Scudder
Large Company
Value Fund
Annual Report
September 30, 1998
Pure No-Load(TM) Funds
A fund which seeks to maximize long-term capital appreciation through a
value-driven investment program.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
SCUDDER (logo)
<PAGE>
Scudder Large Company Value Fund
- --------------------------------------------------------------------------------
Date of Inception: 4/5/67 Total Net Assets as of Ticker Symbol: SCDUX
9/30/98: $2.0 billion
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o For the trailing twelve-month period ended September 30, 1998, Scudder Large
Company Value Fund returned -4.54% in an environment that was particularly
challenging for value-oriented investing.
o Value stocks underperformed growth stocks as the crises in the emerging
markets deepened over the period and investors fled to the relative safety of
Treasury securities and stocks of large, familiar growth companies.
o With valuations near historical lows at the end of the period, value stocks
appeared increasingly attractive.
Table of Contents
3 Letter from the Fund's President 19 Financial Highlights
4 Performance Update 20 Notes to Financial Statements
5 Portfolio Summary 23 Report of Independent Accountants
6 Portfolio Management Discussion 24 Tax Information
10 Glossary of Investment Terms 24 Officers and Trustees
11 Investment Portfolio 25 Investment Products and Services
16 Financial Statements 26 Scudder Solutions
2 - Scudder Large Company Value Fund
<PAGE>
Dear Shareholders,
Over the 12-month period, the economic crises in the emerging markets
spread across the globe, causing investors to seek cover in perceived safe
havens such as U.S. Treasury bonds and stocks of large, familiar growth
companies. In the process, large-cap value stocks underperformed, as individual
stock selection based on fundamentals was set aside. In a broad-based market
downdraft such as this, even shares of companies with attractive fundamentals
can get hit hard.
As difficult as these sell-offs are to deal with, they can provide
extraordinary opportunities for those willing to endure short-term volatility.
Over the long-term, we believe that stocks with attractive fundamentals will
ultimately be recognized and rewarded in the marketplace. In this challenging
climate, we believe that investors should remain focused on their long-term
investment goals.
For this report, we asked fund managers Kathleen Millard and Lois Roman to
discuss the market environment and the Fund's performance for the 12-month
period. By sticking with their disciplined approach to selecting attractively
valued large-cap stocks, the Fund has produced impressive performance relative
to its peers over the last three years. Their discussion begins on page 6.
For those of you who are interested in new Scudder funds, we recently
introduced two international funds: Scudder International Growth Fund--which
seeks to invest in high growth opportunities in both developed and developing
markets, and Scudder International Value Fund--which seeks to invest in
undervalued foreign securities. For further information on these new funds,
please call Scudder Investor Information at 1-800-225-2470.
Thank you for your investment in Scudder Large Company Value Fund. If you
have any questions about your Fund, please call Scudder Investor Information at
the number above, or visit our Internet Web site at www.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Large Company Value Fund
3 - Scudder Large Company Value Fund
<PAGE>
PERFORMANCE UPDATE as of September 30, 1998
- ----------------------------------------------------------------
Fund Index Comparisons
- ----------------------------------------------------------------
Total Return
--------------
Period Growth
Ended of Average
9/30/98 $10,000 Cumulative Annual
- --------------------------------------------
Scudder Large Company Value Fund
- ---------------------------------------------
1 Year $ 9,546 -4.54% -4.54%
5 year $ 18,399 83.99% 12.97%
10 Year $ 37,762 277.62% 14.21%
- ---------------------------------------------
Russell 1000 Value Index
- ---------------------------------------------
1 Year $ 10,361 3.61% 3.61%
5 Year $ 22,051 120.51% 17.12%
10 Year $ 43,584 335.84% 15.85%
- ---------------------------------------------
S&P 500 Index
- ---------------------------------------------
1 Year $ 10,904 9.04% 9.04%
5 Year $ 24,792 147.92% 19.90%
10 Year $ 49,258 392.58% 17.28%
- ---------------------------------------------
- -----------------------------------------------------------------
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 LARGE COMPANY VALUE FUND
Year Amount
- ----------------------
88 $10,000
89 $14,404
90 $10,392
91 $15,084
92 $15,930
93 $20,524
94 $19,555
95 $23,849
96 $27,652
97 $39,557
98 $37,762
S&P 500 INDEX
Year Amount
- ----------------------
88 $10,000
89 $13,297
90 $12,070
91 $18,530
92 $17,583
93 $19,869
94 $20,601
95 $26,728
96 $32,160
97 $45,173
98 $49,258
RUSSELL 1000 VALUE INDEX
Year Amount
- ----------------------
88 $10,000
89 $12,842
90 $10,881
91 $14,027
92 $15,767
93 $19,765
94 $19,628
95 $25,061
96 $29,558
97 $42,064
98 $43,584
Yearly periods ended September 30
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. The Russell 1000 Value Index consists of securities with less than
average growth orientation.
With this report, the Fund has adopted the Russell 1000 Value Index for its
primary securities market index over the S&P Index, as the Russell 1000 Value
Index better represents the securities and markets in which the Fund typically
invests.
