regulatory limitations on rent and fluctuations in rental income. Equity REITs
generally experience these risks directly through fee or leasehold interests,
whereas mortgage REITs generally experience these risks indirectly through
mortgage interests, unless the mortgage REIT forecloses on the underlying real
estate. Changes in interest rates may also affect the value of the Fund's
investment in REITs. For instance, during periods of declining interest rates,
certain mortgage REITs may hold mortgages that the mortgagors elect to prepay,
which prepayment may diminish the yield on securities issued by those REITs.
Certain REITs have relatively small market capitalization, which may tend
to increase the volatility of the market price of their securities. Furthermore,
REITs are dependent upon specialized management skills, have limited
diversification and are, therefore, subject to risks inherent in operating and
financing a limited number of projects. REITs are also subject to heavy cash
flow dependency, defaults by borrowers and the possibility of failing to qualify
for tax-free pass-through of income under the Internal Revenue Code of 1986, as
amended and to maintain exemption from the registration requirements of the 1940
Act. By investing in REITs indirectly through the Fund, a shareholder will bear
not only his or her proportionate share of the expenses of the Fund, but also,
indirectly, similar expenses of the REITs. In addition, REITs depend generally
on their ability to generate cash flow to make distributions to shareholders.
Mortgage-Backed Securities and Mortgage Pass-Through Securities. The Fund may
invest in mortgage-backed securities, which are interests in pools of mortgage
loans, including mortgage loans made by savings and loan institutions, mortgage
bankers, commercial banks and others. Pools of mortgage loans are assembled as
securities for sale to investors by various governmental, government-related and
private organizations as further described below. The Fund may also invest in
debt securities which are secured with collateral consisting of mortgage-backed
securities (see "Collateralized Mortgage Obligations"), and in other types of
mortgage-related securities.
A decline in interest rates may lead to a faster rate of repayment of the
underlying mortgages, and expose the Fund to a lower rate of return upon
reinvestment. To the extent that such mortgage-backed securities are held by the
Fund, the prepayment right will tend to limit to some degree the increase in net
asset value of the Fund because the value of the mortgage-backed securities held
by the Fund may not appreciate as rapidly as the price of non-callable debt
securities.
When interest rates rise, mortgage prepayment rates decline, thus
lengthening the life of a mortgage-related security and increasing the price
volatility of that security, affecting the price volatility of the Fund's
shares.
Interests in pools of mortgage-backed securities differ from other forms
of debt securities, which normally provide for periodic payment of interest in
fixed amounts with principal payments at maturity or specified call dates.
Instead, these securities provide a monthly payment which consists of both
interest and principal payments. In effect, these payments are a "pass-through"
of the monthly payments made by the individual borrowers on their mortgage
loans, net of any fees paid to the issuer or guarantor of such securities.
Additional payments are caused by repayments of principal resulting from the
sale of the underlying property, refinancing or foreclosure, net of fees or
costs which may be incurred. Some mortgage-related securities (such as
securities issued by the Government National Mortgage Association) are described
as "modified pass-through." These securities entitle the holder to receive all
interest and principal payments owed on the mortgage pool, net of certain fees,
at the scheduled payment dates regardless of whether or not the mortgagor
actually makes the payment.
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The principal governmental guarantor of mortgage-related securities is the
Government National Mortgage Association ("GNMA"). GNMA is a wholly-owned U.S.
Government corporation within the Department of Housing and Urban Development.
GNMA is authorized to guarantee, with the full faith and credit of the U.S.
Government, the timely payment of principal and interest on securities issued by
institutions approved by GNMA (such as savings and loan institutions, commercial
banks and mortgage bankers) and backed by pools of FHA-insured or VA-guaranteed
mortgages. These guarantees, however, do not apply to the market value or yield
of mortgage-backed securities or to the value of Fund shares. Also, GNMA
securities often are purchased at a premium over the maturity value of the
underlying mortgages. This premium is not guaranteed and will be lost if
prepayment occurs.
Government-related guarantors (i.e., not backed by the full faith and
credit of the U.S. Government) include the Federal National Mortgage Association
("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA is a
government-sponsored corporation owned entirely by private stockholders. It is
subject to general regulation by the Secretary of Housing and Urban Development.
FNMA purchases conventional (i.e., not insured or guaranteed by any government
agency) mortgages from a list of approved seller/servicers which include state
and federally-chartered savings and loan associations, mutual savings banks,
commercial banks and credit unions and mortgage bankers. Pass- through
securities issued by FNMA are guaranteed as to timely payment of principal and
interest by FNMA but are not backed by the full faith and credit of the U.S.
Government.
FHLMC is a corporate instrumentality of the U.S. Government and was
created by Congress in 1970 for the purpose of increasing the availability of
mortgage credit for residential housing. Its stock is owned by the twelve
Federal Home Loan Banks. FHLMC issues Participation Certificates ("PCs") which
represent interests in conventional mortgages from FHLMC's national portfolio.
FHLMC guarantees the timely payment of interest and ultimate collection of
principal, but PCs are not backed by the full faith and credit of the U.S.
Government.
Commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market issuers also
create pass-through pools of conventional mortgage loans. Such issuers may, in
addition, be the originators and/or servicers of the underlying mortgage loans
as well as the guarantors of the mortgage-related securities. Pools created by
such non-governmental issuers generally offer a higher rate of interest than
government and government-related pools because there are no direct or indirect
government or agency guarantees of payments. However, timely payment of interest
and principal of these pools may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance and
letters of credit. The insurance and guarantees are issued by governmental
entities, private insurers and the mortgage poolers. Such insurance and
guarantees and the creditworthiness of the issuers thereof will be considered in
determining whether a mortgage-related security meets the Fund's investment
quality standards. There can be no assurance that the private insurers or
guarantors can meet their obligations under the insurance policies or guarantee
arrangements. The Fund may buy mortgage-related securities without insurance or
guarantees, if through an examination of the loan experience and practices of
the originators/servicers and poolers, the Fund Manager determines that the
securities meet the Fund's quality standards. Although the market for such
securities is becoming increasingly liquid, securities issued by certain private
organizations may not be readily marketable.
Collateralized Mortgage Obligations ("CMOs"). The Fund may invest in CMOs which
are hybrids between mortgage-backed bonds and mortgage pass-through securities.
Similar to a bond, interest and prepaid principal are paid, in most cases,
semiannually. CMOs may be collateralized by whole mortgage loans but are more
typically collateralized by portfolios of mortgage pass-through securities
guaranteed by GNMA, FHLMC, or FNMA, and their income streams.
CMOs are structured into multiple classes, each bearing a different stated
maturity. Actual maturity and average life will depend upon the prepayment
experience of the collateral. CMOs provide for a modified form of call
protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payment of principal
received from the pool of underlying mortgages, including prepayments, is first
returned to investors holding the shortest maturity class. Investors holding the
longer maturity classes receive principal only after the first class has been
retired. An investor is partially guarded against a sooner than desired return
of principal because of the sequential payments.
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In a typical CMO transaction, a corporation issues multiple series, (e.g.,
A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering are used to
purchase mortgages or mortgage pass-through certificates ("Collateral"). The
Collateral is pledged to a third party trustee as security for the Bonds.
Principal and interest payments from the Collateral are used to pay principal on
the Bonds in the order A, B, C, Z. The Series A, B, and C bonds all bear current
interest. Interest on the Series Z Bond is accrued and added to principal and a
like amount is paid as principal on the Series A, B, or C Bond currently being
paid off. When the Series A, B, and C Bonds are paid in full, interest and
principal on the Series Z Bond begins to be paid currently. With some CMOs, the
issuer serves as a conduit to allow loan originators (primarily builders or
savings and loan associations) to borrow against their loan portfolios.
Strategic Transactions and Derivatives. The Fund may, but is not required to,
utilize various other investment strategies as described below to hedge various
market risks (such as interest rates, currency exchange rates, and broad or
specific equity or fixed-income market movements), to manage the effective
maturity or duration of the Fund's portfolio, or to enhance potential gain.
These strategies may be executed through the use of derivative contracts. Such
strategies are generally accepted as a part of modern portfolio management and
are regularly utilized by many mutual funds and other institutional investors.
Techniques and instruments may change over time as new instruments and
strategies are developed or regulatory changes occur.
In the course of pursuing these investment strategies, the Fund may
purchase and sell exchange-listed and over-the-counter put and call options on
securities, equity and fixed-income indices and other financial instruments,
purchase and sell financial futures contracts and options thereon, enter into
various interest rate transactions such as swaps, caps, floors or collars, and
enter into various currency transactions such as currency forward contracts,
currency futures contracts, currency swaps or options on currencies or currency
futures (collectively, all the above are called "Strategic Transactions").
Strategic Transactions may be used without limit to attempt to protect against
possible changes in the market value of securities held in or to be purchased
for the Fund's portfolio resulting from securities markets or currency exchange
rate fluctuations, to protect the Fund's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage the effective maturity or duration of fixed-income
securities in the Fund's portfolio, or to establish a position in the
derivatives markets as a temporary substitute for purchasing or selling
particular securities. Some Strategic Transactions may also be used to enhance
potential gain although no more than 5% of the Fund's assets will be committed
to Strategic Transactions entered into for non-hedging purposes. Any or all of
these investment techniques may be used at any time and in any combination, and
there is no particular strategy that dictates the use of one technique rather
than another, as use of any Strategic Transaction is a 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
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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
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generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. The
Fund will only sell OTC options (other than OTC currency options) that are
subject to a buy-back provision permitting the Fund to require the Counterparty
to sell the option back to the Fund at a formula price within seven days. The
Fund expects generally to enter into OTC options that have cash settlement
provisions, although it is not required to do so.
Unless the parties provide for it, there is no central clearing or
guaranty function in an OTC option. As a result, if the Counterparty fails to
make or take delivery of the security, currency or other instrument underlying
an OTC option it has entered into with the Fund or fails to make a cash
settlement payment due in accordance with the terms of that option, the Fund
will lose any premium it paid for the option as well as any anticipated benefit
of the transaction. Accordingly, the Adviser must assess the creditworthiness of
each such Counterparty or any guarantor or credit enhancement of the
Counterparty's credit to determine the likelihood that the terms of the OTC
option will be satisfied. The Fund will engage in OTC option transactions only
with U.S. government securities dealers recognized by the Federal Reserve Bank
of New York as "primary dealers" or broker/dealers, domestic or foreign banks or
other financial institutions which have received (or the guarantors of the
obligation of which have received) a short-term credit rating of A-1 from S&P or
P-1 from Moody's or an equivalent rating from any nationally recognized
statistical rating organization ("NRSRO") or, in the case of OTC currency
transactions, are determined to be of equivalent credit quality by the Adviser.
The staff of the SEC currently takes the position that OTC options purchased by
the Fund, and portfolio securities "covering" the amount of the Fund's
obligation pursuant to an OTC option sold by it (the cost of the sell-back plus
the in-the-money amount, if any) are illiquid, and are subject to the Fund's
limitation on investing no more than 10% of its assets in illiquid securities.
If the Fund sells a call option, the premium that it receives may serve as
a partial hedge, to the extent of the option premium, against a decrease in the
value of the underlying securities or instruments in its portfolio or will
increase the Fund's income. The sale of put options can also provide income.
The Fund may purchase and sell call options on securities including U.S.
Treasury and agency securities, mortgage-backed securities, corporate debt
securities, equity securities (including convertible securities) and Eurodollar
instruments that are traded on U.S. and foreign securities exchanges and in the
over-the-counter markets, and on securities indices, currencies and futures
contracts. All calls sold by the Fund must be "covered" (i.e., the Fund must own
the securities or futures contract subject to the call) or must meet the asset
segregation requirements described below as long as the call is outstanding.
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
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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
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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
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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 cash or liquid
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 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 cash or liquid
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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 cash or
liquid 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
cash or liquid 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 cash or liquid 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 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 may not be
changed without the approval of a majority of the outstanding voting securities
of the Fund involved which, under the 1940 Act and the rules thereunder and as
used in this Statement of Additional Information, means the lesser of (1) 67% or
more of the voting securities present at a meeting, if the holders of more than
50% of the outstanding voting securities of the Fund are present or represented
by proxy; or (2) more than 50% of the outstanding voting securities of the Fund.
Any investment restrictions herein which involve a maximum percentage of
securities or assets shall not be considered to be violated unless an excess
over the percentage occurs immediately after, and is caused by, an acquisition
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or encumbrance of securities or assets of, or borrowings by, a Fund. The Fund is
under no restriction as to the amount of portfolio securities which may be
bought or sold.
As a matter of fundamental policy, the Fund may not:
1. with respect to 75% of its total assets taken at market value purchase
more than 10% of the voting securities of any one issuer; or invest
more than 5% of the value of its total assets in the securities of any
one issuer, except obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and except securities of
other investment companies;
2. borrow money except as a temporary measure for extraordinary or
emergency purposes or except in connection with reverse repurchase
agreements provided that the Fund maintains asset coverage of 300% for
all borrowings;
3. purchase or sell real estate (except that the Fund may invest in (i)
securities of companies which deal in real estate or mortgages, and
(ii) securities secured by real estate or interests therein, and that
the Fund reserves freedom of action to hold and to sell real estate
acquired as a result of the Fund's ownership of securities); or
purchase or sell physical commodities or contracts relating to
physical commodities;
4. act as underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the
disposition of portfolio securities of the Fund;
5. make loans to other persons, except (a) loans of portfolio securities,
and (b) to the extent the entry into repurchase agreements and the
purchase of debt securities in accordance with its investment
objective and investment policies may be deemed to be loans;
6. issue senior securities, except as appropriate to evidence
indebtedness which it is permitted to incur and except for shares of
the separate classes or series of the Trust, provided that collateral
arrangements with respect to currency-related contracts, futures
contracts, options or other permitted investments, including deposits
of initial and variation margin, are not considered to be the issuance
of senior securities for purposes of this restriction; and
7. purchase any securities which would cause more than 25% of the market
value of its total assets at the time of such purchase to be invested
in the securities of one or more issuers having their principal
business activities in the same industry, provided that there is no
limitation in respect to investments in obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities
(for the purposes of this restriction, telephone companies are
considered to be in a separate industry from gas and electric public
utilities, and wholly-owned finance companies are considered to be in
the industry of their parents if their activities are primarily
related to financing the activities of their parents).
The Fund has undertaken that if the Fund obtains an exemptive order of the
SEC which would permit the taking of action in contravention of any policy which
may not be changed without a shareholder vote, the Fund will not take such
action unless either (i) the applicable exemptive order permits the taking of
such action without a shareholder vote or (ii) the staff of the SEC has issued
to the Fund a "no action" or interpretive letter to the effect that the Fund may
proceed without a shareholder vote.
As a matter of nonfundamental policy, the Fund may not:
(a) purchase or retain securities of any open-end investment company or
securities of closed-end investment companies except by purchase in
the open market where no commission or profit to a sponsor or dealer
results from such purchases, or except when such purchase, though not
made in the open market, is part of a plan of merger, consolidation,
reorganization or acquisition of assets; in any event the Fund may not
purchase more than 3% of the outstanding voting securities of another
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<PAGE>
investment company, may not invest more than 5% of its assets in
another investment company, and may not invest more than 10% of its
assets in other investment companies;
(b) pledge, mortgage or hypothecate its assets in excess, together with
permitted borrowings, of 1/3 of its total assets;
(c) purchase or retain securities of an issuer any of whose officers,
directors, trustees or security holders is an officer, director or
trustee of the Fund or a member, officer, director or trustee of the
investment adviser of the Fund if one or more of such individuals owns
beneficially more than one-half of one percent (1/2%) of the
outstanding shares or securities or both (taken at market value) of
such issuer and such individuals owning more than one-half of one
percent (1/2%) of such shares or securities together own beneficially
more than 5% of such shares or securities or both;
(d) purchase securities on margin or make short sales unless, by virtue of
its ownership of other securities, it has the right to obtain
securities equivalent in kind and amount to the securities sold and,
if the right is conditional, the sale is made upon the same
conditions, except in connection with arbitrage transactions and
except that the Fund may obtain such short-term credits as may be
necessary for the clearance of purchases and sales of securities;
(e) invest more than 10% of its total assets in securities which are not
readily marketable, the disposition of which is restricted under
Federal securities laws, or in repurchase agreements not terminable
within 7 days, and the Fund will not invest more than 10% 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 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);
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<PAGE>
(m) make securities loans if the value of such securities loaned exceeds
331/3% of the value of the Fund's total assets at the time any loan is
made; all loans of portfolio securities will be fully collateralized
and marked to market daily; and
(n) purchase or sell real estate limited partnership interests.
PURCHASES
(See "Purchases" and "Transaction information" in the
Fund's prospectus.)
Additional Information About Opening An Account
Clients having a regular investment counsel account with the Adviser or
its affiliates and members of their immediate families, officers and employees
of the Adviser or of any affiliated organization and their immediate families,
members of the National Association of Securities Dealers, Inc. ("NASD") and
banks may, if they prefer, subscribe initially for at least $2,500 of Fund
shares through Scudder Investor Services, Inc. (the "Distributor") by letter,
fax, TWX or telephone.
Shareholders of other Scudder funds who have submitted an account
application and have a certified taxpayer identification number, clients having
a regular investment counsel account with the Adviser or its affiliates and
members of their immediate families, officers and employees of the Adviser or of
any affiliated organization and their immediate families, members of the NASD
and banks may open an account by wire. These investors must call 1-800-225-5163
to get an account number. During the call the investor will be asked to indicate
the Fund name, amount to be wired ($2,500 minimum), name of bank or trust
company from which the wire will be sent, the exact registration of the new
account, the taxpayer identification or Social Security number, address and
telephone number. The investor must then call the bank to arrange a wire
transfer to The Scudder Funds, State Street Bank and Trust Company, Boston, MA
02101, ABA Number 011000028, DDA Account Number 9903-5552. The investor must
give the Scudder fund name, account name and new account number. Finally, the
investor must send the completed and signed application to the Fund promptly.
The minimum initial purchase amount is less than $2,500 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, and Scudder 401(k) and Scudder
403(b) Plan holders]. Orders placed in this manner may be directed to any office
of the Distributor listed in the Fund's prospectus. A two-part invoice of the
purchase will be mailed out promptly following receipt of a request to buy.
Payment should be attached to a copy of the invoice for proper identification.
Federal regulations require that payment be received within seven business days.
If payment is not received within that time, the shares may be canceled. In the
event of such cancellation or cancellation at the purchaser's request, the
purchaser will be responsible for any loss incurred by the Fund or the principal
underwriter by reason of such cancellation. If the purchaser is a shareholder,
the Fund shall have the authority, as agent of the shareholder, to redeem shares
in the account in order to reimburse the Fund or the principal underwriter for
the loss incurred. Net losses on such transactions which are not recovered from
the purchaser will be absorbed by the principal underwriter. Any net profit on
the liquidation of unpaid shares will accrue to the Fund.
Additional Information About Making Subsequent Investments by
AutoBuy
Shareholders, whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and who have elected to participate
in the AutoBuy program, may purchase shares of the Fund by telephone. Through
this service shareholders may purchase up to $250,000. To purchase shares by
AutoBuy, shareholders should call before 4 p.m. eastern time. Proceeds in the
amount of your purchase will be transferred from your bank checking account two
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or three business days following your call. For requests received by the close
of regular trading on the Exchange, shares will be purchased at the net asset
value per share calculated at the close of trading on the day of your call.
AutoBuy requests received after the close of regular trading on the Exchange
will begin their processing and be purchased at the net asset value calculated
the following business day. If you purchase shares by AutoBuy and redeem them
within seven days of the purchase, the Fund may hold the redemption proceeds for
a period of up to seven business days. If you purchase shares and there are
insufficient funds in your bank account the purchase will be canceled and you
will be subject to any losses or fees incurred in the transaction. AutoBuy
transactions are not available for most retirement plan accounts. However,
AutoBuy transactions are available for Scudder IRA accounts.
In order to request purchases by AutoBuy, shareholders must have completed
and returned to the Transfer Agent the application, including the designation of
a bank account from which the purchase payment will be debited. New investors
wishing to establish AutoBuy may so indicate on the application. Existing
shareholders who wish to add AutoBuy to their account may do so by completing an
AutoBuy Enrollment Form. After sending in an enrollment form shareholders should
allow for 15 days for this service to be available.
The Fund employs procedures, including recording telephone calls, testing
a caller's identity, and sending written confirmation of telephone transactions,
designed to give reasonable assurance that instructions communicated by
telephone are genuine, and to discourage fraud. To the extent that the Fund does
not follow such procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. The Fund will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine.
Checks
A certified check is not necessary but checks are only accepted subject to
collection at full face value in U.S. funds and must be drawn on, or payable
through, a U.S. bank.
If shares of the Fund are purchased by a check which proves to be
uncollectible, the Trust reserves the right to cancel the purchase immediately
and the purchaser will be responsible for any loss incurred by the Trust or the
principal underwriter by reason of such cancellation. If the purchaser is a
shareholder, the Trust will have the authority, as agent of the shareholder, to
redeem shares in the account in order to reimburse the Fund or the principal
underwriter for the loss incurred. Investors whose orders have been canceled may
be prohibited from, or restricted in, placing future orders in any of the
Scudder funds.
Wire Transfer of Federal Funds
To obtain the net asset value determined as of the close of regular
trading on the Exchange on a selected day, your bank must forward federal funds
by wire transfer and provide the required account information so as to be
available to the Fund prior to the close of regular trading on the Exchange
(normally 4 p.m., eastern time).
The bank sending an investor's federal funds by bank wire may charge for
the service. Presently the Distributor pays a fee for receipt by State Street
Bank and Trust Company (the "Custodian") of "wired funds," but the right to
charge investors for this service is reserved.
Boston banks are closed on certain holidays although the Exchange may be
open. These holidays include Martin Luther King, Jr. Day (the 3rd Monday in
January), Columbus Day (the 2nd Monday in October) and Veterans' Day (November
11). Investors are not able to purchase shares by wiring federal funds on such
holidays because the Custodian is not open to receive such federal funds on
behalf of the Fund.
Share Price
Purchases will be filled without sales charge at the net asset value next
computed after receipt of the application in good order. Net asset value
normally will be computed as of the close of regular trading on the Exchange on
each day during which the Exchange is open for trading. Orders received after
the close of regular trading on the Exchange will receive the next day's net
asset value. If the order has been placed by a member of the NASD, other than
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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 the Trust's management to afford ease of redemption,
certificates will not be issued to indicate ownership in the Fund. Share
certificates now in a shareholder's possession may be sent to Scudder Service
Corporation (the "Transfer Agent") for cancellation and credit to such
shareholder's account. Shareholders who prefer may hold the certificates in
their possession until they wish to exchange or redeem such shares. (See
"Redeeming shares" in the Fund's prospectus.)
Other Information
If purchases or redemptions of Fund shares are arranged and settlement is
made at the investor's election through a member of the NASD other than the
Distributor, that member may, at its discretion, charge a fee for that service.
The Board of Trustees and the Distributor, the Trust's principal
underwriter, each has the right to limit the amount of purchases by, and to
refuse to sell to, any person. The Trustees and the Distributor may suspend or
terminate the offering of shares of the Fund at any time.
The Tax Identification Number section of the application must be completed
when opening an account. Applications and purchase orders without a certified
tax identification number and certain other certified information (e.g., from
exempt organizations, certification of exempt status) will be returned to the
investor.
The Trust may issue shares of the Fund at net asset value in connection
with any merger or consolidation with, or acquisition of the assets of, any
investment company (or series thereof) or personal holding company, subject to
the requirements of the 1940 Act.
EXCHANGES AND REDEMPTIONS
(See "Exchanges and redemptions" and "Transaction information"
in the Fund's prospectus.)
Exchanges
Exchanges are comprised of a redemption from one Scudder fund and a
purchase into another Scudder fund. The purchase side of the exchange may be
either an additional investment into an existing account or may involve opening
a new account in another fund. When an exchange involves a new account, the new
account will be established with the same registration, tax identification
number, address, telephone redemption option, "Scudder Automated Information
Line" (SAIL) and dividend option as the existing account. Other features will
not carry over automatically to the new account. Exchanges into a new fund
account must be for a minimum of $2,500. When an exchange represents an
additional investment into an existing account, the account receiving the
exchange proceeds must have identical registration, tax identification number,
address, and account options/features as the account of origin. Exchanges into
an existing account must be for $100 or more. If the account receiving the
exchange proceeds is different in any respect, the exchange request must be in
writing and must contain an original signature guarantee as described under
"Transaction information--Redeeming shares--Signature guarantee" in the Fund's
prospectus.
Exchange orders received before the close of regular trading on the
Exchange on any business day ordinarily will be executed at the respective net
asset value determined on that day. Exchange orders received after the close of
regular trading on the Exchange will be executed on the following business day.
Investors may also request, at no extra charge, to have exchanges
automatically executed on a predetermined schedule from one Scudder fund to an
existing account in another Scudder fund, at current net asset value, through
Scudder's Automatic Exchange Program. Exchanges must be for a minimum of $50.
Shareholders may add this free feature over the telephone or in writing.
Automatic Exchanges will continue until the shareholder requests by telephone or
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in writing to have the feature removed, or until the originating account is
depleted. The Trust and the Transfer Agent each reserves the right to suspend or
terminate the privilege of the Automatic Exchange Program at any time.
There is no charge to the shareholder for any exchange described above. An
exchange into another Scudder fund is a redemption of shares, and therefore may
result in tax consequences (gain or loss) to the shareholder and the proceeds of
such exchange may be subject to backup withholding. (See "TAXES.")
Investors currently receive the exchange privilege, including exchange by
telephone, automatically without having to elect it. The Trust employs
procedures, including recording telephone calls, testing a caller's identity,
and sending written confirmation of telephone transactions, designed to give
reasonable assurance that instructions communicated by telephone are genuine,
and to discourage fraud. To the extent that the Trust does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Trust will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine. The Trust and the Transfer Agent each reserves the right to suspend or
terminate the privilege of exchanging by telephone or fax at any time.
The Scudder funds into which investors may make an exchange are listed
under "THE SCUDDER FAMILY OF FUNDS" herein. Before making an exchange,
shareholders should obtain a prospectus of the Scudder fund into which the
exchange is being contemplated from the Distributor.
Scudder retirement plans may have different exchange requirements. Please
refer to appropriate plan literature.
Redemption by Telephone
Shareholders currently receive the right, automatically without having to
elect it, to redeem by telephone up to $100,000 to their address of record.
Shareholders may also request by telephone to have the proceeds mailed or wired
to their predesignated bank account. In order to request wire redemptions by
telephone, shareholders must have completed and returned to the Transfer Agent
the application, including the designation of a bank account to which the
redemption proceeds are to be sent.
(a) NEW INVESTORS wishing to establish telephone redemption to a
predesignated bank account must complete the appropriate section on
the application.
(b) EXISTING SHAREHOLDERS (except those who are Scudder IRA, Scudder
Pension and Profit Sharing, Scudder 401(k) and Scudder 403(b) plan
holders) who wish to establish telephone redemption to a predesignated
bank account or who want to change the bank account previously
designated to receive redemption proceeds should either return a
Telephone Redemption Option Form (available upon request) or send a
letter identifying the account and specifying the exact information to
be changed. The letter must be signed exactly as the shareholder's
name(s) appears on the account. An original signature and an original
signature guarantee are required for each person in whose name the
account is registered.
Telephone redemption is not available with respect to shares represented
by share certificates or shares held in retirement accounts.
If a request for redemption to a shareholder's bank account is made by
telephone or fax, payment will be made by Federal Reserve Bank wire to the bank
account designated on the application unless a request is made that the
redemption check be mailed to the designated bank account. There will be a $5.00
charge for all wire redemptions.
