Scudder
Choice Series:
Scudder Financial
Services Fund
Scudder
Health Care Fund
Scudder
Technology Fund
Annual Report
May 31, 1998
Pure No-Load(TM) Funds
Three pure no-load(TM) funds which each seek long-term growth of capital by
investing primarily in common stocks and other equity securities of companies in
a group of related industries.
SCUDDER (logo)
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Scudder Financial
Services Fund Date of Inception: 11/3/97 Ticker Symbol: SCFSX
Scudder Health Care Fund Date of Inception: 3/2/98 Ticker Symbol: SCHLX
Scudder Technology Fund Date of Inception: 3/2/98 Ticker Symbol: SCUTX
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o Scudder Financial Services Fund provided a strong total return of 18.73% for
the abbreviated annual period beginning with the Fund's inception on November 3,
1997, and ending May 31, 1998. Financial services stocks performed well during
the period, rebounding impressively in February and March after a brief
correction in January 1998.
o Scudder Health Care Fund provided a total return of 0.67% for the abbreviated
annual period beginning with the Fund's inception on March 2, 1998, and ending
May 31, 1998. While large-cap S&P 500 stocks were the strongest performers,
small- to mid-cap health care stocks underperformed and limited the Fund's total
return during the period.
o Scudder Technology Fund provided a total return of 0.58% for the abbreviated
annual period beginning with the Fund's inception on March 2, 1998, and ending
May 31, 1998. Technology stocks overall provided positive returns in March and
April, but declined in May due to exposure to the Asian financial crisis.
<TABLE>
<CAPTION>
Table of Contents
<S> <C> <C>
3 Letter from the Series' Scudder Health 26 Financial Statements
President Care Fund 32 Notes to Financial
Statements
Scudder Financial 9 Portfolio Management 35 Report of Independent
Services Fund Discussion Accountants
12 Portfolio Summary 36 Officers and Trustees
4 Portfolio Management 20 Investment Portfolio 37 Investment Products
Discussion 30 Financial Highlights and Services
7 Performance Update 38 Scudder Solutions
8 Portfolio Summary Scudder
17 Investment Portfolio Technology Fund
29 Financial Highlights
13 Portfolio Management
Discussion
16 Portfolio Summary
23 Investment Portfolio
31 Financial Highlights
</TABLE>
2 - Scudder Choice Series
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Letter from the Series' President
Dear Shareholders,
We are pleased to present the first combined annual report for the Scudder
Choice Series, which includes Scudder Financial Services Fund, Scudder Health
Care Fund, and Scudder Technology Fund. The Trustees of all three funds have
approved the change of each Fund's fiscal year end to May 31. Going forward, you
can expect to receive regular reports following the Funds' annual and semiannual
periods ending in May and November.
We're also pleased to note that all three funds have experienced rapid
growth in assets since their introductions in November (Scudder Financial
Services Fund) and March (Scudder Health Care Fund and Scudder Technology Fund),
with combined net assets of $115 million as of May 31. For information about
each Fund's performance, investment environment, portfolio strategy, and
outlook, please see the portfolio management discussions that begin on page 4.
For those of you interested in new Scudder products, we recently introduced
two additions to Scudder's series of growth and income offerings. Scudder Real
Estate Investment Fund, launched on April 6, invests primarily in Real Estate
Investment Trusts, and is designed to allow investors to participate in the
impressive long-term growth potential of the U.S. real estate industry. Our
second new offering, Scudder Dividend & Growth Fund, will commence operations on
July 17. Designed to be conservatively managed, Dividend & Growth Fund will seek
high current income and growth of capital by investing primarily in
income-paying U.S. stocks and other equity-based securities. Please see page 37
for more information on Scudder products and services.
Thank you for your interest and investment in the Scudder Choice Series.
Please do not hesitate to contact Investor Relations at 1-800-225-2470 with any
questions regarding your account.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Choice Series
3 - Scudder Choice Series
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Portfolio Management Discussion
Scudder Financial Services Fund
In the following interview, Co-Lead Portfolio Managers Thaddeus Paluszek and
Peter Taylor discuss Scudder Financial Services Fund's strategy and the market
environment during the period since the Fund began operations on November 3,
1997.
Q: How has Scudder Financial Services Fund performed in its first seven months?
A: The Fund's total return for the period since its inception was 18.73% as of
May 31, 1998. The total return of the Fund's unmanaged benchmark, the Standard &
Poor's Financial Index, was 18.62% over the same period.
Q: How do you view the Fund's performance?
A: We are pleased, both on an absolute and a comparative basis. Many financial
services stocks performed well during the period, but there was actually more
turbulence in the sector than the numbers indicate. Concerns related to Asian
economic difficulties, temporary increases in interest rates, and profit taking
after the 1997 year-end rally contributed to volatile market conditions in
January. However, we saw a resurgence in the sector in February and March as
interest rates declined. While the end of the period was again characterized by
worry over Asian markets, the U.S. economy remained strong and low interest
rates helped moderate volatility in the sector.
Q: Please discuss your portfolio strategy.
A: Our investment approach is research based and "bottom up." We try to identify
positive changes in company fundamentals and find companies that have a
competitive advantage. We're looking for companies that have the value drivers
- -- including attractive price-to-earnings and price-to-book ratios, improving
earnings trends, and a favorable franchise and business mix -- that we believe
may enable them to outperform. We're particularly interested in companies that
have undergone important changes that haven't yet been recognized by the
marketplace. We also incorporate a strong measure of risk control that includes
broad diversification within the sector and limits any one holding to 5% of the
Fund's assets.
Q: What types of financial services stocks did you favor during the period?
A: The Fund's portfolio has been modestly underweighted in banks, 43% as of May
31, 1998, and somewhat overweighted in insurance (37%), compared to the S&P
Financial Index, the Fund's benchmark. Banks comprise about 50% of the Index and
insurance companies account for about 30%. We favored insurance companies over
banks in large part because of their better valuations. As part of our effort to
control risk, we steered clear of what we view as the more volatile areas of
investment banking and brokerage firms, which account for about 2.5% of the
Index.
Q: Can you discuss some of the Fund's bank holdings?
A: We continue to be impressed with BankAmerica Corp., the Fund's fifth largest
holding. We believe BankAmerica maintains one of the premier retail banking
franchises in the country and has been very focused on improving financial
4 - Scudder Choice Series
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results and creating value for shareholders. In April, BankAmerica announced a
merger with NationsBank, creating a larger, more diversified company, and we
believe it remains a very attractive holding. We also owned shares of both
Citicorp and Travelers Group, Inc., now awaiting regulatory approval of their
merger announced in April which will create the largest bank holding company in
the country. Interestingly, while mergers in the financial services sector have
been plentiful over the past few years, they no longer seem to guarantee big
near-term payoffs for shareholders via large up-front premiums, but have longer
term investment attraction. The Citicorp/Travelers transaction was a good
example of a "merger of equals" -- two industry giants joined forces and created
a new company with dynamic long-term prospects.
Q: How about the insurance sector?
A: We like American International Group (AIG), the Fund's third largest holding,
a truly international insurance player with several characteristics that
differentiate it from the average insurance company. The company is AAA-rated
with what we view as a superb balance sheet and has consistently produced an
underwriting profit for many years. In addition, AIG has established offices in
key countries worldwide. In most cases, they have a history of several decades
in their foreign offices -- AIG has been in China since 1920 -- so they have
local talent in place to run their operations successfully.
On the life insurance side, we've added to our holdings of Hartford Life and
Nationwide Financial Services, significant players in retirement and tax
planning services. These companies have been very profitable, using advances in
5 - Scudder Choice Series
<PAGE>
technology to produce variable life products with extremely low acquisition
costs and marketing them through multiple distribution channels.
Q: What is your outlook for the financial services sector?