- -----------------------------------------------------------------
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>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
------------------------------------------------------------------------------------------------
NET ASSET VALUE... $ 22.30 $ 14.77 $ 19.30 $ 19.12 $ 23.06 $ 19.54 $ 22.92 $ 22.64 $ 28.98 $ 25.65
INCOME DIVIDENDS.. $ .07 $ .16 $ .37 $ .22 $ .10 $ -- $ -- $ .08 $ .16 $ .24
CAPITAL GAINS
DISTRIBUTIONS... $ .55 $ 1.45 $ 1.35 $ .98 $ 1.25 $ 2.62 $ .73 $ 3.50 $ 2.48 $ 1.86
FUND TOTAL
RETURN (%)...... 44.05 -28.20 45.85 5.61 28.83 -4.72 21.96 15.94 43.06 -4.54
INDEX TOTAL
RETURN (%)...... 28.42 -15.27 28.91 12.40 25.36 -.69 27.68 17.94 42.31 3.61
</TABLE>
On February 1, 1997, the Fund adopted its current name. Prior to that date,
the Fund was known as the Scudder Capital Growth Fund. 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.
4 - Scudder Large Company Value Fund
<PAGE>
Portfolio Summary as of September 30, 1998
Diversification
- ----------------------------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Equity 97%
Cash Equivalents 3%
----------------------------------------
100%
----------------------------------------
Management pursues a fully-invested approach to investing in attractively
valued large-cap value stocks.
Sectors
(Excludes 3% Cash Equivalents)
- ----------------------------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Financial 24%
Energy 14%
Consumer Staples 10%
Technology 10%
Communications 8%
Utilities 7%
Manufacturing 7%
Health 5%
Durables 4%
Other 11%
----------------------------------------
100%
----------------------------------------
The Fund's bottom-up, individual stock selection approach is the primary
driver of its sector weights.
Ten Largest Equity Holdings
(26% of Portfolio)
- ----------------------------------------
1. International Business Machines
Corp.
Principal manufacturer and
servicer of business and
computing machines
2. Bell Atlantic Corp.
Telecommunication services
3. Exxon Corp.
Integrated oil company
4. AT&T Corp. Telecommunication services
5. Chase Manhattan Corp.
Commercial banking
6. Dow Chemical Co.
Chemical producer
7. BellSouth Corp.
Telephone operating company serving south central U.S.
8. Duke Energy Corp.
Electric utility
9. BankAmerica Corp.
Commercial banking
10. Allstate Corp.
Life insurance
Remaining true to its value orientation, the portfolio's price/earnings
multiple was significantly lower than that of the S&P 500.
For more complete details about the Fund's investment portfolio, see page 11. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
5 - Scudder Large Company Value Fund
<PAGE>
Portfolio Management Discussion
We asked Kathleen T. Millard and Lois Friedman Roman, portfolio managers of
Scudder Large Company Value Fund, to discuss the market environment and their
current investment strategy for the Fund.
Q: How did the Fund perform for the 12-month period ended September 30, 1998?
A: Despite an above average three-year track record using value disciplines, the
Fund underperformed, declining 4.54% for the 12-month period. The primary reason
for the relative underperformance is the wide margin of outperformance of richly
valued mega-capitalization growth stocks over almost all other types of stocks
during the period. The outperformance of "growth" over "value" stocks was
evident in the 11.11% return of the unmanaged Russell 1000 Growth Index versus
the 3.61% return of the Russell 1000 Value Index. During this period, stocks
with the highest P/Es outperformed those with the lowest P/Es.*
Q: Given the Fund's value focus, what do you think about overall stock
valuations today?
A: The recent price declines have dramatically improved the attractiveness of
many companies in our investment universe, returning them to valuations not seen
since the recessionary period of 1990-91. Values are especially compelling when
one looks beyond the big growth stocks that have dominated the popular averages.
The portfolio reflects the current attractive valuation environment, with an
overall P/E 20% lower than the S&P 500 based on 1999 estimated earnings.
Q: Individual company fundamentals are an important driver of your stock
selection approach. What variables do you focus on?
A: Our analysts determine the financial statement developments and the
management strategies that influence changes in normalized earnings for a
company. (Normalized earnings are the smoothed out level of earnings over an
economic cycle, which removes the peaks and troughs for cyclical companies whose
businesses rise and fall with the economy.) A successful value stock investment
typically requires normalized earnings above current company earnings, which
could be driven by sales or operating margin changes, or magnified by
adjustments in the balance sheet.
Q: Cyclical stocks, which are sensitive to changes in economic growth, took a
beating toward the end of the period. At what point are these stocks attractive?
A: Although finding the exact trough point for cyclicals is difficult, this
group of stocks is one of the most interesting long-term opportunities today.
During the period, we began to increase our exposure to cyclicals. We added
Raytheon, the defense contractor, which declined because of fears that the
company's engineering and construction business, which has exposure to Asia,
would continue to slump. The stock price reached a low 12x earnings based on a
1999 estimate of $3.50 per share. The company also produces significant free
cash flow. Another example is Motorola, the telecommunications and semiconductor
company. The semiconductor business is depressed globally, but, we believe, is
likely to revive in the coming years, and the stock was very undervalued,
selling near an all-time low price-to-sales ratio at the end of the period. We
- ----------
* With this report, the Fund has adopted the Russell 1000 Value Index for its
primary securities market index over the S&P 500 Index, as the Russell 1000
Value Index better represents the securities and markets in which the Fund
typically invests.
