Scudder
Tax Managed
Growth Fund
Annual Report
October 31, 1998
Pure No-Load(TM) Funds
A pure no-load(TM) (no sales charges) mutual fund, which seeks long-term growth
of capital on an after-tax basis through diversified investment in U.S. equity
securities.
SCUDDER (logo)
<PAGE>
Scudder Tax Managed Growth Fund
- --------------------------------------------------------------------------------
Date of Inception: 9/18/98 Total Net Assets as of 10/31/98: $2.29 million
- --------------------------------------------------------------------------------
o Scudder Tax Managed Growth Fund returned 6.08% for the abbreviated fiscal
period from September 18, 1998 to October 31, 1998.
o Management follows a disciplined approach to selecting attractive growth
stocks and managing a tax-efficient portfolio, as it pursues its goal of seeking
long-term growth of capital on an after-tax basis from large-cap stocks with
above-average return potential.
o At the end of the period, the portfolio was broadly diversified with 126
securities and no position greater than 2% of assets. The Fund's median
market-cap was $2.7 billion, which compares to the $3.4 billion market-cap of
the unmanaged Russell 1000 Index.
Table of Contents
3 Letter from the Fund's President 18 Financial Highlights
4 Portfolio Summary 19 Notes to Financial Statements
5 Portfolio Management Discussion 22 Report of Independent Accountants
7 Glossary of Investment Terms 24 Trustees and Officers
8 Investment Portfolio 25 Investment Products and Services
15 Financial Statements 26 Scudder Solutions
2 - Scudder Tax Managed Growth Fund
<PAGE>
Letter from the Fund's President
Dear Shareholders,
We are pleased to present the first report to shareholders for the
abbreviated fiscal period from the Fund's commencement of operations on
September 18, 1998 to October 31, 1998.
While this is a very short period to report on the Fund's activities, it
provides an opportunity to highlight the Fund's tax managed approach to seeking
long-term growth of capital through equity investments in medium- to large-sized
U.S. companies. To that end, we have included a discussion with your Fund's
managers, Phil Fortuna, Mac Eysenbach, and Rob Tymoczko, which begins on page 5.
In the interview, the Fund's managers describe how their investment process
- -- unlike that used in managing many other mutual funds -- is designed to
maximize shareholders' after-tax returns by systematically analyzing each
stock's potential return on an after-tax basis. They also discuss their use of a
quantitative multi-factor valuation model and their approach to risk control.
For those of you who are interested in new Scudder funds, we recently
introduced two international funds: Scudder International Growth Fund -- which
seeks to invest in high growth opportunities in both developed and developing
markets, and Scudder International Value Fund -- which seeks to invest in
undervalued foreign securities. For further information on these new funds,
please call Scudder Investor Information at 1-800-225-2470.
Thank you for your interest in Scudder Tax Managed Growth Fund. If you have
any questions about your Fund, please call Scudder Investor Information at the
number above or visit our Internet Web site at www.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Tax Managed Growth Fund
3 - Scudder Tax Managed Growth Fund
<PAGE>
Portfolio Summary as of October 31, 1998
- ---------------
Diversification
- ---------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Common Stock 94%
Short-Term Investments 6%
---------------------------------------------
100%
---------------------------------------------
Management pursues a fully invested approach to seeking
long-term growth of capital from mid- and large-cap stocks
on an after tax basis.
- ------------------------------
Sectors
(Excludes 6% Cash Equivalents)
- ------------------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Financial 23%
Consumer Discretionary 17%
Manufacturing 14%
Health 9%
Utilities 7%
Technology 6%
Service Industries 6%
Durables 4%
Transportation 3%
Other 11%
---------------------------------------------
100%
---------------------------------------------
The Fund's sector allocations are the result of individual
stock selections, rather than bets on specific industry
sectors.
- ---------------------------
Ten Largest Equity Holdings
(15% of Portfolio)
- ---------------------------
1. American National Insurance Co.
Provider of various types of insurance
and financial services
2. Litton Industries, Inc.
Manufacturer of advanced electronics, defense,
marine, technology based information systems and products
3. Dow Chemical Co.
Chemical producer
4. Knight Ridder, Inc.
Communications company
5. Vulcan Materials Co.
Manufacturer of aggregates and
chemicals
6. Unitrin, Inc.
Provider of life and health insurance,
property and casualty insurance, and
consumer finance services
7. Johnson Controls, Inc.
Markets automotive systems and
building controls
8. U.S. Trust Corporation
Provider of investment management,
fiduciary, and private banking services
9. Transamerica Corp.
Provider of insurance and financial
services
10. Texas Utilities Co., Inc.
Holding company for energy service
companies
The Fund's top holdings are the result of a proprietary,
quantitative approach to identifying attractively valued
growth stocks with above-average return potential.
