SCUDDER
INVESTMENTS(SM)
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EQUITY/DOMESTIC
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Scudder Tax Managed Growth Fund
Fund #306
Annual Report
October 31, 1999
The fund seeks long-term growth of capital on an after-tax basis.
A no-load fund with no commissions to buy, sell, or exchange shares.
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Contents
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4 Letter from the Fund's President
6 Performance Update
8 Portfolio Summary
10 Portfolio Management Discussion
16 Glossary of Investment Terms
17 Investment Portfolio
25 Financial Statements
28 Financial Highlights
29 Notes to Financial Statements
33 Report of Independent Accountants
34 Tax Information
35 Officers and Trustees
36 Investment Products and Services
38 Scudder Solutions
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Scudder Tax Managed Growth Fund
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fund number 306
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Date of Inception:
9/18/98
o Reflecting Scudder Tax Managed Growth Fund's
disciplined approach to selecting stocks with
above-average return potential and attractive
valuations, the fund returned 7.77% for the
12-month period ended October 31, 1999.
Total Net Assets as of 10/31/99:
$4.1 million
o A handful of large-cap growth and technology
stocks recorded impressive returns while the
broader market provided comparatively modest
returns.
o The fund's emphasis on companies that are trading
for almost half the valuations of the S&P 500
Index was not rewarded as investors set aside
company fundamentals in favor of a select group of
highly valued stocks.
o With a few stocks leading market returns, the
portfolio's broad diversification across 150
holdings with no position greater than 21/4% of
assets limited its performance.
SCUDDER TAX MANAGED GROWTH FUND 3
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Letter from the Fund's President
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[PHOTO]
Lynn S. Birdsong
President,
Scudder Tax Managed Growth Fund
Dear Shareholders,
This fiscal period has tested one's commitment to an investment approach, as a
handful of stocks continued to record impressive results. Pursuing such
short-term returns can be tempting, but we know that successful investing is not
premised solely on investing in last week's or last year's winners. It is based
on a thoughtful long-term approach that includes exposure to several asset
classes that offer the potential to earn a positive return when other
investments may not.
Over the 12-month fiscal period for Scudder Tax Managed Growth Fund, we
witnessed unusually strong performance from a shrinking number of highly valued
large-cap growth and technology stocks. This narrow market leadership has
propelled the broader market averages higher while many stocks have provided
modest returns. As a result, I encourage you to seriously review your
portfolio's exposure to assets that may have become overvalued, especially given
the four consecutive years of 20%+ gains for the S&P 500 Index. We believe that
this environment warrants an emphasis on securities that are fairly- or
undervalued, (such as those in which Scudder Tax Managed Growth Fund invests) or
have a low correlation to recent strong performers.
In the following pages, portfolio managers Robert D. Tymoczko and Philip S.
Fortuna describe how their investment process -- unlike that used by other
mutual funds -- is designed to maximize
4 SCUDDER TAX MANAGED GROWTH FUND
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shareholders' after-tax returns by systematically analyzing each stock's
potential return on an after-tax basis.
For current information on your fund and your account, visit our Internet Web
site at www.scudder.com. There you'll find a wealth of information, including
the most recent fund performance, the latest news on Scudder products and
services, and the opportunity to perform account transactions. You can also
speak with one of our representatives by calling 1-800-SCUDDER (1-800-728-3337).
Thank you for your continued investment in Scudder Tax Managed Growth Fund.
Sincerely,
/s/ Lynn S. Birdsong
Lynn S. Birdsong
President,
Scudder Tax Managed Growth Fund
SCUDDER TAX MANAGED GROWTH FUND 5
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Performance Update
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October 31, 1999
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Growth of a $10,000 Investment
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THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE.
LINE CHART DATA:
Scudder
Tax Managed S&P 500
Growth Fund Index*
9/98** 10000 10000
10/98 10608 10814
1/99 11391 12638
4/99 11926 13228
7/99 12085 13207
10/99 11432 13591
Yearly periods ended October 31
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Fund Index Comparison
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Total Return
Growth of Average
Period ended 10/31/1999 $10,000 Cumulative Annual
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Scudder Tax Managed Growth Fund
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1 year $ 10,777 7.77% 7.77%
Life of Fund** $ 11,433 14.33% 12.79%
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S&P 500 Index*
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1 year $ 12,568 25.68% 25.68%
Life of Fund** $ 13,591 35.91% 32.69%
* The Standard & Poor's 500 Index is a capitalization-weighted index of 500
stocks. The index is designed to measure performance of the broad domestic
economy through changes in the aggregate market value of 500 stocks
representing all major industries. Index returns assume reinvested
dividends and, unlike Fund returns, do not reflect any fees or expenses.
Total return would have been lower if certain expenses had not been
reduced.
** The Fund commenced operations on September 18, 1998. Index comparisons
begin September 30, 1998.
6 SCUDDER TAX MANAGED GROWTH FUND
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Returns and Per Share Information
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S&P 500 Index*
Yearly periods ended October 31
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE, ILLUSTRATING
THE FUND TOTAL RETURN AND INDEX TOTAL RETURN* AS BELOW.
