SCUDDER
INVESTMENTS(SM)
[LOGO]
--------------------------
EQUITY/DOMESTIC
--------------------------
Scudder Dividend &
Growth Fund
Fund #303
Semiannual Report
June 30, 2000
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.
<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
23 Financial Statements
26 Financial Highlights
27 Notes to Financial Statements
32 Shareholder Meeting Results
33 Officers and Trustees
34 Investment Products and Services
36 Account Management Resources
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 In a volatile period for the financial markets, the
Inception: fund's emphasis on defensive, dividend-paying
7/17/98 securities enabled the fund to outperform its
benchmark. In addition, Lipper Analytical Services
ranked the fund in the top 6% of all equity-income
funds over the twelve-month period ended June 30, 2000.^1
Total Net o Each of the three components of the portfolio-- common
Assets as stocks, REITs, and convertible securities--
of 6/30/00: outperformed their respective benchmark indices. The
$26 million fund benefited from strong security selection in each
area.
^1 Lipper Analytical Services, Inc., is an independent analyst of
investment performance. Performance includes reinvestment of dividends
and capital gains. For the period ended June 30, 2000, Scudder Dividend
and Growth Fund's Lipper ranking was 13 out of 216 funds for the
one-year period. 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,
The global financial markets experienced unusual volatility during the first
half of the year. A powerful first quarter rally in growth stocks gave way to a
violent correction during April and May, as concerns built that the Fed would be
forced to raise interest rates several times in order to stem inflation
pressures. Just as market sentiment reached its nadir, however, the U.S. economy
began to show signs of cooling to a more manageable rate of growth. Taking this
to mean that the Fed would be less likely to raise rates over the second half of
the year, investors moved back into equities during June. The net result of
these fluctuations was that the U.S. market, as measured by the S&P 500,
finished the period virtually unchanged.
We believe that the lesson from the last six months is that no matter what is
taking place in the financial markets, it is essential to stay focused on your
goals and ensure that your investments are appropriately suited for your needs.
For many investors, however, the strong performance of the U.S. stock market
during the second half of the 1990s diminished the attractiveness of
diversification and a long-term point of view. But as the events of the first
half of 2000 demonstrated, these factors are still important components of a
successful investment strategy. In a period in which stocks experienced
significant volatility, portfolios
4
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with exposure to a wide variety of asset classes were generally better
positioned to ride out the market's fluctuations than portfolios that were
concentrated in a single area, such as technology. Unless you plan to devote
your energies to investing every day, we think that you will benefit from taking
a long-term approach that includes exposure to several asset classes.
As a shareholder of the Scudder Dividend & Growth Fund, you already own shares
of a fund that invests in a diversified portfolio of securities that tends to
pay higher dividends than the broader market. Although high-dividend stocks have
generally underperformed over the last two years, the group demonstrated strong
defensive qualities amid the volatile market environment of the past six months.
For more information on the reasons behind the fund's strong performance during
the first half of the year, please turn to the Portfolio Management Discussion
that begins on page 9NO TAG.
Thank you for your continued investment in Scudder Dividend & Growth Fund. For
current information on the fund or your account, visit our Web site at
www.scudder.com. You can also speak with the one of our representatives by
calling 1-800-SCUDDER (1-800-728-3337).
Sincerely,
/s/Lin Coughlin
Linda C. Coughlin
President,
Scudder Dividend & Growth Fund
5
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Performance Update
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June 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:
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 9500 9500
9/98 8833 8599 8676
12/98 9600 10431 9976
3/99 9921 10950 10312
6/99 10917 11722 11093
9/99 10088 10990 10479
12/99 11154 12626 11996
3/00 11460 12915 12441
6/00 11925 12572 12223
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Fund Index Comparison
--------------------------------------------------------------------------------
Total Return
Growth of Average
Period ended 6/30/2000 $10,000 Cumulative Annual
-------------------------------------------------------------------------------
Scudder Dividend & Growth Fund
-------------------------------------------------------------------------------
1 year $ 10,923 9.23% 9.23%
-------------------------------------------------------------------------------
Life of Fund** $ 11,925 19.25% 9.42%
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S&P 500 Index (60%), Morgan Stanley Real Estate Investment
Trust Index (20%), Merrill Lynch All Convertible Index (20%)*
-------------------------------------------------------------------------------
1 year $ 11,019 10.19% 10.19%
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Life of Fund** $ 12,223 22.23% 10.82%
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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.
