SCUDDER
INVESTMENTS(SM)
[LOGO]
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EQUITY/DOMESTIC
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Scudder Tax Managed
Small Company Fund
Fund #307
Semiannual Report
April 30, 2000
The fund seeks long-term growth of capital on an after-tax basis.
A no-load fund with no commissions to buy, sell, or exchange shares.
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Contents
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4 Letter from the Fund's President
6 Performance Update
8 Portfolio Summary
10 Portfolio Management Discussion
14 Glossary of Investment Terms
15 Investment Portfolio
22 Financial Statements
25 Financial Highlights
26 Notes to Financial Statements
31 Trustees and Officers
32 Investment Products and Services
34 Scudder Solutions
2
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Scudder Tax Managed Small Company Fund
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fund number 307
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Date of o A strong preference for growth stocks over the
Inception: six-month period was a distinct disadvantage given the
9/18/98 fund's emphasis on attractively valued companies.
o Reflecting the challenging environment for the fund's
Total Net investment approach, Scudder Tax Managed Small Company
Assets as of Fund returned 1.35% for the six-month period ended
4/30/00: April 30, 2000.
$2 million
o Management continued to pursue the fund's goal of
long-term growth of capital on an after-tax basis by
investing in attractively valued small-cap stocks.
3
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Letter from the Fund's President
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Dear Shareholders,
The fund's emphasis on stocks with attractive valuations and solid earnings
continued to be out of favor as growth stocks provided exceptional returns over
most of the six-month period. On the surface small-cap stocks appeared to
perform well with returns that bested large-cap stocks. However, it was really a
tale of two different market environments as a select group of small growth
stocks provided exceptional returns during the first four months of the period,
which then dramatically reversed course in March and April. The shift can be
attributed, in part, to renewed interest in solid companies generating current
profits and a recognition that the high valuations of some small growth stocks
could no longer be supported.
After a period of extremely high valuations for some growth stocks, we welcomed
the change in market sentiment. The lower levels for stocks has helped to reduce
market risk, which we believe bodes well for the long-term health of the overall
stock market and small-cap stocks. While the rising interest rate environment
likely sets the stage for continued market volatility in the near term, our
outlook for the fund's disciplined strategy of investing in attractively valued
small-cap stocks has improved.
In the following pages, portfolio managers Mac Eysenbach and Calvin Young
describe this unusual period and how they managed
4
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the portfolio. I encourage you to read their discussion, which begins on page
10.
For current information on your fund and your account, visit our Internet Web
site at www.scudder.com. There you'll find a wealth of information, including
current fund performance, the latest news on Scudder products and services, and
the opportunity to perform account transactions. You can also call our
representatives at 1-800-SCUDDER (728-3337).
Thank you for your continued investment in Scudder Tax Managed Small Company
Fund.
Sincerely,
/s/Lin Coughlin
Linda C. Coughlin
President,
Scudder Tax Managed Small Company Fund
5
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Performance Update
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April 30, 2000
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Growth of a $10,000 Investment
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THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
Scudder Tax Managed
Small Company Fund Russell 2000 Index*
9/98** 10000 10000
10/98 10350 10408
1/99 10918 11786
4/99 11060 11986
7/99 11671 12362
10/99 10524 11955
1/00 10473 13876
4/00 10666 14192
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Fund Index Comparison
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Total Return
Growth of Average
Period ended 4/30/2000 $10,000 Cumulative Annual
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Scudder Tax Managed Small Company Fund
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1 year $ 9,644 -3.56% -3.56%
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Life of Fund** $ 10,666 6.66% 4.08%
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Russell 2000 Index*
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1 year $ 11,841 18.41% 18.41%
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Life of Fund** $ 14,192 41.92% 24.74%
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* The Russell 2000 Index is an unmanaged capitalization-weighted measure of
approximately 2000 small U.S. stocks. Index returns assume reinvested
dividends and, unlike Fund returns, do not reflect any fees or expenses.
Total return would have been lower had certain expenses not been reduced.
** The Fund commenced operations on September 18, 1998.
6
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Returns and Per Share Information
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THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
Yearly periods ended April 30
Scudder Tax Managed
Small Company Fund Russell 2000 Index*
1999** 10.60 20.13
2000 -3.56 18.41
1999** 2000
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Fund Total
Return (%) 10.60 -3.56
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Index Total
Return (%) 20.13 18.41
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Net Asset Value ($) 13.22 12.70
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Income
Dividends ($) .05 .06
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Capital Gains
Distributions ($) -- --
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* The Russell 2000 Index is an unmanaged capitalization-weighted measure of
approximately 2000 small U.S. stocks. Index returns assume reinvested
dividends and, unlike Fund returns, do not reflect any fees or expenses.
** The Fund commenced operations on September 18, 1998.
Performance is historical and assumes reinvestment of all dividends and
capital gains and is not indicative of future results. Total return and
principal value will fluctuate, so an investor's shares, when redeemed, may
be worth more or less than when purchased. If the Adviser had not maintained
the Fund's expenses, the total return for the 1-year and life of Fund periods
would have been lower.
7
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Portfolio Summary
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April 30, 2000
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Asset Allocation
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Common Stocks 100%
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The fund seeks to be fully invested in a broad selection of small-cap stocks
with attractive valuations.