A: The outlook continues to be positive for the sector, thanks to continuing low
interest rates and the strong economy. Mortgage refinancings and new housing
starts are up, which is producing strong demand for mortgage financing and
homeowners insurance. Longer term, homeowners who reduce their monthly payments
free up money for other purposes, and seem to be good candidates for financial
products related to retirement. We also anticipate more merger and acquisition
activity throughout the sector, although this area may not have the same upside
potential as it has in past years. Overall, the financial services industry has
enjoyed three years of outperformance of the S&P 500, and the coming year may be
a more challenging one. But we believe the ongoing changes in this industry --
consolidations, deregulation, advances in technology -- continue to provide
attractive opportunities for investors. We will seek to capitalize on those
changes as we pursue long-term growth of capital for the Fund's investors.
Scudder Financial Services Fund:
A Team Approach to Investing
Scudder Financial Services Fund is managed by a team of Scudder Kemper
Investments, Inc. (the "Adviser") professionals who each play 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.
Co-Lead Portfolio Managers Thaddeus Paluszek and Peter Taylor have
responsibility for the Fund's day-to-day management and investment strategies.
Mr. Paluszek, who joined the Adviser in 1993, has 18 years of investment
industry experience and specializes in global banking, consumer finance,
commercial finance and financial transaction processing companies. Mr. Taylor
joined the Adviser in 1989 as an equity analyst and focuses on insurance
companies, asset management companies and government-sponsored enterprises.
Mr. Taylor has 29 years of investment industry experience. William Truscott
serves as a Portfolio Manager for the Fund. Mr. Truscott, who joined the
Adviser in 1992 and has 15 years of investment industry experience, was a
portfolio manager and equity research analyst from 1992 to 1996, focusing on
Latin American securities. He is currently the Adviser's Director of Global
Equity Research.
6 - Scudder Choice Series
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Performance Update as of May 31, 1998
Scudder Financial Services Fund
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PORTFOLIO INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
5/31/98 $10,000 Cumulative Annual
- --------------------------------------
SCUDDER FINANCIAL SERVICES FUND
- --------------------------------------
Life
of Fund* $11,873 18.73% --
- --------------------------------------
S&P FINANCIAL INDEX
- --------------------------------------
Life
of Fund* $11,862 18.62% --
* The Fund commenced operations on
November 3, 1997.
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
SCUDDER FINANCIAL SERVICES FUND
Year Amount
- ----------------------
11/3/97* 10000
11/97 10192
12/97 10805
1/98 10521
2/98 10423
3/98 12066
4/98 12166
5/98 11873
S&P FINANCIAL INDEX
Year Amount
- ----------------------
11/3/97* 10000
11/97 10134
12/97 10642
1/98 10340
2/98 11313
3/98 11958
4/98 12156
5/98 11862
The Standard & Poor's Corporation (S&P) Financial Index is a capitalization
weighted price only index representing 11 financial groups and 74 financial
companies. Index returns assume reinvestment of dividends and, unlike Fund
returns, do not reflect any fees or expenses.
- -----------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
- -----------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index
Total Return (%) with the exact points listed in the
table below.
PERIOD ENDED MAY 31
1998*
----------
NET ASSET VALUE..... $ 14.22
INCOME DIVIDENDS.... $ .03
CAPITAL GAINS
DISTRIBUTIONS....... $ --
PORTFOLIO TOTAL
RETURN (%).......... 18.73
INDEX TOTAL
RETURN (%).......... 18.62
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 Fund would have been lower.
7 - Scudder Choice Series
<PAGE>
Portfolio Summary as of May 31, 1998
Scudder Financial Services Fund
Chart Title: Asset Allocation
Equity Holdings 97%
Cash Equivalents 3%
- -----------------------------------
100%
- -----------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The Fund retained a modest cash
position during the period.
Chart Title: Diversification
(Excludes 3% Cash Equivalents)
Banks 43%
Insurance 37%
Other Financial Companies 13%
Consumer Finance 7%
- -----------------------------------
100%
- -----------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
Compared with its benchmark,
the S&P Financial Index, the Fund
was underweighted in banks and
overweighted in insurance
companies as of May 31.
- -------------------------------------------------
Ten Largest Equity Holdings
(36% of Portfolio)
- -------------------------------------------------
1. Federal National Mortgage Association
Insurance and holder of mortgage loans
2. Norwest Corp.
Commercial banking
3. American International Group, Inc.
Major international insurance holding company
4. First Union Corp.
Commercial banking in the southeast
5. BankAmerica Corp.
Commercial banking
6. Travelers Group, Inc.
Provider of diversified financial services
7. NationsBank Corp.
Commercial banking
8. Fremont General Corp.
Insurance and financial services
9. Allstate Corp.
Property, liability and life insurance company
10. Chase Manhattan Corp.
Commercial banking
BankAmerica remains one of
the premier retail banking
franchises in the United
States following its merger
with NationsBank.
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For more complete details about the Fund's investment portfolio, see page 17.
A monthly Investment Portfolio Summary and quarterly Portfolio Holdings are
available upon request.
8 - Scudder Choice Series
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Portfolio Management Discussion
Scudder Health Care Fund
In the following interview, Lead Portfolio Manager James E. Fenger discusses
Scudder Health Care Fund's strategy and the market environment during the period
since the Fund began operations on March 2, 1998.
Q: How has Scudder Health Care Fund performed in its first months?
A: The Fund's total return for the brief period since its inception was 0.67% as
of May 31, 1998, in keeping with the generally lackluster performance of the
health care sector over the period.
Q: How do you view the Fund's performance?
A: The period in question is too short to provide a real basis for evaluating
performance. Performance was helped by significant ownership in large
pharmaceutical companies such as Pfizer and Warner Lambert. Pfizer rallied on a
strong initial launch of Viagra, a new treatment for impotence. Warner Lambert's
stock continued to rise due to strong performance of Lipitor, used to treat
elevated levels of cholesterol, and Rezulin, a unique new diabetes drug. Two
other factors during the brief three-month period limited Fund returns. First,
the market for health care stocks was strongest in March, when we were still in
the process of becoming fully invested, and then declined through May. Second,
the dominating factor during the period continued to be the large stocks that
make up the S&P 500 Index. While about half of the Fund's assets are invested in
large company stocks, the other half are in small- and mid-cap companies. These
companies seem to have strong long-term prospects, but underperformed during the
period.
Q: What are some of the benefits of investing in the health care sector?
A: We believe this sector has many strong positives from an investment
standpoint, starting with demographics. In the United States and other developed
nations, an aging population is accelerating the use of health care products and
services. In less developed countries, growing economies are expected to
increase health care expenditures as a percentage of GDP. Health care also tends
to have less cyclical growth than other areas of the economy because it is more
dependent on an aging population than on the ups and downs of the business
cycle. As an example, the Asian financial crisis, which rocked the broader
markets, had relatively little impact on the health care sector.
Q: What is your investment strategy?
A: The Fund is managed with long-term growth as the key objective. We attempt to
maximize long-term performance by investing in what we view as high quality
companies with above-average sustainable growth that sell at reasonable
valuations. Small-cap investing is a significant focus for the Fund, with 15% to
20% of Fund holdings in companies with less than $1 billion in market
capitalization. Another 35% to 40% of Fund assets are invested in mid-cap stocks
with market caps between $1 billion and $10 billion. We attempt to minimize risk
among our smaller-cap holdings by limiting position sizes and diversifying among
therapeutic categories and time frames to development. We believe this strategy
is very useful in controlling potential volatility in industry areas such as
9 - Scudder Choice Series
<PAGE>
emerging research, biotech, and medical device companies.
Q: How are the Fund's assets allocated?
A: As of May 31, 1998, 40% of the Fund was invested in pharmaceutical stocks,
approximately one quarter of which was concentrated in foreign based companies.
Medical devices and supplies represented 19% of total Fund holdings, and 14% of
assets were in biotechnology and emerging drug discovery companies. Much of the
remaining 28% of Fund assets were invested in health care service companies with
representation across several areas including information systems, managed care,
contract research and sales organizations, health care facilities, and
distribution.
Q: Can you discuss some of the Fund's investment themes and specific holdings?
A: New technologies are a key area of investment for the Fund. Recent
discoveries in the development of new drugs and medical devices have provided
the medical community with an opportunity to treat illnesses more effectively.
