SCUDDER
INVESTMENTS(SM)
[LOGO]
------------------------------
EQUITY/VALUE
------------------------------
Scudder Large
Company Value Fund
Fund #049
Annual Report
July 31, 2000
A fund seeking maximum long-term capital appreciation through a value-oriented
investment approach.
A no-load fund with no commissions to buy, sell, or exchange shares.
<PAGE>
Contents
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4 Letter from the Fund's President
6 Performance Update
8 Portfolio Summary
10 Portfolio Management Discussion
15 Glossary of Investment Terms
16 Investment Portfolio
20 Financial Statements
23 Financial Highlights
24 Notes to Financial Statements
29 Report of Independent Accountants
30 Tax Information
31 Shareholder Meeting Results
32 Officers and Trustees
33 Investment Products and Services
35 Account Management Resources
2
<PAGE>
Scudder Large Company Value Fund
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ticker symbol SCDUX fund number 049
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Date of o Although value stocks showed signs of a rebound during
Inception: July, the sector trailed growth stocks by a wide margin
11/21/66 over the full year.
o Management employs a disciplined, three-step program to
uncover value opportunities, while at the same time
Total Net seeking to avoid value "traps."
Assets as
of 7/31/00: o The fund has been helped by its positions
$2.1 billion in technology, health care, media, and insurance, but
was hurt by its holdings in chemical stocks.
3
<PAGE>
Letter from the Fund's President
--------------------------------------------------------------------------------
Dear Shareholders,
Growth stocks have provided some spectacular fireworks for investors during the
past year, and have therefore attracted the lion's share of both investors'
assets and the media's attention. During the winter, dozens of companies with
three- and four-digit price-to-earnings ratios defied traditional valuation
metrics by posting huge returns, burying value stocks in the lower reaches of
the short-term performance tables. But the events of this past summer -- which
include a collapse in many high-flying technology stocks and rallies in
traditional value areas such as financials and energy -- have shown that value
stocks still hold a place in the portfolios of long-term investors.
We believe that the lesson from the volatility of the past year is that no
matter what short-term developments are unfolding in the financial markets at
any given time, it is essential to stay focused on your goals and ensure that
your investments are appropriately suited for your needs. For many investors,
the strong performance of the U.S. market during the past five years diminished
the attractiveness of diversification and a long-term point of view. In a period
of significant volatility, however, portfolios with exposure to a wide variety
of investment styles and asset classes were often better positioned to ride out
the market's fluctuations than those that were concentrated in a single area,
such as
4
<PAGE>
technology. Unless you plan to devote your energies to investing every day, we
think that you will benefit from taking an approach that emphasizes
diversification and a long-term point of view.
As a shareholder of the Scudder Large Company Value Fund, you already own a fund
that invests in value stocks. Using a disciplined, bottom-up approach,
management establishes long-term positions in companies that its extensive,
three-step stock selection process show to be undervalued. For more information
on how the fund's approach has helped it navigate the volatile market
environment of the past year, please turn to the Portfolio Management Discussion
that begins on page 10.
Thank you for your continued investment in Scudder Large Company Value Fund. For
current information on the fund or your account, visit our Web site at
www.scudder.com. There you will find a wealth of information, including fund
performance, the most recent news on Scudder products and services, and the
opportunity to perform account transactions. You can also speak with one of our
representatives by calling 1-800-SCUDDER (1-800-728-3337).
Sincerely,
/s/Lin Coughlin
Linda C. Coughlin
President
Scudder Large Company Value Fund
5
<PAGE>
Performance Update
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July 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 Large Russell 1000
Company Value Fund Value Index*
'90 10000 10000
'91 11016 11071
'92 12683 12797
'93 14753 15192
'94 14939 15742
'95 17863 19024
'96 20084 22045
'97 30186 32810
'98 33405 38626
'99 37243 44415
'00 35525 42199
Yearly periods ended July 31
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Fund Index Comparison
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Total Return
Growth of Average
Period ended 7/31/2000 $10,000 Cumulative Annual
--------------------------------------------------------------------------------
Scudder Large Company Value Fund
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1 year $ 9,539 -4.61% -4.61%
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5 year $ 19,887 98.87% 14.74%
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10 year $ 35,525 255.25% 13.51%
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Russell 1000 Value Index*
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1 year $ 9,501 -4.99% -4.99%
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5 year $ 22,183 121.83% 17.25%
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10 year $ 42,199 321.99% 15.47%
--------------------------------------------------------------------------------
* The Russell 1000 Value Index is an unmanaged index that consists of
those stocks in the Russell 1000 Index with less than average growth
orientation. Index returns assume reinvestment of dividends and, unlike
Fund returns, do not reflect any fees or expenses.
