SCUDDER
INVESTMENTS (SM)
[LOGO]
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EQUITY/DOMESTIC
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Scudder Dividend & Growth Fund
Fund #303
Annual Report
December 31, 1999
Seeking high current income and long-term growth of capital through investment
in income-paying equity securities.
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
19 Investment Portfolio
26 Financial Statements
29 Financial Highlights
30 Notes to Financial Statements
34 Report of Independent Accountants
35 Tax Information
35 Officers and Trustees
36 Investment Products and Services
38 Scudder Solutions
2
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Scudder Dividend & Growth Fund
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ticker symbol SDGFX fund number 303
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Date of o Scudder Dividend & Growth Fund outperformed its peers
Inception: by a significant margin, ranking in the top 7% of 219
7/17/98 equity income funds according to Lipper Analytical
Services.^1
Total Net
Assets as o Good selection in the convertible security and real
of 12/31/99: estate investment trust portions of the portfolio made
$25 million significant contributions to fund performance.
o Undervalued stocks, which typically comprise about half
of the portfolio, were not in favor in 1999 as a
handful of large-cap growth stocks dominated returns.
o The fund's position in technology stocks, which has
been underweighted, was increased toward the end of the
period, helping performance.
^1 Source: Lipper Analytical Services, Inc., an independent analyst of
investment performance. Total returns include reinvestment of dividends and
capital gains. The fund ranked 14th among 219 equity income funds for the
one-year period ended 12/31/99. Past performance is no guarantee of future
results.
3
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Letter from the Fund's President
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Dear Shareholders,
In 1999 we witnessed another year of strong performance for the equity markets
as large-cap growth, especially technology stocks, recorded impressive returns.
Against the current backdrop of high consumer confidence, robust economic
growth, and relatively low inflation, these generous returns have had the
potential to make other asset classes seem less important to an investor's
overall portfolio. Strong gains in certain sectors can have the effect of
unintentionally increasing one's exposure to a particular asset class or
industry sector. Given this potential, we encourage shareholders to carefully
review their holdings to ensure that current allocations continue to match their
objectives and provide adequate exposure to several asset classes.
As a shareholder in Scudder Dividend & Growth Fund, you already hold a core
component of a well-diversified portfolio. We believe the fund's combination of
investments in undervalued stocks, convertible securities, and real estate
investment trusts has the potential to provide competitive returns and a measure
of protection in periods of market decline. With a few high growth stocks
leading market returns over the last few years, we think this fund has the
potential to stand out, especially if the currently high valuations of some
growth stocks prove unsustainable. For a detailed discussion of management's
investment strategy and portfolio positioning, I encourage you to read the
Portfolio
4
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Management Discussion with Kathleen Millard, Nicholas Anisimov, and Gregory
Adams beginning on page 10.
For current information on the fund and your account, visit our Internet Web
site at www.scudder.com. There you'll find a wealth of information, including
the fund's most recent 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).
In closing, I would like to inform you that Daniel Pierce, president of the
fund, retired in June 1999. At that time I assumed his role and
responsibilities. We are fortunate that Dan's long-standing affiliation with
Scudder is ongoing, and that we will continue to benefit from his counsel. I am
pleased to join the fund's team in this capacity, and look forward to serving
your interests.
Thank you for your continued investment in Scudder Dividend & Growth Fund.
Sincerely,
/s/Lynn S. Birdsong
Lynn S. Birdsong
President,
Scudder Dividend & Growth Fund
5
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Performance Update
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December 31, 1999
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Growth of a $10,000 Investment
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THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
S&P 500 Index (60%),
Morgan Stanley Real
Estate Investment
Trust Index (20%),
Scudder Dividend Merrill Lynch All
& Growth Fund S&P 500 Index* Convertible Index (20%)*
7/17/98** 10000 10000 10000
7/98 9408 9447 9493
9/98 8832 8599 8726
12/98 9599 10431 10025
3/99 9921 10950 10335
6/99 10917 11723 11138
9/99 10088 10991 10465
12/99 11155 12626 11946
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Fund Index Comparison
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Total Return
Growth of Average
Period ended 12/31/1999 $10,000 Cumulative Annual
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Scudder Dividend & Growth Fund
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1 year $ 11,620 16.20% 16.20%
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Life of Fund** $ 11,155 11.55% 7.79%
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S&P 500 Index (60%), Morgan Stanley Real Estate Investment Trust Index (20%),
Merrill Lynch All Convertible Index (20%)*
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1 year $ 11,916 19.16% 19.16%
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Life of Fund** $ 11,946 19.46% 12.97%
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* The Standard and Poor's (S&P) 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. The Morgan Stanley Real Estate
Investment Trust Index is a total-return index comprised of the most
actively traded real estate investment trusts and is designed to be a
measure of real estate equity performance. The Merrill Lynch All
Convertible (MLAC) Index is composed of all types of U.S. domestic
convertible instruments (bonds, preferred, etc.). Index returns assume
reinvestment of dividends and, unlike Fund returns, do not reflect any fees
or expenses.
** The Fund commenced operations on July 17, 1998. Index comparisons begin on
July 17, 1998.
6
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Returns and Per Share Information
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Periods ended December 31
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
S&P 500 Index (60%), Morgan
Stanley Real Estate Investment
Scudder Dividend & Trust Index (20%), Merrill Lynch
Growth Fund All Convertible Index (20%)*
1998 -4.00 -0.34
1998 16.20 19.16
1998 1999
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Fund Total
Return (%) -4.00 16.20
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Index Total
Return (%) -.34 19.16
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Net Asset
Value ($) 11.35 12.76
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Income
Dividends ($) .17 .40
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Capital Gains
Distributions ($) -- --
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* The Standard and Poor's (S&P) 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. The Morgan Stanley Real Estate
Investment Trust Index is a total-return index comprised of the most
actively traded real estate investment trusts and is designed to be a
measure of real estate equity performance. The Merrill Lynch All
Convertible (MLAC) Index is composed of all types of U.S. domestic
convertible instruments (bonds, preferred, etc.). Index returns assume
reinvestment of dividends and, unlike Fund returns, do not reflect any fees
or expenses.