In addition to their therapeutic benefits, many of these new products seem to
ultimately lower overall health care costs by decreasing hospital stays,
reducing surgical trauma, or even eliminating the onset of various diseases or
symptoms. Long term, we believe companies involved in these new technologies are
well positioned for strong growth.
One particular area of focus for the Fund is companies specializing in
innovative methods of drug delivery. New drug delivery technologies are
important as they increase user compliance due to less frequent dosing. They may
10 - Scudder Choice Series
<PAGE>
also improve efficacy and side effects as the peaks and valleys of traditional
dosing regimens are diminished. A good example of a company we own shares of,
specializing in drug delivery, is Alkermes. Alkermes has developed a technology
that enables proteins or peptides to be released over periods as long as one
month from a single injection. This replaces the need for daily or weekly
injections for certain medical conditions.
Q: What is your outlook for the health care sector?
A: Our long-term outlook is very positive. We believe that, in many ways,
today's medical breakthroughs are analogous to discoveries made in the computer
industry over the last 20 years, and they are likely to have significant
business and social ramifications well into the next century. New drug discovery
methods are greatly expanding potential for effective drug treatments. Updated
FDA approval guidelines have increased new drug flow and enabled new drugs to
reach the market in six to 12 months rather than two to three years. Direct
consumer drug advertising is spurring demand at the user level, and in an
industry with no single dominant player, merger and takeover activity is also a
positive factor in our view. We will seek to capitalize on these trends as we
pursue long-term growth of capital for the Fund's investors.
Scudder Health Care Fund:
A Team Approach to Investing
Scudder Health Care Fund is managed by a team of Scudder Kemper Investments,
Inc. (the "Adviser") professionals who each play 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 Fenger has responsibility for the Fund's
day-to-day management and investment strategies. Mr. Fenger has 15 years of
investment industry experience and specializes in pharmaceutical (domestic and
foreign) and biotechnology companies, as well as medical technology and
hospital supply firms. Mr. Fenger has been a health care investment analyst
with the Adviser for 15 years. Sally Yanchus, Portfolio Manager, contributes
expertise in small-cap medical devices and medical technology companies for
the global equity group. Prior to joining the Adviser in September 1997, Ms.
Yanchus was a sell-side analyst for six years covering various health care
industries. Leefin Lai, Portfolio Manager, has over five years of investment
industry experience and specializes in small- and mid-cap pharmaceutical and
biotechnology companies. Prior to joining the Adviser, Ms. Lai was a senior
tax accountant for Baxter Healthcare Corporation and a tax specialist for KPMG
Peat Marwick.
11 - Scudder Choice Series
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Portfolio Summary as of May 31, 1998
Scudder Health Care Fund
Chart Title: Asset Allocation
Equity Holdings 100%
- -----------------------------------
100%
- -----------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The Fund was fully invested at
the close of the period.
Chart Title: Diversification
Pharmaceuticals 40%
Medical Supply & Specialty 19%
Health Industry Services 18%
Biotechnology 14%
Chemicals 4%
Other 5%
- -----------------------------------
100%
- -----------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
Approximately one quarter of the
Fund's pharmaceutical holdings
are based overseas.
- -------------------------------------------------
Ten Largest Equity Holdings
(35% of Portfolio)
- -------------------------------------------------
1. Warner-Lambert Co.
Drugs, toiletries and food products
2. Pfizer, Inc.
Leading international pharmaceutical company
3. Bristol-Myers Squibb Co.
Diversified pharmaceutical and consumer products company
4. Schering-Plough Corp.
Pharmaceutical and consumer products
5. HEALTHSOUTH Corp.
Medical rehabilitation services
6. HBO & Company, Inc.
Designer of computerized information systems to the healthcare industry
7. American Home Products Corp.
Major diversified pharmaceutical company
8. Guidant Corp.
Developer and manufacturer of products used in minimally invasive surgery
9. Merck & Co. Inc.
Leading ethical drug manufacturer
10. Eli Lilly & Co.
Leading pharmaceutical company
Several top holdings are
positioned to benefit from
growing consumer demand for
pharmaceutical products.
- -------------------------------------------------------------------------------
For more complete details about the Fund's investments, see page 20. A monthly
Investment Portfolio Summary and quarterly Portfolio Holdings are available
upon request.
12 - Scudder Choice Series
<PAGE>
Portfolio Management Discussion
Scudder Technology Fund
In the following interview, Lead Portfolio Manager J. Brooks Dougherty discusses
Scudder Technology Fund's strategy and the market environment during the period
since the Fund began operations on March 2, 1998.
Q: How has Scudder Technology Fund performed in its first months?
A: The Fund's total return for the brief period since its inception was a
positive 0.58% as of May 31, 1998.
Q: How do you view the Fund's performance?
A: It's really too soon to evaluate the Fund's performance. However, considering
the market environment during the Fund's start-up period, we are reasonably
pleased with its performance. Several factors limited returns, most notably
price declines brought on by exposure of semiconductor, computer hardware, and
computer peripherals companies to the economic problems in Asia. In addition,
severe overcapacity in the semiconductor and disk drive markets forced prices to
very low levels.
Q: What are some of the benefits of investing in technology companies?
A: In recent years the technology sector has enjoyed one of the fastest growth
rates in the United States due to continued strong demand from corporate and
individual consumers around the globe for improved ways to enhance productivity,
communication, and learning. Technology companies currently account for 14% of
the S&P 500, and growth in specific industries has been double-digit compared to
overall U.S. economic growth of 3% to 4%. We believe this sector offers almost
unlimited opportunities for investors to capitalize on the growth of new
technologies and new companies that may become the IBM or Microsoft of tomorrow.
Q: What is your investment strategy?
A: The Fund is managed with long-term growth as the key objective, and under
normal market conditions seeks to be as fully invested as possible. We run a
concentrated portfolio of approximately 50 stocks which provides some
diversification among industries within the technology sector but allows us to
overweight our best ideas. The Fund invests in six key technology sectors:
semi-conductors, software, hardware, network/telecommunications, services, and
Internet. We generally try to maintain our sector weighting at 200% to 50% of
the composition of the Fund's benchmark, the Goldman Sachs Technology Composite
Index. We also attempt to control risk by seeking to limit small-cap holdings to
less than 25% of the Fund's total net assets. We believe that while the smallest
companies can offer very attractive growth opportunities, they also entail
considerable liquidity risks in declining markets.
13 - Scudder Choice Series
<PAGE>
Q: What is the Fund's single largest position?
A: As of May 31, 1998, Ascend Communications Inc. was the Fund's largest
holding, at 3.8% of the portfolio. In total, the ten largest holdings accounted
for 30% of the portfolio.
Q: Can you discuss some of the Fund's investment themes and specific holdings?
A: We believe the Internet is a growth opportunity that will continue to drive
growth in other areas for years to come. In addition to companies that produce
networking hardware and software, we believe that there is tremendous potential
in the areas of computer security, such as encryption and transaction
confidentiality. We also see strong growth in commerce and banking, ranging from
electronic payment systems to worldwide electronic distribution of goods and
services.
The Fund's third largest holding, Cisco Systems, Inc., manufacturer of computer
network products, yielded capital appreciation of 19% during the period. It is
currently consolidating and leveraging its strong industry position and has
benefited from strong demand from telecommunication equipment carriers. The
fifth largest holding, EMC Corporation, is the dominant mainframe and open
system storage vendor and has shown steady growth by helping companies
consolidate their data centers. EMC gained 12% during the period.
Q: What is your outlook for the technology sector?
A: Our long-term outlook is positive, but this is an industry characterized by
volatility in the short term. We believe that the continuing market dominance of
14 - Scudder Choice Series
<PAGE>
the large-cap stocks of the S&P 500 is likely to overpower smaller technology
companies for the rest of the year, but we believe many of the other factors
affecting the sector are more transitory. We expect demand for computer hardware
to pick up in the second half and anticipate better earnings in that industry.
