SCUDDER
INVESTMENTS(SM)
[LOGO]
-----------------------
EQUITY/GROWTH
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Scudder Capital
Growth Fund
Annual Report
September 30, 2000
The fund seeks to provide long-term capital growth while actively seeking to
reduce downside risk compared with other growth mutual funds.
<PAGE>
Contents
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4 Letter from the Fund's President
6 Performance Update
8 Portfolio Summary
10 Portfolio Management Discussion
15 Glossary of Investment Terms
16 Investment Portfolio
20 Financial Statements
23 Financial Highlights
25 Notes to Financial Statements
32 Report of Independent Accountants
33 Tax Information
34 Shareholder Meeting Results
35 Officers and Trustees
36 Investment Products and Services
38 Account Management Resources
2
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Scudder Capital Growth Fund
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Class AARP ticker symbol ACGFX fund number 198
Class S ticker symbol SCPGX fund number 398
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Date of Inception: o The fund's Class AARP shares returned 26.01%
11/30/84 for the 12-month period, beating the 13.30%
return of its unmanaged benchmark, the S&P
Total Net Assets as 500, and the 17.72% average return for the
of 9/30/00-- large-cap core fund category, as calculated
by Lipper Inc.^1
Class AARP:
$2 billion o While growth equity investors saw a great
deal of volatility, particularly after March
Class S: of this year, the fund's more conservative
$7 million approach to growth investing enabled it to
hold up well relative to its peer group.
Moreover, these results are in line with our
expectations as our strategy is designed to
participate in broad advances made by growth
stocks generally, while limiting volatility
relative to more aggressive growth funds and
indices.
o We believe the market will remain very
selective, rewarding only those companies
that are able to consistently demonstrate
above-average earnings growth.
^1 Lipper Inc. is an independent analyst of investment performance.
3
<PAGE>
Letter from the Fund's President
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Dear Shareholders,
An ongoing battle for market dominance between "new economy" technology and
Internet stocks and more conservative value-oriented stocks resulted in a
volatile market environment during much of the past 12 months. Early in the
period, a combination of strong economic momentum, moderate inflation, and an
improving corporate profits outlook helped to ease concerns about the impact of
rising energy and labor prices and the threat of a more aggressive monetary
tightening by the Federal Reserve Board (the Fed). In the spring, however,
leadership shifted from technology and Internet stocks as financial and cyclical
sectors responded favorably to a more benign economic outlook. At the same time,
investors once again focused on valuation and earnings, shied away from
companies with unproven business plans and no current earnings, and sought out
more seasoned and reasonably valued companies.
We believe Scudder Capital Growth Fund (formerly AARP Capital Growth Fund),
which seeks to invest in quality growing companies while paying attention to
valuation and risk management, was well positioned for this environment. The
fund uses an investment approach known as GARP, or Growth at a Reasonable Price,
a relatively conservative style of growth
4
<PAGE>
investing designed to weather volatile periods within the market cycle.
Over the past 12 months, Class AARP shares of the fund outperformed both its
benchmark, the S&P 500 Index, and the average for funds in the large-cap core
fund category. For more information on the market environment and management's
approach to stockpicking, please turn to the Portfolio Management Discussion
that begins on page 9.
Thank you for your continued interest in Scudder Capital Growth Fund. If you
have any questions about your investment, please call Scudder Investor
Information at 1-800-SCUDDER (1-800-728-3337) or visit our Web site at
www.scudder.com.
Sincerely,
/s/Lin Coughlin
Linda C. Coughlin
President
Scudder Capital Growth Fund
5
<PAGE>
Performance Update
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September 30, 2000
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Growth of a $10,000 Investment
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THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Scudder Capital
Growth Fund -- Standard & Poor's
Class AARP 500 Index*
'90 10000 10000
'91 14281 13115
'92 14843 14567
'93 18484 16461
'94 17616 17068
'95 21750 22144
'96 25223 26645
'97 37009 37426
'98 35754 40811
'99 48922 52165
'00 61644 59101
Yearly periods ended September 30
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Fund Index Comparison
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Total Return
Growth of Average
Period ended 9/30/2000 $10,000 Cumulative Annual
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Scudder Capital Growth Fund
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1 year $ 12,601 26.01% 26.01%
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5 year $ 28,342 183.42% 23.16%
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10 year $ 61,644 516.44% 19.95%
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Standard & Poor's 500 Index*
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1 year $ 11,330 13.30% 13.30%
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5 year $ 26,689 166.89% 21.67%
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10 year $ 59,101 491.01% 19.43%
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6
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Returns and Per Share Information
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THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE ILLUSTRATING THE SCUDDER CAPITAL
GROWTH FUND -- CLASS AARP TOTAL RETURN (%) AND STANDARD & POOR'S 500 INDEX*
TOTAL RETURN (%)
<TABLE>
<CAPTION>
Yearly periods ended September 30
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Total
Return (%) 42.81 3.94 24.53 -4.70 23.47 15.97 46.72 -3.39 36.83 26.01
------------------------------------------------------------------------------------
Index Total
Return (%) 31.15 11.07 13.00 3.68 29.74 20.32 40.46 9.04 27.82 13.30
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Net Asset
Value ($) 30.23 30.30 36.20 31.74 38.36 43.47 57.84 51.24 62.68 73.41
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Income
Dividends
($) .59 .23 .14 .05 .01 .39 .41 .31 .24 .04
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Capital
Gains
Distributions
($) 1.79 .94 1.21 2.90 .64 .51 3.99 4.31 6.55 5.40
------------------------------------------------------------------------------------
</TABLE>
* The Standard & Poor's 500 Index is a capitalization-weighted index of
500 stocks. The index is designed to measure performance of domestic
stocks through changes in the aggregate market value of 500 stocks
representing all major industries. Index returns assume reinvestment of
dividends and, unlike Fund returns, do not reflect any fees or
expenses.
On July 17, 2000, existing shares of the Fund were redesignated as
Class AARP shares. In addition, the Fund commenced offering Class S
shares. The total return information provided is for the Fund's Class
AARP shares.
All performance is historical, assumes reinvestment of all dividends
and capital gains, and is not indicative of future results. Investment
return and principal value will fluctuate, so an investor's shares,
when redeemed, may be worth more or less than when purchased.