Note: Investors designating that a savings bank receive their telephone
redemption proceeds are advised that if the savings bank is not a participant in
the Federal Reserve System, redemption proceeds must be wired through a
commercial bank which is a correspondent of the savings bank. As this may delay
receipt by the shareholder's account, it is suggested that investors wishing to
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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 requests by telephone (technically a repurchase by agreement
between the Trust and the shareholder) of shares purchased by check will not be
accepted until the purchase check has cleared, which may take up to seven
business days.
Redemption by AutoSell
Shareholders, whose predesignated bank account of record is a member of
the Automated Clearing House Network (ACH) and who have elected to participate
in the AutoSell program may sell shares of the Fund by telephone. To sell shares
by AutoSell, shareholders should call before 4 p.m. eastern time. Redemptions
must be for at least $250. Proceeds in the amount of your redemption will be
transferred to your bank checking account two or three business days following
your call. For requests received by the close of regular trading on the
Exchange, shares will be redeemed at the net asset value per share calculated at
the close of trading on the day of your call. AutoSell requests received after
the close of regular trading on the Exchange will begin their processing and be
redeemed at the net asset value calculated the following business day. AutoSell
transactions are not available for Scudder IRA accounts and most other
retirement plan accounts.
In order to request redemptions by AutoSell, shareholders must have
completed and returned to the Transfer Agent the application, including the
designation of a bank account from which the purchase payment will be debited.
New investors wishing to establish AutoSell may so indicate on the application.
Existing shareholders who wish to add AutoSell to their account may do so by
completing an AutoSell Enrollment Form. After sending in an enrollment form,
shareholders should allow for 15 days for this service to be available.
The Fund employs procedures, including recording telephone calls, testing
a caller's identity, and sending written confirmation of telephone transactions,
designed to give reasonable assurance that instructions communicated by
telephone are genuine, and to discourage fraud. To the extent that the Fund does
not follow such procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. The Fund will not be liable for acting upon
instructions communicated by telephone that it reasonably believes to be
genuine.
Redemption by Mail or Fax
Any existing share certificates representing shares being redeemed must
accompany a request for redemption and be duly endorsed or accompanied by a
proper stock assignment form with signature(s) guaranteed as explained in the
Fund's prospectus.
In order to ensure proper authorization before redeeming shares, the
Transfer Agent may request additional documents such as, but not restricted to,
stock powers, trust instruments, certificates of death, appointments as
executor, certificates of corporate authority and waivers of tax (required in
some states when settling estates).
It is suggested that shareholders holding share certificates or shares
registered in other than individual names contact the Transfer Agent prior to
redemptions to ensure that all necessary documents accompany the request. When
shares are held in the name of a corporation, trust, fiduciary agent, attorney
or partnership, the Transfer Agent requires, in addition to the stock power,
certified evidence of authority to sign. These procedures are for the protection
of shareholders and should be followed to ensure prompt payment. Redemption
requests must not be conditional as to date or price of the redemption. Proceeds
of a redemption will be sent within five business days after receipt by the
Transfer Agent of a request for redemption that complies with the above
requirements. Delays in payment of more than seven days for shares tendered for
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repurchase or redemption may result but only until the purchase check has
cleared.
The requirements for IRA redemptions are different from those for regular
accounts. For more information please call 1- 800-225-5163.
Redemption-In-Kind
The Trust reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase order by making
payment in whole or in part in readily marketable securities chosen by the Trust
and valued as they are for purposes of computing the Fund's net asset value (a
redemption- in-kind). If payment is made in securities, a shareholder may incur
transaction expenses in converting these securities into cash. The Fund has
elected, however, to be governed by Rule 18f-1 under the 1940 Act as a result of
which the Trust is obligated to redeem shares, with respect to any one
shareholder during any 90 day period, solely in cash up to the lesser of
$250,000 or 1% of the net asset value of the Fund at the beginning of the
period.
Other Information
Clients, officers or employees of the Adviser or of an affiliated
organization and members of such clients', officers' or employees' immediate
families, banks and members of the NASD may direct repurchase requests to the
Trust through the Distributor at Two International Place, Boston, Massachusetts
02110-4103 by letter, fax or telephone. A two-part confirmation will be mailed
out promptly after receipt of the redemption request. A written request in good
order as described above and any certificates with a proper signature
guarantee(s), as described in the Fund's prospectus under "Transaction
information_Redeeming shares_Signature guarantee", should be sent with a copy of
the invoice to Scudder Service Corporation, Confirmed Processing Department, Two
International Place, Boston, Massachusetts 02110- 4103. Failure to deliver
shares or required documents (see above) by the settlement date may result in
cancellation of the trade and the shareholder will be responsible for any loss
incurred by the Fund or the principal underwriter by reason of such
cancellation. The Trust will have the authority, as agent of the shareholder, to
redeem shares in the account in order to reimburse the Fund or the principal
underwriter for the loss incurred. Net losses on such transactions which are not
recovered from the shareholder will be absorbed by the principal underwriter.
Any net gains so resulting will accrue to the Fund. For this group, repurchases
will be carried out at the net asset value next computed after such repurchase
requests have been received. The arrangements described in this paragraph for
repurchasing shares are discretionary and may be discontinued at any time.
If a shareholder redeems all shares in the account after the record date
of a dividend, the shareholder will receive in addition to the net asset value
thereof, all declared but unpaid dividends thereon. The value of shares redeemed
or repurchased may be more or less than the shareholder's cost depending on the
net asset value at the time of redemption or repurchase. The Trust does not
impose a redemption or repurchase charge although a wire charge may be
applicable for redemption proceeds wired to an investor's bank account.
Redemption of shares, including an exchange into another Scudder fund, may
result in tax consequences (gain or loss) to the shareholder and the proceeds of
such redemptions may be subject to backup withholding. (See "TAXES.")
Shareholders who wish to redeem shares from Special Plan Accounts should
contact the employer, trustee or custodian of the Plan for the requirements.
The determination of net asset value may be suspended at times and a
shareholder's right to redeem shares and to receive payment may be suspended at
times during which (a) the Exchange is closed, other than customary weekend and
holiday closings, (b) trading on the Exchange is restricted, (c) an emergency
exists as a result of which disposal by the Trust of securities owned by it is
not reasonably practicable or it is not reasonably practicable for the Fund
fairly to determine the value of its net assets or (d) a governmental body
having jurisdiction over the Fund may by order permit such a suspension for the
protection of the Trust's shareholders; provided that applicable rules and
regulations of the SEC (or any succeeding governmental authority) will govern as
to whether the conditions prescribed in (b), (c) or (d) exist.
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If transactions at any time reduce a shareholder's account balance in the
Fund to below $2,500 in value, the Trust may notify the shareholder that, unless
the account balance is brought up to at least $2,500, 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 $2,500 before any
action will be taken by the Fund. No transfer from an existing account to a new
fund account may be for less than $2,500 or the new account will be redeemed as
described above. (This policy applies to accounts of new shareholders, but does
not apply to certain Special Plan Accounts.) The Trustees have the authority to
change the minimum account size.
FEATURES AND SERVICES OFFERED BY THE FUND
(See "Shareholder benefits" in the Fund's prospectus.)
The Pure No-Load(TM) Concept
Investors are encouraged to be aware of the full ramifications of mutual
fund fee structures, and of how Scudder distinguishes its funds from the vast
majority of mutual funds available today. The primary distinction is between
load and no-load funds.
Load funds generally are defined as mutual funds that charge a fee for the
sale and distribution of fund shares. There are three types of loads: front-end
loads, back-end loads, and asset-based 12b-1 fees. 12b-1 fees are
distribution-related fees charged against fund assets and are distinct from
service fees, which are charged for personal services and/or maintenance of
shareholder accounts. Asset-based sales charges and service fees are typically
paid pursuant to distribution plans adopted under 12b-1 under the 1940 Act.
A front-end load is a sales charge, which can be as high as 8.50% of the
amount invested. A back-end load is a contingent deferred sales charge, which
can be as high as 8.50% of either the amount invested or redeemed. The maximum
front-end or back-end load varies, and depends upon whether or not a fund also
charges a 12b-1 fee and/or a service fee or offers investors various sales-
related services such as dividend reinvestment. The maximum charge for a 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.
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No-Load
Scudder 8.50% Load Fund Fund with
YEARS Pure No- Load with 0.75% 0.25% 12b-1
Load(TM) Fund Fund 12b-1 Fee Fee
10 $ 25,937 $ 23,733 $ 24,222 $ 25,354
15 41,772 38,222 37,698 40,371
20 67,275 61,557 58,672 64,282
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.
Internet access
World Wide Web Site -- The address of the Scudder Funds site is
http://funds.scudder.com. The site offers guidance on global investing and
developing strategies to help meet financial goals and provides access to the
Scudder investor relations department via e-mail. The site also enables users to
access or view fund prospectuses and profiles with links between summary
information in Profiles and details in the Prospectus. Users can fill out new
account forms on-line, order free software, and request literature on funds.
The site is designed for interactivity, simplicity and maneuverability. A
section entitled "Planning Resources" provides information on asset allocation,
tuition, and retirement planning to users who fill out interactive "worksheets."
Investors can easily establish a "Personal Page," that presents price
information, updated daily, on funds they're interested in following. The
"Personal Page" also offers easy navigation to other parts of the site. Fund
performance data from both Scudder and Lipper Analytical Services, Inc. are
available on the site. Also offered on the site is a news feature, which
provides timely and topical material on the Scudder Funds.
Scudder has communicated with shareholders and other interested parties
on Prodigy since 1988 and has participated since 1994 in GALT's Networth
"financial marketplace" site on the Internet. The firm made Scudder Funds
information available on America Online in early 1996.
Account Access -- Scudder is among the first mutual fund families to allow
shareholders to manage their fund accounts through the World Wide Web. Scudder
Fund shareholders can view a snapshot of current holdings, review account
activity and move assets between Scudder Fund accounts.
Scudder's personal portfolio capabilities -- known as SEAS (Scudder
Electronic Account Services) -- are accessible only by current Scudder Fund
shareholders who have set up a Personal Page on Scudder's Web site. Using a
secure Web browser, shareholders sign on to their account with their Social
Security number and their SAIL password. As an additional security measure,
users can change their current password or disable access to their portfolio
through the World Wide Web.
An Account Activity option reveals a financial history of transactions for
an account, with trade dates, type and amount of transaction, share price and
number of shares traded. For users who wish to trade shares between Scudder
Funds, the Fund Exchange option provides a step-by-step procedure to exchange
shares among existing fund accounts or to new Scudder Fund accounts.
A Call Me(TM) feature enables users to speak with a Scudder Investor
Relations telephone representative while viewing their account on the Web site.
In order to use the Call MeTM feature, an individual must have two phone lines
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and enter on the screen the phone number that is not being used to connect to
the Internet. They are connected to the next available Scudder Investor
Relations representative from 8 a.m. to 8 p.m. eastern time.
Dividend and Capital Gain Distribution Options
Investors have freedom to choose whether to receive cash or to reinvest any
dividends from net investment income or distributions from realized capital
gains in additional shares of the Fund. A change of instructions for the method
of payment must be received by the Transfer Agent at least five days prior to a
dividend record date. Shareholders may change their dividend option either by
calling 1-800-225-5163 or by sending written instructions to the Transfer Agent.
Please include your account number with your written request. See "How to
contact Scudder" in the prospectus for the address.
Reinvestment is usually made at the closing net asset value determined on
the day following the record date. Investors may leave standing instructions
with the Transfer Agent designating their option for either reinvestment or cash
distribution of any income dividends or capital gains distributions. If no
election is made, dividends and distributions will be invested in additional
shares of the Fund.
Investors may also have dividends and distributions automatically
deposited to their predesignated bank account through Scudder's
DistributionsDirect Program. Shareholders who elect to participate in the
DistributionsDirect Program, and whose predesignated checking account of record
is with a member bank of the Automated Clearing House Network (ACH) can have
income and capital gain distributions automatically deposited to their personal
bank account usually within three business days after the Fund pays its
distribution. A DistributionsDirect request form can be obtained by calling
1-800-225-5163.
Investors choosing to participate in Scudder's Automatic Investment
Withdrawal Plan must reinvest any dividends or capital gains. For most
retirement plan accounts, the reinvestment of dividends and capital gains is
also required.
Diversification
Your investment represents an interest in a large, diversified portfolio of
carefully selected securities. Diversification may protect you against the
possible risks associated with concentrating in fewer securities or in a
specific market sector.
Scudder Funds Centers
Investors may visit any of the Fund Centers maintained by the Distributor.
The Centers are designed to provide individuals with services during any
business day. Investors may pick up literature or find assistance with opening
an account, adding monies or special options to existing accounts, making
exchanges within the Scudder Family of Funds, redeeming shares, or opening
retirement plans. Checks should not be mailed to the Centers but to "The Scudder
Funds" at the address listed under "How to Contact Scudder" in the Prospectus.
Reports to Shareholders
The Trust issues shareholders financial statements examined by independent
accountants on a semi-annual basis and audited annually. These include a list of
investments held and statements of assets and liabilities, operations, changes
in net assets and supplementary information.
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.
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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 $2,500 or $1,000 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 Global Bond Fund seeks to provide total return with an emphasis on
current income by investing primarily in high-grade bonds denominated in
foreign currencies and the U.S. dollar. As a secondary objective, the Fund
will seek capital appreciation.
Scudder GNMA Fund seeks to provide investors with high current income from
a portfolio of high-quality GNMA securities.
Scudder High Yield Bond Fund seeks to provide a high level of current
income and, secondarily, capital appreciation through investment primarily
in below investment grade domestic debt securities.
Scudder Income Fund seeks to earn a high level of income consistent with
the prudent investment of capital through a flexible investment program
emphasizing high-grade bonds.
Scudder International Bond Fund seeks to provide income from a portfolio of
high-grade bonds denominated in foreign currencies. As a secondary
objective, the Fund seeks protection and possible enhancement of principal
value by actively managing currency, bond market and maturity exposure and
by security selection.
Scudder Short Term Bond Fund seeks to provide a higher and more stable
level of income than is normally provided by money market investments, and
more price stability than investments in intermediate- and long-term bonds.
Scudder Zero Coupon 2000 Fund seeks to provide as high an investment return
over a selected period as is consistent with the minimization of
reinvestment risks through investments primarily in zero coupon securities.
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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 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 grade.
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.
- -------------------------------------------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
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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 Classic Growth Fund seeks long-term growth of capital with reduced
share price volatility compared to other growth mutual funds.
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 Emerging Markets Growth Fund seeks long-term growth of capital
primarily through equity investment in emerging markets around the globe.
Scudder Global Discovery 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 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 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 Large Company Growth Fund seeks to provide long-term growth of
capital through investment primarily in equity securities of large U.S.
growth companies.
Scudder Large Company Value Fund seeks to maximize long-term capital
appreciation through a broad and flexible investment program emphasizing
common stocks.
Scudder Latin America Fund seeks to provide long-term capital appreciation
through investment primarily in the securities of Latin American issuers.
- -------------------------------
* These funds are not available for sale in all states. For information,
contact Scudder Investor Services, Inc.
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<PAGE>
Scudder Micro Cap Fund seeks long-term growth of capital by investing
primarily in a diversified portfolio of U.S. micro- cap stocks.
Scudder Pacific Opportunities Fund seeks long-term growth of capital
through investment primarily in the equity securities of Pacific Basin
companies, excluding Japan.
Scudder Small Company Value Fund invests for long-term growth of capital by
seeking out undervalued stocks of small U.S.
companies.
Scudder 21st Century Growth Fund seeks long-term growth of capital by
investing primarily in securities of emerging growth companies poised to be
leaders in the 21st century.
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.
ASSET ALLOCATION
Scudder Pathway Series: Conservative Portfolio seeks primarily current
income and secondarily long-term growth of capital. In pursuing these
objectives, the Portfolio will, under normal market conditions, invest
substantially in a select mix of Scudder bond mutual funds, but will have
some exposure to Scudder equity mutual funds.
Scudder Pathway Series: Balanced Portfolio seeks a balance of growth and
income by investing in a select mix of Scudder money market, bond and
equity mutual funds.
Scudder Pathway Series: Growth Portfolio seeks to provide investors with
long-term growth of capital. In pursuing this objective, the Portfolio
will, under normal market conditions, invest predominantly in a select mix
of Scudder equity mutual funds designed to provide long-term growth.
Scudder Pathway Series: International Portfolio seeks maximum total return.
Total return consists of any capital appreciation plus dividend income and
interest. To achieve this objective, the Portfolio invests in a select mix
of international and global Scudder Funds.
The net asset values of most Scudder Funds can be found daily in the
"Mutual Funds" section of The Wall Street Journal under "Scudder Funds," and in
other leading newspapers throughout the country. Investors will notice the net
asset value and offering price are the same, reflecting the fact that no sales
commission or "load" is charged on the sale of shares of the Scudder Funds. The
latest seven-day yields for the money-market funds can be found every Monday and
Thursday in the "Money-Market Funds" section of The Wall Street Journal. This
information also may be obtained by calling the Scudder Automated Information
Line (SAIL) at 1- 800-343-2890.
The Scudder Family of Funds offers many conveniences and services,
including: active professional investment management; broad and diversified
investment portfolios; pure no-load funds with no commissions to purchase or
redeem shares or Rule 12b-1 distribution fees; individual attention from a
service representative of Scudder Investor Relations; easy telephone exchanges
into other Scudder funds.
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SPECIAL PLAN ACCOUNTS
(See "Scudder tax-advantaged retirement plans," "Purchases--By Auto matic
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 $2,000 per individual for married couples if only one spouse has earned
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income). All income and capital gains derived from IRA investments are
reinvested and compound tax-deferred until distributed. Such tax-deferred
compounding can lead to substantial retirement savings.
The table below shows how much individuals would accumulate in a fully
tax-deductible IRA by age 65 (before any distributions) if they contribute
$2,000 at the beginning of each year, assuming average annual returns of 5, 10,
and 15%. (At withdrawal, accumulations in this table will be taxable.)
Value of IRA at Age 65
Assuming $2,000 Deductible Annual Contribution
Starting
Age of Annual Rate of Return
Contributions 5% 10% 15%
25 $253,680 $973,704 $4,091,908
35 139,522 361,887 999,914
45 69,439 126,005 235,620
55 26,414 35,062 46,699
This next table shows how much individuals would accumulate in non-IRA
accounts by age 65 if they start with $2,000 in pretax earned income at the
beginning of each year (which is $1,380 after taxes are paid), assuming average
annual returns of 5, 10 and 15%. (At withdrawal, a portion of the accumulation
in this table will be taxable.)
Value of a Non-IRA Account at
Age 65 Assuming $1,380 Annual Contributions (post tax, $2,000
pretax) and a 31% Tax Bracket
Starting
Age of Annual Rate of Return
Contributions 5% 10% 15%
25 $119,318 $287,021 $741,431
35 73,094 136,868 267,697
45 40,166 59,821 90,764
55 16,709 20,286 24,681
Scudder 403(b) Plan
Shares of the Fund may also be purchased as the underlying investment for
tax sheltered annuity plans under the provisions of Section 403(b)(7) of the
Internal Revenue Code. In general, employees of tax-exempt organizations
described in Section 501(c)(3) of the Internal Revenue Code (such as hospitals,
churches, religious, scientific, or literary organizations and educational
institutions) or a public school system are eligible to participate in a 403(b)
plan.
Automatic Withdrawal Plan
Non-retirement plan shareholders may establish an Automatic Withdrawal Plan to
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
share--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
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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.
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
(See Distribution and performance information--Dividends and capital gains
distributions" in the Fund's prospectus.)
The Fund intends to follow the practice of distributing substantially all
of its investment company taxable income which includes any excess of net
realized short-term capital gains over net realized long-term capital losses.
The Fund may follow the practice of distributing the entire excess of net
realized long-term capital gains over net realized short-term capital losses.
However, the Fund may retain all or part of such gain for reinvestment, after
paying the related federal taxes for which shareholders may then be able to
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claim a credit against their federal tax liability. If the Fund does not
distribute the amount of capital gain and/or net investment income required to
be distributed by an excise tax provision of the Internal Revenue Code, the Fund
may be subject to that excise tax. In certain circumstances, the Fund may
determine that it is in the interest of shareholders to distribute less than the
required amount. (See "TAXES.")
The Fund intends to distribute investment company taxable income,
exclusive of net short-term capital gains in excess of net long-term capital
losses, in April, July, October and December each year. Distributions of net
capital gains realized during each fiscal year will be made annually before the
end of the Fund's fiscal year on December 31. Additional distributions,
including distributions of net short-term capital gains in excess of net
long-term capital losses, may be made within three months of the Fund's fiscal
year end, if necessary.
Both types of distributions will be made in shares of the Fund and
confirmations will be mailed to each shareholder unless a shareholder has
elected to receive cash, in which case a check will be sent.
PERFORMANCE INFORMATION
(See "Distribution and performance information--Performance information"
in the Fund's prospectus.)
From time to time, quotations of the Fund's performance may be included in
advertisements, sales literature or reports to shareholders or prospective
investors. These performance figures are calculated in the following manners:
Average Annual Total Return
Average annual total return is the average annual compound rate of return
for periods of one year, five years and ten years (or such shorter periods as
may be applicable dating from the commencement of the Fund's operations under
its current investment objective), all ended on the last day of a recent
calendar quarter. Average annual total return quotations reflect changes in the
price of the Fund's shares and assume that all dividends and capital gains
distributions during the respective periods were reinvested in Fund shares.
Average annual total return is calculated by finding the average annual compound
rates of return of a hypothetical investment, over such periods, according to
the following formula (average annual total return is then expressed as a
percentage):
T = (ERV/P)^1/n - 1
Where:
T = Average Annual Total Return.
P = a hypothetical initial investment of $1,000.
n = number of years.
ERV = ending redeemable value: ERV is the value, at the end of the
applicable period, of a hypothetical $1,000 investment made at the
beginning of the applicable period.
Average Annual Total Return for periods ended December 31, 1996
One Five Ten
Year Years Years
22.18% 15.80% 14.34%
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.
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In connection with communicating its average annual total return to
current or prospective shareholders, the Fund also may compare these figures to
the performance of other mutual funds tracked by mutual fund rating services or
to unmanaged indices which may assume reinvestment of dividends but generally do
not reflect deductions for administrative and management costs.
Cumulative Total Return
Cumulative total return is the cumulative rate of return on a hypothetical
initial investment of $1,000 for a specified period. Cumulative total return
quotations reflect changes in the price of a Fund's shares and assume that all
dividends and capital gains distributions during the period were reinvested in
Fund shares. Cumulative total return is calculated by finding the cumulative
rates of a return of a hypothetical investment over such periods, according to
the following formula (cumulative total return is then expressed as a
percentage):
C = (ERV/P)-1
Where:
C = Cumulative Total Return.
P = a hypothetical initial investment of
$1,000.
ERV = ending redeemable value: ERV is the value, at the end of the
applicable period, of a hypothetical $1,000 investment made at the
beginning of the applicable period.
Cumulative Total Return for periods ended December 31, 1996
One Five Ten
Year Years Years
22.18% 108.25% 281.85%
Total Return
Total return is the rate of return on an investment for a specified period
of time calculated in the same manner as cumulative total return.
Capital Change
Capital change measures the return from invested capital including
reinvested capital gains distributions. Capital change does not include the
reinvestment of income dividends.
Quotations of the Fund's performance are based on historical earnings,
show the performance of a hypothetical investment and are not intended to
indicate future performance of the Fund. An investor's shares when redeemed may
be worth more or less than their original cost. Performance of the Fund will
vary based on changes in market conditions and the level of the Fund's expenses.
Because some of the Fund's investments are denominated in foreign
currencies, the strength or weakness of the U.S. dollar against these currencies
may account for part of the Fund's investment performance. Historical
information on the value of the dollar versus foreign currencies may be used
from time to time in advertisements concerning the Fund. Such historical
information is not indicative of future performance.
Comparison of Fund Performance
A comparison of the quoted non-standard performance offered for various
investments is valid only if performance is calculated in the same manner. Since
there are different methods of calculating performance, investors should
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consider the effects of the methods used to calculate performance when comparing
performance of the Fund with performance quoted with respect to other investment
companies or types of investments.
In connection with communicating its performance to current or prospective
shareholders, the Fund also may compare these figures to the performance of
unmanaged indices which may assume reinvestment of dividends or interest but
generally do not reflect deductions for administrative and management costs.
Examples include, but are not limited to the Dow Jones Industrial Average, the
Consumer Price Index, Standard & Poor's 500 Composite Stock Price Index (S&P
500), the NASDAQ OTC Composite Index, the NASDAQ Industrials Index, the Russell
2000 Index, and statistics published by the Small Business Administration.
From time to time, in advertising and marketing literature, this Fund's
performance may be compared to the performance of broad groups of mutual funds
with similar investment goals, as tracked by independent organizations such as,
Investment Company Data, Inc. ("ICD"), Lipper Analytical Services, Inc.
("Lipper"), CDA Investment Technologies, Inc. ("CDA"), Morningstar, Inc., Value
Line Mutual Fund Survey and other independent organizations. When these
organizations' tracking results are used, the Fund will be compared to the
appropriate fund category, that is, by fund objective and portfolio holdings, or
to the appropriate volatility grouping, where volatility is a measure of a
fund's risk. For instance, a Scudder growth fund will be compared to funds in
the growth fund category; a Scudder income fund will be compared to funds in the
income fund category; and so on. Scudder funds (except for money market funds)
may also be compared to funds with similar volatility, as measured statistically
by independent organizations.
From time to time, in marketing and other Fund literature, Trustees and
officers of the Fund, the Fund's portfolio manager, or members of the portfolio
management team may be depicted and quoted to give prospective and current
shareholders a better sense of the outlook and approach of those who manage the
Fund. In addition, the amount of assets that the Adviser has under management in
various geographical areas may be quoted in advertising and marketing materials.
The Fund may be advertised as an investment choice in Scudder's college
planning program. The description may contain illustrations of projected future
college costs based on assumed rates of inflation and examples of hypothetical
fund performance, calculated as described above.
Statistical and other information, as provided by the Social Security
Administration, may be used in marketing materials pertaining to retirement
planning in order to estimate future payouts of social security benefits.
Estimates may be used on demographic and economic data.
Marketing and other Fund literature may include a description of the
potential risks and rewards associated with an investment in the Fund. The
description may include a "risk/return spectrum" which compares the Fund to
other Scudder funds or broad categories of funds, such as money market, bond or
equity funds, in terms of potential risks and returns. Money market funds are
designed to maintain a constant $1.00 share price and have a fluctuating yield.
Share price, yield and total return of a bond fund will fluctuate. The share
price and return of an equity fund also will fluctuate. The description may also
compare the Fund to bank products, such as certificates of deposit. Unlike
mutual funds, certificates of deposit are insured up to $100,000 by the U.S.
government and offer a fixed rate of return.
Because bank products guarantee the principal value of an investment and
money market funds seek stability of principal, these investments are considered
to be less risky than investments in either bond or equity funds, which may
involve the loss of principal. However, all long-term investments, 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.
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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
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.
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IBC Money Fund Report, a weekly publication of IBC Financial Data, Inc.,
reporting on the performance of the nation's money market funds, summarizing
money market fund activity and including certain averages as performance
benchmarks, specifically "IBC's Money Fund Average," and "IBC'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 Business Daily, a daily newspaper that features financial, economic,
and business news.
Kiplinger's Personal Finance Magazine, a monthly investment advisory publication
that periodically features the performance of a variety of securities.
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis, a weekly
publication of industry-wide mutual fund averages by type of fund.
Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.
Morgan Stanley International, an integrated investment banking firm that
compiles statistical information.
Mutual Fund Values, a biweekly Morningstar, Inc. publication that provides
ratings of mutual funds based on fund performance, risk and portfolio
characteristics.
Ned Davis Research, an independent research and brokerage firm that specializes
in quantitative research and publishes quarterly statistics pertaining to the
investment industry.