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Sectors
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A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
Consumer Discretionary 18%
Financial 13%
Construction 12%
Manufacturing 9%
Health 8%
Technology 8%
Durables 7%
Service Industries 7%
Energy 6%
Other 12%
--------------------------------
100%
--------------------------------
The fund's strongest performance came from energy stocks, which were
overweighted in the portfolio. The fund's communications and technology holdings
had strong absolute returns, but these holdings did not keep pace with those in
the index.
8
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Ten Largest Equity Holdings
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(18% of Portfolio)
1. Technitrol, Inc.
Manufacturer of electronic components
2. National Beverage Corp.
Holding company with subsidiaries in the beverage industry
3. Genesco Inc.
Retailer and wholesaler of branded footwear
4. Hilb, Rogal & Hamilton Co.
Insurance agency
5. Kaneb Services, Inc.
Provider of industrial field services and pipeline transportation
6. CTG Resources Inc.
Gas utility holding company
7. Justin Industries, Inc.
Manufacturer of building materials and footwear products
8. CTS Corp.
Manufacturer of electronic and electromechanical components
9. NBTY Inc.
Nutritional supplement manufacturer
10.Guess?, Inc.
Designer, developer, and marketer of apparel, accessories
and related consumer products
Management uses a proprietary, quantitative screening process to identify
attractively valued stocks with above- average capital appreciation potential.
The analysis is comprised of four factors: valuation, trends in sales and
earnings, price momentum and risk.
For more complete details about the Fund's investment portfolio, see page 15. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
9
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Portfolio Management Discussion
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April 30, 2000
In the following interview, portfolio managers James M. Eysenbach and Calvin S.
Young discuss the market environment and their approach to managing the fund.
Q: How would you characterize the investment environment for the six-month
period?
A: Investors faced an increasingly volatile market. During the first four months
of the six-month fiscal period, the market favored speculative growth stocks in
the technology and health sectors, especially Internet and biotechnology issues.
Stocks with strong past performance leading into the period again posted the
best returns, almost regardless of fundamentals or earnings histories. This
narrow focus on price momentum came at the expense of most other stocks. Then,
in March, the lofty tech-heavy Nasdaq took a tumble and all bets on the former
winners were off.
For the six-month period as a whole, small-cap stocks in the Russell 2000 Index
posted a gain of 18.71%, an impressive showing over the 9.72% return of
large-cap stocks in the Russell 1000 Index. Small growth stocks led the way with
a 27.78% return, a phenomenal 19 percentage point spread over small-cap value
stocks. But the six-month figures mask the dramatic shift towards value stocks
near the end of the period.
Q: How did the fund perform in this environment?
A: The fund's 1.35% six-month total return compared with the 18.72% return for
its benchmark, the Russell 2000 Index. The significant return shortfall can
largely be attributed to the market's narrow focus on a few high-flying growth
stocks. The best performing stocks were those selling at the highest valuation
levels -- stocks with high price/earnings or high price/book ratios. Among
high-priced stocks, the market generally favored those with the strongest price
momentum and high price volatility, not those with the strongest earnings
growth.
10
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By contrast, our strategy is to seek a balance between growth and value. The
fund's average earnings growth rate of 16.8% is only moderately lower than the
18.4% rate of the Russell 2000 Index. However, we have been able to buy these
stocks for the fund at a substantial discount to the market as illustrated by
the portfolio's lower P/E versus the market. As of the end of the period, the
fund's average P/E was 11x, less than half that of its benchmark. While this
strategy has not been rewarded in the short run, we believe that this current
disparity will be corrected over time.
Q: Have small-cap stocks returned to favor?
A: There has been renewed interest in small-caps, yet the performance impact has
so far been less than it might appear from the index returns. The performance of
the Russell 2000 market leaders (the largest index stocks as of 12/31/99)
suggest that stocks that generally would not be considered small-cap have
recently driven the index returns. (Note that these stocks remain in the Russell
2000 because the index is only reconstituted annually on June 30, even though
these stocks would not have qualified as of 12/31/99.)
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% Total Return
---------------------
Russell 2000 Market Leaders Market Cap 12/31 to Peak to Peak
as of 12/31/99 ($ billions) P/E Peak 4/30 Date
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Broadvision 13.9 1000 60 -52 3/6
Microstrategy 8.2 656 198 -92 3/10
Emulex 4.0 294 94 -61 3/27
Millennium Pharmaceuticals 5.4 185 158 -50 2/17
Mercury Interactive 4.2 136 145 -15 3/3
Idec 4.2 97 74 -32 3/6
Interdigital 3.7 85 0 -63 12/31
Lam Research 4.5 Loss 46 -67 3/24
Celera 3.9 Loss 232 -72 3/6
Verticalnet 5.9 Loss 69 -79 3/9
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Average 5.8 223 108 -58 --
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11
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Thanks to momentum-driven investing, these market leaders were trading at
remarkably high prices relative to their earnings -- if they had earnings -- at
the beginning of the calendar year. These stocks' prices have continued to climb
dramatically, doubling from year-end. But from their peaks, these high fliers
shed half of their market value on average, some only in a few days.
Q: How did the shift in market leadership impact the fund's performance?
A: Our investment disciplines kept the fund out of many high-flying stocks. As a
result, the fund's performance trailed during the first four months of the
period, while the Russell 2000 Index rose 35.24%. When the shift came in March
and April, however, the fund's relative performance improved, as stocks selling
at reasonable valuations fell far less than the index. Over those two months,
the Russell 2000 Index dropped 12.21% while the fund fell only 0.97%. We view
the market's renewed focus on value as a positive sign for the fund.