7
<PAGE>
Portfolio Summary
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September 30, 2000
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Asset Allocation
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A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
The fund remains
Common Stocks 97% close to fully invested
Cash Equivalents 3% in domestic
------------------------------------ growth stocks.
100%
------------------------------------
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Sector Diversification
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(Excludes 3% Cash Equivalents)
A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
The fund's diversified
approach and attention
Technology 28% to risk management have
Health 17% helped mitigate losses,
Financial 11% particularly in the
Media 7% technology sector.
Energy 7%
Communications 7%
Manufacturing 7%
Consumer Staples 7%
Consumer Discretionary 5%
Other 4%
------------------------------------
100%
------------------------------------
8
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Ten Largest Equity Holdings
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(32% of Portfolio) The fund's top holdings
reflect our desire to
1. General Electric Co. invest in companies that
Producer of electrical equipment we believe can
provide growth at a
2. Pfizer, Inc. reasonable price.
Manufacturer of prescription pharmaceuticals and
non-prescription self medications
3. Cisco Systems, Inc.
Manufacturer of computer network products
4. American Express Co.
Provider of travel-related, financial advisory and
international banking services
5. Sun Microsystems, Inc.
Manufacturer of high-performance workstations, servers
and software
6. Microsoft Corp.
Developer of computer software
7. Intel Corp.
Producer of semiconductor memory circuits
8. EMC Corp.
Provider of enterprise storage systems, software,
networks and services
9. Citigroup, Inc.
Provider of diversified financial services
10. American International Group, Inc.
Provider of insurance services
For more complete details about the Fund's investment portfolio, see page 16. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
9
<PAGE>
Portfolio Management Discussion
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September 30, 2000
In the following interview, William F. Gadsden, portfolio manager of the Scudder
Capital Growth Fund, discusses the fund's strategy and the market environment
during the twelve-month period ended September 30, 2000.
Q: How did the fund perform over the period?
A: The fund's Class AARP shares returned 26.01% during the period, beating the
13.30% return of its unmanaged benchmark, the S&P 500. In addition, the fund's
returns placed it ahead of the 17.72% average of the Lipper large-cap core fund
category. While growth equity investors saw a great deal of volatility,
particularly after March of this year, our more conservative approach to growth
investing enabled the fund to hold up well relative to its peer group.
Q: Could you tell us a little more about your growth investing strategy?
A: We use an approach known as GARP, or Growth at a Reasonable Price. We believe
this approach should help us outperform on a long-term basis by fully
participating in broad advances while limiting portfolio volatility and risk in
the event that conditions become less favorable. Additionally, our approach
helps us assess opportunities in sectors that are often not represented in
traditional growth styles. We believe that good companies that offer superior
long-term growth characteristics, and the strength of a competitive franchise to
sustain them, are worth more than less reliable companies that are often "cheap"
for a reason. On the other hand, when a stock reaches a price that we believe to
be excessive in light of its long-term growth prospects, we will generally trim
the position to avoid what may be substantial downside risk in the event of a
disappointment. In short, GARP is a disciplined methodology that has allowed us
to participate in some of the market's biggest winners, and to avoid an
inordinate number of negative surprises.
10
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Q: Please give us an overview of the market and how it impacted the fund.
A: Market volatility was quite high during much of the period. Late last year
and early this year, a combination of strong economic momentum, moderate
inflation, and an improving corporate profits outlook helped to alleviate prior
concerns about the impact of rising energy and labor prices and the threat of a
more aggressive monetary tightening by the Federal Reserve Board (the Fed).
In March, however, leadership shifted from technology and Internet stocks as
financial and cyclical sectors responded favorably to a more benign economic
outlook and interest rate stability. Throughout the summer, rapid sector
rotation resulted in increased market volatility. Many of the top contributors
to the S&P 500 in the second quarter were health care companies such as Pfizer
and Merck, while many of the poorest performers were technology stocks,
including Microsoft and Cisco Systems. In many ways, the first quarter's
laggards took the lead in the second quarter, as investors once again focused on
valuation and earnings. They shied away from companies with unproven business
plans and no current earnings, and sought out more seasoned and reasonably
valued companies.
In August, a strong rally in growth stocks gave way to profit taking brought
about by concerns as to how the now-slowing economy, higher oil prices, and a
weak euro currency will impact corporate earnings. In September, the selling
intensified. Many bellwether companies, across different economic sectors,
pre-announced that earnings would likely fail to meet expectations. The most
visible pre-announcements came in technology, which reinforced investor concerns
that third-quarter revenues and earnings may be significantly lower than
anticipated and not attributable to company-specific factors. Throughout the
third quarter, however, the fund's diversified approach and attention to risk
management helped mitigate losses, particularly in the technology sector. The
benefit of this approach can be seen in the performance of the fund's
11
<PAGE>
technology holdings, which declined 7.73% during the quarter, compared with a
13.48% decline for the technology sector of the S&P 500.
Q: What industries and stocks have had the greatest impact on performance?
A: Over the past year, portfolio sector weightings had a slightly positive
impact on performance relative to the S&P 500 Index. The fund was helped by
underweighted positions in basic industries and communications, two of the
market's poorest performing sectors. A low inflation environment and a lack of
pricing power for many companies operating in these sectors contributed to the
weakness. The fund also benefited from its moderate overweightings, relative to
the S&P 500, in technology and health care, which both outperformed. These
sectors have traditionally housed many of the market's top growth companies and
have historically been well represented in our investment style. Mild
underweightings in the utility and financial sectors detracted from performance.
Both groups had been fairly depressed and performed well in reaction to
declining interest rates.
The fund's outperformance versus the benchmark was primarily attributable to
good stock selection. This result is by design as we seek to identify the best
companies within the different economic sectors. Our issue selections added
value across several economic sectors but the greatest contributions came from
technology, health care, and financials. Technology holdings were led by EMC,
Corning, and Sun Microsystems, which all outperformed dramatically. Our small
allocations to biotech companies Genentech and Immunex Corp. nicely complemented
long-time holdings in drug stocks such as Eli Lilly and Pfizer. Strength in the
finance sector of the portfolio was broad as American International Group,
American Express, and Citigroup all benefited from declining interest rates and
continue to post strong operating results.
12
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Q: Where do you see things going from here in technology?