The New York Times, a nationally distributed newspaper which regularly covers
financial news.
The No-Load Fund Investor, a monthly newsletter, published by Sheldon Jacobs,
that includes mutual fund performance data and recommendations for the mutual
fund investor.
No-Load Fund*X, a monthly newsletter, published by DAL Investment Company, Inc.,
that reports on mutual fund performance, rates funds and discusses investment
strategies for the mutual fund investor.
Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.
Personal Investor, a monthly investment advisory publication that includes a
"Mutual Funds Outlook" section reporting on mutual fund performance measures,
yields, indices and portfolio holdings.
Smart Money, a national personal finance magazine published monthly
by Dow Jones and Company, Inc. and The Hearst Corporation. Focus
is placed on ideas for investing, spending and saving.
Success, a monthly magazine targeted to the world of entrepreneurs and growing
business, often featuring mutual fund performance data.
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 news weekly that periodically reports
mutual fund performance data.
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Value Line Mutual Fund Survey, an independent organization that provides
biweekly performance and other information on mutual funds.
The Wall Street Journal, a Dow Jones and Company, Inc. newspaper which regularly
covers financial news.
Wiesenberger Investment Companies Services, an annual compendium of information
about mutual funds and other investment companies, including comparative data on
funds' backgrounds, management policies, salient features, management results,
income and dividend records and price ranges.
Working Woman, a monthly publication that features a "Financial Workshop"
section reporting on the mutual fund/financial industry.
Worth, a national publication put out 10 times per year by Capital Publishing
Company, a subsidiary of Fidelity Investments. Focus is placed on personal
financial journalism.
FUND ORGANIZATION
(See "Fund organization" in the Fund's prospectus.)
The Fund is a series of Scudder Investment Trust, a Massachusetts
business trust established under a Declaration of Trust dated September 20,
1984, as amended. The name of the Trust was changed on May 15, 1991 from Scudder
Growth and Income Fund. The other series of the Trust is Scudder Large Company
Growth Fund.
On November 4, 1987, the par value of the shares of beneficial interest of
the Trust was changed from no par value to $0.01 par value per share. The
Trust's authorized capital consists of an unlimited number of shares of
beneficial interest of $0.01 par value, all of which are of one class and have
equal rights as to voting, dividends and liquidation. The Trustees have the
authority to issue two or more series of shares and to designate the relative
rights and preferences as between the different series. All shares issued and
outstanding will be fully paid and non-assessable by the Trust and redeemable as
described in this Statement of Additional Information and in the Fund's
prospectus.
The assets of the Trust received for the issue or sale of the shares of
each series and all income, earnings, profits and proceeds thereof, subject only
to the rights of creditors, are specifically allocated to such series and
constitute the underlying assets of such series. The underlying assets of each
series are segregated on the books of account and are to be charged with the
liabilities in respect to such series and with a proportionate share of the
general liabilities of the Trust. If a series were unable to meet its
obligations, the assets of all other series may in some circumstances be
available to creditors for that purpose, in which case the assets of such other
series could be used to meet liabilities which are not otherwise properly
chargeable to them. Expenses with respect to any two or more series are to be
allocated in proportion to the asset value of the respective series except where
allocations of direct expenses can otherwise be fairly made. The officers of the
Trust, subject to the general supervision of the Trustees, have the power to
determine which liabilities are allocable to a given series, or which are
general or allocable to two or more series. In the event of the dissolution or
liquidation of the Trust or any series, the holders of the shares of any series
are entitled to receive as a class the underlying assets of such shares
available for distribution to shareholders.
Shares of the Trust entitle their holders to one vote per share; however,
separate votes are taken by each series on matters affecting an individual
series. For example, a change in investment policy for a series would be voted
upon only by shareholders of the series involved. Additionally, approval of the
investment advisory agreement is a matter to be determined separately by each
series. Approval by the shareholders of one series is effective as to that
series whether or not enough votes are received from the shareholders of the
other series to approve such agreement as to other series.
The Trustees, in their discretion, may authorize the division of shares of
the Fund (or shares of a series) into different classes, permitting shares of
different classes to be distributed by different methods. Although shareholders
of different classes of a series would have an interest in the same portfolio of
assets, shareholders of different classes may bear different expenses in
connection with different methods of distribution. The Trustees have no present
intention of taking the action necessary to effect the division of shares into
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separate classes nor of changing the method of distribution of shares of the
Fund.
The Declaration of Trust provides that obligations of the Trust are not
binding upon the Trustees individually but only upon the property of the Trust,
that the Trustees and officers will not be liable for errors of judgment or
mistakes of fact or law and that the Trust will indemnify its Trustees and
officers against liabilities and expenses incurred in connection with litigation
in which they may be involved because of their offices with the Trust except if
it is determined in the manner provided in the Declaration of Trust that they
have not acted in good faith in the reasonable belief that their actions were in
the best interests of the Trust. However, nothing in the Declaration of Trust
protects or indemnifies a Trustee or officer against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
INVESTMENT ADVISER
(See "Fund organization--Investment adviser" in the Fund's
prospectus.)
Scudder, Stevens & Clark, Inc., an investment counsel firm, acts as
investment adviser to the Fund. This organization is one of the most experienced
investment management firms in the United States. It was established in 1919 and
pioneered the practice of providing investment counsel to individual clients on
a fee basis. In 1928 it introduced the first no-load mutual fund to the public.
In 1953 Scudder introduced Scudder International Fund, Inc., the first mutual
fund available in the U.S. investing internationally in securities of issuers in
several foreign countries. The firm reorganized from a partnership to a
corporation on June 28, 1985.
The principal source of the Adviser's income is professional fees received
from providing continuous investment advice, and the firm derives no income from
brokerage or underwriting of securities. Today, it provides investment counsel
for many individuals and institutions, including insurance companies, colleges,
industrial corporations, and financial and banking organizations. In addition,
it manages Montgomery Street Income Securities, Inc., Scudder California Tax
Free Trust, Scudder Cash Investment Trust, Scudder 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
Pathway Series, Scudder Securities Trust, Scudder State Tax Free Trust, Scudder
Tax Free Money Fund, Scudder Tax Free Trust, Scudder U.S. Treasury Money Fund,
Scudder Variable Life Investment Fund, Scudder World Income Opportunities Fund,
Inc., The Argentina Fund, Inc., The Brazil Fund, Inc., The First Iberian Fund,
Inc., The Korea Fund, Inc., The Japan Fund, Inc. and The Latin America Dollar
Income Fund, Inc. Some of the foregoing companies or trusts have two or more
series.
The Adviser also provides investment advisory services to the mutual funds
which comprise the AARP Investment Program from Scudder. The AARP Investment
Program from Scudder has assets over $13 billion and includes the AARP Growth
Trust, AARP Income Trust, AARP Tax Free Income Trust, AARP Managed Investment
Portfolios Trust and AARP Cash Investment Funds.
The Adviser maintains a large research department, which conducts ongoing
studies of the factors that affect the position of various industries, companies
and individual securities. In this work, the Adviser utilizes certain reports
and statistics from a wide variety of sources, including brokers and dealers who
may execute portfolio transactions for the Fund and for clients of the Adviser,
but conclusions are based primarily on investigations and critical analyses by
its own research specialists.
Certain investments may be appropriate for the Fund and also for other
clients advised by the Adviser. Investment decisions for the Fund and other
clients are made with a view toward achieving their respective investment
objectives and after consideration of such factors as their current holdings,
availability of cash for investment and the size of their investments generally.
Frequently, a particular security may be bought or sold for only one client or
in different amounts and at different times for more than one but less than all
clients. Likewise, a particular security may be bought for one or more clients
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
38
<PAGE>
purchased or sold by the Fund. Purchase and sale orders for the Fund may be
combined with those of other clients of the Adviser in the interest of achieving
the most favorable net results to the Fund.
The Investment Management Agreement (the "Agreement") between the Trust,
on behalf of the Fund, and the Adviser was approved by the Trustees of the Trust
on April 8, 1997. The Agreement is dated May 1, 1997 and will continue in effect
until May 1, 1999 and from year to year thereafter only if its continuance is
approved annually by the vote of a majority of those Trustees who are not
parties to such Agreement or interested persons of the Adviser or the Fund, cast
in person at a meeting called for the purpose of voting on such approval, and by
a majority vote either of the Fund's Trustees or of the outstanding voting
securities of the Fund. The Agreement may be terminated at any time without
payment of penalty by either party on sixty days' written notice, and
automatically terminates in the event of its assignment.
Under the Agreement, the Adviser provides the Fund with continuing
investment management for the Fund's portfolio consistent with the Fund's
investment objectives, policies and restrictions and determines what securities
shall be purchased for the portfolio of the Fund, what portfolio securities
shall be held or sold by the Fund and what portion of the Fund's assets shall be
held uninvested, subject always to the provisions of the Fund's Declaration of
Trust and By-Laws, the 1940 Act and the Code and to the Fund's investment
objectives, policies and restrictions and subject, further, to such policies and
instructions as the Trustees of the Trust may from time to time establish. The
Adviser also advises and assists the officers of the Trust in taking such steps
as are necessary or appropriate to carry out the decisions of its Trustees and
the appropriate committees of the Trustees regarding the conduct of the business
of the Fund.
The Adviser also renders significant administrative services (not
otherwise provided by third parties) necessary for the Fund's operations as an
open-end investment company including, but not limited to, preparing reports and
notices to the Trustees and shareholders; supervising, negotiating contractual
arrangements with, and monitoring various third-party service providers to the
Fund (such as the Fund's transfer agent, pricing agents, custodian, accountants
and others); preparing and making filings with the SEC and other regulatory
agencies; assisting in the preparation and filing of the Fund's federal, state
and local tax returns; preparing and filing the Fund's federal excise tax
returns; assisting with investor and public relations matters; monitoring the
valuation of securities and the calculation of net asset value; monitoring the
registration of shares of the Fund under applicable federal and state securities
laws; maintaining the Fund's books and records to the extent not otherwise
maintained by a third party; assisting in establishing accounting policies of
the Fund; assisting in the resolution of accounting and legal issues;
establishing and monitoring the Fund's operating budget; processing the payment
of the Fund's bills; assisting the Fund in, and otherwise arranging for, the
payment of distributions and dividends; and otherwise assisting the Fund in the
conduct of its business, subject to the direction and control of the Trustees.
The Adviser pays the compensation and expenses (except those for attending
Board and Committee meetings outside New York, New York and Boston,
Massachusetts) of all Trustees, officers and executive employees of the Trust
affiliated with the Adviser and makes available, without expense to the Trust,
the services of such Trustees, officers and employees of the Adviser as may duly
be elected officers or Trustees of the Trust, subject to their individual
consent to serve and to any limitations imposed by law, and provides the Trust's
office space and facilities.
For the Adviser's services from August 13, 1996 to May 1, 1997, The Fund
paid the Adviser the annual fee of 0.60% of the first $500 million of average
daily net assets, 0.55% of such assets in excess of $500 million, 0.50% of such
assets in excess of $1 billion, 0.475% of such assets in excess of $1.5 billion,
0.45% of such assets in excess of $2 billion, 0.425% of such assets in excess of
$3 billion.
For the Adviser's services after May 1, 1997, the Fund will pay the
Adviser the annual fee of 0.60% of the first $500 million of average daily net
asset, , 0.55% of such assets in excess of $500 million, 0.50% of such assets in
excess of $1 billion, 0.475% of such assets in excess of $1.5 billion, 0.45% of
such assets in excess of $2 billion, 0.425% of such assets in excess of $3
billion and 0.405% of such assets in excess of $4.5 billion.
39
<PAGE>
For the years ended December 31, 1996, 1995, and 1994, the Fund was
charged by the Adviser aggregate fees pursuant to its then effective investment
advisory agreement of $17,628,873, $13,054,200, and $9,941,300, respectively.
The Adviser waived approximately $1.3 million of management fees otherwise
payable to it in 1992 by the Fund. The $1.3 million resulted from the one-time
assumption of substantially all of the Niagara Share Corporation's ("Niagara")
severance plan liability by the Fund during the Fund's acquisition of certain
assets of Niagara. Net assets as of December 31, 1996 were $4,186,481,205.
Under the Agreement the Fund is responsible for all of its other expenses
including organizational costs, fees and expenses incurred in connection with
membership in investment company organizations; brokers' commissions; legal,
auditing and accounting expenses; the calculation of Net Asset Value; taxes and
governmental fees; the fees and expenses of the transfer agent; the cost of
preparing stock certificates and any other expenses including clerical expenses
of issue, redemption or repurchase of shares; the expenses of and the fees for
registering or qualifying securities for sale; the fees and expenses of
Trustees, officers and employees of the Trust who are not affiliated with the
Adviser; the cost of printing and distributing reports and notices to
shareholders; and the fees and disbursements of custodians. The Fund may arrange
to have third parties assume all or part of the expenses of sale, underwriting
and distribution of shares of the Fund. The Fund is also responsible for its
expenses incurred in connection with litigation, proceedings and claims and the
legal obligation it may have to indemnify its officers and Trustees with respect
thereto.
The Agreement expressly provides that the Adviser shall not be required to
pay a pricing agent of the Fund for portfolio pricing services, if any.
On July 27, 1992, the Fund acquired certain assets with a fair value of
$208,411,296 (including unrealized appreciation of $52,317,307) from Niagara, a
closed-end investment company, in a tax free exchange for 13,249,287 shares of
the Fund and the assumption by the Fund of substantially all of Niagara's
severance plan liability of $1,300,000. The Fund and its shareholders did not
bear the economic burden of the assumption of such Niagara liability because the
Adviser waived approximately $1,300,000 of management fees otherwise payable to
it in 1992 by the Fund. In addition to the severance plan liability, costs of
$207,541 were incurred by the Fund as a result of the acquisition. These costs,
which were borne by the Fund are included as Fund expenses for the year ended
December 31, 1992.
The Agreement also provides that the Fund may use any name derived from
the name "Scudder, Stevens & Clark" only as long as the Agreement extension or
any renewal or amendment thereof remains in effect.
In reviewing the terms of the Agreement and in discussions with the
Adviser concerning such Agreement, the Trustees of the Trust who are not
"interested persons" of the Trust have been represented by independent counsel
at the Fund's expense.
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 have
transactions with various banks, including the Fund's custodian bank. It is the
Adviser's opinion that the terms and conditions of those transactions which have
occurred were not influenced by existing or potential custodial or other Fund
relationships.
None of the officers or Trustees of the Trust may have dealings with the
Trust as principals in the purchase or sale of securities, except as individual
subscribers or holders of shares of the Trust.
Personal Investments by Employees of the Adviser
Employees of the Adviser are permitted to make personal securities
transactions, subject to requirements and restrictions set forth in the
Adviser's Code of Ethics. The Code of Ethics contains provisions and
requirements designed to identify and address certain conflicts of interest
between personal investment activities and the interests of investment advisory
clients such as the Fund. Among other things, the Code of Ethics, which
generally complies with standards recommended by the Investment Company
40
<PAGE>
Institute's Advisory Group on Personal Investing, prohibits certain types of
transactions absent prior approval, imposes time periods during which personal
transactions may not be made in certain securities, and requires the submission
of duplicate broker confirmations and monthly reporting of securities
transactions. Additional restrictions apply to portfolio managers, traders,
research analysts and others involved in the investment advisory process.
Exceptions to these and other provisions of the Code of Ethics may be granted in
particular circumstances after review by appropriate personnel.
TRUSTEES AND OFFICERS
Position with
Name, Age and Position Principal Underwriter,
Address with Fund Occupation** Scudder Investor
Services, Inc.
Daniel Pierce+*= President Chairman of Director, Vice
(63) and Trustee the Board and President and
Managing Assistant Treasurer
Director
of Scudder,
Stevens &
Clark, Inc.
Henry P. Becton, Trustee President and _
Jr. (53) General
125 Western Manager, WGBH
Avenue Educational
Allston, MA 02134 Foundation
Dudley H. Ladd+*= Trustee Managing Director and Senior
(53) Director of Vice President
Scudder,
Stevens &
Clark, Inc.
George M. Trustee President and _
Lovejoy, Jr.= Former
(67) Director,
160 Federal Fifty
Street Associates
Boston, MA 02110 (real estate
corporation)
Wesley W. Marple, Trustee Professor of _
Jr.= (65) Business
413 Hayden Hall Administration
360 Huntington Northeastern
Ave. Boston, MA University,
02115 College of
Business
Administration
Kathryn L. Trustee Managing Director, Senior
Quirk*# (44) Director of Vice President and
Scudder, Clerk
Stevens &
Clark, Inc.
Jean C. Tempel Trustee General _
(54) Partner, TL
Ten Post Office Ventures
Square (venture
Suite 1325 capital funds)
Boston, MA 02109
Bruce F. Beaty# Vice Principal of _
(38) President Scudder,
Stevens &
Clark, Inc.
William F. Vice Managing _
Gadsden*# (42) President Director of
Scudder,
Stevens &
Clark, Inc.
Jerard K. Vice Managing _
Hartman# (64) President Director of
Scudder,
Stevens &
Clark, Inc.
41
<PAGE>
Position with
Name, Age and Position Principal Underwriter,
Address with Fund Occupation** Scudder Investor
Services, Inc.
Robert T. Vice Managing _
Hoffman# (38) President Director of
Scudder,
Stevens &
Clark, Inc.
Thomas W. Joseph+ Vice Principal of Director, Vice
(58) President Scudder, President,
Stevens & Treasurer and
Clark, Inc. Assistant Clerk
David S. Lee+ Vice Managing Director, President
(63) President Director of and Assistant
Scudder, Treasurer
Stevens &
Clark, Inc.
Valerie F. Vice Principal of __
Malter# (38) President Scudder,
Stevens &
Clark, Inc.
Thomas F. Vice Principal of Assistant Clerk
McDonough+ (50) President, Scudder,
Secretary Stevens &
and Clark, Inc.
Assistant
Treasurer
Pamela A. Vice Managing _
McGrath+ (43) President Director of
and Scudder,
Treasurer Stevens &
Clark, Inc.
Edward J. Vice Principal of Assistant Treasurer
O'Connell# (52) President Scudder,
and Stevens &
Assistant Clark, Inc.
Treasurer
* Messrs. Gadsden, Ladd, Pierce and Ms. Quirk are considered by the Fund and
its counsel to be persons who are "interested persons" of the Adviser or of
the Fund (within the meaning of the Investment Company Act of 1940, as
amended).
** Unless otherwise stated, all the officers and directors have been
associated with their respective companies for more than five years, but
not necessarily in the same capacity.
= Messrs. Ladd, Lovejoy and Pierce and Marple are members of the Executive
Committee, which has the power to declare dividends from ordinary income
and distributions of realized capital gains to the same extent as the Board
is so empowered.
+ Address: Two International Place, Boston, Massachusetts
# Address: 345 Park Avenue, New York, New York
As of March 31, 1997, all Trustees and officers of the Fund as a group
owned beneficially (as that term is defined in Section 13(d) of the Securities
Exchange Act of 1934) less than 1% of the Fund.
As of March 31, 1997, 10,255,839 shares in the aggregate, 5.15% of the
outstanding shares of the Fund, were held in the name of Charles Schwab & Co.,
101 Montgomery Street, San Francisco, CA 94104, who may be deemed to be the
beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
To the best of the Fund's knowledge, as of March 31, 1997 no person owned
beneficially more than 5% of the Fund's outstanding shares except as stated
above.
The Trustees and officers of the Fund also serve in similar capacities
with other Scudder funds.
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<PAGE>
REMUNERATION
Responsibilities of the Board--Board and Committee Meetings
The Board of Trustees is responsible for the general oversight of each
Fund's business. A majority of the Board's members are not affiliated with
Scudder, Stevens & Clark, Inc. (The "Adviser"). These "Independent Trustees"
have primary responsibility for assuring that each Fund is managed in the best
interests of its shareholders.
The Board of Trustees meets at least quarterly to review the investment
performance of each Fund and other operational matters, including policies and
procedures designated to assure compliance with various regulatory requirements.
At least annually, the Independent Trustees review the fees paid to the Adviser
and its affiliates for investment advisory services and other administrative and
shareholder services. In this regard, they evaluate, among other things, each
Funds' investment performance, the quality and efficiency of the various other
services provided, costs incurred by the Adviser and its affiliates, and
comparative information regarding fees and expenses of competitive funds. They
are assisted in this process by each Fund's independent public accountants and
by independent legal counsel selected by the Independent Trustees.
All of the Independent Trustees serve on the Committee on Independent
Trustees, which nominates Independent Trustees and considers other related
matters, and the Audit Committee, which selects each Fund's independent public
accountants and reviews accounting policies and controls. In addition,
Independent Trustees from time to time have established and served on task
forces and subcommittees focusing on particular matters such as investment,
accounting and shareholder service issues.
The Independent Trustees met fourteen times during 1996, including Board
and Committee meetings and meetings to review each Fund's contractual
arrangements as described above. The Scudder Growth and Income Fund also held
two Special Meetings in 1996. All of the Independent Trustees attended 100% of
all such meetings.
Compensation of Officers and Trustees
The Independent Trustees receive the following compensation from the
Funds: an annual trustee's fee of $4,000; a fee of $300 for attendance at each
Board meeting, audit committee meeting, or other meeting held for the purposes
of considering arrangements between the Funds and the Adviser or any affiliate
of the Adviser; $100 for any other committee meeting (although in some cases the
Independent Trustees have waived committee meeting fees); and reimbursement of
expenses incurred for travel to and from Board Meetings. No additional
compensation is paid to any Independent Trustee for travel time to meetings,
attendance at directors' educational seminars or conferences, service on
industry or association committees, participation as speakers at directors'
conferences, service on special trustee task forces or subcommittees or service
as lead or liaison trustee. Independent Trustees do not receive any employee
benefits such as pension, retirement or health insurance.
The Independent Trustees also serve in the same capacity for other funds
managed by the Adviser. These funds differ broadly in type an complexity and in
some cases have substantially different Trustee fee schedules. The following
table shows the aggregate compensation received by each Independent Trustee
during 1996 from the Trust and from all of Scudder funds as a group.
The following table shows the aggregate compensation received by each
unaffiliated Trustee during 1996 from the Registrant and from all other Scudder
Funds as a group.
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<PAGE>
Scudder
Name Investment All Scudder
Trust* Funds
Henry P. Becton, $ 17,800 $91,012 (16 funds)
Jr. Trustee
George M. $ 19,300 $124,512 (13 funds)
Lovejoy, Jr.
Trustee
Wesley W. $ 19,300 $106,812 (16 funds)
Marple, Jr.
Trustee
Jean C. Tempel $ 18,400 $102,895 (16 funds)
Trustee
* Scudder Investment Trust consists of three funds: Scudder
Growth and Income Fund, Scudder Large Company Growth Fund and
Scudder Classic Growth Fund.
DISTRIBUTOR
The Fund has an underwriting agreement with Scudder Investor Services,
Inc. (the "Distributor"), a Massachusetts corporation, which is a subsidiary of
the Adviser. The Fund's underwriting agreement dated September 10, 1985 will
remain in effect until September 30, 1997 and from year to year thereafter only
if its continuance is approved annually by a majority of the Trustees who are
not parties to such agreement or interested persons of any such party and either
by vote of a majority of the Board of Trustees or a majority of the outstanding
voting securities of the Fund. The underwriting agreement was approved by the
Trustees on August 13, 1996.
Under the underwriting agreement, the Fund is responsible for: the payment
of all fees and expenses in connection with the preparation and filing with the
Commission of its registration statement and prospectus and any amendments and
supplements thereto; the registration and qualification of shares for sale in
the various states, including registering the Fund as a broker/dealer in various
states, as required; the fees and expenses of preparing, printing and mailing
prospectuses annually to existing shareholders (see below for expenses relating
to prospectuses paid by the Distributor), notices, proxy statements, reports or
other communications to shareholders of the Fund; the cost of printing and
mailing confirmations of purchases of shares and the prospectuses accompanying
such confirmations; any issuance taxes and/or any initial transfer taxes; a
portion of shareholder toll-free telephone charges and expenses of customer
service representatives; the cost of wiring funds for share purchases and
redemptions (unless paid by the shareholder who initiates the transaction); the
cost of printing and postage of business reply envelopes; and a portion of the
cost of computer terminals used by both the Fund and the Distributor.
The Distributor will pay for printing and distributing prospectuses or
reports prepared for its use in connection with the offering of the Fund's
shares to the public and preparing, printing and mailing any other literature or
advertising in connection with the offering of shares of the Fund to the public.
The Distributor will pay all fees and expenses in connection with its
qualification and registration as a broker or dealer under federal and state
laws, a portion of the cost of toll-free telephone service and expenses of
service representatives, a portion of the cost of computer terminals and
expenses of any activity which is primarily intended to result in the sale of
shares issued by the Fund, unless a Rule 12b-1 plan is in effect which provides
that each Fund shall bear some or all of such expenses.
NOTE: Although the Trust currently has no 12b-1 Plan and the Trustees have
no current intention of adopting one, the Fund will also pay those fees and
expenses permitted to be paid or assumed by the Trust pursuant to a 12b-1
Plan, if any, adopted by the Trust, notwithstanding any other provision to
the contrary in the underwriting agreement.
44
<PAGE>
As agent, the Distributor currently offers the Fund's shares on a
continuous basis to investors in all states. The Underwriting Agreement provides
that the Distributor accepts orders for shares at net asset value as no sales
commission or load is charged the investor. The Distributor has made no firm
commitment to acquire shares of the Fund.
TAXES
(See "Fund organization--Dividends and capital gains distributions"
and "Transaction
information--Tax information and Tax identification number" in the
Fund's prospectus.)
The Fund has elected to be treated as a regulated investment company under
Subchapter M of the Code or a predecessor statute and has qualified as such
since its inception. It intends to continue to qualify for such treatment. Such
qualification does not involve governmental supervision or management of
investment practices or policy.
As a regulated investment company qualifying under Subchapter M of the
Code, the Fund is required to distribute to its shareholders at least 90 percent
of its investment company taxable income (including net short-term capital gain)
and is not generally subject to federal income tax to the extent that it
distributes annually its investment company taxable income and net realized
capital gains in the manner required under the Code.
The Fund is subject to a 4% nondeductible excise tax on amounts required
to be but not distributed under a prescribed formula. The formula requires the
Fund to distribute to shareholders during a calendar year an amount equal to at
least 98% of the Fund's ordinary income for the calendar year, at least 98% of
the excess of its capital gains over capital losses (adjusted for certain
ordinary losses) realized during the one-year period ending October 31 during
such year and all ordinary income and capital gains for prior years that were
not previously distributed. Investment companies with taxable years ending on
November 30 or December 31 may make an irrevocable election to measure the
required capital gain distribution for excise tax purposes, using their actual
taxable year, rather than the one year period ending October 31.
The Fund's investment company taxable income includes dividends, interest
and net short-term capital gains in excess of net long-term capital losses, less
expenses. Net realized capital gains for a fiscal year are computed by taking
into account any capital loss carryforward of the Fund.
If any net realized long-term capital gains in excess of net realized
short-term capital losses are retained by the Fund for reinvestment, requiring
federal income taxes to be paid thereon by the Fund, the Fund intends to elect
to treat such capital gains as having been distributed to shareholders. As a
result, each shareholder will report such capital gains as long-term capital
gains, will be able to claim a relative share of federal income taxes paid by
the Fund on such gains as a credit against personal federal income tax
liabilities and will be entitled to increase the adjusted tax basis of Fund
shares by the difference between a pro rata share of such gains and the
individual tax credit.
Distributions of investment company taxable income are taxable to
shareholders as ordinary income.