6
<PAGE>
--------------------------------------------------------------------------------
Returns and Per Share Information
--------------------------------------------------------------------------------
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE SCUDDER LARGE COMPANY VALUE FUND TOTAL RETURN (%) AND
RUSSELL 1000 VALUE INDEX* TOTAL RETURN (%)
Yearly periods ended July 31
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Total
Return (%) 10.15 15.14 16.32 1.26 19.57 12.43 50.30 10.66 11.49 -4.61
------------------------------------------------------------------------------------
Index Total
Return (%) 10.71 15.59 18.72 3.61 20.85 15.88 48.83 17.72 14.99 -4.99
------------------------------------------------------------------------------------
Net Asset
Value ($) 18.12 19.57 21.31 19.19 22.07 21.14 28.43 29.17 30.05 26.81
------------------------------------------------------------------------------------
Income
Dividends
($) .37 .22 .10 -- -- .08 .16 .24 .18 .39
------------------------------------------------------------------------------------
Capital
Gains
Distributions
($) 1.35 .98 1.25 2.62 .73 3.50 2.48 1.86 2.10 1.45
------------------------------------------------------------------------------------
</TABLE>
* The Russell 1000 Value Index is an unmanaged index that consists of
those stocks in the Russell 1000 Index with less than average growth
orientation. Index returns assume reinvestment of dividends and, unlike
Fund returns, do not reflect any fees or expenses.
On February 1, 1997, the Fund adopted its current name. Prior to that
date, the Fund was known as the Scudder Capital Growth Fund. All
performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results. Investment
return and principal value will fluctuate, so an investor's shares,
when redeemed, may be worth more or less than when purchased.
7
<PAGE>
Portfolio Summary
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July 31, 2000
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Diversification
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A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
Management seeks to
Common Stocks 98% remain as close to fully
Cash Equivalents 2% invested in equities as
------------------------------------ possible.
100%
------------------------------------
--------------------------------------------------------------------------------
Sectors
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A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
(Excludes 2% Cash Equivalents) Performance was boosted
by the fund's positions
Financial 24% in the technology,
Energy 15% health care, insurance,
Durables 9% and media sectors.
Communications 9%
Health 9%
Technology 8%
Consumer Staples 7%
Manufacturing 7%
Utilities 5%
Other 7%
------------------------------------
100%
------------------------------------
8
<PAGE>
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Ten Largest Equity Holdings
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(33% of Portfolio) Top holdings reflect
management's focus on
1. Exxon Mobil Corp. well-established
International oil company companies with
attractive valuations.
2. Citigroup, Inc.
Diversified financial services company
3. Cigna Corp.
Provider of insurance, health care benefits, pension
management and related financial services
4. Boeing Co.
Manufacturer of jet airplanes
5. Dow Chemical Co.
Chemical producer
6. Verizon Communications
Provider of wireline voice and data services
7. PepsiCo, Inc.
Provider of soft drinks, snack foods and food services
8. Royal Dutch Petroleum Co.
Petroleum company
9. American Home Products Corp.
Diversified pharmaceutical company
10. SBC Communications, Inc.
Provider of telecommunication services
For more complete details about the Fund's investment portfolio, see page 16. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
9
<PAGE>
Portfolio Management Discussion
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July 31, 2000
In the following interview, portfolio manager Lois Roman discusses Scudder Large
Company Value Fund's strategy and the market environment during the twelve-month
period ending July 31, 2000.
Q: Value stocks did not perform well over the full reporting period, but they
showed signs of life in early 2000. What factors are driving the performance of
this asset class?
