Scudder
Large Company
Value Fund
Annual Report
July 31, 1999
No-Load Funds
A fund which seeks to maximize capital appreciation over the long term through a
value-oriented approach to investing.
A no-load fund with no commissions to buy, sell, or exchange shares.
SCUDDER
<PAGE>
Scudder Large Company Value Fund
- --------------------------------------------------------------------------------
Date of Inception: 4/5/67 Total Net Assets as of Ticker Symbol: SCDUX
7/31/99: $2.6 billion
- --------------------------------------------------------------------------------
o A dramatic rally in less expensive value stocks during the second calendar
quarter marked a shift in investor sentiment away from expensive large
capitalization growth stocks that had dominated market returns for the last few
years.
o Management's decision to increase cyclical stocks a year ago -- which had held
back performance at the beginning of the fiscal period -- was the primary driver
of the fund's outperformance year to date in 1999.
o Scudder Large Company Value Fund returned 26.79% for the 10-month fiscal
period ended July 31, 1999.
Table of Contents
3 Letter from the Fund's President 18 Financial Highlights
4 Performance Update 19 Notes to Financial Statements
5 Portfolio Summary 22 Report of Independent Accountants
6 Portfolio Management Discussion 23 Tax Information
10 Glossary of Investment Terms 25 Officers and Trustees
11 Investment Portfolio 26 Investment Products and Services
15 Financial Statements 27 Scudder Solutions
2 - Scudder Large Company Value Fund
<PAGE>
Letter from the Fund's President
Dear Shareholders,
The most recent period is a classic example of the cyclical nature of
investing. In particular, I am referring to the strong performance of growth
stocks during the first six months of the period, which gave way to a remarkable
rally in value stocks in the final months of the fund's fiscal period. Such
shifts in investor sentiment served to remind investors of the importance of
maintaining exposure to several asset classes, even if one class has fallen out
of favor temporarily.
As investors, we need to be careful that we are not distracted by the
dominance of one particular sector at the expense of our long-term goals. In the
case of Scudder Large Company Value Fund, we believe that the fund will continue
to serve as an attractive core holding for long-term investors -- as it has in
the most recent period -- regardless of whether growth or value styles are in
favor.
In the pages that follow, co-lead portfolio managers Kathleen Millard and
Lois Roman discuss the market environment and the recent resurgence of the value
style of investing. Despite the dominance of growth stocks over much of the
period, your managers remained committed to their long-term, disciplined
investment approach. This commitment to large capitalization value stocks
contributed to the fund's performance when this style returned to favor in 1999.
Their discussion begins on page 6.
Please note that we have changed the Fund's fiscal year-end from September
30 to July 31 as part of a larger effort to create efficiencies and reduce the
costs of producing Scudder fund regulatory materials such as fund reports and
prospectuses. Going forward, you will receive regular reports following the
Fund's semiannual and annual periods ending in January and July.
Finally, it should be noted that Daniel Pierce retired in June of this year
as President of Scudder Large Company Value Fund, at which time I assumed that
role and its responsibilities. We are fortunate that Dan's longstanding
affiliation with Scudder is ongoing, and that we will continue to benefit from
his counsel going forward. I am pleased to join the Fund's team in this
capacity, and look forward to serving your interests.
Thank you for your continued investment in Scudder Large Company Value
Fund. If you have any questions about your investment, please call us at
1-800-SCUDDER (1-800-728-3337), or visit our Web site at www.scudder.com.
Sincerely,
/s/Lynn S. Birdsong
Lynn S. Birdsong
President,
Scudder Large Company Value Fund
3 - Scudder Large Company Value Fund
<PAGE>
Performance Update as of July 31, 1999
- -----------------------------
Fund Index Comparison
- -----------------------------
Total Return
--------------------------------------------
Period
Ended Growth of Average
7/31/1999 $10,000 Cumulative Annual
--------------------------------------------
Scudder Large Company Value Fund
--------------------------------------------
1 Year $ 11,149 11.49% 11.49%
5 Year $ 24,930 149.30% 20.05%
10 Year $ 34,031 240.31% 13.03%
--------------------------------------------
Russell 1000 Value Index
--------------------------------------------
1 Year $ 11,499 14.99% 14.99%
5 Year $ 28,214 182.14% 23.04%
10 Year $ 44,007 340.07% 15.96%
- ---------------------------------
Growth of a $10,000 Investment
- ---------------------------------
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
CHART DATA:
Russell 1000 Value Index Scudder Large Company Value Fund
'89 10000 '89 10000
'90 9908 '90 9137
'91 10969 '91 10065
'92 12679 '92 11598
'93 15053 '93 13480
'94 15597 '94 13650
'95 18849 '95 16322
'96 21842 '96 18351
'97 32508 '97 27582
'98 38270 '98 30524
'99 44007 '99 34031
Yearly periods ended July 31
The Russell 1000 Value Index consists of securities with less than average
growth orientation. Index returns assume reinvestment of dividends and, unlike
Fund returns, do not reflect any fees or expenses.
