SCUDDER LARGE COMPANY VALUE FUND
SCUDDER VALUE FUND
SUPPLEMENT TO THE STATEMENT OF
ADDITIONAL INFORMATION DATED FEBRUARY 1, 1999
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The following text replaces the section entitled "General Investment Objective
and Policies of Value Fund" beginning on page 2 of the Fund's Statement of
Additional Information:
Value Fund seeks to provide long-term growth of capital through investment in
undervalued equity securities. This objective is not fundamental and may be
changed by the Trustees without a shareholder vote. Also, unless otherwise
stated, the policies of the Fund are not fundamental and may be changed by the
Trustees without a shareholder vote. If there is a change in investment
objective, shareholders should consider whether the Fund remains an appropriate
investment in light of their then current financial position and needs. There
can be no assurance that the Fund's objective will be met. The Fund invests
primarily in the stock of larger, established U.S. companies that the Fund's
portfolio management team believes are undervalued in the marketplace.
Stocks trade at a discount for many reasons. Typically, these companies, or
their industries, have fallen out of favor with investors because of such things
as earnings disappointments, negative industry or economic events, or investor
skepticism. As a result, their stock prices may not accurately reflect their
long-term business potential. Accordingly, the prices of these stocks may rise
as business fundamentals improve or as market conditions change. For example,
stock prices are often affected beneficially when a company's earnings exceed
general expectations or when investors begin to appreciate the full extent of a
company's business potential.
The Fund invests at least 80% of its assets in equity securities consisting of
common stocks, preferred stocks, securities convertible into common stocks,
rights and warrants. The Fund changes its portfolio securities for long-term
investment considerations and not for trading purposes.
The Fund may be appropriate for investors who seek a core holding to establish
the foundation of a value-oriented portfolio or a value fund to diversify an
investor's existing growth-equity portfolio.
The Fund invests primarily in common stocks of larger, established domestic
companies with market capitalizations of at least $1 billion. The Adviser uses
in-depth fundamental and quantitative research to identify companies that are
currently undervalued in relation to future business prospects.
The Fund's portfolio management team uses a proprietary computer model to rank
the 1000 stocks that comprise the Russell 1000 Index -- a widely used large
stock universe -- based on their relative valuations. A company's valuation is
measured by comparing its stock price to its business fundamentals, such as
sales, earnings or book value. The Fund's portfolio management team focuses on
the stocks with the lowest valuations, which are further analyzed and rated
using fundamental research, such as an examination of a company's historical
earnings patterns, sales growth and profit margins in order to assess the
likelihood of a rebound in the stock price if a company's business fundamentals
improve or market conditions change.
In an effort to manage the risk exposure of the Fund, the portfolio management
team then assesses the expected volatility of the Fund and the potential impact
the most promising of the stocks may have on the Fund's risk level. Based on
this information, the Fund's portfolio management team selects approximately
60-90 stocks that the portfolio management team believes offer the greatest
potential for attractive long-term gains.
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The Fund typically sells a stock when its price is no longer considered to be a
value, it is less likely to benefit from the current market or economic
environment, it experiences deteriorating fundamentals or its price performance
falls short of the portfolio management team's expectations.
The Fund may invest up to 20% of its assets in investment-grade debt
obligations, including zero coupon securities and commercial paper and may enter
into repurchase agreements and reverse repurchase agreements. In addition, the
Fund may engage in strategic transactions and derivatives and invest in illiquid
securities. Investment-grade debt securities are those rated Aaa, Aa, A or Baa
by Moody's, or AAA, AA, A or BBB by S&P or, if unrated, of equivalent quality as
determined by the Adviser.
The Fund may also purchase debt securities which are rated below
investment-grade (that is, rated below Baa by Moody's or below BBB by S&P) and
unrated securities of equivalent quality as determined by the Adviser, which
usually entail greater risk (including the possibility of default or bankruptcy
of the issues of such securities), generally involve greater volatility of price
and risk of principal and income, and may be less liquid and more difficult to
value than securities in the higher rating categories. The Fund may invest up to
20% of its assets in such securities ("high yield/high risk securities" commonly
referred to as "junk bonds") but will invest no more than 10% of its assets in
securities rated B or lower by Moody's or S&P and may not invest more than 5% of
its net assets in securities which are rated C by Moody's or D by S&P or of
equivalent quality as determined by the Adviser. Securities rated C or D may be
in default with respect to payment of principal or interest. Also, longer
maturity bonds tend to fluctuate more in price as interest rates change than do
short-term bonds, providing both opportunity and risk. (See "High Yield, High
Risk Securities.")
The Fund is limited to 5% of net assets for initial margin and premium amounts
on futures positions considered speculative by the Commodities Futures Trading
Commission.
The Fund may borrow money for temporary, emergency or other purposes, including
investment leverage purposes, as determined by the Trustees.
The Fund cannot guarantee a gain or eliminate the risk of loss. The net asset
value of a Fund's shares will increase or decrease with changes in the market
price of the Fund's investments, and there is no assurance that the Fund's
objective will be achieved.