6
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--------------------------------------------------------------------------------
Returns and Per Share Information
--------------------------------------------------------------------------------
Yearly periods ended June 30
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE SCUDDER DIVIDEND & GROWTH FUND TOTAL RETURN (%) AND
S&P 500 INDEX (60%), MORGAN STANLEY REAL ESTATE INVESTMENT TRUST INDEX (20%),
MERRILL LYNCH ALL CONVERTIBLE INDEX (20%)* TOTAL RETURN (%)
1999** 2000
---------------------------------------------------------------
Fund Total
Return (%) 9.17 9.23
---------------------------------------------------------------
Index Total
Return (%) 10.93 10.19
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Net Asset
Value ($) 12.76 13.50
---------------------------------------------------------------
Income
Dividends
($) .31 .41
---------------------------------------------------------------
Capital
Gains
Distributions ($) -- --
---------------------------------------------------------------
* 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.
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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June 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.
Common Stocks 45% The fund's holdings in
REITs 20% each of its three areas
Cash Equivalents 6% of focus -- common
Convertible Preferred 1% stocks, REITs, and
Convertible Bonds 28% convertibles --
------------------------------------ outperformed their
100% respective benchmarks.
------------------------------------
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Sector Diversification
--------------------------------------------------------------------------------
A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
(Excludes 6% Cash Equivalents) The strong performance
REITs 21% of fund holdings in
Technology 18% REITs and technology
Financial 9% stocks was instrumental
Health 8% in its impressive
Energy 6% showing during the
Manufacturing 5% reporting period.
Media 5%
Communications 4%
Consumer Staples 3%
Durables 3%
Other 18%
------------------------------------
100%
------------------------------------
8
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Ten Largest Equity Holdings
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(23% of Portfolio) The fund's top ten
holdings demonstrate its
1. Siebel Systems, Inc. extensive
Supplier of marketing and customer diversification.
service information systems
2. Corning, Inc.
Manufacturer of specialty glass
3. American International Group, Inc.
Provider of insurance
4. Intel Corp.
Producer of semiconductor memory circuits
5. Avalonbay Communities, Inc.
Acquisition, development and management of apartment
communities
6. Post Properties, Inc.
Developer and manager of apartments, primarily in
Atlanta
7. Boston Properties, Inc.
Commercial and industrial real estate developer
8. Arden Realty Group, Inc.
Owner of office properties
9. Interpublic Group of Companies, Inc.
Advertising agency
10. Spieker Properties, Inc.
Independent equity investment trust which owns and
develops commercial real estate
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
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Portfolio Management Discussion
--------------------------------------------------------------------------------
June 30, 2000
In the following interview, Kathleen Millard, Nicholas Anisimov, Gregory S.
Adams and David Hoffman, portfolio managers of Scudder Dividend & Growth Fund,
discuss the recent market environment and the fund's current investment
strategy.
Q: The first half of 2000 was marked by extreme fluctuations in the U.S. stock
market. What has this meant for dividend-paying common stocks?
A: Within the equity portion of the portfolio, we tend to invest in the types of
securities that are traditionally classified as "value" stocks. In the first two
months of the year, the overall market posted negative returns despite a rally
in a small group of technology stocks and small cap growth names. Meanwhile,
value-oriented stocks responded negatively to rising long-term interest rates,
higher energy prices, and the threat of increases in short-term interest rates
by the U.S. Federal Reserve. However, the March-May period brought a significant
rotation in market leadership. Value stocks generally outperformed growth stocks
in this period, as stronger-than-expected corporate earnings, fears regarding
more aggressive Fed action, and a steep correction in technology shares weighed
heavily on the market. But by June, a powerful Nasdaq-driven rally propelled
large-cap growth indices higher, while softness in the financial and energy
sectors set the tone for a decline in large-cap value stocks.
Q: How did REITs and convertibles perform during the first six months of the
year?
A: REITs' performance during the first half of 2000 began to reflect the strong
fundamentals of the real estate markets. The extraordinary strength of the
economic expansion in the U.S. has increased the demand for space in nearly
every segment of the real estate market. As rents have risen to new highs,
same-property net operating income has increased at substantially higher rates,
and investment returns on new developments have likewise exceeded expectations.
For REITs, these trends translate
10
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into higher funds from operations and increased net asset values.
Meanwhile, the convertible market has generally mirrored the performance of the
broader market. Convertibles issued by companies in the technology and biotech
sectors experienced high volatility and lost ground during the second quarter,
following a strong first quarter. On the other hand, those in the more
traditional value areas -- such as energy and utilities -- produced stronger
performance over the full period.
Q: How did the fund perform in this environment?