6 - Scudder Large Company Value Fund
<PAGE>
also added railroad company Union Pacific. The stock fell to very attractive
valuation levels due to the company's logistical problems, which are now
improving, and the earnings power of this company is likely to improve
dramatically over the coming years.
Q: With market volatility on the rise, and the markets declining, how did you
manage risk?
A: It was a challenging period to manage systematic (market) risk. Volatility
soared during the period and correlations among stocks rose because of the
broad-based macroeconomic shock of the crises in the emerging markets. The
declines touched every sector, limiting the value of traditional portfolio
diversification efforts. Money center bank stocks were especially volatile as
they were among the best performing stocks in the first half of 1998, only to
plunge in August. Since the end of the fiscal period on September 30, many
financials have rebounded dramatically. On a longer term basis, the downside
volatility of this Fund has been much lower than the overall market and its peer
funds.
THE PRINTED DOCUMENT CONTAINS A FLOW DIAGRAM HERE:
TITLE:
Portfolio Management Process
FLOW DIAGRAM
Universe: Russell 1000 Index
(arrows point to both quadrants)
<TABLE>
<CAPTION>
Valuation Disciplines Fundamental Research
<S> <C>
Buy: Deciles 1-4 Buy: Internal analyst expects the stock to
Neutral: Deciles 5-8 outperform
Sell: Deciles 9-10 Sell: Internal analyst expects the stock to
underperform
</TABLE>
(arrows point from both quadrants to following subheads)
Portfolio Risk Decisions
Portfolio of 60-90 stocks
DIAGRAM CAPTION
The process begins by screening the Russell 1000 Index for companies with
attractive valuations that meet our investment criteria. The universe is divided
into ten groups (deciles) ranked from most attractive (1-4) to least (9-10).
From a fundamental research standpoint, we also review the ratings of our
internal research analysts. Then we review the risk profile of the portfolio and
the potential effect of additions or deletions. The final result is a portfolio
of 60-90 stocks with what we view as attractive valuation characteristics.
7 - Scudder Large Company Value Fund
<PAGE>
Q: Do you have an example of how your stock selection criteria work?
A: IBM is a good example of our long-term portfolio management disciplines. We
bought the stock in mid-1995 at $44 a share when our quantitative valuation
model identified it as attractive. The normalized earnings per share at the time
was about $3.00 and our fundamental research analyst rated the stock a "buy" as
a restructuring story. Since then, the normalized earnings have risen to about
$5.50 per share, driven by improving revenue growth from the services business
and by share repurchases. The stock has outperformed during this holding period
as the market accorded the rising earnings a higher P/E multiple. Today the
stock is fairly valued based on our quantitative model (in our "hold" zone), and
our analysts have a neutral opinion. The risk profile of IBM has also changed
dynamically, as the company has been transformed from a turnaround to a growth
story.
Q: How about on the sell side?
A: Costco is an example of how our disciplines also led us to sell a stock. We
initially purchased Costco, a discount warehouse retailer, in 1996 at $23 per
share. The stock was in the "buy" zone of our valuation model. Additionally, the
earnings forecast for 1996 was $1.20 per share while normalized earnings were
$1.75. Our analysts also rated Costco a "buy." The company was finally beginning
to integrate the merger with Price Club, revenues were expected to rise with
store expansions, and hence, margins were also poised to improve. During our
holding period, same store sales for the company accelerated as the management
successfully introduced additional merchandise through the stores. Finally, a
8 - Scudder Large Company Value Fund
<PAGE>
membership fee increase was initiated in 1998, further enhancing earnings.
During 1998, we began to believe that the strong performance of the company was
becoming fully reflected in the share price, which reached a high of $65, or a
P/E ratio of nearly 33. The stock was approaching our model's "sell" zone, and
the current level of earnings is well above the company's normalized rate of
profits. Our fundamental research also suggested that the pace of growth might
begin to slow. Finally, the risk profile of the stock had increased
significantly, given the premium valuation. By the end of the period we had
completely exited our position in Costco, which was a strong contributor to Fund
performance during the two-year holding period.
Q: With valuations lower, has your outlook for value investing improved versus a
year ago?
A: We believe value stocks are a compelling opportunity. First, valuations are
very attractive in many segments of the market that have fallen in price during
the 12-month period. Second, the difficult economic environment, which has a
pervasive influence on corporate profits for the companies in which we invest,
is now well known, and has been priced into most stocks, even touching the large
consumer growth stocks previously believed to be immune to profit concerns.
Stock prices are forward-looking; just as they began falling over a year ago,
they may reflect anticipated improvements in global conditions before concrete
evidence is at hand.
