-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LyrW7+JOARj1MCGdkQOh9fnCl3BY7uhklBUBCWPr0FS3YBGiWl56vNK4gVTquLq9 ZFmaOhuuYKutEBHmhVzebQ== 0000088053-98-001233.txt : 19981228 0000088053-98-001233.hdr.sgml : 19981228 ACCESSION NUMBER: 0000088053-98-001233 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981031 FILED AS OF DATE: 19981222 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INVESTMENT TRUST CENTRAL INDEX KEY: 0000088064 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 042212654 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-00043 FILM NUMBER: 98774076 BUSINESS ADDRESS: STREET 1: 160 FEDERAL ST CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6173305590 FORMER COMPANY: FORMER CONFORMED NAME: SCUDDER INVESTMENT TRUST DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SCUDDER GROWTH & INCOME FUND DATE OF NAME CHANGE: 19910402 FORMER COMPANY: FORMER CONFORMED NAME: SCUDDER COMMON STOCK FUND INC DATE OF NAME CHANGE: 19841125 N-30D 1 ANN. REPT - SCUDDER TAX MANAGED SMALL COMPANY FUND Scudder Tax Managed Small Company Fund Annual Report October 31, 1998 Pure No-Load(TM) Funds A pure no-load(TM) (no sales charges) mutual fund, which seeks long-term growth of capital on an after-tax basis through investment in undervalued stocks of small U.S. companies. SCUDDER (logo) Scudder Tax Managed Small Company Fund - -------------------------------------------------------------------------------- Date of Inception: 9/18/98 Total Net Assets as of 10/31/98: $1.58 million - -------------------------------------------------------------------------------- o Scudder Tax Managed Small Company Fund returned 3.50% for the abbreviated fiscal period from September 18, 1998 to October 31, 1998. o A disciplined approach to selecting undervalued small-cap U.S. stocks is followed in the pursuit of its goal of long-term growth of capital on an after-tax basis. o At the end of the period, the portfolio was broadly diversified with 163 securities and no position greater than 2% of assets. The Fund's median market-cap was $252 million, which compares to the $398 million market-cap of the unmanaged Russell 2000 Index. Table of Contents 3 Letter from the Fund's President 19 Financial Highlights 4 Portfolio Summary 20 Notes to Financial Statements 5 Portfolio Management Discussion 23 Report of Independent Accountants 7 Glossary of Investment Terms 24 Trustees and Officers 8 Investment Portfolio 25 Investment Products and Services 16 Financial Statements 26 Scudder Solutions 2 - Scudder Tax Managed Small Company Fund Letter from the Fund's President Dear Shareholders, We are pleased to present the first report to shareholders for the abbreviated fiscal period from the Fund's commencement of operations on September 18, 1998 to October 31, 1998. While this is a very short period to report on the Fund's activities, it provides an opportunity to highlight the Fund's tax sensitive approach to seeking long-term growth of capital through small-cap U.S. stocks. To that end, we have included a discussion with your Fund's managers, Mac Eysenbach, Phil Fortuna, Calvin Young, and Rob Tymoczko, which begins on page 5. In the interview, the Fund's managers describe how their investment process - -- unlike that used with many other mutual funds -- is designed to maximize shareholders' after-tax returns by systematically analyzing each stock's potential return on an after-tax basis. Also discussed is the use of a quantitative valuation model that takes into account several key investment characteristics in selecting securities for the portfolio and their approach to risk control. For those of you who are interested in new Scudder funds, we recently introduced two international funds: Scudder International Growth Fund -- which seeks to invest in high growth opportunities in both developed and developing markets, and Scudder International Value Fund -- which seeks to invest in undervalued foreign securities. For further information on these new funds, please call Scudder Investor Information at 1-800-225-2470. Thank you for your interest in Scudder Tax Managed Small Company Fund. If you have any questions about your Fund, please call Scudder Investor Information at the number above or visit our Internet Web site at www.scudder.com. Sincerely, /s/Daniel Pierce Daniel Pierce President, Scudder Tax Managed Small Company Fund 3 - Scudder Tax Managed Small Company Fund Portfolio Summary as of October 31, 1998 Asset Allocation - ----------------------------------------- A graph in the form of a pie chart appears here, illustrating the exact data points in the table below. Common Stock 98% Cash Equivalent, net 2% -------------------------------------- 100% -------------------------------------- Management pursues a fully invested approach to seeking long-term growth of capital from small-cap stocks on an after tax basis. Sectors - ----------------------------------------- A graph in the form of a pie chart appears here, illustrating the exact data points in the table below. Manufacturing 20% Financial 14% Consumer Discretionary 14% Service Industries 10% Construction 8% Durables 7% Technology 5% Energy 4% Consumer Staples 4% Other 14% -------------------------------------- 100% -------------------------------------- The Fund's sector allocations are the result of our individual stock selections, rather than bets on specific industry sectors. Ten Largest Equity Holdings (9% of Portfolio) - ----------------------------------------- 1. Conestoga Enterprises, Inc. Independent local telephone utility 2. Mesaba Holdings, Inc. Regional passenger airline 3. Zenith National Insurance Corp. Multi-line insurance company 4. Varco International, Inc. Manufacturer of oil and gas drilling tools 5. CTS Corp. Manufacturer of electro-mechanical components 6. Brightpoint, Inc. Service provider to the wireless communication industry 7. Advest Group, Inc. Provider of banking and financial services 8. Oshkosh Truck Corp. Manufacturer of commercial and military vehicles 9. Chartwell Re Corp. Reinsurance underwriter 10. Technitrol, Inc. Manufacturer of electronic components The Fund's top holdings are the result of our proprietary, quantitative approach to identifying attractively valued small-cap stocks with above-average capital appreciation potential. For more complete details about the Fund's investment portfolio, see page 8. A quarterly Fund Summary and Portfolio Holdings are available upon request. 4 - Scudder Tax Managed Small Company Fund Portfolio Management Discussion We recently spoke with the Fund's portfolio management team -- Mac Eysenbach, Phil Fortuna, Calvin Young, and Rob Tymoczko -- about their approach to managing this Fund. Highlights of the discussion are below. Q: What does Scudder Tax Managed Small Company Fund invest in? A: Designed as a complement to the Tax Managed Growth Fund, the Small Company Fund focuses on stocks smaller than the 1000 largest U.S. companies. These stocks are similar in size or smaller than those in the Russell 2000 Index of small stocks, which currently has a median market capitalization of $398 million. Q: How does Scudder's approach to tax management differ from others? A: Rather than focusing exclusively on non-dividend paying stocks, minimizing portfolio turnover or indexing, Scudder actively manages these portfolios by taking into consideration the implications of trading activity to maximize after-tax returns. By successfully balancing the expected return trade-offs due to differing tax rates for dividend income, short-term and long-term capital gains, we seek to enhance shareholders' potential for post-tax returns. By harvesting capital losses and selling