A: Over the six-month period ended June 30, 2000, the fund returned 6.91%,
compared to a return of 6.51% for its benchmark index, a blend of the S&P 500
(60%), the Morgan Stanley Real Estate Investment Trust Index (20%), and the
Merrill Lynch All-Convertible Index. According to Lipper Analytical Services,
this performance placed the fund in the top 6% of all equity-income funds for
the trailing twelve months.* We are pleased to report that each component of the
portfolio beat its respective benchmark during the first half of the year, as
reflected in the table below:
<TABLE>
<CAPTION>
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Performance of Fund Components Versus Relevant Benchmarks
-----------------------------------------------------------------------------------------
<S> <C> <C>
Dividend & Growth Fund Equity +0.82% S&P 500 -0.42%
Dividend & Growth REITs 19.97% Morgan Stanley REIT Index 13.31%
Dividend & Growth Convertibles 7.64% Merrill Lynch All-Convertible Index 1.37%
-----------------------------------------------------------------------------------------
</TABLE>
* Source: Lipper Analytical Services, Inc. Lipper Analytical Services,
Inc., is an independent analyst of investment performance. Performance
includes reinvestment of dividends and capital gains. For the period
ended June 30, 2000, Scudder Dividend & Growth Fund's Lipper ranking
was 13 out of 216 funds for the one-year period. Past performance is no
guarantee of future results.
11
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Q: In the common stock portion of the portfolio, what holdings had the most
significant impact on performance?
A: The combination of our underweighted position in the technology sector and
strong stock selection within the group helped fund performance during the
second quarter correction. Relative to the benchmark, the fund's weighting in
tech stocks has increased in the past three months as our holdings, as a group,
have outperformed the technology component of the S&P 500. The fund's two
largest positions, Intel and Corning, were both down much less than the sector
as a whole during the spring correction.
The fund's holdings in the consumer staples area performed well in the second
quarter as the volatile market environment prompted investors to seek more
defensive holdings. The fund benefited from rallies in Anheuser- Busch, PepsiCo,
and Avon. Health care stocks, a sector in which we have been adding throughout
the first half of the year, also contributed to performance. We moved into
health care during the first quarter on the theory that the sector's valuations
were extremely attractive in relation to its growth rate, a disparity that
resulted from concerns over the Medicare drug benefit that, in our view, were
overblown. In addition, health care stocks tend to perform well when growth is
expected to slow, since their earnings are less vulnerable to fluctuations in
the economy. Stocks that have performed well for us in this area include Eli
Lilly, Amgen, and American Home Products.
Our strategy within the financial services sector has been to tilt the portfolio
toward insurance stocks and large global financial services companies with
diversified, fee-oriented revenue streams. Our hypothesis is that these groups
will outperform the average financial services stock as interest rates rise,
credit conditions deteriorate, and traditional lending businesses become
increasingly commoditized. The fund's largest positions within the financial
sector are AIG, Marsh McClennan, and Citigroup.
12
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Q: How is the fund positioned within the convertible sector?
A: The fund has an overweighting in convertibles issued by companies in the tech
and biotech sectors, which have experienced increased volatility in recent
months. Nevertheless, we believe that exposure to the tech and biotech areas is
the right strategy over the long-term given our focus on securities that we
believe to have attractive yields and downside protection. In addition, exposure
to these areas increases the overall diversification of the portfolio and allows
it to participate in rallies such as those which took place in both February and
June. Strong performers in this portion of the portfolio include converts issued
by Siebel Systems, Burr-Brown, and Curagen.
Q: The fund's REIT position has performed well. What factors are driving returns
in this area?
A: We run a highly concentrated portfolio that focuses on our very best ideas
within the REIT group. While we seek to keep the fund's REITs diversified among
sectors and geographic areas, ours is a bottom-up approach that focuses on REITs
with strong operating fundamentals, management teams, and returns well above
their cost of capital. In general, we strive to select the best companies within
the core areas of the REIT group -- office, industrial, and apartments -- while
placing less of an emphasis on the peripheral subsectors. The most significant
contributors to performance during the first half of 2000 were two REITs that
specialize in office properties-Spieker Properties and Boston Properties -- as
well as Avalon Bay Communities, a multi-family REIT. All three operate in areas
where the supply of new space is constrained, but where demand is high. A prime
example is Spieker Properties, whose holdings in San Francisco, Silicon Valley,
Los Angeles, and Seattle have performed exceptionally well, due to the demand
for office space that has resulted from the high-tech boom in these areas.
Recently, rents on the company's new leases have been
13
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60% higher than rents on its expiring leases, a spread that has a significant
impact on earnings and valuation.
Q: What is your outlook as we move into the second half of the year?
A: The market environment remains fraught with potential risks, but we believe
that the fund is well-positioned to weather further volatility by virtue of its
defensive posture and extensive diversification. We feel that the portfolio's
relative performance during the period demonstrates the value of a strategy that
emphasizes dividend-paying securities. Although the group, as a whole, has
underperformed in recent years as technology stocks have taken off, its strong
relative performance during the volatile first half of the year underscores its
sound defensive qualities. Going forward, we will continue to focus on
generating returns through individual stock selection, while diligently managing
the fund's risk profile. Our investment discipline has been consistently applied
across all sectors, as we have adhered to our value-oriented style amid
extremely volatile market conditions. The pace of change in the markets and the
economy is moving at a blistering rate, but we believe that with a sound process
and a strong investment organization, we will continue to deliver a superior
investment product to our shareholders.