We don't expect to see an upturn in Asian demand before the end of the year, and
don't anticipate favorable pricing conditions for companies selling in Asia
until March 1999 at the earliest. We will seek to capitalize on these trends as
we pursue long-term growth of capital for the Fund's investors.
Scudder Technology Fund:
A Team Approach to Investing
Scudder Technology Fund is managed by a team of Scudder Kemper Investments,
Inc. (the "Adviser") professionals who each play 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.
Brooks Dougherty, Lead Portfolio Manager, joined the Adviser in 1993 as an
equity analyst specializing in technology companies. Mr. Dougherty has 14
years of industry experience. Robert Horton, Portfolio Manager, joined the
Adviser in 1996 and has nine years of industry experience. Virginea Stuart,
Portfolio Manager, joined the Adviser in 1996 and has four years of industry
experience. Paul Svetz, Portfolio Manager, joined the Adviser in 1988 and has
over 25 years of industry experience. Christine Chien, Portfolio Manager,
specializes in networking, semiconductors, semiconductor equipment, personal
computers, workstations, CAD/CAM and household products. Ms. Chien, who has 11
years of investment industry experience, joined the Adviser in 1991. Deb Koch,
Portfolio Manager, is responsible for security analysis for software/data
services, aerospace/defense and conglomerates. Ms. Koch joined the Adviser in
1992.
15 - Scudder Choice Series
<PAGE>
Portfolio Summary as of May 31, 1998
Scudder Technology Fund
Chart Title: Asset Allocation
Equity Holdings 91%
Cash Equivalents 9%
- -----------------------------------
100%
- -----------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The Fund gradually reduced its cash
position during its start-up phase.
Chart Title: Diversification
(Excludes 9% Cash Equivalents)
Computer Software 25%
Telecommunications Equipment 16%
Electronic Data Processing 12%
EDP Peripherals 9%
Miscellaneous Commercial
Services 7%
EDP Services 7%
Semiconductors 7%
Health Industry Services 6%
Office/Plant Automation 4%
Other 7%
- -----------------------------------
100%
- -----------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
A concentrated portfolio of
approximately 50 stocks allows
the Fund to diversify across
sectors while overweighting our
best ideas.
- -------------------------------------------------
Ten Largest Equity Holdings
(30% of Portfolio)
- -------------------------------------------------
1. Ascend Communications, Inc.
Developer and producer of a variety of high-speed wide area network
access products
2. Lucent Technologies, Inc.
Producer of public and private networks, communication systems and
software, and telecommunication systems
3. Cisco Systems, Inc.
Manufacturer of computer network products
4. Sun Microsystems, Inc.
Producer of high-performance workstations, servers and networking software
5. EMC Corp.
Manufacturer of enhancement products for computer systems
6. HBO & Company, Inc.
Designer of computerized information systems to the healthcare industry
7. Nokia AB Oy
Leading cellular telephone manufacturer
8. Ciena Corp.
Manufacturer of dense wavelength multiplexing systems for fiberoptic
telecommunication networks
9. Computer Associates International, Inc.
Designer and producer of standardized software for various
business applications
10. Parametric Technology Corp.
Mechanical design software producer
Top holdings reflect the
growing demand for computer
network products and services.
- -------------------------------------------------------------------------------
For more complete details about the Fund's investments, see page 23. A monthly
Investment Portfolio Summary and quarterly Portfolio Holdings are available
upon request.
16 - Scudder Choice Series
<PAGE>
Investment Portfolio as of May 31, 1998
Scudder Financial Services Fund
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Cash Equivalents 2.9%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with State Street Bank and Trust Company dated 5/29/98 at
5.55%, to be repurchased at $1,075,497 on 6/01/98, collateralized by a ------------
$1,090,000 U.S. Treasury Note, 6.375%, 5/15/99 (Cost $1,075,000) ...................... 1,075,000 1,075,000
------------
Shares
- ------------------------------------------------------------------------------------------------------------------------------
Common Stocks 97.1%
- ------------------------------------------------------------------------------------------------------------------------------
Banks 42.2%
BANC ONE CORP. .......................................................................... 19,130 1,054,541
BankAmerica Corp. ....................................................................... 17,200 1,422,220
BankBoston Corp. ........................................................................ 7,100 748,163
Chase Manhattan Corp. ................................................................... 8,300 1,128,281
Citicorp ................................................................................ 2,700 402,638
First American Corp. (Tennessee) ........................................................ 5,800 268,975
First Chicago NBD Corp. ................................................................. 8,000 699,500
First Security Corp. .................................................................... 16,150 367,413
First Union Corp. ....................................................................... 25,880 1,431,488
Imperial Bancorp* ....................................................................... 9,800 286,650
KeyCorp ................................................................................. 11,000 417,313
Mellon Bank Corp. ....................................................................... 9,400 633,913
National City Corp. ..................................................................... 7,800 528,450
NationsBank Corp. ....................................................................... 16,000 1,212,000
North Fork Bancorporation, Inc. ......................................................... 14,100 339,281
Northern Trust Corp. .................................................................... 10,100 712,366
Norwest Corp. ........................................................................... 37,500 1,457,813
Silicon Valley Bancshares* .............................................................. 8,000 262,000
US Bancorp .............................................................................. 18,600 727,725
Wells Fargo & Co. ....................................................................... 2,700 976,050
Zions Bancorp ........................................................................... 10,800 550,800
------------
15,627,580
------------
Insurance 35.6%
AMBAC Inc. .............................................................................. 13,700 749,219
Aegon NV (ADR) .......................................................................... 6,400 507,600
Allstate Corp. .......................................................................... 12,100 1,138,913
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - Scudder Choice Series
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
American General Corp. .................................................................. 5,900 396,038
American International Group, Inc. ...................................................... 11,600 1,436,225
Chubb Corp. ............................................................................. 3,300 262,556
Cigna Corp. ............................................................................. 5,700 390,450
Conseco, Inc. ........................................................................... 12,300 573,488
ESG Re Ltd .............................................................................. 27,400 575,400
EXEL Ltd. (ADR) ......................................................................... 7,800 586,950
Fremont General Corp. ................................................................... 20,300 1,160,906
General Re Corp. ........................................................................ 1,600 351,800
Hartford Life, Inc. "A" ................................................................. 19,800 1,019,700
MBIA, Inc. .............................................................................. 10,600 790,363
Mid Ocean, Ltd. ......................................................................... 5,200 395,850
Nationwide Financial Services, Inc. "A" ................................................. 21,600 938,250
PMI Group, Inc. ......................................................................... 7,100 533,831
Stirling Cooke Brown Holdings Limited ................................................... 13,400 373,525
Travelers Property & Casualty Insurance Co. "A" ......................................... 14,900 619,281
UNUM Corp. .............................................................................. 7,000 388,938
------------
13,189,283
------------
Consumer Finance 6.7%
American Express Company ................................................................ 8,500 872,313
Associates First Capital Corp. .......................................................... 12,900 965,081
SLM Holding Corp. ....................................................................... 15,950 637,003
------------
2,474,397
------------
Other Financial Companies 12.6%
CIT Group, Inc. ......................................................................... 7,700 242,550
Charter One Financial, Inc. ............................................................. 10,800 369,900
Federal Home Loan Mortgage Corp. ........................................................ 10,100 459,550
Federal National Mortgage Association ................................................... 25,500 1,526,813
Federated Investors, Inc. "B"* .......................................................... 20,000 358,750
First Data Corp. ........................................................................ 11,800 392,350
Travelers Group, Inc. ................................................................... 21,550 1,314,550
------------
4,664,463
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $32,213,872) 35,955,723
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio-- 100.0% (Cost $33,288,872) (a) 37,030,723
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 - Scudder Choice Series
<PAGE>
- --------------------------------------------------------------------------------
* Non-income producing security.
(a) The cost for federal income tax purposes was $33,293,653. At May 31, 1998,
net unrealized appreciation for all securities based on tax cost was
$3,737,070. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $3,853,151 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$116,081.