Dividends from domestic corporations are expected to comprise a
substantial part of the Fund's gross income. To the extent that such dividends
constitute a portion of the Fund's gross income, a portion of the income
distributions of the Fund may be eligible for the deduction for dividends
received by corporations. Shareholders will be informed of the portion of
dividends which so qualify. The dividends-received deduction is reduced to the
extent the shares of the Fund, with respect to which the dividends are received,
are treated as debt-financed under federal income tax law and is eliminated if
either those shares or the shares of the Fund are deemed to have been held by
the Fund or the shareholder, as the case may be, for less than 46 days.
Distributions of the excess of net long-term capital gains over net
short-term capital losses, which the Fund designates as "capital gain
dividends," 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.
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<PAGE>
Distributions of investment company taxable income and net realized
capital gains will be taxable as described above, whether received in shares or
in cash. Shareholders electing to receive distributions in the form of
additional shares will have a cost basis for federal income tax purposes in each
share so received equal to the net asset value of a share on the reinvestment
date.
All distributions of investment company taxable income and net realized
capital gains, whether received in shares or in cash, must be reported by each
shareholder on his or her federal income tax return. Dividends and capital gains
distributions declared in October, November or December and payable to
shareholders of record in such a month will be deemed to have been received by
shareholders on December 31 if paid during January of the following year.
Redemptions of shares, including exchanges for shares of another Scudder fund,
may result in tax consequences (gain or loss) to the shareholder and are also
subject to these reporting requirements.
An individual may make a deductible IRA contribution of up to $2,000 or,
if less, the amount of the individual's earned income for any taxable year only
if (i) neither the individual nor his or her spouse (unless filing separate
returns) is an active participant in an employer's retirement plan, or (ii) the
individual (and his or her spouse, if applicable) has an adjusted gross income
below a certain level ($40,050 for married individuals filing a joint return,
with a phase-out of the deduction for adjusted gross income between $40,050 and
$50,000; $25,050 for a single individual, with a phase-out for adjusted gross
income between $25,050 and $35,000). However, an individual not permitted to
make a deductible contribution to an IRA for any such taxable year may
nonetheless make nondeductible contributions up to $2,000 to an IRA for that
year. There are special rules for determining how withdrawals are to be taxed if
an IRA contains both deductible and nondeductible amounts. In general, a
proportionate amount of each withdrawal will be deemed to be made from
nondeductible contributions; amounts treated as a return of nondeductible
contributions will not be taxable. Also, annual contributions may be made to a
spousal IRA even if the spouse has earnings in a given year if the spouse elects
to be treated as having no earnings (for IRA contribution purposes) for the
year.
Distributions by the Fund result in a reduction in the net asset value of
the Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should consider the tax implications of buying shares just
prior to a distribution. The price of shares purchased at that time includes the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will then receive a partial return of capital upon the
distribution, which will nevertheless be taxable to them.
If the Fund invests in stock of certain foreign investment companies the
Fund may be subject to U.S. federal income taxation on a portion of any "excess
distribution" with respect to, or gain from, the disposition of, such stock. The
tax would be determined by allocating such distribution or gain ratably to each
day of the Fund's holding period for the stock. The distribution or gain so
allocated to any taxable year of the Fund, other than the taxable year of the
excess distribution or disposition, would be taxed to the Fund at the highest
ordinary income rate in effect for such year and the tax would be further
increased by an interest charge to reflect the value of the tax deferral deemed
to have resulted from the ownership of the foreign company's stock. Any amount
of distribution or gain allocated to the taxable year of the distribution or
disposition would be included in the Fund's investment company taxable income
and, accordingly, would not be taxable to the Fund to the extent distributed by
the Fund as a dividend to its shareholders.
Proposed regulations have been issued which may allow the Fund to make an
election to mark to market its shares of these foreign investment companies in
lieu of being subject to U.S. federal income taxation. At the end of each
taxable year to which the election applies, the Fund would report as ordinary
income the amount by which the fair market value of the foreign company's stock
exceeds the Fund's adjusted basis in these shares. No mark to market losses may
be recognized. The effect of the election would be to treat excess distributions
and gain on dispositions as ordinary income which is not subject to a fund level
tax when distributed to shareholders as a dividend. Alternatively, the Fund may
elect to include as income and gain its share of the ordinary earnings and net
capital gain of certain foreign investment companies in lieu of being taxed in
the manner described above.
Equity options (including covered call options on portfolio stock) written
or purchased by the Fund will be subject to tax under Section 1234 of the Code.
In general, no loss is recognized by the Fund upon payment of a premium in
46
<PAGE>
connection with the purchase of a put or call option. The character of any gain
or loss recognized (i.e., long-term or short-term) will generally depend, in the
case of a lapse or sale of the option, on the Fund's holding period for the
option and, in the case of an exercise of the option, on the Fund's holding
period for the underlying security. The purchase of a put option may constitute
a short sale for federal income tax purposes, causing an adjustment in the
holding period of the underlying security or substantially identical security in
the Fund's portfolio. If the Fund writes a call option, no gain is recognized
upon its receipt of a premium. If the option lapses or is closed out, any gain
or loss is treated as a short-term capital gain or loss. If a call option is
exercised, any resulting gain or loss is short-term or long-term capital gain or
loss depending on the holding period of the underlying security. The exercise of
a put option written by the Fund is not a taxable transaction for the Fund.
Many futures and forward contracts entered into by the Fund and all listed
nonequity options written or purchased by the Fund (including covered call
options written on debt securities and options purchased or written on futures
contracts) will be governed by Section 1256 of the Code. Absent a tax election
to the contrary, gain or loss attributable to the lapse, exercise or closing out
of any such position will be treated as 60% long-term and 40% short-term, and on
the last trading day of the Fund's fiscal year (and generally, on October 31 for
purposes of the 4% excise tax), all outstanding Section 1256 positions will be
marked to market (i.e., treated as if such positions were closed out at their
closing price on such day), with any resulting gain or loss recognized as 60%
long-term and 40% short-term. Under Section 988 of the Code, discussed below,
foreign currency gain or loss from foreign currency-related forward contracts,
certain futures and options, and similar financial instruments entered into or
acquired by the Fund will be treated as ordinary income or loss. Under certain
circumstances, entry into a futures contract to sell a security may constitute a
short sale for federal income tax purposes, causing an adjustment in the holding
period of the underlying security or a substantially identical security in the
Fund's portfolio.
Subchapter M of the Code requires that the Fund realize less than 30% of
its annual gross income from the sale or other disposition of stock, securities
and certain options, futures and forward contracts held for less than three
months. Options, futures and forward activities of the Fund may increase the
amount of gains realized by the Fund that are subject to the 30% limitation.
Accordingly, the amount of such activities that the Fund may engage in may be
limited.
Positions of the Fund consisting 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 consisting of at least one position not governed by
Section 1256 and at least one future, forward, or nonequity option contract
which is governed by Section 1256 which substantially diminishes the Fund's risk
of loss with respect to such other position will be treated as a "mixed
straddle." Although mixed straddles are subject to the straddle rules of Section
1092 of the Code, certain tax elections exist for them which reduce or eliminate
the operation of these rules. The Fund will monitor its transactions in options
and futures and may make certain tax elections in connection with these
investments.
Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time the Fund accrues receivables or liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables or pays such liabilities generally are treated as ordinary income or
ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency, and on disposition of certain futures, forward or options
contracts, 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.
If the Fund holds zero coupon securities or other securities which are
issued at a discount a portion of the difference between the issue price and the
face value of such securities ("original issue discount") will be treated as
income to the Fund each year, even though the Fund will not receive cash
interest payments from these securities. This original issue discount (imputed
47
<PAGE>
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 Fund level. If the Fund acquires a debt instrument at a market
discount, a portion of the gain recognized (if any) on disposition of such
instrument may be treated as ordinary income.
The Fund will be required to report to the IRS all distributions of
taxable income and capital gains as well as gross proceeds from the redemption
or exchange of Fund shares, except in the case of certain exempt shareholders.
Under the backup withholding provisions of Section 3406 of the Code,
distributions of taxable income and capital gains and proceeds from the
redemption or exchange of the shares of a regulated investment company may be
subject to withholding of federal income tax at the rate of 31% in the case of
non-exempt shareholders who fail to furnish the investment company with their
taxpayer identification numbers and with required certifications regarding their
status under the federal income tax law. Withholding may also be required if the
Fund is notified by the IRS or a broker that the taxpayer identification number
furnished by the shareholder is incorrect or that the shareholder has previously
failed to report interest or dividend income. If the withholding provisions are
applicable, any such distributions and proceeds, whether taken in cash or
reinvested in additional shares, will be reduced by the amounts required to be
withheld.
Shareholders of the Fund may be subject to state and local taxes on
distributions received from the Fund and on redemptions of the Fund's shares.
Each distribution is accompanied by a brief explanation of the form and
character of the distribution. In January of each year the Fund issues to each
shareholder a statement of the federal income tax status of all distributions.
The Fund is organized as a Massachusetts business trust and is not liable
for any income or franchise tax in the Commonwealth of Massachusetts, provided
that the Fund continues to be treated as a regulated investment company under
Subchapter M of the Code.
The foregoing discussion of U.S. federal income tax law relates solely to
the application of that law to U.S. persons, i.e., U.S. citizens and residents
and U.S. corporations, partnerships, trusts and estates. Each shareholder who is
not a U.S. person should consider the U.S. and foreign tax consequences of
ownership of shares of the Fund, including the possibility that such a
shareholder may be subject to a U.S. withholding tax at a rate of 30% (or at a
lower rate under an applicable income tax treaty) on amounts constituting
ordinary income received by him or her, where such amounts are treated as income
from U.S. sources under the Code.
Dividend and interest income received by the Fund from sources outside the
U.S. may be subject to withholding and other taxes imposed by such foreign
jurisdictions. Tax conventions between certain countries and the U.S. may reduce
or eliminate these foreign taxes, however, and foreign countries generally do
not impose taxes on capital gains respecting investments by foreign investors.
Shareholders should consult their tax advisers about the application of
the provisions of tax law in light of their particular tax situations.
PORTFOLIO TRANSACTIONS
Brokerage
To the maximum extent feasible the Adviser places orders for portfolio
transactions through the Distributor which in turn places orders on behalf of
the Fund with other broker/dealers. The Distributor receives no commissions,
fees or other remuneration from the Fund for this service. Allocation of
brokerage is supervised by the Adviser.
The primary objective of the Adviser in placing orders for the purchase and
sale of securities for the Fund's portfolio is to obtain the most favorable net
results taking into account such factors as price, commission (negotiable in the
case of U.S. national securities exchange transactions) where applicable, size
of order, difficulty of execution and skill required of the executing
broker/dealer. The Adviser seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) through the familiarity of
48
<PAGE>
the Distributor with commissions charged on comparable transactions, as well as
by comparing commissions paid by the Fund to reported commissions paid by
others. The Adviser reviews on a routine basis commission rates, execution and
settlement services performed, making internal and external comparisons.
The Fund's purchases and sales of fixed-income securities are generally
placed by the Adviser with primary market makers for these securities on a net
basis, without any brokerage commission being paid by the Fund. Trading does,
however, involve transaction costs. Transactions with dealers serving as primary
market makers reflect the spread between the bid and asked prices. Purchases of
underwritten issues may be made, which will include an underwriting fee paid to
the underwriter.
When it can be done consistently with the policy of obtaining the most
favorable net results, it is the Adviser's practice to place such orders with
broker/dealers who supply market quotations to Scudder Fund Accounting
Corporation for appraisal purposes or who supply research, market and
statistical information to the Fund. The term "research, market and statistical
information" includes advice as to the value of securities; the advisability of
investing in, purchasing or selling securities; the availability of securities
or purchasers or sellers of securities; and analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and the performance of accounts. The Adviser is not authorized when placing
portfolio transactions for the Fund to pay a brokerage commission in excess of
that which another broker might charge for executing the same transaction solely
on account of the receipt of research, market or statistical information. The
Adviser does not place orders with broker/dealers on the basis that the
broker/dealer has or has not sold shares of the Fund. In effecting transactions
in over-the-counter securities, orders are placed with the principal market
makers for the security being traded unless, after exercising care, it appears
that more favorable results are available elsewhere.
Subject also to obtaining the most favorable net results, the Adviser may
place brokerage transactions through the Custodian and a credit against the
custodian fee due to State Street Bank equal to one-half of the commission on
any such transaction will be given on any such transaction. Except for
implementing the policy stated above, there is no intention to place portfolio
transactions with particular broker/dealers or groups thereof.
Although certain research, market and statistical information from
broker/dealers may be useful to the Fund and to the Adviser, it is the opinion
of the Adviser that such information only supplements its own research effort
since the information must still be analyzed, weighed and reviewed by the
Adviser's staff. Such information may be useful to the Adviser in providing
services to clients other than the Fund and not all such information is used by
the Adviser in connection with the Fund. Conversely, such information provided
to the Adviser by broker/dealers through whom other clients of the Adviser
effect securities transactions may be useful to the Adviser in providing
services to the Fund.
In the fiscal years ended December 31, 1996, 1995 and 1994, the Fund paid
brokerage commissions of $3,595,644, $2,371,881, and $2,365,678, respectively.
In the fiscal year ended December 31, 1996, the Fund paid brokerage commissions
of $3,170,480 (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 $1,814,275,642 (76% 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 Fund review from time to time whether the recapture
for the benefit of the Fund of some portion of the brokerage commissions or
similar fees paid by the Fund on portfolio transactions is legally permissible
and advisable. Within the past three years no such recapture has been effected.
Portfolio Turnover
The Fund's average annual portfolio turnover rates, i.e. the ratio of the
lesser of sales or purchases to the monthly average value of the portfolio
(excluding from both the numerator and the denominator all securities with
maturities at the time of acquisition of one year or less), for the fiscal years
ended December 31, 1996, 1995 and 1994 were 26.6%, 26.9%, and 42.3%,
respectively. Purchases and sales are made for the Fund's portfolio whenever
necessary, in management's opinion, to meet the Fund's objective.
49
<PAGE>
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 audited by Coopers & Lybrand L.L.P., One Post Office
50
<PAGE>
Square, Boston, MA 02109, independent accountants, and are included or
incorporated by reference in the Prospectus and this Statement of Additional
Information, in reliance upon the accompanying report of said firm, which report
is given upon their authority as experts in accounting and auditing.
Shareholder Indemnification
The Fund is an organization of the type commonly known as a Massachusetts
business trust. Under Massachusetts law, shareholders of such a trust may, under
certain circumstances, be held personally liable as partners for the obligations
of the Fund. The Declaration of Trust contains an express disclaimer of
shareholder liability in connection with the Fund property or the acts,
obligations or affairs of the Fund. The Declaration of Trust also provides for
indemnification out of the Fund property of any shareholder held personally
liable for the claims and liabilities to which a shareholder may become subject
by reason of being or having been a shareholder. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its obligations.
Other Information
The CUSIP number of the Fund is 811167-10-5.
The Fund has a fiscal year ending December 31.
Many of the investment changes in the Fund will be made at prices
different from those prevailing at the time they may be reflected in a regular
report to shareholders of the Fund. These transactions will reflect investment
decisions made by the Adviser in light of the Fund's investment objectives and
policies, its other portfolio holdings and tax considerations, and should not be
construed as recommendations for similar action by other investors.
Portfolio securities of the Fund are held separately pursuant to a
custodian agreement, by the Fund's custodian, State Street Bank and Trust
Company, 225 Franklin Street, Boston, Massachusetts
02110.
The law firm of Dechert Price & Rhoads is counsel to the Fund.
The name "Scudder Growth and Income Fund" is the designation of the Trust
for the time being under a Declaration of Trust dated September 20, 1984, as
amended from time to time, and all persons dealing with the Fund must look
solely to the property of the Fund for the enforcement of any claims against the
Fund as neither the Trustees, officers, agents, shareholders nor other series of
the Trust assume any personal liability for obligations entered into on behalf
of the Fund. No other series of the Trust assumes any liabilities for
obligations entered into on behalf of the Fund. Upon the initial purchase of
shares, the shareholder agrees to be bound by the Fund's Declaration of Trust,
as amended from time to time. The Declaration of Trust is on file at the
Massachusetts Secretary of State's Office in Boston, Massachusetts.
Scudder Fund Accounting Corporation, Two International Place, Boston,
Massachusetts, 02110-4103, a 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. For the fiscal
years ended December 31, 1996, 1995, and 1994, Scudder Fund Accounting
Corporation's fee amounted to $249,566, $198,521, and $39,116, respectively, of
which $23,174 is unpaid at December 31, 1996.
Scudder Service Corporation (the "Service Corporation"), P.O. Box 2291,
Boston, Massachusetts 02107-2291, a subsidiary of the Adviser, is the transfer,
dividend-paying and shareholder service agent for the Fund. The Fund pays
Service Corporation an annual fee of $26.00 for each account maintained for a
participant.
Scudder Trust Company, an affiliate of the Adviser, provides subaccounting
and recordkeeping services for shareholder accounts in certain retirement and
employee benefit plans. Annual service fees are paid by the Fund to Scudder
Trust Company, Two International Place, Boston, Massachusetts 02110-4103, an
affiliate of the Adviser, for such accounts. The Fund pays Scudder Trust Company
an annual fee of $29.00 per shareholder account. The Fund incurred fees of
51
<PAGE>
$2,482,721, $1,518,972, and $1,122,704 during the fiscal years ended December
31, 1996, 1995 and 1994, respectively, of which $273,253 is unpaid at December
31, 1996.
The Fund's prospectus and this Statement of Additional Information omit
certain information contained in the Registration Statement and its amendments
which the Fund has filed with the SEC under the Securities Act of 1933 and
reference is hereby made to the Registration Statement for further information
with respect to the Fund and the securities offered hereby. The Registration
Statement and its amendments, are available for inspection by the public at the
SEC in Washington, D.C.
FINANCIAL STATEMENTS
The financial statements, including the investment portfolio of Scudder
Growth and Income Fund together with the Report of Independent Accountants,
Financial Highlights and notes to financial statements are incorporated by
reference and attached hereto in the Annual Report to the Shareholders of the
Fund dated December 31, 1996 and are hereby deemed to be a part of this
Statement of Additional Information.
52
<PAGE>
Scudder
Growth and
Income Fund
Annual Report
December 31, 1996
Pure No-Load(TM) Funds
A fund with a disciplined approach to common stock investing offering
opportunities for long-term growth of capital, current income, and growth of
income.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
SCUDDER
<PAGE>
Table of Contents
2 In Brief
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
10 Investment Portfolio
19 Financial Statements
22 Financial Highlights
23 Notes to Financial Statements
27 Report of Independent Accountants
28 Tax Information
29 Officers and Trustees
30 Investment Products and Services
31 How to Contact Scudder
In Brief
o Scudder Growth and Income Fund provided a total return of 22.18% for the
fiscal year, besting the average return of 522 growth and income funds as
tracked by Lipper Analytical Services, Inc.
o The Fund's value approach to investing in stocks with above-average
dividend yields helped it outperform the market averages during periods of
market weakness in the third and fourth quarters.
o The Fund benefited from a shift from consumer staples and health care to
economically sensitive (cyclical) stocks during the year.
o Morningstar assigned the Fund an overall 4-star rating for its
risk-adjusted performance among 2,959 domestic equity funds as of December
31, 1996.^1
- ----------
^1 Source: Morningstar. Ratings are subject to change monthly and are calculated
from the Fund's three-, five-, and ten-year average annual returns in excess of
90-day Treasury bill returns with appropriate fee adjustments, and a risk factor
that reflects Fund performance below 90-day T-bill returns. In an investment
category, 10% of funds receive 5 stars and the next 22.5% receive 4 stars. In
the growth and income category, the Fund received a 4-star rating for the
one-year period, a 4-star rating for the three-year period, a 4-star rating for
the five-year period, and a 4-star rating for the ten-year period. In the equity
category there were 1,826; 1,058; and 598 funds for the three-, five-, and
ten-year periods, respectively. Past performance is no guarantee of future
results.
2 - Scudder Growth and Income Fund
<PAGE>
Letter From the Fund's President
Dear Shareholders,
In 1996 Scudder Growth and Income Fund celebrated its 68th year by
providing a total return of 22.18% for the 12-month period ended December 31,
1996. This return was in keeping with the 22.96% annual return for the S&P 500.
We hope that long-term as well as new shareholders are pleased with this
performance, which was achieved in an environment of conflicting economic
signals and rapid sector rotation.
The strong performance of the stock market in 1995 and 1996 has prompted
many investors to worry about the possibility of a near-term correction. We
would like to take this opportunity to remind shareholders that the Fund's
combination of strict dividend yield requirements and value orientation is
designed to provide strong relative performance in less favorable environments.
The Fund's sound approach and solid track record have been recognized by a
number of financial publications recently. SmartMoney, for example, selected
Scudder Growth and Income Fund as one of the seven best mutual funds for 1997.^1
Honors such as these are gratifying, and we will continue to seek to live up to
these high expectations.
Looking ahead, we believe there are few reasons to dispute the market's
momentum over the long term. Many structural factors including improved fiscal
policies, deregulation, technology, and globalization are setting the stage for
positive global economic growth without harmful levels of inflation. We believe
that these are powerful and positive influences, which should benefit long-term
investors.
Thank you for your continued investment in Scudder Growth and Income Fund.
If you have any questions about your investment, please call a Scudder Investor
Relations representative at 1-800-225-2470 or visit our Internet Web site at
http://funds.scudder.com.
Sincerely,
/s/Daniel Pierce
President,
Scudder Growth and Income Fund
^1 Smart Money, February 1997
3 - Scudder Growth and Income Fund
<PAGE>
PERFORMANCE UPDATE as of December 31, 1996
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
12/31/96 $10,000 Cumulative Annual
- --------------------------------------
SCUDDER GROWTH AND INCOME FUND
- --------------------------------------
1 Year $12,218 22.18% 22.18%
5 Year $20,825 108.25% 15.80%
10 Year $38,185 281.85% 14.34%
- --------------------------------------
S & P 500 INDEX
- --------------------------------------
1 Year $12,296 22.96% 22.96%
5 Year $20,305 103.05% 15.20%
10 Year $41,485 314.85% 15.28%
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
YEARLY PERIODS ENDED DECEMBER 31
SCUDDER GROWTH AND INCOME FUND
Year Amount
- ----------------------
'86 $10,000
'87 $10,350
'88 $11,593
'89 $14,648
'90 $14,307
'91 $18,336
'92 $20,090
'93 $23,222
'94 $23,826
'95 $31,253
'96 $38,185
S & P 500 INDEX
Year Amount
- ----------------------
'86 $10,000
'87 $10,525
'88 $12,273
'89 $16,162
'90 $15,660
'91 $20,431
'92 $21,988
'93 $24,204
'94 $24,524
'95 $33,739
'96 $41,485
The Standard & Poor's (S&P) 500 Index is an unmanaged capitalization-weighted
measure of 500 widely held common stocks listed on the New York Stock Exchange,
American Stock Exchange, and Over-The-Counter market. Index returns assume
reinvestment of dividends and, unlike Fund returns, do not reflect any fees
or expenses.
- -----------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
- -----------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
YEARLY PERIODS ENDED DECEMBER 31
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
-------------------------------------------------------------------------------
NET ASSET VALUE... $12.31 $13.18 $14.14 $12.77 $15.76 $16.20 $17.24 $16.26 $20.23 $23.23
INCOME DIVIDENDS.. $ .68 $ .59 $ .69 $ .67 $ .55 $ .53 $ .45 $ .51 $ .56 $ .57
CAPITAL GAINS
DISTRIBUTIONS..... $ 2.64 $ -- $ 1.77 $ .34 $ -- $ .50 $ 1.01 $ .91 $ .48 $ .87
FUND TOTAL
RETURN (%)........ 3.50 12.01 26.36 -2.33 28.16 9.57 15.59 2.60 31.18 22.18
INDEX TOTAL
RETURN (%)........ 5.25 16.56 31.63 -3.11 30.40 7.61 10.06 1.32 37.58 22.96
</TABLE>
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results.
Investment return and principal value will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than when purchased.
4 - SCUDDER GROWTH AND INCOME FUND
<PAGE>
PORTFOLIO SUMMARY as of December 31, 1996
- ---------------------------------------------------------------------------
ASSET ALLOCATION
- ---------------------------------------------------------------------------
Common Stocks 94%
Convertible Bonds 3%
Convertible Stocks 2%
Cash Equivalents 1%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The Fund focuses on stocks with
above-average dividends and
attractive valuations.
- --------------------------------------------------------------------------
SECTOR DIVERSIFICATION
(Excludes 1% Cash Equivalents)
- --------------------------------------------------------------------------
Financial 21%
Manufacturing 20%
Consumer Staples 10%
Health 8%
Energy 8%
Durables 8%
Communications 7%
Utilities 6%
Consumer Discretionary 5%
Other 7%
- ---------------------------------------------
100%
- ---------------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
During the year the Funds
weighting in manufacturing
increased and health decreased.
- --------------------------------------------------------------------------
10 LARGEST EQUITY HOLDINGS
(19% OF PORTFOLIO)
- --------------------------------------------------------------------------
1. XEROX CORP.
Leading manufacturer of copiers and duplicators
2. POWERGEN PLC
Electric utility in the United Kingdom
3. STUDENT LOAN MARKETING ASSOCIATION
Student loan financing programs
4. PHILLIP MORRIS COMPANIES INC.
Tobacco, food products and brewing
5. TRW INC.
Defense electronics, automotive parts and systems
6. UNITED TECHNOLOGIES CORP.
Manufacturer of areospace equipment, climate control systems, and elevators
7. E.I. DU PONT DE NEMOURS & CO.
Chemical producer
8. PHILIPS ELECTRONICS NV
Leading manufacturer of electrical equipment
9. KIMBERLY-CLARK CORP.
Consumer paper products and newsprint
10. RITE AID CORP.
Discount drug store chain
Philip Morris and Student Loan
Marketing Association were strong
contributors to performance.
- -----------------------------------------------------------------------------
For more complete details about the Fund's investment portfolio,
see page 10. A monthly Investment Portfolio Summary and quarterly Portfolio
Holdings are available upon request.
5 - SCUDDER GROWTH AND INCOME FUND
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
For the second year in a row, both the Dow Jones Industrial Average and the S&P
500 reached new heights. Scudder Growth and Income Fund returned 22.18% for the
year, almost even with the overall market return of 22.96% as represented by the
S&P 500 Index. Of particular note was the month of December, when the Fund
outperformed the S&P 500 by about 1.5 percentage points, demonstrating one of
the key characteristics of our investment style: the ability to outperform in
declining markets. The Fund's total return represents an increase in its net
asset value from $20.23 at the end of 1995 to $23.23 on December 31, 1996, as
well as per share income and capital gain distributions of $0.57 and $0.865,
respectively.
Strong Performance During a Period of Increased Volatility
The Fund ended the year essentially in line with the S&P 500 due, in part, to
the strong relative performance of some of our largest holdings, including
Philip Morris, Warner Lambert, and Student Loan Marketing Association (Sallie
Mae). The environment was characterized by sector rotation out of stocks with
small market capitalizations (small-cap) into larger, more value-oriented names
during the second half of 1996. For the first half of the year, the unmanaged
Russell 2000 Index^1 of small-cap stocks steadily gained on the larger-cap
unmanaged Russell 1000 Index, a continuation of what we witnessed in 1995. In
July, earnings disappointments initiated a rotation into more liquid blue chip
names, and by the end of 1996 the trend had completely reversed: the Russell
1000 Index jumped ahead to outperform the Russell 2000 Index.
Unlike 1995, when the market was driven largely by a one percentage point drop
in long-term interest rates and 18% growth in corporate profits, 1996 was
characterized by market forecasts which seemed to flip-flop with each new
release of corporate earnings or economic data. In the end, however, nothing
could keep stocks from rising: not the negative earnings surprises in high tech,
which drove the S&P 500 down 9% and the NASDAQ down nearly 20% in the volatile
June/July period, nor the warnings of "irrational exuberance" by Federal Reserve
Chairman Alan Greenspan, which soured the global markets for two weeks in early
December.