14
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Glossary of Investment Terms
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<TABLE>
<S> <C>
Consumer Staples Products purchased by consumers on a regular basis, such as
food, beverages, alcohol, and tobacco. In the aggregate,
sales of consumer staples tend to be steady and less
sensitive to economic fluctuations.
Convertibles Securities (usually preferred shares or bonds) that are
exchangeable for a set number of another form (usually
common shares) at a prestated price. Convertibles generally
offer higher income than is available from a common stock,
but more appreciation potential than bonds.
Defensive Securities Stocks and bonds that are more conservative than average,
and tend to perform better than the overall market when that
market is weak. Often, non-cyclical stocks are used to
establish a defensive position, since they tend not to be as
severely affected during economic slowdowns.
Funds From The measurement that is used to evaluate the financial
Operations (FFO) performance of a REIT. It subtracts the depreciation of
properties from the REITs net income, providing a more
effective gauge of management's performance.
Real Estate A company, usually traded publicly, that manages a portfolio
Investment Trust of real estate to earn profits for investors. A REIT
(REIT) functions in a similar fashion to a mutual fund in that its
investors obtain the potential benefits of a diversified
portfolio under professional management. Equity REITs take
equity positions in real estate; shareholders receive income
from the rents received from the properties and also receive
capital gains as buildings are sold at a profit.
Value Stock A company whose stock price does not fully reflect its
intrinsic value, as indicated by price/earnings ratio,
price/book value ratio, dividend yield, or some other
valuation measure, relative to its industry or the market
overall. Value stocks tend to display less price volatility
and may carry higher dividend yields. Distinct from growth
stock.
</TABLE>
(Source: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
15
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Investment Portfolio as of June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Principal
Amount ($) Value ($)
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Short-Term Investments 5.5%
-------------------------------------------------------------------------------
State Street Bank and Trust Company, 6.48%,
to be repurchased at $1,406,759 on 7/3/2000** -----------
(Cost $1,406,000) ................................ 1,406,000 1,406,000
-----------
-------------------------------------------------------------------------------
Convertible Bonds 27.7%
-------------------------------------------------------------------------------
Health 6.1%
Biotechnology 2.1%
Alexion Pharmaceuticals, 5.75%, 3/15/2007 ........... 400,000 333,000
IDEC Pharmaceuticals Corp., 0% 2/16/2019 ............ 125,000 198,438
-----------
531,438
-----------
Medical Supply & Specialty 2.6%
Alkermes, Inc, 3.75%, 2/15/2007 ..................... 210,000 179,288
COR Therapeutics, 5%, 3/1/2007 ...................... 350,000 488,906
-----------
668,194
-----------
Pharmaceuticals 1.4%
Roche Holding AG, 3.44%, 1/19/2015 .................. 406,000 371,490
-----------
Communications 1.6%
Cellular Telephone
Aether Systems, 6%, 3/22/2005 ....................... 400,000 423,000
-----------
Financial 1.3%
Insurance
American International Group, Inc., 2.25%, 7/30/2004 194,000 324,223
-----------
Media 3.2%
Advertising 1.5%
Interpublic Group of Companies, Inc., 1.8%, 9/16/2004 325,000 387,156
-----------
Broadcasting & Entertainment 0.7%
Jacor Communications, Inc., Zero coupon, 2/9/2018 ... 316,000 186,440
-----------
Miscellaneous 1.0%
Liberty Media Group, 3.75%, 2/15/2030 ............... 230,000 248,975
-----------
The accompanying notes are an integral part of the financial statements.
16
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Principal
Amount ($) Value ($)
-------------------------------------------------------------------------
Durables 1.2%
Telecommunications Equipment
Antec Corp., 4.5%, 5/15/2003 ................. 180,000 320,400
-----------
Technology 10.3%
Computer Software 6.8%
Rational Software Corp., 5%, 2/1/2007 ........ 350,000 513,406
Siebel Systems, Inc., 5.5%, 9/15/2006 ........ 253,000 909,851
VERITAS Software Corp, 1.856%, 8/13/2006 ..... 106,000 337,345
-----------
1,760,602
-----------
Diverse Electronic Products 0.7%
Cymer, Inc, 3.5%, 8/6/2004 ................... 154,000 172,095
-----------
Electronic Components/Distributors 1.5%
Solectron Corp., 0%, 1/27/2019 ............... 580,000 392,950
-----------
Semiconductors 1.2%
Vitesse Semiconductor, 4%, 3/15/2005 ......... 340,000 313,225
-----------
Energy 2.3%
Oil & Gas Production 1.2%
Diamond Offshore Convertible, 3.75%, 2/15/2007 300,000 307,500
-----------
Oilfield Services/Equipment 1.1%
Advanced Energy Ind. 5.25%, 11/15/2006 ....... 205,000 277,903
-----------
Miscellaneous 1.7%
Juniper Networks, Inc., 4.75%, 3/15/2007 ..... 400,000 442,500
-----------
-------------------------------------------------------------------------
Total Convertible Bonds (Cost $6,275,450) 7,128,091
-------------------------------------------------------------------------
Shares
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Common Stocks 65.6%
-------------------------------------------------------------------------
Consumer Discretionary 1.0%
Department & Chain Stores
Wal-Mart Stores, Inc. ........................ 4,400 253,550
-----------
The accompanying notes are an integral part of the financial statements.