The following text replaces the section entitled "Foreign Securities" under
"Investments and Investment Techniques" on page 4 of the Funds' Statement of
Additional Information:
Foreign Securities. While Large Company Value Fund generally emphasizes
investments in companies domiciled in the U.S., it may invest in listed and
unlisted foreign securities of the same types as the domestic securities in
which they may invest, when the anticipated performance of foreign securities is
believed by the Adviser to offer more potential than domestic alternatives, in
keeping with the investment objectives of the Fund.
Investors should recognize that investing in foreign securities involves certain
special considerations, including those set forth below, which are not typically
associated with investing in U.S. securities and which may favorably or
unfavorably affect the Large Company Value Fund's performance. As foreign
companies are not generally subject to uniform accounting, auditing and
financial reporting standards, practices and requirements comparable to those
applicable to domestic companies, there may be less publicly available
information about a foreign company than about a domestic company. Many foreign
stock markets, while growing in volume of trading activity, have substantially
less volume than the U.S. market and securities of some foreign issuers are less
liquid and more volatile than securities of domestic companies. Similarly,
volume and liquidity in most foreign bond markets are less than the volume and
liquidity in the U.S. and at times, volatility of price can be greater than in
the U.S. Further, foreign markets have different clearance and settlement
procedures and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when assets
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of Large Company Value Fund are uninvested and no return is earned thereon. The
inability of Large Company Value Fund to make intended security purchases due to
settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of portfolio securities due to settlement
problems either could result in losses to Large Company Value Fund due to
subsequent declines in value of the portfolio security or, if the Fund has
entered into a contract to sell the security, could result in possible liability
to the purchaser. Fixed commissions on some foreign stock exchanges and bid to
asked spreads in foreign bond markets are generally higher than negotiated
commissions or bid to asked spreads on U.S. markets although Large Company Value
Fund will endeavor to achieve the most favorable net results on its portfolio
transactions. Further, Large Company Value Fund may encounter difficulties or be
unable to pursue legal remedies and obtain judgments in foreign courts. There is
generally less governmental supervision and regulation of securities exchanges,
brokers and listed companies in most foreign countries than in the U.S. It may
be more difficult for Large Company Value Fund's agents to keep currently
informed about corporate actions in foreign countries such as stock dividends or
other matters, which may affect the prices of portfolio securities.
Communications between the U.S. and foreign countries may be less reliable than
within the U.S., thereby increasing the risk of delayed settlements of portfolio
transactions or loss of certificates for portfolio securities. Payment for
securities without delivery may be required in certain foreign markets. In
addition, with respect to certain foreign countries, there is the possibility of
nationalization, expropriation, the imposition of withholding or confiscatory
taxes, political, social, or economic instability, or diplomatic development,
which could affect U.S. investments in those countries. Investments in foreign
securities may also entail certain risks, such as possible currency blockages or
transfer restrictions, and the difficulty of enforcing rights in other
countries. Moreover, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resource self-sufficiency and
balance of payments position.
These considerations generally are more of a concern in developing countries.
For example, the possibility of revolution and the dependence on foreign
economic assistance may be greater in those countries than in developed
countries. The management of Large Company Value Fund seeks to mitigate the
risks associated with these considerations through diversification and active
professional management. Although investments in companies domiciled in
developing countries may be subject to potentially greater risks than
investments in developed countries, Large Company Value Fund will not invest in
any securities of issuers located in developing countries if the securities, in
the judgment of the Adviser, are speculative.
Investments in foreign securities usually will involve currencies of foreign
countries. Moreover, Large Company Value Fund may temporarily hold funds in bank
deposits in foreign currencies during the completion of investment programs and
the value of the assets for Large Company Value Fund, as measured in U.S.
dollars, may be affected favorably or unfavorably by changes in foreign currency
exchange rates and exchange control regulations, and Large Company Value Fund
may incur costs in connection with conversions between various currencies.
Although Large Company Value Fund values its assets daily in terms of U.S.
dollars, Large Company Value Fund does not intend to convert its holdings of
foreign currencies, if any, into U.S. dollars on a daily basis. Large Company
Value Fund may do so from time to time, and investors should be aware of the
costs of currency conversion. Although foreign exchange dealers do not charge a
fee for conversion, they do realize a profit based on the difference (the
"spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to Large Company
Value Fund at one rate, while offering a lesser rate of exchange should Large
Company Value Fund desire to resell that currency to the dealer. Large Company
Value Fund will conduct its foreign currency exchange transactions, if any,
either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market or through forward foreign currency exchange contracts.
To the extent that Large Company Value Fund invests in foreign securities, Large
Company Value Fund's share price could reflect the movements of both the
different stock and bond markets in which it is invested and the currencies in
which the investments are denominated: the strength or weakness of the U.S.
dollar against foreign currencies could account for part of Large Company Value
Fund's investment performance.
July 21, 1999