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 would have been lower.
7
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Portfolio Summary
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December 31, 1999
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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.
Common Stocks 48%
REITs 18%
Convertible Preferred 8%
Short Term Investments 6%
Convertible Bonds 20%
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100%
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The fund's convertible and REIT holdings outperformed their respective asset
classes by a wide margin.
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Sector Diversification
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(Excludes 6% Short Term Investments)
A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
REIS 18%
Communications 14%
Technology 13%
Financial 11%
Health 8%
Media 8%
Manufacturing 7%
Energy 5%
Durables 2%
Service Industries 4%
Other 10%
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100%
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An increased exposure to technology in the common stock portion of the portfolio
contributed significantly to performance.
8
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Ten Largest Holdings
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(24% of Portfolio)
1. Boston Properties, Inc. (REIT)
Commercial and industrial real estate developer
2. Spieker Properties, Inc. (REIT)
Independent equity investment trust which owns and
develops commercial real estate
3. Omnicom Group, Inc.
Leading advertising company
4. Corning, Inc.
Specialty glass manufacturer
5. Equity Office Properties Trust (REIT)
Owner of office properties and parking facilities
6. Taubman Centers, Inc. (REIT)
Real estate investment trust company
7. Global Crossing Ltd.
Internet communication services
8. Interpublic Group of Companies, Inc.
Advertising agency
9. American International Group, Inc.
Provider of insurance
10. Siebel Systems, Inc.
Supplier of marketing and customer service information
systems
Rather than holding a large number of REITs, management has focused on building
meaningful positions in a few well managed companies with strong positions.
For more complete details about the Fund's investment portfolio, see page 19. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
9
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Portfolio Management Discussion
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December 31, 1999
In the following interview, portfolio managers Kathleen T. Millard, Nicholas
Anisimov, and Gregory S. Adams discuss the market environment and their approach
to managing the fund.
Q: A handful of growth stocks dominated market returns over the year, despite a
brief rally in value-oriented securities in the second calendar quarter. How did
dividend-producing equity securities perform?
A: Value stocks, which constitute the majority of the fund's investments, were
not in favor. For most of the year, U.S. stock market performance remained
concentrated in a few high growth stocks. Meanwhile, other equity securities
remained flat or declined. This environment especially impacted real estate
investment trusts (REITs) and undervalued stocks. The phenomenon is similar to
the environment in 1998, but the disparity was even more pronounced in 1999. The
returns of the Russell indices show that the performance spread between growth
and value stocks widened. (See Total returns table below.)
Q: How did the fund perform?
A: The fund performed very well relative to its peers. For the 12-month period,
it ranked in the top 7% of 219 equity income funds according to Lipper
Analytical Services. However, equity income funds overall trailed the 21.04%
return of the unmanaged S&P 500 Index due, in part, to the significant component
of technology stocks in the index and their exceptional performance over the
year.
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Total returns
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Growth Value Difference
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1998 33.71% 15.63% 18.08%
1999 33.16% 7.35% 25.81%
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All indices are unmanaged and reflect performance for the 12-month periods ended
12/31. The Russell 1000 Growth Index represents large-cap growth stocks; the
Russell 1000 Value Index represents large-cap value stocks.
10
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Q: The fund invests in three major areas: undervalued common stocks, convertible
securities, and REITs. How did the portfolio perform in each respective area?
A: At the end of the period, the fund had 48% in common stocks, 28% in
convertibles, and 18% in REITs. Relative to our benchmark for convertibles, the
fund's holdings performed exceptionally well, up 48.40% versus 39.56% for the
unmanaged Merrill Lynch All Convertible Index. While REITs overall reported
negative returns (the Morgan Stanley REIT Index returned -4.55%) your holdings
in this area outperformed the index by a wide margin, up 4.35%. We are pleased
with this achievement, especially given the difficult market environment for
REITs in 1999. The common stock portion of the portfolio -- reflecting the weak
performance of value stocks -- returned only 7.98%. As mentioned earlier, the
fund's underweighting of the strongest performing common stock sector --
technology -- was a significant disadvantage over much of the year.
Q: In the common stock portion of the portfolio you broadened the fund's
investment universe by adding additional variables to the selection process.
What enhancements were made?
A: As you may know, we modified the fund's stock selection criteria last summer
so that we would not have to rely solely on our relative dividend yield strategy
to uncover undervalued stocks. In short, we added several criteria -- including
price/earnings and price/cash flow ratios -- to our selection process. We think
this enhancement will enable us to increase the fund's exposure on an
opportunistic basis to sectors that are heavily populated by low- or
non-dividend-paying stocks, such as those in the health care and technology
sectors. By broadening the investment universe and sector base of the common
stock portion of the portfolio, we believe that the fund will have greater
opportunities to outperform over the long term.
11
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Q: Why was the investment criteria expanded for common stocks?
A: In recent years, there has been a fundamental shift in U.S. corporate policy
in favor of share repurchases and the reinvestment of cash flows, rather than in
making regular dividend payments to stockholders. For instance, 36% of the
largest 1000 companies as measured by the Russell 1000 Index pay no dividends.
In addition, fully 25% of the companies that comprise the Russell 1000 Value
Index also make no dividend payments. Our relative dividend yield strategy
excluded these stocks, even though many were attractive values by other
measures.
Q: Have you been able to take advantage of the expanded investment universe?