Q: Which sectors contributed to or subtracted from the fund's performance?
A: The fund's strongest performance came from energy stocks. The fund's
overweighting in this sector made a positive contribution to performance as
rising prices propelled many stocks in this area. In addition, the energy
holdings in the portfolio outperformed those in the Russell 2000 Index. The
fund's communications and technology holdings also had strong absolute returns,
but did not keep pace with those in the index. These two sectors -- along with
health care, the strongest sector in the index -- were underweighted because of
their high valuations.
Q: What are you expecting from small-cap stocks for the rest of the year?
A: There has been a dramatic divergence between the growth and value segments of
the small-cap market. While many growth stocks remain at extremely high
valuation
12
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levels even after the recent correction, other small-cap stocks are selling at
surprisingly low levels. In fact, 20% of small-cap stocks have P/Es below 10x.
We have also observed that performance leadership rarely stays entrenched in any
one area for more than a couple of years (see "A Closer Look at Small Cap Style
Performance" chart below). Ultimately, prices tend to respond to the underlying
company fundamentals. Consequently, we believe that the time is ripe for a
rebound in attractively valued small-cap stocks. We believe investors who
maintain a commitment to value-oriented funds will be well positioned to benefit
from such a rebound.
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A Closer Look at Small Cap Style Performance
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Russell 2000 Value Total Return minus Russell 2000 Growth Total Return
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE DENOTING "VALUE OUTPERFORMING"
AND "GROWTH OUTPERFORMING" FROM THE PERIOD OF 3/79 THROUGH 3/00
Past performance is no guarantee of future results.
13
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Glossary of Investment Terms
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Market The value of a company's outstanding shares of common
Capitalization stock, determined by multiplying the number of shares
outstanding by the share price (shares x price =
market capitalization). The universe of publicly
traded companies is frequently divided into large-,
mid-, and small-capitalizations.
Over/Under Weighting Refers to the allocation of assets --
usually by sector, industry, or country -- within a
portfolio relative to a benchmark index (e.g. the
Russell 2000 Index), or an investment universe.
Price/Earnings A widely used gauge of a stock's valuation that
Ratio (P/E) indicates what investors are paying for a company's
(also "earnings earnings on a per share basis. A higher "earnings
multiple") multiple" indicates a higher expected growth rate and
the potential for greater price fluctuations.
Quantitative A systematic approach to evaluating a security based
Model on its financial characteristics.
Standard A statistical measure of the degree to which an
Deviation investment's return tends to vary from the mean
return. Frequently used in portfolio management to
measure the variability of past returns and to gauge
the likely range of possible future returns.
Tax Basis The price paid by an investor for a stock or bond
plus any out-of-pocket expenses such as brokerage
commissions. A security's basis is used to determine
capital gains or losses for tax purposes when the
stock is sold.
Value Stock A company whose stock price does not fully reflect
its intrinsic value, as indicated by price-earnings
ratio, price-book value ratio, dividend yield, or
some other valuation measure, relative to its
industry or the market overall. Value stocks tend to
display less price volatility and may carry higher
dividend yields.
(Source: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms) Additional glossary terms are available at our Internet Web
site -- www.scudder.com.
14
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Investment Portfolio as of April 30, 2000 (Unaudited)
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Shares Value ($)
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Common Stocks 100.0%
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Consumer Discretionary 18.0%
Apparel & Shoes 5.2%
Garan, Inc. ..................................... 800 17,300
Genesco Inc. .................................... 2,200 28,463
Guess?, Inc.* ................................... 2,200 24,750
Steven Madden, Ltd.* ............................ 200 4,338
Tropical Sportswear Int'l Corp.* ................ 300 5,288
------
80,139
Department & Chain Stores 3.1% ------
Ames Department Stores, Inc.* ................... 500 8,969
Deb Shops, Inc. ................................. 200 2,775
Dress Barn Inc.* ................................ 600 11,775
Fred's, Inc. "A" ................................ 700 11,025
Goody's Family Clothing, Inc. ................... 500 3,250
Jo-Ann Stores, Inc. "A" ......................... 1,100 10,244
------
48,038
------
Home Furnishings 0.6%
Oneida Ltd. ..................................... 500 9,563
------
Hotels & Casinos 0.3%
Pinnacle Entertainment, Inc. .................... 200 4,013
------
Recreational Products 0.4%
Arctic Cat Inc. ................................. 200 2,013
National R.V. Holdings, Inc.* ................... 300 3,675
------
5,688
------
Restaurants 4.2%
CEC Entertainment, Inc. * ....................... 600 18,000
Rainforest Cafe Inc.* ........................... 1,200 3,825
Ruby Tuesday, Inc. .............................. 400 8,375
Ryan's Family Steak Houses, Inc.* ............... 1,100 10,759
VICORP Restaurants, Inc. ........................ 1,100 23,238
------
64,197
------
Specialty Retail 4.2%
Brookstone, Inc.* ............................... 800 13,400
Finlay Enterprises, Inc.* ....................... 600 6,075
Musicland Stores Corp.* ......................... 900 6,750
PETCO Animal Supplies, Inc.* .................... 400 4,625
The accompanying notes are an integral part of the financial statements.
