Scudder Value Fund
Annual Report
September 30, 1996
For investors seeking long-term growth of capital through investment in
undervalued equity securities.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
<PAGE>
2 In Brief
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
9 Investment Portfolio
15 Financial Statements
18 Financial Highlights
19 Notes to Financial Statements
23 Report of Independent Accountants
24 Tax Information
25 Officers and Trustees
26 Investment Products and Services
27 How to Contact Scudder
In Brief
o Scudder Value Fund provided a total return of 17.18% for the fiscal year ended
September 30, 1996, outperforming the 15.89% return on average of the 633 growth
funds tracked by Lipper Analytical Services. The Fund trailed its benchmark
index, the unmanaged S&P 500, during the year, partly due to the performance of
a few very large companies which drive the index's returns.
o The Fund received a four-star rating from Morningstar, reflecting
"above-average" risk-adjusted performance through September 30, 1996. These
ratings are subject to change every month and are calculated from the Fund's
three-year average annual return in excess of 90-day Treasury bill returns with
appropriate fee adjustments, and a risk factor that reflects fund performance
below T-bill returns. 1,708 equity funds were rated. 10% received five stars,
22.5% received four stars, 35% three stars, 22.5% two stars, and the bottom 10%
one star. Past performance is no guarantee of future returns.
o The Fund's performance during the year benefited from holdings in the
financial sector. Paper and utility-related holdings provided most of the year's
disappointments.
2-Scudder Value Fund
<PAGE>
Letter from the Fund's President
Dear Shareholders,
We are pleased to present the newly redesigned annual report for Scudder Value
Fund. The new format is designed to enhance the attractiveness and readability
of the reports. Let us know what you think.
In this era of electronic information we have also taken a look at our
abbreviated quarterly reports, which you generally receive during the month
after the end of your fund's first and third fiscal quarters. Going forward,
these printed reports will be discontinued, and portfolio information will be
made available on a more timely basis -- each month, in most cases -- through
Scudder's Web site, Scudder's automated information line (SAIL), and by calling
Investor Relations.
As detailed in the portfolio management discussion that follows, Scudder Value
Fund provided a solid return of 17.18% for the 12-month period ended September
30, 1996. We are also pleased with the Fund's four-star Morningstar rating (see
page 2).
The stock market may not be as rewarding in 1997. Having just broken through the
6,000 mark, the market is considered by some to be overvalued and at risk of
correction. Scudder Value Fund historically has performed well in such an
environment, due in large part to its disciplined approach to buying stocks at a
discount.
We look forward to the coming year, and thank you for your continued investment
in Scudder Value Fund. Please do not hesitate to call Investor Relations at
1-800-225-2470 with any questions.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Value Fund
3-Scudder Value Fund
<PAGE>
PERFORMANCE UPDATE as of SEPTEMBER 30, 1996
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
9/30/96 $10,000 Cumulative Annual
- --------------------------------------
SCUDDER VALUE FUND
- --------------------------------------
1 Year $11,718 17.18% 17.18%
Life of
Fund* $16,456 64.56% 14.20%
- --------------------------------------
S&P 500 INDEX
- --------------------------------------
1 Year $12,034 20.34% 20.34%
Life of
Fund* $17,416 74.16% 15.97%
*THE FUND COMMENCED OPERATIONS ON DECEMBER 31, 1992.
- -----------------------------------------------------------------
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 VALUE FUND
Year Amount
- ----------------------
12/92 $10000
3/93 $10933
9/93 $11150
3/94 $10830
9/94 $11360
3/95 $12070
9/95 $14043
3/96 $15470
9/96 $16456
S&P 500 INDEX
Year Amount
- ----------------------
12/92 $10000
3/93 $10437
9/93 $10758
3/94 $10590
9/94 $11155
3/95 $12239
9/95 $14473
3/96 $16168
9/96 $17416
The Standard & Poor's (S&P) 500 Index is an unmanaged capitalization-weighted
measure of 500 widely held common stocks listed on the New York Stock Exchange,
American Stock Exchange, and Over-The-Counter market. 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 data points listed in the table
below.
YEARLY PERIODS ENDED SEPTEMBER 30
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1993* 1994 1995 1996
-------------------------------------------------------------------------------
NET ASSET VALUE... $13.38 $13.08 $15.87 $17.52
INCOME DIVIDENDS.. $ - $ .11 $ .12 $ .04
CAPITAL GAINS
DIVIDENDS..... $ - $ .43 $ .13 $ .92
FUND TOTAL
RETURN (%)........ 11.50 1.88 23.62 17.18
INDEX TOTAL
RETURN (%)........ 7.56 3.68 29.75 20.34
</TABLE>
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results.
Investment 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 average annual
total return for the Fund for the one year and life of Fund periods would
have been lower.
4-Scudder Value Fund
<PAGE>
PORTFOLIO SUMMARY as of September 30, 1996
- ---------------------------------------------------------------------------
ASSET ALLOCATION
- ---------------------------------------------------------------------------
Equity Securities 92%
Cash Equivalents 8%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
In a constructive year for equities,
the Fund remained near fully invested.
- --------------------------------------------------------------------------
SECTORS
(Excludes 8% Cash Equivalents)
- --------------------------------------------------------------------------
Financial 23%
Manufacturing 14%
Energy 11%
Consumer Staples 10%
Technology 8%
Consumer Discretionary 5%
Health 5%
Service Industries 4%
Communications 3%
Other 17%
- ---------------------------------------------
100%
- ---------------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
By far the largest group, financial holdings
contributed most to the Fund's positive
performance this year.
- --------------------------------------------------------------------------
TEN LARGEST EQUITY HOLDINGS
(20% OF PORTFOLIO)
- --------------------------------------------------------------------------
1. TRW INC.
Defense electronics, automotive parts and systems
2. MBIA INC.
Insurer of municipal bonds
3. INTEL CORP.
Semiconductor memory circuits
4. CITICORP
Provider of a broad range of financial services,
including banking and consumer finance
5. NEDLLOYD GROEP NV
Provider of container transport and supply
6. ZEIGLER COAL HOLDING CO.
Coal producer
7. CONAGRA INC.
Food and grain conglomerate
8. ALLSTATE CORP.
Property, liability, and life insurance company
9. SARA LEE CORP.
Processed foods maker
10.UNICOM CORP.