A: We doubled our stock holdings in the technology area in the fourth quarter
while still maintaining our commitment to undervalued stocks. The fund has
traditionally underweighted tech due to its reliance on the relative yield
strategy. We added Electronic Data Systems, Microsoft, America Online, Compaq
Computer, Intel, IBM, Hewlett-Packard, and Oracle. While the increased weighting
helped the fund tremendously, our benchmark -- the S&P 500 -- still held a
larger sector weighting in tech (30% of the index). The performance difference
in the quarter is attributed primarily to the fund's smaller weighting in
technology stocks.
Q: Oracle and Intel represent your two largest tech positions among your common
stock holdings. What is your outlook for these two companies?
A: Within the tech sector, we are overweighted in software, semiconductors, and
telecommunications stocks, while remaining underweighted in hardware companies.
In the case of Oracle, we are positive on the company. It has a unique position.
Oracle supplies software products that many corporations use to manage
information, including e-commerce and e-business applications. The company
offers leading products in many areas and our earnings
12
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outlook is currently favorable. Although Intel lagged other semiconductor stocks
in 1999, the stock is one of our semiconductor analyst's top picks for 2000.
Essentially, the company is a proxy for microprocessors, which are used in an
increasingly wide range of applications. We think the stock is attractively
valued and we are expecting earnings to reaccelerate this year.
Q: Were there other factors that impacted the stock portion of the portfolio?
A: We had a number of sectors and positions that contributed positively to the
fund's performance for the year. The fund benefited from strong stock selection
in communications (Sprint, Global Crossing, Alltel, and Bell Atlantic/GTE),
energy (Total Fina), and construction (Weyerhaeuser). However, weak stock
selection in finance (XL Capital, Banc One, First Union, and Fleet Boston
Financial) and manufacturing (Lyondell Petrochemical) were significant
detractors.
Q: Finance is the largest industry sector in the stock portion of the portfolio,
reflecting the fund's value-orientation. With interest rates rising, how did you
manage this sector?
A: Our strategy in financial stocks has been to emphasize companies with scale
and global reach. We have emphasized the insurance segment for two reasons: We
expect a pricing recovery for property and casualty companies and these
companies are not exposed to the negative effects of rising interest rates as
are other financials. We are avoiding niche players on the theory that their
products are about to be "commoditized" by larger competitors seeking
incremental margin. Niche players are also more vulnerable to disintermediation
by Internet-based distribution. Scale and global reach should help offset local
interest rate and credit pressures.
We are equal-weighted in banks versus the S&P 500, but deeply underweighted (50%
of the benchmark weighting) versus value benchmarks, a performance risk if
financial
13
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stocks outperform. However, this scenario requires a positive interest rate
backdrop, which does not appear likely for at least six months given the Federal
Reserve's current bias to raise interest rates. Meanwhile, the near term outlook
for bank earnings is weakening and the appetite for bank-to-bank consolidation
is waning. The group has been underperforming since mid-1998, but historically
valuation has not been a good anchor for banks during periods of credit
deterioration.
Q: Did you make other changes to the portfolio?
A: We reduced some of the fund's industry sector bets in favor of making the
fund more sector-neutral. Our rationale for this market-weighting is driven by
our individual stock selection approach. Since we believe that one of our core
competencies is fundamental research and analysis of companies, we prefer that
it drive our selection process. Specifically, we moved out of some illiquid and
smaller-cap holdings, and reduced our exposure to communications stocks. The
fund's holdings of regional bell operating companies (RBOCs) and other
communications companies was also reduced, but it is still more than the S&P 500
communications sector weighting of about 8%.
Q: Given the fund's overweighting in energy, are you expecting a market
correction?
A: While there is always a possibility of a market decline in the short run, we
do not make big sector bets based on where we think the overall economy or
markets might be going. The fund's sector weightings are determined largely by
our valuation screen, company fundamentals, and risk control measures we employ
in managing the fund (see Security Selection Process below). With regard to the
energy sector, we are overweighted in this area mainly because valuations are
attractive and our earnings forecast for many companies in this sector is very
strong. The
14
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Security Selection Process -- Common Stocks
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3-Step Investment Process
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Valuation Fundamental Research Risk Management
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Criteria Analyst ratings are Company Specific Risk
- -------- used to narrow the ---------------------
Multi-factor model list. Focus is on the Manage valuation,
screens stocks for management strategy of fundamentals, and
attractive valuations. the company and the position sizes.
dynamics of the
Rank stocks by quintile company's financial Portfolio Risk
- ----------------------- statements. --------------
o 1-2 Buy Maintain
o 3-4 Hold diversification, value
o 5 Sell tilt, and monitor
performance deviation
from S&P 500.
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higher price of oil should help the earnings of a number of companies and we
have attempted to invest in the best names that meet our criteria in this area.
Q: The REIT and convertible securities portions of the portfolio outperformed
their benchmarks by a wide margin. Please describe the investment environment
and what contributed to these strong gains.
A: The economic environment for REITs has been the best that it has ever been.
We have had strong economic growth, rising income levels, strong domestic job
growth, and low vacancy rates. In addition, the low inflation and relatively low
interest rates environment in 1999 has been positive. Given the overwhelmingly
favorable conditions in 1999, why was this sector's performance negative? We
think that investors have a perception that: "If the environment for REITs is so
good right now, how can it get any better?" Secondly, the rising rate
environment has been perceived as a negative for REITs. We believe that REITs
tend to perform better than classic "rate sensitive" stocks, e.g., finance
stocks, over the long term. Third, REITs are not technology stocks and, as such,
have been out of favor as most domestic investor cash flows have gone into
technology and high growth stocks.
15
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Q: Where have you focused the fund's REIT holdings?