For more complete details about the Fund's investment portfolio, see page 8. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
4 - Scudder Tax Managed Growth Fund
<PAGE>
Portfolio Management Discussion
We recently spoke with the Fund's portfolio management team -- Phil Fortuna, Mac
Eysenbach, and Rob Tymoczko -- about their approach to managing this Fund.
Highlights of the discussion are listed below.
Q: What does Scudder Tax Managed Growth Fund invest in?
A: The Fund seeks long-term growth of capital through equity investments in
medium- to large-sized U.S. companies. We focus on selecting investments from
the 1000 largest U.S. companies, as represented by the unmanaged Russell 1000
Index.
Q: Why did Scudder decide to introduce a series of tax managed funds?
A: Our experience managing other funds, as well as input from existing and
potential shareholders, suggested investors would find value in a series of tax
managed funds. As mutual fund investors well know, taxes can take a significant
bite out of returns each year for taxable investment portfolios. Our research
indicates that a tax-sensitive investment approach, which fully incorporates the
tax consequences of portfolio turnover, offers the potential to deliver more
value to investors for the portion of their equity portfolio not held in an IRA
or other tax-deferred retirement account.
Q: How does Scudder's approach to tax management differ from others?
A: Rather than focusing exclusively on non-dividend paying stocks, minimizing
portfolio turnover, or indexing, we actively manage the portfolio by taking into
consideration the implications of trading activity to maximize after-tax
returns. By successfully balancing the expected return trade-offs due to
differing tax rates for dividend income, and short- and long-term capital gains,
we seek to enhance shareholders' post-tax return potential. By harvesting
capital losses and selling lots with the lowest tax potential first, the tax
implications of trades can be minimized, resulting in lower average annual
distributions.
Q: Given a universe consisting of approximately 1,000 mid- and large-cap U.S.
companies, how do you go about assessing each stock's return potential?
A: We rely on a proprietary, quantitative screening process to identify
attractively valued stocks with above-average capital appreciation potential. We
consider three primary factors: valuation, trends in fundamentals, and price
momentum. Our valuation measures tell us how cheap the security is relative to
the overall growth stock universe. Sales and earnings trends suggest whether the
company's fundamentals are stable, improving or deteriorating. And, price
momentum allows us to assess how the market is responding to these fundamentals.
Each company is then ranked based on its relative attractiveness.
Q: How are these rankings used to manage a tax-efficient portfolio?
A: We first build a diversified portfolio of attractively rated companies. To
limit individual security risk and provide trading flexibility, we typically
hold more than 125 securities. On an ongoing basis, we then use a tax-aware
portfolio optimization process to determine which securities should be replaced
due to diminishing growth prospects, while creating the lowest tax impact for
5 - Scudder Tax Managed Growth Fund
<PAGE>
shareholders. The process allows us to keep the portfolio focused on
attractively rated companies, while managing overall portfolio risk and the tax
consequences of portfolio turnover.
Q: What should we expect to see from this approach?
A: As a result of this tax sensitive investment process, investors should see
fewer short-term gains, and lower capital gain and dividend income
distributions. Keep in mind, however, that our overriding goal is to generate
above-average after-tax returns, not minimize taxes. As a result, we will
realize gains, but only when we believe it is advantageous to do so on an
after-tax basis. Though our emphasis is on risk control, we also expect the Fund
to have less downside risk than the typical growth fund.
Q: How is the Fund invested today?
A: Consistent with our disciplines, the Fund is essentially fully invested in
equities of medium and large companies. At the end of the period, we held a
broadly diversified portfolio of 126 securities with no position greater than 2%
of assets. The median market capitalization of the Fund was $2.7 billion, which
compares to the $3.4 billion market-cap of the Russell 1000. The typical Fund
holding had a P/E of 17x reported earnings versus 20x for the Index.