Electric utility in northern Illinois
Several of the Fund's largest holdings - including TRW,
ConAgra, and Allstate - were also its top performers
during the year.
- -----------------------------------------------------------------------------
For more complete details about the Fund's investment portfolio,
see page 9. A monthly Investment Portfolio Summary and quarterly Portfolio
Holdings are available upon request.
5-Scudder Value Fund
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
Scudder Value Fund has been managed by Donald E. Hall and William J. Wallace
since the Fund's inception in 1992. For a report on the Fund's fiscal year 1996
performance and strategy, as well as management's outlook going into 1997, here
is an interview with Don Hall, Lead Portfolio Manager of Scudder Value Fund.
Q: Lipper includes the Fund in its growth category. How did it perform relative
to this peer group in fiscal year 1996?
A: Scudder Value Fund performed well relative to this group. The 633 growth
funds tracked by Lipper returned 15.89% on average over the 12-month period,
compared with 17.18% for the Fund.
Q: How did Scudder Value Fund perform relative to its benchmark index, the S&P
500?
A: The index return was higher at 20.34% partly due to the strong performance of
its largest companies. The index is capitalization weighted, which means that
the performance of a few very large companies, such as Coca Cola and GE, can
drive the index's overall return. In fact, 47% of the index's return is
determined by just 50 of its 500 stocks. In general, funds with more exposure to
mid-sized companies than the S&P 500 tend to lag the index when the largest
stocks perform better than the broader market. By way of comparison, the S&P
Mid-Cap Index returned 14.0% for the period.
Q: What sectors and stocks contributed most to performance?
A: Financial stocks, our most important group, representing over 22% of the
Fund's equity position, contributed most to this year's positive performance.
The group outperformed the market despite higher interest rates. As we have
proclaimed many times, our financial stocks are purchased based on bottom-up
value research, not as interest rate plays. Financial stocks appreciating at
least 30% over the period included BankAmerica, Chase Manhattan, State Street
Boston, and Allstate. Other strong returns came from a diverse group that
includes ConAgra, Becton Dickinson, TRW, Lockheed Martin, and Intel.
Q: What were some of the disappointments?
A: Paper companies and semiconductor capital equipment companies saw their
orders turn down during the period. These are cyclical industries that will
inevitably enjoy an upturn. Another disappointment was the electric utility
group, including Destec Energy, an independent power producer. Frustrated with
the public price of their company's stock, Destec's management announced that
they are seeking to sell the company in a private transaction. The stock moved
up sharply on this news after the end of the Fund's fiscal period.
Q: What role do foreign stocks play in the portfolio?
A: Foreign stocks provide additional opportunity in our view, especially when
they are selling at significantly lower multiples than comparable U.S. stocks.
While delivering positive performance, the foreign stocks in the portfolio were
not able to keep up with the strong U.S. market over the past year. We believe
the Fund's foreign holdings may be due for some catch-up.
6-Scudder Value Fund
<PAGE>
Q: Why is Scudder Value Fund included in Lipper's growth category?
A: The Fund's style is value but the goal is growth. The Fund seeks growth by
investing in companies whose stock prices are low in relation to their
anticipated earnings, among other measures. The Fund's average price/earnings
(p/e) ratio is lower than that of the overall market, and in fact is lower than
97% of all funds in its category. This low p/e reflects our value style. Style
decisions can impact the relative performance of a fund in the same way as the
decision to invest in large or small companies. In fact, the relative
performance of different styles is cyclical. Many investors choose to own both
value and growth style funds for diversification, even though their goal is
growth.
Q: Do you look at selection criteria other than value?
A: Yes. We consider the direction of current fundamentals. For example, if a
company's earnings are in a downturn and we cannot foresee with confidence a
turnaround, we will move on. In this way we believe we protect the portfolio
from prolonged disappointments. Fortunately, there were few of these situations
over the past year. Most sales were the result of stocks reaching price targets.
Q: How defensive is Scudder Value Fund's approach?
A: The value style adds some risk-reducing characteristics. A discriminating
focus on what we will pay for a company reduces so-called "price risk," which is
the risk that a stock will underperform even if the fundamentals -- including
earnings -- work out as anticipated. Also, we attempt to gauge the fundamental
risk of each stock we purchase, with special attention to such details as
leverage and volatile earnings. Generally, we prefer established companies whose
managements have been tested under a variety of environments.
Having said that, we recognize the prices of riskier companies at times become
depressed and undervalued. We are not at one of those times. In fact, we have
been adding to utility stocks that have underperformed dramatically over the
last year, including Unicom and PowerGen. Among more volatile stocks which, at
single-digit multiples, appear to more than adequately discount fundamental
risks are holdings AMR and Alaska Airlines.
Q: With the stock market hitting new highs, some believe stocks are overvalued.
How is the Fund positioned to benefit shareholders in this environment?
A: The historical average p/e multiple for the S&P 500 Index is 14 times next
year's estimated earnings. Based on our estimates, the S&P 500 currently is
selling near 20 times next year's earnings. By contrast, the Fund's average p/e
is only 13 times. It follows that the Fund has a less than average exposure to
the more speculative and vulnerable components of the market.
We believe the market may be vulnerable to some setbacks over the next several
months due to earnings disappointments. We expect a slower economy to keep
inflation and interest rates in check, however, which should confine the length
of any market decline. The July selloff was the first significant one-month
decline since 1990. For the first time in many quarters, the market declined
7-Scudder Value Fund
<PAGE>
more than one percent on several days. In each of those days, the Fund declined
less than the S&P 500.
We believe the Fund is well-positioned for a market that will work itself higher
over the next several quarters but with more setbacks than we have grown
accustomed to in recent years.
Q: What groups do you find particularly attractive now?