Finally, we believe the bond market backdrop is also supportive of investing in
lower P/E, value-oriented stocks. With long-term dollar-denominated Treasuries
perceived as one of the few safe havens amidst the global turmoil during the
period, we believe the bulk of the bond market rally is now behind us. Long bond
yields are near historically low levels, returning real (after inflation)
interest rates to more normal levels. We also think the recent extremely high
valuations of growth stocks are unlikely to rise further, and the market's
overall P/E may have peaked for this market cycle. These factors suggest the
possibility of renewed investor interest in value stocks.
Scudder Large Company
Value Fund:
A Team Approach to Investing
Scudder Large Company Value 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 Kathleen T. Millard assumed responsibility for the
Fund's day-to-day management in 1995. Ms. Millard, who joined Scudder in 1991,
has been involved in the investment industry since 1983 and has worked as a
portfolio manager since 1986. Lois Friedman Roman, Portfolio Manager, joined
the Fund in 1995 and Scudder in 1994 and has ten years of experience as an
equity analyst.
9 - Scudder Large Company Value Fund
<PAGE>
Glossary of Investment Terms
FUNDAMENTAL RESEARCH Analysis of companies based on the projected
impact of management, products, sales, and earnings
on balance sheets and income statements. Distinct
from technical analysis, which evaluates the
attractiveness of a stock based on historical price
and trading volume movements, rather than the
financial results of the underlying company.
GROWTH STOCK Stock of a company that has displayed above average
earnings growth and is expected to continue to
increase profits rapidly going forward. Stocks of
such companies usually trade at a higher price
relative to earnings and exhibit greater price
volatility.
LIQUIDITY A characteristic of an investment or an asset
referring to the ease of convertibility into cash
within a reasonably short period of time.
MARKET CAPITALIZATION The value of a company's outstanding shares of
common stock, determined by multiplying the
number of shares outstanding by the share price
(Shares x Price = Market Capitalization). The
universe of publicly traded companies is frequently
divided into large-, mid-, and small-capitalizations.
OVER/UNDER WEIGHTING Refers to the allocation of assets -- usually by
sector, industry, or country -- within a
portfolio relative to a benchmark index (i.e. the
Russell 1000 Value Index), or an investment universe.
PRICE/EARNINGS RATIO A widely used gauge of a stock's valuation that
(P/E) (also "earnings indicates what investors are paying for a company's
multiple") earnings on a per share basis. Typically based on a
company's projected earnings for the next 12 months,
a higher "earnings multiple" indicates a higher
expected growth rate and the potential for greater
price fluctuations.
VALUE STOCK A company whose stock price does not fully reflect
its intrinsic value, as indicated by price-earnings
ratio, price-book value ratio, dividend yield, or
some other valuation measure, relative to its
industry or the market overall. Value stocks tend to
display less price volatility and may carry higher
dividend yields.
(Sources: Scudder Kemper Investments Inc.; Barron's Dictionary of
Finance and Investment Terms)
10 - Scudder Large Company Value Fund
<PAGE>
Investment Portfolio as of September 30, 1998
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements 2.7%
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement with State Street Bank and Trust Co. dated 9/30/1998 at
5.45%, to be repurchased at $54,120,192 on 10/1/1998, collateralized by a -------------
$55,645,000 U.S. Treasury Note, 3.625%, 1/15/2007 (Cost $54,112,000) .................. 54,112,000 54,112,000
-------------
<CAPTION>
Shares
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks 97.3%
- ------------------------------------------------------------------------------------------------------------------------------
Consumer Discretionary 2.6%
Department & Chain Stores
Dayton Hudson Corp. ..................................................................... 684,600 24,474,450
Federated Department Stores, Inc.* ...................................................... 758,800 27,601,350
-------------
52,075,800
-------------
Consumer Staples 9.7%
Alcohol & Tobacco 2.6%
Philip Morris Companies, Inc. ........................................................... 907,300 41,792,506
Universal Corp.-- VA .................................................................... 303,200 10,839,400
-------------
52,631,906
-------------
Consumer Electronic & Photographic Products 1.6%
Whirlpool Corp. ......................................................................... 654,000 30,738,000
-------------
Consumer Specialties 0.6%
American Greeting Corp., "A" ............................................................ 299,600 11,852,925
-------------
Food & Beverage 3.6%
ConAgra Inc. ............................................................................ 960,500 25,873,469
H.J. Heinz Co. .......................................................................... 327,900 16,763,888
Unilever NV (New York shares) ........................................................... 490,200 30,024,750
-------------
72,662,107
-------------
Textiles 1.3%
VF Corporation .......................................................................... 705,000 26,173,125
-------------
Health 4.4%
Health Industry Services 0.9%
Humana Inc.* ............................................................................ 1,141,600 18,693,700
-------------
Hospital Management 1.1%
Tenet Healthcare Corp. .................................................................. 769,400 22,120,250
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Large Company Value Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Pharmaceuticals 2.4%
American Home Products Corp. ............................................................ 699,900 36,657,263
Bristol-Myers Squibb Co. ................................................................ 103,000 10,699,125
-------------
47,356,388
-------------
Communications 8.0%
Telephone/Communications
AT & T Corp. ............................................................................ 941,700 55,030,586
Bell Atlantic Corp. ..................................................................... 1,246,000 60,353,125
BellSouth Corp. ......................................................................... 609,500 45,864,875
-------------
161,248,586
-------------
Financial 23.3%
Banks 11.9%
Banc One Corp. .......................................................................... 317,590 13,537,274
BankAmerica Corp. ....................................................................... 729,700 43,873,213
BankBoston Corp. ........................................................................ 931,200 30,729,600
Chase Manhattan Corp. ................................................................... 1,090,000 47,142,500
First Chicago NBD Corp. ................................................................. 220,200 15,083,700
First Union Corp. ....................................................................... 492,800 25,225,200
J.P. Morgan & Co., Inc. ................................................................. 204,500 17,305,813