During the period November 3, 1997 (commencement of operations) to May 31,
1998, purchases and sales of investment securities (excluding short-term
investments) aggregated $36,090,283 and $4,019,875, respectively.
The accompanying notes are an integral part of the financial statements.
19 - Scudder Choice Series
<PAGE>
Investment Portfolio as of May 31, 1998
Scudder Health Care Fund
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Cash Equivalents 0.3%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with State Street Bank and Trust Company dated 5/29/98 at
5.55%, to be repurchased at $117,054 on 6/1/98, collateralized by a $120,000 ------------
U.S. Treasury Bond, 5.75%, 11/30/2002 (Cost $117,000) 117,000 117,000
------------
Shares
- ------------------------------------------------------------------------------------------------------------------------------
Common Stocks 99.7%
- ------------------------------------------------------------------------------------------------------------------------------
Biotechnology & Drug Discovery 13.2%
Alexion Pharmaceuticals, Inc.* .......................................................... 16,500 195,938
Alkermes, Inc.* ......................................................................... 26,500 579,688
Alza Corp. "A"* ......................................................................... 14,300 691,763
ArQule, Inc. ............................................................................ 14,000 199,500
BioChem Pharma, Inc.* ................................................................... 18,100 475,125
Centocor Inc.* .......................................................................... 9,800 382,200
Chiron Corp.* ........................................................................... 10,400 187,850
GelTex Pharmaceuticals, Inc.* ........................................................... 5,200 119,925
Genentech, Inc.* ........................................................................ 5,800 400,200
Genzyme Corporation (General Division)* ................................................. 9,900 271,013
Guilford Pharmaceuticals, Inc.* ......................................................... 10,000 180,625
IDEC Pharmaceuticals Corp.* ............................................................. 11,700 368,550
Ligand Pharmaceuticals "B"* ............................................................. 28,500 397,219
MedImmune, Inc.* ........................................................................ 9,000 448,875
Millennium Pharmaceuticals, Inc.* ....................................................... 5,800 102,225
Sepracor, Inc.* ......................................................................... 8,400 361,200
------------
5,361,896
------------
Health Industry Services 18.4%
Access Health, Inc.* .................................................................... 16,300 417,688
Boron LePore & Associates, Inc.* ........................................................ 9,400 277,300
HBO & Company, Inc. ..................................................................... 24,200 1,396,794
HEALTHSOUTH Corp.* ...................................................................... 50,800 1,441,450
Healthcare Recoveries, Inc.* ............................................................ 13,300 241,894
IDX Systems Corp.* ...................................................................... 4,900 206,106
McKesson Corp. (New) .................................................................... 9,500 742,188
MedPartners, Inc.* ...................................................................... 33,000 294,938
PAREXEL International Corporation* ...................................................... 14,500 435,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 - Scudder Choice Series
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Professional Detailing, Inc.* ........................................................... 6,000 126,000
QuadraMed Corp.* ........................................................................ 10,800 259,875
Quintiles Transnational Corp.* .......................................................... 13,400 651,575
Total Renal Care Holdings, Inc.* ........................................................ 13,600 417,350
Wellpoint Health Networks Inc.* ......................................................... 9,200 598,000
------------
7,506,158
------------
Hospital Management 2.3%
Tenet Healthcare Corp.* ................................................................. 15,000 525,000
Universal Health Services, Inc.* ........................................................ 7,600 418,000
------------
943,000
------------
Medical Supply & Specialty 21.6%
Acuson Corporation* ..................................................................... 20,600 393,975
ArthroCare Corp.* ....................................................................... 23,100 410,025
Bausch & Lomb, Inc. ..................................................................... 11,900 592,769
Becton, Dickinson & Co.* ................................................................ 8,400 594,300
Biomet Inc.* ............................................................................ 27,200 785,400
C.R. Bard, Inc.* ........................................................................ 12,000 416,250
Computer Motion, Inc.* .................................................................. 18,300 281,363
Cyberonics, Inc.* ....................................................................... 15,200 172,900
ESC Medical Systems Ltd.* ............................................................... 15,800 440,425
Focal, Inc.* ............................................................................ 9,900 121,275
Guidant Corp. ........................................................................... 19,900 1,282,306
Novoste Corp.* .......................................................................... 18,500 467,125
Perclose, Inc.* ......................................................................... 10,100 256,288
STERIS Corp.* ........................................................................... 10,600 662,500
Sofamor Danek Group, Inc.* .............................................................. 4,500 374,063
Stryker Corp. ........................................................................... 15,700 639,775
Theragenics Corp.* ...................................................................... 13,800 384,675
Wesley Jessen VisionCare, Inc.* ......................................................... 20,200 545,400
------------
8,820,814
------------
Pharmaceuticals 37.6%
Abbott Laboratories ..................................................................... 13,300 986,694
Altana AG ............................................................................... 2,900 227,547
American Home Products Corp. ............................................................ 28,600 1,381,738
Astra AB "A" (ADR) ...................................................................... 15,900 321,975
Baxter International Inc. ............................................................... 9,800 560,438
</TABLE>
The accompanying notes are an integral part of the financial statements.
21 - Scudder Choice Series
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bristol-Myers Squibb Co. ................................................................ 15,300 1,644,742
Dura Pharmaceuticals, Inc.* ............................................................. 20,100 523,856
Elan Corp. PLC (ADS)* ................................................................... 7,400 452,788
Eli Lilly & Co. ......................................................................... 17,800 1,093,588
Forest Laboratories, Inc.* .............................................................. 10,200 336,600
Glaxo Wellcome PLC (ADR) ................................................................ 10,500 566,344
Merck & Co., Inc. ....................................................................... 9,400 1,100,388
Novartis AG (Registered) ................................................................ 370 626,196
Orion-yhtyma Oy "B" ..................................................................... 7,300 218,692
Pfizer, Inc. ............................................................................ 15,700 1,645,556
Schering-Plough Corp. ................................................................... 19,500 1,631,906
Takeda Chemical Industries, Ltd. ........................................................ 12,000 310,158
Warner-Lambert Co. ...................................................................... 26,400 1,684,650
------------
15,313,856
------------
Insurance 2.2%
Cigna Corp. ............................................................................. 13,000 890,500
------------
Chemicals 4.4%
Akzo-Nobel NV ........................................................................... 2,750 574,657
Monsanto Co. ............................................................................ 12,700 703,263
Rhone-Poulenc SA "A" (ADR) .............................................................. 9,800 539,000
------------
1,816,920
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $40,590,267) 40,653,144
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio-- 100.0% (Cost $40,707,267) (a) 40,770,144
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security
(a) The cost for federal income tax purposes was $40,726,595. At May 31, 1998,
net unrealized appreciation for all securities based on tax cost was
$43,549. This consisted of aggregate gross unrealized appreciation for all
securities in which there was an excess of market value over tax cost of
$1,815,984 and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over market value of $1,772,435.
During the period March 2, 1998 (commencement of operations) to May 31,
1998, purchases and sales of investment securities (excluding short-term
investments) aggregated $47,234,011 and $6,617,744, respectively.
The accompanying notes are an integral part of the financial statements.