A: We have continued to concentrate on selecting the right REITs that we think
are delivering consistently high growth. Spieker Properties, one of our top
holdings, is a good example. The company is in the office building segment and
has a large commitment to properties in Silicon Valley. In our opinion, this
location places the firm at the center of the most rapidly growing part of the
global economy -- the U.S. technology sector. We believe that this positioning
and the strength of the firm's management team is evident in the company's
excellent performance in 1999. Boston Properties has been another strong
performer. This company is in the office sector and has concentrated holdings in
four major metropolitan areas: New York, Boston, Washington, D.C., and San
Francisco. With supply constrained in these markets and an entrepreneurial
management team at the helm, we believe Boston Properties should continue to add
to its good performance.
Two well-managed REITs in the regional mall sector held back performance --
General Growth Properties and Taubman Centers. Apparently some investors worried
that Internet shopping would hurt "bricks and mortar" retailers. This assumption
proved false as mall shoppers turned out in record numbers in the fourth
quarter. General Growth and Taubman are focusing on properties that attract
shoppers with excellent demographic characteristics, which allows them to sign
leases with high quality, rapidly growing tenants, such as The Gap, Abercrombie
& Fitch, and Target. As a result, we view these firms as temporarily out of
favor.
Q: What about the fund's convertible securities holdings?
A: Of the fund's three major asset classes, its convertible securities holdings
provided outstanding returns. Overall, convertibles rose strongly, but our
holdings outperformed the convertible market and the S&P 500 by a significant
margin. We were helped by holdings in the technology, advertising, and
pharmaceuticals sectors. The
16
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fund benefited from substantial gains from our holdings of QUALCOMM, Omnicom,
Interpublic Group of Companies, and IDEC Pharmaceutical. A few positions held
back performance, including Alza Pharmaceuticals (a takeover by Abbott Labs
failed to materialize), Monsanto, and Alpharma.
Q: What is your overall outlook for the fund?
A: Our goal is to achieve first quartile performance among our peers and to beat
the S&P 500 Index. We are pleased that we have achieved the first part of this
goal over the fiscal period. We believe that the fund's broadened investment
universe will provide the portfolio with additional opportunities to outperform
the S&P 500 over the long term. While the enhancements to the common stock
portion of the portfolio have only recently been implemented and may take time
to show results, we are confident that we will be able to achieve both of these
goals. We also have favorable outlooks for REITs and convertible securities.
When the Federal Reserve completes it program of raising interest rates, we
expect REITs to recover after adjusting to the higher rate environment. For
convertibles, we will continue to focus on investing in these securities as a
means to participate in growing companies, often at more reasonable prices than
a firm's common stock.
17
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Scudder Dividend & Growth Fund:
A Team Approach to Investing
Scudder Dividend & 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.
Lead portfolio manager Kathleen T. Millard joined the Adviser in 1991 as a
portfolio manager. Ms. Millard began her investment career in 1983.
Portfolio manager Nicholas Anisimov focuses on the fund's convertible securities
investments. Mr. Anisimov joined the Adviser in 1987. Mr. Anisimov is a
Chartered Financial Analyst with 14 years of industry experience.
Portfolio manager Gregory S. Adams joined the fund in 1999 and focuses on stock
selection and investment strategy. Mr. Adams has worked in the investment
industry since 1987 and at the Adviser since 1999.
18
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<TABLE>
<CAPTION>
Investment Portfolio as of December 31, 1999
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Principal
Amount ($) Value ($)
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Short Term Investments 6.3%
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<S> <C> <C>
Federal Home Loan Mortgage Corp., 1.50%** with various
maturities to 1/3/2000 (Cost $1,563,870) .......................... 1,564,000 1,563,870
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Convertible Bonds 20.1%
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Health 4.7%
Biotechnology 1.4%
Centocor Inc., 4.75%, 2/15/2005 ................................... 249,000 333,660
---------
Pharmaceuticals 3.3%
Alpharma Inc., 5.75%, 4/1/2005 .................................... 309,000 367,132
IDEC Pharmaceutical Corp., 0%, 2/16/2019* ......................... 328,000 436,240
---------
803,372
---------
Communications 1.4%
Telephone/Communications 1.4%
Nextel Communications, 4.75%, 7/1/2007 ............................ 154,000 347,270
---------
Financial 2.8%
Insurance 1.2%
American International Group, Inc., 2.25%, 7/30/2004 .............. 194,000 302,883
---------
Other Financial Companies 1.6%
American Express Corp, 1.125%, 2/19/2003 .......................... 282,000 399,735
---------
Media 6.2%
Advertising 4.7%
Interpublic Group of Companies, Inc., 1.8%, 9/16/2004 ............. 325,000 507,406
Omnicom Group, Inc., 4.25%, 1/3/2007 .............................. 203,000 650,361
---------
1,157,767
---------
Cable Television 1.5%
EchoStar Communications Corp., 4.875%, 1/1/2007 ................... 300,000 368,250
---------
Technology 5.0%
Computer Software 2.0%
Siebel Systems, Inc., 5.5%, 9/15/2006 ............................. 253,000 489,555
---------
The accompanying notes are an integral part of the financial statements.
19
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Principal
Amount ($) Value ($)
- ---------------------------------------------------------------------------------------------
EDP Peripherals 1.2%
EMC Corp., 3.25%, 3/15/2002 ....................................... 30,000 289,275
---------
Electronic Components/Distributors 1.8%
Solectron Corp., 0% 1/27/2019* .................................... 580,000 435,544
---------
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Total Convertible Bonds (Cost $3,934,511) 4,927,311
- ---------------------------------------------------------------------------------------------
Shares
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- ---------------------------------------------------------------------------------------------
Convertible Preferred Stocks 8.4%
- ---------------------------------------------------------------------------------------------
Communications 5.0%
Cellular Telephone 2.0%
QUALCOMM Financial Trust, 5.75%, .................................. 477 468,891
---------
Miscellaneous 3.0%
Global Crossing Ltd., 6.375% ...................................... 3,000 376,500
UnitedGlobalCom Inc., 7% .......................................... 6,000 379,500
---------
756,000
---------
Financial 1.2%
Other Financial Companies
American General Deleware LLC, 6% ................................. 3,300 310,613
---------
Media 0.8%
Print Media
Tribune Co., 2% ................................................... 1,200 189,000
---------
Service Industries 1.4%
EDP Services
PSINet Inc., 6.75% ................................................ 6,000 350,250
---------
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Total Convertible Preferred Stocks (Cost $1,605,957) 2,074,754
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The accompanying notes are an integral part of the financial statements.