securities with a high cost basis first, the tax implications of trades can be minimized, resulting in lower average annual distributions. Q: Given a universe consisting of approximately 2,000 small U.S. companies, how do you go about assessing each stock's potential return? A: We rely on a proprietary, quantitative screening process to identify attractively valued stocks with above-average capital appreciation potential. We consider four primary factors: valuation, trends in fundamentals, price momentum, and risk. Our valuation measures tell us how cheap the security is relative to the overall small-cap universe. Sales and earnings trends suggest whether the company's fundamentals are stable, improving, or deteriorating. Price momentum allows us to assess how the market is responding to these fundamentals. And, risk measures help us to understand the degree of financial uncertainty for a given company. Each company is then ranked based on its relative attractiveness. Q: How are these rankings used to manage a tax-efficient portfolio? A: We first build a diversified portfolio of attractively rated companies. To limit individual security risk and provide trading flexibility, we typically hold more than 150 securities. On an ongoing basis, we then use a tax-aware portfolio optimization process to determine which securities should be replaced due to diminishing growth prospects, while creating the lowest tax impact for shareholders. The process allows us to keep the portfolio focused on attractively rated companies, while managing overall portfolio risk and the tax consequences of portfolio turnover. Q: What should we expect to see from this approach? A: As a result of this tax sensitive investment process, investors should see fewer short-term gains, and lower capital gain and dividend income distributions. Keep in mind, however, that our overriding goal is to generate above-average after-tax returns, not minimize taxes. As a result, we will 5 - Scudder Tax Managed Small Company Fund realize gains, but only when we believe it is advantageous to do so on an after-tax basis. Through our emphasis on risk control, we also expect the Fund to have less downside risk than the typical small company fund. Q: How is the Fund invested today? A: Consistent with our disciplines, the Fund is essentially fully invested in equities. At the end of the period, we held a broadly diversified portfolio of 163 securities with no position greater than 2% of assets. The median market capitalization of the Fund was $252 million, which compares to the $398 million market-cap of the Russell 2000. The typical Fund holding had a p/e of 12x reported earnings versus 19x for the Index. Q: What is your outlook for small-cap stocks? A: Small-cap stocks have just come through a difficult period. In fact, on a relative basis, the performance shortfall versus large-cap stocks over the past year is the largest we have seen in the last 25 years. While small-cap stocks have historically sold at higher p/e multiples than large-cap stocks, today that relationship is reversed. Given the prospects for faster growth from small stocks, this suggests that small-cap valuations are quite attractive. In short, we believe it is a good time to be starting a small-cap fund. Scudder Tax Managed Small Company Fund: A Team Approach to Investing Scudder Tax Managed Small Company Fund is managed by a team of Scudder Kemper Investments, Inc. (the "Adviser") professionals, each of whom plays an important role in the Fund's management process. Team members work together to develop investment strategies and select securities for the Fund's portfolio. They are supported by the Adviser's large staff of economists, research analysts, traders, and other investment specialists who work in our offices across the United States and abroad. We believe our team approach benefits Fund investors by bringing together many disciplines and leveraging our extensive resources. Lead Portfolio Manager James (Mac) M. Eysenbach has responsibility for the Fund's day-to-day management and investment strategies. Mr. Eysenbach joined the Adviser in 1991 as a senior quantitative analyst and has more than 10 years of investment management experience, specializing in quantitative research. Portfolio Manager Philip S. Fortuna joined the Adviser in 1986 as a manager of institutional equity accounts. Mr. Fortuna is currently director of the Adviser's quantitative group. Portfolio Manager Calvin S. Young joined the Adviser in 1990 as a quantitative analyst. Mr. Young has ten years of investment industry experience with a special focus on small companies. Portfolio Manager Robert Tymoczko joined the Adviser in 1997 as a quantitative analyst. Mr. Tymoczko has five years of experience in quantitative research and econometric modeling. 6 - Scudder Tax Managed Small Company Fund Glossary of Investment Terms MARKET CAPITALIZATION The value of a company's outstanding shares of common stock, determined by multiplying the number of shares outstanding by the share price (Shares x Price = Market Capitalization). The universe of publicly traded companies is frequently divided into large-, mid-, and small-capitalizations. OVER/UNDER WEIGHTING Refers to the allocation of assets -- usually by sector, industry, or country -- within a portfolio relative to a benchmark index (e.g. the Russell 2000 Index), or an investment universe. PRICE/EARNINGS RATIO A widely used gauge of a stock's valuation that (P/E) (also "earnings indicates what investors are paying for a company's multiple") earnings on a per share basis. A higher "earnings multiple" indicates a higher expected growth rate and the potential for greater price fluctuations. QUANTITATIVE MODEL A systematic approach to evaluating a security based on its financial characteristics. STANDARD DEVIATION A statistical measure of the degree to which an investment's return tends to vary from the mean return. Frequently used in portfolio management to measure the variability of past returns and to gauge the likely range of possible future returns. TAX BASIS The price paid by an investor for a stock or bond plus any out-of-pocket expenses such as brokerage commissions. A security's basis is used to determine capital gains or losses for tax purposes when the stock is sold. 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. (Sources: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and Investment Terms) 7 - Scudder Tax Managed Small Company Fund Investment Portfolio as of October 31, 1998
Market Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------ Common Stocks 100.0% - ------------------------------------------------------------------------------------------------------------------------------ Consumer Discretionary 13.7% Apparel & Shoes 1.3% Garan, Inc. ............................................................................. 500 13,563 Wolverine World Wide, Inc. .............................................................. 500 6,531 ------ 20,094 ------ Department & Chain Stores 2.4% Ames Department Stores, Inc.* ........................................................... 600 11,025 Dress Barn Inc.* ........................................................................ 600 8,475 Fred's, Inc. "A" ........................................................................ 600 7,838 Jo-Ann Stores, Inc. "A"* ................................................................ 500 9,000 ------ 36,338 ------ Home Furnishings 2.3% Chromcraft Revington, Inc. .............................................................. 700 11,331 Interface, Inc. ......................................................................... 