22 - Scudder Choice Series
<PAGE>
Investment Portfolio as of May 31, 1998
Scudder Technology Fund
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Short Term Notes 8.7%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
------------
Federal National Mortgage Association, 5.55%, 6/1/98** (Cost $3,162,000) ................ 3,162,000 3,162,000
------------
Shares
- ------------------------------------------------------------------------------------------------------------------------------
Common Stocks 91.3%
- ------------------------------------------------------------------------------------------------------------------------------
Health Industry Services 5.3%
Access Health, Inc.* .................................................................... 17,300 443,313
HBO & Company, Inc. ..................................................................... 17,900 1,033,166
IDX Systems Corp.* ...................................................................... 10,900 458,481
------------
1,934,960
------------
Advertising 1.0%
DoubleClick, Inc.* ...................................................................... 10,100 349,713
------------
EDP Services 6.1%
Computer Horizons Corp.* ................................................................ 17,500 584,609
Keane, Inc.* ............................................................................ 14,300 641,713
Manhattan Associates, Inc.* ............................................................. 19,900 398,000
Sapient Corp.* .......................................................................... 13,200 590,700
------------
2,215,022
------------
Miscellaneous Commercial Services 6.2%
AccuStaff, Inc.* ........................................................................ 27,700 912,369
Gartner Group, Inc. "A"* ................................................................ 22,500 743,906
Whittman-Hart, Inc.* .................................................................... 14,800 604,950
------------
2,261,225
------------
Telecommunications Equipment 14.2%
Ascend Communications, Inc.* ............................................................ 32,300 1,394,949
Ciena Corp.* ............................................................................ 18,800 977,600
L.M. Ericsson Telephone Co. "B" (ADR) ................................................... 19,800 551,925
Lucent Technologies Inc. ................................................................ 17,800 1,262,688
Nokia AB Oy "A" (ADR) ................................................................... 15,100 980,556
------------
5,167,718
------------
Electrical Products 2.6%
FORE Systems, Inc.* ..................................................................... 43,200 950,400
------------
Computer Software 22.7%
12 Technologies Inc.* ................................................................... 7,500 446,719
BMC Software Inc.* ...................................................................... 15,800 727,788
</TABLE>
The accompanying notes are an integral part of the financial statements.
23 - Scudder Choice Series
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CBT Group PLC (ADR)* .................................................................... 9,700 482,575
Cadence Design System Inc.* ............................................................. 20,500 722,625
Check Point Software Technologies Ltd.* ................................................. 25,200 705,600
Computer Associates International, Inc. ................................................. 18,600 976,500
JDA Software Group, Inc.* ............................................................... 7,000 316,094
MEMCO Software Ltd.* .................................................................... 14,600 324,850
Microsoft Corp.* ........................................................................ 4,600 390,138
Parametric Technology Corp.* ............................................................ 31,800 974,869
QuadraMed Corp.* ........................................................................ 17,900 430,719
Sterling Commerce, Inc.* ................................................................ 14,000 555,625
Vantive Corp.* .......................................................................... 15,500 416,563
Xylan Corp.* ............................................................................ 32,500 784,063
------------
8,254,728
------------
Diverse Electronic Products 2.9%
KLA Tencor Corp.* ....................................................................... 9,800 331,975
Solectron Corp.* ........................................................................ 8,600 355,825
Teradyne Inc.* .......................................................................... 11,600 356,700
------------
1,044,500
------------
EDP Peripherals 7.9%
EMC Corp.* .............................................................................. 25,200 1,044,225
MMC Networks, Inc.* ..................................................................... 36,300 943,800
Network Appliance, Inc.* ................................................................ 25,500 886,922
------------
2,874,947
------------
Electronic Components/Distributors 1.3%
Broadcom Corp.* ......................................................................... 9,200 470,350
------------
Electronic Data Processing 10.9%
Compaq Computer Corp. ................................................................... 12,300 335,944
Dell Computer Corp.* .................................................................... 10,300 848,784
Hewlett-Packard Co. ..................................................................... 14,300 888,388
International Business Machines Corp. ................................................... 6,700 786,413
Sun Microsystems, Inc.* ................................................................. 27,400 1,097,713
------------
3,957,242
------------
Office/Plant Automation 4.1%
Cisco Systems, Inc.* .................................................................... 15,400 1,164,625
Mercury Computer Systems, Inc.* ......................................................... 20,100 316,575
------------
1,481,200
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24 - Scudder Choice Series
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Semiconductors 6.1%
Intel Corp. ............................................................................. 6,200 442,913
Linear Technology Corp. ................................................................. 9,000 629,438
PMC-Sierra, Inc.* ....................................................................... 8,600 334,863
Vitesse Semiconductor Corp.* ............................................................ 25,000 640,625
Xilinx Inc.* ............................................................................ 4,900 186,353
------------
2,234,192
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $32,193,546) 33,196,197
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio-- 100.0% (Cost $35,355,546) (a) 36,358,197
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security
** Annualized yield at time of purchase; not a coupon rate. (Unaudited)
(a) The cost for federal income tax purposes was $35,432,750. At May 31, 1998,
net unrealized appreciation for all securities based on tax cost was
$925,447. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $2,572,106 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$1,646,659.
During the period March 2, 1998 (commencement of operations) to May 31,
1998, purchases and sales of investment securities (excluding short-term
investments) aggregated $44,549,557 and $11,306,141, respectively.
The accompanying notes are an integral part of the financial statements.
25 - Scudder Choice Series
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of May 31, 1998
<TABLE>
<CAPTION>
Scudder Scudder Scudder
Assets Financial Health Care Technology
Services Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investments, at market (for identified cost, see
accompanying investment portfolios) ...................... $ 37,030,723 $ 40,770,144 $ 36,358,197
Cash ...................................................... 478 965 17,625
Receivable for investments sold ........................... -- 268,116 1,424,633
Receivable for Fund shares sold ........................... 9,792 30,518 29,110
Dividends and interest receivable ......................... 40,888 30,788 2,239
Foreign taxes recoverable ................................. 357 4,475 --
Deferred organization expenses ............................ 9,622 12,655 11,448
---------------- ---------------- ----------------
Total assets 37,091,860 41,117,661 37,843,252
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ......................... -- 51,320 498,658
Payable for Fund shares redeemed .......................... -- 45,886 92,690
Other payables and accrued expenses ....................... 165,391 96,582 92,560
---------------- ---------------- ----------------
Total liabilities ......................................... 165,391 193,788 683,908
------------------------------------------------------------- ---------------- ---------------- ----------------
Net assets, at market value $ 36,926,469 $ 40,923,873 $ 37,159,344
------------------------------------------------------------- ---------------- ---------------- ----------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income (loss) ................ 14,902 -- --
Unrealized appreciation (depreciation) on:
Investment securities ................................... 3,741,851 62,877 1,002,651
Foreign currency related transactions ................... -- (34) --
Accumulated net realized gain (loss) ...................... 143,464 (26,000) (1,049,870)
Paid-in capital ........................................... 33,026,252 40,887,030 37,206,563
------------------------------------------------------------- ---------------- ---------------- ----------------
Net assets, at market value $ 36,926,469 $ 40,923,873 $ 37,159,344
------------------------------------------------------------- ---------------- ---------------- ----------------
Net Asset Value
- ------------------------------------------------------------------------------------------------------------------------------------
---------------- ---------------- ----------------
Net Asset Value, offering and redemption price per share $14.22 $12.08 $12.07
(outstanding shares of beneficial interest, $.01 par value, ---------------- ---------------- ----------------
unlimited number of shares authorized) .................. 2,597,296 3,387,150 3,078,971
</TABLE>
The accompanying notes are an integral part of the financial statements.