- ------------------------------------
Returns and Per Share Information
- ------------------------------------
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE FUND TOTAL RETURN (%) AND
INDEX TOTAL RETURN (%)
CHART DATA:
<TABLE>
<CAPTION>
Yearly periods ended July 31
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value $ 18.36 $ 18.12 $ 19.57 $ 21.31 $ 19.19 $ 22.07 $ 21.14 $ 28.43 $ 29.17 $ 30.05
- -----------------------------------------------------------------------------------------------------------------------------
Income Dividends $ .16 $ .37 $ .22 $ .10 $ -- $ -- $ .08 $ .16 $ .24 $ .18
- -----------------------------------------------------------------------------------------------------------------------------
Capital Gains Distributions $ 1.45 $ 1.35 $ .98 $ 1.25 $ 2.62 $ .73 $ 3.50 $ 2.48 $ 1.86 $ 2.10
- -----------------------------------------------------------------------------------------------------------------------------
Fund Total Return (%) -8.62 10.15 15.14 16.32 1.26 19.57 12.43 50.30 10.66 11.49
- -----------------------------------------------------------------------------------------------------------------------------
Index Total Return (%) -.92 10.71 15.59 18.72 3.61 20.85 15.88 48.83 17.72 14.99
- -----------------------------------------------------------------------------------------------------------------------------
</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 July 31, 1999
- --------------------------
Diversification
- --------------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Equity 98%
Cash Equivalents 2%
------------------------------------
100%
------------------------------------
Management seeks to remain fully invested in reasonably valued large-cap growth
stocks.
- -----------------------------------
Sectors
(Excludes 2% Cash Equivalents)
- -----------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the table below.
Financial 25%
Technology 13%
Energy 12%
Manufacturing 9%
Communications 8%
Durables 8%
Consumer Discretionary 5%
Consumer Staples 4%
Utilities 4%
Other 12%
------------------------------------
100%
------------------------------------
A move into cyclical stocks in the summer of 1998 contributed to the fund's
outperformance year to date in 1999.
- -----------------------------------
Ten Largest Equity Holdings
(33% of Portfolio)
- -----------------------------------
1. International Business Machines Corp.
Manufacturer of computers and
servicer of information
processing units
2. Dow Chemical Co.
Chemical producer
3. Hewlett-Packard Co.
Measurement and test instruments, computer
systems
4. Citigroup Inc.
Diversified financial services company
5. Chase Manhattan Corp.
Commercial bank
6. Bell Atlantic Corp.
Telecommunication services
7. Union Pacific Corp.
Railroad transportation,
overnight shipping, and computer
technology
8. Motorola Inc.
Manufacturer of telecommunication
products and semiconductors
9. AT&T Corp.
Telecommunication services
10. Exxon Corp.
International oil and gas company
For a stock to become a candidate for the fund's portfolio, it must pass
through a quantitative value screen and is subject to fundamental and risk
analysis.
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, co-lead portfolio managers
of Scudder Large Company Value Fund, to discuss the market environment and their
current investment strategy for the fund.
Q: With value stocks returning to favor, how did the fund perform?
A: For the 10-month period covered by this report, the fund's 26.79% return
nearly matched the 27.76% return for the unmanaged Russell 1000 Value Index.
Last summer we increased the fund's weighting in cyclical stocks. Our model had
a historically high concentration of cyclical stocks in the "buy" zone
indicating that, on a valuation basis, the stocks were inexpensive. With the
help of our analysts, we identified stocks that had "trough" fundamentals and
positive catalysts on the horizon. While this decision has helped the fund
outperform year-to-date in 1999, our move last summer preceded the market shift,
holding back the fund's performance in 1998.
Q: When value investing is out of favor, as it has been until the end of the
first quarter, do you change your investment strategy?
A: No. We are continuing to manage the portfolio with the same quantitative
multi-factor model we have been using since 1995. Sticking with this approach
has worked well, in our opinion. Take, for example, the Morningstar Ratings(TM)
for the three-, five-, and ten-year periods ended July 31, 1999. The fund holds
4-star ratings for the three- and five-year periods, which encompass nearly all
of the period that we have been managing the fund with the current investment
discipline. The fund holds a 2-star rating for the ten-year period, which
includes performance earned under a different investment approach.^1
Q: How does the model work?
A: We strive to build an optimal portfolio by combining quantitative value
screens with original research and risk analysis. We begin with our investment
universe, which is the largest 1000 companies in the United States, as
represented by the Russell 1000 Index. We apply a valuation screen to each
company in this universe to identify "buy" and "sell" candidates. Companies that
are ranked in the top four deciles (the cheapest 40%) based on our valuation
criteria are potential "buy" candidates, while those that fall into the bottom
two deciles (the most expensive 20%) are "sell" candidates if held in the
portfolio. We narrow the list further by employing intensive fundamental
analysis to determine which "buy"-rated companies have the strongest financial
positions and most capable management teams. Finally, we determine which stocks
will minimize portfolio risk by contributing to overall diversification.