1998** 1999
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Fund Total
Return (%) 6.08 7.77
Index Total
Return (%) 8.14 25.68
Net Asset
Value ($) 12.73 13.66
Income
Dividends ($) -- .06
Capital Gains
Distributions($) -- --
* The Standard & Poor's 500 Index is a capitalization-weighted index of 500
stocks. The index is designed to measure performance of the broad domestic
economy through changes in the aggregate market value of 500 stocks
representing all major industries. Index returns assume reinvested
dividends and, unlike Fund returns, do not reflect any fees or expenses.
** The Fund commenced operations on September 18, 1998. Index comparisons
begin September 30, 1998.
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 1-year and life
of Fund periods would have been lower.
SCUDDER TAX MANAGED GROWTH FUND 7
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Portfolio Summary
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October 31, 1999
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Diversification
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The fund seeks to be fully invested in a broad selection of large- and mid-cap
stocks with attractive valuations.
Common Stocks 100%
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100%
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Sectors
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An emphasis on stocks with attractive valuations has resulted in an
overweighting in the financial sector and an underweighting in the
telecommunications and technology sectors.
Financial 19%
Consumer Discretionary 16%
Technology 14%
Manufacturing 12%
Utilities 9%
Durables 7%
Health 4%
Service Industries 4%
Communications 3%
Other 12%
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100%
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[PIE CHART]
8 SCUDDER TAX MANAGED GROWTH FUND
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Ten Largest Equity Holdings
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(16% of Portfolio)
To identify individual securities for purchase, management utilizes a
proprietary, quantitative screening process that incorporates stock valuation,
trends in fundamentals, and price momentum.
1. Intel Corp.
Producer of semiconductor memory circuits
2. Adobe Systems Inc.
Print and graphic software systems
3. Citigroup, Inc.
Diversified financial services company
4. AES Corp.
Provider of electricity
5. Florida Progress Corp.
Electric utility holding company
6. Gateway Inc.
Marketer of personal computers and related products and services
7. Chase Manhattan Corp.
Commercial bank
8. Transatlantic Holdings, Inc.
Property and casualty reinsurance
9. Hewett-Packard Co.
Measurement and test instruments, computer systems
10. Comverse Technology Inc.
Designs, manufactures, markets and supports
various software for multimedia communications
For more complete details about the Fund's investment portfolio, see page 17. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
SCUDDER TAX MANAGED GROWTH FUND 9
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Portfolio Management Discussion
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October 31, 1999
In the following interview, portfolio managers Robert D. Tymoczko and Philip S.
Fortuna discuss the market environment and their approach to managing the fund.
Q: A handful of highly valued large-cap growth stocks dominated market
returns over much of the 12-month period that ended October 31, 1999. How
would you characterize this environment?
A: This has been an unusual period in which a few stocks dominated while
the broader market provided only modest returns. Performance has been
striking for a select group of technology, especially Internet, stocks.
The 86.66% return of the unmanaged Pacific Stock Exchange Technology Index
is evidence of tech's huge gains over the period, which stood in sharp
contrast to the 25.68% return of the S&P 500 Index. Technology stocks,
which have attained unprecedented valuations, reflect high investor
expectations.
Q: How did this environment affect diversified portfolios?
A: The focus on this select group of stocks has come at the expense of
other sectors, causing investors with broadly diversified portfolios to
lag the market averages. One of the reasons that diversified portfolios
have lagged the market indices is that the stocks with the strongest
performance have also been among the largest in terms of market
capitalization. This factor has had a significant effect on index returns
that are calculated based on market capitalization weightings, such as the
unmanaged S&P 500 (the fund's benchmark) and Russell 1000 indices. This
means that stocks with the largest market capitalizations, such as
Microsoft, Cisco, and Lucent Technologies (4.2%, 2.0%, and 1.8% of the S&P
500, respectively) have a greater impact on index performance, primarily
due to their size. Essentially, if you were not invested in these stocks,
your return trailed the indices during this period.
The heavy emphasis on a shrinking number of highly valued, e.g., high
price/earnings (p/e), high price/book (p/b) value stocks, left little
attention for stocks with good
SCUDDER TAX MANAGED GROWTH FUND 10
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earnings growth rates and attractive valuations -- stocks that are typical
of the fund's holdings. This phenomenon impacted the performance of growth
versus value stocks, which diverged to one of its widest points on record.
The 34.25% return of the unmanaged Russell 1000 Growth Index illustrates
the dominance of growth stocks, contrasting with the 16.52% return of the
Russell 1000 Value Index for the same period.
Q: How did the fund perform?
A: The fund underperformed the S&P 500 with a 7.77% return for several
reasons. While the fund typically invests in stocks using a quantitative
model to identify the most attractively valued stocks, the fund's broad
diversification among 150 stocks and less than 21/4% position in any
single issuer limited its participation in the biggest gainers.
In managing the portfolio we focus on stocks that meet our criteria for
attractive valuations. You can see this by comparing the portfolio's
characteristics with those of the broader market. For example, the fund's
p/e ratio stood at 17.5x while the S&P 500 Index p/e was nearly twice the
fund's at 30.8x. Another valuation measure we look at is the p/b ratio.
The fund's ratio was 2.7x versus 4.7x for the S&P 500. When you consider
that the fund's realized monthly average earnings per share growth rate
(12-month trailing periods) is the essentially the same as the S&P 500
($15.47 versus $15.40), you could say that we paid about half as much for
our own holdings compared to the S&P 500 for the same growth rate.
Unfortunately, investors have not been focused on companies with strong
fundamentals, but instead have concentrated on a few stocks, irrespective
of their prices or valuations.