The performance of your Fund was driven by several factors, led by a relative
underweighting in the telecommunications sector, specifically in the Regional
Bell Operating Companies (RBOCs). A decision to focus the telecom exposure in
long distance and foreign telecommunications companies benefited the Fund for
much of the year, as the local operators underperformed the S&P 500. During the
fourth quarter, however, we began to increase exposure to the RBOCs, given our
belief that much of the competitive risk in the market was already reflected in
stock prices. We initiated positions in BellSouth and Frontier, and increased
our weighting in Bell Atlantic and NYNEX.
An underweighting in the U.S. electric utility sector also boosted performance
for the year. Continued
^1 The Russell 1000 Index is comprised of the largest 1000 companies in the
Russell 3000 Index. The Russell 2000 Index represents the smallest 2000
companies in the Russell 3000 Index.
6 - Scudder Growth and Income Fund
<PAGE>
concerns over industry deregulation, competition, and nuclear power caused these
stocks to be among the worst performers for the third year in a row. While
domestic utilities languished, concentration in foreign utilities such as
National Power and Powergen was a tremendous benefit. Like the RBOCs, however,
valuations in domestic utilities are becoming more compelling, and we have been
slowly increasing exposure to that group by initiating positions in Duke Power
and Boston Edison. It is our belief that while uncertainty remains in the
restructuring of the electric industry, the process is proceeding at an
appropriate pace, with many states allowing utilities ample time to make the
transition.
The Fund's health care weighting, concentrated in pharmaceuticals, also
contributed strongly to Fund returns. Pharmaceuticals were up nearly 25% for the
year thanks to holdings such as Warner Lambert, which gained 57% due to strong
earnings momentum and the excitement over revenue enhancements from two new
drugs to treat diabetes and high cholesterol. Other strong performers were
Zeneca Group, a U.K. pharmaceutical holding company, Eli Lilly, and Bristol
Myers. We trimmed holdings as the market strengthened, although the Fund's
health care position remained in proportion to the S&P 500's health care
weighting.
Financial stocks were also strong performers in 1996. Regional banks led the
group, particularly in the latter half of the year as inflationary fears were
quelled by evidence of a slowing and stable economy. Given the strong
performance in banks, we have used the opportunity to trim holdings in
================================================================================
Higher Yields and Attractive Valuations
- --------------------------------------------------------------------------------
Fund S&P 500
Yield 2.4% 1.9%
The Fund's dividend yields exceeded
the market as measured by the S&P 500
- --------------------------------------------------------------------------------
Price-to-Earnings per share 13.7x 21.5x
Valuations were also attractive (1997
compared to the S&P 500. estimates)
================================================================================
stocks such as CoreStates Financial and First Bank Systems. While we continue to
find opportunities in banks, evidenced by a newly initiated position in BancOne,
bank stocks have bounced back considerably from historically low valuations and
are no longer cheap, particularly in the wake of rising consumer credit
concerns.
Consumer staples holdings closed 1996 with mixed performance, resulting in a
slight drag on the Fund's return. On the positive side, holdings benefited from
a strong rally in the fourth quarter driven by positive price momentum in Avon
Products, Clorox, and General Mills. Philip Morris and RJR Nabisco also
rebounded nicely to return 29% and 31%, respectively, in the fourth quarter
after a volatile year driven by tobacco litigation concerns.
For the first nine months of the year, many of the portfolio changes were
concentrated in cyclical areas where we used attractive valuations in chemicals,
paper, and retailing as an opportunity to increase holdings. In chemicals, we
initiated a position in Eastman Chemical in the third quarter to take advantage
of what we believed was a price decline and subsequently increased holdings in
the fourth quarter. At the same time we increased
7 - Scudder Growth and Income Fund
<PAGE>
positions in Allegheny Teledyne, Imperial Chemical, Louisiana Pacific, and
Westvaco. Despite recession concerns, we believe that a possible threat of
negative economic news is already reflected in the prices of these issues.
A Limited Exposure To Technology
Given the Fund's strict relative yield discipline, holdings in the technology
area are minimal. Our exposure to technology was achieved by owning
well-established, rapidly growing firms with above-average dividend yields. We
include companies such as Rockwell (industrial automation and semiconductor
systems), TRW (defense electronic and automotive safety sensors), and Philips
Electronics (medical equipment and communications systems) in this category.
Although these companies may never be the lead story in Wired magazine, we
believe they offer capital appreciation potential with downside protection
stemming from their high relative dividend yields, a feature that more glamorous
technology issues typically do not provide.
And, finally, a word about Xerox, the Fund's largest holding. The stock's 18%
gain for the year masks a drop in mid October when the company indicated third
quarter earnings would be below consensus expectations. We took advantage of
this price weakness and added to the Fund's position. The stock has fully
recovered since its initial decline. Our fundamental thesis for Xerox remains
intact, namely, that digital and other high-end color products will be the key
to long-term growth and profitability at the company.
8 - Scudder Growth and Income Fund
<PAGE>
Scudder Growth and Income Fund: A Team Approach to Investing
Scudder Growth and Income Fund is managed by a team of Scudder investment
professionals who each play an important role in the Fund's management process.
Team members work together to develop investment strategies and select
securities for the Fund's portfolio. They are supported by Scudder's large staff
of economists, research analysts, traders, and other investment specialists who
work in Scudder's offices across the United States and abroad. We believe our
team approach benefits Fund investors by bringing together many disciplines and
leveraging Scudder's extensive resources.
Lead Portfolio Manager Robert T. Hoffman has had responsibility for setting the
Fund's stock investing strategy and overseeing the Fund's day-to-day operations
since 1991. Rob joined Scudder in 1990 and has 12 years of investment industry
experience. Kathleen T. Millard, Portfolio Manager, has focused on strategy and
stock selection since she joined Scudder and the team in 1991. Benjamin W.
Thorndike, Portfolio Manager, is the Fund's chief analyst and strategist for
convertible securities. Ben joined Scudder in 1983 as a portfolio manager and
the Fund in 1986. Lori Ensinger, Portfolio Manager, joined the Fund in 1996 and
focuses on stock selection and investment strategy. Lori has worked in the
investment industry since 1983 and at Scudder since 1993.
Your Portfolio Management Team: Robert T. Hoffman, Kathleen T. Millard, Benjamin
W. Thorndike and Lori J. Ensinger
Looking Ahead
While we watch the endless stream of economic data and the trends in corporate
profit growth, and remain cautious with respect to the current level of the
stock market, we will not make large sector commitments based on financial
market forecasts. We have seen, particularly in 1996, how expectations can shift
overnight, only to come full circle in as short a time period. Rather than
attempt to outguess the market, we remain focused on investing in attractively
valued securities with premium dividend yields, which we believe is a superior
strategy in any market environment.
Sincerely,
Your Portfolio Management Team
/s/Robert T. Hoffman /s/Kathleen T. Millard
Robert T. Hoffman Kathleen T. Millard
/s/Benjamin W. Thorndike /s/Lori J. Ensinger
Benjamin W. Thorndike Lori J. Ensinger
9 - Scudder Growth and Income Fund
<PAGE>
Invesment Portfolio as of December 31, 1996
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- -----------------------------------------------------------------------------------------------------------------
Repurchase Agreements 0.1%
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated
12/31/96 at 6.7%, to be repurchased at $3,143,170 on 1/2/97,
collateralized by a $3,020,000 U.S. Treasury Note, 8.625%, -----------
8/15/97 (Cost $3,142,000) ................................................. 3,142,000 3,142,000
-----------
Commercial Paper 1.2%
- -----------------------------------------------------------------------------------------------------------------
Financial
Other Financial Companies
Centric Funding Corp. 5.62%, 1/6/97 ......................................... 15,000,000 14,988,292
Dresdner US Finance Inc., 5.62%, 1/2/97 ..................................... 25,000,000 24,996,097
Prudential Funding Corp., 5.62% 1/8/97 ...................................... 10,000,000 9,989,072
- -----------------------------------------------------------------------------------------------------------------
Total Commercial Paper (Cost $49,973,461) 49,973,461
- -----------------------------------------------------------------------------------------------------------------
Corporate Bonds 0.2%
- -----------------------------------------------------------------------------------------------------------------
Financial -----------
Siemens Capital Corp. with warrants, 8%, 6/24/02 (Cost $7,177,934) .......... 5,500,000 7,046,875
-----------
Convertible Bonds 2.7%
- -----------------------------------------------------------------------------------------------------------------
Consumer Discretionary 0.7%
Department & Chain Stores
Federated Department Stores, Inc., Debenture, 5%, 10/1/03 ................... 11,000,000 12,705,000
Home Depot Inc. Convertible until 10/1/2001, 3.25%, 10/1/01 ................. 16,500,000 16,252,500
-----------
28,957,500
Health 0.1% -----------
Pharmaceuticals
Sandoz Capital BVI Ltd., Debenture, 2%, 10/6/02 ............................. 5,810,000 6,245,750
-----------
Financial 1.0%
Banks 0.4%
MBL International Finance Bermuda, 3%, 11/30/02 ............................. 16,140,000 17,108,400
-----------
Other Financial Companies 0.2%
First Financial Management Corp., Debenture, 5%, 12/15/99 ................... 4,560,000 8,014,200
-----------
Real Estate 0.4%
Security Capital Corp., Debenture, 6.5%, 3/29/16 (b) (c) .................... 16,750,000 16,750,000
-----------
Service Industries 0.5%
Miscellaneous Commercial Services
ADT Operations Inc. Liquid Yield Option Note, 7/6/10 ........................ 24,000,000 15,510,000
Jardine Strategic Holdings Ltd., Debenture, 7.5%, 5/7/49 .................... 6,151,000 7,381,200
-----------
22,891,200
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - SCUDDER GROWTH AND INCOME FUND
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Durables 0.2%
Automobiles
Magna International, Inc., Debenture, 5%, 10/15/02 .......................... 6,700,000 7,688,250
-----------
Manufacturing 0.1%
Diversified Manufacturing
Thermo Electron Corp., 4.25%, 1/1/03 ........................................ 5,000,000 5,875,000
-----------
Technology 0.1%
Electronic Data Processing
Silicon Graphics Inc., Debenture, 11/2/13 ................................... 7,500,000 3,946,875
- -----------------------------------------------------------------------------------------------------------------
Total Convertible Bonds (Cost $104,295,344) 117,477,175
- -----------------------------------------------------------------------------------------------------------------
Shares
- -----------------------------------------------------------------------------------------------------------------
Convertible Preferred Stocks 1.9%
- -----------------------------------------------------------------------------------------------------------------
Consumer Discretionary 0.5%
Department & Chain Stores
K Mart 7.75% ................................................................ 392,900 19,153,875
Health 0.0% -----------
Medical Supply & Specialty 0.0%
U.S. Surgical Corp. "A" Cum $2.20 ........................................... 25,000 956,250
Financial 0.2% -----------
Consumer Finance 0.0%
Advanta Corp. 6.75% ......................................................... 7,500 303,750
Real Estate 0.2% -----------
Security Capital Industrial Trust "B", 7% ................................... 278,000 7,575,500
Manufacturing 0.6% -----------
Containers & Paper 0.1%
Boise Cascade Corp. "G", Cum $1.58 .......................................... 60,100 1,570,113
International Paper Co. 5.25% ............................................... 47,000 2,150,250
-----------
3,720,363
Industrial Specialty 0.3% -----------
Cooper Industries, Inc. 6% .................................................. 606,300 11,747,063
Wholesale Distributors 0.2% -----------
Alco Standard Corp. 6.50% ................................................... 96,100 9,177,550
Energy 0.3% -----------
Oil & Gas Production
Parker & Parsley Capital Corp., 6.25% ....................................... 180,500 11,822,750
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - SCUDDER GROWTH AND INCOME FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Metals & Minerals 0.3%
Precious Metals
Freeport McMoRan Copper & Gold, Inc., Cum. $1.25 ............................ 500,000 13,875,000
- -----------------------------------------------------------------------------------------------------------------
Total Convertible Preferred Stocks (Cost $69,469,658) 78,332,101
- -----------------------------------------------------------------------------------------------------------------
Common Stocks 93.9%
- -----------------------------------------------------------------------------------------------------------------
Consumer Discretionary 3.6%
Department & Chain Stores
J.C. Penney Co., Inc. ....................................................... 745,600 36,348,000
May Department Stores ....................................................... 520,100 24,314,675
Rite Aid Corp. .............................................................. 1,488,700 59,175,825
Sears, Roebuck & Co. ........................................................ 715,300 32,993,202
------------
152,831,702
------------
Consumer Staples 10.2%
Alcohol & Tobacco 3.7%
Anheuser-Busch Companies, Inc. .............................................. 1,030,400 41,216,000
Philip Morris Companies, Inc. ............................................... 761,300 85,741,413
RJR Nabisco Holdings Corp. .................................................. 788,580 26,811,720
------------
153,769,133
------------
Consumer Electronic & Photographic Products 1.0%
Whirlpool Corp. ............................................................. 903,700 42,135,013
------------
Food & Beverage 3.4%
General Mills, Inc. ......................................................... 559,500 35,458,313
H.J. Heinz Co. .............................................................. 1,526,850 54,584,888
Unilever NV (New York shares) ............................................... 305,700 53,573,925
------------
143,617,126
------------
Package Goods/Cosmetics 2.1%
Avon Products Inc. .......................................................... 220,500 12,596,063
Kimberly-Clark Corp. ........................................................ 624,800 59,512,200
Tambrands Inc. .............................................................. 431,000 17,617,125
------------
89,725,388
------------
Health 8.1%
Pharmaceuticals
American Home Products Corp. ................................................ 705,800 41,377,525
Baxter International Inc. ................................................... 1,088,100 44,612,100
Bristol-Myers Squibb Co. .................................................... 511,800 55,658,250
Eli Lilly & Co. ............................................................. 77,900 5,686,700
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - SCUDDER GROWTH AND INCOME FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Schering-Plough Corp. ....................................................... 844,500 54,681,375
SmithKline Beecham PLC (ADR) ................................................ 590,200 40,133,600
Warner-Lambert Co. .......................................................... 787,300 59,047,500
Zeneca Group PLC ............................................................ 1,356,100 38,191,040
------------
339,388,090
------------
Communications 6.9%
Telephone/Communications
Alltel Corp. ................................................................ 1,239,600 38,892,450
Bell Atlantic Corp. ......................................................... 641,500 41,537,125
BellSouth Corp. ............................................................. 489,700 19,771,638
Frontier Corp. .............................................................. 996,100 22,536,763
GTE Corp. ................................................................... 990,000 45,045,000
Koninklijke PTT Nederland ................................................... 810,000 30,897,777
NYNEX Corp. ................................................................. 773,700 37,234,313
Sprint Corp. ................................................................ 1,058,100 42,191,738
Telecom Corp. of New Zealand ................................................ 1,901,000 9,703,046
------------
287,809,850
------------
Financial 19.1%
Banks 9.2%
AmSouth Bancorp. ............................................................ 235,000 11,368,125
Argentaria Corporacion Bancaria de Espana ................................... 474,000 21,212,709
Banc One Corp. .............................................................. 668,700 28,754,100
BankAmerica Corp. ........................................................... 111,500 11,122,125
Bankers Trust New York Corp. ................................................ 594,000 51,232,500
Chase Manhattan Corp. New ................................................... 607,400 54,210,450
CoreStates Financial Corp. .................................................. 877,800 45,535,875
First Bank System Inc. ...................................................... 584,700 39,905,775
First Chicago NBD Corp. ..................................................... 273,600 14,706,000
J.P. Morgan & Co., Inc. ..................................................... 503,300 49,134,663
KeyCorp, New ................................................................ 869,800 43,924,900
NationsBank Corp. ........................................................... 107,300 10,488,575
Nordbanken AB ............................................................... 128,500 3,891,113
------------
385,486,910
------------
Insurance 2.6%
EXEL, Ltd. .................................................................. 916,000 34,693,500
Hartford Steam Boiler Inspection & Insurance Co. ............................ 287,400 13,328,175
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - SCUDDER GROWTH AND INCOME FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Lincoln National Corp. ....................................................... 968,200 50,830,500
Mid Ocean Limited ............................................................ 101,400 5,323,500
Transamerica Corp. ........................................................... 45,200 3,570,800
------------
107,746,475
------------
Other Financial Companies 3.0%
Federal National Mortgage Association ........................................ 1,044,400 38,903,900
Student Loan Marketing Association ........................................... 942,800 87,798,250
------------
126,702,150
------------
Real Estate 4.3%
Avalon Properties, Inc. (REIT) ............................................... 217,100 6,241,625
Camden Property Trust (REIT) ................................................. 338,500 9,689,563
Charles E. Smith Residential Realty, Inc. (REIT) ............................. 73,800 2,158,650
Developers Diversified Realty Corp. .......................................... 224,700 8,341,988
Equity Residential Properties Trust (REIT) ................................... 28,100 1,159,125
General Growth Properties, Inc. (REIT) ....................................... 1,588,600 51,232,350
Health Care Property Investment Inc. (REIT) .................................. 359,300 12,575,500
Mark Centers Trust (REIT) .................................................... 31,400 317,925
Meditrust SBI (REIT) ......................................................... 468,400 18,736,000
Nationwide Health Properties Inc. (REIT) ..................................... 604,800 14,666,400
Post Properties Inc. (REIT) .................................................. 61,900 2,491,475
Security Capital Corp. (b) (c) ............................................... 15,968 19,847,712
Security Capital Industrial Trust (REIT) ..................................... 424,125 9,065,672
Security Capital US Realty (REIT) ............................................ 1,205,788 15,434,086
Spieker Properties, Inc. ..................................................... 150,000 5,400,000
Vornado Realty Trust (REIT) .................................................. 88,800 4,662,000
------------
182,020,071
------------
Durables 7.3%
Aerospace 4.0%
Boeing Co. ................................................................... 30,634 3,258,692
Lockheed Martin Corp. ........................................................ 472,328 43,218,012
Northrop Grumman Corp. ....................................................... 71,000 5,875,250
Rockwell International Corp. ................................................. 729,400 44,402,225
United Technologies Corp. .................................................... 1,093,800 72,190,800
------------
168,944,979
------------
Automobiles 2.6%
Dana Corp. ................................................................... 994,700 32,452,088
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - SCUDDER GROWTH AND INCOME FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Eaton Corp. .................................................................. 290,100 20,234,475
Ford Motor Co. ............................................................... 1,077,500 34,345,313
Genuine Parts Co. ............................................................ 429,100 19,094,950
------------
106,126,826
------------
Construction/Agricultural Equipment 0.7%
PACCAR, Inc. ................................................................. 449,600 30,572,800
------------
Manufacturing 18.7%
Chemicals 5.8%
DSM NV ....................................................................... 356,100 35,123,547
Dow Chemical Co. ............................................................. 484,700 37,988,363
E.I. du Pont de Nemours & Co. ................................................ 652,400 61,570,250
Eastman Chemical Co. ......................................................... 852,100 47,078,525
Imperial Chemical Industries PLC ............................................. 3,032,000 39,943,093
Lyondell Petrochemical Co. ................................................... 948,900 20,875,800
------------
242,579,578
------------
Containers & Paper 1.6%
Bowater, Inc. ................................................................ 502,900 18,921,613
Stone Container Corp. ........................................................ 1,332,900 19,826,888
Westvaco Corp. ............................................................... 890,100 25,590,375
------------
64,338,876
------------
Diversified Manufacturing 3.3%
Dresser Industries Inc. ...................................................... 301,600 9,349,600
Olin Corp. ................................................................... 1,061,200 39,927,650
St. Joe Paper Co. ............................................................ 93,100 6,051,500
TRW Inc. ..................................................................... 1,666,200 82,476,900
------------
137,805,650
------------
Electrical Products 2.7%
Philips Electronics NV ....................................................... 1,487,800 60,283,630
Philips NV (New York shares) ................................................. 387,700 15,508,000
Thomas & Betts Corp. ......................................................... 830,800 36,866,750
------------
112,658,380
------------
Industrial Specialty 0.4%
Corning Inc. ................................................................. 320,300 14,813,875
------------
Machinery/Components/Controls 0.4%
S.K.F. AB "B" (Free) ......................................................... 785,000 18,590,575
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - SCUDDER GROWTH AND INCOME FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Office Equipment/Supplies 3.1%
Xerox Corp. .................................................................. 2,470,400 130,004,800
------------
Specialty Chemicals 1.4%
ARCO Chemical Co. ............................................................ 180,000 8,820,000
BetzDearborn Inc. ............................................................ 613,800 35,907,300
Witco Corp. .................................................................. 458,200 13,975,100
------------
58,702,400
------------
Technology 0.1%
Electronic Data Processing
Ceridian Corp.* .............................................................. 110,000 4,455,000
------------
Energy 7.6%
Oil & Gas Production 0.2%
Union Pacific Resources Group ................................................ 265,771 7,773,802
------------
Oil Companies 7.2%
Exxon Corp. .................................................................. 294,800 28,890,400
Murphy Oil Corp. ............................................................. 372,800 20,737,000
Pennzoil Co. ................................................................. 475,600 26,871,400
Repsol SA (ADR) .............................................................. 484,000 18,452,500
Royal Dutch Petroleum Co. .................................................... 229,000 39,101,750
Societe Nationale Elf Aquitaine .............................................. 506,000 46,073,607
Texaco Inc. .................................................................. 234,900 23,049,563
Total SA "B" ................................................................. 510,323 41,518,470
Total SA (ADR) ............................................................... 396,253 15,949,183
YPF S.A. "D" (ADR) ........................................................... 1,580,200 39,900,050
------------
300,543,923
------------
Oil/Gas Transmission 0.2%
PanEnergy Corp. .............................................................. 218,000 9,810,000
------------
Metals & Minerals 2.3%
Steel & Metals
Allegheny Teledyne Inc. ...................................................... 1,879,015 43,217,345
Freeport McMoRan Copper & Gold, Inc. "A" ..................................... 542,590 15,260,344
J & L Specialty Steel, Inc. .................................................. 1,709,700 19,447,838
Phelps Dodge Corp. ........................................................... 268,400 18,117,000
------------
96,042,527
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - SCUDDER GROWTH AND INCOME FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Construction 1.8%
Building Materials 0.3%
Martin Marietta Materials, Inc. .............................................. 488,449 11,356,439
-------------
Forest Products 1.5%
Georgia Pacific Corp. ........................................................ 470,400 33,868,800
Louisiana-Pacific Corp. ...................................................... 461,900 9,757,638
Weyerhaeuser Co. ............................................................. 364,500 17,268,188
-------------
60,894,626
-------------
Transportation 2.2%
Airlines 0.3%
Delta Air Lines, Inc. ........................................................ 172,448 12,222,252
-------------
Railroads 1.9%
CSX Corp. .................................................................... 512,600 21,657,350
Canadian National Railway Co. ................................................ 809,800 30,803,913
Norfolk Southern Corp. ....................................................... 120,100 10,508,750
Union Pacific Corp. .......................................................... 313,800 18,867,225
-------------
81,837,238
-------------
Utilities 6.0%
Electric Utilities
Boston Edison Co. ............................................................ 81,100 2,179,563
CINergy Corp. ................................................................ 494,500 16,503,938
CMS Energy Corp. ............................................................. 227,600 7,653,050
China Light & Power Co., Ltd. (ADR) .......................................... 2,332,800 10,380,960
Duke Power Co. ............................................................... 119,900 5,545,375
National Power PLC ........................................................... 577,367 4,823,648
National Power PLC (GDR) ..................................................... 239,500 8,113,063
PacifiCorp ................................................................... 740,000 15,170,000
Pacific Gas & Electric Co. ................................................... 1,773,200 37,237,200
PowerGen PLC ................................................................. 5,112,000 50,059,989
PowerGen PLC (ADR) ........................................................... 970,200 38,322,900
Southern Company ............................................................. 606,000 13,710,750
Texas Utilities Co., Inc. .................................................... 210,000 8,557,500
Unicom Corp. ................................................................. 1,212,100 32,878,213
-------------
251,136,149
- -----------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $2,837,247,293) 3,932,442,603
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $3,071,305,690) (a) 4,188,414,215
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - SCUDDER GROWTH AND INCOME FUND
<PAGE>
- --------------------------------------------------------------------------------
* Non-income producing security.
(a) The cost for federal income tax purposes was $3,068,594,400. At December
31, 1996, net unrealized appreciation for all securities based on tax cost
was $1,119,819,815. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market
value over tax cost of $1,138,883,535 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost
over market value of $19,063,720.
(b) Securities valued in good faith by the Valuation Committee of the Board of
Trustees at fair value amounted to $36,597,712 (.87% of net assets). Their
values have been estimated by the Board of Trustees in the absence of
readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of
these securities at December 31, 1996 aggregated $33,500,000. These
securities may also have certain restrictions as to resale.
(c) Restricted Securities -- securities which have not been registered with
the Securities and Exchange Commission under the Securities Act of 1933.
Information concerning such restricted securities at December 31, 1996 is
as follows:
<TABLE>
<CAPTION>
Security Acquisition Date Cost ($)
-------- ---------------- --------
<S> <C> <C>
Security Capital Corp., Debenture,
6.5%, 3/29/16 4/18/96 16,750,000
Security Capital Corp. 4/18/96 16,750,000
</TABLE>
Transactions in written call options on securities during the twelve
months ended December 31, 1996 were:
<TABLE>
<CAPTION>
Number of Contracts Premiums Received ($)
------------------- ---------------------
<S> <C> <C>
Outstanding at December 31, 1995 ............... -- --
Contracts written .............................. 500 23,999
Contracts expired .............................. (500) (23,999)
---------------------------------------------------------------------------------------------
Outstanding at December 31, 1996 ............... -- --
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 - SCUDDER GROWTH AND INCOME FUND
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of December 31, 1996
<TABLE>
<CAPTION>
Assets
----------------------------------------------------------------------------------------------------------
<S> <C>
Investments, at market (identified cost $3,071,305,690) (Note A) ...... $4,188,414,215
Collateral held for securities loaned (Note A) ........................ 258,790,700
Dividends and interest receivables .................................... 12,855,207
Receivable for investments sold ....................................... 16,383,366
Receivable for fund shares sold ....................................... 7,036,358
Receivable for foreign tax recoverable ................................ 1,395,195
Foreign currency, at value (cost $1,022,226) .......................... 1,034,614
Other assets .......................................................... 20,224
--------------
Total assets .......................................................... 4,485,929,879
Liabilities
----------------------------------------------------------------------------------------------------------
Collateral on securities loaned (Note A) .............................. 258,790,700
Due to custodian bank ................................................. 145,365
Payable for investments purchased ..................................... 10,050,401
Payable for fund shares redeemed ...................................... 27,128,682
Accrued management fee (Note C) ....................................... 1,682,044
Other accrued expenses (Note C) ....................................... 1,553,336
Other payables ........................................................ 98,146
--------------
Total liabilities ..................................................... 299,448,674
-----------------------------------------------------------------------------------------
Net assets, at market value $4,186,481,205
-----------------------------------------------------------------------------------------
Net Assets
----------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ................................... $ 6,401,797
Net unrealized appreciation on:
Investments ........................................................ 1,117,108,525
Foreign currency related transactions .............................. 14,357
Accumulated net realized gain ......................................... 70,381,341
Paid-in capital ....................................................... 2,992,575,185
-----------------------------------------------------------------------------------------
Net assets, at market value $4,186,481,205
-----------------------------------------------------------------------------------------
Net Asset Value
----------------------------------------------------------------------------------------------------------
Net asset value, offering and redemption price per share
($4,186,481,205 / 180,244,068 shares of capital stock
outstanding, $.01 par value, unlimited number of --------------
shares authorized) .................................................... $23.23
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19 - SCUDDER GROWTH AND INCOME FUND
<PAGE>
Statement of Operations
year ended December 31, 1996
<TABLE>
<CAPTION>
Investment Income
---------------------------------------------------------------------------------------------------------
<S> <C>
Income:
Dividends (net of foreign taxes withheld of $2,632,557) ............ $ 117,546,539
Interest ........................................................... 9,381,108
-------------
126,927,647
Expenses:
Management fee (Note C) ............................................ $ 17,628,873
Services to shareholders (Note C) .................................. 8,105,791
Custodian and accounting fees (Note C) ............................. 837,262
Trustees' fees and expenses (Note C) ............................... 38,083
Reports to shareholders ............................................ 640,002
Legal .............................................................. 52,870
Auditing ........................................................... 53,529
Registration ....................................................... 282,702
Other .............................................................. 99,531
-------------
27,738,643
----------------------------------------------------------------------------------------
Net investment income 99,189,004
----------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
---------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ........................................................ 212,888,290
Options ............................................................ 23,999
Foreign currency related transactions .............................. (170,703)
-------------
212,741,586
Net unrealized appreciation during the period on:
Investments ........................................................ 415,531,437
Foreign currency related transactions .............................. 19,314
-------------
415,550,751
----------------------------------------------------------------------------------------
Net gain on investment transactions 628,292,337
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 727,481,341
----------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 - SCUDDER GROWTH AND INCOME FUND
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended December 31,
Increase (Decrease) in Net Assets 1996 1995
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ........................................ $ 99,189,004 $ 78,522,376
Net realized gain from investment transactions ............... 212,741,586 63,930,236
Net unrealized appreciation on investment transactions
during the period .......................................... 415,550,751 546,323,308
-------------- --------------
Net increase in net assets resulting from operations ......... 727,481,341 688,775,920
-------------- --------------
Distributions to shareholders from:
Net investment income ........................................ (95,258,805) (78,569,568)
-------------- --------------
Net realized gains on investment transactions ................ (149,937,532) (69,054,578)
-------------- --------------
Fund share transactions:
Proceeds from shares sold .................................... 1,116,527,351 829,474,858
Net asset value of shares issued to shareholders in
reinvestment of distributions .............................. 224,992,117 133,306,288
Cost of shares redeemed ...................................... (698,530,847) (434,428,526)
-------------- --------------
Net increase in net assets from Fund share transactions ...... 642,988,621 528,352,620
-------------- --------------
Increase in net assets ....................................... 1,125,273,625 1,069,504,394
Net assets at beginning of period ............................ 3,061,207,580 1,991,703,186
Net assets at end of period (including undistributed
net investment income of $6,401,797 and $2,471,598, -------------- --------------
respectively) .............................................. $4,186,481,205 $3,061,207,580
-------------- --------------
Other Information
------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares ...........................