A: First, we see no quick resolution to the antitrust litigation involving
Microsoft. However, when the legal situation stabilizes, we think investors will
focus on the company's good fundamentals and the wider acceptance of Windows
2000 at the corporate level. Also, the market has refocused its attention on
fundamentals. This means that while investors are looking for growth, they want
growth at a reasonable price. This renewed focus on valuation is the reason many
high-flying stocks came crashing down. We don't think this is a temporary
situation. A market focused on fundamentals should benefit the fund's portfolio.
Holdings such as Pepsi and Pfizer are all solid companies with strong earnings
but with stock prices that had been depressed by the singular focus on
technology. At the same time, many of the fundamentally sound technology
companies the fund holds have begun to regain their footing. In fact, we have
recently added to select technology holdings on short-term weakness.
Q: What's your outlook for the markets in general?
A: We continue to believe the market will remain very selective, rewarding only
those companies that are able to consistently demonstrate above-average earnings
growth. In this environment, we believe our focus on risk control and
identifying companies with dominant competitive positions and the ability to
sustain superior earnings growth is particularly important.
13
<PAGE>
Scudder Capital Growth Fund:
A Team Approach to Investing
Scudder Capital 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 offices across the United States and abroad.
The Adviser believes that a team approach benefits fund investors by bringing
together many disciplines and leveraging the firm's extensive resources.
Portfolio manager William F. Gadsden joined the Adviser in 1983 and is
responsible for the fund's investment strategy and daily operation. Mr. Gadsden
has over 18 years of investment industry experience.
14
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Glossary of Investment Terms
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Diversification The spreading of risk by investing in several asset
categories, industry sectors, or individual securities. An
investor with a broadly diversified portfolio will likely
receive some protection from the price declines of an
individual asset class.
Growth Stock Stock of a company that has displayed above-average earnings
growth and is expected to continue to increase profits
faster than the overall market. Stocks of such companies
usually trade at higher valuations and experience more price
volatility than the market as a whole. Distinct from value
stock.
Monetary Policy The decision of a central bank to control the level of
economic activity by either supplying credit through lower
interest rates or open market purchases, or by restricting
credit through higher rates or open market sales. Looser
credit tends to stimulate the economy, while tighter credit
tends to calm inflationary forces.
S&P 500 Index A capitalization-weighted index of 500 stocks. The Index is
designed to measure the performance of the broad domestic
economy through changes in the aggregate market value of 500
stocks representing all major industries. It is commonly
used as a performance benchmark for stock funds.
Total Return The most common yardstick to measure the performance of a
fund. Total return -- annualized or compounded -- is based on
a combination of share price changes plus income and capital
gain distributions, if any, expressed as a percentage gain
or loss in value.
Weighting Refers to the allocation of assets -- usually in terms of
(over/under) sectors, industries, or countries -- within a portfolio
relative to the portfolio's benchmark index or investment
universe.
(Source: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
15
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Investment Portfolio as of September 30, 2000
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Principal
Amount ($) Value ($)
--------------------------------------------------------------------------------
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Repurchase Agreements 2.8%
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State Street Bank and Trust Company, 6.48%, to be
repurchased at $67,678,527 on 10/2/2000**
(Cost $67,642,000) ........................... 67,642,000 67,642,000
Shares
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Common Stocks 97.2%
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Consumer Discretionary 4.6%
Department & Chain Stores
Home Depot, Inc. ................................ 942,450 50,008,747
Target Corp. .................................... 812,500 20,820,313
Wal-Mart Stores, Inc. ........................... 872,700 41,998,688
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112,827,748
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Consumer Staples 6.4%
Alcohol 1.1%
Anheuser-Busch Companies, Inc. .................. 635,600 26,893,825
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Food & Beverage 3.5%
Coca-Cola Co. ................................... 511,300 28,185,413
PepsiCo, Inc. ................................... 1,284,900 59,105,400
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87,290,813
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Package Goods/Cosmetics 1.8%
Colgate-Palmolive Co. ........................... 543,100 25,634,320
Gillette Co. .................................... 579,500 17,892,063
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43,526,383
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Health 16.3%
Biotechnology 3.7%
Genentech, Inc. ................................. 172,700 32,068,231
Immunex Corp.* .................................. 322,200 14,015,700
MedImmune, Inc.* ................................ 251,900 19,459,275
PE Corp.-PE Biosystems Group .................... 217,900 25,385,350
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90,928,556
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Medical Supply & Specialty 4.3%
Baxter International, Inc. ...................... 615,100 49,092,669
Becton, Dickinson & Co. ......................... 982,300 25,969,556
Medtronic, Inc. ................................. 594,200 30,786,988
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105,849,213
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The accompanying notes are an integral part of the financial statements.
16
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Shares Value ($)
-------------------------------------------------------------------
Pharmaceuticals 8.3%
Bristol-Myers Squibb Co. ............... 330,300 18,868,388
Eli Lilly & Co. ........................ 461,100 37,406,738
Merck & Co., Inc. ...................... 733,200 54,577,575
Pfizer, Inc. ........................... 2,085,075 93,698,058
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204,550,759
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Communications 6.8%
Cellular Telephone 2.0%
Nokia Oyj (ADR) ........................ 618,500 24,624,031
Vodafone Group plc (ADR) ............... 669,900 24,786,300
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49,410,331
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Telephone/Communications 4.8%
AT&T Wireless Group* ................... 776,900 16,217,788
Broadwing, Inc.* ....................... 880,100 22,497,556
JDS Uniphase Corp.* .................... 300,300 28,434,656
Qwest Communications International Inc.* 575,252 27,648,049
Verizon Communications ................. 482,250 23,358,984
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118,157,033
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Financial 10.3%
Banks 2.6%
Citigroup, Inc. ........................ 1,158,600 62,636,813
-------------
Insurance 2.4%
American International Group, Inc. ..... 620,155 59,341,082
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Consumer Finance 3.0%
American Express Co. ................... 1,210,800 73,556,100
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Other Financial Companies 2.3%
Federal National Mortgage Association .. 285,100 20,384,650
Marsh & McLennan Companies, Inc. ....... 270,700 35,935,425
-------------
56,320,075
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Media 7.3%
Advertising 1.5%
Interpublic Group of Companies, Inc. ... 406,600 13,849,813
Omnicom Group, Inc. .................... 307,500 22,428,281
-------------
36,278,094
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Broadcasting & Entertainment 2.8%
Infinity Broadcasting Corp. "A"* ....... 543,600 17,938,800
Viacom, Inc. "B"* ...................... 446,200 26,102,700
The accompanying notes are an integral part of the financial statements.