A: We believe financial stocks continue to look attractive despite strong price
appreciation. The financial companies in the portfolio are making good on their
estimated earnings, and multiples are modest. Citicorp, with a growing global
franchise, sells for only 12 times next year's earnings. Allstate, with one of
the best names in the financial service industry, has reduced its risk exposure
dramatically, yet the stock sells for only 13 times. MBIA, a lesser-known
company with earnings gains in each of the past 10 years, sells for 12 times. We
expect the earnings of these and other companies in the Fund to grow on average
approximately 12% per year over the next five years. These earnings should
provide attractive returns, even without higher multiples. Of course, low
multiples leave the door open for more exciting performance.
Sincerely,
Your Portfolio Management Team
/s/Donald E. Hall /s/William J. Wallace
Donald E. Hall William J. Wallace
Scudder Value Fund:
A Team Approach to Investing
Scudder Value Fund is managed by a team of Scudder investment 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 Scudder's large staff of economists,
research analysts, traders, and other investment specialists who work in
Scudder's offices across the United States and abroad. We believe our team
approach benefits Fund investors by bringing together many disciplines and
leveraging Scudder's extensive resources.
Lead Portfolio Manager Donald E. Hall has had responsibility for Scudder Value
Fund's day-to-day management since its inception in 1992. Don, who joined
Scudder in 1982, has 13 years of experience in the value style of investing.
William J. Wallace, Portfolio Manager, has been a member of Scudder Value
Fund's team since 1992 and has 15 years of investment experience.
8-Scudder Value Fund
<PAGE>
<PAGE>
INVESTMENT PORTFOLIO as of September 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT ($) VALUE ($)
==========================================================================================================
<S> <C> <C>
REPURCHASE AGREEMENTS 8.0%
- ----------------------------------------------------------------------------------------------------------
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 9/30/96
at 5.7%, to be repurchased at $7,155,133 on 10/1/96, collateralized by ----------
a $5,393,000 U.S. Treasury Note, 11.875%, 11/15/03 (Cost $7,154,000) ....... 7,154,000 7,154,000
----------
CONVERTIBLE BONDS 0.2%
- ----------------------------------------------------------------------------------------------------------
MEDIA
CABLE TELEVISION ----------
Rogers Communications Inc., LYON, 5/20/13(Cost $180,958) .................... 435,000 162,581
----------
<CAPTION>
SHARES
==========================================================================================================
<S> <C> <C>
COMMON STOCKS 91.8%
- ----------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY 4.7%
APPAREL & SHOES 0.1%
Payless ShoeSource Inc.* .................................................... 1,344 45,192
----------
DEPARTMENT & CHAIN STORES 1.5%
J.C. Penney Co., Inc. ....................................................... 7,400 400,525
May Department Stores ....................................................... 8,400 408,450
Rite Aid Corp. .............................................................. 15,300 554,625
----------
1,363,600
----------
HOTELS & CASINOS 1.8%
Grand Casinos Inc.* ......................................................... 12,200 179,950
Royal Caribbean Cruises Ltd. ................................................ 36,300 966,488
Shuffle Master, Inc.* ....................................................... 37,800 434,700
----------
1,581,138
----------
RESTAURANTS 0.8%
McDonald's Corp. ............................................................ 16,200 767,475
----------
SPECIALTY RETAIL 0.5%
Toys "R" Us Inc.* ........................................................... 14,700 428,138
----------
CONSUMER STAPLES 9.0%
ALCOHOL & TOBACCO 3.4%
Anheuser-Busch Companies, Inc. .............................................. 41,600 1,565,200
Philip Morris Companies Inc. ................................................ 16,500 1,480,875
----------
3,046,075
----------
FOOD & BEVERAGE 5.6%
ConAgra Inc. ................................................................ 35,400 1,743,450
Dole Food Co. ............................................................... 18,800 789,600
</TABLE>
The accompanying notes are an integral part of the financial statements.
9 - Scudder Value Fund
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE ($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Kroger Co.* ................................................................. 19,500 872,625
Sara Lee Corp. .............................................................. 45,700 1,633,775
----------
5,039,450
----------
HEALTH 4.2%
HEALTH INDUSTRY SERVICES 1.2%
Bergen Brunswig Corp. "A" ................................................... 33,900 1,076,325
----------
MEDICAL SUPPLY & SPECIALTY 2.3%
Bausch & Lomb, Inc. ......................................................... 23,400 859,950
Becton, Dickinson & Co. ..................................................... 26,200 1,159,350
----------
2,019,300
----------
PHARMACEUTICALS 0.7%
Schering-Plough Corp. ....................................................... 4,900 301,350
Watson Pharmaceuticals, Inc.* ............................................... 9,500 356,250
----------
657,600
----------
COMMUNICATIONS 3.2%
TELEPHONE/COMMUNICATIONS
Century Telephone Enterprises ............................................... 44,200 1,519,375
Tele Danmark A/S (ADR) ...................................................... 55,400 1,308,825
----------
2,828,200
----------
FINANCIAL 21.0%
BANKS 9.0%
BankAmerica Corp. ........................................................... 11,400 936,225
Chase Manhattan Corp. (New) ................................................. 5,700 456,713
Citicorp .................................................................... 20,100 1,821,563
First Chicago NBD Corp. ..................................................... 9,200 416,300
J.P. Morgan & Co., Inc. ..................................................... 7,600 675,450
Mellon Bank Corp. ........................................................... 14,100 835,425
National Australia Bank Ltd. (ADR) .......................................... 15,300 808,980
Northern Trust Corp. ........................................................ 7,100 466,825
State Street Boston Corp. ................................................... 27,800 1,595,025
----------
8,012,506
----------
INSURANCE 10.4%
Allstate Corp. (b) .......................................................... 34,200 1,684,350
American States Financial Corp. (b) ......................................... 47,600 1,106,700
EXEL, Ltd. .................................................................. 41,400 1,438,650
MBIA Inc. ................................................................... 24,000 2,058,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load[Tradema
- --------------------------------------------------------------------------------
10 - Scudder Value Fund
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE ($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mid Ocean Limited ........................................................... 9,400 400,675
PartnerRe Holdings Ltd. ..................................................... 18,700 532,950
UNUM Corp. .................................................................. 12,200 782,325
Western National Corp. ...................................................... 67,200 1,251,600
----------
9,255,250
----------
CONSUMER FINANCE 0.4%
Associates First Capital Corp. .............................................. 9,800 401,800
----------
OTHER FINANCIAL COMPANIES 1.2%
Federal National Mortgage Association ....................................... 25,600 892,800