1,100 13,544 Oneida Ltd. ............................................................................. 700 10,019 ------ 34,894 ------ Recreational Products 0.6% The First Years Inc. .................................................................... 600 9,450 ------ Restaurants 3.5% Avado Brands, Inc. ...................................................................... 900 7,088 CEC Entertainment Inc.* ................................................................. 400 11,300 Rainforest Cafe Inc. .................................................................... 900 5,963 Ruby Tuesday, Inc. ...................................................................... 400 6,750 Ryan's Family Steak Houses, Inc.* ....................................................... 1,000 10,750 VICORP Restaurants, Inc.* ............................................................... 900 12,713 ------ 54,564 ------ Specialty Retail 3.6% Discount Auto Parts Inc.* ............................................................... 400 9,650 Inacom Corp.* ........................................................................... 400 7,750 Piercing Pagoda, Inc. ................................................................... 600 8,925 Rent-Way, Inc.* ......................................................................... 500 11,813 Russ Berrie & Co., Inc. ................................................................. 500 9,875 Wet Seal, Inc. "A"* ..................................................................... 400 8,450 ------ 56,463 ------
The accompanying notes are an integral part of the financial statements. 8 - Scudder Tax Managed Small Company Fund
Market Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------ Consumer Staples 3.9% Consumer Specialties 1.7% Imperial Holly Corp. .................................................................... 1,100 7,838 Sola International, Inc.* ............................................................... 600 11,513 Watsco, Inc. ............................................................................ 400 6,775 ------ 26,126 ------ Farming 0.6% Tractor Supply Co.* ..................................................................... 400 9,900 ------ Food & Beverage 0.6% National Beverage Corp. ................................................................. 900 9,169 ------ Package Goods/Cosmetics 0.5% Chattem, Inc.* .......................................................................... 250 6,938 ------ Textiles 0.5% Hartmarx Corp.* ......................................................................... 1,700 8,606 ------ Health 3.6% Biotechnology 0.4% Bio-Rad Laboratories, Inc. "A"* ......................................................... 300 6,619 ------ Health Industry Services 2.7% DVI, Inc.* .............................................................................. 700 10,938 Hanger Orthopedic Group, Inc.* .......................................................... 400 7,900 PharMerica, Inc.* ....................................................................... 1,700 5,738 Prime Medical Services, Inc.* ........................................................... 1,100 8,250 Syncor International Corp.* ............................................................. 450 8,213 41,039 ------ Pharmaceuticals 0.5% Medco Research Inc.* .................................................................... 400 7,250 ------ Communications 1.1% Telephone/Communications Conestoga Enterprises, Inc. ............................................................. 500 16,480 ------ Financial 13.9% Banks 7.5% Andover Bancorp, Inc. ................................................................... 300 9,375 BSB Bancorp, Inc. ....................................................................... 300 8,400 Columbia Banking System, Inc. ........................................................... 400 8,050 D & N Financial Corp. ................................................................... 500 9,625 Evergreen Bancorp, Inc. ................................................................. 300 8,325 First Federal Financial Corp. ........................................................... 500 8,188
The accompanying notes are an integral part of the financial statements. 9 - Scudder Tax Managed Small Company Fund
Market Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------ First Republic Bank* .................................................................... 300 7,425 JSB Financial, Inc. ..................................................................... 250 13,203 PFF Bancorp, Inc.* ...................................................................... 400 5,875 Parkvale Financial Corp. ................................................................ 575 12,075 Silicon Valley Bancshares ............................................................... 600 12,300 The Trust Company of N.J. ............................................................... 500 12,500 ------- 115,341 ------- Insurance 4.6% Acceptance Insurance Cos., Inc.* ........................................................ 500 9,813 Chartwell Re Corp. ...................................................................... 550 13,681 Guarantee Life Companies, Inc. .......................................................... 500 9,625 MMI Companies, Inc. ..................................................................... 500 8,031 National Western Life Insurance Co.* .................................................... 50 5,850 RLI Corp. ............................................................................... 300 9,825 Zenith National Insurance Corp. ......................................................... 600 15,338 ------- 72,163 ------- Business Finance 0.9% Advest Group, Inc. ...................................................................... 700 14,525 ------- Real Estate 0.2% IMC Mortgage Co.* ....................................................................... 1,200 2,400 ------- Miscellaneous 0.7% Resource Bancshares Mortgage Group, Inc. ................................................ 700 10,325 ------- Service Industries 9.7% EDP Services 0.7% Pomeroy Computer Resources, Inc.* ....................................................... 600 10,088 ------- Environmental Services 0.7% URS Corp.* .............................................................................. 600 10,125 ------- Investment 1.4% Interstate/Johnson Lane, Inc. ........................................................... 400 12,250 Southwest Securities Group, Inc. ........................................................ 500 9,250 ------- 21,500 ------- Miscellaneous Commercial Services 5.4% CORT Business Services Corp.* ........................................................... 500 9,813 Fleming Companies Inc. .................................................................. 800 8,150 Kaneb Services, Inc.* ................................................................... 1,700 7,756 Morrison Knudsen Corp.* ................................................................. 700 6,956 Personnel Group of America, Inc. ........................................................ 800 12,400
The accompanying notes are an integral part of the financial statements. 10 - Scudder Tax Managed Small Company Fund