26 - Scudder Choice Series
<PAGE>
Statement of Operations
for the period (commencement of operations*) to May 31, 1998
<TABLE>
<CAPTION>
Scudder Scudder Scudder
Financial Health Care Technology
Investment Income (Loss) Services Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income:
Dividends ................................................ $ 225,611 $ 85,854 $ 10,875
Interest ................................................. 45,685 45,879 65,245
---------------- ---------------- ----------------
271,296 131,733 76,120
Less foreign taxes withheld .............................. (536) (6,572) (1,098)
---------------- ---------------- ----------------
270,760 125,161 75,022
Expenses:
Management fee ........................................... 116,242 78,411 72,121
Services to shareholders ................................. 154,810 160,822 146,598
Custodian and accounting fees ............................ 27,249 13,249 12,555
Trustees' fees and expenses .............................. 18,621 19,326 19,326
Auditing ................................................. 20,421 20,320 20,320
Registration fees ........................................ 28,540 26,373 23,768
Reports to shareholders .................................. 23,507 14,873 12,650
Legal .................................................... 6,340 3,525 3,253
Amortization of organization expense ..................... 1,229 641 601
Other .................................................... 4,171 3,863 3,107
---------------- ---------------- ----------------
Total expenses before reductions ......................... 401,130 341,403 314,299
Expense reductions ....................................... (168,987) (179,123) (165,222)
---------------- ---------------- ----------------
Expenses, net ............................................ 232,143 162,280 149,077
------------------------------------------------------------- ---------------- ---------------- ----------------
Net investment income (loss) 38,617 (37,119) (74,055)
------------------------------------------------------------- ---------------- ---------------- ----------------
Realized and unrealized gain (loss) on investment transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ............................................ 143,464 (26,000) (1,049,870)
Foreign currency related transactions .................. -- 2,209 --
---------------- ---------------- ----------------
143,464 (23,791) (1,049,870)
---------------- ---------------- ----------------
Net unrealized appreciation (depreciation) during the
period on:
Investments ............................................ 3,741,851 62,877 1,002,651
Foreign currency related transactions .................. -- (34) --
---------------- ---------------- ----------------
3,741,851 62,843 1,002,651
------------------------------------------------------------- ---------------- ---------------- ----------------
Net gain (loss) on investment transactions 3,885,315 39,052 (47,219)
------------------------------------------------------------- ---------------- ---------------- ----------------
------------------------------------------------------------- ---------------- ---------------- ----------------
Net increase (decrease) in net assets resulting from
operations $ 3,923,932 $ 1,933 $ (121,274)
------------------------------------------------------------- ---------------- ---------------- ----------------
</TABLE>
* Scudder Financial Services Fund commenced operations on November 3, 1997
Scudder Health Care Fund and Scudder Technology Fund commenced operations
on March 2, 1998
The accompanying notes are an integral part of the financial statements.
27 - Scudder Choice Series
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Period (commencement of
operations*) to May 31, 1998
Scudder Scudder Scudder
Financial Health Care Technology
Increase (Decrease) in Net Assets Services Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income (loss) ................................ $ 38,617 $ (37,119) $ (74,055)
Net realized gain (loss) from investment transactions ....... 143,464 (23,791) (1,049,870)
Net unrealized appreciation (depreciation) on
investment transactions during the period ................. 3,741,851 62,843 1,002,651
---------------- ---------------- ----------------
Net increase (decrease) in net assets resulting from
operations ................................................ 3,923,932 1,933 (121,274)
---------------- ---------------- ----------------
Distributions to shareholders from:
Net investment income ....................................... (41,350) -- --
---------------- ---------------- ----------------
Fund share transactions:
Proceeds from shares sold ................................... 35,640,825 42,821,776 38,714,812
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................. 40,371 -- --
Cost of shares redeemed ..................................... (2,656,047) (1,910,103) (1,441,830)
Redemption fees ............................................. 17,538 9,067 6,436
---------------- ---------------- ----------------
Net increase (decrease) in net assets from Fund share
transactions .............................................. 33,042,687 40,920,740 37,279,418
---------------- ---------------- ----------------
Increase (decrease) in net assets ........................... 36,925,269 40,922,673 37,158,144
Net assets at beginning of period ........................... 1,200 1,200 1,200
---------------- ---------------- ----------------
Net assets at end of period (a) ............................. $ 36,926,469 $ 40,923,873 $ 37,159,344
---------------- ---------------- ----------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ................... 100 100 100
---------------- ---------------- ----------------
Shares sold ................................................. 2,789,515 3,543,239 3,194,723
Shares issued to shareholders in reinvestment of
distributions ............................................. 3,199 -- --
Shares redeemed ............................................. (195,518) (156,189) (115,852)
---------------- ---------------- ----------------
Net increase (decrease) in Fund shares ...................... 2,597,196 3,387,050 3,078,871
---------------- ---------------- ----------------
Shares outstanding at end of period ......................... 2,597,296 3,387,150 3,078,971
---------------- ---------------- ----------------
(a) Includes undistributed net investment income of ....... $ 14,902 $ -- $ --
</TABLE>
* Scudder Financial Services Fund commenced operations on November 3, 1997
Scudder Health Care Fund and Scudder Technology Fund commenced operations
on March 2, 1998
The accompanying notes are an integral part of the financial statements.
28 - Scudder Choice Series
<PAGE>
Financial Highlights
Scudder Financial Services Fund
The following table includes selected data for a share outstanding (a)
throughout the period and other performance information derived from the
financial statements.
<TABLE>
<CAPTION>
For the Period
November 3,
1997
(commencement
of operations) to
May 31, 1998
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
------------------
Net asset value, beginning of period ................................................................ $12.00
Income (loss) from investment operations: ------------------
Net investment income (loss) ........................................................................ .02
Net realized and unrealized gain (loss) on investments .............................................. 2.22
------------------
Total from investment operations .................................................................... 2.24
------------------
Less distributions from net investment income ....................................................... (.03)
Redemption fees ..................................................................................... .01
------------------
Net asset value, end of period ...................................................................... $14.22
------------------
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (%) (b) (c) ............................................................................ 18.73**
Ratios and Supplemental Data
Net assets, end of period ($ millions) .............................................................. 37
Ratio of operating expenses, net, to average daily net assets (%) ................................... 1.50*
Ratio of operating expenses before expense reductions, to average daily net assets (%) .............. 2.59*
Ratio of net investment income to average daily net assets (%) ...................................... .25*
Portfolio turnover rate (%) ......................................................................... 25.0*
Average commission rate paid ........................................................................ $.0395
</TABLE>
(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 1%
redemption fee on shares held less than one year.
* Annualized
** Not annualized
29 - Scudder Choice Series
<PAGE>
Financial Highlights
Scudder Health Care Fund
The following table includes selected data for a share outstanding (a)
throughout the period and other performance information derived from the
financial statements.
<TABLE>
<CAPTION>
For the Period
March 2, 1998
(commencement
of operations) to
May 31, 1998
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
------------------
Net asset value, beginning of period ................................................................ $12.00
Income (loss) from investment operations: ------------------
Net investment income (loss) ........................................................................ (.01)
Net realized and unrealized gain (loss) on investments .............................................. .09
------------------
Total from investment operations .................................................................... .08
------------------
Redemption fees ..................................................................................... --***
------------------
Net asset value, end of period ...................................................................... $12.08
------------------
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (%) (b) (c) ............................................................................ .67**
Ratios and Supplemental Data
Net assets, end of period ($ millions) .............................................................. 41
Ratio of operating expenses, net, to average daily net assets (%) ................................... 1.75*
Ratio of operating expenses before expense reductions, to average daily net assets (%) .............. 3.68*
Ratio of net investment income to average daily net assets (%) ...................................... (.40)*
Portfolio turnover rate (%) ......................................................................... 68.3*
Average commission rate paid ........................................................................ $.0573
</TABLE>
(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 1%
redemption fee on shares held less than one year.
* Annualized
** Not annualized
*** Amount is less than one half of $.01.
30 - Scudder Choice Series
<PAGE>
Financial Highlights
Scudder Technology Fund
The following table includes selected data for a share outstanding (a)
throughout the period and other performance information derived from the
financial statements.
<TABLE>
<CAPTION>
For the Period
March 2, 1998
(commencement
of operations) to
May 31, 1998
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
------------------
Net asset value, beginning of period ................................................................ $12.00
Income (loss) from investment operations: ------------------
Net investment income (loss) ........................................................................ (.03)
Net realized and unrealized gain (loss) on investments .............................................. .10
------------------
Total from investment operations .................................................................... .07
------------------
Redemption fees ..................................................................................... --***
------------------
Net asset value, end of period ...................................................................... $12.07
------------------
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (%) (b) (c) ............................................................................ .58**
Ratios and Supplemental Data
Net assets, end of period ($ millions) .............................................................. 37
Ratio of operating expenses, net, to average daily net assets (%) ................................... 1.75*
Ratio of operating expenses before expense reductions, to average daily net assets (%) .............. 3.69*
Ratio of net investment income to average daily net assets (%) ...................................... (.87)*
Portfolio turnover rate (%) ......................................................................... 136.5*
Average commission rate paid ........................................................................ $.0442
</TABLE>
(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 1%
redemption fee on shares held less than one year.