20
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Shares Value ($)
- ------------------------------------------------------------------------------------------
Common Stocks 65.2%
- ------------------------------------------------------------------------------------------
Consumer Discretionary 1.0%
Department & Chain Stores
Wal-Mart Stores, Inc. ........................................... 3,500 241,938
---------
Consumer Staples 2.4%
Alcohol & Tobacco 0.6%
Anheuser-Busch Companies, Inc. .................................. 2,000 141,750
---------
Food & Beverage 0.9%
H.J. Heinz Co. .................................................. 3,200 127,400
PepsiCo, Inc. ................................................... 2,600 91,650
---------
219,050
---------
Package Goods/Cosmetics 0.9%
Avon Products, Inc. ............................................. 6,900 227,700
---------
Health 3.6%
Hospital Management 0.2%
Columbia/HCA Healthcare Corp. ................................... 1,500 43,969
---------
Pharmaceuticals 3.4%
American Home Products Corp. .................................... 5,800 228,738
Bristol-Myers Squibb Co. ........................................ 2,600 166,888
Glaxo Wellcome PLC (ADR) ........................................ 2,000 111,750
Johnson & Johnson ............................................... 2,500 232,813
SmithKline Beecham PLC (ADR) .................................... 1,700 109,544
---------
849,733
---------
Communications 6.4%
Telephone/Communications
AT&T Corp. ...................................................... 1,200 60,900
Alltel Corp. .................................................... 1,400 115,763
Bell Atlantic Corp. ............................................. 3,700 227,781
BellSouth Corp. ................................................. 7,500 351,094
GTE Corp. ....................................................... 3,400 239,913
Global Crossing Ltd.* ........................................... 3,730 186,500
SBC Communicatons, Inc. ......................................... 5,100 248,625
Sprint Corp. .................................................... 2,400 161,550
---------
1,592,126
---------
The accompanying notes are an integral part of the financial statements.
21
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Shares Value ($)
- ------------------------------------------------------------------------------------------
Financial 25.5%
Banks 2.0%
Chase Manhattan Corp. ........................................... 2,400 186,450
First Union Corp. ............................................... 2,900 95,156
FleetBoston Financial Corp. ..................................... 3,400 118,363
US Bancorp ...................................................... 5,000 119,063
---------
519,032
---------
Insurance 2.1%
American International Group, Inc. .............................. 1,800 194,625
Marsh & McLennan Companies, Inc. ................................ 2,100 200,944
XL Capital Ltd. "A" ............................................. 2,400 124,500
---------
520,069
---------
Consumer Finance 1.6%
American Express Co. ............................................ 500 83,125
Citigroup, Inc. ................................................. 4,300 238,919
SLM Holding Corp. ............................................... 1,800 76,050
---------
398,094
---------
Other Financial Companies 1.7%
Federal National Mortgage Association ........................... 3,600 224,775
Morgan Stanley Dean Witter & Co. ................................ 1,400 199,850
---------
424,625
---------
Real Estate 18.1%
AMB Property Corp (REIT) ........................................ 24,300 484,481
Arden Realty Group, Inc. (REIT) ................................. 23,100 463,444
Boston Properties, Inc. (REIT) .................................. 27,300 849,702
Equity Office Properties Trust (REIT) ........................... 23,600 581,150
Equity Residential Properties Trust (REIT) ...................... 7,000 298,813
General Growth Properties, Inc. (REIT) .......................... 4,400 123,200
ProLogis Trust (REIT) ........................................... 18,700 359,975
Spieker Properties, Inc. (REIT) ................................. 20,300 739,681
Taubman Centers, Inc. (REIT) .................................... 53,100 570,825
---------
4,471,271
---------
Media 0.9%
Broadcasting & Entertainment 0.6%
Walt Disney Co. ................................................. 4,700 137,475
---------
Cable Television 0.3%
Comcast Corp. "A" ............................................... 1,600 80,400
---------
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
Shares Value ($)
- ---------------------------------------------------------------------------------------
Service Industries 1.9%
EDP Services 0.8%
Electronic Data Systems Corp. ................................... 3,000 200,813
-------
Environmental Services 0.1%
Transocean Sedco Forex Inc. ..................................... 213 7,189
-------
Printing/Publishing 1.0%
McGraw-Hill, Inc. ............................................... 4,000 246,500
-------
Durables 1.5%
Aerospace 0.7%
Rockwell International Corp. .................................... 3,500 167,563
-------
Automobiles 0.8%
Ford Motor Co. .................................................. 3,900 208,406
-------
Manufacturing 6.7%
Chemicals 1.7%
Dow Chemical Co. ................................................ 2,600 347,425
E.I. du Pont de Nemours & Co. ................................... 1,300 85,638
-------
433,063
-------
Electrical Products 1.8%
Emerson Electric Co. ............................................ 2,200 126,225
General Electric Co. ............................................ 2,100 324,975
-------
451,200
-------
Industrial Specialty 2.4%
Corning, Inc. ................................................... 4,600 593,113
-------
Machinery/Components/Controls 0.8%
Parker-Hannifin Corp. ........................................... 4,000 205,250
-------
Technology 7.0%
Computer Software 3.9%
America Online, Inc. ............................................ 2,400 181,050
Computer Associates International, Inc. ......................... 2,300 160,856
Microsoft Corp.* ................................................ 2,100 245,175
Oracle Corp.* ................................................... 3,300 369,806
-------
956,887
-------
Electronic Data Processing 1.2%
Compaq Computer Corp. ........................................... 2,200 59,538
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
Shares Value ($)
- ---------------------------------------------------------------------------------------
Hewlett-Packard Co. ............................................. 800 91,150
International Business Machines Corp. ........................... 1,300 140,400
-------
291,088
-------
Semiconductors 1.9%
Conexant Systems, Inc.* ......................................... 2,100 139,388
Intel Corp. ..................................................... 3,900 321,019
-------
460,407
-------
Energy 4.7%
Oil & Gas Production 1.0%
Conoco, Inc. "A" ................................................ 4,600 113,875
Royal Dutch Petroleum Co. (New York shares) ..................... 2,300 139,006
-------
252,881
-------
Oil Companies 3.5%
Exxon Mobil Corp. ............................................... 3,036 244,588
Texaco, Inc. .................................................... 4,600 249,838
Total Fina SA (ADR) ............................................. 5,407 374,435
-------
868,861
-------
Oilfield Services/Equipment 0.2%
Schlumberger Ltd. ............................................... 1,100 61,875
-------
Metals & Minerals 0.3%
Steel & Metals
Alcoa, Inc. ..................................................... 900 74,700
-------
Construction 0.9%
Forest Products
Weyerhaeuser Co. ................................................ 3,000 215,438
-------
Transportation 0.8%
Airlines 0.3%
AMR Corp. ....................................................... 1,300 87,100
-------
Railroads 0.5%
CSX Corp. ....................................................... 3,800 119,225
-------
Utilities 1.5%
Electric Utilities
ScottishPower plc ............................................... 7,714 215,992