Scudder Tax Managed
Growth Fund:
A Team Approach to Investing
Scudder Tax Managed Growth Fund is managed by a team of Scudder Kemper
Investments, Inc. (the "Adviser") professionals, each of whom plays 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 the Adviser's large staff of economists,
research analysts, traders, and other investment specialists who work in our
offices across the United States and abroad. We believe our team approach
benefits Fund investors by bringing together many disciplines and leveraging
our extensive resources.
Lead Portfolio Manager Philip S. Fortuna has responsibility for the Fund's
day-to-day management and investment strategies. Mr. Fortuna joined the
Adviser in 1986 as a manager of institutional equity accounts. Mr. Fortuna is
currently director of the Adviser's quantitative group. Portfolio Manager
James M. Eysenbach joined the Adviser in 1991 as a senior quantitative
analyst. Mr. Eysenbach has more than 10 years of investment management
experience, specializing in quantitative research. Portfolio Manager Robert
Tymoczko joined the Adviser in 1997 as a quantitative analyst. Mr. Tymoczko
has five years of experience in quantitative research and econometric
modeling.
6 - Scudder Tax Managed Growth Fund
<PAGE>
Glossary of Investment Terms
GROWTH STOCK Stock of a company that has displayed greater than
average earnings growth and is expected to continue
to increase profits rapidly going forward. Stocks of
such companies usually trade at higher price
relative to earnings (higher P/E) and can exhibit
greater price volatility.
MARKET CAPITALIZATION The value of a company's outstanding shares of
common stock, determined by multiplying the
number of shares outstanding by the share price
(Shares x Price = Market Capitalization). The
universe of publicly traded companies is frequently
divided into large-, mid-, and small-capitalizations.
OVER/UNDER WEIGHTING Refers to the allocation of assets -- usually by
sector, industry, or country -- within a
portfolio relative to a benchmark index, (e.g. the
Russell 1000 Index) or an investment universe.
PRICE/EARNINGS RATIO (P/E) A widely used gauge of a stock's valuation that
(also "earnings multiple") indicates what investors are paying for a company's
earnings on a per share basis. A higher "earnings
multiple" indicates a higher expected growth rate and
the potential for greater price fluctuations.
QUANTITATIVE MODEL A systematic approach to evaluating a security based
on its financial characteristics.
STANDARD DEVIATION A statistical measure of the degree to which an
investment's return tends to vary from the
mean return. Frequently used in portfolio management
to measure the variability of past returns and to
gauge the likely range of possible future returns.
TAX BASIS The price paid by an investor for a stock or
bond plus any out-of-pocket expenses such as
brokerage commissions. A security's basis is used to
determine capital gains or losses for tax purposes
when the stock is sold.
(Sources: Scudder Kemper Investments, Inc.; Barron's Dictionary of
Finance and Investment Terms)
7 - Scudder Tax Managed Growth Fund
<PAGE>
Investment Portfolio as of October 31, 1998
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Short-Term Investments 5.8%
- ------------------------------------------------------------------------------------------------------------------------------
----------
Federal National Mortgage Association, 5.528%** 11/2/1998 (Cost $138,979) ............... 138,979 138,979
----------
Shares
- ------------------------------------------------------------------------------------------------------------------------------
Common Stocks 94.2%
- ------------------------------------------------------------------------------------------------------------------------------
Consumer Discretionary 16.5%
Apparel & Shoes 1.2%
Jones Apparel Group, Inc.* .............................................................. 600 10,350
Payless ShoeSource, Inc.* ............................................................... 400 18,775
----------
29,125
----------
Department & Chain Stores 6.9%
Best Buy Co., Inc.* ..................................................................... 200 9,600
Federated Department Stores, Inc.* ...................................................... 600 23,064
Gap Inc. ................................................................................ 300 18,038
Kmart Corp.* ............................................................................ 600 8,475
Neiman Marcus Group, Inc.* .............................................................. 600 13,275
Rite Aid Corp. .......................................................................... 400 15,875
Ross Stores, Inc. ....................................................................... 600 19,500
Saks Incorporated* ...................................................................... 400 9,100
TJX Companies, Inc. ..................................................................... 500 9,469
The Limited, Inc. ....................................................................... 600 15,375
Whole Foods Market, Inc.* ............................................................... 500 20,031
----------
161,802
----------
Home Furnishings 1.6%
Furniture Brands International, Inc.* ................................................... 500 10,750
Mohawk Industries, Inc.* ................................................................ 500 15,094
Newell Companies, Inc. .................................................................. 300 13,200
----------
39,044
----------
Hotels & Casinos 0.4%
Harrah's Entertainment, Inc.* ........................................................... 600 8,475
----------
Recreational Products 1.5%
Electronic Arts, Inc.* .................................................................. 600 24,675
Harley-Davidson, Inc. ................................................................... 300 11,625
----------
36,300
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8 - Scudder Tax Managed Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Restaurants 2.4%
Brinker International, Inc.* ............................................................ 600 14,513
Cracker Barrel Old Country Stores ....................................................... 600 15,525