By combining these disciplines, we attempt to build a portfolio of
- ------------------------
^1 Morningstar proprietary ratings reflect historical risk-adjusted performance
as of 7/31/99. Ratings are subject to change every month and are calculated
from the fund's three-, five-, and ten-year average annual returns in excess
of 90-day Treasury bill returns with appropriate fee adjustments, and a risk
factor that reflects fund performance below 90-day T-bill returns. In a broad
asset class, 10% of funds receive 5 stars, the next 22.5% receive 4 stars, the
next 35% receive 3 stars, and the next 22.5% receive 2 stars. In the domestic
equity category, the fund received a 4-star rating for the three- and
five-year periods and a 2-star rating for the ten-year period among 3092,
1923, and 746 funds, respectively. The fund's overall rating is 3 stars. Past
performance is no guarantee of future results.
6 - Scudder Large Company Value Fund
<PAGE>
reasonably valued, fundamentally strong large companies that will outperform the
Russell 1000 Value Index over the long term.
Q: In attempting to decide if the individual merits of a company meet your "buy"
criteria, on what do you focus?
A: In particular, we look for management teams that are creating value for
shareholders. To accomplish this, we seek to establish the level and direction
of income statement, balance sheet, and cash flow drivers that contribute to the
creation of earnings. Examples of these drivers are margins, leverage ratios,
and returns on capital. The purpose of this intensive approach is to distinguish
between "value traps," or companies whose stock prices are depressed for a
reason, and "value opportunities," where poor price performance obscures
positive changes taking place within the firm. In the process, we search for
companies whose actual earnings have fallen below their "normalized" earnings.
(Normalized earnings are the smoothed- out level of earnings over an economic
cycle, removing the peaks and troughs associated with fluctuations in the
economy.) We believe that over time this strategy will allow us to separate
companies that are poised to rebound from those whose difficulties are likely to
continue.
Q: With value stocks staging a big rally toward the end of the fiscal period,
how did it affect your portfolio holdings?
A: Due to the tremendous surge of cyclical stocks since the beginning of the
year, many of our portfolio holdings have migrated to the "hold" zone of our
model. Although not candidates for sale yet, these stocks are no longer
undiscovered opportunities. The portfolio team continually searches through the
buyable stock list to find new ideas to add to the portfolio. During 1998 when
expensive stocks became more expensive and inexpensive stocks languished, our
quantitative model -- like most others -- contributed less to overall
performance than in previous years. The complementary qualitative investment
process step of fundamental research was a key component of performance. Since
the second calendar quarter of 1999, the quantitative model has been adding
value to the decision making process. The "buy" zone stocks are outperforming
the "hold" and "sell" zone stocks.
Q: Can you provide us with an update on some of the fund's top holdings?
A: Hewlett-Packard (at $105 on 7/31) is a good example of one of our top
holdings that made a significant contribution to performance over the period. We
added H-P in 1998 in the mid-$30s. The stock was rated as a "buy" candidate by
our model and our investment analyst also rated it a "buy." The company has been
a leader in the personal printer business for years. Once a high growth premier
technology company, H-P lost its luster when it faced increasing competition in
its markets and missed new product launches. In 1998, we increased our position
as the stock fell because we had confidence in H-P's long-term positioning as a
necessary and complementary technology company in the rapidly developing
Internet world. Management responded to the near-term shortfalls with massive
cost cutting and restructurings. The company will split into two pieces during
the
7 - Scudder Large Company Value Fund
<PAGE>
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 "purchase" ratings
Sell: Deciles 9-10 Sell: Internal analyst "underperform"
ratings
</TABLE>
(arrows point from both quadrants to first subhead)
Portfolio Risk Decisions
(arrow points from first subhead to second one)
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.
- --------------------------------------------------------------------------------
calendar year 2000 and we expect revenue growth acceleration from new
products and alliances.
Q: Another large fund holding is AT&T. While the rest of the market has gone up
this year, AT&T's stock is still standing at the starting line. What is the
story for AT&T, which closed the period at $52 a share?
A: We purchased shares of AT&T in mid-1995 when the stock was in the mid-$20s.
It was rated a "buy" by our model and a "buy" by our internal analyst. Our
thesis was that this premier franchise would survive the expected entry of the
regional Bell operating companies (RBOCs) into the long distance market. In
addition, AT&T had premier assets unvalued by the marketplace. The stock rallied
slightly and then declined in mid-1997 in the face of threats of a declining
market share. We took advantage of the price dip by doubling up on our position
when a new CEO was named. The stock rebounded strongly in the second half of
1997, primarily because the new management team pared back the cost structure
and refocused operations. Normalized earnings for AT&T have more than
8 - Scudder Large Company Value Fund
<PAGE>
doubled and the return on invested capital has increased significantly. In
addition, AT&T has made several acquisitions to build a formidable cable and
telephony powerhouse to compete in the newly converged telecommunications world.
Recently, AT&T's stock price has been lagging the markets. We still believe that
as the long-term story continues to unfold in telecommunications, the impact
that the company has on the future structure of this industry will be
significant.
Q: What is your outlook?
