Scudder
Tax Managed
Small Company
Fund
Semiannual Report
April 30, 1999
No-Load Funds
A no-load mutual fund, which seeks long-term growth of capital on an after-tax
basis through investment in securities of undervalued small public U.S.
companies.
SCUDDER
<PAGE>
Scudder Tax Managed Small Company Fund
- --------------------------------------------------------------------------------
Date of Inception: 9/18/98 Total Net Assets as of 4/30/99: $2.23 million
- --------------------------------------------------------------------------------
o Management follows a disciplined approach to selecting undervalued small-cap
U.S. stocks in pursuit of its objective of long-term growth of capital on an
after-tax basis.
o The Fund is broadly diversified, with 170 holdings and no position greater
than 2% of the Fund's assets. At the close of the period, the Fund's median
market cap was $276 million, compared with the $418 million market cap of the
Russell 2000 Index.
o Scudder Tax Managed Small Company Fund posted a 6.86% total return for its
most recent semiannual period ended April 30, 1999. Over the same period, the
Russell 2000 Index returned 15.16% in a narrow, technology-driven market.
Table of Contents
3 Letter from the Fund's President 21 Financial Highlights
4 Performance Update 22 Notes to Financial Statements
5 Portfolio Summary 25 Shareholder Meeting Results
6 Portfolio Management Discussion 28 Trustees and Officers
8 Glossary of Investment Terms 29 Investment Products and Services
9 Investment Portfolio 30 Scudder Solutions
18 Financial Statements
2 - Scudder Tax Managed Small Company Fund
<PAGE>
Letter from the Fund's President
Dear Shareholders,
We are pleased to provide you with an update on your investment in the
Scudder Tax Managed Small Company Fund. For the semiannual period ended April
30, 1999, the Fund posted a 6.86% return, as compared with the 15.16% return of
the Russell 2000 Index. Much of the market's progress over this period was
driven by the outperformance of a small number of Internet stocks with little or
no earnings. In fact, just five stocks accounted for virtually all of the
index's gain in the first four months of 1999.
Although the Fund's return fell significantly short of its benchmark, we
are hopeful that April's results, where the Fund outperformed the Russell 2000
Index by more than two percentage points, indicate the start of a much broader
market rally. They also highlight the volatility of short-term results. This is
why we recommend evaluating the results for stock funds over a minimum horizon
of three years.
In the interview that begins on page 5, the Fund's managers describe how
their investment process is designed to maximize shareholders' after-tax returns
by systematically analyzing each stock's potential return on an after-tax basis.
They also describe their approach to risk control and results to date.
For those interested in new Scudder products, we are pleased to introduce
Scudder Select 500 Fund and Scudder Select 1000 Growth Fund. Both funds are
managed with the goal of pursuing long-term outperformance compared to their
benchmark indices, the S&P 500 Index and the Russell 1000 Growth Index,
respectively. For more information on either Select fund, please call us at the
number below.
If you have any questions regarding Scudder Tax Managed Small Company Fund
or any other Scudder fund, please call Investor Relations at 1-800-225-2470. Or
visit Scudder's Web site at www.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Tax Managed Small Company Fund
3 - Scudder Tax Managed Small Company Fund
<PAGE>
Performance Update as of April 30, 1999
--------------------------------------------
Fund Index Comparison
--------------------------------------------
Total Return
--------------------------------------------
Period Ended Growth of
4/30/1999 $10,000 Cumulative
--------------------------------------------
Tax Managed Small Company Fund
Life of Fund* $ 11,060 10.60%
--------------------------------------------
Russell 2000 Index
Life of Fund* $ 12,013 20.13%
--------------------------------------------
* The Fund commenced operations on September 18, 1998.
--------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
CHART DATA:
Scudder Tax
Managed Small Russell
Company Fund 2000 Index
9/98* 10000 10000
10/98 10350 10435
11/98 10792 10981
12/98 11001 11658
1/99 10918 11813
2/99 10190 10858
3/99 9889 11027
4/99 11060 12013
The Russell 2000 Index is an unmanaged capitalization-weighted measure of
approximately 2000 small U.S. stocks. Index returns assume reinvested dividends
and, unlike Fund returns, do not reflect any fees or expenses.