Market Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------ Pinkerton's, Inc.* ...................................................................... 600 9,825 SOS Staffing Services, Inc.* ............................................................ 600 5,063 Veritas DGC Inc.* ....................................................................... 650 12,106 Volt Information Sciences, Inc.* ........................................................ 500 11,969 ------ 84,038 ------ Miscellaneous Consumer Services 0.9% Jan Bell Marketing, Inc.* ............................................................... 1,400 6,738 Westaff Inc. ............................................................................ 800 6,900 ------ 13,638 ------ Printing/Publishing 0.6% Merrill Corp. ........................................................................... 600 10,050 ------ Durables 7.3% Aerospace 3.0% Aviall, Inc.* ........................................................................... 800 8,650 Banner Aerospace, Inc.* ................................................................. 1,000 7,938 Ducommun, Inc. .......................................................................... 600 9,600 Kaman Corp. "A" ......................................................................... 600 9,750 Primex Technologies, Inc. ............................................................... 300 11,025 ------ 46,963 ------ Automobiles 3.5% Coachmen Industries, Inc. ............................................................... 400 9,250 Intermet Corp. .......................................................................... 600 9,750 Monaco Coach Corp. ...................................................................... 300 9,113 Myers Industries, Inc. .................................................................. 500 12,000 Oshkosk Truck Corp. "B" ................................................................. 500 13,688 ------ 53,801 ------ Leasing Companies 0.8% AMERCO* ................................................................................. 300 7,050 Leasing Solutions, Inc.* ................................................................ 500 5,094 ------ 12,144 ------ Manufacturing 20.2% Chemicals 1.8% Chemfab Corp.* .......................................................................... 500 10,500 Kronos, Inc.* ........................................................................... 300 10,800 Quaker Chemical Corp. ................................................................... 500 7,063 ------ 28,363 ------
The accompanying notes are an integral part of the financial statements. 11 - Scudder Tax Managed Small Company Fund
Market Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------ Containers & Paper 0.6% Alltrista Corp.* ........................................................................ 400 9,175 ------ Diversified Manufacturing 3.7% Cascade Corp. ........................................................................... 500 6,750 International Aluminum Co. .............................................................. 300 8,681 Justin Industries ....................................................................... 700 10,150 Mestek, Inc.* ........................................................................... 600 11,250 Park-Ohio Holdings Corp.* ............................................................... 700 10,281 Ralcorp Holdings, Inc.* ................................................................. 600 10,575 ------ 57,687 ------ Electrical Products 2.7% AFC Cable Systems, Inc.* ................................................................ 300 7,388 C&D Technologies, Inc. .................................................................. 400 9,750 Katy Industries, Inc. ................................................................... 500 10,250 Kuhlman Corp. ........................................................................... 300 7,950 SLI, Inc.* .............................................................................. 400 6,700 ------ 42,038 ------ Industrial Specialty 5.7% Chart Industries, Inc. .................................................................. 1,400 12,863 Gardner Denver Inc. ..................................................................... 500 7,188 Huffy Corp. ............................................................................. 800 10,150 Modtech, Inc.* .......................................................................... 400 6,750 National R.V. Holdings, Inc. ............................................................ 500 11,313 Optical Coating Laboratory, Inc. ........................................................ 600 9,975 RTI International Metals, Inc.* ......................................................... 400 5,950 Regal-Beloit Corp. ...................................................................... 300 6,319 Thermo BioAnalysis Corp.* ............................................................... 700 7,394 TransTechnology Corp. ................................................................... 500 10,531 ------ 88,433 ------ Machinery/Components/Controls 3.9% Amcast Industrial Corp. ................................................................. 700 11,988 Columbus McKinnon Corp. ................................................................. 500 8,250 Dura Automotive Systems, Inc.* .......................................................... 300 7,163 Varco International, Inc. ............................................................... 1,400 15,138 Varlen Corp. ............................................................................ 300 8,963 Woodward Governor Co. ................................................................... 400 8,800 ------ 60,302 ------
The accompanying notes are an integral part of the financial statements. 12 - Scudder Tax Managed Small Company Fund
Market Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------ Wholesale Distributors 1.0% Brightpoint, Inc. ....................................................................... 1,200 14,700 ------ Miscellaneous 0.8% M&F Worldwide Corp.* .................................................................... 1,300 12,919 ------ Technology 4.8% Computer Software 1.0% Caere Corp.* ............................................................................ 600 5,813 MAPICS, Inc.* ........................................................................... 500 9,438 ------ 15,251 ------ Diverse Electronic Products 0.2% SBS Technologies, Inc.* ................................................................. 200 3,238 ------ Electronic Components/Distributors 2.5% CTS Corp. ............................................................................... 500 14,813 Harmon Industries, Inc. ................................................................. 400 10,150 Technitrol, Inc. ........................................................................ 500 13,625 ------ 38,588 ------ Military Electronics 0.6% ESCO Electronics Corp.* ................................................................. 700 8,750 ------ Precision Instruments 0.5% Coherent, Inc. .......................................................................... 700 8,225 ------ Energy 4.1% Oil & Gas Production 1.7% Plains Resources, Inc.* ................................................................. 500 8,500 Tesoro Petroleum Corp.* ................................................................. 800 11,850 UTI Energy Corp.* ....................................................................... 700 6,256 ------ 26,606 ------ Oil/Gas Transmission 0.5% World Fuel Services Corp. ............................................................... 500 7,000 ------ Oilfield Services/Equipment 1.9% Daniel Industries ....................................................................... 500 6,938 Pool Energy Services Co.* ............................................................... 1,000 13,344 Seacor Smit Inc.* ....................................................................... 200 9,563 ------ 29,845 ------ Metals & Minerals 3.7% Steel & Metals 3.2% Armco, Inc.* ............................................................................ 2,500 11,875 Chase Industries, Inc. .................................................................. 700 9,275