Outback Steakhouse, Inc.* ............................................................... 800 27,700
----------
57,738
----------
Specialty Retail 2.5%
BJ's Wholesale Club, Inc.* .............................................................. 300 10,781
Blyth Industries, Inc.* ................................................................. 600 16,574
Family Dollar Stores, Inc. .............................................................. 500 9,063
Office Depot, Inc.* ..................................................................... 600 15,000
OfficeMax, Inc.* ........................................................................ 900 8,213
----------
59,631
----------
Consumer Staples 1.9%
Consumer Specialties 0.7%
American Greeting Corp., "A" ............................................................ 400 16,050
----------
Food & Beverage 0.6%
Interstate Bakeries Corp. ............................................................... 600 15,038
----------
Textiles 0.6%
WestPoint Stevens, Inc.* ................................................................ 500 14,219
----------
Health 8.4%
Biotechnology 0.9%
Biogen, Inc.* ........................................................................... 300 20,850
----------
Health Industry Services 2.2%
Shared Medical Systems Corp. ............................................................ 600 29,925
Wellpoint Health Networks, Inc.* ........................................................ 300 22,088
----------
52,013
----------
Hospital Management 2.6%
Health Management Associates, Inc.* ..................................................... 600 10,688
Trigon Healthcare, Inc.* ................................................................ 800 30,000
Universal Health Services, Inc.* ........................................................ 400 20,525
----------
61,213
----------
Medical Supply & Specialty 2.7%
Lincare Holdings, Inc.* ................................................................. 500 19,969
STERIS Corp.* ........................................................................... 600 13,800
Sofamor Danek Group, Inc.* .............................................................. 300 30,488
----------
64,257
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9 - Scudder Tax Managed Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Communications 1.8%
Cellular Telephone 0.1%
Leap Wireless International, Inc.* ...................................................... 75 452
----------
Telephone/Communications 1.7%
Alltel Corp. ............................................................................ 400 18,725
BellSouth Corp. ......................................................................... 300 23,944
----------
42,669
----------
Financial 21.2%
Banks 3.6%
Bank United Corp. ....................................................................... 300 11,953
Commerce Bankshares, Inc. ............................................................... 500 21,781
Hibernia Corp. .......................................................................... 600 10,013
U.S. Trust Corporation .................................................................. 500 31,844
Washington Federal, Inc. ................................................................ 400 10,675
----------
86,266
----------
Insurance 10.6%
AFLAC, Inc. ............................................................................. 400 15,250
American National Insurance Co. ......................................................... 500 42,000
Fremont General Corp. ................................................................... 600 29,625
Jefferson Pilot Corp. ................................................................... 400 24,300
Ohio Casualty Corp. ..................................................................... 400 15,100
PMI Group, Inc. ......................................................................... 500 25,219
ReliaStar Financial Corp. ............................................................... 500 21,906
Reliance Group Holdings, Inc. ........................................................... 900 12,544
Transamerica Corp. ...................................................................... 300 31,200
Unitrin, Inc. ........................................................................... 500 35,563
----------
252,707
----------
Consumer Finance 1.0%
SLM Holding Corp. ....................................................................... 600 24,038
----------
Other Financial Companies 4.7%
A.G. Edwards, Inc. ...................................................................... 600 20,738
Bear Stearns Companies, Inc. ............................................................ 600 21,413
CIT Group, Inc. ......................................................................... 700 19,119
Legg Mason, Inc. ........................................................................ 1,100 29,219
TCF Financial Corporation ............................................................... 900 21,206
----------
111,695
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder Tax Managed Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Real Estate 1.3%
Catellus Development Corp.* ............................................................. 900 12,375
Orion Capital Corp. ..................................................................... 500 17,094
----------
29,469
----------
Media 1.9%
Broadcasting & Entertainment 0.4%
King World Productions, Inc.* ........................................................... 400 10,500
----------
Print Media 1.5%
Knight-Ridder, Inc. ..................................................................... 700 35,656
----------
Service Industries 5.6%
EDP Services 1.9%
Fiserv, Inc.* ........................................................................... 300 13,950
Keane, Inc.* ............................................................................ 400 13,300
SunGard Data Systems, Inc.* ............................................................. 500 16,875
----------
44,125
----------
Environmental Services 1.3%
Allied Waste Industries* ................................................................ 400 8,650
Waste Management, Inc. .................................................................. 500 22,563
----------
31,213
----------
Investment 1.6%