--------------------------------------------
Returns and Per Share Information
--------------------------------------------
Period ended April 30
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE FUND TOTAL RETURN (%) AND
INDEX TOTAL RETURN (%)
CHART DATA:
1999*
- --------------------------------------------------------------------------------
Net Asset Value $ 13.22
- --------------------------------------------------------------------------------
Income Dividends $ .05
- --------------------------------------------------------------------------------
Capital Gains Distributions $ --
- --------------------------------------------------------------------------------
Fund Total Return (%) 10.60
- --------------------------------------------------------------------------------
Index Total Return (%) 20.13
- --------------------------------------------------------------------------------
Performance is historical and assumes reinvestment of all dividends and capital
gains and is not indicative of future results. Total return and principal value
will fluctuate, so an investor's shares, when redeemed, may be worth more or
less than when purchased. If the Adviser had not maintained the Fund's expenses,
the total return for the life of Fund period would have been lower.
4 - Scudder Tax Managed Small Company Fund
<PAGE>
Portfolio Summary as of April 30, 1999
- -------------------------
Asset Allocation
- -------------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Common Stock 97%
Cash Equivalent, net 3%
------------------------------------
100%
------------------------------------
Management pursues a fully invested approach to seeking long-term growth of
capital from small-cap stocks on an after-tax basis.
------------------------------------
Sectors
(Excludes 3% Cash Equivalents)
------------------------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Manufacturing 16%
Consumer Discretionary 15%
Financial 12%
Construction 11%
Service Industries 8%
Durables 7%
Technology 6%
Energy 6%
Health 5%
Other 14%
--------------------------------------
100%
--------------------------------------
The Fund's sector allocations are the result of our individual stock
selections, rather than bets on specific industry sectors.
------------------------------------
Ten Largest Equity Holdings
(11% of Portfolio)
------------------------------------
1. Southwest Securities Group, Inc.
Securities brokerage, investment
banking and asset management
services
2. Optical Coating Laboratory, Inc.
Manufacturer of thin film coated
components
3. CTS Corp.
Manufacturer of electronic and
electromechanical components
4. Tuboscope Inc.
Supplier of oilfield internal
tubular coating and tubular
inspection services
5. Genesco Inc.
Retailer and wholesaler of
branded footwear
6. International Aluminum Co.
Manufacturer of aluminum and
glass products
7. Energen Corp.
Natural gas distribution, oil and
gas exploration and production
8. TNP Enterprises, Inc.
Electric utility in Texas and New
Mexico
9. Conestoga Enterprises, Inc.
Independent local telephone
utility
10. Ames Department Stores, Inc.
Operator of discount department
stores
The Fund's top holdings are the result of our proprietary, quantitative
approach to identifying attractively valued small-cap stocks with
above-average capital appreciation potential.
For more complete details about the Fund's investment portfolio, see page 9.
A quarterly Fund Summary and Portfolio Holdings are available upon request
5 - Scudder Tax Managed Small Company Fund
<PAGE>
Portfolio Management Discussion
In the following interview, Portfolio Managers James Eysenbach, Robert Tymoczko,
and Calvin Young discuss the Fund's market environment and strategy for the
six-month period ended April 30, 1999.
Q: How did Scudder Tax Managed Small Company Fund perform over the past six
months?
A: The Fund posted a 6.86% total return over the semiannual period, as compared
with the 15.16% return of the Russell 2000 Index of small stocks. Since
inception (September 18, 1998), the Fund gained 10.6%.
Q: How do you assess the Fund's performance?
A: Those are respectable absolute returns, but when you compare them to the
various benchmarks, you can see there's been a significant shortfall. The
shortfall was due to two factors: the narrow market in which a small number of
stocks drove the indices higher and the significant spread between growth and
value. Over the six-month period, the S&P 500 was up 22.32%, and small stocks as
measured by the Russell 2000 were up 15.16%, a spread of about seven percentage
points. But the spread over that same period within the small cap arena between
value and growth stocks was roughly triple that with small value stocks up 4.4%
and small growth stocks gaining 25.7%. That's one of the largest spreads over a
six-month period since the inception of the Russell indices in 1979. Clearly,
given that valuation is a significant component of our investment discipline,
this spread in performance worked against us over the six-month period.
Q: Does the Fund's strong value orientation exclude most growth stocks?
A: No. We will include growth stocks as long as we think the stock's growth
potential in comparison to its valuation makes sense -- in other words, we will
buy growth stocks if we believe the valuations are not excessive. But our
investment process does generally preclude us from investing in growth stocks
that have no earnings currently or for the foreseeable future. That excludes
many of the Internet stocks that drove performance over this period.