17
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Shares Value ($)
-----------------------------------------------------
Consumer Staples 3.0%
Alcohol & Tobacco 0.9%
Anheuser-Busch Companies, Inc. 3,100 231,531
-----------
Food & Beverage 1.1%
PepsiCo, Inc. ................. 6,600 293,288
-----------
Package Goods/Cosmetics 1.0%
Avon Products, Inc. ........... 5,700 253,650
-----------
Health 5.7%
Biotechnology 0.4%
Amgen Inc.* ................... 1,400 98,350
-----------
Medical Supply & Specialty 1.1%
Becton, Dickinson & Co. ....... 2,600 74,588
Medtronic, Inc. ............... 4,200 209,213
-----------
283,801
-----------
Pharmaceuticals 4.2%
American Home Products Corp. .. 5,600 329,000
Bristol-Myers Squibb Co. ...... 3,000 174,750
Eli Lilly & Co. ............... 1,900 189,763
Johnson & Johnson ............. 1,700 173,188
Merck & Co., Inc. ............. 2,800 214,550
-----------
1,081,251
-----------
Communications 3.5%
Telephone/Communications
Bell Atlantic Corp. ........... 3,100 157,519
BellSouth Corp. ............... 4,400 187,550
GTE Corp. ..................... 3,200 199,200
SBC Communications, Inc. ...... 4,500 194,625
Sprint Corp. .................. 2,900 147,900
-----------
886,794
-----------
Financial 27.8%
Banks 1.7%
Chase Manhattan Corp. ......... 4,500 207,281
FleetBoston Financial Corp. ... 3,700 125,800
US Bancorp .................... 5,000 96,250
-----------
429,331
-----------
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
Shares Value ($)
-----------------------------------------------------------------
Insurance 1.1%
American International Group, Inc. ....... 2,500 293,750
-----------
Consumer Finance 2.0%
American Express Co. ..................... 1,500 78,188
Citigroup, Inc. .......................... 5,600 337,400
Mellon Financial Corp. ................... 2,600 94,738
-----------
510,326
-----------
Other Financial Companies 2.8%
Federal National Mortgage Association .... 4,700 245,281
Marsh & McLennan Companies, Inc. ......... 2,800 292,425
Morgan Stanley Dean Witter & Co. ......... 2,200 183,150
-----------
720,856
-----------
Real Estate 20.3%
AMB Property Corp. (REIT) ............... 20,000 456,250
Arden Realty Group, Inc. (REIT) .......... 21,900 514,650
Avalonbay Communities, Inc. (REIT) ....... 13,800 576,150
Boston Properties, Inc. (REIT) ........... 14,100 544,613
Equity Office Properties Trust (REIT) .... 16,400 452,025
Equity Residential Properties Trust (REIT) 8,900 409,400
General Growth Properties, Inc. (REIT) ... 10,800 342,900
Post Properties Inc. (REIT) .............. 12,800 563,200
ProLogis Trust (REIT) .................... 17,200 366,575
Spieker Properties, Inc. (REIT) ......... 13,600 642,600
Taubman Centers, Inc. (REIT) ............ 31,100 342,100
-----------
5,210,463
-----------
Media 1.8%
Advertising 0.5%
Interpublic Group of Companies, Inc. ..... 2,800 120,400
-----------
Broadcasting & Entertainment 0.9%
Walt Disney Co. .......................... 6,000 232,875
-----------
Cable Television 0.4%
Comcast Corp. "A"* ....................... 2,800 113,400
-----------
Service Industries 1.3%
EDP Services 0.5%
First Data Corp. ......................... 2,900 143,913
-----------
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
Shares Value ($)
-------------------------------------------------------------
Printing/Publishing 0.8%
McGraw-Hill, Inc. ...................... 3,700 199,800
---------
Durables 1.2%
Aerospace 0.6%
Boeing Co. ............................. 1,500 62,719
Rockwell International Corp. ........... 2,500 78,750
---------
141,469
---------
Automobiles 0.3%
Ford Motor Co. ......................... 2,000 86,000
---------
Construction/Agricultural Equipment 0.3%
Deere & Co. ............................ 2,400 88,800
---------
Manufacturing 5.1%
Chemicals 0.7%