Q: Within the structure of your investment discipline, what helped or hurt
performance?
A: There were four primary factors that held back the fund's performance
over the 12 months: relative strength, lower earnings variability, lower
price volatility, and
SCUDDER TAX MANAGED GROWTH FUND 11
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market capitalization. The market has very much been driven by momentum.
That is, stocks that have done well in the recent past continued to
perform well. This relative strength trend is not typical for the market
and it worked against us during the period. Lower earnings variability
usually is a reliable indicator of stocks that provide better performance
over time. During this period, stocks with the greatest earnings
variability provided the best returns. In addition, stocks with lower
price volatility did not provide superior returns. Again, investors
typically prefer stocks with lower volatility, but just the opposite
occurred in this environment -- investors sought stocks that were more
volatile, which also generally provided the best returns. Lastly, our
weighting of the portfolio in mid-cap stocks limited performance, as
larger-cap stocks provided the best returns (at the end of the period the
fund's market-cap was $20 billion versus $90 billion for the S&P 500).
While these factors proved challenging for the fund's investment
discipline over the period, we believe that this environment has been
highly unusual. Eventually, we expect the environment to return to one
that is more in line with historical trends.
Q: How did the fund's industry sector weights affect performance?
A: Our investment discipline resulted in an overweighting in the finance
sector, which contributed to performance in October as progress was made
in Washington toward repealing the Glass-Steagall Act. Historically, this
Act has kept investment banking and consumer banking separate, but its
repeal may spur a number of new combinations within the financial services
industry. Nevertheless, our overweight position in the finance sector was
the largest detractor from performance over the 12 months due, in part, to
the negative effects of rising interest rates on financial companies. In
addition, the fund has been underweighted in telecommunications and
technology because of the extraordinarily high valuations for most
companies in these sectors. While it is easy for one to look
12 SCUDDER TAX MANAGED GROWTH FUND
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back and wish the fund had had greater exposure, we do not have a positive
outlook for these sectors given their extremely high valuations.
Q: The fund's investment universe is comprised of approximately 1,000 mid-
and large-cap U.S. companies. How do you assess the return potential of
these stocks?
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 our overall stock universe. Earnings trends
suggest whether the company's fundamentals are stable, improving, or
deteriorating. Price momentum enables 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 hold
approximately 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 growth 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: What were the results of this process from an individual stock
selection standpoint?
A: We had a number of strong performers, however, it is interesting to
note that -- similar to the overall market -- we had a few stocks that
performed extremely well, but a lot of stocks that produced average or
negative returns.
SCUDDER TAX MANAGED GROWTH FUND 13
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We've included a table below that highlights the fund's top and bottom
performers over the 12 months.
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Price return on shares held
for the 12-month period
Top Five Perfomers ended October 31, 1999
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Comverse Technology 382%
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Scientific-Atlanta, Inc. 229%
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Best Buy Co., Inc. 159%
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Biogen, Inc. 115%
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Electronic Arts, Inc. 113%
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Price return on shares held
for the 12-month period
Bottom Five Perfomers ended October 31, 1999
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American Greeting Corp. A -33%
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Kmart Corp. -24%
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Litton Industries, Inc. -20%
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Centex Corp. -16%
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Johns Manville Corp. -16%
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Q: Given the strong performance of the S&P 500 over the last four years,
can stocks record 20%+ returns again in 2000?
A: We think it should come as no surprise that we are not expecting a
repeat of the market's performance in the new year. However, the U.S.
economy remains healthy, inflation is low, and even though interest rates
have risen this year, rates are still at relatively low levels. Technology
stocks are one of the most sensitive to the higher interest rate
environment in our opinion, but to-date, this sector has been largely
unaffected. We remain concerned about stocks with high valuations because
we believe that eventually investors will return to investing in
profitable companies with growing earnings and reasonable valuations.
14 SCUDDER TAX MANAGED GROWTH FUND
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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.
[PHOTO]
Robert D. Tymoczko
Lead Portfolio manager Robert D. Tymoczko has responsibility for the fund's
day-to-day management and investment strategies. Mr. Tymoczko joined the adviser
in 1997 as a quantitative analyst and has five years of experience in
quantitative research and econometric modeling.
[PHOTO]
Philip S. Fortuna
Portfolio manager Philip S. Fortuna joined the adviser in 1986 as a manager of
institutional equity accounts. Mr. Fortuna is currently director of the
Adviser's quantitative group.
SCUDDER TAX MANAGED GROWTH FUND 15
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Glossary of Investment Terms
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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 a 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 2000 Index),
or an investment universe.
Price/Earnings higher Ratio (P/E) (also price "earnings multiple")
A widely used gauge of a stock's valuation that indicates what investors are
paying for a company's earnings on a per share basis. A higher "earnings
multiple" indicates a expected growth rate and the potential for greater
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.
Source: Scudder Kemper Investments, Inc. and Barron's Dictionary of Finance and
Investment Terms. Additional glossary terms are available at our Internet Web
site, www.scudder.com.