KeyCorp ................................................................................. 913,800 26,385,975
NationsBank Corp. ....................................................................... 385,900 20,645,650
-------------
239,928,925
-------------
Insurance 6.9%
Allstate Corp. .......................................................................... 1,037,200 43,238,275
Chubb Corp. ............................................................................. 235,000 14,805,000
Cigna Corp. ............................................................................. 615,700 40,713,163
EXEL Limited (ADR) ...................................................................... 346,100 21,804,300
General Re Corp. ........................................................................ 88,300 17,924,900
-------------
138,485,638
-------------
Consumer Finance 1.8%
American Express Company ................................................................ 464,100 36,025,763
-------------
Other Financial Companies 2.7%
Federal National Mortgage Association ................................................... 396,700 25,487,975
Travelers Group, Inc. ................................................................... 742,899 27,858,713
-------------
53,346,688
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder Large Company Value Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Media 3.7%
Advertising 0.8%
WPP Group PLC (ADR) ..................................................................... 335,900 15,325,438
-------------
Broadcasting & Entertainment 1.7%
Viacom Inc. "B"* ........................................................................ 588,200 34,115,600
-------------
Print Media 1.2%
Knight-Ridder, Inc. ..................................................................... 548,000 24,386,000
-------------
Service Industries 1.4%
Environmental Services 0.8%
Browning Ferris Industries Inc. ......................................................... 543,600 16,443,900
-------------
Investment 0.6%
Merrill Lynch & Co., Inc. ............................................................... 258,600 12,251,175
-------------
Durables 4.3%
Aerospace 1.5%
United Technologies Corp. ............................................................... 393,300 30,062,869
-------------
Automobiles 1.3%
Ford Motor Co. .......................................................................... 565,000 26,519,688
-------------
Tires 1.5%
Goodyear Tire & Rubber Co. .............................................................. 581,500 29,874,563
-------------
Manufacturing 6.5%
Chemicals 3.3%
Dow Chemical Co. ........................................................................ 551,600 47,127,390
E.I. du Pont de Nemours & Co. ........................................................... 328,600 18,442,675
-------------
65,570,065
-------------
Containers & Paper 0.8%
Sonoco Products Co. ..................................................................... 705,510 16,932,240
-------------
Diversified Manufacturing 1.5%
Textron, Inc. ........................................................................... 514,900 31,215,813
-------------
Hand Tools 0.9%
Black & Decker Corp. .................................................................... 417,500 17,378,438
-------------
Technology 9.9%
Diverse Electronic Products 0.9%
Motorola Inc. ........................................................................... 408,700 17,446,381
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder Large Company Value Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
EDP Peripherals 2.1%
Seagate Technology, Inc. ................................................................ 1,656,000 41,503,500
-------------
Electronic Data Processing 5.1%
Hewlett-Packard Co. ..................................................................... 491,600 26,024,075
International Business Machines Corp. ................................................... 589,800 75,494,400
-------------
101,518,475
-------------
Military Electronics 1.8%
General Dynamics Corp. .................................................................. 251,200 12,607,100
Raytheon Co. "A" ........................................................................ 447,600 23,191,275
-------------
35,798,375
-------------
Energy 13.8%
Oil & Gas Production 2.7%
Coastal Corp. ........................................................................... 981,600 33,129,000
Royal Dutch Petroleum Co. ............................................................... 140,000 6,951,304
Royal Dutch Petroleum Co. (New York shares) ............................................. 284,800 13,563,600
-------------
53,643,904
-------------
Oil Companies 10.0%
Atlantic Richfield Co. .................................................................. 311,700 22,111,219
British Petroleum PLC (ADR) ............................................................. 187,800 16,385,550
Chevron Corp. ........................................................................... 294,300 24,739,594
Exxon Corp. ............................................................................. 799,400 56,107,888
Mobil Corp. ............................................................................. 542,800 41,218,875
Texaco Inc. ............................................................................. 639,800 40,107,463
-------------
200,670,589
-------------
Oil/Gas Transmission 1.1%
Sempra Energy ........................................................................... 882,129 22,990,487
-------------
Construction 1.7%
Forest Products
Weyerhaeuser Co. ........................................................................ 802,700 33,863,906
-------------
Transportation 1.4%
Railroads
Canadian National Railway ............................................................... 380,700 17,157,642
Union Pacific Corp. ..................................................................... 233,000 9,931,625
-------------
27,089,267
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - Scudder Large Company Value Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Utilities 6.6%
Electric Utilities
American Electric Power Co. ............................................................. 374,800 18,294,925
Duke Energy Corp. ....................................................................... 684,500 45,305,344
FPL Group, Inc. ......................................................................... 470,100 32,760,094
P G & E Corp. ........................................................................... 654,000 20,887,125
Wisconsin Energy Corp. .................................................................. 470,300 14,843,844
-------------
132,091,332
-------------
Other 0.0%
Miscellaneous securities ................................................................ 1,252 26,096
-------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $1,518,477,369) 1,950,057,902
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $1,572,589,369) (a) 2,004,169,902
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) The cost for federal income tax purposes was $1,575,850,147. At September
30, 1998, net unrealized appreciation for all securities based on tax cost
was $428,319,755. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market
value over tax cost of $479,461,230 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost
over market value of $51,141,475.