A: As always, we prefer not to make broad predictions about the market. Instead
we focus on the relative opportunities within our universe of large company
stocks. In this realm, we think one of the most important longer-term questions
is when will be the right time to jump off the cyclical bandwagon. In the short
run, we believe that there remains more upside in our cyclical holdings and
pockets of opportunity in the stocks that have not yet reached "trough"
fundamentals, e.g., the auto sector. When these stocks reach the trough point,
we believe they will provide fertile ground for stock picking.
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, each of whom plays an important
role in the fund's management process. Team members work together to develop
investment strategies and select securities for the fund's portfolio. They are
supported by the Adviser's large staff of economists, research analysts,
traders, and other investment specialists who work in our offices across the
United States and abroad. We believe our team approach benefits fund investors
by bringing together many disciplines and leveraging our extensive resources.
Co-Lead Portfolio Managers Kathleen T. Millard and Lois Friedman Roman have
responsibilitiy for the fund's day-to-day management. Ms. Millard, who joined
the Adviser in 1991 and the fund in 1995, has 15 years of industry experience.
Ms. Roman, who joined the Adviser in 1994 and the fund in 1995, has 11 years of
experience as an equity analyst. Together they oversee the investment strategies
of the fund.
9 - Scudder Large Company Value Fund
<PAGE>
Glossary of Investment Terms
CYCLICAL/NON-CYCLICAL Securities of companies whose fortunes tend
to rise quickly when the economy turns up
and to fall quickly when the economy turns
down. Examples include companies in the
auto, cement, housing, machinery, paper,
technology, and steel industries. Securities
of non-cyclical companies are less affected
by the economy, such as those in the food
and pharmaceutical industries.
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.
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.
PRICE/EARNINGS RATIO (P/E) A widely used gauge of a stock's valuation
(also "earnings multiple") that indicates what investors are paying for
a company's 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.
TROUGH VALUATION/ Technical financial analysis looks at the
TROUGH FUNDAMENTALS cyclical trend lines of stocks based on
their valuations (e.g., price/earnings,
price/cash flow ratios) and fundamentals
(e.g., income statement, balance sheet).
Since stocks and industry sectors typically
move in cycles -- peaks and troughs -- a
technical analyst attempts to identify the
most attractive point at which to purchase a
stock. The trough represents a low point for
the particular measure charted.
VALUE STOCK A company whose stock price does not fully
reflect its intrinsic value, as indicated by
price-earnings ratio, price-book value
ratio, dividend yield, or some other
valuation measure, relative to its industry
or the market overall. Value stocks tend to
display less price volatility and may carry
higher dividend yields.
(Source: Scudder Kemper Investments and Barron's Dictionary of Finance and
Investment Terms.)
An expanded list of terms is located at our Web site, www.scudder.com.
10 - Scudder Large Company Value Fund
<PAGE>
Investment Portfolio as of July 31, 1999
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ----------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 1.5%
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with State Street Bank & Trust Company dated 7/30/1999 at 5.04%, to be
repurchased at $37,065,561 on 8/2/1999, collateralized by a $34,240,000 U.S. Treasury Bond,
7.25%, 5/15/2016 (Cost $37,050,000) ........................................................... 37,050,000 37,050,000
Shares
- ----------------------------------------------------------------------------------------------------------------------------
Common Stocks 98.5%
- ----------------------------------------------------------------------------------------------------------------------------
Consumer Discretionary 4.5%
Department & Chain Stores
Dayton Hudson Corp. ............................................................................. 691,400 44,724,938
Federated Department Stores, Inc.* .............................................................. 849,000 43,564,313
Rite Aid Corp. .................................................................................. 1,308,300 27,719,606
------------
116,008,857
------------
Consumer Staples 3.6%
Alcohol & Tobacco 2.0%
Philip Morris Companies, Inc. ................................................................... 1,402,100 52,228,225
------------
Food & Beverage 1.6%
Unilever NV (New York Shares) ................................................................... 567,585 39,660,002
------------
Health 2.9%
Pharmaceuticals
American Home Products Corp. .................................................................... 897,100 45,752,100
Pharmacia & Upjohn, Inc. ........................................................................ 515,400 27,734,963
------------
73,487,063
------------
Communications 8.1%
Telephone/Communications
AT&T Corp. ...................................................................................... 1,470,150 76,355,916
Bell Atlantic Corp. ............................................................................. 1,278,200 81,485,250
BellSouth Corp. ................................................................................. 1,055,100 50,644,800