16 SCUDDER TAX MANAGED GROWTH FUND
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Investment Portfolio as of October 31, 1999
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Market
Shares Value ($)
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Common Stocks 100%
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Consumer Discretionary 16.1%
Apparel & Shoes 1.5%
Jones Apparel Group, Inc.* ......................... 1,000 31,625
Liz Claiborne, Inc. ................................ 400 16,000
Payless ShoeSource, Inc.* .......................... 300 13,744
Too, Inc.* ......................................... 85 1,360
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62,729
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Department & Chain Stores 7.4%
Best Buy Co., Inc.* ................................ 600 33,338
Fastenal Co. ....................................... 700 25,375
Federated Department Stores, Inc.* ................. 700 29,881
Gap, Inc. .......................................... 675 25,059
Home Depot, Inc. ................................... 300 22,650
Kmart Corp.* ....................................... 600 6,038
Longs Drug Stores Corp. ............................ 1,000 27,250
Neiman Marcus Group, Inc.* ......................... 600 14,363
Ross Stores, Inc. .................................. 1,200 24,750
TJX Companies, Inc. (New) .......................... 500 13,563
The Limited, Inc. .................................. 600 24,675
Wal-Mart Stores, Inc. .............................. 900 51,019
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297,961
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Home Furnishings 0.6%
Furniture Brands International, Inc.* .............. 500 9,688
Mohawk Industries, Inc.* ........................... 600 13,763
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23,451
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Hotels & Casinos 1.8%
Harrah's Entertainment, Inc.* ...................... 1,100 31,831
MGM Grand, Inc.* ................................... 300 15,300
Marriott International, Inc. "A" ................... 200 6,738
Promus Hotel Corp.* ................................ 600 20,550
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74,419
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Recreational Products 0.8%
Harley-Davidson, Inc. .............................. 300 17,794
International Game Technology ...................... 700 13,038
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30,832
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The accompanying notes are an integral part of the financial statements.
SCUDDER TAX MANAGED GROWTH FUND 17
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Market
Shares Value ($)
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Restaurants 1.1%
Brinker International, Inc.* ..................... 700 16,319
Outback Steakhouse, Inc.* ........................ 1,200 27,600
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43,919
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Specialty Retail 1.9%
BJ's Wholesale Club, Inc.* ....................... 300 9,244
Family Dollar Stores, Inc. ....................... 1,400 28,875
Intimate Brands, Inc. ............................ 700 28,700
Zale Corp.* ...................................... 200 8,375
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75,194
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Miscellaneous 1.0%
Lancaster Colony Corporation ..................... 1,100 38,431
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Consumer Staples 2.8%
Consumer Specialties 0.5%
American Greeting Corp., "A" ..................... 700 18,113
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Food & Beverage 1.9%
Dean Foods Co. ................................... 900 41,625
IBP, Inc. ........................................ 1,600 38,300
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79,925
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Textiles 0.4%
VF Corp. ......................................... 600 18,038
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Health 4.2%
Biotechnology 1.5%
Amgen, Inc.* ..................................... 200 15,950
Biogen, Inc.* .................................... 600 44,475
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60,425
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Health Industry Services 1.2%
Cardinal Health, Inc. ............................ 100 4,313
Medical Manager Corp.* ........................... 100 5,013
Shared Medical Systems Corp. ..................... 400 15,100
Wellpoint Health Networks, Inc.* ................. 400 23,200
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47,626
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Hospital Management 0.7%
Trigon Healthcare, Inc.* ......................... 1,000 28,375
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The accompanying notes are an integral part of the financial statements.
18 SCUDDER TAX MANAGED GROWTH FUND
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Market
Shares Value ($)
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Medical Supply & Specialty 0.8%
C.R. Bard, Inc. .................................... 400 21,575
St. Jude Medical, Inc.* ............................ 400 10,950
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32,525
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Communications 3.3%
Telephone/Communications 3.3%
AT&T Corp. ......................................... 400 18,700
Alltel Corp. ....................................... 600 49,950
BellSouth Corp. .................................... 1,200 54,000
SBC Communicatons, Inc. ............................ 200 10,188
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132,838
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Financial 18.8%
Banks 3.8%
Bank of America Corp. .............................. 700 45,063
Chase Manhattan Corp. .............................. 800 69,900
Commerce Bancshares, Inc. .......................... 525 20,344
U.S. Trust Corporation ............................. 200 16,225
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151,532
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Insurance 7.1%
Aetna Inc. ......................................... 400 20,100
Financial Security Assurance Holdings Ltd. ......... 300 16,913
Jefferson Pilot Corp. .............................. 600 45,038
PMI Group, Inc. .................................... 750 38,906
Progressive Corp. .................................. 200 18,513
Protective Life Corp. .............................. 700 25,331
Transatlantic Holdings, Inc. ....................... 800 60,300
Travelers Property Casualty Corp. "A" .............. 600 21,600
Unitrin, Inc. ...................................... 1,000 37,438
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284,139
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Consumer Finance 2.7%
Citigroup, Inc. .................................... 1,500 81,188
SLM Holding Corp. .................................. 600 29,363
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110,551
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Other Financial Companies 4.9%
Bear Stearns Companies, Inc. ....................... 630 26,854
Edwards (A.G.), Inc. ............................... 600 18,038
Federal Home Loan Mortgage Corp. ................... 200 10,813
Golden West Financial Corp. ........................ 300 33,525
GreenPoint Financial Corp. ......................... 1,000 28,500
Legg Mason, Inc. ................................... 1,100 40,013
The accompanying notes are an integral part of the financial statements.