Q: Within the Fund's universe of approximately 2,000 small U.S. companies, how
does the Fund assess each stock's potential return?
A: We rely on a proprietary, quantitative screening process to identify
attractively valued stocks with above-average capital appreciation potential. We
consider four primary factors: valuation, trends in sales and earnings, price
momentum, and risk. Our valuation measures tell us how inexpensive the security
is relative to the overall small-cap universe. Sales and earnings trends suggest
whether the company's fundamentals are stable, improving, or deteriorating.
Price momentum allows us to assess how the market is responding to these
fundamentals. Risk measures help us understand the degree of financial
uncertainty for a given company. Each company is then ranked based on its
relative attractiveness.
Q: How are these rankings used to manage a tax-efficient portfolio?
A: First, we build a diversified portfolio of attractively rated companies. To
limit individual security risk and provide trading flexibility, we typically
6 - Scudder Tax Managed Small Company Fund
<PAGE>
hold more than 150 securities. On an ongoing basis, we then use a tax-aware
portfolio optimization process to determine which securities should be replaced
due to diminishing return prospects, while creating the lowest tax impact for
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: Do you make adjustments to the Fund's investment model?
A: There are several model approaches that are used in the industry to help
select investments. Some funds try to dynamically adjust their model based on
the latest market environment. This is another form of a market timing strategy,
and not one that we follow. Our approach is to attempt to incrementally improve
the models that we're using over time. Any changes to the model are infrequent
and very gradual in nature. These might include seeking out an additional data
source, or refining the way we calculate factors such as a company's cash flow
or normalized earnings. They are fine-tuning adjustments that would be hard to
detect looking at the Fund's portfolio characteristics but are meant to ensure
that each factor included in the model is working as intended. If there are new
factors that we've identified through our experience or research that are
particularly effective, we will incorporate that into the process.
Q: What is your outlook for the Fund?
A: We've just come through a year that ended with one of the widest performance
spreads between small- and large-cap stocks this century. That's created some
very attractive valuations in the small-cap area. We feel strongly that
small-cap stocks will provide attractive returns over the long term and that it
makes sense for investors to have a portion of their portfolios allocated to
these stocks. Because market leadership often changes abruptly, it is easy to
miss a significant rally in a segment of the market if an investor has not made
a commitment to that segment. April's small-cap stock rebound is a good example
of this. After trailing large-cap stocks by 10 percentage points in the first
quarter, small-cap stocks jumped 9% in April (versus less than 4% for the S&P
500) and continued to outperform in May.
7 - Scudder Tax Managed Small Company Fund
<PAGE>
Glossary of Investment Terms
<TABLE>
<CAPTION>
<S> <C>
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 2000
Index), or an investment universe.
PRICE/EARNINGS RATIO (P/E) A widely used gauge of a stock's valuation that indicates what investors are
(also "earnings multiple") 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.
VALUE STOCK A company whose stock price does not fully reflect its intrinsic value, as
indicated by price/earnings ratio, price/book value ratio, dividend yield, or
some other valuation measure, relative to its industry or the market overall.
Value stocks tend to display less price volatility and may carry higher
dividend yields.