15
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Shares Value ($)
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Piercing Pagoda, Inc.* .............................. 500 7,063
SCP Pool Corp.* ..................................... 100 3,681
The Finish Line, Inc. "A"* .......................... 600 6,338
United Auto Group, Inc.* ............................ 800 6,950
United Retail Group, Inc.* .......................... 400 3,275
Wet Seal, Inc. "A"* ................................. 300 5,325
------
63,482
Consumer Staples 4.5% ------
Alcohol & Tobacco 0.7%
Schweitzer-Mauduit International, Inc. .............. 700 10,194
------
Consumer Electronic & Photographic 0.3%
Salton, Inc.* ....................................... 100 4,294
------
Consumer Specialties 0.7%
Jan Bell Marketing, Inc.* ........................... 2,000 5,875
Russ Berrie & Co., Inc. ............................. 300 5,588
------
11,463
------
Food & Beverage 2.5%
National Beverage Corp.* ............................ 3,700 30,739
Ralcorp Holdings, Inc.* ............................. 600 8,288
------
39,027
------
Package Goods/Cosmetics 0.3%
Chattem, Inc. ....................................... 350 4,463
------
Health 7.8%
Biotechnology 1.0%
Bio-Rad Laboratories, Inc. "A"* ..................... 600 15,300
------
Health Industry Services 3.3%
AmeriPath, Inc.* .................................... 700 5,469
Magellan Health Services, Inc.* ..................... 1,100 4,125
PAREXEL International Corp. ......................... 200 1,800
Prime Medical Services, Inc. ........................ 400 3,000
RehabCare Group, Inc. ............................... 600 17,888
Syncor International Corp. .......................... 450 18,563
------
50,845
------
Hospital Management 0.6%
Coventry Health Care, Inc.* ......................... 900 9,563
The accompanying notes are an integral part of the financial statements.
16
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Shares Value ($)
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Medical Supply & Specialty 2.6%
Cooper Companies, Inc. .......................... 100 3,363
NBTY Inc.* ...................................... 1,400 24,850
Vital Signs Inc. ................................ 600 12,000
-------
40,213
-------
Pharmaceuticals 0.3%
K-V Pharmaceutical Co.* ......................... 200 5,050
-------
Financial 12.9%
Banks 6.9%
Columbia Banking System, Inc.* .................. 420 5,171
Dime Community Bancshares* ...................... 700 12,119
First Federal Financial Corp.* .................. 900 11,250
First Republic Bank* ............................ 600 11,775
Gold Banc Corp. ................................. 1,100 6,806
Haven Bancorp, Inc. ............................. 700 11,506
Medford Bancorp Inc. ............................ 700 10,500
PBOC Holdings, Inc.* ............................ 1,400 12,250
PFF Bancorp, Inc. ............................... 900 12,656
Parkvale Financial Corp. ........................ 775 12,206
-------
106,239
-------
Insurance 4.1%
Baldwin & Lyons, Inc. "B" ....................... 100 1,963
Hilb, Rogal & Hamilton Co. ...................... 1,000 28,313
LandAmerica Financial Group, Inc. ............... 300 5,288
National Western Life Insurance Co.* ............ 100 7,444
RLI Corp. ....................................... 400 12,850
Triad Guaranty Inc.* ............................ 300 6,300
-------
62,158
-------
Other Financial Companies 0.9%
Bay View Capital Corp. .......................... 500 3,594
ITLA Capital Corp.* ............................. 700 9,581
-------
13,175
-------
Real Estate 1.0%
CB Richard Ellis Services Inc.* ................. 400 3,950
Grubb & Ellis Co. ............................... 1,400 7,525
Trammell Crow Co.* .............................. 300 3,900
-------
15,375
-------
The accompanying notes are an integral part of the financial statements.
17
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Shares Value ($)
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Service Industries 7.4%
EDP Services 0.6%
Pomeroy Computer Resources, Inc.* ................. 600 9,900
------
Environmental Services 0.3%
URS Corp. ......................................... 400 5,100
------
Investment 2.2%
Advest Group, Inc.* ............................... 700 13,694
Southwest Securities Group, Inc. .................. 470 19,329
------
33,023
------
Miscellaneous Commercial Services 3.5%
IT Group, Inc.* ................................... 600 4,013
Morrison Knudsen Corp. ............................ 700 6,431
Personnel Group of America, Inc.* ................. 1,100 5,775
RCM Technologies, Inc.* ........................... 600 6,450
RemedyTemp, Inc., "A"* ............................ 500 9,906
SOS Staffing Services, Inc.* ...................... 100 313
Volt Information Sciences, Inc.* .................. 500 17,281
Workflow Management, Inc.* ........................ 200 2,800
------
52,969
------
Miscellaneous Consumer Services 0.4%
Westaff Inc.* ..................................... 800 5,800
------
Miscellaneous 0.4%
New Horizons Worldwide, Inc.* ..................... 200 3,525
REX Stores Corp.* ................................. 100 2,513
------
6,038
------
Durables 6.6%
Aerospace 1.8%
Kaman Corp. "A" ................................... 1,000 10,625
Primex Technologies, Inc. ......................... 800 17,600
------
28,225
------
Automobiles 3.5%
Aftermarket Technology Corp.* ..................... 600 6,975
Dura Automotive Systems, Inc.* .................... 400 6,500
Monaco Coach Corp.* ............................... 975 15,966
Oshkosh Truck Corp. ............................... 750 23,625
------
53,066
------
Leasing Companies 1.3%
AMERCO* ........................................... 500 8,375
The accompanying notes are an integral part of the financial statements.