SCUDDER TAX MANAGED GROWTH FUND 19
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Market
Shares Value ($)
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Morgan Stanley Dean Witter & Co. ..................... 100 11,031
TCF Financial Corporation ............................ 900 26,550
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195,324
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Real Estate 0.3%
Catellus Development Corp.* .......................... 1,200 14,100
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Media 1.7%
Broadcasting & Entertainment 0.4%
King World Productions, Inc.* ........................ 400 15,500
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Print Media 1.3%
Knight-Ridder, Inc. .................................. 800 50,800
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Service Industries 3.7%
EDP Services 1.2%
Affiliated Computer Services* ........................ 1,100 41,800
First Data Corp. ..................................... 100 4,569
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46,369
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Investment 1.3%
Donaldson, Lufkin & Jenrette Securities Corp. ........ 500 25,875
Paine Webber Group, Inc. ............................. 600 24,450
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50,325
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Miscellaneous Commercial Services 0.9%
Kelly Services, Inc. "A" ............................. 1,300 38,106
Printing/Publishing 0.3%
Houghton Mifflin Co. ................................. 300 12,713
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Durables 7.2%
Aerospace 1.2%
AlliedSignal, Inc. ................................... 100 5,694
Northrop Grumman Corp. ............................... 500 27,438
United Technologies Corp. ............................ 279 16,880
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50,012
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Automobiles 3.9%
Borg-Warner Automotive, Inc. ......................... 500 19,750
Cummins Engine Co., Inc. ............................. 300 15,206
Eaton Corp. .......................................... 400 30,100
Ford Motor Co. ....................................... 1,000 54,875
The accompanying notes are an integral part of the financial statements.
20 SCUDDER TAX MANAGED GROWTH FUND
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Market
Shares Value ($)
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Genuine Parts Co. .................................. 400 10,425
Navistar International Corp.* ...................... 600 25,013
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155,369
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Construction/Agricultural Equipment 0.7%
PACCAR, Inc. ....................................... 600 28,275
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Leasing Companies 0.4%
Hertz Corp. ........................................ 400 17,350
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Telecommunications Equipment 1.0%
Scientific-Atlanta, Inc. ........................... 700 40,075
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Manufacturing 11.7%
Chemicals 1.8%
Dow Chemical Co. ................................... 400 47,300
Rohm & Haas Co. .................................... 600 22,950
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70,250
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Diversified Manufacturing 2.5%
Ball Corporation ................................... 400 16,125
Cooper Industries, Inc. ............................ 500 21,531
Honeywell, Inc. .................................... 100 10,544
National Service Industries, Inc. .................. 500 16,125
Pentair, Inc. ...................................... 500 18,813
Tyco International Ltd. (New) ...................... 456 18,212
----------
101,350
----------
Electrical Products 0.9%
Thomas & Betts Corp. ............................... 800 35,900
----------
Industrial Specialty 4.0%
Carlisle Companies, Inc. ........................... 600 19,950
Centex Corp. ....................................... 900 24,131
Fleetwood Enterprises, Inc. ........................ 300 6,544
Johns Manville Corp. ............................... 600 6,563
Johnson Controls, Inc. ............................. 600 36,450
Sherwin-Williams Co. ............................... 500 11,188
Teleflex Incorporated .............................. 600 20,438
The Valspar Corp. .................................. 1,200 36,225
----------
161,489
----------
The accompanying notes are an integral part of the financial statements.
SCUDDER TAX MANAGED GROWTH FUND 21
<PAGE>
- --------------------------------------------------------------------------------
Market
Shares Value ($)
- --------------------------------------------------------------------------------
Machinery/Components/Controls 1.5%
Ingersoll-Rand Co. ................................. 700 36,575
Tecumseh Products Co., Class A ..................... 500 23,969
----------
60,544
----------
Miscellaneous 1.0%
Hon Industries, Inc. ............................... 2,000 39,250
----------
Technology 14.0%
Computer Software 5.3%
Adobe Systems, Inc. ................................ 1,200 83,925
Compuware Corp.* ................................... 300 8,344
Comverse Technology, Inc.* ......................... 500 56,750
Electronic Arts Inc.* .............................. 200 16,163
Symantec Corp.* .................................... 200 9,550
Synopsys Inc.* ..................................... 600 37,388
----------
212,120
----------
Diverse Electronic Products 1.1%
Solectron Corp.* ................................... 600 45,150
----------
Electronic Components/Distributors 2.0%
Gateway, Inc.* ..................................... 1,100 72,669
Tech Data Corp.* ................................... 400 7,525
----------
80,194
----------
Electronic Data Processing 1.9%
Apple Computer, Inc.* .............................. 200 16,025
Hewlett-Packard Co. ................................ 800 59,250
----------
75,275
----------
Military Electronics 0.8%
Litton Industries, Inc.* ........................... 700 32,856
----------
Semiconductors 2.9%
Intel Corp. ........................................ 1,100 85,181
Xilinx, Inc.* ...................................... 400 31,450
----------
116,631
----------
Energy 3.3%
Oil Companies 1.3%
Ashland, Inc. ...................................... 1,600 52,800
----------
The accompanying notes are an integral part of the financial statements.