The accompanying notes are an integral part of the financial statements. 13 - Scudder Tax Managed Small Company Fund
Market Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------ Commercial Metals Co. ................................................................... 500 13,313 Gibraltar Steel Corp.* .................................................................. 500 9,688 Lone Star Technologies, Inc.* ........................................................... 600 6,375 ------ 50,526 ------ Miscellaneous 0.5% Kaiser Aluminum Corp.* .................................................................. 1,100 6,944 ------ Construction 8.0% Building Materials 3.3% Ameron International Corp. .............................................................. 300 10,931 Building Materials Holding Corp.* ....................................................... 800 8,900 Elcor Corp. ............................................................................. 300 8,700 Florida Rock Industries, Inc. ........................................................... 500 12,406 Genlyte Group, Inc. ..................................................................... 500 9,906 ------ 50,843 ------ Building Products 2.3% American Buildings Co.* ................................................................. 300 7,200 Holophane Corp. ......................................................................... 300 6,394 NCI Building Systems, Inc. .............................................................. 600 12,975 Robertson-Ceco Corp.* ................................................................... 1,200 9,600 ------ 36,169 ------ Homebuilding 2.4% American Homestar Corp. ................................................................. 400 6,550 Cavalier Homes, Inc. .................................................................... 1,000 9,688 MDC Holdings, Inc. ...................................................................... 700 12,294 Standard Pacific Corp. .................................................................. 900 8,719 ------ 37,251 ------ Transportation 3.4% Airlines 1.7% Atlantic Coast Airlines Holdings ........................................................ 400 9,600 Mesaba Holdings, Inc. ................................................................... 900 16,425 ------ 26,025 ------ Trucking 1.7% Covenant Transport, Inc. "A"* ........................................................... 500 7,563 M.S. Carriers Inc.* ..................................................................... 500 10,750 U.S. Xpress Enterprises, Inc. "A"* ...................................................... 600 8,700 ------ 27,013 ------
The accompanying notes are an integral part of the financial statements. 14 - Scudder Tax Managed Small Company Fund
Market Shares Value ($) - ------------------------------------------------------------------------------------------------------------------------------ Utilities 2.6% Electric Utilities 1.7% TNP Enterprises, Inc. ................................................................... 400 13,500 UniSource Energy Corp.* ................................................................. 800 12,400 --------- 25,900 --------- Natural Gas Distribution 0.9% CTG Resources Inc. ...................................................................... 300 7,106 Energen Corp. ........................................................................... 400 7,200 --------- 14,306 - ------------------------------------------------------------------------------------------------------------------------------ Total Common Stocks (Cost $1,449,763) 1,547,128 - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Total Investment Portfolio -- 100.0% (Cost $1,449,763) (a) 1,547,128 - ------------------------------------------------------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $1,449,763. At October 31, 1998, net unrealized appreciation for all securities based on tax cost was $97,365. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of market value over tax cost of $149,666 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over market value of $52,301. * Non-income producing security. The accompanying notes are an integral part of the financial statements. 15 - Scudder Tax Managed Small Company Fund Financial Statements Statement of Assets and Liabilities as of October 31, 1998 Assets - ---------------------------------------------------------------------------------------------------------------------------- Investments, at market (identified cost $1,449,763) .................... $ 1,547,128 Cash ................................................................... 42,716 Dividends receivable ................................................... 486 Reimbursement from Adviser ............................................. 40,550 ---------------- Total assets ........................................................... 1,630,880 Liabilities - ---------------------------------------------------------------------------------------------------------------------------- Payable for investments purchased ...................................... 12,129 Other accrued expenses ................................................. 42,534 ---------------- Total liabilities ...................................................... 54,663 -------------------------------------------------------------------------------------------- Net assets, at market value $ 1,576,217 -------------------------------------------------------------------------------------------- Net Assets - ---------------------------------------------------------------------------------------------------------------------------- Net assets consist of: Undistributed net investment income .................................... 3,301 Unrealized appreciation (depreciation) on investment securities ........ 97,365 Paid-in capital ........................................................ 1,475,551 -------------------------------------------------------------------------------------------- Net assets, at market value $ 1,576,217 -------------------------------------------------------------------------------------------- Net Asset Value - ---------------------------------------------------------------------------------------------------------------------------- Net Asset Value, offering and redemption price per share ($1,576,217 / 126,926 outstanding shares of beneficial interest, $.01 par value, ---------------- unlimited number of shares authorized) .............................. $12.42 ----------------