Student Loan Marketing Association .......................................... 3,000 223,875
----------
1,116,675
----------
MEDIA 0.7%
BROADCASTING & ENTERTAINMENT
Univision Communication Inc.* ............................................... 18,100 606,350
----------
SERVICE INDUSTRIES 3.4%
ENVIRONMENTAL SERVICES 2.6%
Destec Energy Inc.* ......................................................... 101,700 1,207,688
Wheelabrator Technologies Inc. .............................................. 69,900 1,065,975
----------
2,273,663
----------
INVESTMENT 0.3%
Donaldson, Lufkin & Jenrette Securities Corp. ............................... 8,300 291,538
----------
MISCELLANEOUS CONSUMER SERVICES 0.2%
H&R Block Inc. .............................................................. 6,700 199,325
----------
PRINTING/PUBLISHING 0.3%
Deluxe Corp. ................................................................ 7,900 298,225
----------
DURABLES 4.3%
AEROSPACE 0.9%
Lockheed Martin Corp. ....................................................... 9,349 842,579
----------
AUTOMOBILES 1.0%
Dana Corp. .................................................................. 15,800 477,950
Genuine Parts Co. ........................................................... 8,600 376,250
----------
854,200
----------
CONSTRUCTION/AGRICULTURAL EQUIPMENT 1.0%
PACCAR, Inc. ................................................................ 16,300 892,425
----------
TELECOMMUNICATIONS EQUIPMENT 1.0%
Nokia AB Oy (ADR) ........................................................... 20,600 911,550
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Value Fund
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE ($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
TIRES 0.4%
Goodyear Tire & Rubber Co. .................................................. 7,700 355,163
----------
MANUFACTURING 12.5%
CHEMICALS 0.7%
Sigma-Aldrich Corp. ......................................................... 11,300 644,100
----------
CONTAINERS & PAPER 1.9%
Boise Cascade Corp. ......................................................... 27,800 945,200
Crown Cork & Seal Co. Inc. .................................................. 17,200 793,350
----------
1,738,550
----------
DIVERSIFIED MANUFACTURING 4.1%
Canadian Pacific Ltd. (Ord.) ................................................ 27,000 626,363
Olin Corp. .................................................................. 10,800 907,200
TRW Inc. .................................................................... 22,700 2,111,100
----------
3,644,663
----------
ELECTRICAL PRODUCTS 1.0%
Philips NV (New York shares) ................................................ 24,900 893,288
----------
INDUSTRIAL SPECIALTY 1.1%
Schindler Holdings AG (PC) .................................................. 1,000 976,251
Schindler Holdings AG Warrants (expire 12/16/96)* ........................... 1,000 239
----------
976,490
----------
MACHINERY/COMPONENTS/CONTROLS 1.4%
Parker-Hannifin Group ....................................................... 20,700 869,400
Timken Co. .................................................................. 10,500 412,125
----------
1,281,525
----------
OFFICE EQUIPMENT/SUPPLIES 1.8%
Xerox Corp. ................................................................. 29,400 1,576,575
----------
SPECIALTY CHEMICALS 0.5%
Betz Laboratories Inc. ...................................................... 7,900 414,750
----------
TECHNOLOGY 7.7%
DIVERSE ELECTRONIC PRODUCTS 0.9%
Applied Materials, Inc.* .................................................... 28,500 787,313
----------
EDP PERIPHERALS 0.1%
Intergraph Corp.* ........................................................... 4,200 46,200
----------
ELECTRONIC DATA PROCESSING 0.3%
Data General Corp.* ......................................................... 22,600 316,400
----------
OFFICE/PLANT AUTOMATION 1.0%
Cabletron Systems Inc.* ..................................................... 13,100 895,713
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder Value Fund
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE ($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
PRECISION INSTRUMENTS 1.2%
Silicon Valley Group Inc.* .................................................. 59,200 1,050,800
----------
SEMICONDUCTORS 4.2%
Atmel Corp.* ................................................................ 30,000 926,250
Intel Corp. ................................................................. 19,200 1,832,400
Tower Semiconductor Ltd.* ................................................... 135,700 983,825
----------
3,742,475
----------
ENERGY 9.7%
ENGINEERING 0.4%
Coastal Corp. ............................................................... 9,800 404,250
----------
OIL & GAS PRODUCTION 1.3%
Imperial Oil Ltd. ........................................................... 26,700 1,134,750
----------
OIL COMPANIES 6.2%
Amoco Corp. (b) ............................................................. 16,400 1,156,200
Mobil Corp. ................................................................. 6,700 775,525
Repsol SA (ADR) ............................................................. 40,300 1,334,938
Total SA (ADR) .............................................................. 40,084 1,568,287
YPF S.A. "D" (ADR) .......................................................... 30,800 704,550
----------
5,539,500
----------
OIL/GAS TRANSMISSION 1.8%
Williams Cos., Inc. ......................................................... 31,300 1,596,300
----------
METALS & MINERALS 2.4%
COAL MINING 2.0%
Zeigler Coal Holding Co. .................................................... 101,600 1,752,600
----------
STEEL & METALS 0.4%
Nucor Corp. ................................................................. 7,000 355,250
----------
CONSTRUCTION 0.3%
FOREST PRODUCTS
Louisiana-Pacific Corp. ..................................................... 11,900 270,725
----------
TRANSPORTATION 4.1%
AIRLINES 1.6%
AMR Corp.(b)* ............................................................... 8,500 676,813
Alaska Air Group Inc.(b)* ................................................... 19,100 408,263
Continental Airlines Inc. "B"* .............................................. 14,400 322,200
----------
1,407,276
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load[Tradema
- --------------------------------------------------------------------------------
13 - Scudder Value Fund
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE ($)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
MARINE TRANSPORTATION 2.2%
Nedlloyd Groep NV (Sponsored ADR) ........................................... 142,200 1,813,050
Teekay Shipping Corp. ....................................................... 5,800 167,475
----------
1,980,525
----------
RAILROADS 0.3%
Canadian National Railway Co. ............................................... 12,800 262,400
----------
UTILITIES 4.6%
ELECTRIC UTILITIES
PowerGen PLC (ADR) .......................................................... 46,400 1,432,600
Public Service Co. of New Mexico ............................................ 25,200 491,400
TNP Enterprises Inc. ........................................................ 9,800 242,550
Tuscon Electric Power Co.* .................................................. 20,040 338,175
Unicom Corp. ................................................................ 64,900 1,630,613
----------
4,135,338
- ----------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $71,914,343) 82,011,498
- ----------------------------------------------------------------------------------------------------------
==========================================================================================================
- ----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0% (Cost $79,249,301) 89,328,079
- ----------------------------------------------------------------------------------------------------------
* Non-income producing security.