22 SCUDDER TAX MANAGED GROWTH FUND
<PAGE>
- --------------------------------------------------------------------------------
Market
Shares Value ($)
- --------------------------------------------------------------------------------
Oil/Gas Transmission 1.0%
El Paso Energy Corporation ....................... 700 28,700
Sunoco, Inc. ..................................... 500 12,063
----------
40,763
----------
Oilfield Services/Equipment 1.0%
Noble Drilling Corp.* ............................ 500 11,094
Tidewater, Inc. .................................. 900 27,000
----------
38,094
----------
Metals & Minerals 0.3%
Steel & Metals 0.3%
Alcoa, Inc. ...................................... 200 12,150
----------
Construction 1.8%
Building Materials 1.3%
LaFarge Corp. .................................... 500 14,844
Vulcan Materials Co. ............................. 900 37,181
----------
52,025
----------
Building Products 0.5%
Masco Corp. ...................................... 700 21,350
----------
Transportation 1.8%
Air Freight 0.2%
FDX Corp.* ....................................... 200 8,613
----------
Airlines 0.4%
Southwest Airlines Co. ........................... 900 15,131
----------
Railroads 0.9%
Burlington Northern Santa Fe Corp. ............... 500 15,938
Trinity Industries, Inc. ......................... 600 17,888
----------
33,826
----------
Trucking 0.3%
CNF Transportation, Inc. ......................... 400 13,225
----------
Utilities 9.3%
Electric Utilities 9.3%
AES Corp.* ....................................... 1,300 73,350
Allegheny Energy, Inc. ........................... 1,300 41,356
DTE Energy Co. ................................... 500 16,594
Florida Progress Corp. ........................... 1,600 73,300
The accompanying notes are an integral part of the financial statements.
SCUDDER TAX MANAGED GROWTH FUND 23
<PAGE>
- --------------------------------------------------------------------------------
Market
Shares Value ($)
- --------------------------------------------------------------------------------
GPU, Inc. ...................................... 300 10,181
MidAmerican Energy Holdings Co. ................ 800 26,900
NSTAR .......................................... 1,255 47,768
OGE Energy Corp. ............................... 500 11,344
Puget Sound Energy, Inc. ....................... 1,800 39,825
Texas Utilities Co., Inc. ...................... 900 34,875
----------
375,493
----------
- --------------------------------------------------------------------------------
Total Common Stocks (Cost $3,589,251) 4,019,820
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $3,589,251) (a) 4,019,820
- --------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $3,589,251. At October 31,
1999, net unrealized appreciation for all securities based on tax cost was
$430,569. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $666,531 and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over market value of $235,962.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
24 SCUDDER TAX MANAGED GROWTH FUND
<PAGE>
Financial Statements
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities as of October 31, 1999
- --------------------------------------------------------------------------------
Assets
- --------------------------------------------------------------------------------
Investments, at market (identified cost $3,589,251) ............. $ 4,019,820
Cash ............................................................ 84,302
Dividends receivable ............................................ 3,899
Receivable for Fund shares sold ................................. 500
Reimbursement from Adviser ...................................... 41,047
Other assets .................................................... 1,397
-----------
Total assets .................................................... 4,150,965
Liabilities
- --------------------------------------------------------------------------------
Other payables and accrued expenses ............................. 100,829
-----------
Total liabilities ............................................... 100,829
- --------------------------------------------------------------------------------
Net assets, at market value $ 4,050,136
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ............................. 27,457
Unrealized appreciation (depreciation) on investment securities . 430,569
Accumulated net realized gain (loss) ............................ (132,486)
Paid-in capital ................................................. 3,724,596
- --------------------------------------------------------------------------------
Net assets, at market value $ 4,050,136
- --------------------------------------------------------------------------------
Net Asset Value
- --------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($4,050,136/296,592 outstanding shares of beneficial interest, -----------
$.01 par value, unlimited number of shares authorized)......... $ 13.66
-----------
The accompanying notes are an integral part of the financial statements.
SCUDDER TAX MANAGED GROWTH FUND 25
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Operations for the year ended October 31, 1999
- --------------------------------------------------------------------------------
Investment Income (Loss)
- -------------------------------------------------------------------------------
Income:
Dividends ....................................................... $ 52,871
Interest ........................................................ 3,793
-----------
56,664
-----------
Expenses:
Management fee .................................................. 29,423
Services to shareholders ........................................ 5,658
Custodian and accounting fees ................................... 45,859
Trustees' fees and expenses ..................................... 28,800
Reports to shareholders ......................................... 21,375
Auditing ........................................................ 19,650
Legal ........................................................... 14,507
Registration fees ............................................... 30,933
Other ........................................................... 2,035
-----------
Total expenses before reductions ................................ 198,240
Expense reductions .............................................. (152,263)
-----------
Expenses, net ................................................... 45,977
- --------------------------------------------------------------------------------
Net investment income (loss) 10,687
- --------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- --------------------------------------------------------------------------------
Net realized gain (loss) from investments ....................... (132,486)
Net unrealized appreciation (depreciation) during the period on
investments ................................................... 277,558
- --------------------------------------------------------------------------------
Net gain (loss) on investment transactions 145,072
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 155,759
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
26 SCUDDER TAX MANAGED GROWTH FUND
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period
September 18,
1998
Year Ended (commencement of
October 31, operations) to
Increase (Decrease) in Net Assets 1999 October 31, 1998
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................. $ 10,687 $ 836
Net realized gain (loss) from investment
transactions ................................... (132,486) --
Net unrealized appreciation (depreciation) on
investment transactions during the period ...... 277,558 153,011
----------- -----------
Net increase (decrease) in net assets resulting
from operations ................................ 155,759 153,847
----------- -----------
Distributions to shareholders from net investment
income ......................................... (12,914) --
----------- -----------
Fund share transactions:
Proceeds from shares sold ......................... 2,012,729 2,134,072
Reinvestment of distributions ..................... 12,056 --
Cost of shares redeemed ........................... (410,090) --
Redemption fees ................................... 3,477 --
----------- -----------
Net increase (decrease) in net assets from Fund
share transactions ............................. 1,618,172 2,134,072
----------- -----------
Increase (decrease) in net assets ................. 1,761,017 2,287,919
Net assets at beginning of period ................. 2,289,119 1,200
Net assets at end of period (including
undistributed net investment income of $27,457 ----------- -----------
and $4,314, respectively) ...................... $ 4,050,136 $ 2,289,119
----------- -----------
Other Information
- -----------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ......... 179,789 100
----------- -----------
Shares sold ....................................... 145,878 179,689
Shares issued to shareholders in reinvestment of
distributions .................................. 874 --
Shares redeemed ................................... (29,949) --
----------- -----------
Net increase in Fund shares ....................... 116,803 179,689
----------- -----------
Shares outstanding at end of period ............... 296,592 179,789
----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
SCUDDER TAX MANAGED GROWTH FUND 27
<PAGE>
Financial Highlights
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each period (a) and other performance information derived from the financial
statements.