Donaldson, Lufkin & Jenrette Securities Corp. ........................................... 500 17,875
Paine Webber Group, Inc. ................................................................ 600 20,063
----------
37,938
----------
Miscellaneous Commercial Services 0.8%
Ciber, Inc.* ............................................................................ 300 5,888
Kelly Services, Inc. "A" ................................................................ 400 12,575
----------
18,463
----------
Durables 3.7%
Aerospace 0.9%
Northrop Grumman Corp. .................................................................. 100 7,975
Sundstrand Corp. ........................................................................ 300 14,081
----------
22,056
----------
Automobiles 1.1%
Genuine Parts Co. ....................................................................... 400 12,600
Navistar International Corp.* ........................................................... 600 12,525
----------
25,125
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Tax Managed Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Construction/Agricultural Equipment 0.7%
PACCAR, Inc. ............................................................................ 400 17,450
----------
Leasing Companies 0.6%
Hertz Corp. ............................................................................. 400 14,325
----------
Telecommunications Equipment 0.4%
Scientific-Atlanta, Inc. ................................................................ 600 8,963
----------
Manufacturing 12.8%
Chemicals 2.0%
Dow Chemical Co. ........................................................................ 400 37,450
Rohm & Haas Co. ......................................................................... 300 10,125
----------
47,575
----------
Containers & Paper 0.4%
Crown Cork & Seal Co., Inc. ............................................................. 300 9,563
----------
Diversified Manufacturing 2.0%
Cooper Industries, Inc. ................................................................. 400 17,650
Pentair, Inc. ........................................................................... 400 15,050
Tyco International Ltd. (New) ........................................................... 228 14,122
----------
46,822
----------
Electrical Products 0.4%
Thomas & Betts Corp. .................................................................... 200 8,938
----------
Industrial Specialty 7.4%
Carlisle Companies, Inc. ................................................................ 600 23,175
Centex Corp. ............................................................................ 600 20,100
Clayton Homes, Inc. ..................................................................... 800 12,350
Cordant Technologies, Inc. .............................................................. 400 16,275
Fleetwood Enterprises ................................................................... 400 12,900
Johns Manville Corp. .................................................................... 600 7,875
Johnson Controls, Inc. .................................................................. 600 33,735
QUALCOMM, Inc.* ......................................................................... 300 16,688
Sherwin-Williams Co. .................................................................... 500 12,594
Teleflex Incorporated ................................................................... 500 19,344
----------
175,036
----------
Machinery/Components/Controls 0.6%
Ingersoll-Rand Co. ...................................................................... 300 15,150
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder Tax Managed Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Technology 6.0%
Computer Software 3.2%
Compuware Corp.* ........................................................................ 400 21,675
Comverse Technologies, Inc.* ............................................................ 600 27,600
Synopsys Inc.* .......................................................................... 600 27,150
----------
76,425
----------
Electronic Data Processing 1.1%
Affiliated Computer Services* ........................................................... 400 14,800
Hewlett-Packard Co. ..................................................................... 200 12,038
----------
26,838
----------
Military Electronics 1.7%
Litton Industries, Inc.* ................................................................ 600 39,150
----------
Energy 2.3%
Oil & Gas Production 0.4%
Valero Energy Corporation ............................................................... 400 10,000
----------
Oil Companies 0.7%
Texaco, Inc. ............................................................................ 300 17,794
----------
Oil/Gas Transmission 0.6%
El Paso Energy Corporation .............................................................. 400 14,175
----------
Miscellaneous 0.6%
Ipalco Enterprises, Inc. ................................................................ 300 13,763
----------
Construction 2.6%
Building Materials 2.2%
LaFarge Corp. ........................................................................... 500 16,844
Vulcan Materials Co. .................................................................... 300 35,588
----------
52,432
----------
Building Products 0.4%
Masco Corp. ............................................................................. 300 8,456
----------
Transportation 3.0%
Airlines 1.8%
COMAIR Holdings, Inc. ................................................................... 400 13,150
Continental Airlines Inc. "B"* .......................................................... 400 15,850
Southwest Airlines Co. .................................................................. 600 12,713
----------
41,713
----------
Railroads 0.6%
Burlington Northern Santa Fe Corp. ...................................................... 500 15,438
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder Tax Managed Growth Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Trucking 0.6%
CNF Transportation, Inc. ................................................................ 500 15,125
----------
Utilities 6.5%
Electric Utilities 5.8%
Allegheny Energy, Inc. .................................................................. 700 21,525