------------
208,485,966
------------
Financial 24.4%
Banks 11.9%
Banc One Corp. .................................................................................. 426,214 23,255,301
Bank of America Corp. ........................................................................... 773,728 51,356,196
BankBoston Corp. ................................................................................ 760,600 35,700,663
Chase Manhattan Corp. ........................................................................... 1,100,900 84,631,688
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Large Company Value Fund
<PAGE>
Market
Shares Value ($)
- ---------------------------------------------------------------
First Union Corp. ................... 580,900 26,721,400
J.P. Morgan & Co., Inc. ............. 419,700 53,669,138
KeyCorp ............................. 922,900 29,071,350
------------
304,405,736
------------
Insurance 4.9%
Allstate Corp. ...................... 1,057,700 37,548,350
Cigna Corp. ......................... 702,100 61,916,444
St. Paul Companies, Inc. ............ 809,900 25,208,138
------------
124,672,932
------------
Consumer Finance 5.8%
American Express Co. ................ 468,700 61,751,225
Citigroup Inc. ...................... 1,922,848 85,686,914
------------
147,438,139
------------
Other Financial Companies 1.8%
Federal National Mortgage Association 664,800 45,871,200
------------
Media 3.6%
Broadcasting & Entertainment 1.6%
Viacom Inc. "B" * ................... 955,400 40,067,088
------------
Print Media 2.0%
Knight-Ridder, Inc. ................. 943,600 50,600,550
------------
Service Industries 1.6%
Investment
Merrill Lynch & Co., Inc. ........... 615,100 41,865,244
------------
Durables 7.7%
Aerospace 5.2%
Boeing Co. .......................... 1,231,370 55,873,414
Lockheed Martin Corp. ............... 688,800 23,978,850
United Technologies Corp. ........... 794,400 52,976,550
------------
132,828,814
------------
Automobiles 1.6%
Ford Motor Co. ...................... 846,500 41,161,063
------------
Tires 0.9%
Goodyear Tire & Rubber Co. .......... 449,800 23,783,175
------------
Manufacturing 8.8%
Chemicals 4.9%
Dow Chemical Co. .................... 728,100 90,284,400
The accompanying notes are an integral part of the financial statements.
12 - Scudder Large Company Value Fund
<PAGE>
Market
Shares Value ($)
- -------------------------------------------------------------------
E.I. du Pont de Nemours & Co. ............. 466,700 33,631,569
------------
123,915,969
------------
Containers & Paper 1.0%
Sonoco Products Co. ....................... 998,910 26,783,274
------------
Diversified Manufacturing 1.5%
Textron, Inc. ............................. 461,900 37,991,275
------------
Hand Tools 1.0%
Black & Decker Corp. ...................... 439,200 25,363,800
------------
Specialty Chemicals 0.4%
Air Products & Chemicals, Inc. ............ 316,300 10,576,281
------------
Technology 12.9%
Diverse Electronic Products 3.0%
Motorola Inc. ............................. 843,800 76,996,750
------------
Electronic Data Processing 8.0%
Hewlett-Packard Co. ....................... 859,900 90,020,781
International Business Machines Corp. ..... 914,000 114,878,375
------------
204,899,156
------------
Military Electronics 1.9%
Raytheon Co. "A" .......................... 669,800 46,551,100
------------
Energy 11.8%
Oil & Gas Production 3.3%
Coastal Corp. ............................. 597,700 23,646,506
Royal Dutch Petroleum Co. ................. 140,000 8,751,995
Royal Dutch Petroleum Co. (New York Shares) 825,300 50,343,300
------------
82,741,801
------------
Oil Companies 8.5%
Atlantic Richfield Co. .................... 213,100 19,192,319
BP Amoco Plc (ADR) ........................ 189,700 21,981,488
Chevron Corp. ............................. 297,200 27,119,500
Exxon Corp. ............................... 873,000 69,294,375
Mobil Corp. ............................... 395,200 40,409,200
Texaco Inc. ............................... 646,200 40,266,338
------------
218,263,220
------------
Metals & Minerals 0.8%
Steel & Metals
Phelps Dodge Corp. ........................ 361,500 21,441,469
------------
The accompanying notes are an integral part of the financial statements.
13 - Scudder Large Company Value Fund
<PAGE>
Market
Shares Value ($)
- -------------------------------------------------------------------------------
Construction 0.8%
Forest Products
Weyerhaeuser Co. ............................... 309,100 19,994,906
------------
Transportation 3.1%
Railroads
Union Pacific Corp. ............................ 1,462,200 79,415,738
------------
Utilities 3.9%
Electric Utilities
Duke Energy Corp. .............................. 606,700 32,117,175
FPL Group, Inc. ................................ 474,800 25,609,525
PECO Energy Co. ................................ 306,300 12,979,463
Unicom Corp. ................................... 717,600 28,165,800
------------
98,871,963
Total Common Stocks (Cost $1,683,348,568) 2,516,370,756
- -------------------------------------------------------------------------------
Total Investment Portfolio-- 100.0% (Cost $1,720,398,568) (a) 2,553,420,756
* Non-income producing security.
(a) The cost for federal income tax purposes was $1,722,068,678. At July 31,
1999, net unrealized appreciation for all securities based on tax cost
was $831,352,078. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market
value over tax cost of $849,586,555 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost
over market value of $18,234,477.
The accompanying notes are an integral part of the financial statements.