- --------------------------------------------------------------------------------
Years Ended October 31, 1999 1998(b)
- --------------------------------------------------------------------------------
Net asset value, beginning of period ..................... $12.73 $12.00
----------------
Income from investment operations:
Net investment income .................................. .04 .01
Net realized and unrealized gain (loss) on investments . .94 .72
----------------
Total from investment operations ....................... .98 .73
Distributions to shareholders from net investment income (.06) --
Redemption fee ......................................... .01 --
Net asset value, end of period ........................... $13.66 $12.73
================
Total Return (%) (c) ..................................... 7.77 6.08(d)**
Ratios and Supplemental Data
- --------------------------------------------------------------------------------
Net assets, end of period ($ millions) ................... 4 2
Ratio of operating expenses to
average daily net assets (%) ............................. 1.25 1.25*
Ratio of operating expenses, before
expense reductions, to average daily net assets (%) ...... 5.40 25.9*
Ratio of net investment income to
average daily net assets (%) ............................. .29 .42*
Portfolio turnover rate (%) .............................. 60.8 --
(a) Based on monthly average shares outstanding during the period.
(b) For the period September 18, 1998 (commencement of operations) to October
31, 1998.
(c) Total return would have been lower had certain expenses not been reduced.
(d) Shareholders redeeming shares held less than one year will have a lower
total return due to the effect of the 2% redemption fee.
* Annualized
** Not annualized
28 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") which is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as an open-end management investment
company organized as a Massachusetts business trust.
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. Investments are stated at value determined as of the close
of regular trading on the New York Stock Exchange. 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 ("Nasdaq"), for which there have been sales, are valued at
the most recent sale price reported. 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, or if no sale occurred, at the calculated mean between the most recent
bid and asked quotations on such market. If there are no such bid and asked
quotations, the most recent bid quotation 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 Directors.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian or
sub-custodian bank, 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
principal amount of the repurchase price plus accrued interest.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
SCUDDER TAX MANAGED GROWTH FUND 29
<PAGE>
- --------------------------------------------------------------------------------
investment companies and to distribute all of its taxable income to its
shareholders. Accordingly, the Fund paid no federal income taxes and no federal
income tax provision was required.
At October 31, 1999 the Fund had a net tax basis capital loss carryforward of
approximately $132,000 which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until October 31,
2007, the expiration date, whichever occurs first.
Distribution of Income and Gains. Distributions of net investment income, if
any, are made annually. 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 at least
annually.
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 (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date. Realized gains and
losses from investment transactions are recorded on an identified cost basis.
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.
B. Purchases and Sales of Securities
For the year ended October 31, 1999, purchases and sales of investment
securities (excluding short-term investments) aggregated $3,847,001 and
$2,179,246, respectively.
30 SCUDDER TAX MANAGED GROWTH FUND
<PAGE>
- --------------------------------------------------------------------------------
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 29, 2000 in order to maintain the
annualized expenses of the Fund at not more than 1.25% of average daily net
assets. Accordingly, for the year ended October 31, 1999, the Adviser did not
impose any of its fee amounting to $29,423. Further, due to the limitations of
such Agreement, the Adviser's reimbursement payable to the Fund for the year
ended October 31, 1999, amounted to $41,047.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
year ended October 31, 1999, SSC did not impose any of its fee, which amounted
to $4,824.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the year ended
October 31, 1999, SFAC did not impose any of its fee, which amounted to $37,500.
The Fund pays each of its Trustees not affiliated with the Adviser an annual
retainer, plus specified amounts for attended board and committee meetings. For
the year ended October 31, 1999, Trustees' fees and expenses aggregated $28,800,
of which $13,950 was not imposed.