(a) The cost for federal income tax purposes was $79,251,664. At September 30, 1996, net unrealized
appreciation for all securities based on tax cost was $10,076,415. This consisted of aggregate gross
unrealized appreciation for all securities in which there was an excess of market value over tax cost
of $11,904,494 and aggregate gross unrealized depreciation for all securities in which there was an
excess of tax cost over market value of $1,828,079.
(b) At September 30, 1996 these securities, in part, have been pledged to cover initial margin
requirements for open futures contracts. At September 30, 1996, open futures contracts purchased long
were as follows (Note A):
<CAPTION>
Aggregate
Futures Expiration Contracts Face Value ($) Market Value ($)
------- ---------- --------- -------------- ----------------
<S> <C> <C> <C> <C>
S&P500 Index Dec. 1996 8 2,780,080 2,765,600
- --------- ---------
Total net unrealized depreciation on open futures contracts purchased long ... (14,480)
=======
Transactions in written call options on securities indices during the year ended September 30, 1996
were as follows:
<CAPTION>
Number of Contracts Premiums Received ($)
---------------------------------------------------
<S> <C> <C>
Outstanding at
September 30, 1995 ..................... 200 91,897
Contracts closed ....................... (200) (91,897)
---------------------------------------------------
Outstanding at
September 30, 1996 ..................... -- --
=== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load[Tradema
- --------------------------------------------------------------------------------
14 - Scudder Value Fund
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
Statement of Assets and Liabilities
as of September 30, 1996
<S> <C> <C>
ASSETS
- -----------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $79,249,301) (Note A) $89,328,079
Cash ........................................................ 378
Dividends and interest receivable ........................... 138,498
Receivable on Fund shares sold .............................. 136,476
Receivable on foreign taxes recoverable ..................... 28,484
Deferred organization expense (Note A) ...................... 15,897
-----------
Total assets ................................................ 89,647,812
LIABILITIES
- -----------------------------------------------------------------------------------------------------------------
Payable for investments purchased ........................... $ 655,383
Payable for Fund shares redeemed ............................ 12,021
Accrued management fee (Note C) ............................. 46,261
Other accrued expenses (Note C) ............................. 45,375
Daily variation margin on futures contracts (Note A) ........ 14,480
-----------
Total liabilities ........................................... 773,520
----------------------------------------------------------------------------------
NET ASSETS, AT MARKET VALUE ................................. $88,874,292
----------------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ......................... $ 960,593
Unrealized appreciation (depreciation) on:
Investments .............................................. 10,078,778
Futures .................................................. (14,480)
Foreign currency related transactions .................... 44
Accumulated net realized gain ............................... 7,225,434
Shares of beneficial interest ............................... 50,717
Additional paid-in capital .................................. 70,573,206
----------------------------------------------------------------------------------
NET ASSETS, AT MARKET VALUE ................................. $88,874,292
----------------------------------------------------------------------------------
NET ASSET VALUE
- -----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, offering and redemption price per share
($88,874,292 / 5,071,691 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares -----------
authorized) ................................................. $ 17.52
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load[Tradema
- --------------------------------------------------------------------------------
15 - Scudder Value Fund
<PAGE>
<TABLE>
Statement of Operations
year ended September 30, 1996
<S> <C> <C>
INVESTMENT INCOME
- ---------------------------------------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $59,213) ........... $ 1,784,646
Interest ....................................................... 259,946
-----------
2,044,592
Expenses:
Management fee (Note C) ........................................ $ 552,773
Services to shareholders (Note C) .............................. 236,920
Custodian and accounting fees (Note C) ......................... 55,624
Trustees' fees and expenses (Note C) ........................... 52,626
Reports to shareholders ........................................ 48,742
Auditing ....................................................... 35,796
Registration ................................................... 14,713
Legal .......................................................... 12,568
Amortization of organization expenses (Note A) ................. 8,956
Other .......................................................... 12,619
-----------
Total expenses before reductions ............................... 1,031,337
Expense reductions (Note C) .................................... (43,951)
-----------
Expenses, net .................................................. 987,386
-------------------------------------------------------------------------------
NET INVESTMENT INCOME .......................................... 1,057,206
-------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
- ---------------------------------------------------------------------------------------------------------------
Net realized gain from:
Investments .................................................... 8,543,037
Options ........................................................ 80,047
Futures ........................................................ 45,160
Foreign currency related transactions .......................... 2,041
-----------
8,670,285
Net unrealized appreciation (depreciation) during the period on:
Investments .................................................... 2,404,227
Options ........................................................ (16,897)
Futures ........................................................ (14,480)
Foreign currency related transactions .......................... 44
-----------
2,372,894
-----------
Net gain on investment transactions ............................ 11,043,179
-------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........... $12,100,385
-------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load[Tradema
- --------------------------------------------------------------------------------
16 - Scudder Value Fund
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
Years Ended September 30,
1996 1995
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Operations:
Net investment income .................................................. $ 1,057,206 $ 791,269
Net realized gain from investment transactions ......................... 8,670,285 2,767,597
Net unrealized appreciation on investment transactions during the
period............................................................... 2,372,894 7,364,295
------------ ------------
Net increase in net assets resulting from operations ................... 12,100,385 10,923,161
Distributions to shareholders from:
Net investment income .................................................. (175,992) (309,372)
------------ ------------
Net realized gains from investment transactions ........................ (4,025,296) (336,274)
------------ ------------
Fund share transactions:
Proceeds from shares sold .............................................. 34,987,688 48,559,462
Net asset value of shares issued to shareholders in reinvestment of
distributions ....................................................... 4,132,230 599,884
Cost of shares redeemed ................................................ (26,219,135) (26,461,130)
------------ ------------
Net increase in net assets from Fund share transactions ................ 12,900,783 22,698,216
------------ ------------
INCREASE IN NET ASSETS ................................................. 20,799,880 32,975,731
Net assets at beginning of period ...................................... 68,074,412 35,098,681
NET ASSETS AT END OF PERIOD (including undistributed net investment ------------ ------------
income of $960,593 and $102,110, respectively) ....................... $ 88,874,292 $ 68,074,412
------------ ------------
OTHER INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period .............................. 4,288,446 2,683,720
------------ ------------
Shares sold ............................................................ 2,121,557 3,327,977
Shares issued to shareholders in reinvestment of distributions ......... 263,367 47,124
Shares redeemed ........................................................ (1,601,679) (1,770,375)
------------ ------------
Net increase in Fund shares ............................................ 783,245 1,604,726
------------ ------------
Shares outstanding at end of period .................................... 5,071,691 4,288,446
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
- --------------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load[Tradema
- --------------------------------------------------------------------------------
17 - Scudder Value Fund
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<CAPTION>
FOR THE PERIOD
DECEMBER 31,
1992
(COMMENCEMENT
YEARS ENDED SEPTEMBER 30, OF OPERATIONS) TO
SEPTEMBER 30,
1996 1995 1994 1993
===============================================================================================================================
<S> <C> <C> <C> <C>
-------------------------------------------------------------
Net asset value, beginning of period ............................. $15.87 $13.08 $13.38 $12.00
-------------------------------------------------------------
Income from investment operations:
Net investment income ............................................ .21 .18 .13 .10
Net realized and unrealized gain on investments .................. 2.40 2.86 .11 1.28
-------------------------------------------------------------
Total from investment operations ................................. 2.61 3.04 .24 1.38
-------------------------------------------------------------
Less distributions from:
Net investment income ............................................ (.04) (.12) (.11) --
Net realized gains on investment transactions .................... (.92) (.13) (.43) --
-------------------------------------------------------------
Total distributions .............................................. (.96) (.25) (.54) --
-------------------------------------------------------------
-------------------------------------------------------------
Net asset value, end of period ................................... $17.52 $15.87 $13.08 $13.38
-------------------------------------------------------------
===============================================================================================================================
TOTAL RETURN (%) (b) ............................................. 17.18 23.62 1.88 11.50**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) ........................... 89 68 35 29
Ratio of operating expenses, net to average daily net
assets (%) ..................................................... 1.25 1.25 1.25 1.25*
Ratio of operating expenses before expense reductions,
to average daily net assets (%) ................................ 1.31 1.44 1.61 2.16*
Ratio of net investment income to average daily net
assets (%) ..................................................... 1.34 1.57 1.16 1.56*
Portfolio turnover rate (%) ...................................... 90.8 98.2 74.6 60.8*
Average commission rate paid (a) ................................. $.0577 $ -- $ -- $ --
(a) Average commission rate paid per share of common and preferred stocks is calculated for fiscal years beginning on or
after September 1, 1995.
(b) Total return is higher due to maintenance of the Fund's expenses.
* Annualized
** Not annualized
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 - Scudder Value Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
A. Significant Accounting Policies
Scudder Value Fund (the "Fund") is a diversified series of Scudder Equity Trust
(the "Trust"). The Trust is organized as a Massachusetts business trust and is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
SECURITY VALUATION. Portfolio securities which are traded on U.S. or foreign
stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the National Association of
Securities Dealers Automatic Quotation ("NASDAQ") System, 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 high or "inside" bid quotation.
Securities which are not quoted on the NASDAQ System but are traded in another
over-the-counter market are valued at the most recent sale price on such market.
If no sale occurred, the security is then valued at the calculated mean between
the most recent bid and asked quotations. If there are no such bid and asked
quotations, the most recent bid quotation shall be used.
Portfolio debt securities with remaining maturities greater than sixty days are
valued by pricing agents approved by the officers of the Fund, which quotations
reflect broker/dealer-supplied valuations and electronic data processing
techniques. If the pricing agents are unable to provide such quotations, the
most recent bid quotation supplied by a bona fide market maker shall be used.
Short-term investments having a maturity of sixty days or less are valued at
amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Trustees.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and 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 Fund does 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.
19 - Scudder Value Fund
<PAGE>
OPTIONS. An option contract is a contract in which the writer of the option
grants the buyer of the option the right to purchase from (call option), or sell
to (put option), the writer a designated instrument at a specified price within
a specified period of time. Certain options, including options on indices, will
require cash settlement by the Fund if the option is exercised.
If the Fund writes an option and the option expires unexercised, the Fund will
realize income, in the form of a capital gain, to the extent of the amount
received for the option (the "premium"). If the Fund elects to close out the
option it would recognize a gain or loss based on the difference between the
cost of closing the option and the initial premium received. If the Fund
purchased an option and allows the option to expire it would realize a loss to
the extent of the premium paid. If the Fund elects to close out the option it
would recognize a gain or loss equal to the difference between the cost of
acquiring the option and the amount realized upon the sale of the option.