18
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Shares Value ($)
--------------------------------------------------------------------------------
Electro Rent Corp.* ............................. 900 9,900
Neff Corp.* ..................................... 400 1,800
------
20,075
------
Manufacturing 8.8%
Chemicals 0.8%
Quaker Chemical Corp. ........................... 700 11,769
------
Containers & Paper 0.6%
Alltrista Corp.* ................................ 400 8,500
------
Diversified Manufacturing 3.5%
ESCO Electronics Corp.* ......................... 1,000 16,313
Justin Industries, Inc. ......................... 1,400 25,550
Myers Industries, Inc. .......................... 570 7,980
Park-Ohio Holdings Corp. ........................ 400 3,625
------
53,468
------
Electrical Products 1.0%
C&D Technologies, Inc. .......................... 100 6,444
Katy Industries, Inc. ........................... 300 3,150
Windmere-Durable Holdings, Inc. ................. 400 6,425
------
16,019
------
Industrial Specialty 0.9%
Gardner Denver Inc.* ............................ 700 12,206
Lennox International Inc. ....................... 268 2,261
------
14,467
------
Machinery/Components/Controls 1.2%
Astec Industries, Inc.* ......................... 100 2,513
Intermet Corp. .................................. 900 6,638
Woodward Governor Co. ........................... 400 8,825
------
17,976
------
Wholesale Distributors 0.8%
Barnett, Inc.* .................................. 800 8,500
Watsco, Inc. .................................... 300 3,863
------
12,363
------
Technology 8.6%
Computer Software 1.5%
Activision, Inc.* ............................... 600 3,750
Indus International, Inc.* ...................... 1,500 9,000
MAPICS, Inc.* ................................... 500 3,313
THQ, Inc.* ...................................... 450 6,975
------
23,038
------
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
Shares Value ($)
--------------------------------------------------------------------------------
Diverse Electronic Products 2.3%
Cable Design Technologies Corp.* .................... 600 20,550
SBS Technologies, Inc.* ............................. 400 13,800
Simione Central Holdings, Inc.* ..................... 151 330
------
34,680
------
Electronic Components/Distributors 3.9%
CTS Corp. ........................................... 400 25,225
Technitrol, Inc. .................................... 500 34,000
------
59,225
------
Office/Plant Automation 0.9%
Kronos, Inc.* ....................................... 450 14,456
------
Energy 5.6%
Oil & Gas Production 0.7%
UTI Energy Corp.* ................................... 300 10,425
------
Oil/Gas Transmission 1.8%
Kaneb Services, Inc. ................................ 4,800 27,300
------
Oilfield Services/Equipment 3.1%
Seacor Smit Inc.* ................................... 200 12,250
Tuboscope Inc.* ..................................... 700 12,163
Varco International, Inc. ........................... 1,400 17,500
Veritas DGC Inc.* ................................... 250 6,000
------
47,913
------
Metals & Minerals 0.9%
Steel & Metals 0.9%
Commercial Metals Co. ............................... 400 11,750
Metals USA, Inc. .................................... 200 1,425
------
13,175
------
Construction 11.5%
Building Materials 3.9%
Ameron International Corp. .......................... 400 14,225
Building Materials Holding Corp.* ................... 1,500 15,000
Elcor Corp. ......................................... 450 14,316
Florida Rock Industries, Inc. ....................... 500 16,188
------
59,729
------
Building Products 3.6%
Genlyte Group, Inc.* ................................ 500 9,813
International Aluminum Co. .......................... 100 1,594
Mestek, Inc.* ....................................... 900 16,144
The accompanying notes are an integral part of the financial statements.
20
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Shares Value ($)
--------------------------------------------------------------------------------
Modtech Holdings, Inc.* ......................... 210 2,061
NCI Building Systems, Inc.* ..................... 200 3,825
Pitt-Des Moines, Inc. ........................... 200 4,800
Robertson-Ceco Corp. ............................ 1,500 16,969
------
55,206
------
Homebuilding 4.0%
Crossmann Communities, Inc.* .................... 500 8,094
Engle Homes, Inc. ............................... 1,100 10,519
Hovnanian Enterprises Inc. "A"* ................. 1,400 8,225
MDC Holdings, Inc. .............................. 600 11,438
Schuler Homes, Inc.* ............................ 2,200 13,200
Standard Pacific Corp. .......................... 900 9,056
------
60,532
------
Transportation 3.3%
Airlines 1.4%
Amtran, Inc.* ................................... 400 6,600
Atlantic Coast Airlines Holdings* ............... 100 2,988
Frontier Airlines, Inc.* ........................ 400 6,100
Mesaba Holdings, Inc.* .......................... 500 6,250
------
21,938
------
Trucking 1.9%
Covenant Transport, Inc. "A"* ................... 950 12,528
M.S. Carriers Inc.* ............................. 500 11,875
U.S. Xpress Enterprises, Inc. "A"* .............. 500 4,188
------
28,591
------
Utilities 4.1%
Electric Utilities 0.8%
UniSource Energy Corp. .......................... 800 13,000
------
Natural Gas Distribution 3.3%
CTG Resources Inc. .............................. 700 26,994
Energen Corp. ................................... 1,300 23,806
------
50,800
------
--------------------------------------------------------------------------------
Total Common Stocks (Cost $1,337,090) 1,531,245
--------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $1,337,090) (a) 1,531,245
--------------------------------------------------------------------------------
* Non-income producing security.