(Sources: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and Investment Terms)
</TABLE>
8 - Scudder Tax Managed Small Company Fund
<PAGE>
Investment Portfolio as of April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------------------------------------
Common Stocks 100.0%
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Consumer Discretionary 15.0%
Apparel & Shoes 2.8%
Garan, Inc. ..................................... 700 18,725
Genesco Inc.* ................................... 2,200 23,925
Hartmarx Corp.* ................................. 2,700 12,825
Wolverine World Wide, Inc. ...................... 500 6,000
--------
61,475
--------
Department & Chain Stores 2.3%
Ames Department Stores, Inc.* ................... 600 20,963
Dress Barn Inc.* ................................ 600 8,775
Fred's, Inc. "A" ................................ 700 8,181
Jo-Ann Stores, Inc."A"* ......................... 800 12,900
--------
50,819
--------
Home Furnishings 1.4%
Chromcraft Revington, Inc.* ...................... 1,000 15,313
Oneida Ltd. ...................................... 700 16,888
--------
32,201
--------
Recreational Products 2.5%
Arctic Cat Inc. .................................. 1,100 9,488
Coachmen Industries, Inc. ........................ 500 9,438
Huffy Corp. ...................................... 900 11,981
National R.V. Holdings, Inc.* .................... 500 7,875
The First Years Inc. ............................. 200 3,038
--------
54,758
--------
Restaurants 3.4%
Avado Brands, Inc. ............................... 1,200 9,300
CEC Entertainment Inc.* .......................... 400 15,000
Rainforest Cafe Inc.* ............................ 2,100 11,550
Ruby Tuesday, Inc. ............................... 400 7,300
Ryan's Family Steak Houses, Inc.* ................ 1,300 16,088
VICORP Restaurants, Inc.* ........................ 1,100 16,775
--------
76,013
--------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9 - Scudder Tax Managed Small Company Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Specialty Retail 2.6%
DM Management Co.* ............................... 500 11,875
Discount Auto Parts Inc.* ........................ 600 13,688
Tractor Supply Co.* .............................. 600 16,500
Wet Seal, Inc. "A"* .............................. 400 16,300
--------
58,363
--------
Consumer Staples 4.4%
Consumer Specialties 1.6%
Jan Bell Marketing, Inc.* ........................ 2,000 6,125
Russ Berrie & Co., Inc. .......................... 600 16,313
Sola International, Inc.* ........................ 900 13,388
--------
35,826
--------
Food & Beverage 2.2%
Imperial Sugar Co. ............................... 1,500 10,688
M&F Worldwide Corp.* ............................. 1,800 14,625
National Beverage Corp.* ......................... 1,400 12,513
Ralcorp Holdings, Inc.* .......................... 600 11,025
--------
48,851
--------
Package Goods/Cosmetics 0.6%
Chattem, Inc.* ................................... 350 13,672
---------
Health 4.5%
Biotechnology 0.8%
Bio-Rad Laboratories, Inc. "A"* .................. 600 16,800
Health Industry Services 1.9% --------
Hanger Orthopedic Group, Inc.* ................... 800 11,700
NCS HealthCare, Inc. "A"* ........................ 700 9,100
Prime Medical Services, Inc.* .................... 1,300 9,344
Syncor International Corp.* ...................... 450 12,825
--------
42,969
--------
Medical Supply & Specialty 0.9%
NBTY Inc.* ...................................... 1,400 7,088
Vital Signs Inc. ................................ 600 12,600
--------
19,688
--------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder Tax Managed Small Company Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Pharmaceuticals 0.9%
K-V Pharmaceutical Co.* .......................... 600 9,300
Medco Research Inc.* ............................. 500 11,063
---------
20,363
---------
Communications 0.9%
Telephone/Communications
Conestoga Enterprises, Inc. ...................... 700 21,000
---------
Financial 11.9%
Banks 7.1%
BSB Bancorp, Inc. ................................ 700 17,981
Columbia Banking System, Inc.* ................... 400 6,800
D & N Financial Corp. ............................ 500 11,500
First Federal Financial Corp.* ................... 900 15,581
First Republic Bank* ............................. 600 15,450
JSB Financial, Inc. .............................. 400 19,725
Medford Bancorp Inc. ............................. 1,000 16,750
PFF Bancorp, Inc.* ............................... 900 16,847
Parkvale Financial Corp. ......................... 775 16,275
The Trust Company of N.J ......................... 900 20,588
---------
157,497
---------
Insurance 3.4%
Baldwin & Lyons, Inc. "B" ........................ 800 18,800
Chartwell Re Corp. ............................... 650 12,025
Guarantee Life Companies, Inc. ................... 700 14,000
MMI Companies, Inc. .............................. 500 7,750
National Western Life Insurance Co.* ............. 100 9,925
RLI Corp. ........................................ 400 12,725
---------
75,225
---------