The gain or loss recognized by the Fund upon the exercise of a written call or
purchased put option is adjusted for the amount of option premium. If a written
put or purchased call option is exercised the Fund's cost basis of the acquired
security or currency would be the exercise price adjusted for the amount of the
option premium.
The liability representing the Fund's obligation under an exchange traded
written option or investment in a purchased option is valued at the last sale
price or, in the absence of a sale, the mean between the closing bid and asked
price or at the most recent asked price (bid for purchased options) if no bid
and asked price are available. Over-the-counter written or purchased options are
valued using dealer supplied quotations.
When the Fund writes a covered call option, the Fund foregoes, in exchange for
the premium, the opportunity to profit during the option period from an increase
in the market value of the underlying security or currency above the exercise
price. When the Fund writes a put option it accepts the risk of a decline in the
market value of the underlying security or currency below the exercise price.
Over-the-counter options have the risk of the potential inability of
counterparties to meet the terms of their contracts. The Fund's maximum exposure
to purchased options is limited to the premium initially paid. In addition,
certain risks may arise upon entering into option contracts including the risk
that an illiquid secondary market will limit the Fund's ability to close out an
option contract prior to the expiration date and, that a change in the value of
the option contract may not correlate exactly with changes in the value of the
securities or currencies hedged.
FUTURES CONTRACTS. A futures contract is an agreement between a buyer or seller
and an established futures exchange or its clearinghouse in which the buyer or
seller agrees to take or make a delivery of a specific amount of an item at a
specified price on a specific date (settlement date). During the period, the
Fund purchased securities index futures as a temporary substitute for purchasing
selected investments.
Upon entering into a futures contract, the Fund is required to deposit with a
financial intermediary an amount ("initial margin") equal to a certain
percentage of the face value indicated in the futures contract. Subsequent
payments ("variation margin") are made or received by the Fund each day,
dependent on the daily fluctuations in the value of the underlying security, and
are recorded for financial reporting purposes as unrealized gains or losses by
the Fund. When entering into a closing transaction, the Fund will realize a gain
or loss equal to the difference between the value of the futures contract to
sell and the futures contract to buy. Futures contracts are valued at the most
recent settlement price.
Certain risks may arise upon entering into futures contracts including the risk
that an illiquid secondary market will limit the Fund's ability to close out a
futures contract prior to the settlement date and that a change in the value of
a futures contract may not correlate exactly with changes in the value of the
securities or currencies hedged. When utilizing futures contracts to
20 - Scudder Value Fund
<PAGE>
hedge, the Fund gives up the opportunity to profit from favorable price
movements in the hedged positions during the term of the contract.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement and the underlying collateral, is equal to at least 100.5% of the
resale price.
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment companies
and to distribute all of its taxable income to its shareholders. Accordingly,
the Fund paid no federal income taxes and no federal income tax provision was
required.
DISTRIBUTION OF INCOME AND GAINS. Distributions of net investment income are
made annually. During any particular year net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders annually. An additional distribution may be made to the extent
necessary to avoid the payment of a four percent federal excise tax.
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. The differences
primarily relate to deferral of certain losses for tax purposes. As a result,
net investment income (loss) and net realized gain (loss) on investment
transactions for a reporting period may differ significantly from distributions
during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
The Fund uses 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 the Fund in connection with its
organization and initial registration of shares 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 an accrual basis. Original
issue discounts are accreted for both tax and financial reporting purposes.
B. Purchases and Sales of Securities
During the year ended ended September 30, 1996, purchases and sales of
investment securities (excluding short-term investments) aggregated $72,967,211
and $67,927,672, respectively.
The aggregate face value of futures contracts opened and closed during the year
ended September 30, 1996 was $8,822,970 and $6,042,890, respectively.
- --------------------------------------------------------------------------------
Pure No-Load[Trademark] Funds Pure No-Load[Trademark] Funds Pure No-Load[Tradema
- --------------------------------------------------------------------------------
21 - Scudder Value Fund
<PAGE>
C. Related Parties
Under the Fund's Investment Management Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Fund pays the Adviser a fee equal to
an annual rate of 0.70% of the Fund's average daily net assets, computed and
accrued daily and payable monthly. As manager of the assets of the Fund, the
Adviser directs the investments of the Fund in accordance with its investment
objectives, policies, and restrictions. The Adviser determines the securities,
instruments, and other contracts relating to investments to be purchased, sold
or entered into by the Fund. In addition to portfolio management services, the
Adviser provides certain administrative services in accordance with the
Agreement. The Agreement provides that if the Fund's expenses, exclusive of
taxes, interest, and extraordinary expenses, exceed specified limits, such
excess, up to the amount of the management fee, will be paid by the Adviser. In
addition, the Adviser has agreed not to impose all or a portion of its
management fee until July 31, 1997 in order to maintain the annualized expenses
of the Fund at not more than 1.25% of average daily net assets. For the year
ended September 30, 1996, the Adviser did not impose a portion of its management
fee amounting to $43,951 and the amount imposed amounted to $508,822, of which
$46,261 is unpaid at September 30, 1996.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
year ended September 30, 1996, the amount charged to the Fund by SSC aggregated
$174,570, of which $15,126 is unpaid at September 30, 1996.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the year ended September 30,
1996, the amount charged to the Fund by STC aggregated $18,319, of which $1,640
is unpaid at September 30, 1996.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the year ended
September 30, 1996, the amount charged to the Fund by SFAC aggregated $38,190,
of which $3,644 is unpaid at September 30, 1996.
The Fund pays each of its Trustees not affiliated with the Adviser $4,000
annually, plus specified amounts for attended board and committee meetings. For
the year ended September 30, 1996, Trustees' fees and expenses aggregated
$52,626.