The accompanying notes are an integral part of the financial statements. 16 - Scudder Tax Managed Small Company Fund Statement of Operations for the period September 18, 1998 (commencement of operations) to October 31, 1998 Investment Income - ---------------------------------------------------------------------------------------------------------------------------- Income: Dividends .............................................................. $ 958 Interest ............................................................... 849 ---------------- 1,807 Expenses: Management fee ......................................................... 1,206 Services to shareholders ............................................... 3,348 Custodian and accounting fees .......................................... 8,860 Auditing ............................................................... 19,100 Registration fees ...................................................... 3,915 Reports to shareholders ................................................ 8,530 Legal .................................................................. 2,048 Other .................................................................. 4,233 ---------------- Total expenses before reductions ....................................... 51,240 Expense reductions ..................................................... (49,256) ---------------- Expenses, net .......................................................... 1,984 -------------------------------------------------------------------------------------------- Net investment income (loss) (177) -------------------------------------------------------------------------------------------- Realized and unrealized gain (loss) on investment transactions - ---------------------------------------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation) during the period on investments .......................................................... 97,365 -------------------------------------------------------------------------------------------- Net gain (loss) on investment transactions 97,365 -------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 97,188 --------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 17 - Scudder Tax Managed Small Company Fund Statement of Changes in Net Assets
For the Period September 18, 1998 (commencement of operations) to Increase (Decrease) in Net Assets October 31, 1998 - ---------------------------------------------------------------------------------------------------------------------------- Operations: Net investment income (loss) ........................................... $ (177) Net unrealized appreciation (depreciation) on investment transactions during the period ...................................... 97,365 ---------------- Net increase (decrease) in net assets resulting from operations ........ 97,188 ---------------- Fund share transactions: Proceeds from shares sold .............................................. 1,477,911 Cost of shares redeemed ................................................ (82) ---------------- Net increase (decrease) in net assets from Fund share transactions ..... 1,477,829 ---------------- Increase (decrease) in net assets ...................................... 1,575,017 Net assets at beginning of period ...................................... 1,200 Net assets at end of period (including undistributed net investment ---------------- income of $3,301) ................................................... $ 1,576,217 ---------------- Other Information - ---------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in Fund shares Shares outstanding at beginning of period .............................. 100 ---------------- Shares sold ............................................................ 126,833 Shares redeemed ........................................................ (7) ---------------- Net increase (decrease) in Fund shares ................................. 126,826 ---------------- Shares outstanding at end of period .................................... 126,926 ----------------
The accompanying notes are an integral part of the financial statements. 18 - Scudder Tax Managed Small Company Fund Financial Highlights The following table includes selected data for a share outstanding throughout the period (a) and other performance information derived from the financial statements.
For the Period September 18, 1998 (commencement of operations) to October 31, 1998 - ---------------------------------------------------------------------------------------------------------------------------- ---------------- Net asset value, beginning of period .................................................................. $12.00 ---------------- Income from investment operations: Net investment income ................................................................................. -- Net realized and unrealized gain on investments ....................................................... .42 ---------------- Total from investment operations ...................................................................... .42 ---------------- Redemption fee ........................................................................................ -- ---------------- Net asset value, end of period ........................................................................ $12.42 ---------------- - ---------------------------------------------------------------------------------------------------------------------------- Total Return (%) (b) .................................................................................. 3.50(c)** Ratios and Supplemental Data Net assets, end of period ($ millions) ................................................................ 1.58 Ratio of operating expenses, net to average daily net assets (%) ...................................... 1.50* Ratio of operating expenses, before expense reductions, to average daily net assets (%) ............... 38.75* Ratio of net investment income (loss) to average daily net assets (%) ................................. (0.13)* Portfolio turnover rate (%) ........................................................................... --
(a) Based on monthly average shares outstanding during the period. (b) Total return would have been lower had certain expenses not been reduced. (c) Total return does not reflect the effect to the shareholder of the 2% redemption fee on shares held less than one year. * Annualized ** Not annualized 19 - Scudder Tax Managed Small Company Fund Notes to Financial Statements A. Significant Accounting Policies Scudder Tax Managed Small Company Fund (the "Fund") is a diversified series of Investment Trust (the "Trust"). The Trust is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. 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. Portfolio 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, Inc. ("Nasdaq"), for which there have been sales, are valued at the most recent sale price reported on such system. 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 on such market. 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 shall be used. Portfolio debt securities other than money market securities with an original maturity of over sixty days are valued by pricing agents approved by the officers of the Fund, 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. Repurchase Agreements. The Fund may enter into repurchase agreements with certain banks and broker/dealers whereby the Fund, through its custodian, 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, depending on the maturity of the repurchase agreement, is equal to at least the repurchase price. Federal Income Taxes. The Fund's policy is to comply with the requirements of the Internal Revenue Code of 1986, as amended, which are applicable to regulated investment companies, and to distribute all of its taxable income to its shareholders. The Fund accordingly paid no federal income taxes and no provision for federal income taxes was required. 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. Distribution of Income and Gains. Distributions of net investment income are made annually. During any particular year, 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 annually. An additional distribution may be made to the extent necessary to avoid the payment of a four percent federal excise tax. 20 - Scudder Tax Managed Small Company Fund 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 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. The Fund uses the specific identified cost method for determining realized gain or loss on investments for both financial and federal income tax reporting purposes. Other. Investment security transactions are accounted for on a trade date basis. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Interest income is recorded on the accrual basis. B. Purchases and Sales of Securities During the period September 18, 1998 (commencement of operations) to October 31, 1998, purchases of investment securities (excluding short-term investments) aggregated $1,449,763. There were no sales during the period. C. Related Parties Under the Fund's Investment Management Agreement (the "Management Agreement") with Scudder Kemper Investments, Inc. (the "Adviser"), the Adviser directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Adviser determines the securities, instruments and other contracts relating to investments to be purchased, sold or entered into by the Fund. In addition to portfolio management services, the Adviser provides certain administrative services in accordance with the Management Agreement. The management fee payable under the Management Agreement is equal to an annual rate of 0.90% 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, 1999 in order to maintain the annualized expenses of the Fund at not more than 1.50% of average daily net assets. Accordingly, for the period September 18, 1998 (commencement of operations) to October 31, 1998, the Adviser did not impose any of its fee amounting to $1,206. Further, due to the limitations of such Agreement, the Adviser's reimbursement payable to the Fund for the period September 18, 1998 (commencement of operations) to October 31, 1998 amounted to $40,550. On September 7, 1998, Zurich Insurance Company ("Zurich"), majority owner of the Adviser, entered into an agreement with B.A.T Industries p.l.c. ("B.A.T") pursuant to which the financial services businesses of B.A.T were combined with Zurich's businesses to form a new global insurance and financial services company known as Zurich Financial Services. Upon consummation of the transaction, the Fund's investment management agreement with Scudder Kemper was deemed to have been assigned and, therefore, terminated. The Board of Directors of the Fund has approved a new investment management agreement with Scudder Kemper, which is substantially identical to the former investment management agreement, except for the dates of execution and termination. The Board of Directors of the Fund will seek shareholder approval of the new investment management agreement through a proxy solicitation that is currently scheduled to conclude in mid-December. Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the transfer, dividend paying and shareholder service agent for the Fund. For the period September 18, 1998 (commencement of operations) to October 31, 1998, SSC did not impose any of its fee, which amounted to $1,071. 21 - Scudder Tax Managed Small Company Fund 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 period September 18, 1998 (commencement of operations) to October 31, 1998, 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 period September 18, 1998 (commencement of operations) to October 31, 1998, SFAC did not impose any of its fee, which amounted to $6,430. The Trust pays each Trustee not affiliated with the Adviser an annual retainer, plus specified amounts for attended board and committee meetings. For the period September 18, 1998 (commencement of operations) to October 31, 1998, the Fund did not incur any such fees. 22 - Scudder Tax Managed Small Company Fund Report of Independent Accountants To the Trustees of Investment Trust and the Shareholders of Scudder Tax Managed Small Company Fund: In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Scudder Tax Managed Small Company Fund (the "Fund") at October 31, 1998, the results of its operations for the period then ended and the changes in its net assets and financial highlights for the period September 18, 1998 (commencement of operations) to October 31, 1998, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 1998 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Boston, Massachusetts December 18, 1998 23 - Scudder Tax Managed Small Company Fund Trustees and Officers Daniel Pierce* President and Trustee Henry P. Becton, Jr. Trustee; President and General Manager, WGBH Educational Foundation Dawn-Marie Driscoll Trustee; Executive Fellow, Center for Business Ethics, Bentley College; President, Driscoll Associates Peter B. Freeman Trustee; Corporate Director and Trustee George M. Lovejoy, Jr. Trustee; President and Director, Fifty Associates Wesley W. Marple, Jr. Trustee; Professor of Business Administration, Northeastern University Kathryn L. Quirk* Trustee, Vice President and Assistant Secretary Jean C. Tempel Trustee; Managing Partner, Technology Equity Partners Bruce F. Beaty* Vice President Philip S. Fortuna* Vice President William F. Gadsden* Vice President Robert T. Hoffman* Vice President Thomas W. Joseph* Vice President Valerie F. Malter* Vice President Ann M. McCreary* Vice President Thomas F. McDonough* Vice President and Secretary John R. Hebble* Treasurer Caroline Pearson* Assistant Secretary *Scudder Kemper Investments, Inc. 24 - Scudder Tax Managed Small Company Fund Investment Products and Services The Scudder Family of Funds+++ - -------------------------------------------------------------------------------- Money Market - ------------ Scudder U.S. Treasury Money Fund Scudder Cash Investment Trust Scudder Money Market Series-- Prime Reserve Shares* Premium Shares* Managed Shares* Scudder Government Money Market Series-- Managed Shares* Tax Free Money Market+ - ---------------------- Scudder Tax Free Money Fund Scudder Tax Free Money Market Series-- Managed Shares* Scudder California Tax Free Money Fund** Scudder New York Tax Free Money Fund** Tax Free+ - --------- Scudder Limited Term Tax Free Fund Scudder Medium Term Tax Free Fund Scudder Managed Municipal Bonds Scudder High Yield Tax Free Fund Scudder California Tax Free Fund** Scudder Massachusetts Limited Term Tax Free Fund** Scudder Massachusetts Tax Free Fund** Scudder New York Tax Free Fund** Scudder Ohio Tax Free Fund** Scudder Pennsylvania Tax Free Fund** U.S. Income - ----------- Scudder Short Term Bond Fund Scudder Zero Coupon 2000 Fund Scudder GNMA Fund Scudder Income Fund Scudder Corporate Bond Fund Scudder High Yield Bond Fund Global Income - ------------- Scudder Global Bond Fund Scudder International Bond Fund Scudder Emerging Markets Income Fund Asset Allocation - ---------------- Scudder Pathway Conservative Portfolio Scudder Pathway Balanced Portfolio Scudder Pathway Growth Portfolio Scudder Pathway International Portfolio U.S. Growth and Income - ---------------------- Scudder Balanced Fund Scudder Dividend & Growth Fund Scudder Growth and Income Fund Scudder S&P 500 Index Fund Scudder Real Estate Investment Fund U.S. Growth - ----------- Value Scudder Large Company Value Fund Scudder Value Fund*** Scudder Small Company Value Fund Scudder Micro Cap Fund Growth Scudder Classic Growth Fund*** Scudder Large Company Growth Fund Scudder Development Fund Scudder 21st Century Growth Fund Global Equity - ------------- Worldwide Scudder Global Fund Scudder International Value Fund Scudder International Growth and Income Fund Scudder International Fund++ Scudder International Growth Fund Scudder Global Discovery Fund*** Scudder Emerging Markets Growth Fund Scudder Gold Fund Regional Scudder Greater Europe Growth Fund Scudder Pacific Opportunities Fund Scudder Latin America Fund The Japan