Other Financial Companies 0.5%
ITLA Capital Corp.* .............................. 700 11,025
---------
Real Estate 0.4%
Grubb & Ellis Co.* ............................... 1,500 9,094
---------
Miscellaneous 0.5%
Resource Bancshares Mortgage Group, Inc. 900...... 11,025
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Tax Managed Small Company Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ---------------------------------------------------------------------
<S> <C> <C>
Service Industries 7.9%
EDP Services 0.7%
Cotelligent, Inc.* ...................... 600 7,013
Pomeroy Computer Resources, Inc.* ....... 600 8,475
--------
15,488
--------
Environmental Services 0.6%
URS Corp.* ............................. 600 13,838
--------
Investment 2.3%
Advest Group, Inc. ..................... 700 14,175
Southwest Securities Group, Inc. ....... 700 37,032
--------
51,207
--------
Miscellaneous Commercial Services 3.2%
CORT Business Services Corp.* ......... 700 16,144
Data Processing Resources Corp.* ...... 700 8,838
Morrison Knudsen Corp.* ............... 700 7,613
Personnel Group of America, Inc.* ..... 1,800 16,425
RCM Technologies, Inc.* ............... 600 7,800
SOS Staffing Services, Inc.* .......... 600 4,200
Volt Information Sciences, Inc.* ...... 500 8,750
--------
69,770
--------
Miscellaneous Consumer Services 0.6%
Miller Industries, Inc.* ............. 1,500 7,594
Westaff Inc.* ........................ 800 5,900
--------
13,494
--------
Printing/Publishing 0.5%
Merrill Corp. ........................ 800 11,900
--------
Durables 7.4%
Aerospace 2.3%
Aviall, Inc.* ........................ 1,200 19,125
Ducommun, Inc.* ...................... 1,300 14,788
Kaman Corp. "A" ...................... 1,300 17,063
--------
50,976
--------
Automobiles 2.8%
Borg-Warner Automotive Inc. ......... 256 14,528
Dura Automotive Systems, Inc.*....... 400 11,450
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder Tax Managed Small Company Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------
<S> <C> <C>
Monaco Coach Corp.* .................................. 650 18,038
Oshkosk Truck Corp. "B" .............................. 500 18,500
--------
62,516
--------
Construction/Agricultural Equipment 0.7%
Cascade Corp. ........................................ 1,100 14,713
--------
Leasing Companies 1.6%
AMERCO* .............................................. 500 11,250
Electro Rent Corp.* .................................. 900 10,238
Leasing Solutions, Inc.* ............................. 500 750
Rent-Way, Inc. ....................................... 500 13,625
--------
35,863
--------
Manufacturing 16.0%
Apparel & Shoes 0.5%
Guess ?, Inc.* ....................................... 1,400 10,675
--------
Chemicals 1.0%
Chemfab Corp.* ....................................... 800 13,800
Quaker Chemical Corp. ................................ 500 7,906
--------
21,706
--------
Containers & Paper 0.6%
Alltrista Corp.* ..................................... 600 12,750
--------
Diversified Manufacturing 2.2%
Justin Industries .................................... 1,400 18,900
Myers Industries, Inc. ............................... 700 15,838
Park-Ohio Holdings Corp.* ............................ 900 13,613
--------
48,351
--------
Electrical Products 1.6%
AFC Cable Systems, Inc.* ............................. 300 9,900
C&D Technologies, Inc. ............................... 100 2,581
Katy Industries, Inc. ................................ 800 13,400
SLI, Inc.* ........................................... 400 10,975
--------
36,856
--------
Industrial Specialty 5.2%
Chart Industries, Inc. ............................... 1,800 17,888
Gardner Denver Inc.* ................................. 1,000 17,813
Optical Coating Laboratory, Inc. ..................... 500 30,813
RTI International Metals, Inc.* ...................... 1,000 13,313
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder Tax Managed Small Company Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ---------------------------------------------------------------------------
<S> <C> <C>
Regal-Beloit Corp. ................................. 500 10,813
TransTechnology Corp. .............................. 700 13,431
Vallen Corp.* ...................................... 800 12,700
--------
116,771
--------
Machinery/Components/Controls 3.5%
Amcast Industrial Corp. ............................ 700 11,725
Columbus McKinnon Corp. ............................ 700 14,700
Fairchild Corp. "A"* ............................... 788 10,589
Intermet Corp. ..................................... 1,000 14,750
Varlen Corp. ....................................... 475 13,300
Woodward Governor Co. .............................. 500 12,375
--------
77,439
--------
Office Equipment/Supplies 0.4%
Interface, Inc. .................................... 1,200 8,475
--------
Wholesale Distributors 1.0%
Barnett, Inc.* ..................................... 800 7,700
Watsco, Inc. ....................................... 800 15,700
--------
23,400
--------
Technology 6.4%
Computer Software 0.9%