Dow Chemical Co. ....................... 6,300 190,181
---------
Diversified Manufacturing 1.4%
General Electric Co. ................... 6,600 349,800
---------
Industrial Specialty 2.4%
Corning, Inc. .......................... 2,300 620,713
---------
Machinery/Components/Controls 0.6%
Parker-Hannifin Corp. .................. 4,300 147,275
Visteon Corporation .................... 1 11
---------
147,286
---------
Technology 9.0%
Computer Software 3.7%
America Online, Inc.* .................. 1,900 100,225
Computer Associates International, Inc. 2,100 107,494
Intuit, Inc.* .......................... 1,400 57,925
Microsoft Corp.* ....................... 2,800 224,000
Oracle Corp.* .......................... 5,600 470,750
---------
960,394
---------
Electronic Components/Distributors 0.9%
Cisco Systems, Inc.* ................... 3,500 222,469
---------
Electronic Data Processing 1.7%
Compaq Computer Corp. .................. 5,200 132,925
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
Shares Value ($)
--------------------------------------------------------------------------------
Hewlett-Packard Co. ................................... 1,000 124,875
International Business Machines Corp. ................. 1,600 175,300
---------
433,100
---------
Semiconductors 2.6%
Intel Corp. ........................................... 4,500 601,594
Texas Instruments, Inc. ............................... 1,000 68,688
---------
670,282
---------
Miscellaneous 0.1%
Agilent Technologies, Inc.* ........................... 420 30,941
---------
Energy 4.4%
Oil & Gas Production 2.2%
Exxon Mobil Corp. ..................................... 4,536 356,070
Royal Dutch Petroleum Co. (New York shares) ........... 3,300 203,156
---------
559,226
---------
Oil Companies 1.8%
Chevron Corp. ......................................... 1,000 84,813
Texaco, Inc. .......................................... 3,300 175,725
Total Fina SA (ADR) ................................... 2,707 208,439
---------
468,977
---------
Oilfield Services/Equipment 0.4%
Schlumberger Ltd. ..................................... 1,600 119,400
---------
Metals & Minerals 0.4%
Steel & Metals
Alcoa, Inc. ........................................... 3,200 92,800
---------
Transportation 0.1%
Airlines
AMR Corp. ............................................. 1,300 34,369
---------
Utilities 1.1%
Electric Utilities
FPL Group, Inc. ....................................... 2,500 123,750
Unicom Corp. .......................................... 4,300 166,356
---------
290,106
---------
Miscellaneous .1%
Standard & Poor's 500 Depository Receipt Trust Series I 154 22,373
---------
--------------------------------------------------------------------------------
Total Common Stocks (Cost $15,051,859) 16,886,015
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
Shares Value ($)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Preferred Stocks 1.2%
------------------------------------------------------------------------------
Miscellaneous
Enron Corp., Exchange Notes, 2002, 7% .............. 10,000 310,000
---------
------------------------------------------------------------------------------
Total Preferred Stocks (Cost $291,850) 310,000
------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $23,025,159) (a) 25,730,106
------------------------------------------------------------------------------
------------------------------------------------------------------------------
* 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 $23,045,537. At June 30,
2000, net unrealized appreciation for all securities based on tax cost
was $2,684,569. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of value
over tax cost of $3,448,566 and aggregate gross unrealized depreciation
for all securities in which there was an excess of tax cost over value
of $763,997.