A: Value stocks underperformed during the final months of 1999 and the early
part of 2000, as a narrow group of stocks in aggressive growth areas such as
technology and biotech dominated the performance charts. For the 12-month period
ending July 31, the Russell 1000 Growth Index jumped 24.36%. At the same time,
the Russell 1000 Value Index actually declined -4.99%. In this period, investors
were searching for companies whose growth prospects were believed to be strong
enough to withstand an environment of rising interest rates. Since most
companies that fit this description possessed rich valuations, we were not able
to benefit from the rally in this area.
Value stocks initially rallied when the Nasdaq began to go through the early
stages of its spring correction, but once the decline began to extend over a
period of several weeks, all sectors of the markets were affected by selling
pressure. An improved outlook for interest rates sparked a rally in equities
during the summer, but unlike the moves of late 1999 and early 2000, a broad
range of stocks participated in the upturn. This phase was marked by a stronger
performance from value stocks and an upturn in "breadth," the term used to
describe the extent to which advancing stocks are outnumbering decliners.
Financials, oils, utilities, and selected cyclicals -- all groups that have
performed poorly over the past two years -- experienced rallies. At the same
time, the unrestrained optimism that characterized the early part of the year
calmed significantly. In this sense, the tone of the market changed, making
individual stock selection -- and the necessary research that accompanies it --
more important than
10
<PAGE>
momentum factors. This environment proved to be much more healthy for value
stocks than the euphoria that characterized the early part of the year.
Q: How did the fund perform during this period?
A: Over the twelve-month period ended July 31, 2000, the fund posted a total
return of -4.61%, which was slightly better than the -4.99% return of its
unmanaged benchmark, the Russell 1000 Value Index. The fund's outperformance was
due, in part, to strong stock selection within the technology area (Motorola),
insurance (Cigna, Hartford Financial Services Group, and St. Paul Companies),
and health care (American Home Products and Pharmacia). On the negative side, we
were hurt by holdings in chemical stocks such as Dow and DuPont, as well as our
position in Raytheon.
Q: Has the fund's investment discipline helped in the volatile environment of
the past year?
A: Yes. The fund maintains the same steady, disciplined investment process at
all times. We believe that the value of such an approach has been demonstrated
by the volatility we have experienced so far in 2000. Market direction has
changed course significantly on several occasions, and violent sector rotations
have occurred with increasing frequency. In an environment such as this,
investors who try to chase "momentum" stocks or position their portfolios to
take advantage of the most recent "hot" sector are, in our view, destined to
fail. We, on the other hand, strive to position the portfolio for any
environment by buying what we feel are the most attractive value stocks in the
market, and holding on to them over a long-term horizon.
In prospecting for attractive investments, we use a disciplined, three-step
investment process that employs a quantitative screen, fundamental equity
research, and risk management. The quantitative screen helps us find stocks in
the Russell 1000 Index -- a broad, large-capitalization universe -- that are
selling at the most attractive valuations. Companies that are ranked in the top
four
11
<PAGE>
deciles (the cheapest 40%) are our potential buy candidates, while those
that fall into the 9th and 10th deciles (the most expensive 20%) are our
potential sell candidates. Not all cheap stocks have value, however. The use of
our internal army of equity analysts helps us to understand the fundamental
dynamics of a company. This is a crucial step in the process, and it helps
prevent us from investing in stocks where the fundamentals have not yet hit
bottom. Lastly, our use of quantitative and qualitative risk analysis allows us
to control for macroeconomic factors. On the sell side, we will sell a holding
if our investment thesis is violated, or if its fundamentals begin to show signs
of deterioration.
Q: How is the portfolio positioned at present?
A: The fund remains overweight in energy stocks through its position in both
integrated oils (Exxon Mobil, Chevron, and Texaco) and oil services companies
such as Schlumberger. The sector was weak during July on the decline in oil
prices, but we believe that the selloff was overdone for the simple fact that
most analysts are still not factoring higher oil prices into their earnings
models. We feel that the sector's fundamentals remain very strong, and intend to
hold the stocks through short-term turbulence.