The accompanying notes are an integral part of the financial statements.
15 - Scudder Large Company Value Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of September 30, 1998
<TABLE>
<S> <C> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $1,572,589,369) ............ $ 2,004,169,902
Cash ............................................................... 331
Receivable for investments sold .................................... 2,468,276
Dividends and interest receivable .................................. 3,429,614
Receivable on Fund shares sold ..................................... 1,286,819
Receivable on foreign taxes recoverable ............................ 36,090
Other assets ....................................................... 22,712
-------------------
Total assets ....................................................... 2,011,413,744
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased .................................. 11,496,318
Payable for Fund shares redeemed ................................... 1,048,234
Accrued management fee ............................................. 1,066,788
Other payables and accrued expenses ................................ 636,530
-------------------
Total liabilities .................................................. 14,247,870
-------------------------------------------------------------------------------------------
Net assets, at market value $ 1,997,165,874
-------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ................................ 23,122,144
Unrealized appreciation on investments ............................. 431,580,533
Accumulated net realized gain ...................................... 131,121,385
Paid-in capital .................................................... 1,411,341,812
-------------------------------------------------------------------------------------------
Net assets, at market value $ 1,997,165,874
-------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($1,997,165,874 / 77,857,803 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares -------------------
authorized) ...................................................... $25.65
-------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder Large Company Value Fund
<PAGE>
Statement of Operations
year ended September 30, 1998
<TABLE>
<S> <C> <C>
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $353,509) .............. $ 46,619,949
Interest ........................................................... 1,968,420
----------------
48,588,369
Expenses:
Management fee ..................................................... 14,296,878
Services to shareholders ........................................... 4,958,834
Trustees' fees and expenses ........................................ 53,462
Custodian and accounting fees ...................................... 287,686
Reports to shareholders ............................................ 338,620
Auditing ........................................................... 45,801
Legal .............................................................. 30,998
Registration fees .................................................. 100,019
Other .............................................................. 54,313
----------------
20,166,611
-------------------------------------------------------------------------------------------
Net investment income 28,421,758
-------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ........................................................ 162,386,553
Foreign currency related transactions .............................. 1,775
----------------
162,388,328
Net unrealized appreciation (depreciation) during the period on:
Investments ........................................................ (280,820,721)
-------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions (118,432,393)
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ (90,010,635)
-------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - Scudder Large Company Value Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended September 30,
Increase (Decrease) in Net Assets 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income ....................................... $ 28,421,758 $ 28,697,289
Net realized gain from investment transactions .............. 162,388,328 134,428,197
Net unrealized appreciation (depreciation) on investment
transactions during the period ............................ (280,820,721) 519,790,788
------------------ ------------------
Net increase (decrease) in net assets resulting from
operations ................................................ (90,010,635) 682,916,274
------------------ ------------------
Distributions to shareholders from:
Net investment income ....................................... (18,248,388) (11,553,936)
------------------ ------------------
Net realized gain (loss) on investment transactions ......... (141,425,011) (179,180,946)
------------------ ------------------
Fund share transactions:
Proceeds from shares sold ................................... 349,010,684 255,862,093
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................. 152,377,751 182,941,443
Cost of shares redeemed ..................................... (467,271,665) (369,711,587)
------------------ ------------------
Net increase (decrease) in net assets from Fund share
transactions .............................................. 34,116,770 69,091,949
------------------ ------------------
Increase in net assets ...................................... (215,567,264) 561,273,341
Net assets at beginning of period ........................... 2,212,733,138 1,651,459,797
Net assets at end of period (including undistributed
net investment income of $23,122,144 and $22,560,347, ------------------ ------------------
respectively) ............................................. $ 1,997,165,874 $ 2,212,733,138
------------------ ------------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ................... 76,343,193 72,934,700
------------------ ------------------
Shares sold ................................................. 12,220,382 10,356,988
Shares issued to shareholders in reinvestment of
distributions ............................................. 5,700,627 8,148,839
Shares redeemed ............................................. (16,406,399) (15,097,334)
------------------ ------------------
Net increase in Fund shares ................................. 1,514,610 3,408,493
------------------ ------------------
Shares outstanding at end of period ......................... 77,857,803 76,343,193
------------------ ------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 - Scudder Large Company Value Fund