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
Financial Statements
--------------------------------------------------------------------------------
Statement of Assets and Liabilities as of June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets
------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (cost $23,025,159) ................ $25,730,106
Cash .................................................................. 100
Receivable for investments sold ....................................... 36,446
Dividends receivable .................................................. 83,374
Interest receivable ................................................... 61,040
Receivable for Fund shares sold ....................................... 2,335
Foreign taxes recoverable ............................................. 1,297
Due from Adviser ...................................................... 5,888
---------------
Total assets .......................................................... 25,920,586
Liabilities
-------------------------------------------------------------------------------------
Payable for investments purchased ..................................... 263,333
Payable for Fund shares redeemed ...................................... 37,762
Accrued Trustees' fees and expenses ................................... 15,444
Other accrued expenses and payables ................................... 40,302
---------------
Total liabilities ..................................................... 356,841
-------------------------------------------------------------------------------------
Net assets, at value $25,563,745
-------------------------------------------------------------------------------------
Net Assets
-------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ................................... 12,992
Net unrealized appreciation (depreciation) on investments ............. 2,704,947
Accumulated net realized gain (loss) .................................. 147,232
Paid-in capital ....................................................... 22,698,574
-------------------------------------------------------------------------------------
Net assets, at value $25,563,745
-------------------------------------------------------------------------------------
Net Asset Value
-------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share ($25,563,745 /
1,893,933 outstanding shares of beneficial interest, $.01 par value,
unlimited number of shares authorized) ............................. $ 13.50
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
Statement of Operations for the six months ended June 30, 2000 (Unaudited)
Investment Income
-----------------------------------------------------------------------------
Income:
Dividends ..................................................... $ 277,413
Interest ...................................................... 115,902
---------------
Total Income .................................................. 393,315
---------------
Expenses:
Management fee ................................................ 91,380
Services to shareholders ...................................... 72,005
Custodian and accounting fees ................................. 15,233
Auditing ...................................................... 3,458
Legal ......................................................... 10,374
Trustees' fees and expenses ................................... 18,329
Reports to shareholders ....................................... 7,462
Registration fees ............................................. 11,284
Other ......................................................... 345
---------------
Total expenses, before expense reductions ..................... 229,870
Expense reductions ............................................ (132,689)
---------------
Total expenses, after expense reductions ...................... 97,181
-----------------------------------------------------------------------------
Net investment income (loss) 296,134
-----------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
-----------------------------------------------------------------------------
Net realized gain (loss) from investments ..................... 655,591
Net unrealized appreciation (depreciation) during the period on
investments ................................................ 671,502
-----------------------------------------------------------------------------
Net gain (loss) on investment transactions 1,327,093
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 1,623,227
-----------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31,
Increase (Decrease) in Net Assets (Unaudited) 1999
------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) ...................... $ 296,134 $ 588,176
Net realized gain (loss) on investment transactions 655,591 445,885
Net unrealized appreciation (depreciation) on
investment transactions during the period ...... 671,502 2,454,113
--------------- ---------------
Net increase (decrease) in net assets resulting
from operations ................................ 1,623,227 3,488,174
--------------- ---------------
Distributions to shareholders from:
Net investment income ............................. (283,142) (771,938)
--------------- ---------------
Fund share transactions:
Proceeds from shares sold ......................... 3,954,739 6,182,288
Reinvestment of distributions ..................... 260,219 707,787
Cost of shares redeemed ........................... (4,733,763) (9,500,482)
--------------- ---------------
Net increase (decrease) in net assets from Fund
share transactions ............................. (518,805) (2,610,407)
--------------- ---------------
Increase (decrease) in net assets ................. 821,280 105,829
Net assets at beginning of period ................. 24,742,465 24,636,636
Net assets at end of period (including
undistributed net investment income of $12,992
at June 30, 2000) .............................. $ 25,563,745 $ 24,742,465
Other Information
----------------------------------------------------------------------------------
Shares outstanding at beginning of period ......... 1,939,138 2,170,880
--------------- ---------------
Shares sold ....................................... 302,940 505,029
Shares issued to shareholders in reinvestment of
distributions .................................. 19,477 58,067
Shares redeemed ................................... (367,622) (794,838)
--------------- ---------------
Net increase (decrease) in Fund shares ............ (45,205) (231,742)
Shares outstanding at end of period ............... 1,893,933 1,939,138
</TABLE>
The accompanying notes are an integral part of the financial statements.
25
<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.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Year Ended December 31, 2000(d) 1999 1998(b)
------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $12.76 $11.35 $12.00
---------------------------
------------------------------------------------------------------------------------
Income (loss) from investment operations:
------------------------------------------------------------------------------------
Net investment income (loss) (a) .16 .29 .17
------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment
transactions .73 1.52 (.65)
---------------------------
------------------------------------------------------------------------------------
Total from investment operations .89 1.81 (.48)
------------------------------------------------------------------------------------
Less distributions from:
------------------------------------------------------------------------------------
Net investment income (.15) (.40) (.17)
---------------------------
------------------------------------------------------------------------------------
Total distributions (.15) (.40) (.17)
------------------------------------------------------------------------------------
Net asset value, end of period $13.50 $12.76 $11.35
---------------------------
------------------------------------------------------------------------------------
Total Return (%) (c) 6.91** 16.20 (4.00)**
------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 26 25 25
------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.84(e)* 2.07 2.56*
------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .77(e)* .75 .75*
------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) 2.42* 2.44 3.36*
------------------------------------------------------------------------------------
Portfolio turnover rate (%) 123* 93 41*
------------------------------------------------------------------------------------
</TABLE>
(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.
(d) For the six months ended June 30, 2000 (Unaudited).
(e) The ratios of operating expenses excluding costs incurred in connection
with the reorganization before and after expense reductions were 1.79%
and .75%, respectively.