Activision, Inc.* .................................. 600 6,263
Caere Corp.* ....................................... 600 6,150
MAPICS, Inc.* ...................................... 1,200 6,713
--------
19,126
--------
Diverse Electronic Products 0.7%
Cable Design Technologies Corp.* ................... 600 8,925
SBS Technologies, Inc.* ............................ 400 7,250
--------
16,175
--------
Electronic Components/Distributors 2.9%
Brightpoint, Inc.* ................................. 1,200 7,388
CTS Corp. .......................................... 500 26,688
Harmon Industries, Inc. ............................ 600 13,200
InaCom Corp.* ...................................... 400 3,875
Technitrol, Inc. ................................... 500 14,625
--------
65,776
--------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - Scudder Tax Managed Small Company Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -----------------------------------------------------------------------------
<S> <C> <C>
Military Electronics 1.2%
ESCO Electronics Corp.* ..................... 1,000 9,688
Primex Technologies, Inc. ................... 800 16,700
--------
26,388
--------
Office/Plant Automation 0.7%
Kronos, Inc.* ............................... 450 15,300
--------
Energy 6.3%
Oil & Gas Production 0.7%
UTI Energy Corp.* ........................... 1,100 14,713
--------
Oil/Gas Transmission 1.0%
Kaneb Services, Inc.* ....................... 2,500 11,563
World Fuel Services Corp. ................... 800 10,050
--------
21,613
--------
Oilfield Services/Equipment 4.6%
Daniel Industries ........................... 1,100 18,081
Pool Energy Services Co.* ................... 1,000 17,938
Seacor Smit Inc.* ........................... 200 10,588
Tuboscope Inc.* ............................. 1,900 25,888
Varco International, Inc.* .................. 1,400 15,838
Veritas DGC Inc.* ........................... 750 15,188
--------
103,521
--------
Metals & Minerals 2.1%
Steel & Metals
Armco, Inc.* ................................ 3,000 15,375
Commercial Metals Co. ....................... 700 16,494
Gibraltar Steel Corp. ....................... 600 14,063
--------
45,932
--------
Construction 11.0%
Building Materials 2.6%
Ameron International Corp. .................. 400 16,125
Building Materials Holding Corp. ............ 1,100 14,025
Elcor Corp. ................................. 300 11,588
Florida Rock Industries, Inc. ............... 500 17,188
--------
58,926
--------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder Tax Managed Small Company Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------
<S> <C> <C>
Building Products 4.5%
Genlyte Group, Inc.* ....................... 700 13,300
Holophane Corp.* ........................... 500 12,906
International Aluminum Co. ................. 800 23,050
Mestek, Inc.* .............................. 900 17,606
Modtech Holdings, Inc.* .................... 510 4,526
NCI Building Systems, Inc.* ................ 600 14,438
Robertson-Ceco Corp.* ...................... 1,500 13,406
--------
99,232
--------
Homebuilding 3.1%
American Homestar Corp.* ................... 700 4,900
Cavalier Homes, Inc. ....................... 1,100 10,381
Engle Homes, Inc. .......................... 1,100 12,788
MDC Holdings, Inc. ......................... 700 13,738
Schuler Homes, Inc.* ....................... 2,100 14,700
Standard Pacific Corp. ..................... 900 12,431
--------
68,938
--------
Miscellaneous 0.8%
American Buildings Co.* .................... 500 18,000
--------
Transportation 3.1%
Air Freight 0.5%
Kitty Hawk, Inc.* .......................... 1,300 10,725
--------
Airlines 1.1%
Atlantic Coast Airlines Holdings* 400 12,350
Mesaba Holdings, Inc.* ..................... 900 13,106
--------
25,456
--------
Trucking 1.5%
Covenant Transport, Inc. "A"* .............. 650 8,938
M.S. Carriers Inc.* ........................ 500 15,938
U.S. Xpress Enterprises, Inc. "A"*.......... 800 9,100
--------
33,976
--------
Utilities 3.1%
Electric Utilities 1.4%
TNP Enterprises, Inc. ...................... 700 21,875
UniSource Energy Corp.* .................... 800 8,650
--------
30,525
--------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder Tax Managed Small Company Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- -------------------------------------------------------------------------------
<S> <C> <C>
Natural Gas Distribution 1.7%
CTG Resources Inc....................... 700 16,844
Energen Corp............................ 1,300 22,425
--------
39,269
- -------------------------------------------------------------------------------
Total Common Stocks (Cost $2,000,837) 2,226,443
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $2,000,837) (a) 2,226,443
- -------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $2,000,837. At April 30,
1999, net unrealized appreciation for all securities based on tax cost
was $225,606. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of market value over tax
cost of $354,850 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$129,244.
* Non-income producing security.