14 - Scudder Large Company Value Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of July 31, 1999
<TABLE>
<CAPTION>
Assets
- -----------------------------------------------------------------------------------------------------
<S> <C>
Investments, at market (identified cost $1,720,398,568) .......... $2,553,420,756
Cash ............................................................. 383
Receivable for investments sold .................................. 13,609,769
Dividends and interest receivable ................................ 3,161,444
Receivable on Fund shares sold ................................... 1,975,831
Other assets ..................................................... 16,842
--------------
Total assets ..................................................... 2,572,185,025
Liabilities
- -----------------------------------------------------------------------------------------------------
Payable for investments purchased ................................ 14,465,056
Payable for Fund shares redeemed ................................. 710,365
Accrued management fee ........................................... 1,277,754
Other payables and accrued expenses .............................. 569,482
--------------
Total liabilities ................................................ 17,022,657
Net assets, at market value ...................................... $2,555,162,368
Net Assets
- -----------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income .............................. 19,761,249
Unrealized appreciation (depreciation) on investments ............ 833,022,188
Accumulated net realized gain (loss) ............................. 73,790,346
Paid-in capital .................................................. 1,628,588,585
Net assets, at market value ...................................... $2,555,162,368
Net Asset Value
- -----------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($2,555,162,368 / 85,028,260 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares authorized) $ 30.05
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder Large Company Value Fund
<PAGE>
Statements of Operations
<TABLE>
<CAPTION>
Ten Months
Ended Year Ended
July 31, 1999 September 30,
Investment Income (Note E) 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income:
Dividends (net of foreign taxes withheld of $842,354 and $353,509,
respectively) .................................................. $ 40,731,352 $ 46,619,949
Interest ......................................................... 1,702,725 1,968,420
------------- -------------
42,434,077 48,588,369
Expenses:
Management fee ................................................... 12,261,953 14,296,878
Services to shareholders ......................................... 4,411,142 4,958,834
Trustees' fees and expenses ...................................... 29,650 53,462
Custodian and accounting fees .................................... 177,125 287,686
Reports to shareholders .......................................... 275,515 338,620
Auditing ......................................................... 53,212 45,801
Legal ............................................................ 24,444 30,998
Registration fees ................................................ 73,074 100,019
Other ............................................................ 164,773 54,313
------------- -------------
17,470,888 20,166,611
Net investment income ............................................ 24,963,189 28,421,758
Realized and unrealized gain (loss) on investment transactions
- ---------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ...................................................... 109,587,957 162,386,553
Foreign currency related transactions ............................ (3,454) 1,775
------------- -------------
109,584,503 162,388,328
Net unrealized appreciation (depreciation) during the period on:
Investments ...................................................... 401,441,655 (280,820,721)
Net gain (loss) on investment transactions ....................... 511,026,158 (118,432,393)
Net increase (decrease) in net assets resulting from operations .. $ 535,989,347 $ (90,010,635)
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder Large Company Value Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Ten Months
Ended Years Ended September 30,
July 31, 1999
Increase (Decrease) in Net Assets (Note E) 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income .................................. $ 24,963,189 $ 28,421,758 $ 28,697,289
Net realized gain (loss) from investment transactions .. 109,584,503 162,388,328 134,428,197
Net unrealized appreciation (depreciation) on
investment transactions during the period ............ 401,441,655 (280,820,721) 519,790,788
--------------- --------------- ---------------
Net increase (decrease) in net assets resulting from
operations ........................................... 535,989,347 (90,010,635) 682,916,274
--------------- --------------- ---------------
Distributions to shareholders from:
Net investment income .................................. (14,320,764) (18,248,388) (11,553,936)
--------------- --------------- ---------------
Net realized gain on investment transactions ........... (166,948,064) (141,425,011) (179,180,946)
--------------- --------------- ---------------
Fund share transactions:
Proceeds from shares sold .............................. 533,428,766 349,010,684 255,862,093
Net asset value of shares issued to shareholders in
reinvestment of distributions ........................ 172,807,082 152,377,751 182,941,443
Cost of shares redeemed ................................ (502,959,873) (467,271,665) (369,711,587)
--------------- --------------- ---------------
Net increase (decrease) in net assets from Fund share
transactions ......................................... 203,275,975 34,116,770 69,091,949
--------------- --------------- ---------------
Increase (decrease) in net assets ...................... 557,996,494 (215,567,264) 561,273,341
Net assets at beginning of period ...................... 1,997,165,874 2,212,733,138 1,651,459,797
Net assets at end of period (including undistributed
net investment income of $19,761,249, $23,122,144, and
$22,560,347, respectively) ........................... $ 2,555,162,368 $ 1,997,165,874 $ 2,212,733,138
Other Information
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period .............. 77,857,803 76,343,193 72,934,700
--------------- --------------- ---------------
Shares sold ............................................ 18,349,312 12,220,382 10,356,988
Shares issued to shareholders in reinvestment of
distributions ........................................ 6,234,024 5,700,627 8,148,839
Shares redeemed ........................................ (17,412,879) (16,406,399) (15,097,334)