17
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Shares Value ($)
-----------------------------------------------------------------
Walt Disney Co. ...................... 618,000 23,638,500
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67,680,000
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Cable Television 3.0%
AT&T Corp.-- Liberty Media Group "A"* 2,164,600 38,962,800
Comcast Corp. "A" .................... 854,600 34,985,188
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73,947,988
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Service Industries 2.5%
EDP Services 0.7%
Electronic Data Systems Corp. ........ 415,800 17,255,700
-------------
Investment 0.5%
Goldman Sachs Group, Inc. ............ 119,600 13,626,925
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Miscellaneous Commercial Services 1.3%
Siebel Systems, Inc.* ................ 280,200 31,189,763
-------------
Durables 1.9%
Aerospace
United Technologies Corp. ............ 688,000 47,644,000
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Manufacturing 6.6%
Diversified Manufacturing 4.9%
General Electric Co. ................. 2,077,100 119,822,706
-------------
Industrial Specialty 1.7%
Corning, Inc. ........................ 140,100 41,609,700
-------------
Technology 27.4%
Computer Software 8.8%
America Online, Inc.* ................ 724,700 38,952,625
i2 Technologies, Inc.* ............... 77,500 14,497,344
Intuit, Inc.* ........................ 639,900 36,474,300
Microsoft Corp.* ..................... 1,187,300 71,534,825
Oracle Corp.* ........................ 681,200 53,644,500
-------------
215,103,594
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Diverse Electronic Products 2.7%
Applied Materials, Inc.* ............. 562,800 33,381,075
Dell Computer Corp.* ................. 701,600 21,618,050
Teradyne, Inc.* ...................... 342,200 11,977,000
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66,976,125
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The accompanying notes are an integral part of the financial statements.
18
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<TABLE>
<CAPTION>
Shares Value ($)
-------------------------------------------------------------------------------------------
<S> <C> <C>
EDP Peripherals 2.9%
EMC Corp.* ................................................. 714,100 70,785,163
-------------
Electronic Components/Distributors 3.4%
Cisco Systems, Inc.* ....................................... 1,484,500 82,018,625
-------------
Electronic Data Processing 4.6%
International Business Machines Corp. ...................... 364,300 40,983,750
Sun Microsystems, Inc.* .................................... 624,600 72,922,050
-------------
113,905,800
-------------
Semiconductors 5.0%
Intel Corp. ................................................ 1,720,800 71,520,750
Vitesse Semiconductor Corp.* ............................... 302,900 26,939,169
Xilinx, Inc.* .............................................. 282,200 24,163,375
-------------
122,623,294
-------------
Energy 7.0%
Oil & Gas Production 4.1%
Anadarko Petroleum Corp. ................................... 410,800 27,301,768
Exxon Mobil Corp. .......................................... 571,448 50,930,303
Nabors Industries, Inc.* ................................... 451,900 23,679,560
-------------
101,911,631
-------------
Oilfield Services/Equipment 2.9%
BJ Services Company* ....................................... 185,100 11,314,238
Schlumberger Ltd. .......................................... 718,100 59,108,606
-------------
70,422,844
-------------
Utilities 0.1%
Electric Utilities
Southern Energy Inc.* ...................................... 108,000 3,388,500
-------------
-------------------------------------------------------------------------------------------
Total Common Stocks (Cost $1,648,298,422) 2,387,479,183
-------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $1,715,940,422) (a) 2,455,121,183
-------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
** Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities.
(a) The cost for federal income tax purposes was $1,718,313,762. At
September 30, 2000, net unrealized appreciation for all securities
based on tax cost was $736,807,421. This consisted of aggregate gross
unrealized appreciation for all securities in which there was an excess
of value over tax cost of $843,336,215 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax
cost over value of $106,528,794.
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
Financial Statements
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Statement of Assets and Liabilities as of September 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets
-----------------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (cost $1,715,940,422) .................... $2,455,121,183
Cash ......................................................................... 33,314
Receivable for investments sold .............................................. 13,214,680
Dividends receivable ......................................................... 870,144
Interest receivable .......................................................... 24,351
Receivable for Fund shares sold .............................................. 3,364,514
Due from Adviser ............................................................. 41,678
---------------
Total assets ................................................................. 2,472,669,864
Liabilities
-----------------------------------------------------------------------------------------------
Payable for investments purchased ............................................ 12,958,181
Accrued management fee ....................................................... 1,242,429
Accrued Trustees' fees and expenses .......................................... 83,356
Other accrued expenses and payables .......................................... 1,058,489
---------------
Total liabilities ............................................................ 15,342,455
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Net assets, at value $2,457,327,409
-----------------------------------------------------------------------------------------------
Net Assets
-----------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation (depreciation) on investments .................... 739,180,761
Accumulated net realized gain (loss) ......................................... 259,183,443
Paid-in capital .............................................................. 1,458,963,205
-----------------------------------------------------------------------------------------------
Net assets, at value $2,457,327,409
-----------------------------------------------------------------------------------------------
Net Asset Value
-----------------------------------------------------------------------------------------------
Class AARP
Net Asset Value, offering and redemption price per share ($2,450,334,402 /
33,379,474 outstanding shares of beneficial interest, $.01 par value,
unlimited number of shares authorized) .................................... $ 73.41
Class S
Net Asset Value, offering and redemption price per share ($6,993,007 / 95,255
outstanding shares of beneficial interest, $.01 par value, unlimited number
of shares authorized) ..................................................... $ 73.41
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations for the year ended September 30, 2000
--------------------------------------------------------------------------------
Investment Income
-------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $70,916) .......... $ 13,482,141
Interest ...................................................... 4,081,733
---------------
Total Income .................................................. 17,563,874
---------------
Expenses:
Management fee ................................................ 13,653,750
Services to shareholders ...................................... 4,513,174
Custodian and accounting fees ................................. 150,846
Administrative fee ............................................ 1,572,375
Auditing ...................................................... 47,109
Legal ......................................................... 13,334
Trustees' fees and expenses ................................... 117,381
Reports to shareholders ....................................... 356,032
Registration fees ............................................. 51,146
Other ......................................................... 247,033
---------------
Total expenses, before expense reductions ..................... 20,722,180
Expense reductions ............................................ (113,452)
---------------
Total expenses, after expense reductions ...................... 20,608,728
-------------------------------------------------------------------------------
Net investment income (loss) (3,044,854)
-------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
-------------------------------------------------------------------------------