22 - Scudder Value Fund
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Scudder Equity Trust and the Shareholders of Scudder Value
Fund:
We have audited the accompanying statement of assets and liabilities of Scudder
Value Fund, including the investment portfolio, as of September 30, 1996, and
the related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the three years in the period then ended
and for the period December 31, 1992 (commencement of operations) to September
30, 1993. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1996 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder Value Fund as of September 30, 1996, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the three years
in the period then ended and for the period December 31, 1992 (commencement of
operations) to September 30, 1993, in conformity with generally accepted
accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
November 6, 1996
23 - Scudder Value Fund
<PAGE>
TAX INFORMATION
The Fund paid distributions of $.205 per share from net long-term capital gains
during the year ended September 30, 1996.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$5,580,101 as a long-term capital gain dividend for the year ended September 30,
1996.
Pursuant to section 854 of the Internal Revenue Code, the Fund designates
$1,288,664 as dividends eligible for the dividends received deduction for
corporations for the year ended September 30, 1996.
24 - Scudder Value Fund
<PAGE>
Officers and Trustees
Daniel Pierce*
President and Trustee
Paul Bancroft III
Trustee; Venture Capitalist and Consultant
Sheryle J. Bolton
Trustee
Thomas J. Devine
Trustee; Consultant
Keith R. Fox
Trustee
Dudley H. Ladd*
Trustee
David S. Lee*
Vice President and Trustee
Dr. Wilson Nolen
Trustee; Consultant
Juris Padegs*
Vice President and Trustee
Dr. Gordon Shillinglaw
Trustee; Professor Emeritus of Accounting, Columbia University Graduate School
of Business
Robert G. Stone, Jr.
Honorary Trustee; Chairman of the Board and Director, Kirby Corporation
Robert W. Lear
Honorary Trustee; Executive-in-Residence, Visiting Professor, Columbia
University Graduate School of Business
Donald E. Hall*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Kathleen T. Millard*
Vice President
Thomas F. McDonough*
Vice President, Secretary and Assistant Treasurer
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Kathryn L. Quirk*
Vice President and Assistant Secretary
Coleen Downs Dinneen*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
25-Scudder Value Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds
- --------------------------------------------------------------------------------
Money Market
Scudder Cash Investment Trust
Scudder U.S. Treasury Money Fund
Tax Free Money Market+
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax Free+
Scudder California Tax Free Fund*
Scudder High Yield Tax Free Fund
Scudder Limited Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder Massachusetts Limited Term
Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder Medium Term Tax Free Fund
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
Growth and Income
Scudder Balanced Fund
Scudder Growth and Income Fund
Income
Scudder Emerging Markets Income Fund
Scudder Global Bond Fund
Scudder GNMA Fund
Scudder High Yield Bond Fund
Scudder Income Fund
Scudder International Bond Fund
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Growth
Scudder Capital Growth Fund
Scudder Classic Growth Fund
Scudder Development Fund
Scudder Emerging Markets Growth Fund
Scudder Global Discovery Fund
Scudder Global Fund
Scudder Gold Fund
Scudder Greater Europe Growth Fund
Scudder International Fund
Scudder Latin America Fund
Scudder Micro Cap Fund
Scudder Pacific Opportunities Fund
Scudder Quality Growth Fund
Scudder Small Company Value Fund
Scudder 21st Century Growth Fund
Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
- --------------------------------------------------------------------------------
IRAs
Keogh Plans
Scudder Horizon Plan*+++ (a variable annuity)
401(k) Plans
403(b) Plans
SEP-IRAs
Profit Sharing and Money Purchase
Pension Plans
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.
Institutional Cash Management
- --------------------------------------------------------------------------------
Scudder Institutional Fund, Inc.
Scudder Fund, Inc.
Scudder Treasurers Trust(TM)++
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. +A portion of the income from the tax-free funds may
be subject to federal, state, and local taxes. *Not available in all states.
+++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, Stevens & Clark, Inc., are
traded on various stock exchanges. ++For information on Scudder Treasurers
Trust,(TM) an institutional cash management service that utilizes certain
portfolios of Scudder Fund, Inc. ($100,000 minimum), call 1-800-541-7703.
26-Scudder Value Fund
<PAGE>
Account Service and Information
- --------------------------------------------------------------------------------
For existing account service and transactions
Scudder Investor Relations
1-800-225-5163
For personalized information about your Scudder accounts;
exchanges and redemptions; or information on any Scudder fund
Scudder Automated Information Line (SAIL)
1-800-343-2890
Investment Information
- --------------------------------------------------------------------------------
To receive information about the Scudder funds, for additional
applications and prospectuses, or for investment questions
Scudder Investor Relations
1-800-225-2470
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services
1-800-323-6105
Please address all correspondence to
- --------------------------------------------------------------------------------
The Scudder Funds
P.O. Box 2291
Boston, Massachusetts
02107-2291
Visit the Scudder World Wide Web Site at:
- --------------------------------------------------------------------------------
http://funds.scudder.com
Or Stop by a Scudder Funds Center
- --------------------------------------------------------------------------------
Many shareholders enjoy the personal, one-on-one service of the
Scudder Funds Centers. Check for a Funds Center near you--they
can be found in the following cities:
Boca Raton New York
Boston Portland, OR
Chicago San Diego
Cincinnati San Francisco
Los Angeles Scottsdale
For information on Scudder Treasurers Trust(TM), an
institutional cash management service for corporations,
non-profit organizations and trusts which utilizes certain
portfolios of Scudder Fund, Inc.* ($100,000 minimum), call:
1-800-541-7703.
For information on Scudder Institutional Funds*, funds designed
to meet the broad investment management and service needs of
banks and other institutions, call:
1-800-854-8525.
Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a prospectus
with more complete information, including management fees and expenses. Please
read it carefully before you invest or send money.
27-Scudder Value Fund
<PAGE>
Celebrating Over 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven Clark,
Scudder, Stevens & Clark was the first independent investment counsel firm in
the United States. Since its birth, Scudder's pioneering spirit and commitment
to professional long-term investment management have helped shape the investment
industry. In 1928, we introduced the nation's first no-load mutual fund. Today
we offer over 40 pure no load(TM) funds, including the first international
mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication to
research and fundamental investment disciplines have helped us become one of the
largest and most respected investment managers in the world. Though times have
changed since our beginnings, we remain committed to our long-standing
principles: managing money with integrity and distinction; keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