(a) The cost for federal income tax purposes was $1,337,090. At April 30, 2000,
net unrealized appreciation for all securities based on tax cost was
$194,155. This consisted of aggregate gross unrealized appreciation for all
securities in which there was an excess of market value over tax cost of
$348,739 and aggregate gross unrealized depreciation for all securities in
which there was an excess of tax cost over market value of $154,584.
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
Financial Statements
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Statement of Assets and Liabilities as of April 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Assets
--------------------------------------------------------------------------------
Investments in securities, at value (cost $1,337,090) .......... $ 1,531,245
Cash ........................................................... 32,541
Dividends receivable ........................................... 366
Receivable for Fund shares sold ................................ 600
Due from Adviser ............................................... 105,631
Other assets ................................................... 106
-----------
Total assets ................................................... 1,670,489
Liabilities
--------------------------------------------------------------------------------
Payable for Fund shares redeemed ............................... 10,375
Accrued reorganization costs ................................... 717
Other accrued expenses and payables ............................ 50,193
-----------
Total liabilities .............................................. 61,285
--------------------------------------------------------------------------------
Net assets, at value $ 1,609,204
--------------------------------------------------------------------------------
Net Assets
--------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income ... (4,536)
Net unrealized appreciation (depreciation) on investments ...... 194,155
Accumulated net realized gain (loss) ........................... (63,618)
Paid-in capital ................................................ 1,483,203
--------------------------------------------------------------------------------
Net assets, at value $ 1,609,204
--------------------------------------------------------------------------------
Net Asset Value
--------------------------------------------------------------------------------
NetAsset Value, offering and redemption price per share
($1,609,204 / 126,758 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares -----------
authorized) ................................................. $ 12.70
-----------
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations for the six months ended April 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Investment Income
--------------------------------------------------------------------------------
Income:
Dividends .................................................... $ 11,919
Interest ..................................................... 350
--------
Total income ................................................. 12,269
--------
Expenses:
Management fee ............................................... 8,900
Services to shareholders ..................................... 2,183
Custodian and accounting fees ................................ 21,724
Auditing ..................................................... 11,513
Legal ........................................................ 2,942
Trustees' fees and expenses .................................. 13,243
Reports to shareholders ...................................... 1,705
Registration fees ............................................ 27,211
Reorganization ............................................... 828
Other ........................................................ 29
--------
Total expenses, before expense reductions .................... 90,278
Expense reductions ........................................... (74,611)
--------
Total expenses, after expense reductions ..................... 15,667
--------------------------------------------------------------------------------
Net investment income (loss) (3,398)
--------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
--------------------------------------------------------------------------------
Net realized gain (loss) from investments .................... (30,071)
Net unrealized appreciation (depreciation) during the period on
investments ............................................... 54,465
--------------------------------------------------------------------------------
Net gain (loss) on investment transactions 24,394
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 20,996
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
Six Months
Ended Year Ended
April 30, 2000 October 31,
Increase (Decrease) in Net Assets (Unaudited) 1999
--------------------------------------------------------------------------------
Operations:
Net investment income (loss) ...................... $ (3,398) $ (11,924)
Net realized gain (loss) on investment transactions (30,071) (33,547)
Net unrealized appreciation (depreciation) on
investment transactions during the period ...... 54,465 42,325
----------- -----------
Net increase (decrease) in net assets resulting
from operations ................................ 20,996 (3,146)
----------- -----------
Distributions to shareholders from:
Net investment income ............................. (10,202) (7,682)
----------- -----------
Fund share transactions:
Proceeds from shares sold ......................... 99,687 1,070,856
Reinvestment of distributions ..................... 6,967 6,923
Cost of shares redeemed ........................... (804,131) (356,557)
Redemption fees ................................... 3,441 5,835
----------- -----------
Net increase (decrease) in net assets from Fund
share transactions ............................. (694,036) 727,057
----------- -----------
Increase (decrease) in net assets ................. (683,242) 716,229
Net assets at beginning of period ................. 2,292,446 1,576,217
Net assets at end of period (including accumulated
distributions in excess of net investment
income of $4,536 and undistributed net ......... ----------- -----------
investment income of $9,064, respectively) ..... $ 1,609,204 $ 2,292,446
----------- -----------
Other Information
--------------------------------------------------------------------------------
Shares outstanding at beginning of period ......... 182,216 126,926
----------- -----------
Shares sold ....................................... 7,549 83,695
Shares issued to shareholders in reinvestment of
distributions .................................. 543 543
Shares redeemed ................................... (63,550) (28,948)
----------- -----------
Net increase (decrease) in Fund shares ............ (55,458) 55,290
----------- -----------
Shares outstanding at end of period ............... 126,758 182,216
----------- -----------
The accompanying notes are an integral part of the financial statements.