CINergy Corp. ........................................................................... 800 27,600
Carolina Power & Light Co. .............................................................. 600 27,525
DTE Energy Co. .......................................................................... 400 17,050
Texas Utilities Co., Inc. ............................................................... 700 30,625
Western Resources, Inc. ................................................................. 400 14,000
----------
138,325
----------
Natural Gas Distribution 0.7%
NICOR, Inc. ............................................................................. 400 16,950
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $2,085,522) 2,238,533
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $2,224,501) (a) 2,377,512
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $2,224,501. At October 31,
1998, net unrealized appreciation for all securities based on tax cost was
$153,011. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $188,652 and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over market value of $35,641.
* Non-income producing security.
** Annualized yield at time of purchase, not a coupon rate. (Unaudited)
The accompanying notes are an integral part of the financial statements.
14 - Scudder Tax Managed Growth Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of October 31, 1998
<TABLE>
<S> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $2,224,501) ..................... $ 2,377,512
Cash .................................................................... 200
Dividends receivable .................................................... 1,195
Reimbursement from Adviser .............................................. 40,871
----------------
Total assets ............................................................ 2,419,778
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ....................................... 87,283
Other payables and accrued expenses ..................................... 43,376
----------------
Total liabilities ....................................................... 130,659
--------------------------------------------------------------------------------------------
Net assets, at market value $ 2,289,119
--------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ..................................... 4,314
Unrealized appreciation (depreciation) on investment securities ......... 153,011
Paid-in capital ......................................................... 2,131,794
--------------------------------------------------------------------------------------------
Net assets, at market value $ 2,289,119
--------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share ($2,289,119 /
179,789 outstanding shares of beneficial interest, $.01 par value, ----------------
unlimited number of shares authorized) ............................... $12.73
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder Tax Managed Growth Fund
<PAGE>
Statement of Operations
for the period September 18, 1998 (commencement
of operations) to October 31, 1998
<TABLE>
<S> <C>
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Income:
Dividends ............................................................... $ 2,105
Interest ................................................................ 1,236
----------------
3,341
Expenses:
Management fee .......................................................... 1,625
Services to shareholders ................................................ 4,083
Custodian and accounting fees ........................................... 7,438
Auditing ................................................................ 19,221
Registration fees ....................................................... 4,108
Reports to shareholders ................................................. 12,493
Legal ................................................................... 2,049
Other ................................................................... 848
----------------
Total expenses before reductions ........................................ 51,865
Expense reductions ...................................................... (49,360)
----------------
Expenses, net ........................................................... 2,505
--------------------------------------------------------------------------------------------
Net investment income (loss) 836
--------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period on
investments ........................................................... 153,011
--------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 153,847
--------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder Tax Managed Growth Fund
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Period
September 18,
1998
(commencement of
operations) to
Increase (Decrease) in Net Assets October 31, 1998
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Operations:
Net investment income .................................................. $ 836
Net unrealized appreciation (depreciation) on investment
transactions during the period ...................................... 153,011
----------------
Net increase (decrease) in net assets resulting from operations ........ 153,847
----------------
Fund share transactions:
Proceeds from shares sold .............................................. 2,134,072
----------------
Net increase (decrease) in net assets from Fund share transactions ..... 2,134,072
----------------
Increase (decrease) in net assets ...................................... 2,287,919
Net assets at beginning of period ...................................... 1,200
Net assets at end of period (including undistributed net investment ----------------
income of $4,314) ................................................... $ 2,289,119
----------------
Other Information
- ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period .............................. 100
----------------
Shares sold ............................................................ 179,689
----------------
Shares outstanding at end of period .................................... 179,789
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - Scudder Tax Managed Growth Fund
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
the period (a) and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