Shares outstanding at beginning of period .................... 151,318,741 122,454,972
-------------- --------------
Shares sold .................................................. 51,282,565 45,610,829
Shares issued to shareholders in reinvestment of
distributions .............................................. 9,848,328 6,927,513
Shares redeemed .............................................. (32,205,566) (23,674,573)
-------------- --------------
Net increase in Fund shares .................................. 28,925,327 28,863,769
-------------- --------------
Shares outstanding at end of period .......................... 180,244,068 151,318,741
-------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
21 - SCUDDER GROWTH AND INCOME FUND
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Years Ended December 31,
1996(d) 1995 1994 1993(b) 1992 1991 1990 1989 1988 1987
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of -------------------------------------------------------------------------------------
period ........................ $20.23 $16.26 $17.24 $16.20 $15.76 $12.77 $14.14 $13.18 $12.31 $15.02
-------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ............ .60 .55 .49 .49 .57 .57 .65 .67 .60 .68
Net realized and unrealized gain
(loss) on investment
transactions .................. 3.84 4.46 (.05) 2.01 .90 2.97 (1.01) 2.75 .86 (.07)
-------------------------------------------------------------------------------------
Total from investment operations.. 4.44 5.01 .44 2.50 1.47 3.54 (.36) 3.42 1.46 .61
-------------------------------------------------------------------------------------
Less distributions from:
Net investment income ............ (.57) (.56) (.51) (.45) (.53) (.55) (.67) (.69) (.59) (.68)
Net realized gains on investment
transactions .................. (.87) (.48) (.91) (1.01) (.50) -- (.34) (1.77) -- (2.64)
-------------------------------------------------------------------------------------
Total distributions .............. (1.44) (1.04) (1.42) (1.46) (1.03) (.55) (1.01) (2.46) (.59) (3.32)
-------------------------------------------------------------------------------------
Net asset value, -------------------------------------------------------------------------------------
end of period ................. $23.23 $20.23 $16.26 $17.24 $16.20 $15.76 $12.77 $14.14 $13.18 $12.31
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
Total Return (%) ................. 22.18 31.18 2.60 15.59 9.57 28.16 (2.33) 26.36 12.01 3.50
Ratios and Supplemental Data
Net assets, end of period
($ millions) .................. 4,186 3,061 1,992 1,624 1,166 723 491 490 402 392
Ratio of operating expenses to
average net assets (%) ........ .78 .80 .86 .86 .94(a) .97 .95 .87 .92 .89
Ratio of net investment income to
average net assets (%) ........ 2.77 3.10 2.98 2.93 3.60 4.03 5.03 4.47 4.63 4.24
Portfolio turnover rate (%) ...... 26.6 26.9 42.3 35.5 27.5 44.7 64.7 76.6 47.6 59.5
Average commission rate .......... $.0572 $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
paid (c)
</TABLE>
(a)The Adviser did not impose a portion of its management fee amounting to
$.02 per share for the year ended December 31, 1992. If all expenses,
including the management fee not imposed, had been incurred by the Fund, the
annualized ratio of expenses to average net assets for such year would have
been 1.08% and the total return would have been lower. This ratio includes
costs associated with the acquisition of certain assets of Niagara Share
Corporation on July 27, 1992; exclusive of these charges the ratio would
have been .92%.
(b)Effective January 1, 1993, the Fund discontinued using equalization
accounting.
(c)Average commission rate paid per share of common and preferred stocks is
calculated for fiscal years beginning on or after September 1, 1995.
(d)Based on monthly average shares outstanding during the period.
22 - SCUDDER GROWTH AND INCOME FUND
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder Growth and Income Fund (the "Fund") is a diversified series of Scudder
Investment Trust (the "Trust"). The Trust is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The Fund's
financial statements are prepared in accordance with generally accepted
accounting principles which require the use of management estimates. The
policies described below are followed consistently by the Fund in the
preparation of its financial statements.
Security Valuation. Portfolio securities which are traded on U.S. or foreign
stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the National Association of
Securities Dealers Automatic Quotation ("NASDAQ") System, for which there have
been sales, are valued at the most recent sale price reported on such system. If
there are no such sales, the value is the high or "inside" bid quotation.
Securities which are not quoted on the NASDAQ System but are traded in another
over-the-counter market are valued at the most recent sale price on such market.
If no sale occurred, the security is then valued at the calculated mean between
the most recent bid and asked quotations. If there are no such bid and asked
quotations, the most recent bid quotation shall be used.
Portfolio debt securities with remaining maturities greater than sixty days are
valued by pricing agents approved by the officers of the Fund, which quotations
reflect broker/dealer-supplied valuations and electronic data processing
techniques. If the pricing agents are unable to provide such quotations, the
most recent bid quotation supplied by a bona fide market maker shall be used.
Short-term investments having a maturity of sixty days or less are valued at
amortized cost. All other securities are valued at their fair value as
determined in good faith by the Valuation Committee of the Board of Trustees.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement, is equal to at least 100.5% of the resale price.
Options. An option contract is a contract in which the writer of the option
grants the buyer of the option the right to purchase from (call option), or sell
to (put option), the writer a designated instrument at a specified price within
a specified period of time. Certain options, including options on indices, will
require cash settlement by the Fund if the option is exercised. During the
period, the Fund wrote a call option on financial instruments as a hedge against
potential adverse price movements in the value of portfolio assets. If the Fund
writes an option and the option expires unexercised, the Fund will realize
income, in the form of a capital gain, to the extent of the amount received for
the option (the "premium"). If the Fund elects to close out the option it would
recognize a gain or loss based on the difference between the cost of closing the
option and the initial premium received. If the Fund purchased an option and
allows the option to expire it would realize a loss to the extent of the premium
paid. If the Fund elects to close out the option it would recognize a gain or
loss equal to the difference between the cost of acquiring the option and the
amount realized upon the sale of the option.
23 - SCUDDER GROWTH AND INCOME FUND
<PAGE>
The gain or loss recognized by the Fund upon the exercise of a written call or
purchased put option is adjusted for the amount of option premium. If a written
put or purchased call option is exercised, the Fund's cost basis of the acquired
security or currency would be the exercise price adjusted for the amount of the
option premium.
The liability representing the Fund's obligation under an exchange traded
written option or investment in a purchased option is valued at the last sale
price or, in the absence of a sale, the mean between the closing bid and asked
price or at the most recent asked price (bid for purchased options) if no bid
and asked price are available. Over-the-counter written or purchased options are
valued using dealer supplied quotations.
When the Fund writes a covered call option, the Fund foregoes, in exchange for
the premium, the opportunity to profit during the option period from an increase
in the market value of the underlying security or currency above the exercise
price. When the Fund writes a put option it accepts the risk of a decline in the
market value of the underlying security or currency below the exercise price.
Over-the-counter options have the risk of the potential inability of
counterparties to meet the terms of their contracts. The Fund's maximum exposure
to purchased options is limited to the premium initially paid. In addition,
certain risks may arise upon entering into option contracts including the risk
that an illiquid secondary market will limit the Fund's ability to close out an
option contract prior to the expiration date and, that a change in the value of
the option contract may not correlate exactly with changes in the value of the
securities or currencies hedged.
Security Lending. The Fund may seek to increase its income by lending portfolio
securities. Such loans may be made through the Fund's authorized agent to
registered broker/dealers and are required to be collateralized by cash, U.S
Government Securities or liquid high grade debt obligations in an amount at
least equal to the market value plus accrued interest of the securities loaned.
The collateral is invested, and a negotiated percentage of the interest earned
is remitted to the Fund. This income is included as a component of interest
income. At December 31, 1996, the Fund loaned securities with an aggregate
market value of $252,770,463 which represents 6.0% of total net assets.
Restricted Securities. The Fund may not purchase restricted securities (for
these purposes, restricted security means a security which cannot be sold to the
public without registration under the Securities Act of 1933 or the availability
of an exemption from registration, or which is subject to other legal or
contractual delays in or restrictions on resale), if, as a result thereof, more
than 5% of the value of the Fund's total assets would be invested in restricted
securities. The aggregate fair value of restricted securities at December 31,
1996, amounted to $36,597,712 which represents .87% of net assets.
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and liabilities at the
daily rates of exchange, and
(ii)purchases and sales of investment securities, dividend and interest
income and certain expenses at the daily rates of exchange prevailing on
the respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes in
market prices of the investments. Such fluctuations are included with the net
realized and unrealized gains and losses from investments.
24 - SCUDDER GROWTH AND INCOME FUND
<PAGE>
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment companies
and to distribute all of its taxable income to its shareholders. The Fund
accordingly paid no federal income taxes and no provision for federal income
taxes was required.
Distribution of Income and Gains. Distributions of net investment income are
made quarterly. During any particular year, net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders. An additional distribution may be made to the extent necessary to
avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. These
differences relate primarily to non-taxable distributions and certain securities
sold at a loss. As a result, net investment income and net realized gain (loss)
on investment transactions for a reporting period may differ significantly from
distributions during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
The Fund uses the specific identified cost method for determining realized gain
or loss on investments for both financial and federal income tax reporting
purposes.
Other. Investment security transactions are accounted for on a trade date basis.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis.
B. Purchases and Sales of Securities
For the year ended December 31, 1996, purchases and sales of investment
securities (excluding short-term investments) aggregated $1,489,158,420 and
$965,117,003, respectively.
C. Related Parties
Under the Investment Management Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser") the Fund has agreed to pay the Adviser an
amount equal to an annual rate of 0.60% on the first $500,000,000 of the Fund's
average daily net assets, 0.55% on the next $500,000,000, 0.50% on the next
$500,000,000, 0.475% on the next $500,000,000, 0.45% on the next $1,000,000,000,
and 0.425% of such net assets in excess of $3,000,000,000, computed and accrued
daily and payable monthly. As manager of the assets of the Fund, the Adviser
directs the investments of the Fund in accordance with its investment objective,
policies, and restrictions. The Adviser determines the securities, instruments,
and other contracts relating to investments to be purchased, sold or entered
into by the Fund. In addition to portfolio management services, the Adviser
provides certain administrative services in accordance with the Agreement. The
Agreement also provides that if the Fund's expenses, exclusive of taxes,
interest, and extraordinary expenses, exceed specified limits, such excess, up
to the amount of the
25 - SCUDDER GROWTH AND INCOME FUND
<PAGE>
management fee, will be paid by the Adviser. For the year ended December 31,
1996, the fee pursuant to the Agreement amounted to $17,628,873, which was
equivalent to an annual effective rate of .49% of the Fund's average daily net
assets.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
year ended December 31, 1996, the amount charged to the Fund by SSC aggregated
$4,264,447, of which $453,051 is unpaid at December 31, 1996.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the year ended December 31,
1996, the amount charged to the Fund by STC aggregated $2,482,721, of which
$273,253 is unpaid at December 31, 1996
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the year ended
December 31, 1996, the amount charged to the Fund by SFAC aggregated $249,566 of
which $23,174 is unpaid at December 31, 1996.
The Fund pays each Trustee not affiliated with the Adviser $4,000 annually, plus
specified amounts for attended board and committee meetings. For the year ended
December 31, 1996, Trustees' fees and expenses aggregated $38,083.
26 - SCUDDER GROWTH AND INCOME FUND
<PAGE>
Report of Independent Accountants
To the Trustees of Scudder Investment Trust and the Shareholders of Scudder
Growth and Income Fund:
We have audited the accompanying statement of assets and liabilities of Scudder
Growth and Income Fund, including the investment portfolio, as of December 31,
1996, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the ten years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder Growth and Income Fund as of December 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the ten years in the period then ended in conformity with generally accepted
accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
February 14, 1997
27 - SCUDDER GROWTH AND INCOME FUND
<PAGE>
Tax Information
By now shareholders for whom year-end tax reporting is required by the IRS
should have received their Form 1099-DIV and tax information letter from the
Fund.
The Fund paid distributions of $.733 per share from net long-term capital gains
during its fiscal year ended December 31, 1996. Pursuant to Section 852 of the
Internal Revenue Code, the Fund designates $191,399,782 as capital gain
dividends for its fiscal year ended December 31, 1996.
For corporate shareholders, 98.88% of the income dividends paid during the
Fund's year ended December 31, 1996 qualified for the dividends received
deduction.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your Scudder Fund account, please call a Scudder Investor Relations
Representative at 1-800-225-5163.
28 - SCUDDER GROWTH AND INCOME FUND
<PAGE>
Officers and Trustees
Daniel Pierce*
President and Trustee
Henry P. Becton, Jr.
Trustee; President and General Manager, WGBH Educational Foundation
David S. Lee*
Vice President
Dudley H. Ladd*
Trustee
George M. Lovejoy, Jr.
Trustee; President and Director, Fifty Associates
Wesley W. Marple, Jr.
Trustee; Professor of Business Administration, Northeastern University
Kathryn L. Quirk*
Trustee
Jean C. Tempel
Trustee; General Partner,
TL Ventures
Bruce F. Beaty*
Vice President
William F. Gadsden*
Vice President
Jerard K. Hartman*
Vice President
Robert T. Hoffman*
Vice President
Thomas W. Joseph*
Vice President
Valerie F. Malter*
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
*Scudder, Stevens & Clark, Inc
29 - Scudder Growth and Income Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
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 Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund*
Scudder Massachusetts Limited Term
Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
U. S. Income
- ------------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Quality Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
Retirement Programs
- -------------------
IRA
SEP IRA
SIMPLE IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan *+++ +++
(a variable annuity)
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.
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. +++Funds within categories are listed from expected
least to most risk. +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.
30 - Scudder Growth and Income Fund
<PAGE>
How to Contact Scudder
Account Service and Information
- --------------------------------------------------------------------------------
For existing account services and transactions
Scudder Investor Relations -- 1-800-225-5163
For 24 hour account information, fund information, exchanges, and an
overview of all the services available to you
Scudder Electronic Account Services -- http://funds.scudder.com
For information about your Scudder accounts, exchanges and redemptions
Scudder Automated Information Line (SAIL) -- 1-800-343-2890
Investment Information
- --------------------------------------------------------------------------------
For information about the Scudder funds, including additional applications
and prospectuses, or for answers to investment questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services -- 1-800-323-6105
Scudder Brokerage Services
- --------------------------------------------------------------------------------
To receive information about this discount brokerage service and to obtain
an application
Scudder Brokerage Services* -- 1-800-700-0820
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 Chicago San Francisco
Boston New York
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.
* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061 --
Member NASD/SIPC.
** 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 Over 75
Years of Serving Investors
31 - Scudder Growth and Income Fund
<PAGE>
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven Clark,
Scudder, Stevens & Clark was the first independent investment counsel firm in
the United States. Since its birth, Scudder's pioneering spirit and commitment
to professional long-term investment management have helped shape the investment
industry. In 1928, we introduced the nation's first no-load mutual fund. Today
we offer over 40 pure no load(TM) funds, including the first international
mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication to
research and fundamental investment disciplines have helped us become one of the
largest and most respected investment managers in the world. Though times have
changed since our beginnings, we remain committed to our long-standing
principles: managing money with integrity and distinction; keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
SCUDDER INVESTMENT TRUST
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- -------- ---------------------------------
a. Financial Statements
Included in Part A:
-------------------
For Scudder Growth and Income Fund:
Financial highlights for the ten fiscal years ended December 31, 1995
For Scudder Large Company Growth Fund:
Financial Highlights for the period May 15, 1991 (commencement of operations) to
October 31, 1991 and for the five fiscal years ended October 31, 1996
(Incorporated by reference to Post-Effective Amendment No. 79 to the Registration
Statement.)
For Scudder Classic Growth Fund:
Financial Highlights to be filed by amendment.
Included in the Part B:
-----------------------
For Scudder Growth and Income Fund:
Investment Portfolio as of December 31, 1996
Statement of Assets and Liabilities as of December 31, 1996
Statement of Operations for the year ended December 31, 1996
Statements of Changes in Net Assets for the two fiscal years
ended December 31, 1996
Financial Highlights for the ten fiscal years ended December 31, 1996
Notes to Financial Statements
Report of Independent Accountants
For Scudder Large Company Growth Fund:
Investment Portfolio as of October 31, 1996
Statement of Assets and Liabilities as of October 31, 1996
Statement of Operations for the fiscal year ended October 31, 1996
Statements of Changes in Net Assets for the three fiscal years
ended October 31, 1996
Financial Highlights for the period May 15, 1991 (commencement of operations) to
October 31, 1991 and for the five fiscal years ended October 31, 1996
Notes to Financial Statements
Report of Independent Accountants
(Incorporated by reference to Post-Effective Amendment No. 79 to the Registration
Statement.)
For Scudder Classic Growth Fund:
Statement of Assets and Liabilities as of September 5, 1996 and related notes
(Incorporated by reference to Post-Effective Amendment No. 77 to the Registration
Statement.)
Part C - Page 1
<PAGE>
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. 78 to the
Registration Statement ("Post-Effective Amendment No. 78").
(a)(2) Amendment to Amended and Restated Declaration of Trust dated
November 14, 1990 is incorporated by reference to Post-Effective
Amendment No. 78 to the Registration Statement ("Post-Effective
Amendment No. 78").
(a)(3) Certificate of Amendment of Declaration of Trust dated February 12,
1991 is incorporated by reference to Post-Effective Amendment No. 78
to the Registration Statement ("Post-Effective Amendment No. 78").
(b)(1) 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. 78 to the Registration Statement
("Post-Effective Amendment No. 78").
(b)(2) Establishment and Designation of Series of Shares of Beneficial
Interest, $0.01 par value, with respect to Scudder Classic Growth
Fund is incorporated by reference to Post-Effective Amendment No. 76
to the Registration Statement ("Post-Effective Amendment No. 76").
(b)(3) Establishment and Designation of Series of Shares of Beneficial
Interest, $0.01 par value, with respect to Scudder Growth and Income
Fund, Scudder Large Company Growth Fund, and Scudder Classic Growth
Fund is filed herein.
2. (a) By-Laws of the Registrant dated September 20, 1984 are incorporated
by reference to Post-Effective Amendment No. 78 to the Registration
Statement ("Post-Effective Amendment No. 78").
(b) Amendment to By-Laws of the Registrant dated August 13, 1991 is
incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement ("Post-Effective Amendment No. 78").
(c) Amendment to By-Laws of the Registrant dated November 12, 1991 is
incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement ("Post-Effective Amendment No. 78").
3. Inapplicable.
Part C - Page 2
<PAGE>
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. 78 to the Registration Statement
("Post-Effective Amendment No. 78").
(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. 78 to the
Registration Statement ("Post-Effective Amendment No. 78").
(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. 78 to the
Registration Statement ("Post-Effective Amendment No. 78").
(d) Investment Management Agreement between the Registrant (on behalf of
Scudder Growth and Income Fund) and Scudder dated August 8, 1995 is
incorporated by reference to Post-Effective Amendment No. 75 to the
Registration Statement ("Post-Effective Amendment No. 75").
(e) Investment Management Agreement between the Registrant, on behalf of
Scudder Classic Growth Fund, and Scudder, Stevens & Clark, Inc.
dated August 13, 1996 is filed herein.
(f) Form of Investment Management Agreement between the Registrant, on
behalf of Scudder Growth and Income Fund, and Scudder, Stevens &
Clark, Inc. dated May 1, 1997 is filed herein.
6. (a) 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. 78 to the Registration Statement ("Post-Effective
Amendment No. 78").
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. 78 to the Registration
Statement ("Post-Effective Amendment No. 78").
(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. 78 to the Registration Statement
("Post-Effective Amendment No. 78").
Part C - Page 3
<PAGE>
(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. 78 to the Registration Statement
("Post-Effective Amendment No. 78").
(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. 78 to the Registration Statement
("Post-Effective Amendment No. 78").
(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. 78 to the Registration Statement
("Post-Effective Amendment No. 78").
(a)(6) Custodian fee schedule for Scudder Growth and Income Fund is
incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement ("Post-Effective Amendment No. 78").
(a)(7) Custodian fee schedule for Scudder Quality Growth Fund is
incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement ("Post-Effective Amendment No. 78").
(b)(1) 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. 78 to the
Registration Statement ("Post-Effective Amendment No. 78").
(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. 78 to the Registration
Statement ("Post-Effective Amendment No. 78").
(d) Custodian fee schedule for Scudder Quality Growth Fund and Scudder
Growth and Income Fund is incorporated by reference to
Post-Effective Amendment No. 72 to the Registration Statement
("Post-Effective Amendment No. 72").
(e) Form of Custodian fee schedule for Scudder Classic Growth Fund is
incorporated by reference to Post-Effective Amendment No. 77 to the
Registration Statement ("Post-Effective Amendment No. 77").
9. (a)(1) 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. 78 to the
Registration Statement ("Post-Effective Amendment No. 78").
(a)(2) Revised fee schedule dated October 6, 1995 for Exhibit 9(a)(1) is
incorporated by reference to Post-Effective Amendment No. 76
("Post-Effective Amendment No. 76").
Part C - Page 4
<PAGE>
(a)(3) Form of revised fee schedule for Exhibit 9(a)(1) dated October 1,
1996 is incorporated by reference to Post-Effective Amendment No. 78
to the Registration Statement ("Post-Effective Amendment No. 78").
(b)(1) COMPASS Service Agreement and fee schedule with Scudder Trust
Company dated January 1, 1990 is incorporated by reference to
Post-Effective Amendment No. 78 to the Registration Statement
("Post-Effective Amendment No. 78").
(b)(2) COMPASS and TRAK 2000 Service Agreement between Scudder Trust
Company and the Registrant dated October 1, 1995 is incorporated by
reference to Post-Effective Amendment No. 74 ("Post-Effective
Amendment No. 74").
(b)(3) Form of revised fee schedule for Exhibit 9(b)(1) dated October 1,
1996 is incorporated by reference to Post-Effective Amendment No. 78
to the Registration Statement ("Post-Effective Amendment No. 78").
(c) Fund Accounting Services Agreement between the Registrant, on behalf
of Scudder Quality Growth Fund and Scudder Fund Accounting
Corporation dated November 1, 1994 is incorporated by reference to
Post-Effective Amendment No. 72.
(d) Fund Accounting Services Agreement between the Registrant, on behalf
of Scudder Growth and Income Fund and Scudder Fund Accounting
Corporation dated October 17, 1994 is incorporated by reference to
Post-Effective Amendment No. 73.
(e) Form of Fund Accounting Services Agreement between the Registrant,
on behalf of Scudder Classic Growth Fund, and Scudder Fund
Accounting Corporation is incorporated by reference to
Post-Effective Amendment No. 77 to the Registration Statement
("Post-Effective Amendment No. 77").
(f)(1) Shareholder Services Agreement between the Registrant and Charles
Schwab & Co., Inc. dated June 1, 1990 is incorporated by reference
to Post-Effective Amendment No. 78 to the Registration Statement
("Post-Effective Amendment No. 78").
(f)(2) Service Agreement between Copeland Associates, Inc. and Scudder
Service Corporation (on behalf of Scudder Quality Growth Fund and
Scudder Growth and Income Fund) dated June 8, 1995 is incorporated
by reference to Post-Effective Amendment No. 74 ("Post-Effective
Amendment No. 74").
10. Inapplicable.
11. Consent of Independent Accountants is filed herein.
12. Inapplicable.
13. Inapplicable.
Part C - Page 5
<PAGE>
14. (a) Scudder Flexi-Plan for Corporations and Self-Employed Individuals is
incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement ("Post-Effective Amendment No. 78").
(b) Scudder Individual Retirement Plan is incorporated by reference to
Post-Effective Amendment No. 78 to the Registration Statement
("Post-Effective Amendment No. 78").
(c) SEP-IRA is incorporated by reference to Post-Effective Amendment No.
78 to the Registration Statement ("Post-Effective Amendment No. 78").
(d) Scudder Funds 403(b) Plan is incorporated by reference to
Post-Effective Amendment No. 78 to the Registration Statement
("Post-Effective Amendment No. 78").
(e) Scudder Cash or Deferred Profit Sharing Plan under Section 401(k) is
incorporated by reference to Post-Effective Amendment No. 78 to the
Registration Statement ("Post-Effective Amendment No. 78").
15. Inapplicable.
16. Schedule for Computation of Performance Quotation is filed herein.
Power of Attorney is incorporated by reference to Post-Effective
Amendment No. 78 to the Registration Statement ("Post-Effective
Amendment No. 78").
17. Article 6 Financial Data Schedule is filed herein.
Item 25. Persons Controlled by or under Common Control with Registrant.
- -------- --------------------------------------------------------------
None
Item 26. Number of Holders of Securities (as of March 31, 1997).
- -------- -------------------------------------------------------
(1) (2)
Title of Class Number of Record Shareholders
-------------- -----------------------------
Shares of beneficial interest
($0.01 par value):
Scudder Growth and Income Fund 294,224
Scudder Large Company Growth Fund 15,257
Scudder Classic Growth Fund 1,079
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:
Part C - Page 6
<PAGE>
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;
Part C - Page 7
<PAGE>
(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.