24
<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 October 31, 2000(c) 1999 1998(b)
--------------------------------------------------------------------------------
Net asset value, beginning of period $12.58 $12.42 $12.00
--------------------------------------------------------------------------------
Income from investment operations:
--------------------------------------------------------------------------------
Net investment income (loss) (a) (.02) (.07) --
--------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investment transactions .18 .24 .42
--------------------------------------------------------------------------------
Total from investment operations .16 .17 .42
--------------------------------------------------------------------------------
Less distributions from:
Net investment income (.06) (.05) --
--------------------------------------------------------------------------------
Redemption fees .02 .04 --
--------------------------------------------------------------------------------
Net asset value, end of period $12.70 $12.58 $12.42
--------------------------------------------------------------------------------
Total Return (%) (d) 1.35** 1.69 3.50(e)**
--------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
--------------------------------------------------------------------------------
Net assets, end of period ($ millions) 2 2 2
--------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 9.09(f)* 7.87 38.75*
--------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.54(f)* 1.50 1.50*
--------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.34)* (.55) (.13)*
--------------------------------------------------------------------------------
Portfolio turnover rate (%) 14 21 --
--------------------------------------------------------------------------------
(a) Based on monthly average shares outstanding during the period.
(b) For the period September 18, 1998 (commencement of operations) to October
31, 1998.
(c) For the six months ended April 30, 2000 (Unaudited).
(d) Total return would have been lower had certain expenses not been reduced.
(e) Shareholders redeeming shares held less than one year will have a lower
total return due to the effect of the 2% redemption fee.
(f) The ratios of operating expenses excluding costs incurred in connection
with the reorganization before and after expense reductions were 9.05% and
1.50%, respectively.
* Annualized
** Not annualized
25
<PAGE>
Notes to Financial Statements (Unaudited)
--------------------------------------------------------------------------------
A. Description of the Fund
Scudder Tax Managed Small Company 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.
B. Plan of Reorganization
On February 7, 2000 the Trustees of the Fund approved an Agreement and Plan of
Reorganization (the "Plan") between the Fund and Scudder Small Company Value
Fund, pursuant to which Scudder Small Company Value Fund would acquire all or
substantially all of the assets and liabilities of the Fund in exchange for
shares of Scudder Small Company Value Fund. The proposed transaction is part of
Scudder Kemper Investments, Inc.'s ("Scudder Kemper") initiative to restructure
and streamline the management and operations of the funds it advises. Costs
incurred in connection with this reorganization initiative are being borne
jointly by Scudder Kemper and certain funds and are included as reorganization
expense in the Statement of Operations of the Fund. These costs principally
include printing, proxy meeting expenses and professional fees. All funds under
the reorganization initiative are subject to an allocated charge of such costs
except for certain funds not expected to realize a reduction in the operating
expense ratio. The Plan can be consummated only if, among other things, it is
approved by a majority vote of the shareholders of the Fund. A special meeting
(the "Meeting") of the shareholders of the Fund to approve the Plan will be held
on or about July 13, 2000.
As a result of the Plan, each shareholder of Scudder Tax Managed Small Company
Fund will become a shareholder of the shares of Scudder Small Company Value Fund
and would hold, immediately after the closing of the Plan (the "Closing"), that
number of full and fractional voting shares of Scudder Small Company Value Fund
having an aggregate net asset value equal to the aggregate net asset value of
such shareholder's shares held in the Fund as of the close of business on the
business day preceding the Closing. The Closing is expected to take place during
the third quarter of 2000. In the event the shareholders of the Fund fail to
approve the Plan, the Fund will continue to operate and the Fund's Board may
resubmit the Plan for shareholder approval or consider other proposals.
26
<PAGE>
C. Significant Accounting Policies
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close
of regular trading on the New York Stock Exchange. Securities which are traded
on U.S. or foreign stock exchanges are valued at the most recent sale price
reported on the exchange on which the security is traded most extensively. If no
sale occurred, the security is then valued at the calculated mean between the
most recent bid and asked quotations. If there are no such bid and asked
quotations, the most recent bid quotation is used. Securities quoted on the
Nasdaq Stock Market ("Nasdaq"), for which there have been sales, are valued at
the most recent sale price reported. If there are no such sales, the value is
the most recent bid quotation. Securities which are not quoted on Nasdaq but are
traded in another over-the-counter market are valued at the most recent sale
price, or if no sale occurred, at the calculated mean between the most recent
bid and asked quotations on such market. If there are no such bid and asked
quotations, the most recent bid quotation shall be used.
Money market instruments purchased with an original maturity of sixty days or
less are valued at amortized cost.
All other securities are valued at their fair value as determined in good faith
by the valuation committee of the Board of Directors.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian or
sub-custodian bank, receives delivery of the underlying securities, the amount
of which at the time of purchase and each subsequent business day is required to
be maintained at such a level that the market value is equal to at least the
principal amount of the repurchase price plus accrued interest.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
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.
27
<PAGE>
At October 31, 1999 the Fund had a net tax basis capital loss carryforward of
approximately $34,000 which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until October 31,
2007, the expiration date, whichever occurs first.
Distribution of Income and Gains. Distributions of net investment income, if
any, are made annually. Net realized gains from investment transactions, in
excess of available capital loss carryforwards, would be taxable to the Fund if
not distributed, and, therefore, will be distributed to shareholders at least
annually.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. As a result, net
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date. Realized gains and
losses from investment transactions are recorded on an identified cost basis.
Redemption Fees. In general, shares of the Fund may be redeemed at net asset
value. However, upon the redemption or exchange of shares held by shareholders
for less than one year, a fee of 2% of the current net asset value of the shares
will be assessed and retained by the Fund for the benefit of the remaining
shareholders. The redemption fee is accounted for as an addition to paid-in
capital.