The financial sector has had difficulty during the last year due to rising
interest rates and merger integration issues. The fund was skewed more towards
insurance than banks during the last year, which boosted returns. The key
question going forward will be when to reinvest in the banking industry.
In technology, which accounts for less than 10% of the fund, we remain focused
on companies such as IBM and Hewlett-Packard. These names aren't exciting
high-fliers, but they offer attractive valuations and very favorable earnings
stories. We continue to believe that value investors can take advantage of the
growth of the tech sector without having to abandon their disciplines.
12
<PAGE>
The fund continues to hold an overweight position in chemical stocks, an area
that has been a drag on performance throughout 2000. Believing that stocks in
this sector are extremely cheap and will participate if there is a rally within
the broader industrial cyclical group, we have added to the fund's holdings in
this area as prices have fallen.
Q: What is your outlook for value stocks?
A: In the past, we have stated that we believe a rebound in the value area is
inevitable. Only rarely have growth stocks outperformed for as long a period as
they have during the past three years. Unfortunately, nobody can accurately
predict when the turn in value will come, as evidenced by the many false rallies
we have witnessed during the past year. What we can say, however, is that the
market currently offers a wealth of companies that in our view, are worth more
than they are selling for. For this reason, we intend to remain focused on our
value discipline, and will continue to use our three-step process to establish
positions in what we believe to be the most attractive value names in the
market. We believe that by taking this approach, the fund will be positioned to
prosper when the turn in value stocks ultimately arrives.
13
<PAGE>
Scudder Large Company Value Fund:
A Team Approach to Investing
Scudder Large Company Value Fund is managed by a team of Scudder Kemper
Investments, Inc. (the "Adviser") professionals, each of whom plays an important
role in the fund's management process. Team members work together to develop
investment strategies and select securities for the fund's portfolio. They are
supported by the Adviser's large staff of economists, research analysts,
traders, and other investment specialists who work in offices across the United
States and abroad. The Adviser believes that a team approach benefits fund
investors by bringing together many disciplines and leveraging the firm's
extensive resources.
Lead portfolio manager Lois Friedman Roman is responsible for the fund's
day-to-day management. Ms. Roman, who joined the Adviser in 1994 and the fund in
1995, has 12 years of experience as an equity analyst.
Portfolio manager Jonathan Lee joined the Adviser in 1999 and the fund in 1999.
Mr. Lee has 10 years of portfolio management experience.
14
<PAGE>
Glossary of Investment Terms
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Cyclical Stocks Companies whose earnings are closely tied to the business
cycle. Cyclical industries include steel, cement, paper,
machinery, and autos.
Fundamental Analysis of companies based on the projected impact of
Research management, products, sales, and earnings on their balance
sheets and income statements. Distinct from technical
analysis, which evaluates the attractiveness of a stock
based on historical price and trading volume movements,
rather than the financial results of the underlying company.
Momentum Investing The practice of investing in the market's top performing
stocks in order to capture additional upward movements in
their prices.
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. Distinct from growth
stock.
Weighting Refers to the allocation of assets -- usually in terms of
(over/under) sectors, industries, or countries -- within a portfolio
relative to the portfolio's benchmark index or investment
universe.