Net realized gain (loss) from investments ..................... 265,830,606
Net unrealized appreciation (depreciation) during the period
on investments ............................................. 202,013,652
-------------------------------------------------------------------------------
Net gain (loss) on investment transactions 467,844,258
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 464,799,404
-------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended September 30,
Increase (Decrease) in Net Assets 2000 1999
----------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) ...................... $ (3,044,854) $ 1,142,518
Net realized gain (loss) on investment transactions 265,830,606 151,447,604
Net unrealized appreciation (depreciation) on
investment transactions during the period ...... 202,013,652 301,659,944
---------------- ------------------
Net increase (decrease) in net assets resulting
from operations ................................ 464,799,404 454,250,066
---------------- ------------------
Distributions to shareholders from:
Net investment income-- Class AARP ................ (1,021,664) (5,808,380)
Net realized gains-- Class AARP ................... (154,688,680) (158,014,903)
---------------- ------------------
Total distributions ............................... (155,710,344) (163,823,283)
---------------- ------------------
Fund share transactions:
Proceeds from shares sold ......................... 628,729,790 328,380,919
Reinvestment of distributions ..................... 147,667,614 155,712,173
Cost of shares redeemed ........................... (363,478,388) (286,536,164)
---------------- ------------------
Net increase (decrease) in net assets from Fund
share transactions ............................. 412,919,016 197,556,928
---------------- ------------------
Increase (decrease) in net assets ................. 722,008,076 487,983,711
Net assets at beginning of period ................. 1,735,319,333 1,247,335,622
Net assets at end of period (including
undistributed net investment income of $940,626
at September 30, 1999) ......................... $ 2,457,327,409 $ 1,735,319,333
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
Class AARP (a)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Years Ended September 30, 2000(b) 1999(b) 1998(b) 1997(b) 1996
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $62.68 $51.24 $57.84 $43.47 $38.36
--------------------------------------------
------------------------------------------------------------------------------------
Income (loss) from investment operations:
------------------------------------------------------------------------------------
Net investment income (loss) (.10) .04 .28 .34 .42
------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investment transactions 16.27 18.19 (2.26) 18.43 5.59
--------------------------------------------
------------------------------------------------------------------------------------
Total from investment operations 16.17 18.23 (1.98) 18.77 6.01
------------------------------------------------------------------------------------
Less distributions from:
------------------------------------------------------------------------------------
Net investment income (.04) (.24) (.31) (.41) (.39)
------------------------------------------------------------------------------------
Net realized gains on investment
transactions (5.40) (6.55) (4.31) (3.99) (.51)
--------------------------------------------
------------------------------------------------------------------------------------
Total distributions (5.44) (6.79) (4.62) (4.40) (.90)
------------------------------------------------------------------------------------
Net asset value, end of period $73.41 $62.68 $51.24 $57.84 $43.47
--------------------------------------------
------------------------------------------------------------------------------------
Total Return (%) 26.01 36.83 (3.39) 46.72 15.97
------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 2,450 1,735 1,247 1,228 826
------------------------------------------------------------------------------------
Ratio of expenses before expense
reductions (%) .91(c) .91 .87 .92 .90
------------------------------------------------------------------------------------
Ratio of expenses after expense
reductions (%) .90(c) .91 .87 .92 .90
------------------------------------------------------------------------------------
Ratio of net investment income (loss)
(%) (.13) .07 .50 .70 1.05
------------------------------------------------------------------------------------
Portfolio turnover rate (%) 66 68 53 39 65
------------------------------------------------------------------------------------
</TABLE>
(a) On July 17, 2000, existing shares of the Fund were redesignated as
Class AARP shares.
(b) Based on monthly average shares outstanding during the period.
(c) The ratios of operating expenses excluding costs incurred in connection
with the reorganization before and after expense reductions were 0.90%
and 0.90%, respectively (see Notes to Financial Statements).
23
<PAGE>
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
Class S
--------------------------------------------------------------------------------
2000(a)
--------------------------------------------------------------------------------
Net asset value, beginning of period $76.71
----------
--------------------------------------------------------------------------------
Income (loss) from investment operations:
--------------------------------------------------------------------------------
Net investment income (loss) (.02)
--------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment transactions (3.28)
----------
--------------------------------------------------------------------------------
Total from investment operations (3.30) Less distributions from:
--------------------------------------------------------------------------------
Net investment income --
--------------------------------------------------------------------------------
Net asset value, end of period $73.41
----------
--------------------------------------------------------------------------------
Total Return (%) (4.30)**
--------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
--------------------------------------------------------------------------------
Net assets, end of period ($ millions) 7
--------------------------------------------------------------------------------
Ratio of expenses (%) .89*
--------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.15)*
--------------------------------------------------------------------------------
Portfolio turnover rate (%) 66
--------------------------------------------------------------------------------
(a) For the period from July 17, 2000 (commencement of sale of Class S) to
September 30, 2000.
* Annualized
** Not annualized
24
<PAGE>
Notes to Financial Statements
--------------------------------------------------------------------------------
A. Significant Accounting Policies
Scudder Capital Growth Fund (the "Fund"), formerly AARP Capital Growth Fund, a
series of AARP Growth Trust, 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 and is
organized as a Massachusetts business trust.
On July 17, 2000, the Fund was reorganized from AARP Capital Growth Fund into
Class AARP of Scudder Capital Growth Fund. Shares of Class AARP are especially
designed for members of AARP. In addition, the Fund commenced offering Class S
shares. The two classes of shares provide investors with different purchase
options. Investment income, realized and unrealized gains and losses, certain
fund-level expenses and expense reductions, if any, are borne pro rata on the
basis of relative net assets by the holders of all classes of shares, except
that each class bears certain expenses unique to that class such as
reorganization expenses (see Note F). Differences in class expenses may result
in payment of different per share dividends by class. All shares of the Fund
have equal rights with respect to voting subject to class-specific arrangements.
Effective July 17, 2000, there are no class-specific expenses.
The Fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America, 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 is no such bid and asked
quotations, the most recent bid quotation shall
25
<PAGE>
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 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
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.
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 accounting principles generally accepted in the United
States of America. These differences primarily relate to investments in certain
securities sold at a loss. As a result, net investment income (loss) and net
realized gain (loss) on investment transactions for a reporting period may
differ significantly from distributions during such period. Accordingly, the
Fund may periodically make reclassifications among certain of its capital
accounts without impacting the net asset value of the Fund.