--------------- --------------- ---------------
Net increase (decrease) in Fund shares ................ 7,170,457 1,514,610 3,408,493
Shares outstanding at end of period .................... 85,028,260 77,857,803 76,343,193
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - 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>
Ten Months Ended Years Ended September 30,
July 31, 1999(a)
(Note E) 1998(a) 1997(a) 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .. $ 25.65 $ 28.98 $ 22.64 $ 22.92 $ 19.54 $ 23.06
Income from investment operations:
Net investment income (loss) .......... .30(b) .36 .38 .36 .13 (.02)
Net realized and unrealized gain (loss)
on investment transactions .......... 6.38 (1.59) 8.60 2.94 3.98 (.88)
Total from investment operations ...... 6.68 (1.23) 8.98 3.30 4.11 (.90)
Less distributions from:
Net investment income ................. (.18) (.24) (.16) (.08) -- --
Net realized gains on investment
transactions ........................ (2.10) (1.86) (2.48) (3.50) (.73) (2.62)
Total distributions ................... (2.28) (2.10) (2.64) (3.58) (.73) (2.62)
Net asset value, end of period ........ $ 30.05 $ 25.65 $ 28.98 $ 22.64 $ 22.92 $ 19.54
- --------------------------------------------------------------------------------------------------------------------------
Total Return (%) ...................... 26.79** (4.54) 43.06 15.94 21.96 (4.72)
Ratios and Supplemental Data
Net assets, end of period ($ millions) 2,555 1,997 2,213 1,651 1,492 1,338
Ratio of operating expenses to average
daily net assets (%) ................ .87* .88 .93 .92 .98 .97
Ratio of net investment income (loss)
to average daily net assets (%) ..... 1.25* 1.25 1.51 1.62 .62 (.12)
Portfolio turnover rate (%) ........... 35.2* 39.5 43.0 150.7 153.6 75.8
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Net investment income per share includes non-recurring dividend income
amounting to $.05 per share.
* Annualized.
** Not Annualized.
18 - Scudder Large Company Value Fund
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder Large Company Value (the "Fund") is a diversified series of Value Equity
Trust (the "Trust") which is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company
organized as a Massachusetts business trust.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close
of regular trading on the New York Stock Exchange. Securities which are traded
on U.S. or foreign stock exchanges are valued at the most recent sale price
reported on the exchange on which the security is traded most extensively. If no
sale occurred, the security is then valued at the calculated mean between the
most recent bid and asked quotations. If there are no such bid and asked
quotations, the most recent bid quotation is used. Securities quoted on the
Nasdaq Stock Market ("Nasdaq"), for which there have been sales, are valued at
the most recent sale price reported. If there are no such sales, the value is
the most recent bid quotation. Securities which are not quoted on Nasdaq but are
traded in another over-the-counter market are valued at the most recent sale
price, or if no sale occurred, at the calculated mean between the most recent
bid and asked quotations on such market. If there are no such bid and asked
quotations, the most recent bid quotation shall be used.
Portfolio debt securities purchased with an original maturity greater than sixty
days are valued by pricing agents approved by the officers of the Trust, whose
quotations reflect broker/dealer-supplied valuations and electronic data
processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. Money market instruments purchased with an original maturity of
sixty days or less are valued at amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Trustees.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian or
sub-custodian bank, receives delivery of the underlying securities, the amount
of which at the time of purchase and each subsequent business day is required to
be maintained at such a level that the market value is equal to at least the
principal amount of the repurchase price plus accrued interest.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Accordingly, the Fund paid no federal income taxes and no federal
income tax provision was required.
Distribution of Income and Gains. Distributions of net investment income, if
any, are made annually. Net realized gains from investment transactions, in
excess of available capital loss carryforwards, would be taxable to the Fund if
not distributed, and, therefore, will be distributed to shareholders at least
annually. 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.
19 - Scudder Large Company Value Fund
<PAGE>
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. As a result, net
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date. Certain dividends
from foreign securities may be recorded subsequent to the ex-dividend date as
soon as the Fund is informed of such dividends. Realized gains and losses from
investment transactions are recorded on an identified cost basis.
Expenses. Expenses arising in connection with a specific Fund are allocated to
that Fund. Other Trust expenses are allocated between the Funds in proportion to
their relative net assets.
B. Purchases and Sales of Securities
During the ten months ended July 31, 1999, purchases and sales of investment
securities (excluding short-term investments) aggregated $742,489,359 and
$687,059,953, respectively. 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
Under the Investment Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"), the Adviser directs the
investments of the Fund in accordance with its investment objectives, policies,
and restrictions. The Adviser determines the securities, instruments, and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio management services, the Adviser provides certain
administrative services in accordance with the Agreement. The Fund has agreed to
pay to the Adviser a fee equal to an annual rate of 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, 0.55% of the next
$500,000,000 of such net assets, and 0.50% of such net assets in excess of
$2,000,000,000 computed and accrued daily and payable monthly. For the ten
months ended July 31, 1999, the fees pursuant to the Agreement amounted to
$12,261,953 which was equivalent to an annual effective rate of 0.61% of the
Fund's average daily net assets. During 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 0.63% of the Fund's average daily net assets.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
ten months ended July 31, 1999, the amount charged to the Fund by SSC amounted
to $2,057,788, of which $204,116 is unpaid at July 31, 1999. During the year
ended September 30, 1998, the amount charged to the Fund by SSC aggregated
$2,518,178.