* Annualized
** Not annualized
*** Amount is less than one half of $.01.
31 - Scudder Choice Series
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder Financial Services Fund, Scudder Health Care Fund and Scudder Technology
Fund (the "Funds") are each a non-diversified series of Scudder Securities
Trust. The Trust is organized as a Massachusetts business trust and is
registered under the Investment Company Act of 1940, as amended, as and open-end
management investment company.
The Funds' financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed by each Fund in the preparation of its
financial statements.
The initial fiscal year end of the Funds was August 31. Subsequently, the Funds'
Trustees have approved the change of each Fund's fiscal year end to May 31.
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. 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. Each 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 100.5% of the repurchase price.
Foreign Currency Translations. The books and records of the Funds are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and other
liabilities at the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the rates of exchange prevailing on the
respective dates of such transactions.
The Funds do not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes in
market prices of the investments. Such fluctuations are included with the net
realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.
32 - Scudder Choice Series
<PAGE>
Federal Income Taxes. It is each Fund's policy 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, Scudder Financial Services Fund paid no federal
income taxes and no federal income tax provision was required. From March 2,
1998 (commencement of operations) through May 31, 1998, Scudder Health Care Fund
and Scudder Technology Fund incurred approximately $7,000 and $973,000 of net
realized capital losses, respectively. As permitted by tax regulations, Scudder
Health Care Fund and Scudder Technology Fund intend to elect to defer these
losses and treat them as arising in the fiscal year ending May 31, 1999.
Redemption Fees. In general, shares of each 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 1% 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, if
any, 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 applicable 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.
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, a Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
The Funds use the identified cost method for determining realized gain or loss
on investments for both financial and Federal income tax reporting purposes.
Organization Costs. Costs incurred by each Fund in connection with their
organization have been deferred and are being amortized on a straight-line basis
over a five-year period.
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. Related Parties
Effective December 31, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") and The
Zurich Insurance Company ("Zurich"), an international insurance and financial
services organization, formed a new global investment organization by combining
Scudder's business with that of Zurich's subsidiary, Zurich Kemper Investments,
Inc. As a result of the transaction, Scudder changed its name to Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"). The transaction between
Scudder and Zurich resulted in the termination of Scudder Financial Services
Fund's Investment Management Agreement with Scudder. However, a new Investment
Management Agreement (the "Management Agreement") between Scudder Financial
Services Fund and Scudder Kemper was approved by the Trust's Board of Trustees.
The Management Agreement, which was effective December 31, 1997, is the same in
all material respects as the corresponding previous Investment Management
Agreement, except that Scudder Kemper is the new investment adviser to the Fund.
33 - Scudder Choice Series
<PAGE>
Under the Management Agreement with Scudder Kemper, each Fund pays the Adviser a
fee equal to an annual rate of 0.75% for Scudder Financial Services Fund, 0.85%
for Scudder Health Care Fund and 0.85% for Scudder Technology Fund, based on the
applicable Funds' average daily net assets, computed and accrued daily and
payable monthly. The Adviser directs the investments of each Fund in accordance
with its investment objective, policies, and restrictions. The Adviser
determines the securities, instruments and other contracts relating to
investments to be purchased, sold or entered into by each Fund. In addition to
portfolio management services, the Adviser provides certain administrative
services in accordance with each Management Agreement. In addition, the Adviser
has agreed not to impose all or a portion of each Fund's management fee until
December 31, 1998 in order to maintain the annualized expenses of each of
Scudder Financial Services Fund, Scudder Health Care Fund and Scudder Technology
Fund at no more than 1.50%, 1.75% and 1.75%, respectively, of the average daily
net assets of each Fund. For the period November 3, 1997 (commencement of
operations) to May 31, 1998, the Adviser did not impose any of its management
fee for Scudder Financial Services Fund, which amounted to $116,242. For the
period March 2, 1998 (commencement of operations) to May 31, 1998, the Adviser
did not impose any of its management fee for Scudder Health Care Fund and
Scudder Technology Fund, which amounted to $78,411 and $72,121, respectively.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for each Fund. For the
period November 3, 1997 (commencement of operations) to May 31, 1998, SSC did
not impose a portion of its fee for Scudder Financial Services Fund amounting to
$44,865, and the amount imposed aggregated $79,691, all of which is unpaid at
May 31, 1998. For the period March 2, 1998 (commencement of operations) to May
31, 1998, SSC did not impose a portion of its fee for Scudder Health Care Fund
and Scudder Technology Fund amounting to $93,856 and $86,468, respectively, and
the amount imposed aggregated $41,016 and $43,249, respectively. These amounts
are unpaid at May 31, 1998.
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 each Fund. For the period from
November 3, 1997 (commencement of operations) to May 31, 1998, SFAC did not
impose a portion of its fee for Scudder Financial Services Fund amounting to
$7,879, and the amount imposed aggregated $13,996, all of which is unpaid at May
31, 1998. For the period March 2, 1998 (commencement of operations) to May 31,
1998 SFAC did not impose a portion of its fee for Scudder Health Care Fund and
Scudder Technology Fund amounting to $6,857 and $6,633, respectively, and the
amount imposed aggregated $2,996, and $3,318, respectively. These amounts are
unpaid at May 31, 1998.
The Funds pay each Trustee not affiliated with the Adviser an annual retainer
plus specified amounts for attended board and committee meetings. For the period
November 3, 1997 (commencement of operations) to May 31, 1998 the Trustees' fees
and expenses for Scudder Financial Services Fund aggregated $18,621. For the
period March 2, 1998 (commencement of operations) to May 31, 1998 the Trustees'
fees and expenses for Scudder Health Care Fund and Scudder Technology Fund
aggregated $19,326 and $19,326, respectively.
34 - Scudder Choice Series
<PAGE>
Report of Independent Accountants
To the Board of Trustees of Scudder Securities Trust and the Shareholders of
Scudder Financial Services Fund, Scudder Health Care Fund, and Scudder
Technology Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, 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 Financial Services Fund,
Scudder Health Care Fund, and Scudder Technology Fund (the "Funds") at May 31,
1998, the results of their operations, the changes in their net assets, and the
financial highlights for each of the periods indicated therein, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' 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 May 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
July 10, 1998
35 - Scudder Choice Series
<PAGE>
Officers and Trustees
Daniel Pierce*
President and Trustee
Paul Bancroft III
Trustee; Venture Capitalist and
Consultant
Sheryle J. Bolton
Trustee; Consultant
William T. Burgin
Trustee; General Partner, Bessemer
Venture Partners
Thomas J. Devine
Trustee; Consultant
Keith R. Fox
Trustee; President, Exeter Capital
Management Corporation
William H. Luers
Trustee; President, The
Metropolitan Museum of Art
Wilson Nolen
Trustee; Consultant
Kathryn L. Quirk*
Trustee, Vice President and
Assistant Secretary
Robert W. Lear
Honorary Trustee;
Executive-in-Residence, Visiting
Professor, Columbia University
Graduate School of Business
Robert G. Stone, Jr.
Honorary Trustee; Chairman of
the Board and Director, Kirby
Corporation
Edmund R. Swanberg*
Honorary Trustee
Peter Chin*
Vice President
J. Brooks Doherty*
Vice President
James M. Eysenbach*
Vice President
James E. Fenger*
Vice President
Philip S. Fortuna*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Roy C. McKay*
Vice President
Thaddeus Paluszek*
Vice President
Kimberly A. Purvis*
Vice President
Peter Taylor*
Vice President
Thomas F. McDonough*
Vice President, Secretary and
Treasurer
Edward J. O'Connell*
Vice President and Assistant
Treasurer
Richard W. Desmond*
Assistant Secretary
John R. Hebble*
Assistant Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
36 - Scudder Choice Series
<PAGE>
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 --
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 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
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.
37 - Scudder Choice Series
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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 -- http://funds.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
- ------------------------------------------------------------------------------------------------------------------------------
38 - Scudder Choice Series
<PAGE>
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
500 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 Scudder 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
[email protected] Boston New York
</TABLE>
39 - Scudder Choice Series
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $200 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
U.S.
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
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