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Years Ended September 30,
1998(a) 1997(a)* 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------
Net asset value, beginning of period ................................ $ 28.98 $ 22.64 $ 22.92 $ 19.54 $ 23.06
------------------------------------------------------------
Income from investment operations:
Net investment income (loss) ........................................ .36 .38 .36 .13 (.02)
Net realized and unrealized gain (loss) on investment
transactions ...................................................... (1.59) 8.60 2.94 3.98 (.88)
------------------------------------------------------------
Total from investment operations .................................... (1.23) 8.98 3.30 4.11 (.90)
------------------------------------------------------------
Less distributions from:
Net investment income ............................................... (.24) (.16) (.08) -- --
Net realized gains on investment transactions ....................... (1.86) (2.48) (3.50) (.73) (2.62)
------------------------------------------------------------
Total distributions ................................................. (2.10) (2.64) (3.58) (.73) (2.62)
------------------------------------------------------------
------------------------------------------------------------
Net asset value, end of period ...................................... $ 25.65 $ 28.98 $ 22.64 $ 22.92 $ 19.54
------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (%) .................................................... (4.54) 43.06 15.94 21.96 (4.72)
Ratios and Supplemental Data
Net assets, end of period ($ millions) .............................. 1,997 2,213 1,651 1,492 1,338
Ratio of operating expenses to average daily net assets (%) ......... .88 .93 .92 .98 .97
Ratio of net investment income (loss) to average daily net
assets (%) ........................................................ 1.25 1.51 1.62 .62 (.12)
Portfolio turnover rate (%) ......................................... 39.5 43.0 150.7 153.6 75.8
</TABLE>
(a) Based on monthly average shares outstanding during the period.
* On February 1, 1997, the Fund adopted its current name. Prior to that
date, the Fund was known as the Scudder Capital Growth Fund.
19 - Scudder Large Company Value Fund
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder Large Company Value Fund (formerly Scudder Capital Growth Fund) (the
"Fund") is a diversified series of the Value Equity Trust (the "Trust")
(formerly Scudder Equity Trust). The Trust is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
Security Valuation. Portfolio securities which are traded on U.S. or foreign
stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the Nasdaq Stock Market, Inc.
("Nasdaq"), for which there have been sales, are valued at the most recent sale
price reported on such system. If there are no such sales, the value is the most
recent bid quotation. Securities which are not quoted on 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 other than money market securities are valued by
pricing agents approved by the officers of the Trust, 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. Money market
instruments purchased with an original maturity of sixty days or less are valued
at amortized cost. All other securities are valued at their fair value as
determined in good faith by the Valuation Committee of the Board of Trustees.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement, is equal to at least 100.5% of the repurchase price.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code of 1986, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. 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. Earnings
and profits distributed to shareholders on redemption of Fund shares ("tax
equalization") may be utilized by the Fund, to the extent permissible, as part
of the Fund's dividends paid deduction on its federal tax return.
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 the
20 - Scudder Large Company Value Fund
<PAGE>
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.
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 and market discounts are accreted for both tax and financial
reporting purposes.
B. Purchases and Sales of Securities
During the year ended September 30, 1998, purchases and sales of investment
securities (excluding short-term investments) aggregated $876,216,850 and
$985,398,506, respectively.
C. 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 the Fund's Investment
Management Agreement with Scudder. However, a new Investment Management
Agreement (the "Management Agreement") between the Fund and Scudder Kemper was
approved by the Trust's Board of Trustees and by the Fund's Shareholders. The
Management Agreement, which is 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.
Under the Investment Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. (the "Adviser"), the Fund has agreed to pay to the Adviser a
fee equal to an annual rate of approximately 0.75% of the first $500,000,000 of
average daily net assets, 0.65% of the next $500,000,000 of such net assets,
0.60% of the next $500,000,000 of such net assets and 0.55% of such net assets
in excess of $1,500,000,000, 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 Management Agreement. For the year ended
September 30, 1998, the fees pursuant to these agreements amounted to
$14,296,878 which was equivalent to an annual effective rate of .63% of the
Fund's average daily net assets.
On September 7, 1998, Zurich Insurance Company ("Zurich"), majority owner of the
adviser, entered into an agreement with B.A.T Industries p.l.c. ("B.A.T")
pursuant to which the financial services businesses of B.A.T were combined with
Zurich's businesses to form a new global insurance and financial services
company known as Zurich Financial Services. Upon consummation of the
transaction, the Fund's investment management agreement with Scudder Kemper was
deemed to have
21 - Scudder Large Company Value Fund
<PAGE>
been assigned and, therefore, terminated. The Board of Trustees of the Fund has
approved a new investment management agreement with Scudder Kemper, which is
substantially identical to the former investment management agreement, except
for the dates of execution and termination. The Board of Trustees of the Fund
will seek shareholder approval of the new investment management agreement
through a proxy solicitation that is currently scheduled to conclude in
mid-December.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. Included
in services to shareholders is $2,518,178 charged to the Fund by SSC for the
year ended September 30, 1998, of which $206,824 is unpaid at September 30,
1998.