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. Certain dividends
from foreign securities may be recorded subsequent to the ex-dividend date as
soon as the Fund is informed of such dividends. Realized gains and losses from
investment transactions are recorded on an identified cost basis.
26
<PAGE>
B. Purchases and Sales of Securities
During the year ended September 30, 2000, purchases and sales of investment
securities (excluding short-term investments) aggregated $1,682,169,699 and
$1,447,457,222, respectively.
C. Related Parties
As described in Note F, Scudder Kemper Investments, Inc. has initiated a
restructuring program for most of its Scudder no-load, open-end funds. As part
of this reorganization, the Fund adopted a new Investment Management Agreement
and entered into an Administrative Agreement. Both of these agreements were
effective July 17, 2000. The terms of the newly adopted and the pre-existing
agreements are set out below.
Management Agreement. Prior to July 17, 2000, under the investment management
agreement (the "Management Agreement") between AARP Growth Trust, on behalf of
the Fund, and Scudder Kemper Investments, Inc. ("Scudder Kemper" or the
"Adviser"), the management fee consisted of two elements: a Base Fee and an
Individual Fund Fee. The Base Fee was calculated as a percentage of the combined
net assets of all of the AARP Funds ("Program Assets") except the AARP
Diversified Income with Growth and the AARP Diversified Growth Portfolios, and
each AARP Fund paid, as its portion of the Base Fee, an amount equal to the
ratio of its daily net assets to the daily net assets of all of the AARP Funds
(excluding the AARP Diversified Income with Growth and the AARP Diversified
Growth Portfolios). The Annual Base Fee was calculated as follows: 0.35% of the
first $2,000,000,000 of such net assets, 0.33% of the next $2,000,000,000 of
such net assets, 0.30% of the next $2,000,000,000 of such net assets, 0.28% of
the next $2,000,000,000 of such net assets, 0.26% of the next $3,000,000,000 of
such net assets, 0.25% of the next $3,000,000,000 of such net assets and 0.24%
of such net assets thereafter. In addition to the Base Fee, the Fund agreed to
pay the Adviser a flat Individual Fund Fee based on the average daily net assets
of the Fund. The Individual Fund Fee Rate recognized the different
characteristics of the Fund, and the varying levels of complexity of investment
research and securities trading required to manage the Fund. The Individual Fund
Fee Rate was calculated at 0.32% of the average daily net assets of the Fund. As
manager of the assets of the Fund, the Adviser directed the investments of the
Fund in accordance with its investment objectives, policies and restrictions. In
addition to portfolio management services, the Adviser, under the Management
Agreement, provided certain administrative services in
27
<PAGE>
accordance with such Agreement. The Adviser also had a Member Services Agreement
with AARP Financial Services Corp. ("AFSC"), a subsidiary of AARP, and paid
portions of its investment management fee to AFSC.
Effective July 17, 2000, the Fund, as approved by the Fund's Board of Trustees,
adopted a new Investment Management Agreement (the "Agreement") with Scudder
Kemper. As manager of the assets of the Fund, the Adviser directs the
investments of the Fund in accordance with its investment objectives, policies
and restrictions. In addition to portfolio management services, the Adviser,
under the Agreement, will provide certain administrative services in accordance
with such Agreement. The management fee payable under the Agreement is equal to
an annual rate of 0.58% on the first $3,000,000,000 of average daily net assets,
0.555% on the next $1,000,000,000 of such net assets and 0.53% of such net
assets in excess of $4,000,000,000, computed and accrued daily and payable
monthly.
Accordingly, for the year ended September 30, 2000, the fees pursuant to the
Management Agreement and the Agreement amounted to $13,653,750, which was
equivalent to an annual effective rate of 0.60% of the Fund's average daily net
assets.
Administrative Fee. Effective July 17, 2000, the Fund, as approved by the Fund's
Board of Trustees, adopted an Administrative Agreement (the "Administrative
Agreement") with Scudder Kemper. Under the Administrative Agreement the Adviser
provides or pays others to provide substantially all of the administrative
services required by the Fund (other than those provided by Scudder Kemper under
its Agreement with the Fund, as described above) in exchange for the payment by
the Fund of an administrative services fee (the "Administrative Fee") of 0.30%
of average daily net assets. As of the effective date of the Administrative
Agreement, each service provider will continue to provide the services that it
currently provides to the Fund (i.e., fund accounting, shareholder services,
custody, audit and legal) under the current arrangements, except that Scudder
Kemper will pay these entities for the provision of their services to the Fund
and will pay most other Fund expenses, including insurance, registration,
printing and postage fees. Certain expenses of the Fund will not be borne by
Scudder Kemper under the Administrative Agreement, such as taxes, brokerage,
interest and extraordinary expenses, and the fees and expenses of the
Independent Trustees (including the fees and expenses of their independent
counsel). For the period July 17, 2000 through
28
<PAGE>
September 30, 2000, the Administrative Agreement expense charged to the Fund
amounted to $1,572,375, of which $642,634 is unpaid at September 30, 2000.
Other Fees. Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is
the transfer, dividend-paying and shareholder service agent for the Fund. Prior
to July 17, 2000, the amount charged to the Fund by SSC aggregated $3,213,530,
of which $178,698 is unpaid at September 30, 2000.
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. Prior to July 17, 2000, the amount
charged to the Fund by STC aggregated $9,838.
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. Prior to July 17,
2000, the amount charged to the Fund by SFAC aggregated $142,859, of which
$6,956 is unpaid at September 30, 2000.
Effective July 17, 2000, the above fees will be paid by the Adviser in
accordance with the Administrative Agreement.
Trustees' Fees and Expenses. The Fund pays each Trustee not affiliated with the
Adviser an annual retainer plus specified amounts for attended board and
committee meetings. For the year ended September 30, 2000, Trustees' fees and
expenses aggregated $34,025. In addition, a one-time fee of $83,356 was accrued
by Class AARP prior to July 17, 2000, for payment to those Trustees not
affiliated with the Adviser who did not stand for re-election under the
reorganization discussed in Note F. Inasmuch as the Adviser will also benefit
from administrative efficiencies of a consolidated Board, the Adviser has agreed
to bear $41,678 of such costs.