D. Purchases and Sales of Securities
During the six months ended April 30, 2000, purchases and sales of investment
securities (excluding short-term investments) aggregated $133,778 and $897,149,
respectively.
E. Related Parties
Under the Fund's Investment Management Agreement (the "Management Agreement")
with Scudder Kemper Investments, Inc. ("Scudder Kemper" or
28
<PAGE>
the "Adviser"), the Adviser directs the investments of the
Fund in accordance with its investment objectives, policies and restrictions.
The Adviser determines the securities, instruments and other contracts relating
to investments to be purchased, sold or entered into by the Fund. In addition to
portfolio management services, the Adviser provides certain administrative
services in accordance with the Management Agreement. The management fee payable
under the Management Agreement is equal to an annual rate of 0.90% of the Fund's
average daily net assets, computed and accrued daily and payable monthly. In
addition, the Adviser has agreed not to impose all or a portion of its
management fee until February 28, 2001 in order to maintain the annualized
expenses of the Fund at not more than 1.50% of average daily net assets. Certain
expenses incurred in connection with the reorganization are excluded from the
expense limitation. Accordingly, for the six months ended April 30, 2000, the
Adviser did not impose any of its fee amounting to $8,900. Further, due to the
limitations of such Agreement, the Adviser's reimbursement payable to the Fund
for the six months ended April 30, 2000 amounted to $105,631.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
six months ended April 30, 2000, SSC did not impose any of its fee, which
amounted to $641.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the six months
ended April 30, 2000, SFAC did not impose any of its fee, which amounted to
$18,750.
The Trust pays each Trustee not affiliated with the Adviser an annual retainer,
plus specified amounts for attended board and committee meetings. For the six
months ended April 30, 2000, Trustees' fees and expenses aggregated $13,243, of
which $7,500 was not imposed.
F. Expense Off-Set Arrangements
The Fund has entered into arrangements with its custodian and transfer agent
whereby credits realized as a result of uninvested cash balances were used to
reduce a portion of the Fund's expenses. During the period, the Fund's custodian
and transfer agent fees were reduced by $184 and $124, respectively, under these
arrangements.
29
<PAGE>
G. 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 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>
Trustees and Officers
--------------------------------------------------------------------------------
Linda C. Coughlin* 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; Executive Fellow, Center William F. Gadsden*
for Business Ethics, Bentley o Vice President
College; President, Driscoll
Associates Valerie F. Malter*
o Vice President
Peter B. Freeman
o Trustee; Corporate Director and Ann M. McCreary*
Trustee o Vice President
George M. Lovejoy, Jr. Kathleen T. Millard*
o Trustee; President and Director, o Vice President
Fifty Associates
Robert D. Tymoczko*
Wesley W. Marple, Jr. o Vice President
o Trustee; Professor of Business
Administration, Northeastern University John Millette*
o Vice President and Secretary
Kathryn L. Quirk*
o Trustee, Vice President and John R. Hebble*
Assistant Secretary o Treasurer
Jean C. Tempel Caroline Pearson*
o Trustee; Managing Director, o Assistant Secretary
First Light Capital
*Scudder Kemper Investments, Inc.
31
<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
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* Scudder Micro Cap Fund
Managed Shares*
Growth
Tax Free Money Market+ Scudder Classic Growth Fund***
Scudder Tax Free Money Fund Scudder Large Company Growth Fund***
Scudder California Tax Free Money Fund** Scudder Select 1000 Growth Fund
Scudder New York Tax Free Money Fund** Scudder Development Fund
Scudder 21st Century Growth Fund
Tax Free+
Scudder Limited Term Tax Free Fund Global Equity
Scudder Medium Term Tax Free Fund Worldwide
Scudder Managed Municipal Bonds Scudder Global Fund
Scudder High Yield Tax Free Fund Scudder International Value Fund
Scudder California Tax Free Fund** Scudder International Growth and
Scudder Massachusetts Limited Term Income Fund
Tax Free Fund** Scudder International Fund++
Scudder Massachusetts Tax Free Fund** Scudder International Growth Fund
Scudder New York Tax Free Fund** Scudder Global Discovery Fund***
Scudder Ohio Tax Free Fund** Scudder Emerging Markets Growth Fund
Scudder Gold Fund
U.S. Income
Scudder Short Term Bond Fund Regional
Scudder GNMA Fund Scudder Greater Europe Growth Fund
Scudder Income Fund Scudder Pacific Opportunities Fund
Scudder Corporate Bond Fund Scudder Latin America Fund
Scudder High Yield Bond Fund The Japan Fund, Inc.
Global Income Industry Sector Funds
Scudder Global Bond Fund Choice Series
Scudder International Bond Fund Scudder Financial Services Fund
Scudder Emerging Markets Income Fund Scudder Health Care Fund
Scudder Technology Fund
Asset Allocation
Scudder Pathway Conservative Portfolio Preferred Series
Scudder Pathway Balanced Portfolio Scudder Tax Managed Growth Fund
Scudder Pathway Growth Portfolio Scudder Tax Managed Small Company 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
Scudder Real Estate Investment Fund
</TABLE>
32
<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**+++ +++ +++
<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
Kemper Investment'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 Kemper Investment'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.
33
<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.
34
<PAGE>
--------------------------------------------------------------------------------
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
35
<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.
RT307400
395-6A-40
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