(Source: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
15
<PAGE>
Investment Portfolio as of July 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount ($) Value ($)
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Repurchase Agreements 1.8%
------------------------------------------------------------------------------------
<S> <C> <C>
Donaldson, Lufkin & Jenrette, 6.53%, to be repurchased
at $37,647,828 on 8/1/2000** (Cost $37,641,000) ... 37,641,000 37,641,000
Shares
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Common Stocks 98.2%
------------------------------------------------------------------------------------
Consumer Discretionary 1.5%
Department & Chain Stores
Target Corp. ......................................... 1,095,800 31,778,200
------------
Consumer Staples 7.3%
Food & Beverage 4.9%
H.J. Heinz Co. ....................................... 751,500 30,013,031
Hershey Foods Corp. .................................. 312,500 14,453,125
PepsiCo, Inc. ........................................ 1,259,800 57,714,587
------------
102,180,743
------------
Package Goods/Cosmetics 2.4%
Gillette Co. ......................................... 667,700 19,488,494
Unilever NV (New York Shares) ........................ 675,285 29,881,360
------------
49,369,854
------------
Health 8.6%
Biotechnology 1.9%
Pharmacia Corp. ...................................... 721,259 39,488,930
------------
Medical Supply & Specialty 1.0%
Becton, Dickinson & Co. .............................. 826,100 20,859,025
------------
Pharmaceuticals 5.7%
American Home Products Corp. ......................... 1,037,900 55,073,568
Bristol-Myers Squibb Co. ............................. 679,800 33,735,075
Eli Lilly & Co. ...................................... 291,500 30,279,563
------------
119,088,206
------------
Communications 8.9%
Telephone/Communications
AT&T Corp. ........................................... 841,350 26,029,266
BellSouth Corp. ...................................... 1,188,300 47,309,194
SBC Communications, Inc. ............................. 1,198,100 50,994,132
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
Shares Value ($)
--------------------------------------------------------------------
Verizon Communications ................ 1,278,200 60,075,400
-------------
184,407,992
-------------
Financial 23.9%
Banks 7.5%
Bank One Corp. ........................ 649,100 20,649,494
Bank of America Corp. ................. 603,828 28,606,351
Chase Manhattan Corp. ................. 325,800 16,188,187
FleetBoston Financial Corp. ........... 712,654 25,521,921
J.P. Morgan & Co., Inc. ............... 301,000 40,183,500
PNC Bank Corp. ........................ 482,900 24,567,538
-------------
155,716,991
-------------
Insurance 9.8%
AFLAC, Inc. ........................... 661,000 34,330,688
Allstate Corp. ........................ 930,700 25,652,418
Cigna Corp. ........................... 702,100 70,122,238
Hartford Financial Services Group, Inc. 498,600 32,035,050
MetLife, Inc.* ........................ 622,000 13,062,000
St. Paul Companies, Inc. .............. 654,500 29,084,344
-------------
204,286,738
-------------
Consumer Finance 5.0%
Citigroup, Inc. ....................... 1,474,848 104,068,962
-------------
Other Financial Companies 0.9%
Federal National Mortgage Association . 398,700 19,885,163
-------------
Real Estate 0.7%
Post Properties Inc. (REIT) ........... 310,800 14,413,350
-------------
Media 2.3%
Broadcasting & Entertainment 1.8%
Walt Disney Co. ....................... 972,100 37,608,119
-------------
Print Media 0.5%
Knight-Ridder, Inc. ................... 196,900 10,263,413
-------------
Service Industries 1.1%
Investment
Merrill Lynch & Co., Inc. ............. 183,500 23,717,375
-------------
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
Shares Value ($)
----------------------------------------------------------------------
Durables 9.3%
Aerospace 8.3%
Boeing Co. ............................. 1,341,670 65,741,830
Lockheed Martin Corp. .................. 1,786,300 50,239,688
Rockwell International Corp. ........... 298,300 10,459,144
United Technologies Corp. .............. 794,400 46,373,101
-------------
172,813,763
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Construction/Agricultural Equipment 1.0%
Deere & Co. ............................ 533,700 20,580,806
-------------
Manufacturing 6.6%
Chemicals 4.3%
Dow Chemical Co. ....................... 2,184,300 62,798,625
E.I. du Pont de Nemours & Co. .......... 588,900 26,684,531
-------------
89,483,156
-------------
Diversified Manufacturing 0.9%
Textron, Inc. .......................... 347,200 19,812,100
-------------
Industrial Specialty 0.5%
PPG Industries, Inc. ................... 230,700 9,386,606
-------------
Machinery/Components/Controls 0.9%
Parker-Hannifin Corp. .................. 531,500 18,901,469
-------------
Technology 7.7%
Computer Software 0.9%
Intuit, Inc.* .......................... 581,000 19,754,000
-------------
Diverse Electronic Products 1.4%
Diebold, Inc. .......................... 396,100 11,214,581
Motorola, Inc. ......................... 552,300 18,260,419
-------------
29,475,000
-------------
Electronic Data Processing 4.3%
Apple Computer, Inc.* .................. 378,800 19,247,775
Compaq Computer Corp. .................. 821,200 23,044,925
Hewlett-Packard Co. .................... 212,400 23,191,425
International Business Machines Corp. .. 218,200 24,533,863
-------------
90,017,988