For the Period
September 18,
1998
(commencement of
operations) to
October 31, 1998
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
---------------
Net asset value, beginning of period .................................................................... $12.00
---------------
Income from investment operations:
Net investment income ................................................................................... .01
Net realized and unrealized gain (loss) on investments .................................................. .72
---------------
Total from investment operations ........................................................................ .73
---------------
Redemption fee .......................................................................................... --
---------------
Net asset value, end of period .......................................................................... $12.73
---------------
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (%) (b) .................................................................................... 6.08(c)**
Ratios and Supplemental Data
Net assets, end of period ($ millions) .................................................................. 2.29
Ratio of operating expenses, net to average daily net assets (%) ........................................ 1.25*
Ratio of operating expenses, before expense reductions, to average daily net assets (%) ................. 25.9*
Ratio of net investment income to average daily net assets (%) .......................................... .42*
Portfolio turnover rate (%) ............................................................................. --
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been reduced.
(c) Total return does not reflect the effect to the shareholder of the 2%
redemption fee on shares held less than one year.
* Annualized
** Not annualized
18 - Scudder Tax Managed Growth Fund
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder Tax Managed Growth Fund (the "Fund") is a diversified series of
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 an open-end management investment company.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
Security Valuation. Portfolio securities which are traded on U.S. or foreign
stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the Nasdaq Stock Market, Inc.
("Nasdaq"), 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 most
recent bid quotation. Securities which are not quoted on Nasdaq 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 other than money market securities with an original
maturity of over sixty days are valued by pricing agents approved by the
officers of the Fund, whose 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. Money market instruments purchased with an original
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 the repurchase price.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code of 1986, as amended, 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.
Redemption Fees. In general, shares of the Fund may be redeemed at net asset
value. However, upon the redemption or exchange of shares held by shareholders
for less than one year, a fee of 2% of the current net asset value of the shares
will be assessed and retained by the Fund for the benefit of the remaining
shareholders. The redemption fee is accounted for as an addition to paid-in
capital.
Distribution of Income and Gains. Distributions of net investment income are
made annually. During any particular year, net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders. An additional distribution may be made to the extent necessary to
avoid the payment of a four percent federal excise tax.
19 - Scudder Tax Managed Growth Fund
<PAGE>
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. 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 period from September 18, 1998 (commencement of operations) to October
31, 1998, purchases of investment securities (excluding short-term investments)
aggregated $2,085,522. There were no sales during the period.
C. Related Parties
Under the Investment Management Agreement (the "Management Agreement") with
Scudder Kemper Investments, Inc. (the "Adviser"), the Adviser directs the
investments of the Fund in accordance with its investment objectives, policies
and restrictions. The Adviser determines the securities, instruments and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio management services, the Adviser provides certain
administrative services in accordance with the Management Agreement. The
management fee payable under the Management Agreement is equal to an annual rate
of 0.80% of the Fund's average daily net assets, computed and accrued daily and
payable monthly. In addition, the Adviser has agreed not to impose all or a
portion of its management fee until February 28, 1999 in order to maintain the
annualized expenses of the Fund at not more than 1.25% of average daily net
assets. Accordingly, for the period ended October 31, 1998, the Adviser did not
impose any of its fee amounting to $1,625. Further, due to the limitations of
such Agreement, the Adviser's reimbursement payable to the Fund for the period
ended October 31, 1998, amounted to $40,871.
On September 7, 1998, Zurich Insurance Company ("Zurich"), majority owner of the
adviser, entered into an agreement with B.A.T Industries p.l.c. ("B.A.T")
pursuant to which the financial services businesses of B.A.T were combined with
Zurich's businesses to form a new global insurance and financial services
company known as Zurich Financial Services. Upon consummation of the
transaction, the Fund's Management Agreement with Scudder Kemper was deemed to
have been assigned and, therefore, terminated. The Board of Trustees of the Fund
has approved a new investment management agreement with Scudder Kemper, which is
substantially identical to the former Management Agreement, except for the dates
of execution and termination. The Board of Trustees of the Fund will seek
shareholder approval of the new investment management agreement through a proxy
solicitation that is currently scheduled to conclude in mid-December.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
period ended October 31, 1998, SSC did not impose any of its fee, which amounted
to $1,352.