Part C - Page 8
<PAGE>
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
---- ------------------------------------
Stephen R. Beckwith Director, Vice President, Assistant Treasurer, Chief Operating Officer & Chief
Financial Officer, Scudder, Stevens & Clark, Inc. (investment adviser)**
Lynn S. Birdsong Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
President & Director, The Latin America Dollar Income Fund, Inc. (investment company)**
President & Director, Scudder World Income Opportunities Fund, Inc. (investment
company)**
President, The Japan Fund, Inc. (investment company)**
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, Canadian High Income Fund (investment company)#
Director, Hot Growth Companies Fund (investment company)#
Director, Sovereign High Yield Investment Company (investment company)+
Director, Scudder, Stevens & Clark (Luxembourg) S.A. (investment manager) #
Nicholas Bratt Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
President & Director, Scudder New Europe Fund, Inc. (investment company)**
President & Director, The Brazil Fund, Inc. (investment company)**
President & Director, The First Iberian Fund, Inc. (investment company)**
President & Director, Scudder International Fund, Inc. (investment company)**
President & Director, Scudder Global Fund, Inc. (President on all series except Scudder
Global Fund) (investment company)**
President & Director, The Korea Fund, Inc. (investment company)**
President & Director, Scudder New Asia Fund, Inc. (investment company)**
President, The Argentina Fund, Inc. (investment company)**
Vice President, Scudder, Stevens & Clark Corporation (Delaware) (investment adviser)**
Vice President, Scudder, Stevens & Clark Japan, Inc. (investment adviser)###
Vice President, Scudder, Stevens & Clark of Canada Ltd. (Canadian investment adviser)
Toronto, Ontario, Canada
Vice President, Scudder, Stevens & Clark Overseas Corporationoo
E. Michael Brown Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Trustee, Scudder GNMA Fund (investment company)*
Trustee, Scudder U.S. Treasury Fund (investment company)*
Trustee, Scudder Tax Free Money Fund (investment company)*
Trustee, Scudder State Tax Free Trust (investment company)*
Trustee, Scudder Cash Investment Trust (investment company)*
Assistant Treasurer, Scudder Investor Services, Inc. (broker/dealer)*
Director & President, Scudder Realty Holding Corporation (a real estate holding
company)*
Director & President, Scudder Trust Company (a trust company)+++
Director, Scudder Trust (Cayman) Ltd.
Mark S. Casady Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Director & Vice President, Scudder Investor Services, Inc. (broker/dealer)*
Director & Vice President, Scudder Service Corporation (in-house transfer agent)*
Part C - Page 9
<PAGE>
Director, SFA, Inc. (advertising agency)*
Linda C. Coughlin Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Chairman & Trustee, AARP Cash Investment Funds (investment company)**
Chairman & Trustee, AARP Growth Trust (investment company)**
Chairman & Trustee, AARP Income Trust (investment company)**
Chairman & Trustee, AARP Tax Free Income Trust (investment company)**
Chairman & Trustee, AARP Managed Investment Portfolios Trust (investment company)**
Director & Senior Vice President, Scudder Investor Services, Inc. (broker/dealer)*
Director, SFA, Inc. (advertising agency)*
Margaret D. Hadzima Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Assistant Treasurer, Scudder Investor Services, Inc. (broker/dealer)*
Jerard K. Hartman Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President, Scudder California Tax Free Trust (investment company)*
Vice President, Scudder Equity Trust (investment company)**
Vice President, Scudder Cash Investment Trust (investment company)*
Vice President, Scudder Fund, Inc. (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 Institutional Fund, Inc. (investment company)**
Vice President, Scudder International Fund, Inc. (investment company)**
Vice President, Scudder Investment Trust (investment company)*
Vice President, Scudder Municipal Trust (investment company)*
Vice President, Scudder Mutual Funds, Inc. (investment company)**
Vice President, Scudder New Asia Fund, Inc. (investment company)**
Vice President, Scudder New Europe Fund, Inc. (investment company)**
Vice President, Scudder Securities Trust (investment company)*
Vice President, Scudder State Tax Free Trust (investment company)*
Vice President, Scudder Funds Trust (investment company)**
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 Pathway Series (investment company)*
Vice President, Scudder Variable Life Investment Fund (investment company)*
Vice President, The Brazil Fund, Inc. (investment company)**
Vice President, The Korea Fund, Inc. (investment company)**
Vice President, The Argentina Fund, Inc. (investment company)**
Vice President & Director, Scudder, Stevens & Clark of Canada, Ltd. (Canadian
investment adviser) Toronto, Ontario, Canada
Vice President, The First Iberian Fund, Inc. (investment company)**
Vice President, The Latin America Dollar Income Fund, Inc. (investment company)**
Vice President, Scudder World Income Opportunities Fund, Inc. (investment company)**
Richard A. Holt Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President, Scudder Variable Life Investment Fund (investment company)*
Dudley H. Ladd Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President & Trustee, Scudder Cash Investment Trust (investment company)*
Director, Scudder Global Fund, Inc. (investment company)**
Director, Scudder International Fund, Inc. (investment company)**
Part C - Page 10
<PAGE>
Director, Scudder Mutual Fund, Inc. (investment company)**
Trustee, Scudder Investment Trust (investment company)*
Trustee, Scudder Portfolio Trust (investment company)*
Trustee, Scudder Municipal Trust (investment company)*
Trustee, Scudder Securities Trust (investment company)*
Trustee, Scudder State Tax Free Trust (investment company)*
Trustee, Scudder Equity Trust (investment company)**
Trustee, Scudder Funds Trust (investment company)**
Vice President, Scudder U.S. Treasury Money Fund (investment company)*
President & Director, SFA, Inc. (advertising agency)*
Senior Vice President & Director, Scudder Investor Services, Inc. (broker/dealer)*
Vice President & Director, Scudder Precious Metals, Inc. xxx
John T. Packard Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
President, Montgomery Street Income Securities, Inc. (investment company) o
Chairman, Scudder Realty Advisors, Inc. (realty investment adviser) x
Daniel Pierce Chairman & Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Chairman, Vice President & Director, Scudder Global Fund, Inc. (investment company)**
Chairman & Director, Scudder New Europe Fund, Inc. (investment company)**
Chairman & Director, The First Iberian Fund, Inc. (investment company)**
Chairman & Director, Scudder International Fund, Inc. (investment company)**
Chairman & Director, Scudder New Asia Fund, Inc. (investment company)**
President & Trustee, Scudder Equity Trust (investment company)**
President & Trustee, Scudder GNMA Fund (investment company)*
President & Trustee, Scudder Portfolio Trust (investment company)*
President & Trustee, Scudder Funds Trust (investment company)**
President & Trustee, Scudder Securities Trust (investment company)*
President & Trustee, Scudder Investment Trust (investment company)*
President & Director, Scudder Institutional Fund, Inc. (investment company)**
President & Director, Scudder Fund, Inc. (investment company)**
President & Director, Scudder Mutual Funds, Inc. (investment company)**
Vice President & Trustee, Scudder Municipal Trust (investment company)*
Vice President & Trustee, Scudder Variable Life Investment Fund (investment company)*
Vice President & Trustee, Scudder Pathway Series (investment company)*
Trustee, Scudder California Tax Free Trust (investment company)*
Trustee, Scudder State Tax Free Trust (investment company)*
Vice President, Montgomery Street Income Securities, Inc. (investment company)o
Chairman & President, Scudder, Stevens & Clark of Canada, Ltd. (Canadian investment
adviser), Toronto, Ontario, Canada
Chairman & Director, Scudder Global Opportunities Funds (investment company) Luxembourg
Chairman, Scudder, Stevens & Clark, Ltd. (investment adviser) London, England
President & Director, Scudder Precious Metals, Inc. xxx
Vice President, Director & Assistant Secretary, Scudder Realty Holdings Corporation
(a real estate holding company)*
Vice President, Director & Assistant Treasurer, Scudder Investor Services, Inc.
(broker/dealer)*
Director, Scudder Latin America Investment Trust PLC (investment company)@
Director, Fiduciary Trust Company (banking & trust company) Boston, MA
Director, Fiduciary Company Incorporated (banking & trust company) Boston, MA
Trustee, New England Aquarium, Boston, MA
Part C - Page 11
<PAGE>
Incorporator, Scudder Trust Company (a trust company)+++
Kathryn L. Quirk Director & Secretary, Scudder, Stevens & Clark, Inc. (investment adviser)**
Director, Vice President & Assistant Secretary, The Argentina Fund, Inc. (investment
company)**
Director, Vice President & Assistant Secretary, Scudder International Fund, Inc.
(investment company)**
Director, Vice President & Assistant Secretary, Scudder New Asia Fund (investment
company)**
Trustee, Vice President & Assistant Secretary, Scudder Equity Trust (investment
company)**
Trustee, Vice President & Assistant Secretary, Scudder Securities Trust (investment
company)*
Trustee, Vice President & Assistant Secretary, Scudder Funds Trust (investment
company)**
Trustee, Scudder Investment Trust (investment company)*
Trustee, Scudder Municipal Trust (investment company)*
Vice President & Trustee, Scudder Tax Free Money Fund (investment company)*
Vice President & Trustee, Scudder Tax Free Trust (investment company)*
Vice President & Secretary, AARP Growth Trust (investment company)**
Vice President & Secretary, AARP Income Trust (investment company)**
Vice President & Secretary, AARP Tax Free Income Trust (investment company)**
Vice President & Secretary, AARP Cash Investment Funds (investment company)**
Vice President & Secretary, AARP Managed Investment Portfolios Trust (investment
company)**
Vice President & Secretary, The Japan Fund, Inc. (investment company)**
Vice President & Assistant Secretary, Scudder World Income Opportunities Fund, Inc.
(investment company)**
Vice President & Assistant Secretary, The Korea Fund, Inc. (investment company)**
Vice President & Assistant Secretary, The Brazil Fund, Inc. (investment company)**
Vice President & Assistant Secretary, Scudder Global Fund, Inc. (investment company)**
Vice President & Assistant Secretary, Montgomery Street Income Securities, Inc.
(investment company) o
Vice President & Assistant Secretary, Scudder Mutual Funds, Inc. (investment company)**
Vice President & Assistant Secretary, Scudder Pathway Series (investment company)*
Vice President & Assistant Secretary, Scudder New Europe Fund, Inc. (investment
company)**
Vice President & Assistant Secretary, Scudder Variable Life Investment Fund (investment
company)*
Vice President & Assistant Secretary, The First Iberian Fund, Inc. (investment
company)**
Vice President & Assistant Secretary, The Latin America Dollar Income Fund, Inc.
(investment company)**
Vice President, Scudder Fund, Inc. (investment company)**
Vice President, Scudder Institutional Fund, Inc. (investment company)**
Vice President, Scudder GNMA Fund (investment company)*
Director, Senior Vice President & Clerk, Scudder Investor Services, Inc.
(broker/dealer)*
Director, Vice President & Secretary, Scudder Fund Accounting Corporation (in-house
fund accounting agent)*
Director, Vice President & Secretary, Scudder Realty Holdings Corporation (a real
estate holding company)*
Director & Clerk, Scudder Service Corporation (in-house transfer agent)*
Part C - Page 12
<PAGE>
Director, SFA, Inc. (advertising agency)*
Vice President, Director & Assistant Secretary, Scudder Precious Metals, Inc. xxx
Cornelia M. Small Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
President, AARP Cash Investment Funds (investment company)**
President, AARP Growth Trust (investment company)**
President, AARP Income Trust (investment company)**
President, AARP Tax Free Income Trust (investment company)**
President, AARP Managed Investment Portfolio Trust (investment company)**
Edmond D. Villani Director, President & Chief Executive Officer, Scudder, Stevens & Clark, Inc.
(investment adviser)**
Chairman & Director, The Argentina Fund, Inc. (investment company)**
Chairman & Director, The Latin America Dollar Income Fund, Inc. (investment company)**
Chairman & Director, Scudder World Income Opportunities Fund, Inc. (investment
company)**
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 Japan, Inc. (investment adviser)###
Director, The Brazil Fund, Inc. (investment company)**
Director, Indosuez High Yield Bond Fund (investment company) Luxembourg
President & Director, Scudder, Stevens & Clark Overseas Corporationoo
President & Director, Scudder, Stevens & Clark Corporation (Delaware) (investment
adviser)**
Director, Scudder Realty Advisors, Inc. (realty investment adviser) x
Director, IBJ Global Investment Management S.A., (Luxembourg investment management
company) Luxembourg, Grand-Duchy of Luxembourg
Stephen A. Wohler Director, Scudder, Stevens & Clark, Inc. (investment adviser)**
Vice President, Montgomery Street Income Securities, Inc. (investment company)o
* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
++ Two Prudential Plaza, 180 N. Stetson Avenue, Chicago, IL
+++ 5 Industrial Way, Salem, NH
o 101 California Street, San Francisco, CA
# Societe Anonyme, 47, Boulevard Royal, L-2449 Luxembourg, R.C. Luxembourg B 34.564
+ John B. Gorsiraweg 6, Willemstad Curacao, Netherlands Antilles
xx De Ruyterkade 62, P.O. Box 812, Willemstad Curacao, Netherlands Antilles
## 2 Boulevard Royal, Luxembourg
*** B1 2F3F 248 Section 3, Nan King East Road, Taipei, Taiwan
xxx Grand Cayman, Cayman Islands, British West Indies
oo 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
@ c/o Sinclair Hendersen Limited, 23 Cathedral Yard, Exeter, Devon, U.K.
Item 29. Principal Underwriters.
- -------- -----------------------
(a) Scudder California Tax Free Trust
Scudder Cash Investment Trust
Scudder Equity Trust
Part C - Page 13
<PAGE>
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 Pathway Series
Scudder Portfolio Trust
Scudder Securities Trust
Scudder State Tax Free Trust
Scudder Tax Free Money Fund
Scudder Tax Free Trust
Scudder U.S. Treasury Money Fund
Scudder Variable Life Investment Fund
AARP Cash Investment Funds
AARP Growth Trust
AARP Income Trust
AARP Tax Free Income Trust
AARP Managed Investment Portfolios Trust
The Japan Fund, Inc.
(b)
(1) (2) (3)
Name and Principal Position and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
---------------- ------------------------------- -----------------------
E. Michael Brown Assistant Treasurer None
Two International Place
Boston, MA 02110
Mark S. Casady Director and Vice President None
Two International Place
Boston, MA 02110
Linda Coughlin Director and Senior Vice President None
Two International Place
Boston, MA 02110
Richard W. Desmond Vice President None
345 Park Avenue
New York, NY 10154
Paul J. Elmlinger Senior Vice President and Assistant None
345 Park Avenue Clerk
New York, NY 10154
Margaret D. Hadzima Assistant Treasurer None
Two International Place
Boston, MA 02110
Part C - Page 14
<PAGE>
Name and Principal Position and Offices with Positions and
Business Address Scudder Investor Services, Inc. Offices with Registrant
---------------- ------------------------------- -----------------------
Thomas W. Joseph Director, Vice President, Vice President
Two International Place Treasurer and Assistant Clerk
Boston, MA 02110
Dudley H. Ladd Director and Senior Vice President Trustee
Two International Place
Boston, MA 02110
David S. Lee Director, President and Assistant Vice President
Two International Place Treasurer
Boston, MA 02110
Thomas F. McDonough Assistant Clerk Vice President & Treasurer
Two International Place
Boston, MA 02110
Thomas H. O'Brien Assistant Treasurer None
345 Park Avenue
New York, NY 10154
Edward J. O'Connell Assistant Treasurer Vice President & Assistant
345 Park Avenue Treasurer
New York, NY 10154
Daniel Pierce Director, Vice President President & Trustee
Two International Place and Assistant Treasurer
Boston, MA 02110
Kathryn L. Quirk Director, Senior Vice President and Trustee
345 Park Avenue Clerk
New York, NY 10154
Edmund J. Thimme Vice President None
345 Park Avenue
New York, NY 10154
Benjamin Thorndike Vice President Fund Consultant
Two International Place
Boston, MA 02110
David B. Watts Assistant Treasurer None
Two International Place
Boston, MA 02110
Linda J. Wondrack Vice President None
Two International Place
Boston, MA 02110
Part C - Page 15
<PAGE>
The Underwriter has employees who are denominated officers of an operational area. Such persons do not have
corporation-wide responsibilities and are not considered officers for the purpose of this Item 29.
(c)
(1) (2) (3) (4) (5)
Net Underwriting Compensation on
Name of Principal Discounts and Redemptions Brokerage Other Compensation
Underwriter Commissions and Repurchases Commissions
----------- ----------- --------------- -----------
Scudder Investor None None None None
Services, Inc.
Item 30. Location of Accounts and Records.
- -------- ---------------------------------
Certain accounts, books and other documents required to be maintained by Section 31(a) of the 1940
Act and the Rules promulgated thereunder are maintained by Scudder, Stevens & Clark, Two
International Place, Boston, MA 02110. Records relating to the duties of the Registrant's
custodian are maintained by State Street Bank and Trust Company, Heritage Drive, North Quincy,
Massachusetts. Records relating to the duties of the Registrant's transfer agent are maintained by
Scudder Service Corporation, Two International Place, Boston, Massachusetts.
Item 31. Management Services.
- -------- --------------------
Inapplicable.
Item 32. Undertakings.
- -------- -------------
Inapplicable.
Part C - Page 16
</TABLE>
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 day of April 3, 1997.
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.
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE TITLE DATE
/s/Daniel Pierce
- --------------------------------------
Daniel Pierce* President (Principal Executive April 7, 1997
Officer) and Trustee
/s/Henry P. Becton, Jr.
- --------------------------------------
Henry P. Becton, Jr.* Trustee April 7, 1997
/s/Dudley H. Ladd
- --------------------------------------
Dudley H. Ladd* Trustee April 7, 1997
/s/George M. Lovejoy, Jr.
- --------------------------------------
George M. Lovejoy, Jr.* Trustee April 7, 1997
/s/Wesley W. Marple, Jr.
- --------------------------------------
Wesley W. Marple, Jr.* Trustee April 7, 1997
/s/Kathryn L. Quirk
- --------------------------------------
Kathryn L. Quirk* Trustee April 7, 1997
/s/Jean C. Tempel
- --------------------------------------
Jean C. Tempel* Trustee April 7, 1997
<PAGE>
/sPamela A. McGrath
- --------------------------------------
Pamela A. McGrath Treasurer (Principal Financial and April 9, 1997
Accounting Officer) and Vice President
</TABLE>
*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 April 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 April 28,
1995 and pursuant to a power
of attorney contained in the
signature page of
Post-Effective Amendment No.
79 filed February 26, 1997.
2
<PAGE>
File No. 2-13628
File No. 811-43
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
EXHIBITS
TO
FORM N-1A
POST-EFFECTIVE AMENDMENT NO. 81
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 33
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
SCUDDER INVESTMENT TRUST
<PAGE>
SCUDDER INVESTMENT TRUST
EXHIBIT INDEX
Exhibit 1(b)(3)
Exhibit 5(e)
Exhibit 5(f)
Exhibit 11
Exhibit 17
<PAGE>
SCUDDER INVESTMENT TRUST
Establishment and Designation of Series
of Beneficial Interest, $.01 Par Value
The undersigned, being a majority of the duly elected and qualified
Trustees of Scudder Investment Trust, a Massachusetts business trust (the
"Trust"), acting pursuant to Section 5.11 of the Amended and Restated
Declaration of Trust dated November 3, 1987, as amended (the "Declaration of
Trust"), hereby divide the shares of beneficial interest of the Trust into three
separate series (each individually a "Fund" or collectively the "Funds"), each
Fund to have the following special and relative rights:
1. The Funds shall be designated as follows:
Scudder Growth and Income Fund
Scudder Quality Growth Fund
Scudder Classic Growth Fund
2. Each Fund shall be authorized to hold cash and invest in securities and
instruments and use investment techniques as described in the Trust's
registration statement under the Securities Act of 1933, as amended from time to
time. Each share of beneficial interest of each Fund ("share") shall be
redeemable as provided in the Declaration of Trust, shall be entitled to one
vote (or fraction thereof in respect of a fractional share) on matters on which
shares of that Fund shall be entitled to vote and shall represent a pro rata
beneficial interest in the assets allocated to that Fund. The proceeds of sales
of shares of a Fund, together with any income and gain thereon, less any
diminution or expenses thereof, shall irrevocably belong to that Fund, unless
otherwise required by law. Each share of a Fund shall be entitled to receive its
pro rata share of net assets of that Fund upon liquidation of that Fund.
3. Shareholders of each Fund shall vote separately as a class on any matter
to the extent required by, and any matter shall be deemed to have been
effectively acted upon with respect to that Fund as provided in, Rule 18f-2, as
from time to time in effect, under the Investment Company Act of 1940, as
amended, or any successor rule.
4. The shares of beneficial interest of the Trust outstanding on the date
hereof shall be deemed to be shares of Scudder Growth and Income Fund and
Scudder Quality Growth Fund.
5. The assets and liabilities of the Trust existing on the date hereof
shall, except as provided below, be allocated to Scudder Growth and Income Fund
and Scudder Quality Growth Fund and, hereafter, the assets and liabilities of
the Trust shall be allocated among the Funds as set forth in Section 5.11 of the
Declaration of Trust, except as provided below.
<PAGE>
(a) Costs incurred in connection with the organization and
registration of shares of Scudder Classic Growth Fund shall be
amortized by such Fund over the five-year period beginning with
the month the Fund commences operations.
(b) The liabilities, expenses, costs, charges or reserves of the
Trust which are not readily identifiable as belonging to any
particular Fund shall be allocated among the Funds on the basis of
their relative average daily net assets.
(c) The Trustees may from time to time in particular cases make
specific allocations of assets or liabilities among the Funds.
6. The Trustees (including any successor Trustees) shall have the right at
any time and from time to time to reallocate assets and expenses or to change
the designation of any Fund now or hereafter created, or to otherwise change the
special and relative rights of any such Fund provided that such change shall not
adversely affect the rights of shareholders of a Fund.
The foregoing shall be effective upon execution.
/s/Henry P. Becton, Jr.
- ----------------------------------
Henry P. Becton, Jr., as Trustee
/s/Dudley H. Ladd
- ----------------------------------
Dudley H. Ladd, as Trustee
/s/George M. Lovejoy, Jr.
- ----------------------------------
George M. Lovejoy, Jr., as Trustee
/s/Wesley W. Marple, Jr.
- ----------------------------------
Wesley W. Marple, Jr., as Trustee
/s/Juris Padegs
- ----------------------------------
Juris Padegs, as Trustee
2
<PAGE>
/s/Daniel Pierce
- ----------------------------------
Daniel Pierce, as Trustee
/s/Jean C. Tempel
- ----------------------------------
Jean C. Tempel, as Trustee
Dated: June 7, 1996
3
<PAGE>
Scudder Investment Trust
Two International Place
Boston, Massachusetts 02110
August 13, 1996
Scudder, Stevens & Clark, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Scudder Growth and Income Fund
Ladies and Gentlemen:
Scudder Investment Trust (the "Trust") has been established as a
Massachusetts business Trust to engage in the business of an investment company.
Pursuant to the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees has divided the Trust's shares of
beneficial interest, par value $.01 per share, (the "Shares") into separate
series, or funds, including Scudder Growth and Income Fund (the "Fund"). Series
may be abolished and dissolved, and additional series established, from time to
time by action of the Trustees.
The Trust, on behalf of the Fund, has selected you to act as the sole
investment manager of the Fund and to provide certain other services, as more
fully set forth below, and you have indicated that you are willing to act as
such investment manager and to perform such services under the terms and
conditions hereinafter set forth. Accordingly, the Trust on behalf of the Fund
agrees with you as follows:
1. Delivery of Documents. The Trust engages in the business of
investing and reinvesting the assets of the Fund in the manner and in accordance
with the investment objectives, policies and restrictions specified in the
currently effective Prospectus (the "Prospectus") and Statement of Additional
Information (the "SAI") relating to the Fund included in the Trust's
Registration Statement on Form N-1A, as amended from time to time, (the
"Registration Statement") filed by the Trust under the Investment Company Act of
1940, as amended, (the "1940 Act") and the Securities Act of 1933, as amended.
Copies of the documents referred to in the preceding sentence have been
furnished to you by the Trust. The Trust has also furnished you with copies
properly certified or authenticated of each of the following additional
documents related to the Trust and the Fund:
<PAGE>
(a) The Declaration dated November 3, 1987, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the "By-Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders of the Fund
selecting you as investment manager and approving the form of this
Agreement.
(d) Establishment and Designation of Series of Shares of Beneficial Interest
dated February 12, 1991 relating to the Fund.
The Trust will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements, if any, to the
foregoing, including the Prospectus, the SAI and the Registration Statement.
2. Name of Trust and Fund. The Trust and the Fund may use any name
derived from the name "Scudder, Stevens & Clark", if the Trust elects to do so,
only for so long as this Agreement, any other investment management agreement
between you and the Trust with respect to the Fund or any extension, renewal or
amendment hereof or thereof remains in effect, including any similar agreement
with any organization which shall have succeeded to your business as investment
manager. At such time as such an agreement shall no longer be in effect, the
Trust and the Fund shall each (to the extent the Trust has the legal power to
cause it to be done) cease to use such a name or any other name indicating that
it is managed by or otherwise connected with you or any organization which shall
have so succeeded to your business.
3. Portfolio Management Services. As manager of the assets of the Fund,
you shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Trust's Board of
Trustees. In connection therewith, you shall use reasonable efforts to manage
the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
2
<PAGE>
Fund in accordance with the requirements set forth in this section 3, you shall
be entitled to receive and act upon advice of counsel to the Trust or counsel to
you. You shall also make available to the Trust promptly upon request all of the
Fund's investment records and ledgers as are necessary to assist the Trust to
comply with the requirements of the 1940 Act and other applicable laws. To the
extent required by law, you shall furnish to regulatory authorities having the
requisite authority any information or reports in connection with the services
provided pursuant to this Agreement which may be requested in order to ascertain
whether the operations of the Trust are being conducted in a manner consistent
with applicable laws and regulations.
You shall determine the securities, instruments, investments,
currencies, repurchase agreements, futures, options and other contracts relating
to investments to be purchased, sold or entered into by the Fund and place
orders with broker-dealers, foreign currency dealers, futures commission
merchants or others pursuant to your determinations and all in accordance with
Fund policies as expressed in the Registration Statement. You shall determine
what portion of the Fund's portfolio shall be invested in securities and other
assets and what portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on
the investment performance of the Fund and on the performance of your
obligations pursuant to this Agreement, and you shall supply such additional
reports and information as the Trust's officers or Board of Trustees shall
reasonably request.
4. Administrative Services. In addition to the portfolio management
services specified above in section 3, you shall furnish at your expense for the
use of the Fund such office space and facilities in the United States as the
Fund may require for its reasonable needs, and you (or one or more of your
affiliates designated by you) shall render to the Trust administrative services
on behalf of the Fund necessary for operating as an open-end investment company
and not provided by persons not parties to this Agreement including, but not
limited to, preparing reports to and meeting materials for the Trust's Board of
Trustees and reports and notices to Fund shareholders; supervising, negotiating
contractual arrangements with, to the extent appropriate, and monitoring the
performance of, accounting agents, custodians, depositories, transfer agents and
pricing agents, accountants, attorneys, printers, underwriters, brokers and
dealers, insurers and other persons in any capacity deemed to be necessary or
desirable to Fund operations; preparing and making filings with the Securities
and Exchange Commission (the "SEC") and other regulatory and self-regulatory
organizations, including, but not limited to, preliminary and definitive proxy
materials, post-effective amendments to the Registration Statement, semi-annual
reports on Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act;
3
<PAGE>
overseeing the tabulation of proxies by the Fund's transfer agent; 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 return pursuant to Section
4982 of the Code; providing assistance with investor and public relations
matters; monitoring the valuation of portfolio securities, the calculation of
net asset value; monitoring the registration of Shares of the Fund under
applicable federal and state securities laws; maintaining or causing to be
maintained for the Fund all books, records and reports and any other information
required under the 1940 Act, to the extent that such books, records and reports
and other information are not maintained by the Fund's custodian or other agents
of the Fund; assisting in establishing the accounting policies of the Fund;
assisting in the resolution of accounting issues that may arise with respect to
the Fund's operations and consulting with the Fund's independent accountants,
legal counsel and the Fund's other agents as necessary in connection therewith;
establishing and monitoring the Fund's operating expense budgets; reviewing the
Fund's bills; processing the payment of bills that have been approved by an
authorized person; assisting the Fund in determining the amount of dividends and
distributions available to be paid by the Fund to its shareholders, preparing
and arranging for the printing of dividend notices to shareholders, and
providing the transfer and dividend paying agent, the custodian, and the
accounting agent with such information as is required for such parties to effect
the payment of dividends and distributions; and otherwise assisting the Trust as
it may reasonably request in the conduct of the Fund's business, subject to the
direction and control of the Trust's Board of Trustees. Nothing in this
Agreement shall be deemed to shift to you or to diminish the obligations of any
agent of the Fund or any other person not a party to this Agreement which is
obligated to provide services to the Fund.
5. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this section 5, you shall pay the compensation and expenses of all
Trustees, officers and executive employees of the Trust (including the Fund's
share of payroll taxes) who are affiliated persons of you, and you shall make
available, without expense to the Fund, the services of such of your directors,
officers and employees as may duly be elected officers of the Trust, subject to
their individual consent to serve and to any limitations imposed by law. You
shall provide at your expense the portfolio management services described in
section 3 hereof and the administrative services described in section 4 hereof.
You shall not be required to pay any expenses of the Fund other than
those specifically allocated to you in this section 5. In particular, but
without limiting the generality of the foregoing, you shall not be responsible,
except to the extent of the reasonable compensation of such of the Fund's
4
<PAGE>
Trustees and officers as are directors, officers or employees of you whose
services may be involved, for the following expenses of the Fund: organization
expenses of the Fund (including out-of-pocket expenses, but not including your
overhead or employee costs); fees payable to you and to any other Fund advisors
or consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent, custodians,
subcustodians, transfer agents, dividend disbursing agents and registrars;
payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; expenses of preparing share
certificates and, except as provided below in this section 5, other expenses in
connection with the issuance, offering, distribution, sale, redemption or
repurchase of securities issued by the Fund; expenses relating to investor and
public relations; expenses and fees of registering or qualifying Shares of the
Fund for sale; interest charges, bond premiums and other insurance expense;
freight, insurance and other charges in connection with the shipment of the
Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Trust business) of Trustees, officers and
employees of the Trust who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; costs of
shareholders' and other meetings; and travel expenses (or an appropriate portion
thereof) of Trustees and officers of the Trust who are directors, officers or
employees of you to the extent that such expenses relate to attendance at
meetings of the Board of Trustees of the Trust or any committees thereof or
advisors thereto held outside of Boston, Massachusetts or New York, New York.
You shall not be required to pay expenses of any activity which is
primarily intended to result in sales of Shares of the Fund if and to the extent
that (i) such expenses are required to be borne by a principal underwriter which
acts as the distributor of the Fund's Shares pursuant to an underwriting
agreement which provides that the underwriter shall assume some or all of such
expenses, or (ii) the Trust on behalf of the Fund shall have adopted a plan in
conformity with Rule 12b-1 under the 1940 Act providing that the Fund (or some
other party) shall assume some or all of such expenses. You shall be required to
pay such of the foregoing sales expenses as are not required to be paid by the
principal underwriter pursuant to the underwriting agreement or are not
5
<PAGE>
permitted to be paid by the Fund (or some other party) pursuant to such a plan.
6. Management Fee. For all services to be rendered, payments to be made
and costs to be assumed by you as provided in sections 3, 4 and 5 hereof, the
Trust on behalf of the Fund shall pay you on the last day of each month the
unpaid balance of a fee equal to the excess of (a) 1/12 of 0.60 of 1 percent of
the average daily net assets as defined below of the Fund for such month;
provided that, for any calendar month during which the average of such values
exceeds $500 million, the fee payable for that month based on the portion of the
average of such values in excess of $500 million up to and including $1 billion
shall be 1/12 of 0.55 of 1 percent of such portion; provided that, for any
calendar month during which the average of such values exceeds $1 billion, the
fee payable for that month based on the portion of the average of such values in
excess of $1 billion up to and including $1.5 billion shall be 1/12 of 0.50 of 1
percent of such portion; provided that, for any calendar month during which the
average of such values exceeds $1.5 billion, the fee payable for that month
based on the portion of the average of such values in excess of $1.5 billion up
to and including $2 billion shall be 1/12 of 0.475 of 1 percent of such portion;
provided that, for any calendar month during which the average of such values
exceeds $2.0 billion, the fee payable for that month based on the portion of the
average of such values in excess of $2.0 billion up to and including $3.0
billion shall be 1/12 of 0.45 of 1 percent of such portion; and provided that,
for any calendar month during which the average of such values exceeds $3.0
billion, the fee payable for that month based on the portion of the average of
such values in excess of $3.0 billion shall be 1/12 of 0.425 of 1 percent of
such portion over (b) the greater of (i) the amount by which the Fund's expenses
exceed the lowest applicable expense limitation (as more fully described below)
or (ii) any compensation waived by you from time to time (as more fully
described below). You shall be entitled to receive during any month such interim
payments of your fee hereunder as you shall request, provided that no such
payment shall exceed 75 percent of the amount of your fee then accrued on the
books of the Fund and unpaid.
The "average daily net assets" of the Fund shall mean the average of
the values placed on the Fund's net assets as of 4:00 p.m. (New York time) on
each day on which the net asset value of the Fund is determined consistent with
the provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully
determines the value of its net assets as of some other time on each business
day, as of such time. The value of the net assets of the Fund shall always be
determined pursuant to the applicable provisions of the Declaration and the
Registration Statement. If the determination of net asset value does not take
place for any particular day, then for the purposes of this section 6, the value
6
<PAGE>
of the net assets of the Fund as last determined shall be deemed to be the value
of its net assets as of 4:00 p.m. (New York time), or as of such other time as
the value of the net assets of the Fund's portfolio may be lawfully determined
on that day. If the Fund determines the value of the net assets of its portfolio
more than once on any day, then the last such determination thereof on that day
shall be deemed to be the sole determination thereof on that day for the
purposes of this section 6.
You agree that your gross compensation for any fiscal year shall not be
greater than an amount which, when added to the other expenses of the Fund,
shall cause the aggregate expenses of the Fund to equal the maximum expenses
under the lowest applicable expense limitation established pursuant to the
statutes or regulations of any jurisdiction in which the Shares of the Fund may
be qualified for offer and sale. Except to the extent that such amount has been
reflected in reduced payments to you, you shall refund to the Fund the amount of
any payment received in excess of the limitation pursuant to this section 6 as
promptly as practicable after the end of such fiscal year, provided that you
shall not be required to pay the Fund an amount greater than the fee paid to you
in respect of such year pursuant to this Agreement. As used in this section 6,
"expenses" shall mean those expenses included in the applicable expense
limitation having the broadest specifications thereof, and "expense limitation"
means a limit on the maximum annual expenses which may be incurred by an
investment company determined (i) by multiplying a fixed percentage by the
average, or by multiplying more than one such percentage by different specified
amounts of the average, of the values of an investment company's net assets for
a fiscal year or (ii) by multiplying a fixed percentage by an investment
company's net investment income for a fiscal year. The words "lowest applicable
expense limitation" shall be construed to result in the largest reduction of
your compensation for any fiscal year of the Fund; provided, however, that
nothing in this Agreement shall limit your fees if not required by an applicable
statute or regulation referred to above in this section 6.
You may waive all or a portion of your fees provided for hereunder and
such waiver shall be treated as a reduction in purchase price of your services.
You shall be contractually bound hereunder by the terms of any publicly
announced waiver of your fee, or any limitation of the Fund's expenses, as if
such waiver or limitation were fully set forth herein.
7. Avoidance of Inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other investments
for the account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
7
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your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be
deemed to be exclusive and it is understood that you may render investment
advice, management and services to others. In acting under this Agreement, you
shall be an independent contractor and not an agent of the Trust.
8. Limitation of Liability of Manager. As an inducement to your
undertaking to render services pursuant to this Agreement, the Trust agrees that
you shall not be liable under this Agreement for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, provided that nothing in this Agreement
shall be deemed to protect or purport to protect you against any liability to
the Trust, the Fund or its shareholders to which you would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence in the
performance of your duties, or by reason of your reckless disregard of your
obligations and duties hereunder. Any person, even though also employed by you,
who may be or become an employee of and paid by the Fund shall be deemed, when
acting within the scope of his or her employment by the Fund, to be acting in
such employment solely for the Fund and not as your employee or agent.
9. Duration and Termination of This Agreement. This Agreement shall
remain in force until September 30, 1998, and continue in force from year to
year thereafter, but only so long as such continuance is specifically approved
at least annually (a) by the vote of a majority of the Trustees who are not
parties to this Agreement or interested persons of any party to this Agreement,
cast in person at a meeting called for the purpose of voting on such approval,
and (b) by the Trustees of the Trust, or by the vote of a majority of the
outstanding voting securities of the Fund. The aforesaid requirement that
continuance of this Agreement be "specifically approved at least annually" shall
be construed in a manner consistent with the 1940 Act and the rules and
regulations thereunder.
This Agreement may be terminated with respect to the Fund at any time,
without the payment of any penalty, by the vote of a majority of the outstanding
voting securities of the Fund or by the Trust's Board of Trustees on 60 days'
8
<PAGE>
written notice to you, or by you on 60 days' written notice to the Trust. This
Agreement shall terminate automatically in the event of its assignment.
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved by the vote of a majority of the outstanding voting
securities of the Fund and by the Trust's Board of Trustees, including a
majority of the Trustees who are not parties to this Agreement or interested
persons of any party to this Agreement, cast in person at a meeting called for
the purpose of voting on such approval.
11. Limitation of Liability for Claims. The Declaration, a copy of
which, together with all amendments thereto, is on file in the Office of the
Secretary 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 Trustee, officer, employee or agent of the Trust, shall be subject to
claims against or obligations of the Trust or of the Fund to any extent
whatsoever, but that the Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability
as set forth in the Declaration and you agree that the obligations assumed by
the Trust on behalf of the Fund pursuant to this Agreement shall be limited in
all cases to the Fund and its assets, and you shall not seek satisfaction of any
such obligation from the shareholders or any shareholder of the Fund or any
other series of the Trust, or from any Trustee, officer, employee or agent of
the Trust. You understand that the rights and obligations of each Fund, or
series, under the Declaration are separate and distinct from those of any and
all other series.
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. 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.
In interpreting the provisions of this Agreement, the definitions
contained in Section 2(a) of the 1940 Act (particularly the definitions of
"affiliated person," "assignment" and "majority of the outstanding voting
securities"), as from time to time amended, shall be applied, subject, however,
9
<PAGE>
to such exemptions as may be granted by the SEC by any rule, regulation or
order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or
management agreements entered into between you and the Trust on behalf of the
Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
SCUDDER INVESTMENT TRUST
on behalf of Scudder Growth and Income Fund
By: /s/Daniel Pierce
--------------------------------------
President
The foregoing Agreement is hereby accepted as of the date thereof.
SCUDDER, STEVENS & CLARK, INC.
By: /s/Benjamin W. Thorndike
--------------------------------------
Managing Director
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Scudder Investment Trust
Two International Place
Boston, Massachusetts 02110
May 1, 1997
Scudder, Stevens & Clark, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Scudder Growth and Income Fund
Ladies and Gentlemen:
Scudder Investment Trust (the "Trust") has been established as a
Massachusetts business Trust to engage in the business of an investment company.
Pursuant to the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees has divided the Trust's shares of
beneficial interest, par value $.01 per share, (the "Shares") into separate
series, or funds, including Scudder Growth and Income Fund (the "Fund"). Series
may be abolished and dissolved, and additional series established, from time to
time by action of the Trustees.
The Trust, on behalf of the Fund, has selected you to act as the sole
investment manager of the Fund and to provide certain other services, as more
fully set forth below, and you have indicated that you are willing to act as
such investment manager and to perform such services under the terms and
conditions hereinafter set forth. Accordingly, the Trust on behalf of the Fund
agrees with you as follows:
1. Delivery of Documents. The Trust engages in the business of investing
and reinvesting the assets of the Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to the Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement") filed
by the Trust under the Investment Company Act of 1940, as amended, (the "1940
Act") and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you by the Trust.
<PAGE>
The Trust has also furnished you with copies properly certified or authenticated
of each of the following additional documents related to the Trust and the Fund:
(a) The Declaration dated November 3, 1987, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the "By-Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders of the Fund
selecting you as investment manager and approving the form of this
Agreement.
(d Establishment and Designation of Series of Shares of Beneficial Interest
dated February 12, 1991 relating to the Fund.
The Trust will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements, if any, to the
foregoing, including the Prospectus, the SAI and the Registration Statement.
2. Name of Trust and Fund. The Trust and the Fund may use any name derived
from the name "Scudder, Stevens & Clark", if the Trust elects to do so, only for
so long as this Agreement, any other investment management agreement between you
and the Trust with respect to the Fund or any extension, renewal or amendment
hereof or thereof remains in effect, including any similar agreement with any
organization which shall have succeeded to your business as investment manager.
At such time as such an agreement shall no longer be in effect, the Trust and
the Fund shall each (to the extent the Trust has the legal power to cause it to
be done) cease to use such a name or any other name indicating that it is
managed by or otherwise connected with you or any organization which shall have
so succeeded to your business.
3. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
2
<PAGE>
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Trust's Board of
Trustees. In connection therewith, you shall use reasonable efforts to manage
the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 3, you shall
be entitled to receive and act upon advice of counsel to the Trust or counsel to
you. You shall also make available to the Trust promptly upon request all of the
Fund's investment records and ledgers as are necessary to assist the Trust to
comply with the requirements of the 1940 Act and other applicable laws. To the
extent required by law, you shall furnish to regulatory authorities having the
requisite authority any information or reports in connection with the services
provided pursuant to this Agreement which may be requested in order to ascertain
whether the operations of the Trust are being conducted in a manner consistent
with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
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4. Administrative Services. In addition to the portfolio management
services specified above in section 3, you shall furnish at your expense for the
use of the Fund such office space and facilities in the United States as the
Fund may require for its reasonable needs, and you (or one or more of your
affiliates designated by you) shall render to the Trust administrative services
on behalf of the Fund necessary for operating as an open-end investment company
and not provided by persons not parties to this Agreement including, but not
limited to, preparing reports to and meeting materials for the Trust's Board of
Trustees and reports and notices to Fund shareholders; supervising, negotiating
contractual arrangements with, to the extent appropriate, and monitoring the
performance of, accounting agents, custodians, depositories, transfer agents and
pricing agents, accountants, attorneys, printers, underwriters, brokers and
dealers, insurers and other persons in any capacity deemed to be necessary or
desirable to Fund operations; preparing and making filings with the Securities
and Exchange Commission (the "SEC") and other regulatory and self-regulatory
organizations, including, but not limited to, preliminary and definitive proxy
materials, post-effective amendments to the Registration Statement, semi-annual
reports on Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act;
overseeing the tabulation of proxies by the Fund's transfer agent; 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 return pursuant to Section
4982 of the Code; providing assistance with investor and public relations
matters; monitoring the valuation of portfolio securities, the calculation of
net asset value; monitoring the registration of Shares of the Fund under
applicable federal and state securities laws; maintaining or causing to be
maintained for the Fund all books, records and reports and any other information
required under the 1940 Act, to the extent that such books, records and reports
and other information are not maintained by the Fund's custodian or other agents
of the Fund; assisting in establishing the accounting policies of the Fund;
assisting in the resolution of accounting issues that may arise with respect to
the Fund's operations and consulting with the Fund's independent accountants,
legal counsel and the Fund's other agents as necessary in connection therewith;
establishing and monitoring the Fund's operating expense budgets; reviewing the
Fund's bills; processing the payment of bills that have been approved by an
authorized person; assisting the Fund in determining the amount of dividends and
distributions available to be paid by the Fund to its shareholders, preparing
4
<PAGE>
and arranging for the printing of dividend notices to shareholders, and
providing the transfer and dividend paying agent, the custodian, and the
accounting agent with such information as is required for such parties to effect
the payment of dividends and distributions; and otherwise assisting the Trust as
it may reasonably request in the conduct of the Fund's business, subject to the
direction and control of the Trust's Board of Trustees. Nothing in this
Agreement shall be deemed to shift to you or to diminish the obligations of any
agent of the Fund or any other person not a party to this Agreement which is
obligated to provide services to the Fund.
5. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this section 5, you shall pay the compensation and expenses of all
Trustees, officers and executive employees of the Trust (including the Fund's
share of payroll taxes) who are affiliated persons of you, and you shall make
available, without expense to the Fund, the services of such of your directors,
officers and employees as may duly be elected officers of the Trust, subject to
their individual consent to serve and to any limitations imposed by law. You
shall provide at your expense the portfolio management services described in
section 3 hereof and the administrative services described in section 4 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 5. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out-of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent, custodians,
subcustodians, transfer agents, dividend disbursing agents and registrars;
payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; expenses of preparing share
5
<PAGE>
certificates and, except as provided below in this section 5, other expenses in
connection with the issuance, offering, distribution, sale, redemption or
repurchase of securities issued by the Fund; expenses relating to investor and
public relations; expenses and fees of registering or qualifying Shares of the
Fund for sale; interest charges, bond premiums and other insurance expense;
freight, insurance and other charges in connection with the shipment of the
Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Trust business) of Trustees, officers and
employees of the Trust who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; costs of
shareholders' and other meetings; and travel expenses (or an appropriate portion
thereof) of Trustees and officers of the Trust who are directors, officers or
employees of you to the extent that such expenses relate to attendance at
meetings of the Board of Trustees of the Trust or any committees thereof or
advisors thereto held outside of Boston, Massachusetts or New York, New York.
You shall not be required to pay expenses of any activity which is
primarily intended to result in sales of Shares of the Fund if and to the extent
that (i) such expenses are required to be borne by a principal underwriter which
acts as the distributor of the Fund's Shares pursuant to an underwriting
agreement which provides that the underwriter shall assume some or all of such
expenses, or (ii) the Trust on behalf of the Fund shall have adopted a plan in
conformity with Rule 12b-1 under the 1940 Act providing that the Fund (or some
other party) shall assume some or all of such expenses. You shall be required to
pay such of the foregoing sales expenses as are not required to be paid by the
principal underwriter pursuant to the underwriting agreement or are not
permitted to be paid by the Fund (or some other party) pursuant to such a plan.
6. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 3, 4 and 5 hereof, the Trust
on behalf of the Fund shall pay you on the last day of each month the unpaid
balance of a fee equal to the excess of (a) 1/12 of 0.60 of 1 percent of the
average daily net assets as defined below of the Fund for such month; provided
6
<PAGE>
that, for any calendar month during which the average of such values exceeds
$500 million, the fee payable for that month based on the portion of the average
of such values in excess of $500 million up to and including $1 billion shall be
1/12 of 0.55 of 1 percent of such portion; provided that, for any calendar month
during which the average of such values exceeds $1 billion, the fee payable for
that month based on the portion of the average of such values in excess of $1
billion up to and including $1.5 billion shall be 1/12 of 0.50 of 1 percent of
such portion; provided that, for any calendar month during which the average of
such values exceeds $1.5 billion, the fee payable for that month based on the
portion of the average of such values in excess of $1.5 billion up to and
including $2 billion shall be 1/12 of 0.475 of 1 percent of such portion;
provided that, for any calendar month during which the average of such values
exceeds $2.0 billion, the fee payable for that month based on the portion of the
average of such values in excess of $2.0 billion up to and including $3.0
billion up to and including $4.5 billion shall be 1/12 of 0.45 of 1 percent of
such portion; and provided that, for any calendar month during which the average
of such values exceeds $4.5 billion, shall be 1/12 of 0.405 of 1 percent of such
portion over (b) the greater of (i) the amount by which the Fund's expenses
exceed the lowest applicable expense limitation (as more fully described below)
or (ii) any compensation waived by you from time to time (as more fully
described below). You shall be entitled to receive during any month such interim
payments of your fee hereunder as you shall request, provided that no such
payment shall exceed 75 percent of the amount of your fee then accrued on the
books of the Fund and unpaid.
The "average daily net assets" of the Fund shall mean the average of the
values placed on the Fund's net assets as of 4:00 p.m. (New York time) on each
day on which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 6, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
7
<PAGE>
deemed to be the sole determination thereof on that day for the purposes of this
section 6.
You agree that your gross compensation for any fiscal year shall not be
greater than an amount which, when added to the other expenses of the Fund,
shall cause the aggregate expenses of the Fund to equal the maximum expenses
under the lowest applicable expense limitation established pursuant to the
statutes or regulations of any jurisdiction in which the Shares of the Fund may
be qualified for offer and sale. Except to the extent that such amount has been
reflected in reduced payments to you, you shall refund to the Fund the amount of
any payment received in excess of the limitation pursuant to this section 6 as
promptly as practicable after the end of such fiscal year, provided that you
shall not be required to pay the Fund an amount greater than the fee paid to you
in respect of such year pursuant to this Agreement. As used in this section 6,
"expenses" shall mean those expenses included in the applicable expense
limitation having the broadest specifications thereof, and "expense limitation"
means a limit on the maximum annual expenses which may be incurred by an
investment company determined (i) by multiplying a fixed percentage by the
average, or by multiplying more than one such percentage by different specified
amounts of the average, of the values of an investment company's net assets for
a fiscal year or (ii) by multiplying a fixed percentage by an investment
company's net investment income for a fiscal year. The words "lowest applicable
expense limitation" shall be construed to result in the largest reduction of
your compensation for any fiscal year of the Fund; provided, however, that
nothing in this Agreement shall limit your fees if not required by an applicable
statute or regulation referred to above in this section 6.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
7. Avoidance of Inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other investments
for the account of the Fund, neither you nor any of your directors, officers or
8
<PAGE>
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed
to be exclusive and it is understood that you may render investment advice,
management and services to others. In acting under this Agreement, you shall be
an independent contractor and not an agent of the Trust.
8. Limitation of Liability of Manager. As an inducement to your undertaking
to render services pursuant to this Agreement, the Trust agrees that you shall
not be liable under this Agreement for any error of judgment or mistake of law
or for any loss suffered by the Fund in connection with the matters to which
this Agreement relates, provided that nothing in this Agreement shall be deemed
to protect or purport to protect you against any liability to the Trust, the
Fund or its shareholders to which you would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of your
duties, or by reason of your reckless disregard of your obligations and duties
hereunder. Any person, even though also employed by you, who may be or become an
employee of and paid by the Fund shall be deemed, when acting within the scope
of his or her employment by the Fund, to be acting in such employment solely for
the Fund and not as your employee or agent.
9. Duration and Termination of This Agreement. This Agreement shall remain
in force until September 30, 1998, and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Trustees who are not parties
to this Agreement or interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Trustees of the Trust, or by the vote of a majority of the outstanding
voting securities of the Fund. The aforesaid requirement that continuance of
9
<PAGE>
this Agreement be "specifically approved at least annually" shall be construed
in a manner consistent with the 1940 Act and the rules and regulations
thereunder.
This Agreement may be terminated with respect to the Fund at any time,
without the payment of any penalty, by the vote of a majority of the outstanding
voting securities of the Fund or by the Trust's Board of Trustees on 60 days'
written notice to you, or by you on 60 days' written notice to the Trust. This
Agreement shall terminate automatically in the event of its assignment.
10. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved by the vote of a majority of the outstanding voting
securities of the Fund and by the Trust's Board of Trustees, including a
majority of the Trustees who are not parties to this Agreement or interested
persons of any party to this Agreement, cast in person at a meeting called for
the purpose of voting on such approval.
11. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
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
Trustee, officer, employee or agent of the Trust, shall be subject to claims
against or obligations of the Trust or of the Fund to any extent whatsoever, but
that the Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as
set forth in the Declaration and you agree that the obligations assumed by the
Trust on behalf of the Fund pursuant to this Agreement shall be limited in all
cases to the Fund and its assets, and you shall not seek satisfaction of any
such obligation from the shareholders or any shareholder of the Fund or any
other series of the Trust, or from any Trustee, officer, employee or agent of
the Trust. You understand that the rights and obligations of each Fund, or
10
<PAGE>
series, under the Declaration are separate and distinct from those of any and
all other series.
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. 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.
In interpreting the provisions of this Agreement, the definitions contained
in Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust on behalf of the Fund.
11
<PAGE>
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
SCUDDER INVESTMENT TRUST
on behalf of Scudder Growth and
Income Fund
By:/s/
---------------------------------------
President
The foregoing Agreement is hereby accepted as of the date thereof.
SCUDDER, STEVENS & CLARK, INC.
By:/s/
---------------------------------------
Managing Director
12
<PAGE>
Exhibit 11
Coopers & Lybrand
Consent of Independent Accountants
To the Trustees of Scudder Investment Trust:
We consent to the incorporation by reference in Post-Effective Amendment No. 81
to the Registration Statement of Scudder Investment Trust on Form N-1A, of our
report dated February 14, 1997 on our audit of the financial statements and
financial highlights of Scudder Growth and Income Fund, which report is included
in the Annual Report to Shareholders for the period ended December 31, 1996
which is incorporated by reference in the Post-Effective Amendment to the
Registration Statement.
We also consent to the reference to our Firm under the caption, "Experts."
/s/Coopers & Lybrand L.L.P.
---------------------------
Boston, Massachusetts Coopers & Lybrand L.L.P.
April 25, 1997
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial
information extracted from the Scudder
Growth & Income Fund Annual Report for
the fiscal year ended December 31, 1996
and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> Scudder Growth & Income Fund
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 3,071,305,690
<INVESTMENTS-AT-VALUE> 4,188,414,215
<RECEIVABLES> 37,670,126
<ASSETS-OTHER> 259,825,314
<OTHER-ITEMS-ASSETS> 20,224
<TOTAL-ASSETS> 4,485,929,879
<PAYABLE-FOR-SECURITIES> 10,050,401
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 289,398,273
<TOTAL-LIABILITIES> 299,448,674
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,992,575,185
<SHARES-COMMON-STOCK> 180,244,068
<SHARES-COMMON-PRIOR> 151,318,741
<ACCUMULATED-NII-CURRENT> 6,401,797
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 70,381,341
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,117,122,882
<NET-ASSETS> 4,186,481,205
<DIVIDEND-INCOME> 117,546,539
<INTEREST-INCOME> 9,381,108
<OTHER-INCOME> 0
<EXPENSES-NET> 27,738,643
<NET-INVESTMENT-INCOME> 99,189,004
<REALIZED-GAINS-CURRENT> 212,741,586
<APPREC-INCREASE-CURRENT> 415,550,751
<NET-CHANGE-FROM-OPS> 727,481,341
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (95,258,805)
<DISTRIBUTIONS-OF-GAINS> (149,937,532)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 51,282,565
<NUMBER-OF-SHARES-REDEEMED> (32,205,566)
<SHARES-REINVESTED> 9,848,328
<NET-CHANGE-IN-ASSETS> 1,125,273,625
<ACCUMULATED-NII-PRIOR> 2,471,598
<ACCUMULATED-GAINS-PRIOR> 7,577,287
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 17,628,873
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 27,738,643
<AVERAGE-NET-ASSETS> 3,576,590,915
<PER-SHARE-NAV-BEGIN> 20.23
<PER-SHARE-NII> .60
<PER-SHARE-GAIN-APPREC> 3.84
<PER-SHARE-DIVIDEND> (.57)
<PER-SHARE-DISTRIBUTIONS> (.87)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 23.23
<EXPENSE-RATIO> .78
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>