D. Expense Off-Set Arrangements
The Fund has entered into arrangements with its custodian and transfer agent
whereby credits realized as a result of uninvested cash balances were used to
reduce a portion of the Fund's expenses. During the period, the Fund's
SCUDDER TAX MANAGED GROWTH FUND 31
<PAGE>
- --------------------------------------------------------------------------------
custodian and transfer agent fees were reduced by $974 and $77, respectively,
under these arrangements.
E. 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.
32 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, 1999, the
results of its operations, the changes in its net assets, and the
financial highlights for the periods indicated therein, 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, 1999
by correspondence with the custodian, provide a reasonable basis for the
opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
December 16, 1999
SCUDDER TAX MANAGED GROWTH FUND 33
<PAGE>
Tax Information
- --------------------------------------------------------------------------------
October 31, 1999
For corporate shareholders, 100% of the income dividends paid during the
Fund's fiscal year ended October 31, 1999 qualified for the dividends
received deduction.
Please consult a tax adviser if you have questions about federal or state
income tax laws, or on how to prepare your tax returns. If you have
specific questions about your account, please call 1-800-SCUDDER.
34 SCUDDER TAX MANAGED GROWTH FUND
<PAGE>
Officers and Trustees
- --------------------------------------------------------------------------------
Lynn S. Birdsong*
o President and Trustee
Henry P. Becton, Jr.
o Trustee; President and General Manager, WGBH Educational Foundation
Dawn-Marie Driscoll
o Trustee; Executive Fellow, Center for Business Ethics, Bentley College;
President, Driscoll Associates
Peter B. Freeman
o Trustee; Corporate Director and Trustee
George M. Lovejoy, Jr.
o Trustee; President and Director, Fifty Associates
Wesley W. Marple, Jr.
o Trustee; Professor of Business Administration, Northeastern University
Kathryn L. Quirk*
o Trustee, Vice President and Assistant Secretary
Jean C. Tempel
o Trustee; Venture Partner, Internet Capital Group
Bruce F. Beaty*
o Vice President
Jennifer P. Carter*
o Vice President
Philip S. Fortuna*
o Vice President
William F. Gadsden*
o Vice President
Valerie F. Malter*
o Vice President
Ann M. McCreary*
o Vice President
John Millette*
o Vice President and Secretary
John R. Hebble*
o Treasurer
Caroline Pearson*
o Assistant Secretary
*Scudder Kemper Investments, Inc.
SCUDDER TAX MANAGED GROWTH FUND 35
<PAGE>
Investment Products and Services
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
- --------------------------------------------------------------------------------
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**
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
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 Heath Care Fund
Scudder Technology Fund
Preferred Series
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small Company Fund
36 SCUDDER TAX MANAGED GROWTH FUND
<PAGE>
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
- --------------------------------------------------------------------------------
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.
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.
SCUDDER TAX MANAGED GROWTH FUND 37
<PAGE>
Scudder Solutions
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Convenient ways to invest, quickly and reliably
Automatic Investment Plan
A convenient investment program in which money is electronically debited
from your bank account monthly to regularly purchase fund shares and
"dollar cost average" -- buy more shares when the fund's price is lower
and fewer when it's higher, which can reduce your average purchase price
over time.*
Automatic Dividend Transfer
The most timely, reliable, and convenient way to purchase shares -- use
distributions from one Scudder fund to purchase shares in another,
automatically (accounts with identical registrations or the same social
security or tax identification number).
QuickBuy
Lets you purchase Scudder fund shares electronically, avoiding potential
mailing delays; money for each of your transactions is electronically
debited from a previously designated bank account.
Payroll Deduction and Direct Deposit
Have all or part of your paycheck -- even government checks -- invested in
up to four Scudder funds at one time.
* 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) -- 1-800-343-2890
Personalized account information, the ability to exchange or redeem
shares, and information on other Scudder funds and services via touchtone
telephone.
Scudder's Web Site -- www.scudder.com
Personal Investment Organizer: Offering account information and
transactions, interactive worksheets, prospectuses and applications for
all Scudder funds, plus your current asset allocation, whenever your need
them. Scudder's site also provides news about Scudder funds, retirement
planning information, and more.
38 SCUDDER TAX MANAGED GROWTH FUND
<PAGE>
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
Retirees and those who depend on investment proceeds for living expenses can
enjoy these convenient, timely, and reliable automated withdrawal programs
Automatic Withdrawal Plan
You designate the bank account, determine the schedule (as frequently as
once a month) and amount of the redemptions, and Scudder does the rest.
Distributions Direct Automatically deposits your fund distributions into
the bank account you designate within three business days after each
distribution is paid.
QuickSell
Provides speedy access to your money by electronically crediting your
redemption proceeds to the bank account you previously designated.
For more information about these services
Call a Scudder representative at
1-800-SCUDDER
Or visit our Web site at
www.scudder.com
Please address all written correspondence to
The Scudder Funds
PO Box 2291
Boston, Massachusetts
02107-2291
SCUDDER TAX MANAGED GROWTH FUND 39
<PAGE>
SCUDDER
INVESTMENTS(SM)
[LOGO]
PO Box 2291
Boston, MA 02107-2291
1-800-SCUDDER
www.scudder.com
A member of the [LOGO] Zurich Financial Services Group
About the Fund's Advisor
Scudder Kemper Investments, Inc. is one of the largest and most
experienced investment management organizations worldwide, managing more
than $290 billion in assets globally for mutual fund investors, retirement
and pension plans, institutional and corSporate 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 over 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.