20 - Scudder Tax Managed Growth Fund
<PAGE>
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 period ended October 31,
1998, the Fund did not incur any such fees.
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 period ended
October 31, 1998, SFAC did not impose any of its fee, which amounted to $5,512.
The Trust pays each Trustee not affiliated with the Adviser an annual retainer,
plus specified amounts for attended board and committee meetings. For the period
September 18, 1998 (commencement of operations) to October 31, 1998, the Fund
did not incur any such fees.
21 - Scudder Tax Managed Growth Fund
<PAGE>
Report of Independent Accountants
To the Trustees of Investment Trust and the Shareholders of Scudder Tax Managed
Growth Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Scudder Tax Managed Growth Fund
(the "Fund") at October 31, 1998, the results of its operations for the period
then ended and the changes in its net assets and financial highlights for the
period September 18, 1998 (commencement of operations) to October 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 18, 1998
22 - Scudder Tax Managed Growth Fund
<PAGE>
This Page
intentionally
left blank.
23 - Scudder Tax Managed Growth Fund
<PAGE>
Trustees and Officers
Daniel Pierce*
President and Trustee
Henry P. Becton, Jr.
Trustee; President and General
Manager, WGBH Educational
Foundation
Dawn-Marie Driscoll
Trustee; Executive Fellow, Center
for Business Ethics, Bentley
College; President, Driscoll
Associates
Peter B. Freeman
Trustee; Corporate Director and
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, Vice President and
Assistant Secretary
Jean C. Tempel
Trustee; Managing Partner,
Technology Equity Partners
Bruce F. Beaty*
Vice President
Philip S. Fortuna*
Vice President
William F. Gadsden*
Vice President
Robert T. Hoffman*
Vice President
Thomas W. Joseph*
Vice President
Valerie F. Malter*
Vice President
Ann M. McCreary*
Vice President
Thomas F. McDonough*
Vice President and Secretary
John R. Hebble*
Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
24 - Scudder Tax Managed Growth Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series--
Prime Reserve Shares*
Premium Shares*
Managed Shares*
Scudder Government Money Market Series--
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
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 Corporate Bond 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 Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment 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 Equity
- -------------
Worldwide
Scudder Global Fund
Scudder International Value Fund
Scudder International Growth and Income Fund
Scudder International Fund++
Scudder International Growth 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, Inc.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
Preferred Series
- ----------------
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small
Company Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal 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. Certain Scudder funds may not be available for
purchase or exchange. +A portion of the income from the tax-free funds may be
subject to federal, state, and local taxes. *A class of shares of the Fund.
**Not available in all states. ***Only the Scudder Shares of the Fund are part
of the Scudder Family of Funds. ++Only the International Shares of the Fund are
part of the Scudder Family of Funds. +++ +++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 Kemper Investments, Inc., are traded on the New York Stock Exchange and,
in some cases, on various other stock exchanges.
25 - Scudder Tax Managed Growth Fund
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
purchase price over time.*
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
* Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- www.scudder.com
1-800-343-2890
Scudder Electronic Account Services: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you previously designated.
Distributions Direct
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
26 - Scudder Tax Managed Growth Fund
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 8,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
800 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
</TABLE>
27 - Scudder Tax Managed Growth Fund
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $230 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts. It is one of the ten largest mutual fund companies in the
United States.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 79
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Group. As a result, Zurich's subsidiary, Zurich Kemper Investments,
Inc., with 50 years of mutual fund and investment management experience, was
combined with Scudder. Headquartered in New York, Scudder Kemper Investments
offers a full range of investment counsel and asset management capabilities,
based on a combination of proprietary research and disciplined, long-term
investment strategies. With its global investment resources and perspective,
the firm seeks opportunities in markets throughout the world to meet the needs
of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Group. The Zurich Group is an internationally recognized leader in
financial services, including property/casualty and life insurance, reinsurance,
and asset management.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER
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