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - Scudder Tax Managed Small Company Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Assets
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments, at market (identified cost $2,000,837) .................. $ 2,226,443
Cash ................................................................. 62,651
Dividends receivable ................................................. 381
Reimbursement from Adviser ........................................... 50,223
Other assets ......................................................... 165
-----------
Total assets ......................................................... 2,339,863
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased .................................... 16,478
Payable for Fund shares redeemed ..................................... 3,039
Other accrued expenses ............................................... 92,439
-----------
Total liabilities .................................................... 111,956
-------------------------------------------------------------------------------------
Net assets, at market value $ 2,227,907
-------------------------------------------------------------------------------------
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income ......... (7,822)
Unrealized appreciation (depreciation) on investment securities ...... 225,606
Accumulated net realized gain (loss) ................................. (5,185)
Paid-in capital ...................................................... 2,015,308
-------------------------------------------------------------------------------------
Net assets, at market value $ 2,227,907
-------------------------------------------------------------------------------------
Net Asset Value
- -----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share ($2,227,907 /
168,527 outstanding shares of beneficial interest, $.01 par value, -----------
unlimited number of shares authorized) ............................ $ 13.22
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 - Scudder Tax Managed Small Company Fund
<PAGE>
Statement of Operations
six months ended April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Income:
Dividends ............................................................ $ 10,854
Interest ............................................................. 385
---------
11,239
Expenses:
Management fee ....................................................... 8,809
Services to shareholders ............................................. 3,651
Custodian and accounting fees ........................................ 23,037
Trustees' fees and expenses .......................................... 18,993
Auditing ............................................................. 5,509
Registration fees .................................................... 15,183
Reports to shareholders .............................................. 6,913
Legal ................................................................ 8,430
Other ................................................................ 3,983
---------
Total expenses before reductions ..................................... 94,508
Expense reductions ................................................... (79,828)
---------
Expenses, net ........................................................ 14,680
------------------------------------------------------------------------------------
Net investment income (loss) (3,441)
------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- -----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments ............................. (5,185)
Net unrealized appreciation (depreciation) during the period on
investments.......................................................... 128,241
------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 123,056
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 119,615
------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19 - Scudder Tax Managed Small Company Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Period
September 18,
1998
Six Months (commencement
Ended of operations)
April 30, 1999 to October 31,
Increase (Decrease) in Net Assets (Unaudited) 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) ........................ $ (3,441) $ (177)
Net realized gain (loss) ............................ (5,185) --
Net unrealized appreciation (depreciation) on
investment transactions during the period1........... 28,241 97,365
----------- -----------
Net increase (decrease) in net assets resulting from
operations........................................... 119,615 97,188
----------- -----------
Distributions to shareholders from:
Net investment income ............................... (7,682) --
----------- -----------
Fund share transactions:
Proceeds from shares sold ........................... 820,893 1,477,911
Net asset value of shares issued to shareholders in
reinvestment of distributions........................ 6,923 --
Cost of shares redeemed ............................. (292,969) (82)
Redemption fee ...................................... 4,910 --
----------- -----------
Net increase (decrease) in net assets from Fund share
transactions......................................... 539,757 1,477,829
----------- -----------
Increase (decrease) in net assets ................... 651,690 1,575,017
Net assets at beginning of period ................... 1,576,217 1,200
Net assets at end of period (including accumulated
distributions in excess of net investment income of
$7,822 and undistributed net investment income of ---------- ----------
$3,301, respectively ............................... $ 2,227,907 $ 1,576,217
---------- ----------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ........... 126,926 100
----------- -----------
Shares sold ......................................... 64,694 126,833
Shares issued to shareholders in reinvestment of
distributions...................................... 543 --
Shares redeemed ..................................... (23,636) (7)
----------- -----------
Net increase (decrease) in Fund shares .............. 41,601 126,826
---------- ----------
Shares outstanding at end of period ................. 168,527 126,926
---------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 - Scudder Tax Managed Small Company 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,
Six Months 1998
Ended (commencement of
April 30, 1999 operations) to
(Unaudited) October 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
---------------------------
Net asset value, beginning of period .................................................. $ 12.42 $ 12.00
---------------------------
Income from investment operations:
Net investment income ................................................................. (.02) --
Net realized and unrealized gain on investments ....................................... .84 .42
---------------------------
Total from investment operations ...................................................... .82 .42
---------------------------
Less distributions from net investment income ......................................... (.05) --
Redemption fees ....................................................................... .03 --
---------------------------
Net asset value, end of period ........................................................ $ 13.22 $ 12.42
- ------------------------------------------------------------------------------------------------------------------------------
Total Return (%) (b) .................................................................. 6.86(c)** 3.50(c)**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ................................................ 2.23 1.58
Ratio of operating expenses, net to average daily net assets (%) ...................... 1.50* 1.50*
Ratio of operating expenses, before expense reductions,
to average daily net assets (%)...................................................... 9.66* 38.75*
Ratio of net investment income (loss) to average daily net
assets (%) ........................................................................... (.35)* (0.13)*
Portfolio turnover rate (%) ........................................................... 22.95* --
(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
</TABLE>
21 - Scudder Tax Managed Small Company Fund
<PAGE>
Notes to Financial Statements (Unaudited)
A. Significant Accounting Policies
Scudder Tax Managed Small Company 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 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 annually. An additional distribution may be made to the extent
necessary to avoid the payment of a four percent federal excise tax.