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,
1998, the amount charged to the Fund by STC aggregated $1,835,663, of which
$160,513 is unpaid at September 30, 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 the Fund. For the year ended
September 30, 1998, the amount charged to the Fund by SFAC aggregated $174,325,
of which $13,343 is unpaid at September 30, 1998.
The Fund is one of several Scudder Funds (the "Underlying Funds") in which the
Scudder Pathway Series Portfolios (the "Portfolios") invest. In accordance with
the Special Servicing Agreement entered into by the Adviser, the Portfolios, the
Underlying Funds, SSC, SFAC, STC, and Scudder Investor Services, Inc., expenses
from the operation of the Portfolios are borne by the Underlying Funds based on
each Underlying Fund's proportionate share of assets owned by the Portfolios. No
Underlying Funds will be charged expenses that exceed the estimated savings to
each respective Underlying Fund. These estimated savings result from the
elimination of separate shareholder accounts which either currently are or have
potential to be invested in the Underlying Funds. At September 30, 1998, the
Special Servicing Agreement expense charged to the Fund amounted to $18,102, of
which $4,275 is unpaid at September 30, 1998.
The Fund pays each of its Trustees not affiliated with the Adviser an annual
retainer plus specified amounts for attended board and committee meetings. For
the year ended September 30, 1998, Trustees' fees and expenses aggregated
$53,462.
22 - Scudder Large Company Value Fund
<PAGE>
Report of Independent Accountants
To the Trustees of Value Equity Trust and the Shareholders of Scudder Large
Company Value 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 Large Company Value Fund
(the "Fund") at September 30, 1998, the results of its operations for the year
then ended and 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 five years in
the period then ended, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Boston, Massachusetts PricewaterhouseCoopers LLP
November 6, 1998
23 - Scudder Large Company Value Fund
<PAGE>
Tax Information
The Fund paid distributions of $1.23 per share from net long-term capital gains
during its year ended September 30, 1998, of which 47% represents 20% rate
gains. Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$170,000,000 as capital gain dividends for its year ended September 30, 1998.
For corporate shareholders, 100% of the income dividends paid during the Fund's
fiscal year ended September 30, 1998 qualified for the dividends received
deduction.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your account, please call 1-800-SCUDDER.
Officers and Trustees
Daniel Pierce*
President and Trustee
Paul Bancroft III
Trustee; Venture Capitalist and
Consultant
Sheryle J. Bolton
Trustee; Chief Executive Officer,
Scientific Learning Corporation
William T. Burgin
Trustee; General Partner, Bessemer
Venture Partners
Thomas J. Devine
Trustee; Consultant
Keith R. Fox
Trustee; Private Equity Investor
William H. Luers
Trustee; President, The
Metropolitan Museum of Art
Wilson Nolen
Trustee; Consultant
Kathryn L. Quirk*
Trustee, Vice President and
Assistant Secretary
Joan Spero
Trustee; President, Doris Duke
Charitable Foundation
Robert G. Stone, Jr.
Honorary Trustee; Chairman
Emeritus and Director, Kirby
Corporation
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 and Secretary
John R. Hebble*
Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
24 - Scudder Large Company Value Fund
<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--
Prime Reserve Shares*
Premium Shares*
Managed Shares*
Scudder Government Money Market Series--
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder Corporate Bond Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund***
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund***
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Equity
- -------------
Worldwide
Scudder Global Fund
Scudder International Value Fund
Scudder International Growth and Income Fund
Scudder International Fund++
Scudder International Growth Fund
Scudder Global Discovery Fund***
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
Preferred Series
- ----------------
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small
Company Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal Fund, Inc.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed in order from
expected least risk to most risk. Certain Scudder funds may not be available for
purchase or exchange. +A portion of the income from the tax-free funds may be
subject to federal, state, and local taxes. *A class of shares of the Fund.
**Not available in all states. ***Only the Scudder Shares of the Fund are part
of the Scudder Family of Funds. ++Only the International Shares of the Fund are
part of the Scudder Family of Funds. +++ +++A no-load variable annuity contract
provided by Charter National Life Insurance Company and its affiliate, offered
by Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by
Scudder Kemper Investments, Inc., are traded on the New York Stock Exchange and,
in some cases, on various other stock exchanges.
25 - Scudder Large Company Value Fund
<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 -- www.scudder.com
1-800-343-2890
Scudder Electronic Account Services: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you previously designated.
Distributions Direct
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
26 - Scudder Large Company Value Fund
<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
800 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
</TABLE>
27 - Scudder Large Company Value Fund
<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 $230 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts. It is one of the ten largest mutual fund companies in the
United States.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 79
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Group. As a result, Zurich's subsidiary, Zurich Kemper Investments,
Inc., with 50 years of mutual fund and investment management experience, was
combined with Scudder. Headquartered in New York, Scudder Kemper Investments
offers a full range of investment counsel and asset management capabilities,
based on a combination of proprietary research and disciplined, long-term
investment strategies. With its global investment resources and perspective,
the firm seeks opportunities in markets throughout the world to meet the needs
of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Group. The Zurich Group is an internationally recognized leader in
financial services, including property/casualty and life insurance, reinsurance,
and asset management.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER
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