Other Related Parties. Effective July 17, 2000, Scudder Kemper has agreed to pay
a fee to AARP and/or its affiliates in return for advice relating to investments
by AARP members in Class AARP shares of the Fund. This fee is calculated on a
daily basis as a percentage of the combined net assets of the AARP classes of
all funds managed by Scudder Kemper. The fee rates, which decrease as the
aggregate net assets of the AARP classes become larger, are as follows: 0.07%
for the first $6,000,000,000 of net assets, 0.06% for the next $10,000,000,000
of such net assets and 0.05% of such net assets thereafter.
29
<PAGE>
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 year ended September 30,
2000, the Fund's custodian fees were reduced by $735. Prior to July 17, 2000,
transfer agent fees were reduced by $71,039.
Effective July 17, 2000, transfer agent credits will no longer be used to reduce
Fund expenses.
E. Line of Credit
The Fund and several other Scudder Funds (the "Participants") share in a $1
billion revolving credit facility with Chase Manhattan Bank 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, pro rata based upon net
assets, 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.
F. Reorganization
In early 2000, Scudder Kemper initiated a restructuring program for most of its
Scudder no-load open-end funds in response to changing industry conditions and
investor needs. The program proposes to streamline the management and operations
of most of the no-load open-end funds Scudder Kemper advises principally through
the liquidation of several small funds, mergers of certain funds with similar
investment objectives, the creation of one Board of Directors/Trustees and the
adoption of an administrative fee covering the provision of most of the services
currently paid for by the affected funds. Costs incurred in connection with this
restructuring initiative are being borne jointly by Scudder Kemper and certain
of the affected funds.
30
<PAGE>
G. Share Transactions
The following tables summarize share and dollar activity in the Fund:
<TABLE>
<CAPTION>
Year Ended Year Ended
September 30, 2000 September 30, 1999
---------------------------------------------------------------------
Shares Dollars Shares Dollars
Shares sold
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class AARP* ..... 8,686,235 $ 621,165,954 5,450,539 $ 328,380,919
Class S** ....... 99,271 7,563,836 -- --
$ 628,729,790 $ 328,380,919
Shares issued to shareholders in reinvestment of distributions
----------------------------------------------------------------------------------------
Class AARP* ..... 2,060,958 $ 147,667,614 2,723,193 $ 155,712,173
Class S** ....... -- -- -- --
$ 147,667,614 $ 155,712,173
Shares redeemed
----------------------------------------------------------------------------------------
Class AARP* ..... (5,053,818) $(363,174,055) (4,829,916) $(286,536,164)
Class S** ....... (4,016) (304,333) -- --
$(363,478,388) $(286,536,164)
Net increase (decrease)
----------------------------------------------------------------------------------------
Class AARP* ..... 5,693,375 $ 405,659,513 3,343,816 $ 197,556,928
Class S** ....... 95,255 7,259,503 -- --
$ 412,919,016 $ 197,556,928
</TABLE>
* On July 17, 2000, existing shares of the Fund were redesignated as
Class AARP shares.
** For the period from July 17, 2000 (commencement of sale of Class S) to
September 30, 2000.
31
<PAGE>
Report of Independent Accountants
--------------------------------------------------------------------------------
To the Trustees of Investment Trust and the Shareholders of Scudder Capital
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 Capital Growth Fund
(formerly AARP Capital Growth Fund) (the "Fund") at September 30, 2000, the
results of its operations, the changes in its net assets and the financial
highlights for each of the periods indicated therein, in conformity with
accounting principles generally accepted in the United States of America. 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 auditing standards generally accepted in the United States of America 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 September 30, 2000 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
Boston, Massachusetts PricewaterhouseCoopers LLP
November 17, 2000
32
<PAGE>
Tax Information (Unaudited)
--------------------------------------------------------------------------------
The Class AARP shares of the Fund paid distributions of $5.40 per share from net
long-term capital gains during its year ended September 30, 2000, of which 100%
represents 20% rate gains.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$232,000,000 as capital gain dividends for its year ended September 30, 2000, of
which 100% represents 20% rate gains.
For corporate shareholders, 100% of the income dividends paid during the Fund's
fiscal year ended September 30, 2000 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.
33
<PAGE>
Shareholder Meeting Results (Unaudited)
--------------------------------------------------------------------------------
A Special Meeting of Shareholders (the "Meeting") of Scudder Capital Growth Fund
(the "fund"), a series of Investment Trust, formerly AARP Capital Growth Fund, a
series of AARP Growth Trust, was held on July 11, 2000, 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 elect Trustees of AARP Growth Trust.
Number of Votes:
Trustee For Withheld
--------------------------------------------------------------------------------
Henry P. Becton, Jr. 18,378,814 530,943
Linda C. Coughlin 18,392,766 516,991
Dawn-Marie Driscoll 18,396,703 513,054
Edgar R. Fiedler 18,368,268 541,489
Keith R. Fox 18,391,501 518,256
Joan E. Spero 18,362,991 546,766
Jean Gleason Stromberg 18,397,319 512,438
Jean C. Tempel 18,394,142 515,615
Steven Zaleznick 18,375,981 533,776
--------------------------------------------------------------------------------
2. To approve an Agreement and Plan of Reorganization for the fund whereby all
or substantially all of the assets and liabilities of the fund would be acquired
by a new series of Investment Trust in exchange for shares of the AARP class of
such series.
Number of Votes:
Broker
For Against Abstain Non-Votes*
--------------------------------------------------------------------------------
17,341,138 831,065 673,103 64,451
--------------------------------------------------------------------------------
3. To ratify the selection of PricewaterhouseCoopers LLP as the independent
accountants for the fund for the fiscal year ending September 30, 2000.
Number of Votes:
Broker
For Against Abstain Non-Votes*
--------------------------------------------------------------------------------
18,340,946 209,046 359,765 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.