Unicom Corp. .................................................... 4,500 150,750
-------
366,742
-------
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
Shares Value ($)
- ------------------------------------------------------------------------------------
Miscellaneous 0.1%
Miscellaneous
Standard & Poor's 500 Depository Receipt Trust Series I ......... 154 22,619
-------
Total Common Stocks (Cost $15,586,303) 16,158,152
- ---------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $22,690,642) (a) 24,724,087
- ---------------------------------------------------------------------------------------
</TABLE>
* Non-income producing
** Annualized yield at time of purchase; not a coupon rate.
(a) The cost for federal income tax purposes was $22,713,484. At December 31,
1999, net unrealized appreciation for all securities based on tax cost was
$2,010,603. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of value over tax cost of
$3,368,074 and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over value of $1,357,471.
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
<TABLE>
<CAPTION>
Financial Statements
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Statement of Assets and Liabilities as of December 31, 1999
- ----------------------------------------------------------------------------------------------
Assets
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Investments in securities, at value (cost $22,690,642) ....................... $ 24,724,087
Cash ......................................................................... 1,910
Dividends receivable ......................................................... 60,181
Interest receivable .......................................................... 26,330
Receivable for Fund shares sold .............................................. 25,257
Foreign taxes recoverable .................................................... 2,239
Other assets ................................................................. 10,146
------------
Total assets ................................................................. 24,850,150
Liabilities
- ----------------------------------------------------------------------------------------------
Payable for Fund shares redeemed ............................................. 54,738
Due to Adviser ............................................................... 7,800
Other accrued expenses and payables .......................................... 45,147
------------
Total liabilities ............................................................ 107,685
- ----------------------------------------------------------------------------------------------
Net assets, at value $ 24,742,465
- ----------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation (depreciation) on:
Investments .................................................................. 2,033,445
Accumulated net realized gain (loss) ......................................... (508,359)
Paid-in capital .............................................................. 23,217,379
- ----------------------------------------------------------------------------------------------
Net assets, at value $ 24,742,465
- ----------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share ($24,742,465 /
1,939,138 outstanding shares of beneficial interest, $.01 par value, unlimited ------------
number of shares authorized) ............................................... $ 12.76
------------
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
- ----------------------------------------------------------------------------------------------
Statement of Operations for the year ended December 31, 1999
- ----------------------------------------------------------------------------------------------
Investment Income
- ----------------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $1,696) .......................... $ 664,997
Interest ..................................................................... 104,294
------------
Total income ................................................................. 769,291
------------
Expenses:
Management fee ............................................................... 181,066
Services to shareholders ..................................................... 110,392
Custodian and accounting fees ................................................ 51,362
Trustees' fees and expenses .................................................. 19,405
Reports to shareholders ...................................................... 56,260
Auditing ..................................................................... 22,280
Legal ........................................................................ 6,560
Registration fees ............................................................ 48,519
Other ........................................................................ 3,063
------------
Total expenses, before expense reductions .................................... 498,907
Expense reductions ........................................................... (317,792)
------------
Total expenses, after expense reductions ..................................... 181,115
- ----------------------------------------------------------------------------------------------
Net investment income (loss) 588,176
- ----------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments .................................................................. 445,900
Foreign currency related transactions ........................................ (15)
------------
445,885
Net unrealized appreciation (depreciation) during the period on:
Investments .................................................................. 2,454,113
- ----------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 2,899,998
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 3,488,174
- ----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the period
July 17, 1998
(commencement
of operations)
Year Ended to
December 31, December 31,
Increase (Decrease) in Net Assets 1999 1998
- --------------------------------------------------------------------------------
Operations:
Net investment income (loss) .................... $ 588,176 $ 356,956
Net realized gain (loss) on investment
transactions .................................. 445,885 (870,914)
Net unrealized appreciation (depreciation) on
investment transactions during the period ..... 2,454,113 (420,668)
------------ -------------
Net increase (decrease) in net assets resulting
from operations ............................... 3,488,174 (934,626)
------------ -------------
Distributions to shareholders:
From net investment income ...................... (771,938) (360,021)
------------ -------------
Fund share transactions:
Proceeds from shares sold ....................... 6,182,288 30,200,611
Reinvestment of distributions ................... 707,787 328,598
Cost of shares redeemed ......................... (9,500,482) (4,599,126)
------------ -------------
Net increase (decrease) in net assets from Fund
share transactions ............................ (2,610,407) 25,930,083
------------ -------------
Increase (decrease) in net assets ............... 105,829 24,635,436
Net assets at beginning of period ............... 24,636,636 1,200
Net assets at end of period (including
undistributed net investment income of $6,261, ------------ -------------
at December 31, 1998) ......................... $ 24,742,465 $ 24,636,636
------------ -------------
Other Information
- --------------------------------------------------------------------------------
Shares outstanding at beginning of period ....... 2,170,880 100
------------ -------------
Shares sold ..................................... 505,029 2,567,341
Shares issued to shareholders in reinvestment of
distributions ................................. 58,067 29,706
Shares redeemed ................................. (794,838) (426,267)
------------ -------------
Net increase (decrease) in Fund shares .......... (231,742) 2,170,780
------------ -------------
Shares outstanding at end of period ............. 1,939,138 2,170,880
------------ -------------
The accompanying notes are an integral part of the financial statements.