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 ten months ended July 31,
1999, the amount charged to the Fund by STC aggregated $1,545,597, of which
$294,062 is unpaid at July 31, 1999. During the year ended September 30, 1998,
the amount charged to the Fund by STC aggregated $1,835,663.
20 - Scudder Large Company Value Fund
<PAGE>
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 ten months
ended July 31, 1999, the amount charged to the Fund by SFAC aggregated $147,196,
of which $30,868 is unpaid at July 31, 1999. During the year ended September 30,
1998 the amount charged to the Fund by SFAC aggregated $174,325.
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 July 31, 1999, the Special
Servicing Agreement expense charged to the Fund amounted to $30,554. During the
year ended September 30, 1998, the Special Servicing Agreement expense charged
to the Fund amounted to $18,102.
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 ten months ended July 31, 1999, Trustees' fees and expenses aggregated
$29,650. During the year ended September 30, 1998, Trustees' fees and expenses
aggregated $53,462.
D. Line of Credit
The Fund and several Scudder Funds (the "Participants") share in a $850 million
revolving credit facility for temporary or emergency purposes, including the
meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated pro rata among each of the Participants. Interest is
calculated based on the market rates at the time of the borrowing. The Fund may
borrow up to a maximum of 33 percent of its net assets under the agreement.
E. Year End Change
On June 7, 1999, the Fund changed its fiscal year end for financial reporting
and federal income tax purposes to July 31 from September 30.
21 - 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 investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Scudder Large Company Value Fund
(the "Fund") at July 31, 1999, the results of its operations, the changes in its
net assets, and the financial highlights for the periods indicated therein, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the 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 July 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
September 16, 1999
22 - Scudder Large Company Value Fund
<PAGE>
Tax Information
The Fund paid distributions of $2.10 per share from net long-term capital gains
during the ten months endedJuly 31, 1999, of which 100% represents 20% rate
gains. Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$113,000,000 as capital gain dividends for the ten months ended July 31, 1999,
of which 100% represents 20% rate gains.
For corporate shareholders, 100% of the income dividends paid during the Fund's
ten months ended July 31, 1999 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.
23 - Scudder Large Company Value Fund
<PAGE>
This Page
intentionally
left blank.
24 - Scudder Large Company Value Fund
<PAGE>
Officers and Trustees
Lynn S. Birdsong*
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
Keith R. Fox
Trustee; Private Equity Investor
William H. Luers
Trustee; Chairman and
President, U.N. Association of
America
Kathryn L. Quirk*
Trustee, Vice President and
Assistant Secretary
Joan E. Spero
Trustee; President, Doris Duke
Charitable Foundation
Thomas J. Devine
Honorary Trustee; Consultant
Wilson Nolen
Honorary Trustee; Consultant
Robert G. Stone, Jr.
Honorary Trustee; Chairman
Emeritus and Director, Kirby
Corporation
Donald E. Hall*
Vice President
Ann M. McCreary*
Vice President
Kathleen T. Millard*
Vice President
Robert D. Tymoczko*
Vice President
John Millette*
Vice President and Secretary
John R. Hebble*
Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
25 - 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**
U.S. Income
- -----------
Scudder Short Term Bond 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 Select 500 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 Select 1000 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
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
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.
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +++Funds within categories are listed in order from
expected least risk to most risk. Certain Scudder funds or classes thereof may
not be available for purchase or exchange. +A portion of the income from the
tax-free funds may be subject to federal, state, and local taxes. *A class of
shares of the Fund. **Not available in all states. ***Only the Scudder Shares of
the Fund are part of the Scudder Family of Funds. ++Only the International
Shares of the Fund are part of the Scudder Family of Funds. +++ +++A no-load
variable annuity contract provided by Charter National Life Insurance Company
and its affiliate, offered by Scudder's insurance agencies, 1-800-225-2470. +++
+++ +++A no-load variable annuity contract issued by Glenbrook Life and Annuity
Company and underwritten by Allstate Financial Services, Inc., sold by Scudder'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.
26 - 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
Personal Investment Organizer: 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-SCUDDER
Please address all written correspondence to: The Scudder Funds, P.O. Box 2291, Boston, Massachusetts 02107-2291
- ------------------------------------------------------------------------------------------------------------------------------
</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 organizations worldwide, managing more than $280 billion
in assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 80
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Financial Services Group. As a result, Zurich's subsidiary, Zurich
Kemper Investments, Inc., with 50 years of mutual fund and investment management
experience, was combined with Scudder. Headquartered in New York, Scudder Kemper
Investments offers a full range of investment counsel and asset management
capabilities, based on a combination of proprietary research and disciplined,
long-term investment strategies. With its global investment resources and
perspective, the firm seeks opportunities in markets throughout the world to
meet the needs of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Financial Services Group. The Zurich Financial Services Group is
an internationally recognized leader in financial services, including
property/casualty and life insurance, reinsurance, and asset management.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER
