SCUDDER
INVESTMENTS(SM)
[LOGO]
----------------------------
EQUITY/DOMESTIC
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Scudder Select Funds
Scudder Select 500
Fund
Fund #310
Scudder Select 1000
Growth Fund
Fund #311
Semiannual Report
August 31, 2000
Scudder Select 500 Fund seeks to provide long-term growth and income through
investment in selected stocks of companies in the S&P 500(R) Index.
Scudder Select 1000 Growth Fund seeks to provide long-term growth of capital
through investment in selected stocks of companies in the Russell 1000(R) Growth
Index.
Two no-load funds with no commissions to buy, sell or exchange shares.
<PAGE>
Contents
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4 Letter from the Funds' President
6 Portfolio Management Discussion
11 Glossary of Investment Terms
Select 500 Fund
12 Performance Update
14 Portfolio Summary
16 Investment Portfolio
Select 1000 Growth Fund
26 Performance Update
28 Portfolio Summary
30 Investment Portfolio
39 Financial Statements
43 Financial Highlights
45 Notes to Financial Statements
51 Shareholder Meeting Results
53 Officers and Trustees
54 Investment Products and Services
56 Account Management Resources
2
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Scudder Select Funds
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Scudder Select 500 Fund ticker symbol SSFFX fund number 310
Scudder Select 1000 Growth Fund ticker symbol STHGX fund number 311
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Date of Funds' o Scudder Select Funds yielded results that exceeded
Inception: the returns of their comparative indices for the
5/17/99 six-month period ended August 31, 2000.
o The funds' discipline of excluding the least attractive
stocks in their investment universe resulted in a total
Total Net return of 12.59% for Scudder Select 500 Fund and
Assets as a total return of 9.52% for Scudder Select 1000 Growth
of 8/31/00 -- Fund.
Select 500: o The funds produced mixed performance over the first
$39 million half of the six-month period, when top performance was
concentrated on a narrow band of value stocks, and
Select 1000 stronger performance over the latter half, when
Growth: outperformance by growth stocks extended to medium
$36 million capitalization issues.
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Letter from the Funds' President
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Dear Shareholders,
We are pleased to report to you on the performance of Scudder Select 500 Fund
and Scudder Select 1000 Growth Fund for their most recent semiannual period
ended August 31, 2000. During a turbulent period for stocks, both funds
outperformed their respective comparative indices: For the latest six-month
period ended August 31, 2000, Scudder Select 500 Fund's 12.59% return outpaced
the 11.73% return of the S&P 500 Index, while Scudder Select 1000 Growth Fund's
9.52% return was higher than the 8.96% return of the Russell 1000 Growth Index.
Both funds have also outperformed their respective indices since their May 17,
1999 inception date through the close of the period.
We believe that the Select Funds exemplify Scudder's innovative approach to
equity management. They are unique among retail mutual funds. Each fund --
through the use of a proprietary modeling process -- systematically excludes
what we view as the least attractive 20% of stocks in the S&P 500 or the Russell
1000 Growth Index. This strategy, which is primarily available to institutional
investors, seeks to outperform these standard benchmarks while reducing the risk
associated with not holding all of the securities in the particular index.
The idea for these unique products came from our portfolio management team's
insight that most Wall Street analysts have
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assigned many more "buy" ratings than "sell" ratings when evaluating individual
stocks for their firms. In studies leading up to the introduction of the funds,
our team came to the conclusion that 1) rather than the typical 1% or 2%, "sell"
ratings should actually represent 30-40% of analysts' recommendations and 2)
historically, eliminating the worst one fifth of either index's holdings has
produced significantly higher returns over time. The Scudder Select Funds
attempt to eliminate the weakest stocks and minimize the systematic tracking
error versus an index using the remaining stocks. For more information
concerning the funds' performance, strategy, and market environment, please read
the Portfolio Management Discussion that begins on page 6.
For current information about your fund and your account, please visit Scudder's
Web site at www.scudder.com. There you'll find a wealth of information,
including current fund performance, the latest news on Scudder products and
services, and the opportunity to perform account transactions. You can also call
a Scudder representative at 1-800-SCUDDER.
Sincerely,
/s/Lin Coughlin
Linda C. Coughlin
President
Scudder Select Funds
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Portfolio Management Discussion
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August 31, 2000
In the following interview, portfolio managers Robert Tymoczko, Stephen Marsh,
and Mark Berroth discuss the funds' market environment and strategy for the most
recent semiannual period ended August 31, 2000.
Q: How did the funds perform over the past six months?
A: Both funds performed well, posting total returns higher than their respective
benchmarks. For the latest semiannual period ended August 31, 2000, Scudder
Select 500 Fund's 12.59% return outpaced the 11.73% return of the S&P 500 Index,
while Scudder Select 1000 Growth Fund's 9.52% return was higher than the 8.96%
return of the Russell 1000 Growth Index.
Q: How would you describe the market environment during this period?
A: If you look at the first three months of the period versus the last three
months, we experienced two very different environments. During the first part,
value outperformed growth by a significant margin. Over that three-month period
ended in May, the Russell 1000 Value Index returned 12% while the Russell 1000
Growth Index declined -3%. In addition, large-cap stocks significantly
outperformed mid-cap stocks.
During the ensuing three months the opposite occurred: the Russell 1000 Growth
Index outperformed the Russell 1000 Value Index by 12.43% to 2.00%.
Q: What is the significance of the apparent shift during the period?
A: The first three months -- which were value-oriented -- weren't very
fundamentally driven. Technology stocks were falling and investors were looking
for alternatives. The rally in these stocks was limited to a short list of Dow
Jones stocks, large-cap names like Procter & Gamble and Coca-Cola. Though we saw
value stocks outperforming and some called this a return to fundamentals, it was
really a "flight to quality." And -- typical of a flight to quality -- the rally
was very narrow.
6
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-------------------------------------------------------------------------------
A Sampling of Select 500 Fund Quintile 5 Stocks
(Stocks eliminated or avoided)
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Total returns 2/29/00-8/31/00 Six Months
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Owens Corning -64%
Novell -63%
Staples -43%
Rite Aid -42%
Lucent Technologies -30%
Xerox -24%
MCI Worldcom -18%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
A Sampling of Select 1000 Growth Fund Quintile 5 Stocks
(Stocks eliminated or avoided)
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Total returns 2/29/00-8/31/00 Six Months
-------------------------------------------------------------------------------
Healtheon WebMD -68%
Legato Systems -66%
Novell -63%
PSINet -62%
At Home -58%
Earthlink -55%
Staples -43%
Office Depot -40%
Amazon.com -40%
-------------------------------------------------------------------------------
Stocks listed were eliminated prior to the period. Other securities with
positive or negative returns are not included in the tables.
Over the second half of the period, the top performers were growth stocks, which
many people associate with a lack of fundamentals. But that wasn't the case. In
this rally investors switched out of large-cap stocks and opted for stocks with
good earnings growth rates that reflected the valuations. Over that three-month
period ended August 31, the Russell 1000 Index returned 8.31% but the Russell
Midcap Index returned 11.56%. We think these numbers provide a measure of the
breadth of the rally, showing that mid-capitalization stocks were starting to
get some attention. We found this refocusing on
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fundamentals very encouraging, and it helped the performance of both funds.
Q: How do you manage the funds' risk levels, and how have the funds fared on a
risk-management basis?
A: There are several ways we monitor the funds' risk levels. One of our goals is
to keep tracking error within 2.5%. For the Scudder Select 500 Fund, the
realized tracking error has been 2.48% since the fund's inception. And for the
Scudder Select 1000 Growth Fund, the realized tracking error was 2.17% since
inception.
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How the Funds Are Managed
Scudder Select Funds seek to outperform the benchmark index for each fund -- the
S&P 500 Index for the Select 500 Fund and the Russell 1000 Growth Index for the
Select 1000 Growth Fund. The funds' managers attempt to accomplish this by
eliminating the 20% of assets that they believe have the lowest expected return
while replicating the fundamental characteristics of the index by selecting
stocks from the remaining 80%. In short, they attempt to add value in both funds
by "subtracting" stocks that are expected to underperform and investing among
the rest. For most investors, the stocks that will cause the greatest future
underperformance are ones that are already owned -- that is why the two funds
primarily concentrate on identifying stocks to avoid.
In selecting stocks to eliminate from the investment universe, management
attempts to identify those that have unattractive valuations, deteriorating
fundamentals, and a history of disappointing shareholders. The funds' managers
use four types of factors to evaluate a security: 1) valuation factors, such as
price/forward earnings and price/cash flow ratios, to identify those assets with
unattractive valuations; 2) earnings momentum factors, such as short- and
long-term momentum, to determine those securities that have deteriorating
fundamentals and a history of disappointing shareholders; 3) expectational
factors, such as earnings revisions, to identify the markets' recognition of a
deterioration in stock fundamentals; and 4) risk adversity factors, such as beta
or dividend yield, to isolate those stocks that have higher expected downside
risk.
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8
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Stock Selection Process:
Addition by Subtraction
The funds' managers use a proprietary computer model to systematically evaluate
stocks in the benchmarks. This analysis is based on a multifactor model that
evaluates each stock's growth prospects, relative valuation, and price momentum.
In each fund, stocks are assigned a ranking by quintile. Quintile 1 consists of
the highest-rated stocks and quintile 5 consists of the lowest-rated stocks.
Stocks ranked in the bottom, or fifth, quintile are excluded from a fund's
investment universe. From among the remaining stocks (quintile 1-4) an
optimization is performed to create a portfolio with systematic risk
characteristics that closely match the funds' benchmarks. Examples of risk
characteristics include exposure to specific industries, price/earnings ratios,
debt/equity ratios, price volatility, and market capitalization. If the
fundamental factor model calls for it, the characteristics of an excluded stock
can be replicated by increasing the weighting of stocks in the portfolio that
have the same fundamentals as that of the excluded stock. This results in a
portfolio with fundamental characteristics nearly identical to the benchmark.
Over time, each fund is rebalanced periodically as the rankings change.
This investment process is intended to create funds with relatively low
"tracking error," or return deviation, compared to their respective index.
Although management believes the tracking errors will be low relative to typical
U.S. stock funds, the investment approach is expected to help the funds to
outperform their benchmarks over an extended period.
--------------------------------------------------------------------------------
In addition, both portfolios over the semiannual period and since inception have
outperformed the respective benchmarks but they've also had a slightly lower
standard deviation (average variance from the mean). So they've actually
outperformed without taking on more absolute risk. The annualized standard
deviation since inception for the Scudder Select 500 Fund was 15.46% vs. 15.73%
for the benchmark. And for the Scudder Select 1000 Growth Fund it was 21.24% vs.
21.31% for the benchmark since inception.
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Another interesting thing we look at is down-side deviation, standard deviation
from the average but only on the down side. So when the market has declined how
has the fund performed? For the Scudder Select 500 fund the down-side deviation
was 2.20% compared with 2.40% for the benchmark since inception. For the Scudder
Select 1000 Growth Fund the down-side deviation was 3.32% versus 3.45% for the
benchmark since inception. So both funds have outperformed in terms of return,
absolute risk, and down-side risk.
Q: What is your outlook for the funds going forward?
A: Since the close of the period, it appears that the market has turned back to
a narrow value focus, which doesn't typically favor these funds. Historically,
however, there has often been a return to a search for fundamentals following a
period in which value investing has been emphasized. We believe that the funds
are positioned to outperform in such an environment. We believe the Scudder
Select Funds are an attractive vehicle for investors seeking reliable investment
growth over the long term.
10
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Glossary of Investment Terms
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Growth Stock Stock of a company that has displayed above-average earnings
growth and is expected to continue to increase profits
rapidly going forward.
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 The value of a company's outstanding shares of common stock,
Capitalization 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 Refers to the allocation of assets -- usually by sector,
Weighting industry, or country -- within a portfolio relative to a
benchmark index (e.g., the S&P 500 Index), or an investment
universe.
Price/Earnings Price of a stock divided by its earnings per share. A widely
Ratio (P/E) used gauge of a stock's valuation that indicates what
(also Earnings investors are paying for a company's earnings on a per share
Multiple) basis. A higher earnings multiple indicates a higher
investor expectation or growth rate and the potential for
greater price fluctuations.
Standard A statistical measure of the degree to which an investment's
Deviation return tends to vary from the mean return. Frequently used
in portfolio management to measure the variability of past
returns and to gauge the likely range of possible future
returns.
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, Inc.; Barron's Dictionary of Finance and
Investment Terms)
An expanded list of terms is located at our Web site, www.scudder.com.
11
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Performance Update
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August 31, 2000
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Growth of a $10,000 Investment
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THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Scudder Select
500 Fund S&P 500 Index*
5/99** 10000 10000
8/99 9942 9894
11/99 10503 10442
2/00 10595 10302
5/00 10888 10744
8/00 11929 11510
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Fund Index Comparison
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Total Return
Growth of Average
Period ended 8/31/2000 $10,000 Cumulative Annual
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Scudder Select 500 Fund
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1 year $ 11,999 19.99% 19.99%
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Life of Fund** $ 11,929 19.29% 14.62%
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S&P 500 Index*
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1 year $ 11,633 16.33% 16.33%
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Life of Fund** $ 11,510 15.10% 11.49%
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* The Standard & Poor's 500 Index is a capitalization-weighted index of
500 stocks. The index is designed to measure performance of the broad
domestic economy through changes in the aggregate market value of 500
stocks representing all major industries. Index returns assume
reinvestment of dividends and, unlike Fund returns, do not reflect any
fees or expenses.
** The Fund commenced operations on May 17, 1999.
12
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Returns and Per Share Information
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Yearly periods ended August 31
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE SCUDDER SELECT 500 FUND TOTAL RETURN (%) AND
S&P 500 INDEX* TOTAL RETURN (%)
1999** 2000
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Fund Total
Return (%) -.58 19.99
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Index Total
Return (%) -1.06 16.33
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Net Asset
Value ($) 11.91 14.21
--------------------------------------------------------------------------------
Income
Dividends
($) .02 .07
--------------------------------------------------------------------------------
Capital
Gains
Distributions
($) -- --
--------------------------------------------------------------------------------
* The Standard & Poor's 500 Index is a capitalization-weighted index of
500 stocks. The index is designed to measure performance of the broad
domestic economy through changes in the aggregate market value of 500
stocks representing all major industries. Index returns assume
reinvestment of dividends and, unlike Fund returns, do not reflect any
fees or expenses.
** The Fund commenced operations on May 17, 1999.
Performance is historical and assumes reinvestment of all dividends and
capital gains and is not indicative of future results. Total return and
principal value will fluctuate, so an investor's shares, when redeemed,
may be worth more or less than when purchased. If the Adviser had not
maintained the Fund's expenses, the total return for the life of Fund
period would have been lower.
13
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Portfolio Summary
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August 31, 2000
Scudder Select 500 Fund
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Asset Allocation
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A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
Common Stocks 100% The fund pursues a
------------------------------------ fully invested
100% approach.
------------------------------------
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Sector Diversification
--------------------------------------------------------------------------------
A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
Technology 28% The fund's investment
Financial 13% approach typically
Health 10% results in sector
Communications 10% weightings that are
Manufacturing 8% essentially similar to
Consumer Staples 8% the sector weightings of
Energy 7% the S&P 500 Index.
Consumer Discretionary 4%
Service Industries 4%
Other 8%
------------------------------------
100%
------------------------------------
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Ten Largest Equity Holdings
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(30% of Portfolio) The fund's top holdings
are the result of
1. General Electric Co. excluding the 20% of
Producer of electrical equipment assets with the lowest
expected return while
2. Intel Corp. replicating the
Producer of semiconductor memory circuits fundamental
characteristics of the
3. Cisco Systems, Inc. S&P 500 Index by
Manufacturer of computer network products selecting stocks from
among the remaining 80%.
4. Citigroup, Inc.
Diversified financial services company
5. SBC Communications, Inc.
Provider of telecommunication services
6. Microsoft Corp.
Developer of computer software
7. Exxon Mobil Corp.
International oil company
8. Pfizer, Inc.
International pharmaceutical company
9. EMC Corp.
Provider of enterprise storage systems, software,
networks and services
10. Nortel Networks Corp.
Provider of telephony, data, wireless, and wireline
products and services for the Internet
For more complete details about the Fund's investment portfolio, see page 16. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
15
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Investment Portfolio as of August 31, 2000 (Unaudited)
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Principal
Amount ($) Value ($)
---------------------------------------------------------------------
Scudder Select 500 Fund
---------------------------------------------------------------------
Repurchase Agreements 0.4%
---------------------------------------------------------------------
State Street Bank and Trust Company, 6.57%,
to be repurchased at $178,032 on 9/1/2000**
(Cost $178,000) ........................... 178,000 178,000
Shares
-------------------------------------------------------------------
-------------------------------------------------------------------
Common Stocks 99.6%
-------------------------------------------------------------------
Consumer Discretionary 4.0%
Apparel & Shoes 0.2%
Jones Apparel Group, Inc.* ................... 500 12,250
Liz Claiborne, Inc. .......................... 400 17,575
Russell Corp. ................................ 1,900 36,219
---------
66,044
---------
Department & Chain Stores 3.5%
CVS Corp. .................................... 2,800 103,950
Consolidated Stores Corp.* ................... 800 10,900
Federated Department Stores, Inc.* ........... 4,500 124,313
Home Depot, Inc. ............................. 6,800 326,825
J.C. Penney Co., Inc. ........................ 100 1,400
Kohl's Corp.* ................................ 1,000 56,000
Lowe's Companies, Inc. ....................... 1,300 58,256
Sears, Roebuck & Co. ......................... 200 6,238
The Limited, Inc. ............................ 3,200 64,000
Wal-Mart Stores, Inc. ........................ 13,100 621,431
---------
1,373,313
---------
Home Furnishings 0.0%
Newell Rubbermaid, Inc. ...................... 400 10,375
---------
Hotels & Casinos 0.2%
Harrah's Entertainment, Inc.* ................ 600 17,025
Marriott International, Inc. "A" ............. 1,800 71,100
---------
88,125
---------
Restaurants 0.1%
Brinker International, Inc.* ................. 600 19,050
The accompanying notes are an integral part of the financial statements.
16
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Shares Value ($)
----------------------------------------------------------
Outback Steakhouse, Inc.* ............. 1,200 27,525
---------
46,575
---------
Specialty Retail 0.0%
BJ's Wholesale Club, Inc.* ............ 300 10,163
Family Dollar Stores, Inc. ............ 100 1,800
---------
11,963
---------
Consumer Staples 7.6%
Alcohol & Tobacco 2.0%
Anheuser-Busch Companies, Inc. ........ 3,400 267,963
Brown-Forman Corp. "B" ................ 3,300 174,900
Philip Morris Companies, Inc. ......... 8,900 263,663
Seagram Co., Ltd. ..................... 1,300 78,244
---------
784,770
---------
Consumer Electronic & Photographic 0.5%
Eastman Kodak Co. ..................... 2,300 143,175
Energizer Holdings, Inc.* ............. 2,433 48,052
Maytag Corp. .......................... 400 15,250
---------
206,477
---------
Consumer Specialties 0.1%
American Greeting Corp. "A" ........... 1,700 31,663
---------
Food & Beverage 2.4%
Albertson's, Inc. ..................... 2,245 48,268
Coca-Cola Co. ......................... 1,100 57,888
General Mills, Inc. ................... 400 12,850
Kroger Co.* ........................... 4,400 99,825
Nabisco Group Holdings ................ 2,700 75,769
PepsiCo, Inc. ......................... 3,100 132,138
Quaker Oats Co. ....................... 2,800 190,225
Ralston Purina Group .................. 7,300 165,163
Safeway, Inc.* ........................ 2,300 113,419
Winn-Dixie Stores, Inc. ............... 2,300 32,056
---------
927,601
---------
Package Goods/Cosmetics 2.6%
Avon Products, Inc. ................... 3,000 117,563
Clorox Co. ............................ 1,300 47,044
Colgate-Palmolive Co. ................. 1,700 86,594
Kimberly-Clark Corp. .................. 6,500 380,250
Procter & Gamble Co. .................. 3,900 241,069
Unilever NV (New York shares) ......... 3,500 165,375
---------
1,037,895
---------
The accompanying notes are an integral part of the financial statements.
17
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Shares Value ($)
-------------------------------------------------------
Health 10.1%
Biotechnology 1.6%
Amgen, Inc.* ...................... 4,800 363,900
PE Corp.-PE Biosystems Group ...... 1,300 127,888
Pharmacia Corp. ................... 2,618 153,317
---------
645,105
---------
Health Industry Services 0.5%
Cardinal Health, Inc. ............. 1,200 98,175
Wellpoint Health Networks, Inc.* .. 1,100 94,944
---------
193,119
---------
Hospital Management 0.5%
HCA-The Heathcare Co. ............. 1,500 51,750
Health Management Associates, Inc.* 400 6,525
Manor Care, Inc.* ................. 2,400 32,100
UnitedHealth Group, Inc. .......... 1,100 103,950
---------
194,325
---------
Medical Supply & Specialty 0.6%
Baxter International, Inc. ........ 1,900 158,175
Edwards Lifesciences Corp.* ....... 780 20,475
Mallinckrodt, Inc. ................ 100 4,506
Medtronic, Inc. ................... 1,000 51,250
---------
234,406
---------
Pharmaceuticals 6.9%
Abbott Laboratories ............... 6,600 288,750
Allergan, Inc. .................... 1,700 124,313
American Home Products Corp. ...... 2,700 146,306
Bristol-Myers Squibb Co. .......... 5,400 286,200
Eli Lilly & Co. ................... 2,100 153,300
Forest Laboratories, Inc.* ........ 300 29,363
Johnson & Johnson ................. 2,500 229,844
Merck & Co., Inc. ................. 8,500 593,938
Pfizer, Inc. ...................... 18,475 799,044
Watson Pharmaceuticals, Inc.* ..... 1,500 92,531
---------
2,743,589
---------
Communications 9.5%
Cellular Telephone 0.3%
Sprint Corp. (PCS Group)* ......... 2,500 125,469
---------
Telephone/Communications 9.2%
ADC Telecommunications, Inc.* ..... 2,000 81,849
AT&T Corp. ........................ 300 9,450
The accompanying notes are an integral part of the financial statements.
18
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Shares Value ($)
--------------------------------------------------------------
Alltel Corp. ............................ 500 25,281
BellSouth Corp. ......................... 15,200 567,150
JDS Uniphase Corp.* ..................... 2,100 261,713
Nortel Networks Corp. ................... 8,900 725,906
Qwest Communications International, Inc.* 7,898 407,734
SBC Communications, Inc. ................ 27,200 1,135,600
Sprint Corp. ............................ 2,400 80,400
Verizon Communications .................. 7,492 326,839
---------
3,621,922
---------
Financial 13.3%
Banks 3.5%
Bank of New York Co., Inc. .............. 600 31,463
Chase Manhattan Corp. ................... 50 2,794
Commerce Bankshares, Inc. ............... 1 36
First Union Corp. ....................... 1,300 37,619
FleetBoston Financial Corp. ............. 5,913 252,411
Golden West Financial Corp. ............. 5,900 280,988
J.P. Morgan & Co., Inc. ................. 400 66,875
MBNA Corp. .............................. 1,500 52,969
PNC Bank Corp. .......................... 5,100 300,581
State Street Corp. ...................... 1,900 223,725
Wells Fargo & Co. ....................... 3,300 142,519
---------
1,391,980
---------
Insurance 1.9%
Aetna, Inc. ............................. 500 27,969
Allstate Corp. .......................... 2,900 84,281
American General Corp. .................. 900 65,531
Aon Corp. ............................... 700 26,119
Chubb Corp. ............................. 500 38,281
Cigna Corp. ............................. 1,000 97,250
Hartford Financial Services Group, Inc. . 400 26,650
Jefferson-Pilot Corp. ................... 400 26,475
Lincoln National Corp. .................. 2,200 118,800
MBIA, Inc. .............................. 200 13,150
MGIC Investment Corp. ................... 1,300 76,456
PMI Group, Inc. ......................... 750 46,500
Torchmark Corp. ......................... 2,600 72,963
UnumProvident Corp. ..................... 700 15,181
---------
735,606
---------
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
Shares Value ($)
---------------------------------------------------------
Consumer Finance 4.1%
American Express Co. ................ 2,600 153,725
Citigroup, Inc. ..................... 25,133 1,467,139
---------
1,620,864
---------
Other Financial Companies 3.8%
A.G. Edwards, Inc. .................. 600 31,200
Federal National Mortgage Association 7,900 424,625
Legg Mason, Inc. .................... 1,100 58,025
Lehman Brothers Holdings, Inc. ...... 800 116,000
Marsh & McLennan Companies, Inc. .... 2,400 285,000
Morgan Stanley Dean Witter & Co. .... 5,600 602,350
TCF Financial Corp. ................. 200 6,563
---------
1,523,763
---------
Media 1.9%
Advertising 0.4%
Omnicom Group, Inc. ................. 800 66,750
Young & Rubicam, Inc. ............... 1,700 99,450
---------
166,200
---------
Broadcasting & Entertainment 1.2%
Viacom, Inc. "B"* ................... 751 50,552
Walt Disney Co. ..................... 10,800 420,525
---------
471,077
---------
Print Media 0.3%
Harcourt General, Inc. .............. 800 47,450
Knight-Ridder, Inc. ................. 800 43,700
---------
91,150
---------
Service Industries 3.7%
EDP Services 1.0%
Automatic Data Processing, Inc. ..... 3,800 226,575
First Data Corp. .................... 3,800 181,213
---------
407,788
---------
Environmental Services 0.2%
Transocean Sedo Forex, Inc. ......... 400 23,900
Waste Management, Inc. .............. 3,300 62,494
---------
86,394
---------
Investment 1.4%
Donaldson, Lufkin & Jenrette, Inc. .. 500 44,250
Merrill Lynch & Co., Inc. ........... 2,700 391,500
Paine Webber Group, Inc. ............ 600 42,900
Stilwell Financial, Inc.* ........... 1,400 67,725
---------
546,375
---------
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
Shares Value ($)
----------------------------------------------------------
Miscellaneous Commercial Services 0.9%
Ecolab, Inc. ......................... 100 3,894
NCR Corp.* ........................... 800 32,300
Paychex, Inc. ........................ 450 20,081
Sabre Holdings Corp. ................. 6,300 175,613
Siebel Systems, Inc.* ................ 300 59,100
Sysco Corp. .......................... 1,700 71,931
---------
362,919
---------
Printing/Publishing 0.2%
Dow Jones & Co., Inc. ................ 1,100 68,819
---------
Durables 2.1%
Aerospace 1.2%
Boeing Co. ........................... 4,700 252,038
Lockheed Martin Corp. ................ 2,700 76,613
Rockwell International Corp. ......... 1,600 64,700
United Technologies Corp. ............ 1,279 79,858
---------
473,209
---------
Automobiles 0.8%
General Motors Corp. ................. 4,100 295,969
---------
Telecommunications Equipment 0.1%
Andrew Corp.* ........................ 1,800 53,325
---------
Manufacturing 8.8%
Chemicals 0.4%
Dow Chemical Co. ..................... 600 15,713
E.I. du Pont de Nemours & Co. ........ 2,900 130,138
Praxair, Inc. ........................ 400 17,700
---------
163,551
---------
Containers & Paper 0.1%
Fort James Corp. ..................... 900 28,463
Sealed Air Corp.* .................... 200 10,263
---------
38,726
---------
Diversified Manufacturing 6.2%
General Electric Co. ................. 29,100 1,707,806
Minnesota Mining & Manufacturing Co. . 3,000 279,000
Tyco International Ltd. .............. 7,956 453,492
---------
2,440,298
---------
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
Shares Value ($)
-----------------------------------------------------------
Electrical Products 0.4%
Emerson Electric Co. .................. 2,300 152,231
---------
Industrial Specialty 1.0%
Corning, Inc. ......................... 800 262,350
Johnson Controls, Inc. ................ 300 16,031
Novellus Systems, Inc.* ............... 500 30,781
PPG Industries, Inc. .................. 500 20,250
Sherwin-Williams Co. .................. 3,200 73,600
---------
403,012
---------
Machinery/Components/Controls 0.2%
Ingersoll-Rand Co. .................... 800 36,450
Pitney Bowes, Inc. .................... 900 32,906
Visteon Corp. ......................... 497 7,797
---------
77,153
---------
Miscellaneous 0.5%
Ford Motor Co. ........................ 8,216 198,725
---------
Technology 28.3%
Computer Software 5.8%
Adobe Systems, Inc. ................... 700 91,000
Autodesk, Inc. ........................ 2,300 64,688
Comverse Technology, Inc.* ............ 1,000 91,938
Electronic Arts, Inc.* ................ 200 21,588
Microsoft Corp.* ...................... 15,600 1,089,075
Oracle Corp.* ......................... 7,600 691,125
Parametric Technology Corp.* .......... 9,600 128,400
PeopleSoft, Inc.* ..................... 2,900 93,525
Symantec Corp.* ....................... 200 9,763
---------
2,281,102
---------
Diverse Electronic Products 1.0%
Applied Materials, Inc.* .............. 3,600 310,725
Molex, Inc. ........................... 300 15,844
Teradyne, Inc.* ....................... 1,200 77,775
---------
404,344
---------
EDP Peripherals 2.2%
EMC Corp.* ............................ 7,600 744,800
VERITAS Software Corp.* ............... 1,100 132,619
---------
877,419
---------
Electronic Components/Distributors 4.7%
Altera Corp.* ......................... 1,400 90,738
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
Shares Value ($)
-----------------------------------------------------------
Analog Devices, Inc.* ............... 1,000 100,500
Broadcom Corp. "A"* ................. 400 100,000
Cisco Systems, Inc.* ................ 21,700 1,486,450
Gateway, Inc.* ...................... 1,000 68,100
---------
1,845,788
---------
Electronic Data Processing 6.0%
Apple Computer, Inc.* ............... 2,600 158,438
Compaq Computer Corp. ............... 10,200 347,438
Hewlett-Packard Co. ................. 4,900 591,675
International Business Machines Corp. 1,800 237,600
Radioshack Corp. .................... 3,000 177,000
Seagate Technology, Inc.* ........... 1,900 112,813
Sun Microsystems, Inc.* ............. 5,300 672,769
Unisys Corp.* ....................... 6,100 79,300
---------
2,377,033
---------
Military Electronics 0.5%
Computer Sciences Corp.* ............ 2,200 173,938
---------
Office/Plant Automation 0.2%
3Com Corp.* ......................... 1,000 16,625
Palm, Inc.* ......................... 1,683 74,052
---------
90,677
---------
Semiconductors 7.7%
Advanced Micro Devices, Inc.* ....... 1,200 45,150
Intel Corp. ......................... 22,500 1,684,688
KLA-Tencor Corp.* ................... 2,700 177,188
LSI Logic Corp.* .................... 900 32,344
Linear Technology Corp. ............. 1,100 79,131
Maxim Integrated Products, Inc.* .... 1,300 113,994
Micron Technology, Inc.* ............ 1,200 98,100
National Semiconductor Corp.* ....... 2,200 97,900
Sanmina Corp.* ...................... 800 94,400
Texas Instruments, Inc. ............. 7,300 488,644
Xilinx, Inc.* ....................... 1,500 133,313
---------
3,044,852
---------
Miscellaneous 0.2%
Agilent Technologies, Inc.* ......... 1,468 88,539
---------
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
Shares Value ($)
-----------------------------------------------------------------
Energy 7.1%
Engineering 0.1%
Fluor Corp. ............................... 1,600 47,900
---------
Oil & Gas Production 5.3%
Anadarko Petroleum Corp. .................. 1,456 95,761
Apache Corp. .............................. 1,000 63,000
BP Amoco PLC (ADR) ........................ 5,204 287,521
Coastal Corp. ............................. 1,000 68,875
EOG Resources, Inc. ....................... 200 7,650
Exxon Mobil Corp. ......................... 11,904 971,664
Royal Dutch Petroleum Co. (New York shares) 9,000 550,688
Texaco, Inc. .............................. 1,000 51,500
---------
2,096,659
---------
Oil Companies 0.7%
Ashland, Inc. ............................. 100 3,525
Chevron Corp. ............................. 3,100 261,950
---------
265,475
---------
Oil/Gas Transmission 0.6%
El Paso Energy Corp. ...................... 400 23,300
Enron Corp. ............................... 2,600 220,675
---------
243,975
---------
Oilfield Services/Equipment 0.4%
Noble Drilling Corp.* ..................... 500 24,250
Rowan Companies, Inc.* .................... 1,900 58,900
Schlumberger Ltd. ......................... 500 42,656
Tidewater, Inc. ........................... 700 28,263
---------
154,069
---------
Metals & Minerals 0.4%
Steel & Metals
Alcoa, Inc. ............................... 2,800 93,100
Allegheny Technologies, Inc. .............. 2,800 60,900
Phelps Dodge Corp. ........................ 300 13,350
USX-US Steel Group ........................ 200 3,475
---------
170,825
---------
Transportation 0.8%
Air Freight 0.1%
FedEx Corp.* .............................. 800 32,280
---------
Airlines 0.5%
AMR Corp. ................................. 2,400 78,750
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
Shares Value ($)
--------------------------------------------------------------------------------
Delta Air Lines, Inc. .................................... 1,900 94,050
Southwest Airlines Co. ................................... 900 20,363
US Airways Group, Inc.* .................................. 200 6,800
---------
199,963
---------
Railroads 0.2%
Burlington Northern Santa Fe Corp. ....................... 500 11,188
Kansas City Southern Industries, Inc. .................... 350 3,238
Union Pacific Corp. ...................................... 1,800 71,550
---------
85,976
---------
Utilities 2.0%
Electric Utilities
AES Corp.* ............................................... 1,300 82,875
American Electric Power Co. .............................. 1,300 45,825
Consolidated Edison, Inc. ................................ 2,100 65,756
Duke Energy Corp. ........................................ 5,300 396,506
FPL Group, Inc. .......................................... 1,800 96,075
Peco Energy Co. .......................................... 600 28,913
Southern Co. ............................................. 2,900 86,819
---------
802,769
---------
--------------------------------------------------------------------------------
Total Common Stocks (Cost $30,833,578) 39,395,453
--------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $31,011,578) (a) 39,573,453
--------------------------------------------------------------------------------
* Non-income producing security.
** Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities.
(a) The cost for federal income tax purposes was $31,100,255. At August 31,
2000, net unrealized appreciation based on tax cost was $8,473,198.
This consisted of aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost of
$9,894,780 and gross unrealized depreciation for all investment
securities in which there was an excess of tax cost over value of
$1,421,582.
During the six months ended August 31, 2000, purchases and sales of
investment securities (excluding short-term investments) aggregated
$15,131,638 and $13,568,495, respectively.
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
Performance Update
--------------------------------------------------------------------------------
August 31, 2000
--------------------------------------------------------------------------------
Growth of a $10,000 Investment
--------------------------------------------------------------------------------
THE ORIGINAL DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART DATA:
Scudder Select Russell 1000
1000 Growth Fund Growth Index*
5/99** 10000 10000
8/99 10250 10173
11/99 11300 11289
2/00 12619 12459
5/00 12185 12075
8/00 13820 13575
--------------------------------------------------------------------------------
Fund Index Comparison
Total Return
Growth of Average
Period ended 8/31/2000 $10,000 Cumulative Annual
--------------------------------------------------------------------------------
Scudder Select 1000 Growth Fund
--------------------------------------------------------------------------------
1 year $ 13,483 34.83% 34.83%
--------------------------------------------------------------------------------
Life of Fund** $ 13,820 38.20% 28.43%
--------------------------------------------------------------------------------
Russell 1000 Growth Index*
--------------------------------------------------------------------------------
1 year $ 13,344 33.44% 33.44%
--------------------------------------------------------------------------------
Life of Fund** $ 13,575 35.75% 26.66%
--------------------------------------------------------------------------------
* The Russell 1000 Growth Index is an unmanaged capitalization-weighted
price index of the 1000 largest U.S. growth companies traded on the
NYSE, AMEX and Nasdaq. Index returns assume reinvestment of dividends
and, unlike Fund returns, do not reflect any fees or expenses.
** The Fund commenced operations on May 17, 1999.
26
<PAGE>
--------------------------------------------------------------------------------
Returns and Per Share Information
--------------------------------------------------------------------------------
Yearly periods ended August 31
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE SCUDDER SELECT 1000 GROWTH FUND TOTAL RETURN (%) AND
RUSSELL 1000 GROWTH INDEX* TOTAL RETURN (%)
1999** 2000
--------------------------------------------------------------------------------
Fund Total
Return (%) 2.50 34.83
--------------------------------------------------------------------------------
Index Total
Return (%) 1.59 33.44
--------------------------------------------------------------------------------
Net Asset
Value ($) 12.30 16.56
--------------------------------------------------------------------------------
Income
Dividends
($) -- .02
--------------------------------------------------------------------------------
Capital
Gains
Distributions
($) -- --
--------------------------------------------------------------------------------
* The Russell 1000 Growth Index is an unmanaged capitalization-weighted
price index of the 1000 largest U.S. growth companies traded on the
NYSE, AMEX and Nasdaq. Index returns assume reinvestment of dividends
and, unlike Fund returns, do not reflect any fees or expenses.
** The Fund commenced operations on May 17, 1999.
Performance is historical and assumes reinvestment of all dividends and
capital gains and is not indicative of future results. Total return and
principal value will fluctuate, so an investor's shares, when redeemed,
may be worth more or less than when purchased. If the Adviser had not
maintained the Fund's expenses, the total return for the life of Fund
period would have been lower.
27
<PAGE>
Portfolio Summary
--------------------------------------------------------------------------------
August 31, 2000
Scudder Select 1000 Growth Fund
--------------------------------------------------------------------------------
Asset Allocation
--------------------------------------------------------------------------------
A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
The fund pursues a
Common Stocks 99% fully invested
Cash Equivalents 1% approach.
------------------------------------
100%
------------------------------------
--------------------------------------------------------------------------------
Sector Diversification
--------------------------------------------------------------------------------
(Excludes 1% Cash Equivalents)
A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
The fund's investment
approach typically
Technology 51% results in sector
Health 14% weightings that are
Manufacturing 9% essentially similar to
Service Industries 6% the sector weightings of
Communications 5% the Russell 1000 Growth
Consumer Discretionary 5% Index.
Consumer Staples 3%
Media 3%
Financial 3%
Other 1%
------------------------------------
100%
------------------------------------
28
<PAGE>
--------------------------------------------------------------------------------
Ten Largest Equity Holdings
--------------------------------------------------------------------------------
(41% of Portfolio) The fund's top holdings
are the result of
1. Intel Corp. excluding the 20% of
Producer of semiconductor memory circuits assets with the lowest
expected return while
2. General Electric Co. replicating the
Producer of electrical equipment fundamental
characteristics of the
3. Cisco Systems, Inc. Russell 1000 Growth
Manufacturer of computer network products Index by selecting
stocks from among the
4. Microsoft Corp. remaining 80%.
Developer of computer software
5. Pfizer, Inc.
International pharmaceutical company
6. International Business Machines Corp.
Manufacturer of computers and servicer of information
processing units
7. EMC Corp.
Provider of enterprise storage systems, software,
networks and services
8. Oracle Corp.
Provider of database management software
9. Sun Microsystems, Inc.
Manufacturer of high-performance workstations, servers
and software
10. Merck & Co, Inc.
Drug manufacturer
For more complete details about the Fund's investment portfolio, see page 30. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
29
<PAGE>
Investment Portfolio as of August 31, 2000 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
-----------------------------------------------------------------------------------------
Scudder Select 1000 Growth Fund
-----------------------------------------------------------------------------------------
Repurchase Agreements 0.5%
-----------------------------------------------------------------------------------------
<S> <C> <C>
State Street Bank and Trust Company, 6.57%,
to be repurchased at $182,033 on 9/1/2000**
(Cost $182,000) ............................................. 182,000 182,000
Shares
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Common Stocks 99.5%
-----------------------------------------------------------------------------------------
Consumer Discretionary 4.6%
Apparel & Shoes 0.1%
Abercrombie & Fitch Co.* ....................................... 2,500 57,969
----------
Department & Chain Stores 3.7%
Home Depot, Inc. ............................................... 11,850 569,541
Kohl's Corp.* .................................................. 500 28,000
Lowe's Companies, Inc. ......................................... 2,400 107,550
Target Corp. ................................................... 3,600 83,700
Wal-Mart Stores, Inc. .......................................... 11,200 531,300
----------
1,320,091
----------
Recreational Products 0.2%
Harley-Davidson, Inc. .......................................... 1,300 64,756
----------
Specialty Retail 0.6%
CDW Computer Centers, Inc.* .................................... 300 22,050
Circuit City Stores, Inc. ...................................... 800 20,750
Herman Miller, Inc. ............................................ 1,200 38,325
Priceline.com, Inc.* ........................................... 3,500 95,156
Tiffany & Co. .................................................. 1,000 41,625
----------
217,906
----------
Consumer Staples 3.3%
Alcohol & Tobacco 0.2%
Anheuser-Busch Companies, Inc. ................................. 900 70,931
----------
Consumer Electronic & Photographic 0.1%
Energizer Holdings, Inc.* ...................................... 1,433 28,302
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
Shares Value ($)
--------------------------------------------------
Food & Beverage 1.7%
Albertson's, Inc. .............. 1,600 34,400
Bestfoods ...................... 400 28,250
Coca-Cola Co. .................. 1,400 73,675
ConAgra, Inc. .................. 1,100 20,144
PepsiCo, Inc. .................. 8,500 362,313
Ralston Purina Group ........... 4,300 97,288
--------
616,070
--------
Package Goods/Cosmetics 1.3%
Avon Products, Inc. ............ 1,400 54,863
Colgate-Palmolive Co. .......... 2,600 132,438
Gillette Co. ................... 1,400 42,000
Kimberly-Clark Corp. ........... 4,000 234,000
--------
463,301
--------
Health 13.8%
Biotechnology 2.6%
Alkermes, Inc.* ................ 1,000 46,250
Amgen, Inc.* ................... 4,300 325,994
Chiron Corp.* .................. 1,500 81,094
Human Genome Sciences, Inc.* ... 100 16,694
Immunex Corp.* ................. 1,100 55,275
Incyte Genomics, Inc.* ......... 100 8,294
PE Corp.-PE Biosystems Group ... 1,200 118,050
Pharmacia Corp. ................ 2,300 134,694
Protein Design Labs, Inc.* ..... 200 15,200
Sepracor, Inc.* ................ 400 44,000
Waters Corp.* .................. 1,200 95,475
--------
941,020
--------
Health Industry Services 0.5%
Cardinal Health, Inc. .......... 1,200 98,175
Express Scripts, Inc. "A"* ..... 500 35,594
PacifiCare Health Systems, Inc.* 800 43,150
--------
176,919
--------
Hospital Management 0.3%
UnitedHealth Group, Inc. ....... 1,200 113,400
--------
Medical Supply & Specialty 0.8%
Andrx Corp.* ................... 200 17,400
Baxter International, Inc. ..... 600 49,950
Biomet, Inc. ................... 1,350 45,647
DENTSPLY International, Inc. ... 1,100 36,713
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
Shares Value ($)
-------------------------------------------------------------
Medtronic, Inc. ......................... 2,700 138,375
--------
288,085
--------
Pharmaceuticals 9.6%
Abbott Laboratories ..................... 8,600 376,250
Allergan, Inc. .......................... 1,200 87,750
American Home Products Corp. ............ 500 27,094
Bristol-Myers Squibb Co. ................ 5,800 307,400
Cephalon, Inc.* ......................... 600 30,188
Eli Lilly & Co. ......................... 3,500 255,500
Forest Laboratories, Inc.* .............. 300 29,363
Johnson & Johnson ....................... 1,219 112,072
Merck & Co., Inc. ....................... 11,800 824,525
Pfizer, Inc. ............................ 29,350 1,269,388
Schering-Plough Corp. ................... 3,600 144,450
----------
3,463,980
----------
Communications 4.7%
Cellular Telephone 0.0%
American Tower Corp. Class "A"* ......... 300 10,894
United States Cellular Corp.* ........... 100 7,356
----------
18,250
----------
Telephone/Communications 4.7%
ADC Telecommunications, Inc.* ........... 5,200 212,875
AT&T Corp. .............................. 3,159 99,509
AT&T Wireless Group* .................... 3,000 78,563
Allegiance Telecom, Inc.* ............... 1,400 69,738
BroadWing, Inc.* ........................ 1,200 33,525
Efficient Networks, Inc.* ............... 1,100 59,108
JDS Uniphase Corp.* ..................... 3,820 476,068
Level 3 Communications, Inc.* ........... 900 78,511
NEXTLINK Communications, Inc. "A"* ...... 900 31,556
Qwest Communications International, Inc.* 3,804 196,382
SBC Communications, Inc. ................ 4,100 171,175
Terayon Communication Systems, Inc.* .... 1,300 72,150
Time Warner Telecom, Inc. "A"* .......... 600 38,963
Verizon Communications .................. 1,576 68,753
----------
1,686,876
----------
Financial 2.6%
Banks 0.8%
Knight Trading Group, Inc.* ............. 2,900 90,988
MBNA Corp. .............................. 2,200 77,688
The accompanying notes are an integral part of the financial statements.
32
<PAGE>
Shares Value ($)
--------------------------------------------------------
Northern Trust Corp. ................ 800 67,450
State Street Corp. .................. 600 70,650
----------
306,776
----------
Insurance 0.7%
American International Group, Inc. .. 2,800 249,550
----------
Consumer Finance 1.1%
American Express Co. ................ 4,400 260,150
Citigroup, Inc. ..................... 2,066 120,603
----------
380,753
----------
Media 2.8%
Advertising 0.5%
Interpublic Group of Companies, Inc. 1,400 53,550
Omnicom Group, Inc. ................. 900 75,094
TMP Worldwide, Inc.* ................ 500 34,594
----------
163,238
----------
Broadcasting & Entertainment 1.8%
Clear Channel Communications, Inc.* . 500 36,188
StarMedia Network, Inc.* ............ 2,000 17,000
Time Warner, Inc. ................... 5,100 436,050
Univision Communication, Inc.* ...... 1,600 70,600
Viacom, Inc. "B"* ................... 1,300 87,506
----------
647,344
----------
Cable Television 0.5%
AT&T Corp.-- Liberty Media Corp. "A"* 5,200 111,150
Liberty Digital, Inc.* .............. 3,500 86,625
----------
197,775
----------
Service Industries 5.7%
EDP Services 2.9%
Automatic Data Processing, Inc. ..... 4,500 268,313
CSG Systems International, Inc.* .... 2,400 108,450
Electronic Data Systems Corp. ....... 700 34,869
First Data Corp. .................... 6,800 324,275
Micromuse, Inc.* .................... 200 30,375
Sapient Corp.* ...................... 800 42,000
VeriSign, Inc.* ..................... 1,122 223,138
----------
1,031,420
----------
Investment 0.5%
Franklin Resources, Inc. ............ 1,400 53,200
Goldman Sachs Group, Inc. ........... 100 12,806
Stilwell Financial, Inc.* ........... 1,000 48,375
The accompanying notes are an integral part of the financial statements.
33
<PAGE>
Shares Value ($)
----------------------------------------------------------
T. Rowe Price & Associates, Inc. ..... 1,900 85,975
----------
200,356
----------
Miscellaneous Commercial Services 1.9%
Aspect Communications Corp.* ......... 1,600 36,100
CheckFree Corp.* ..................... 200 10,363
Dycom Industries, Inc.* .............. 300 15,900
FreeMarkets, Inc.* ................... 2,100 170,888
Redback Networks, Inc.* .............. 700 104,563
Sabre Holdings Corp. ................. 400 11,150
Scient Corp.* ........................ 1,000 27,063
Siebel Systems, Inc.* ................ 1,000 197,000
Sysco Corp. .......................... 2,000 84,625
United Parcel Service, Inc. "B" ...... 300 16,631
----------
674,283
----------
Miscellaneous Consumer Services 0.3%
Infospace.com, Inc.* ................. 2,500 97,500
----------
Miscellaneous 0.1%
Metris Companies, Inc. ............... 1,200 43,125
----------
Durables 1.1%
Aerospace 0.4%
B.F. Goodrich Co. .................... 1,500 61,219
Boeing Co. ........................... 1,600 85,800
----------
147,019
----------
Telecommunications Equipment 0.7%
Andrew Corp.* ........................ 1,100 32,588
CIENA Corp.* ......................... 700 155,181
Polycom, Inc.* ....................... 200 22,475
Scientific-Atlanta, Inc. ............. 700 54,556
----------
264,800
----------
Manufacturing 9.3%
Diversified Manufacturing 7.0%
General Electric Co. ................. 41,700 2,447,254
Hillenbrand Industries, Inc. ......... 1,300 45,256
Tyco International Ltd. .............. 740 42,180
----------
2,534,690
----------
Electrical Products 0.0%
Ditech Communications Corp.* ......... 200 11,800
----------
The accompanying notes are an integral part of the financial statements.
34
<PAGE>
Shares Value ($)
------------------------------------------------------------
Hand Tools 0.1%
Black & Decker Corp. .................. 700 28,044
----------
Industrial Specialty 1.8%
Avanex Corp.* ......................... 100 15,147
Corning, Inc. ......................... 1,500 491,906
Novellus Systems, Inc.* ............... 2,300 141,594
----------
648,647
----------
Machinery/Components/Controls 0.2%
Illinois Tool Works, Inc. ............. 900 50,456
----------
Office Equipment/Supplies 0.2%
Xerox Corp. ........................... 4,200 67,463
----------
Technology 50.3%
Computer Software 11.1%
Adobe Systems, Inc. ................... 1,200 156,000
Alteon Websystems, Inc.* .............. 900 133,200
Art Technology Group, Inc.* ........... 700 71,356
BEA Systems, Inc.* .................... 1,600 108,900
BroadVision, Inc.* .................... 1,000 34,500
Brocade Communications Systems, Inc.* . 400 90,325
CNET Networks, Inc.* .................. 1,700 56,950
Computer Associates International, Inc. 1,900 60,325
Comverse Technology, Inc.* ............ 1,200 110,325
i2 Technologies, Inc.* ................ 600 101,513
Inktomi Corp.* ........................ 1,400 182,525
Intuit, Inc.* ......................... 1,200 71,850
Macromedia, Inc.* ..................... 500 34,555
Marimba, Inc.* ........................ 1,300 21,938
Micrel, Inc.* ......................... 500 38,219
Microsoft Corp.* ...................... 18,900 1,319,456
Oracle Corp.* ......................... 10,600 963,938
Parametric Technology Corp.* .......... 3,500 46,813
PeopleSoft, Inc.* ..................... 700 22,575
Portal Software, Inc.* ................ 400 22,100
RSA Security, Inc.* ................... 400 23,625
Rational Software Corp.* .............. 800 102,950
Software.com, Inc.* ................... 100 14,556
Sycamore Networks, Inc.* .............. 900 123,300
TIBCO Software, Inc.* ................. 300 30,581
The accompanying notes are an integral part of the financial statements.
35
<PAGE>
Shares Value ($)
-------------------------------------------------------------
USinternetworking, Inc.* ............... 1,900 19,594
VerticalNet, Inc.* ..................... 400 21,300
Wind River Systems, Inc.* .............. 700 28,525
----------
4,011,794
----------
Diverse Electronic Products 1.6%
Aether Systems, Inc.* .................. 500 69,250
Applied Materials, Inc.* ............... 4,700 405,669
Foundry Networks, Inc.* ................ 100 9,306
Molex, Inc. ............................ 300 15,844
Teradyne, Inc.* ........................ 1,200 77,775
----------
577,844
----------
EDP Peripherals 4.7%
Ariba, Inc.* ........................... 1,100 173,113
EMC Corp.* ............................. 10,000 980,000
Mercury Interactive Corp.* ............. 400 48,875
Network Appliance, Inc.* ............... 1,600 187,200
Symbol Technologies, Inc. .............. 750 31,031
VERITAS Software Corp.* ................ 2,300 277,294
----------
1,697,513
----------
Electronic Components/Distributors 10.6%
Altera Corp.* .......................... 2,600 168,513
Analog Devices, Inc.* .................. 1,800 180,900
Applied Micro Circuits Corp.* .......... 500 101,469
Broadcom Corp. "A"* .................... 900 225,000
Cisco Systems, Inc.* ................... 34,600 2,370,100
Gateway, Inc.* ......................... 900 61,290
Jabil Circuit, Inc.* ................... 2,000 127,625
Juniper Networks, Inc.* ................ 1,200 256,500
PMC-Sierra, Inc.* ...................... 1,000 236,000
Powerwave Technologies, Inc.* .......... 300 14,438
SCI Systems, Inc.* ..................... 500 30,875
SanDisk Corp.* ......................... 600 50,100
----------
3,822,810
----------
Electronic Data Processing 7.6%
Apple Computer, Inc.* .................. 1,400 85,313
Compaq Computer Corp. .................. 3,300 112,406
Hewlett-Packard Co. .................... 3,400 410,550
International Business Machines Corp. .. 8,100 1,069,200
Internet Security Systems, Inc.* ....... 700 56,700
RadioShack Corp. ....................... 1,100 64,900
Sun Microsystems, Inc.* ................ 7,400 939,338
----------
2,738,407
----------
Military Electronics 0.4%
Computer Sciences Corp.* ............... 1,100 86,969
The accompanying notes are an integral part of the financial statements.
36
<PAGE>
Shares Value ($)
--------------------------------------------------------
L-3 Communications Holdings, Inc.* 700 41,388
----------
128,357
----------
Office/Plant Automation 0.3%
3Com Corp.* ....................... 1,100 18,288
Palm, Inc.* ....................... 1,631 71,764
----------
90,052
----------
Precision Instruments 0.2%
Credence Systems Corp.* ........... 500 29,281
Lam Research Corp.* ............... 1,200 36,150
----------
65,431
----------
Semiconductors 12.9%
Advanced Micro Devices, Inc.* ..... 1,600 60,200
Atmel Corp.* ...................... 2,200 44,000
Cree, Inc.* ....................... 300 41,325
Cypress Semiconductor Corp.* ...... 300 14,831
Integrated Device Technology, Inc.* 200 17,550
Intel Corp. ....................... 33,100 2,478,355
KLA-Tencor Corp.* ................. 1,500 98,438
LSI Logic Corp.* .................. 1,500 53,906
Lattice Semiconductor Corp.* ...... 500 38,938
Linear Technology Corp. ........... 2,200 158,263
Maxim Integrated Products, Inc.* .. 1,300 113,994
Microchip Technology, Inc.* ....... 400 27,225
Micron Technology, Inc.* .......... 2,600 212,550
National Semiconductor Corp.* ..... 1,600 71,200
Rambus, Inc.* ..................... 400 32,675
SDL, Inc.* ........................ 400 158,925
Sanmina Corp.* .................... 1,100 129,800
Semtech Corp.* .................... 200 23,688
Silicon Storage Technology, Inc.* . 500 16,406
Texas Instruments, Inc. ........... 9,160 613,148
TranSwitch Corp.* ................. 1,600 96,300
Virata Corp.* ..................... 200 13,750
Xilinx, Inc.* ..................... 1,600 142,200
----------
4,657,667
----------
Miscellaneous 0.9%
Agilent Technologies, Inc.* ....... 1,634 98,551
Amkor Technology, Inc.* ........... 200 6,825
Commerce One, Inc.* ............... 1,500 93,797
Copper Mountain Networks, Inc.* ... 1,300 77,919
DMC Stratex Networks, Inc.* ....... 800 20,450
The accompanying notes are an integral part of the financial statements.
37
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
----------------------------------------------------------------------------------
<S> <C> <C>
Digital Lightwave, Inc.* ................................. 100 8,775
Safeguard Scientifics, Inc.* ............................. 100 2,856
--------
309,173
--------
Energy 0.8%
Oil & Gas Production 0.5%
Anadarko Petroleum Corp. ................................. 1,900 124,963
Nabors Industries, Inc.* ................................. 900 42,806
--------
167,769
--------
Oilfield Services/Equipment 0.3%
BJ Services Co.* ......................................... 1,000 67,000
Halliburton Co. .......................................... 200 10,600
Smith International, Inc.* ............................... 200 15,900
Weatherford International, Inc.* ......................... 800 37,550
--------
131,050
--------
Construction 0.1%
Building Products
American Standard Companies, Inc.* ....................... 800 37,050
--------
Transportation 0.1%
Airlines 0.1%
US Airways Group, Inc. ................................... 400 13,600
--------
Railroads 0.0%
Kansas City Southern Industries, Inc. .................... 1,100 10,175
--------
Utilities 0.3%
Electric Utilities
AES Corp.* ............................................... 1,600 102,000
--------
--------------------------------------------------------------------------------
Total Common Stocks (Cost $26,498,440) 35,833,587
--------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $26,680,440) (a) 36,015,587
--------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
** Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities.
(a) The cost for federal income tax purposes was $26,685,997. At August 31,
2000, net unrealized appreciation based on tax cost was $9,329,590.
This consisted of aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost of
$10,618,595 and gross unrealized depreciation for all investment
securities in which there was an excess of tax cost over value of
$1,289,005.
During the six months ended August 31, 2000, purchases and sales of
investment securities (excluding short-term investments) aggregated
$14,377,425 and $10,476,474, respectively.
The accompanying notes are an integral part of the financial statements.
38
<PAGE>
Financial Statements
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Statements of Assets and Liabilities as of August 31, 2000 (Unaudited)
--------------------------------------------------------------------------------
Scudder
Scudder Select 1000
Assets Select 500 Fund Growth Fund
--------------------------------------------------------------------------------
Investments in securities, at value (for cost, see
accompanying investment portfolios) ........... $ 39,573,453 $ 36,015,587
Cash ............................................. 916 447
Dividends receivable ............................. 49,815 14,339
Interest receivable .............................. 32 33
Receivable for Fund shares sold .................. 36,238 19,749
Foreign taxes recoverable ........................ 540 --
Due from Adviser ................................. 16,171 28,883
------------- ------------
Total assets ..................................... 39,677,165 36,079,038
Liabilities
-------------------------------------------------------------------------------
Payable for Fund shares redeemed ................. 55,776 6,071
Accrued Trustees' fees and expenses .............. 18,686 12,245
Other accrued expenses and payables .............. 164,279 110,651
------------- ------------
Total liabilities ................................ 238,741 128,967
Net assets, at value ............................. $ 39,438,424 $ 35,950,071
Net Assets
-------------------------------------------------------------------------------
Net assets consist of:
Undistributed accumulated net investment income
(loss) ........................................ 33,956 (23,889)
Net unrealized appreciation (depreciation) on
investments ................................... 8,561,875 9,335,147
Accumulated net realized gain (loss) ............. (1,628,031) (677,438)
Paid-in capital .................................. 32,470,624 27,316,251
-------------------------------------------------------------------------------
Net assets, at value $ 39,438,424 $ 35,950,071
-------------------------------------------------------------------------------
Net Asset Value
-------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per $ 14.21 $ 16.56
share (outstanding shares of beneficial
interest, $.01
par value, unlimited number of shares
authorized) ................................... 2,774,487 2,171,424
The accompanying notes are an integral part of the financial statements.
39
<PAGE>
--------------------------------------------------------------------------------
Statements of Operations for the six months ended August 31, 2000 (Unaudited)
--------------------------------------------------------------------------------
Scudder
Scudder Select 1000
Investment Income Select 500 Fund Growth Fund
--------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $2,486
and $0, respectively) .......................... $ 185,770 $ 89,382
Interest .......................................... 6,473 11,167
------------ -----------
Total Income ...................................... 192,243 100,549
------------ -----------
Expenses:
Management fee .................................... 119,738 112,031
Services to shareholders .......................... 74,681 64,244
Custodian and accounting fees ..................... 23,642 21,894
Auditing .......................................... 12,761 9,237
Legal ............................................. 4,004 6,493
Trustees' fees and expenses ....................... 26,161 22,314
Reports to shareholders ........................... 8,032 5,990
Registration fees ................................. -- 17,710
Administrative fee ................................ 1,071 --
Other ............................................. 4,047 5,950
------------ -----------
Total expenses, before expense reductions ......... 274,137 265,863
Expense reductions ................................ (140,281) (141,425)
------------ -----------
Total expenses, after expense reductions .......... 133,856 124,438
--------------------------------------------------------------------------------
Net investment income (loss) 58,387 (23,889)
--------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investments
------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions (493,886) (487,196)
------------ -----------
Net unrealized appreciation (depreciation) during
the period on investments ...................... 4,526,996 3,503,881
------------------------------------------------------------------------------
Net gain (loss) on investment transactions 4,033,110 3,016,685
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations $ 4,091,497 $ 2,992,796
------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
40
<PAGE>
--------------------------------------------------------------------------------
Statements of Changes in Net Assets -- Scudder Select 500 Fund
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period
For the Six May, 17, 1999
Months Ended (commencement of
August 31, 2000 operations) to
Increase (Decrease) in Net Assets (Unaudited) February 29, 2000
------------------------------------------------------------------------------------
Operations:
<S> <C> <C>
Net investment income (loss) .................... $ 58,387 $ 136,554
Net realized gain (loss) on investment
transactions ................................. (493,886) (1,134,145)
Net unrealized appreciation (depreciation) on
investment transactions during the period .... 4,526,996 3,187,182
------------ ------------
Net increase (decrease) in net assets resulting
from operations .............................. 4,091,497 2,189,591
------------ ------------
Distributions to shareholders from:
Net investment income ........................... (24,431) (178,394)
Tax return of capital ........................... -- (40,055)
------------ ------------
Total distributions ............................. (24,431) (218,449)
------------ ------------
Fund share transactions:
Proceeds from shares sold ....................... 4,857,024 47,406,748
Net assets acquired in tax-free reorganization .. 3,006,967 --
Reinvestment of distributions ................... 24,439 210,986
Cost of shares redeemed ......................... (5,485,251) (16,621,897)
------------ ------------
Net increase (decrease) in net assets from Fund
share transactions ........................... 2,403,179 30,995,837
------------ ------------
Increase (decrease) in net assets ............... 6,470,245 32,966,979
Net assets at beginning of period ............... 32,968,179 1,200
Net assets at end of period (including
undistributed net investment income of $33,956
at August 31, 2000) .......................... $ 39,438,424 $ 32,968,179
Other Information
------------------------------------------------------------------------------
Shares outstanding at beginning of period ....... 2,611,328 100
------------ ------------
Shares sold ..................................... 363,564 3,922,610
Shares issued in tax-free reorganization ........ 213,715 --
Shares issued to shareholders in reinvestment of
distributions ................................ 1,760 17,573
Shares redeemed ................................. (415,880) (1,328,955)
------------ ------------
Net increase (decrease) in Fund shares .......... 163,159 2,611,228
Shares outstanding at end of period ............. 2,774,487 2,611,328
</TABLE>
The accompanying notes are an integral part of the financial statements.
41
<PAGE>
--------------------------------------------------------------------------------
Statements of Changes in Net Assets -- Scudder Select 1000 Growth Fund
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period May
For the Six 17, 1999
Months Ended (commencement of
August 31, 2000 operations) to
Increase (Decrease) in Net Assets (Unaudited) February 29, 2000
--------------------------------------------------------------------------------------
Operations:
<S> <C> <C>
Net investment income (loss) ..................... $ (23,889) $ 17,782
Net realized gain (loss) on investment
transactions .................................. (487,196) (190,242)
Net unrealized appreciation (depreciation) on
investment transactions during the period ..... 3,503,881 5,831,266
------------ ------------
Net increase (decrease) in net assets resulting
from operations ............................... 2,992,796 5,658,806
------------ ------------
Distributions to shareholders from:
Net investment income ............................ -- (42,087)
------------ ------------
Fund share transactions:
Proceeds from shares sold ........................ 8,570,644 31,911,408
Reinvestment of distributions .................... -- 40,564
Cost of shares redeemed .......................... (4,540,425) (8,642,835)
------------ ------------
Net increase (decrease) in net assets from Fund
share transactions ............................ 4,030,219 23,309,137
------------ ------------
Increase (decrease) in net assets ................ 7,023,015 28,925,856
Net assets at beginning of period ................ 28,927,056 1,200
Net assets at end of period (including accumulated
net investment loss of $23,889 at August 31, ------------ ------------
2000) ......................................... $ 35,950,071 $ 28,927,056
------------ ------------
Other Information
-------------------------------------------------------------------------------
Shares outstanding at beginning of period ........ 1,913,407 100
------------ ------------
Shares sold ...................................... 555,768 2,534,289
Shares issued to shareholders in reinvestment of
distributions ................................. -- 2,710
Shares redeemed .................................. (297,751) (623,692)
------------ ------------
Net increase (decrease) in Fund shares ........... 258,017 1,913,307
------------ ------------
Shares outstanding at end of period .............. 2,171,424 1,913,407
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
42
<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.
Scudder Select 500 Fund
------------------------------------------------------------------------------
2000(b) 2000(c)
------------------------------------------------------------------------------
Net asset value, beginning of period $12.63 $12.00
------------------
------------------------------------------------------------------------------
Income (loss) from investment operations:
------------------------------------------------------------------------------
Net investment income (loss) (a) .02 .07
------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment
transactions 1.57 .64
------------------
------------------------------------------------------------------------------
Total from investment operations 1.59 .71
------------------------------------------------------------------------------
Less distributions from:
------------------------------------------------------------------------------
Net investment income (.01) (.06)
------------------------------------------------------------------------------
Tax return of capital -- (.02)
------------------
------------------------------------------------------------------------------
Total distributions (.01) (.08)
------------------------------------------------------------------------------
Net asset value, end of period $14.21 $12.63
------------------
------------------------------------------------------------------------------
Total Return (%) (d) 12.59** 5.95**
------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------
Net assets, end of period ($ millions) 39 33
------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.59(e)* 1.99*
------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .77(e)* .75*
------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) .34* .52*
------------------------------------------------------------------------------
Portfolio turnover rate (%) 79* 53*
------------------------------------------------------------------------------
(a) Based on monthly average shares outstanding during the period.
(b) For the six months ended August 31, 2000 (Unaudited).
(c) For the period May 17, 1999 (commencement of operations) to February
29, 2000.
(d) Total return would have been lower had certain expenses not been
reduced.
(e) The ratios of operating expenses excluding costs incurred in connection
with the reorganization before and after expense reductions were 1.53%
and 0.75%, respectively (see Notes to Financial Statements).
* Annualized
** Not annualized
43
<PAGE>
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
Scudder Select 1000 Growth Fund
-----------------------------------------------------------------------------
2000(b) 2000(c)
-----------------------------------------------------------------------------
Net asset value, beginning of period $15.12 $12.00
-------------------
-----------------------------------------------------------------------------
Income (loss) from investment operations:
-----------------------------------------------------------------------------
Net investment income (loss) (a) (.01) .01
-----------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment
transactions 1.45 3.13
-------------------
-----------------------------------------------------------------------------
Total from investment operations 1.44 3.14
-----------------------------------------------------------------------------
Less distributions from:
-----------------------------------------------------------------------------
Net investment income -- (.02)
-----------------------------------------------------------------------------
Net asset value, end of period $16.56 $15.12
-------------------
-----------------------------------------------------------------------------
Total Return (%) (d) 9.52** 26.19**
-----------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
-----------------------------------------------------------------------------
Net assets, end of period ($ millions) 36 29
-----------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.66(f)* 2.37*
-----------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) .78(f)* .76(e)*
-----------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.15)* .10*
-----------------------------------------------------------------------------
Portfolio turnover rate (%) 66* 39*
-----------------------------------------------------------------------------
(a) Based on monthly average shares outstanding during the period.
(b) For the six months ended August 31, 2000 (Unaudited).
(c) For the period May 17, 1999 (commencement of operations) to February
29, 2000.
(d) Total return would have been lower had certain expenses not been
reduced.
(e) Ratio of operating expenses, excluding interest, to average net assets
would have been 0.75%.
(f) The ratios of operating expenses excluding costs incurred in connection
with the reorganization before and after expense reductions were 1.61%
and 0.75%, respectively (see Notes to Financial Statements).
* Annualized
** Not annualized
44
<PAGE>
Notes to Financial Statements (Unaudited)
--------------------------------------------------------------------------------
A. Significant Accounting Policies
Scudder Select 500 Fund and Scudder Select 1000 Growth Fund (the "Funds") are
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 Funds' financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America, which require the
use of management estimates. The policies described below are followed
consistently by the Funds in the preparation of their 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.
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 Funds may enter into repurchase agreements with
certain banks and broker/dealers whereby each 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. Each 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
45
<PAGE>
shareholders. Accordingly, neither Fund paid any federal income taxes and no
federal income tax provision were required.
At February 29, 2000, the Scudder Select 500 Fund had a net tax basis capital
loss carryforward of approximately $552,000, which may be applied against any
realized net taxable capital gains of each succeeding year until fully utilized
or until February 29, 2008, the expiration date. In addition, from November 1,
1999 through February 29, 2000, Scudder Select 500 Fund incurred approximately
$493,000 of net realized capital losses. As permitted by tax regulations, the
Fund intends to elect to defer these losses and treat them as arising in the
fiscal year ended February 28, 2001.
At February 29, 2000, the Scudder Select 1000 Growth Fund had a net tax basis
capital loss carryforward of approximately $181,000 which may be applied against
any realized net taxable capital gains of each succeeding year until fully
utilized or until February 29, 2008, the expiration date.
In addition, the Scudder Select 500 Fund inherited approximately $241,085 of
capital losses from its merger (see Note F) with Scudder Tax Managed Growth
Fund, which may be applied against any realized net taxable capital gains in
future years, subject to certain limitations imposed by Section 382 of the
Internal Revenue Code.
Distribution of Income and Gains. Distributions of net investment income, if
any, are made quarterly for the Scudder Select 500 Fund and annually for the
Scudder Select 1000 Growth Fund. Net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to each Fund if not distributed, and, therefore, will be distributed to
shareholders at least annually.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations, which may differ from accounting principles generally accepted in
the United States of America. 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, each
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. Divided income is recorded on the ex-dividend date. Realized gains and
losses from investment transactions are recorded on an identified cost basis.
46
<PAGE>
B. Related Parties
As described in Note E, Scudder Kemper Investments, Inc. has initiated a
restructuring program for most of its Scudder no-load, open-end funds. As part
of this reorganization, the Scudder Select 500 Fund adopted a new Investment
Management Agreement and entered into an Administrative Agreement. Both of these
agreements were effective August 28, 2000. The terms of the newly adopted and
the pre-existing agreements are set out below.
Management Agreement. Under the Investment Management Agreement (the
"Agreement") with Scudder Kemper Investments, Inc. ("Scudder Kemper" or the
"Adviser"), the Adviser directs the investments of the Funds in accordance with
their 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 Funds. In addition to portfolio
management services, the Adviser provides certain administrative services in
accordance with the Agreement. The management fee payable under the Agreement is
equal to an annual rate of 0.70% for Scudder Select 500 Fund and 0.70% for
Scudder Select 1000 Growth Fund, of each Fund's average daily net assets
computed and accrued daily and payable monthly. The Adviser and certain of its
subsidiaries have agreed to reimburse or not impose, respectively, all or a
portion of their fees payable by the Funds until June 30, 2001 in order to
maintain the annualized expenses of each Fund at not more than 0.75% of average
daily net assets. For the six months ended August 31, 2000, the Adviser did not
impose any of its management fee for Scudder Select 500 Fund and Scudder Select
1000 Growth Fund, amounting to $119,738 and $112,031, respectively.
Effective August 28, 2000, the Scudder Select 500 Fund, as approved by the
Fund's Board of Trustees, adopted a new Investment Management Agreement (the
"Management Agreement") with Scudder Kemper. The Management Agreement is
identical to the pre-existing Agreement, except for the fee rate. The management
fee payable under the Management Agreement is equal to an annual rate of 0.50%
of the first $500,000,000 of average daily net assets, 0.475% of the next
$500,000,000 of such net assets, and 0.45% of such net assets in excess of
$1,000,000,000, computed and accrued daily and payable monthly.
Administrative Fee. Effective August 28, 2000, the Scudder Select 500 Fund, as
approved by the Fund's Board of Trustees, adopted an Administrative Agreement
(the "Administrative Agreement") with Scudder Kemper. Under the
47
<PAGE>
Administrative Agreement the Adviser provides or pays others to provide
substantially all of the administrative services required by the Fund (other
than those provided by Scudder Kemper under its Management Agreement with the
Fund, as described above) in exchange for the payment by the Fund of an
administrative services fee (the "Administrative Fee") of 0.25% of average daily
net assets. As of the effective date of the Administrative Agreement, each
service provider will continue to provide the services that it currently
provides to the Fund (i.e., fund accounting, shareholder services, custody,
audit and legal), under the current arrangements, except that Scudder Kemper
will pay these entities for the provision of their services to the Fund and will
pay most other Fund expenses, including insurance, registration, printing and
postage fees. Certain expenses of the Fund would not be borne by Scudder Kemper
under the Administrative Agreement, such as taxes, brokerage, interest and
extraordinary expenses, and the fees and expenses of the Independent Trustees
(including the fees and expenses of their independent counsel). For the period
August 28, 2000 through August 31, 2000, the Administrative Agreement expense
charged to the Fund amounted to $1,071, all of which was unpaid at August 31,
2000.
Other Fees. Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is
the transfer, dividend-paying and shareholder service agent for each Fund. For
the six months ended August 31, 2000, SSC did not impose a portion of its fee
for Scudder Select 1000 Growth Fund amounting to $5,717 and the amount imposed
amounted to $64,200, of which all is unpaid. Prior to August 28, 2000, the fees
imposed for the Scudder Select 500 Fund by SSC amounted to $72,173, of which all
is unpaid at August 31, 2000.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of each Fund. For the six months
ended August 31, 2000, SFAC did not impose any of its fees for Scudder Select
1000 Growth Fund amounting to $18,750. Prior to August 28, 2000, SFAC did not
impose a portion of its fees for Scudder Select 500 Fund amounting to $12,119
and the amount imposed amounted to $5,492.
Effective August 28, 2000, the above fees for the Scudder Select 500 Fund will
be paid by the Adviser in accordance with the Administrative Agreement.
Trustee Fees and Expenses. The Fund pays each Trustee not affiliated with the
Adviser an annual retainer plus specified amounts for attended board and
committee meetings. For the six months ended August 31, 2000, Trustees' fees and
expenses imposed for Scudder Select 500 Fund and Scudder Select 1000
48
<PAGE>
Growth Fund aggregated $17,353 and $13,506, respectively. In addition, a
one-time fee of $8,808 and $8,808 for Scudder Select 500 Fund and Scudder Select
1000 Growth Fund, respectively, was accrued for payment to those Trustees not
affiliated with the Adviser who did not stand for re-election under the
reorganization discussed in Note E. Inasmuch as the Adviser will also benefit
from administrative efficiencies of a consolidated Board, the Adviser has agreed
to bear $4,404 and $4,404 of such costs for Scudder Select 500 Fund and Scudder
Select 1000 Growth Fund, respectively.
C. Line of Credit
The Funds and several other Scudder Funds (the "Participants") share in a $1
billion revolving credit facility with Chase Manhattan Bank 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 based upon net
assets, among each of the Participants. Interest is calculated based on the
market rates at the time of the borrowing. Each Fund may borrow up to a maximum
of 33 percent of its net assets under the agreement.
D. Expense Off-Set Arrangements
Each Fund has entered into arrangements with its custodian and transfer agent
whereby credits realized as a result of uninvested cash balances were used to
reduce a portion of the Fund's expenses. During the six months ended August 31,
2000, the Scudder Select 500 Fund's and Scudder Select 1000 Growth Fund's
custodian and transfer agent fees were reduced by $3,534 and $486, and $181 and
$342, respectively, under these arrangements.
E. Reorganization
In early 2000, Scudder Kemper initiated a restructuring program for most of its
Scudder no-load open-end funds in response to changing industry conditions and
investor needs. The program proposes to streamline the management and operations
of most of the no-load open-end funds Scudder Kemper advises principally through
the liquidation of several small funds, mergers of certain funds with similar
investment objectives, the creation of one Board of Directors/Trustees and the
adoption of an administrative fee covering the provision of most of the services
currently paid for by the affected funds. Costs incurred in connection with this
restructuring initiative are being borne jointly by Scudder Kemper and certain
of the affected funds.
49
<PAGE>
F. Acquisition of Assets
On August 25, 2000, the Scudder Select 500 Fund acquired all the net assets of
Scudder Tax Managed Growth Fund pursuant to a plan of reorganization approved by
shareholders on July 13, 2000. The acquisition was accomplished by a tax-free
exchange of 213,715 shares of the Fund (valued at $3,006,967) for 200,021 shares
of Scudder Tax Managed Growth Fund outstanding on August 25, 2000. Scudder Tax
Managed Growth Fund's net assets at that date ($3,006,967), including $847,697
of unrealized appreciation, were combined with those of the Fund. The aggregate
net assets of the Fund immediately before the acquisition were $36,102,459. The
combined net assets of the Fund immediately following the acquisition were
$39,109,426.
50
<PAGE>
Shareholder Meeting Results (Unaudited)
--------------------------------------------------------------------------------
A Special Meeting of Shareholders (the "Meeting") of Scudder Select 500 Fund
(the "fund") was held on July 13, 2000, at the office of Scudder Kemper
Investments, Inc., Two International Place, Boston, Massachusetts 02110. At the
Meeting the following matters were voted upon by the shareholders (the resulting
votes for each matter are presented below).
1. To elect Trustees of Value Equity Trust.
Number of Votes:
Trustee For Withheld
--------------------------------------------------------------------------------
Henry P. Becton, Jr. 1,413,564 37,514
Linda C. Coughlin 1,401,944 49,134
Dawn-Marie Driscoll 1,412,976 38,102
Edgar R. Fiedler 1,412,544 38,534
Keith R. Fox 1,414,278 36,800
Joan E. Spero 1,401,816 49,262
Jean Gleason Stromberg 1,401,459 49,619
Jean C. Tempel 1,412,536 38,542
Steven Zaleznick 1,401,852 49,226
--------------------------------------------------------------------------------
2. To ratify the selection of PricewaterhouseCoopers LLP as the independent
accountants for the fund for the fiscal year ending February 28, 2001.
Number of Votes:
Broker
For Against Abstain Non-Votes*
--------------------------------------------------------------------------------
1,420,826 15,274 14,977 0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
* Broker non-votes are proxies received by the fund from brokers or
nominees when the broker or nominee neither has received instructions
from the beneficial owner or other persons entitled to vote nor has
discretionary power to vote on a particular matter.
51
<PAGE>
Shareholder Meeting Results (Unaudited)
--------------------------------------------------------------------------------
A Special Meeting of Shareholders (the "Meeting") of Scudder Select 1000 Growth
Fund (the "fund") was held on July 13, 2000, at the office of Scudder Kemper
Investments, Inc., Two International Place, Boston, Massachusetts 02110. At the
Meeting the following matters were voted upon by the shareholders (the resulting
votes for each matter are presented below).
1. To elect Trustees of Value Equity Trust.
Number of Votes:
Trustee For Withheld
--------------------------------------------------------------------------------
Henry P. Becton, Jr. 1,209,360 37,408
Linda C. Coughlin 1,209,402 37,366
Dawn-Marie Driscoll 1,209,235 37,533
Edgar R. Fiedler 1,208,312 37,456
Keith R. Fox 1,209,595 37,174
Joan E. Spero 1,209,199 37,569
Jean Gleason Stromberg 1,209,569 37,199
Jean C. Tempel 1,209,168 37,600
Steven Zaleznick 1,209,163 37,605
--------------------------------------------------------------------------------
2. To approve a change in the fund's sub-classification policy from a
diversified company to a non-diversified company.
Number of Votes:
Broker
For Against Abstain Non-Votes*
--------------------------------------------------------------------------------
1,056,360 55,721 58,431 76,257
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
3. To ratify the selection of PricewaterhouseCoopers LLP as the independent
accountants for the fund for the fiscal year ending February 28, 2001.
Number of Votes:
Broker
For Against Abstain Non-Votes*
--------------------------------------------------------------------------------
1,211,500 14,001 21,267 0
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
* Broker non-votes are proxies received by the fund from brokers or
nominees when the broker or nominee neither has received instructions
from the beneficial owner or other persons entitled to vote nor has
discretionary power to vote on a particular matter.
52
<PAGE>
Officers and Trustees
--------------------------------------------------------------------------------
Linda C. Coughlin* William F. Glavin*
o President and Trustee o Vice President
Henry P. Becton, Jr. James E. Masur*
o Trustee; President, WGBH o Vice President
Educational Foundation
Ann M. McCreary*
Dawn-Marie Driscoll o Vice President
o Trustee; President, Driscoll
Associates; Executive Fellow, Lois R. Roman*
Center for Business Ethics, o Vice President
Bentley College
Howard S. Schneider*
Edgar R. Fiedler o Vice President
o Trustee; Senior Fellow and
Economic Counsellor, The Robert D. Tymoczko*
Conference Board, Inc. o Vice President
Keith R. Fox John Millette*
o Trustee; General Partner, o Vice President and Secretary
The Exeter Group of Funds
Kathryn L. Quirk*
Joan E. Spero o Vice President and
o Trustee; President, The Doris Assistant Secretary
Duke Charitable Foundation
John R. Hebble*
Jean Gleason Stromberg o Treasurer
o Trustee; Consultant
Brenda Lyons*
Jean C. Tempel o Assistant Treasurer
o Trustee; Managing Director,
First Light Capital, LLC Caroline Pearson*
o Assistant Secretary
Steven Zaleznick
o Trustee; President and *Scudder Kemper Investments, Inc.
Chief Executive Officer,
AARP Services, Inc.
Thomas V. Bruns*
o Vice President
53
<PAGE>
Investment Products and Services
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Scudder Funds
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Money Market U.S. Growth
Scudder U.S. Treasury Money Fund Value
Scudder Cash Investment Trust Scudder Large Company Value Fund
Scudder Money Market Series -- Scudder Value Fund
Prime Reserve Shares Scudder Small Company Value Fund
Premium Shares
Managed Shares Growth
Scudder Tax Free Money Fund Scudder Classic Growth Fund
Scudder Capital Growth Fund
Tax Free Scudder Large Company Growth Fund
Scudder Medium Term Tax Free Fund Scudder Select 1000 Growth Fund
Scudder Managed Municipal Bonds Scudder Development Fund
Scudder High Yield Tax Free Fund Scudder Small Company Stock Fund
Scudder California Tax Free Fund Scudder 21st Century Growth Fund
Scudder Massachusetts Tax Free Fund
Scudder New York Tax Free Fund Global Equity
Worldwide
U.S. Income Scudder Global Fund
Scudder Short Term Bond Fund Scudder International Fund
Scudder GNMA Fund Scudder Global Discovery Fund
Scudder Income Fund Scudder Emerging Markets Growth Fund
Scudder Corporate Bond Fund Scudder Gold Fund
Scudder High Yield Bond Fund
Regional
Global Income Scudder Greater Europe Growth Fund
Scudder Global Bond Fund Scudder Pacific Opportunities Fund
Scudder Emerging Markets Income Fund Scudder Latin America Fund
The Japan Fund, Inc.
Asset Allocation
Scudder Pathway Conservative Portfolio Industry Sector Funds
Scudder Pathway Balanced Portfolio Scudder Health Care Fund
Scudder Pathway Growth Portfolio Scudder Technology Fund
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
54
<PAGE>
--------------------------------------------------------------------------------
Retirement Programs and Education Accounts
--------------------------------------------------------------------------------
Retirement Programs Education Accounts
Traditional IRA Education IRA
Roth IRA UGMA/UTMA
SEP-IRA IRA for Minors
Inherited IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
--------------------------------------------------------------------------------
Closed-End Funds
--------------------------------------------------------------------------------
The Argentina Fund, Inc. Montgomery Street Income Securities, Inc.
The Brazil Fund, Inc. Scudder Global High Income Fund, Inc.
The Korea Fund, Inc. Scudder New Asia Fund, Inc.
</TABLE>
Scudder funds are offered by prospectus only. For more complete information on
any fund or variable annuity registered in your state, including information
about a fund's objectives, strategies, risks, advisory fees, distribution
charges, and other expenses, please order a free prospectus. Read the prospectus
before investing in any fund to ensure the fund is appropriate for your goals
and risk tolerance. There is no assurance that the objective of any fund will be
achieved, and fund returns and net asset values fluctuate. Shares are redeemable
at current net asset value, which may be more or less than their original cost.
A money market mutual fund investment is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although a
money market mutual fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in such a fund.
The services and products described should not be considered a solicitation to
buy or an offer to sell a security to any person in any jurisdiction where such
offer, solicitation, purchase, or sale would be unlawful under the securities
laws of such jurisdiction.
Scudder Investor Services, Inc.
55
<PAGE>
Account Management Resources
--------------------------------------------------------------------------------
For shareholders of Scudder funds including those in the AARP Investment Program
Convenient Automatic Investment Plan
ways to invest,
quickly and A convenient investment program in which money is
reliably electronically debited from your bank account monthly
to regularly purchase fund shares and "dollar cost
average" -- buy more shares when the fund's price is
lower and fewer when it's higher, which can reduce
your average purchase price over time.*
Automatic Dividend Transfer
The most timely, reliable, and convenient way to
purchase shares -- use distributions from one Scudder
fund to purchase shares in another, automatically
(accounts with identical registrations or the same
social security or tax identification number).
QuickBuy
Lets you purchase Scudder fund shares electronically,
avoiding potential mailing delays; money for each of
your transactions is electronically debited from a
previously designated bank account.
Payroll Deduction and Direct Deposit
Have all or part of your paycheck -- even government
checks -- invested in up to four Scudder funds at one
time.
* 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- Automated Information Lines
clock electronic
account Scudder Class S Shareholders:
service and Call SAIL(TM) -- 1-800-343-2890
information,
including some AARP Investment Program Shareholders:
transactions Call Easy-Access Line -- 1-800-631-4636
Personalized account information, the ability to
exchange or redeem shares, and information on other
Scudder funds and services via touchtone telephone.
Web Site
Scudder Class S Shareholders --
www.scudder.com
AARP Investment Program Shareholders --
aarp.scudder.com
Personal Investment Organizer: Offering account
information and transactions, interactive worksheets,
prospectuses and applications for all 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.
56
<PAGE>
--------------------------------------------------------------------------------
Those who Automatic Withdrawal Plan
depend on
investment You designate the bank account, determine the
proceeds for schedule (as frequently as once a month) and amount
living expenses of the redemptions, and Scudder does the rest.
can enjoy these
convenient, Distributions Direct
timely, and
reliable Automatically deposits your fund distributions into
automated the bank account you designate within three business
withdrawal days after each distribution is paid.
programs
QuickSell
Provides speedy access to your money by
electronically crediting your redemption proceeds to
the bank account you previously designated.
For more Scudder Class S Shareholders:
information
about these Call a Scudder representative at
services 1-800-SCUDDER
AARP Investment Program Shareholders:
Call an AARP Investment Program representative at
1-800-253-2277
Please address For Scudder Class S Shareholders:
all written
correspondence The Scudder Funds
to PO Box 2291
Boston, Massachusetts
02107-2291
For AARP Investment Program Shareholders:
AARP Investment Program from Scudder
PO Box 2540
Boston, Massachusetts
02208-2540
57
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
Notes
--------------------------------------------------------------------------------
<PAGE>
Notes
--------------------------------------------------------------------------------
<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 $290 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 over 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
INVESTMENTS(SM)
[LOGO]
PO Box 2291
Boston, MA 02107-2291
1-800-SCUDDER
www.scudder.com