28
<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.
- --------------------------------------------------------------------------------
Years Ended December 31, 1999 1998(b)
- --------------------------------------------------------------------------------
Net asset value, beginning of period $11.35 $12.00
-----------------
- --------------------------------------------------------------------------------
Income (loss) from investment operations:
- --------------------------------------------------------------------------------
Net investment income (loss) (a) 29 .17
- --------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions 1.52 (.65)
-----------------
- --------------------------------------------------------------------------------
Total from investment operations 1.81 (.48)
- --------------------------------------------------------------------------------
Less distributions from:
- --------------------------------------------------------------------------------
Net investment income (.40) (.17)
-----------------
- --------------------------------------------------------------------------------
Total distributions (.40) (.17)
- --------------------------------------------------------------------------------
Net asset value, end of period $12.76 $11.35
-----------------
- --------------------------------------------------------------------------------
Total Return (%) (c) 16.20 (4.00)**
- --------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
- --------------------------------------------------------------------------------
Net assets, end of period ($ millions) 25 25
- --------------------------------------------------------------------------------
Ratio of expenses to before expense reductions (%) 2.07 2.56*
- --------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .75 .75*
- --------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) 2.44 3.36*
- --------------------------------------------------------------------------------
Portfolio turnover rate (%) 93 41*
- --------------------------------------------------------------------------------
(a) Based on monthly average shares outstanding during the period.
(b) For the period July 17, 1998 (commencement of operations) to December
31,1998.
(c) Total return would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
29
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
A. Significant Accounting Policies
Scudder Dividend and 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.
Portfolio debt securities purchased with an original maturity greater than sixty
days are valued by pricing agents approved by the officers of the Trust, whose
quotations reflect broker/dealer-supplied valuations and electronic data
processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. Money market instruments purchased with an original maturity of
sixty days or less are valued at amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Trustees.
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars. Investment securities and other assets and liabilities
denominated in a foreign currency are translated into U.S. dollars at the
30
<PAGE>
prevailing exchange rates at period end. Purchases and sales of investment
securities, income and expenses are translated into U.S. dollars at the
prevailing exchange rates on the respective dates of the transactions.
Net realized and unrealized gains and losses on foreign currency transactions
represent net gains and losses between trade and settlement dates on securities
transactions, the disposition of forward foreign currency exchange contracts and
foreign currencies, and the difference between the amount of net investment
income accrued and the U.S. dollar amount actually received. That portion of
both realized and unrealized gains and losses on investments that results from
fluctuations in foreign currency exchange rates is not separately disclosed but
is included with net realized and unrealized gains and losses on investment
securities.
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.
At December 31, 1999 the Fund had a net tax basis capital loss carryforward of
approximately $407,000 which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until December 31,
2006, the expiration date. In addition, from November 1, 1999 through December
31,1999 the Fund incurred approximately $82,000 of net realized capital losses.
As permitted by tax regulations, the Fund intends to elect to defer these losses
and treat them as arising in the fiscal year ended December 31, 2000.
Distribution of Income and Gains. Distributions of net investment income, if
any, are made quarterly. 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.
31
<PAGE>
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. As a result, net
investment income (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.
All discounts are accreted for both tax and financial reporting purposes.
B. Purchases and Sales of Securities
For the year ended December 31, 1999, purchases and sales of investment
securities (excluding short-term investments) aggregated $21,820,590 and
$25,268,907, respectively.
C. Related Parties
Under the Investment Management Agreement (the "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 Agreement. The management fee payable under the
Agreement is equal to an annual rate of approximately 0.75% of the Fund's
average daily net assets computed and accrued daily and payable monthly. In
addition, the Adviser agreed not to impose all or a portion of its management
fee until April 30, 2000 and to maintain the annualized expenses of the Fund at
no more than 0.75% of the average daily net assets. For the year ended December
31, 1999, the Adviser did not impose any of its fee, which amounted to $181,066.
In addition, during the year ended December 31, 1999, the Adviser reimbursed the
Fund $120,981 for losses incurred in connection with equity securities trading.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
32
<PAGE>
year ended December 31, 1999, SSC did not impose a portion of its fee
aggregating $96,432, and the amount imposed aggregated $6,188.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the year ended December 31,
1999, STC did not incur any such fees.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the year ended
December 31, 1999, SFAC did not impose any of its fee, which amounted to
$37,826.
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 December 31, 1999, Trustees' fees and expenses aggregated
$19,405.