34
<PAGE>
Officers and Trustees
--------------------------------------------------------------------------------
Linda C. Coughlin* William F. Gadsden*
o President and Trustee o Vice President
Henry P. Becton, Jr. William F. Glavin*
o Trustee; President, WGBH Educational o Vice President
Foundation
Valerie F. Malter*
Dawn-Marie Driscoll o Vice President
o Trustee; President, Driscoll
Associates; Executive Fellow, Center James E. Masur*
for Business Ethics, Bentley College o Vice President
Edgar R. Fiedler Ann M. McCreary*
o Trustee; Senior Fellow and Economic o Vice President
Counsellor, The Conference Board,
Inc. Kathleen T. Millard*
o Vice President
Keith R. Fox
o Trustee; General Partner, Howard S. Schneider*
The Exeter Group of Funds o Vice President
Joan E. Spero John Millette*
o Trustee; President, The Doris o Vice President and Secretary
Duke Charitable Foundation
Kathryn L. Quirk*
Jean Gleason Stromberg o Vice President and
o Trustee; Consultant Assistant Secretary
Jean C. Tempel John R. Hebble*
o Trustee; Managing Director, o Treasurer
First Light Capital, LLC
Brenda Lyons*
Steven Zaleznick o Assistant Treasurer
o Trustee; President and
Chief Executive Officer, Caroline Pearson*
AARP Services, Inc. o Assistant Secretary
Thomas V. Bruns* *Scudder Kemper Investments, Inc.
o Vice President
James M. Eysenbach*
o Vice President
35
<PAGE>
Investment Products and Services
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Scudder Funds
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Money Market U.S. Growth
Scudder U.S. Treasury Money Fund Value
Scudder Cash Investment Trust Scudder Large Company Value Fund
Scudder Money Market Series -- Scudder Value Fund
Prime Reserve Shares Scudder Small Company Value Fund
Premium Shares
Managed Shares Growth
Scudder Tax Free Money Fund Scudder Classic Growth Fund
Scudder Capital Growth Fund
Tax Free Scudder Large Company Growth Fund
Scudder Medium Term Tax Free Fund Scudder Select 1000 Growth Fund
Scudder Managed Municipal Bonds Scudder Development Fund
Scudder High Yield Tax Free Fund Scudder Small Company Stock Fund
Scudder California Tax Free Fund Scudder 21st Century Growth Fund
Scudder Massachusetts Tax Free Fund
Scudder New York Tax Free Fund Global Equity
Worldwide
U.S. Income Scudder Global Fund
Scudder Short Term Bond Fund Scudder International Fund
Scudder GNMA Fund Scudder Global Discovery Fund
Scudder Income Fund Scudder Emerging Markets Growth Fund
Scudder Corporate Bond Fund Scudder Gold Fund
Scudder High Yield Bond Fund
Regional
Global Income Scudder Greater Europe Growth Fund
Scudder Global Bond Fund Scudder Pacific Opportunities Fund
Scudder Emerging Markets Income Fund Scudder Latin America Fund
The Japan Fund, Inc.
Asset Allocation
Scudder Pathway Conservative Portfolio Industry Sector Funds
Scudder Pathway Balanced Portfolio Scudder Health Care Fund
Scudder Pathway Growth Portfolio Scudder Technology Fund
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
36
<PAGE>
--------------------------------------------------------------------------------
Retirement Programs and Education Accounts
--------------------------------------------------------------------------------
Retirement Programs Education Accounts
Traditional IRA Education IRA
Roth IRA UGMA/UTMA
SEP-IRA IRA for Minors
Inherited IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
--------------------------------------------------------------------------------
Closed-End Funds
--------------------------------------------------------------------------------
The Argentina Fund, Inc. Montgomery Street Income Securities, Inc.
The Brazil Fund, Inc. Scudder Global High Income Fund, Inc.
The Korea Fund, Inc. Scudder New Asia Fund, Inc.
</TABLE>
Scudder funds are offered by prospectus only. For more complete information on
any fund or variable annuity registered in your state, including information
about a fund's objectives, strategies, risks, advisory fees, distribution
charges, and other expenses, please order a free prospectus. Read the prospectus
before investing in any fund to ensure the fund is appropriate for your goals
and risk tolerance. There is no assurance that the objective of any fund will be
achieved, and fund returns and net asset values fluctuate. Shares are redeemable
at current net asset value, which may be more or less than their original cost.
A money market mutual fund investment is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although a
money market mutual fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in such a fund.
The services and products described should not be considered a solicitation to
buy or an offer to sell a security to any person in any jurisdiction where such
offer, solicitation, purchase, or sale would be unlawful under the securities
laws of such jurisdiction.
Scudder Investor Services, Inc.
37
<PAGE>
Account Management Resources
--------------------------------------------------------------------------------
For shareholders of Scudder funds including those in the AARP Investment Program
Convenient Automatic Investment Plan
ways to invest,
quickly and A convenient investment program in which money is
reliably 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- Automated Information Lines
clock electronic
account Scudder Class S Shareholders:
service and Call SAIL(TM) -- 1-800-343-2890
information,
including some AARP Investment Program Shareholders:
transactions Call Easy-Access Line -- 1-800-631-4636
Personalized account information, the ability to
exchange or redeem shares, and information on other
Scudder funds and services via touchtone telephone.
Web Site
Scudder Class S Shareholders --
www.scudder.com
AARP Investment Program Shareholders --
aarp.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 you need
them. Scudder's site also provides news about Scudder
funds, retirement planning information, and more.
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Those who Automatic Withdrawal Plan
depend on
investment You designate the bank account, determine the
proceeds for schedule (as frequently as once a month) and amount
living expenses of the redemptions, and Scudder does the rest.
can enjoy these
convenient, Distributions Direct
timely, and
reliable Automatically deposits your fund distributions into
automated the bank account you designate within three business
withdrawal days after each distribution is paid.
programs
QuickSell
Provides speedy access to your money by
electronically crediting your redemption proceeds to
the bank account you previously designated.
For more Scudder Class S Shareholders:
information
about these Call a Scudder representative at
services 1-800-SCUDDER
AARP Investment Program Shareholders:
Call an AARP Investment Program representative at
1-800-253-2277
Please address For Scudder Class S Shareholders:
all written
correspondence The Scudder Funds
to PO Box 2291
Boston, Massachusetts
02107-2291
For AARP Investment Program Shareholders:
AARP Investment Program from Scudder
PO Box 2540
Boston, Massachusetts
02208-2540
39
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About the Fund's Adviser
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 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 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.
SCUDDER
INVESTMENTS(SM)
[LOGO]
AARP Investment
Program from Scudder
PO Box 2540
Boston, MA 02208-2540
1-800-253-2277
aarp.scudder.com
Scudder Funds
PO Box 2291
Boston, MA 02107-2291
1-800-SCUDDER
www.scudder.com
A member of the [LOGO] Zurich Financial Services Group