22 - Scudder Tax Managed Small Company 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
During the six months ended April 30, 1999, purchases and sales of investment
securities (excluding short-term investments) aggregated $778,097 and $221,837,
respectively.
C. Related Parties
Under the Fund's 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 0.90% 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, 2000 in order to maintain the
annualized expenses of the Fund at not more than 1.50% of average daily net
assets. Accordingly, for the six months ended April 30, 1999, the Adviser did
not impose any of its fee amounting to $8,809. Further, due to the limitations
of such Agreement, the Adviser's reimbursement payable to the Fund for the six
months ended April 30, 1999 amounted to $50,223.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
six months ended April 30, 1999, SSC did not impose any of its fee, which
amounted to $2,046.
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 six months ended April 30,
1999, 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 six months
ended April 30, 1999, SFAC did not impose any of its fee, which amounted to
$18,750.
The Trust pays each Trustee not affiliated with the Adviser an annual retainer,
plus specified amounts for attended board and committee meetings. For the six
months ended April 30, 1999, Trustees' fees and expenses aggregated $18,993.
23 - Scudder Tax Managed Small Company Fund
<PAGE>
D. Line of Credit
The Fund and several Scudder Funds (the "Participants") share in a $850 million
revolving credit facility for temporary or emergency purposes, including the
meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated among each of the Participants. Interest is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up to a
maximum of 33 percent of its net assets under the agreement.
24 - Scudder Tax Managed Small Company Fund
<PAGE>
Shareholder Meeting Results
A Special Meeting of Shareholders (the "Meeting") of Scudder Tax Managed Small
Company Fund (the "Fund") was held on December 15, 1998, at the office of
Scudder Kemper Investments, Inc., Two International Place, Boston, Massachusetts
02110. At the Meeting the following matters were voted upon by the shareholders
(the resulting votes for each matter are presented below).
1. To approve a new Investment Management Agreement for the Fund with Scudder
Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
96,220 1,015 833 0
2. To approve the revision of the Fund's fundamental lending policy.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
92,053 5,182 833 0
- -------------------------------------------------------------------------------
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary
power to vote on a particular matter.
25 - Scudder Tax Managed Small Company Fund
<PAGE>
This Page
intentionally
left blank.
26 - Scudder Tax Managed Small Company Fund
<PAGE>
This Page
intentionally
left blank.
27 - Scudder Tax Managed Small Company 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; Venture Partner,
Venture Capital Group
Bruce F. Beaty*
Vice President
Jennifer P. Carter*
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
John Millette*
Vice President and Secretary
John R. Hebble*
Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
28 - Scudder Tax Managed Small Company 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 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 Select 500 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 Select 1000 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
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
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.
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 or classes thereof 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. +++
+++ +++A no-load variable annuity contract issued by Glenbrook Life and Annuity
Company and underwritten by Allstate Financial Services, Inc., sold 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.
29 - Scudder Tax Managed Small Company 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
Personal Investment Organizer: 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
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
30 - Scudder Tax Managed Small Company Fund
<PAGE>
<TABLE>
<CAPTION>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
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
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder
Brokerage account already reserved for them, with
no minimum investment. For information about
Scudder Brokerage Services, call 1-800-700-0820.
Fund Folio funds held less than six months will be charged a transaction fee. 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.
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>
31 - Scudder Tax Managed Small Company 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 $280 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 80
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Financial Services 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 Financial Services Group. The Zurich Financial Services 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