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. For the year ended December 31, 1999,
the Fund's custodian and transfer agent fees were reduced by $1,846 and $622,
respectively, under these arrangements.
E. Line of Credit
The Fund and several Scudder Funds (the "Participants") share in a $1 billion
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 pro rata 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.
33
<PAGE>
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Trustees of Investment Trust and the Shareholders of Scudder Dividend &
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 Dividend & Growth Fund (the
"Fund") at December 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 accounting principles generally accepted in the United States.
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, 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 December 31, 1999 by correspondence with the custodian, provide
a reasonable basis for the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
February 25, 2000
34
<PAGE>
Tax Information
- --------------------------------------------------------------------------------
December 31, 1999
For corporate shareholders, 41% of the income dividends paid during the Fund's
fiscal year ended December 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.
Officers and Trustees
- --------------------------------------------------------------------------------
Lynn S. Birdsong* Bruce F. Beaty*
o President and Trustee o Vice President
Henry P. Becton, Jr. Jennifer P. Carter*
o Trustee; President and General o Vice President
Manager, WGBH Educational
Foundation James M. Eysenbach*
o Vice President
Dawn-Marie Driscoll
o Trustee; President, Driscoll William F. Gadsden*
Associates; Executive Fellow, o Vice President
Center for Business Ethics, Bentley
College Valerie F. Malter*
o Vice President
Peter B. Freeman
o Trustee, Corporate Director Ann M. McCreary*
o Vice President
George M. Lovejoy, Jr.
o Trustee; President and Director, Kathleen T. Millard*
Fifty Associates o Vice President
Wesley W. Marple, Jr. Robert D. Tymoczko*
o Trustee; Professor of Business o Vice President
Administration, Northeastern
University John Millette*
o Vice President and Secretary
Kathryn L. Quirk*
o Trustee, Vice President John R. Hebble*
and Assistant Secretary o Treasurer
Jean C. Tempel Caroline Pearson*
o Trustee; Venture Partner, o Assistant Secretary
Internet Capital Group
*Scudder Kemper Investments, Inc.
35
<PAGE>
Investment Products and Services
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
<S> <C>
Money Market U.S. Growth and Income
Scudder U.S. Treasury Money Fund Scudder Balanced Fund
Scudder Cash Investment Trust Scudder Dividend & Growth Fund
Scudder Money Market Series -- Scudder Growth and Income Fund
Prime Reserve Shares* Scudder Select 500 Fund
Premium Shares* Scudder S&P 500 Index Fund
Managed Shares* Scudder Real Estate Investment Fund
Scudder Government Money Market
Series -- Managed Shares* U.S. Growth
Value
Tax Free Money Market+ Scudder Large Company Value Fund
Scudder Tax Free Money Fund Scudder Value Fund***
Scudder Tax Free Money Market Scudder Small Company Value Fund
Series -- Managed Shares* Scudder Micro Cap Fund
Scudder California Tax Free Money Fund** Growth
Scudder New York Tax Free Money Fund** Scudder Classic Growth Fund***
Scudder Large Company Growth Fund
Tax Free+ Scudder Select 1000 Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Medium Term Tax Free Fund Scudder 21st Century Growth Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund Global Equity
Scudder California Tax Free Fund** Worldwide
Scudder Massachusetts Limited Term Scudder Global Fund
Tax Free Fund** Scudder International Value Fund
Scudder Massachusetts Tax Free Fund** Scudder International Growth and
Scudder New York Tax Free Fund** Income Fund
Scudder Ohio Tax Free Fund** Scudder International Fund++
Scudder International Growth Fund
U.S. Income Scudder Global Discovery Fund***
Scudder Short Term Bond Fund Scudder Emerging Markets Growth Fund
Scudder GNMA Fund Scudder Gold Fund
Scudder Income Fund Regional
Scudder Corporate Bond Fund Scudder Greater Europe Growth Fund
Scudder High Yield Bond Fund Scudder Pacific Opportunities Fund
Scudder Latin America Fund
Global Income The Japan Fund, Inc.
Scudder Global Bond Fund
Scudder International Bond Fund Industry Sector Funds
Scudder Emerging Markets Income Fund Choice Series
Scudder Financial Services Fund
Asset Allocation Scudder Heath Care Fund
Scudder Pathway Conservative Portfolio Scudder Technology Fund
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio Preferred Series
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small Company Fund
</TABLE>
36
<PAGE>
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
- --------------------------------------------------------------------------------
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs Education Accounts
Traditional IRA Education IRA
Roth IRA UGMA/UTMA
SEP-IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Closed-End Funds#
- -----------------------------------------------------------------------------------------
<S> <C>
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>
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.
37
<PAGE>
Scudder Solutions
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
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- Scudder Automated Information Line: SAIL(TM) --
clock electronic 1-800-343-2890
account
service and Personalized account information, the ability to exchange
information, or redeem shares, and information on other Scudder funds
including some and services via touchtone telephone.
transactions
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.
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1-800-SCUDDER www.scudder.com
Retirees and Automatic Withdrawal Plan
those who depend
on investment You designate the bank account, determine the schedule (as
proceeds for frequently as once a month) and amount of the redemptions,
living expenses and Scudder does the rest.
can enjoy these
convenient, Distributions Direct
timely, and
reliable Automatically deposits your fund distributions into the
automated bank account you designate within three business days after
withdrawal 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 Call a Scudder representative at
information about 1-800-SCUDDER
these services
Or visit our Web site at
www.scudder.com
Please address The Scudder Funds
all written PO Box 2291
correspondence Boston, Massachusetts
to 02107-2291
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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)
[SCUDDER LOGO]
PO Box 2291
Boston, MA 02107-2291
1-800-SCUDDER
www.scudder.com
A member of the [LOGO] Zurich Financial
Services Group