* Annualized
** Not annualized
26
<PAGE>
Notes to Financial Statements (Unaudited)
--------------------------------------------------------------------------------
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 accounting
principles generally accepted in the United States 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
27
<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.
28
<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 accounting principles generally accepted in the United
States. 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 six months ended June 30, 2000, purchases and sales of investment
securities (excluding short-term investments) aggregated $14,429,389 and
$14,601,044, respectively.
C. Related Parties
Under the Investment Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. ("Scudder Kemper" or 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 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, 2001 and to maintain the annualized expenses of the Fund at
no more than 0.75% of the average daily net assets. Certain expenses incurred in
connection with the reorganization are excluded from the expense limitation. For
the six months ended June 30, 2000, the Adviser did not impose any of its fee,
which amounted to $91,380.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend-paying and shareholder service agent for the Fund. For the
29
<PAGE>
six months ended June 30, 2000, SSC did not impose a portion of its fee
aggregating $14,427, and the amount imposed aggregated $35,018, of which $32,278
is unpaid.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the six months ended June 30,
2000, the Fund did not incur any such fees.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the six months
ended June 30, 2000, SFAC did not impose any of its fee, which amounted to
$18,750.
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 six months ended June 30, 2000, Trustees' fees and expenses aggregated
$6,552. In addition, a one-time fee of $11,777 was accrued for payment to those
Trustees not affiliated with the Adviser who are not standing 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 $5,888 of such costs.
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 six months ended June 30, 2000,
the Fund's custodian and transfer agent fees were reduced by $1,765 and $479,
respectively, under these arrangements.
E. Line of Credit
The Fund and several 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.
30
<PAGE>
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.
31
<PAGE>
Shareholder Meeting Results (Unaudited)
--------------------------------------------------------------------------------
A Special Meeting of Shareholders (the "Meeting") of Scudder Dividend & Growth
Fund (the "fund") was held on July 13, 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 the fund.
Number of Votes:
Trustee For Withheld
--------------------------------------------------------------------------------
Henry P. Becton, Jr. 1,207,610 26,643
Linda C. Coughlin 1,207,959 26,294
Dawn-Marie Driscoll 1,209,385 24,869
Edgar R. Fiedler 1,206,867 27,387
Keith R. Fox 1,207,502 26,751
Joan E. Spero 1,208,682 25,571
Jean Gleason Stromberg 1,207,652 26,602
Jean C. Tempel 1,209,385 24,869
Steven Zaleznick 1,207,510 26,743
--------------------------------------------------------------------------------
2. To ratify the selection of PricewaterhouseCoopers LLP as the independent
accountants for the fund for the current fiscal year.
Number of Votes:
Broker
For Against Abstain Non-Votes*
--------------------------------------------------------------------------------
1,203,228 13,561 17,464 0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
* 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.
32
<PAGE>
Officers and Trustees
--------------------------------------------------------------------------------
Linda C. Coughlin* Jennifer P. Carter*
o President and Trustee o Vice President
Henry P. Becton, Jr. James M. Eysenbach*
o Trustee; President, WGBH o Vice President
Educational Foundation
William F. Gadsden*
Dawn-Marie Driscoll o Vice President
o Trustee; President, Driscoll
Associates; Executive Fellow, Valerie F. Malter*
Center for Business Ethics, o Vice President
Bentley College
Ann M. McCreary*
Peter B. Freeman o Vice President
o Trustee, Corporate Director
Kathleen T. Millard*
George M. Lovejoy, Jr. o Vice President
o Trustee; President and
Director, Fifty Associates Robert D. Tymoczko*
o Vice President
Wesley W. Marple, Jr.
o Trustee; Professor of Business John Millette*
Administration, Northeastern o Vice President and Secretary
University
John R. Hebble*
Kathryn L. Quirk* o Treasurer
o Trustee, Vice President and
Assistant Secretary Caroline Pearson*
o Assistant Secretary
Jean C. Tempel
o Trustee; Managing Director, *Scudder Kemper Investments, Inc.
First Light Capital, LLC
Bruce F. Beaty*
o Vice President
33
<PAGE>
Investment Products and Services
--------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
--------------------------------------------------------------------------------
The Scudder Family of 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 Choice Series
Scudder Pathway Growth Portfolio Scudder Health Care Fund
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
</TABLE>
34
<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 IRA for Minors
Inherited IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**@@
Scudder Horizon Advantage**@@@
--------------------------------------------------------------------------------
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.
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 Class S 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 Kemper Investments'
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 Kemper Investments' 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.
35
<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.
36
<PAGE>
Those who Automatic Withdrawal Plan
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
withdrawal 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 Call a Scudder representative at
about these 1-800-SCUDDER
services
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
37
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
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]
PO Box 2291
Boston, MA 02107-2291
1-800-SCUDDER
www.scudder.com
A member of the [LOGO] Zurich Financial Services Group