Fund, Inc. Industry Sector Funds - --------------------- Choice Series Scudder Financial Services Fund Scudder Health Care Fund Scudder Technology Fund Preferred Series - ---------------- Scudder Tax Managed Growth Fund Scudder Tax Managed Small Company Fund Retirement Programs and Education Accounts - -------------------------------------------------------------------------------- Retirement Programs - ------------------- Traditional IRA Roth IRA SEP IRA Keogh Plan 401(k), 403(b) Plans Scudder Horizon Plan**+++ +++ (a variable annuity) Education Accounts - ------------------ Education IRA UGMA/UTMA Closed-End Funds# - -------------------------------------------------------------------------------- The Argentina Fund, Inc. The Brazil Fund, Inc. The Korea Fund, Inc. Montgomery Street Income Securities, Inc. Scudder Global High Income Fund, Inc. Scudder New Asia Fund, Inc. Scudder New Europe Fund, Inc. Scudder Spain and Portugal 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 may not be available for purchase or exchange. +A portion of the income from the tax-free funds may be subject to federal, state, and local taxes. *A class of shares of the Fund. **Not available in all states. ***Only the Scudder Shares of the Fund are part of the Scudder Family of Funds. ++Only the International Shares of the Fund are part of the Scudder Family of Funds. +++ +++A no-load variable annuity contract provided by Charter National Life Insurance Company and its affiliate, offered by Scudder's insurance agencies, 1-800-225-2470. #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. 25 - Scudder Tax Managed Small Company Fund Scudder Solutions
Convenient ways to invest, quickly and reliably: - ------------------------------------------------------------------------------------------------------------------------------ Automatic Investment Plan QuickBuy A convenient investment program in which money is Lets you purchase Scudder fund shares electronically debited from your bank account monthly to electronically, avoiding potential mailing delays; regularly purchase fund shares and "dollar cost average" money for each of your transactions is -- buy more shares when the fund's price is lower and electronically debited from a previously designated bank fewer when it's higher, which can reduce your average account. purchase price over time.* Automatic Dividend Transfer Payroll Deduction and Direct Deposit The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at fund to purchase shares in another, automatically one time. (accounts with identical registrations or the same social security or tax identification number). * Dollar cost averaging involves continuous investment in securities regardless of price fluctuations and does not assure a profit or protect against loss in declining markets. Investors should consider their ability to continue such a plan through periods of low price levels. Around-the-clock electronic account service and information, including some transactions: - ------------------------------------------------------------------------------------------------------------------------------ Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- www.scudder.com 1-800-343-2890 Scudder Electronic Account Services: Offering Personalized account information, the ability to account information and transactions, interactive exchange or redeem shares, and information on other worksheets, prospectuses and applications for all Scudder funds and services via touchtone telephone. 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. Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient, timely, and reliable automated withdrawal programs: - ------------------------------------------------------------------------------------------------------------------------------ Automatic Withdrawal Plan QuickSell You designate the bank account, determine the schedule Provides speedy access to your money by (as frequently as once a month) and amount of the electronically crediting your redemption proceeds redemptions, and Scudder does the rest. to the bank account you previously designated. Distributions Direct Automatically deposits your fund distributions into the bank account you designate within three business days after each distribution is paid. For more information about these services, call a Scudder representative at 1-800-225-5163 - ------------------------------------------------------------------------------------------------------------------------------ 26 - Scudder Tax Managed Small Company Fund Mutual Funds and More -- Brokerage and Guidance Services: - ------------------------------------------------------------------------------------------------------------------------------ Scudder Brokerage Services Scudder Portfolio Builder Offers you access to a world of investments, A free service designed to help suggest ways investors like including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global, over 8,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds, fund companies. And Scudder Fund Folio(SM) provides using Scudder funds. investors with access to a marketplace of more than 800 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM) transaction fees or commissions. Scudder shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load Brokerage account already reserved for them, with funds but want ongoing professional assistance in no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for individuals investing $100,000 or more. Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy shares directly from the fund itself or its principal underwriter or distributor without paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061. Member SIPC. Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a program offered by Scudder Investor Services, Inc., Adviser. For more information about these services, call a Scudder representative at 1-800-225-5163 - ------------------------------------------------------------------------------------------------------------------------------ Additional Information on How to Contact Scudder: - ------------------------------------------------------------------------------------------------------------------------------ For existing account services and transactions Please address all written correspondence to Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds P.O. Box 2291 For establishing 401(k) and 403(b) plans Boston, Massachusetts Scudder Defined Contribution Services -- 02107-2291 1-800-323-6105 Or Stop by a Scudder Investor Center For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near answers to investment questions you -- they can be found in the following cities: Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco Investor.Relations@scudder.com Boston New York
27 - Scudder Tax Managed Small Company Fund About the Fund's Adviser Scudder Kemper Investments, Inc., is one of the largest and most experienced investment management oganizations worldwide, managing more than $230 billion in assets globally for mutual fund investors, retirement and pension plans, institutional and corporate clients, insurance companies, and private family and individual accounts. It is one of the ten largest mutual fund companies in the United States. Scudder Kemper Investments has a rich heritage of innovation, integrity, and client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 79 years ago as one of the nation's first investment counsel organizations, joined the Zurich 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 Group. The Zurich 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 [LOGO] -----END PRIVACY-ENHANCED MESSAGE-----