-------------
Semiconductors 0.9%
Micron Technology, Inc.* ............... 224,200 18,272,300
-------------
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
---------------------------------------------------------------------------------------------
<S> <C> <C>
Miscellaneous 0.2%
Agilent Technologies, Inc.* ................................ 81,009 3,301,131
------------
Energy 14.5%
Oil & Gas Production 10.8%
BP Amoco plc ............................................... 379,400 19,847,362
Conoco, Inc. "B" ........................................... 739,000 17,043,188
Exxon Mobil Corp. .......................................... 1,394,723 111,577,840
Royal Dutch Petroleum Co. .................................. 140,000 8,304,578
Royal Dutch Petroleum Co. (New York shares) ................ 825,300 48,073,725
Texaco, Inc. ............................................... 398,500 19,700,843
------------
224,547,536
------------
Oil Companies 1.3%
Chevron Corp. .............................................. 357,500 28,242,500
------------
Oilfield Services/Equipment 2.4%
Baker Hughes, Inc. ......................................... 686,700 23,776,988
Schlumberger Ltd. .......................................... 356,100 26,329,143
------------
50,106,131
------------
Transportation 1.5%
Railroads
Burlington Northern Santa Fe Corp. ......................... 1,246,700 30,466,231
------------
Utilities 5.0%
Electric Utilities
Allegheny Energy, Inc. ..................................... 747,100 23,440,262
Duke Energy Corp. .......................................... 357,900 22,077,956
FPL Group, Inc. ............................................ 474,800 22,909,100
Peco Energy Co. ............................................ 155,700 6,646,444
Unicom Corp. ............................................... 717,600 29,466,450
------------
104,540,212
------------
---------------------------------------------------------------------------------------------
Total Common Stocks (Cost $1,571,183,071) 2,046,833,990
---------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $1,608,824,071) (a) 2,084,474,990
---------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing.
** Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities.
(a) The cost for federal income tax purposes was $1,610,128,938. At July
31, 2000, net unrealized appreciation for all securities based on tax
cost was $474,346,052. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of value
over tax cost of $526,051,431 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax
cost over value of $51,705,379.
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
Financial Statements
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Statement of Assets and Liabilities as of July 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets
-------------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (cost $1,608,824,071) ................ $2,084,474,990
Cash ..................................................................... 109,456
Dividends receivable ..................................................... 1,672,992
Interest receivable ...................................................... 6,828
Receivable for Fund shares sold .......................................... 1,084,336
Due from Adviser ......................................................... 34,263
Other assets ............................................................. 18,441
---------------
Total assets ............................................................. 2,087,401,306
Liabilities
-------------------------------------------------------------------------------------------
Payable for investments purchased ........................................ 5,180,561
Payable for Fund shares redeemed ......................................... 2,182,060
Accrued management fee ................................................... 1,044,064
Accrued reorganization costs ............................................. 79,450
Accrued Trustees' fees and expenses ...................................... 70,505
Other accrued expenses and payables ...................................... 873,028
---------------
Total liabilities ........................................................ 9,429,668
-------------------------------------------------------------------------------------------
Net assets, at value $2,077,971,638
-------------------------------------------------------------------------------------------
Net Assets
-------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ...................................... 13,317,646
Net unrealized appreciation (depreciation) on investments ................ 475,650,919
Accumulated net realized gain (loss) ..................................... 150,606,032
Paid-in capital .......................................................... 1,438,397,041
-------------------------------------------------------------------------------------------
Net assets, at value $2,077,971,638
-------------------------------------------------------------------------------------------
Net Asset Value
-------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share ($2,077,971,638 /
77,493,102 outstanding shares of beneficial interest, $.01 par value,
unlimited number of shares authorized) ................................ $ 26.81
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
--------------------------------------------------------------------------------
Statement of Operations for the year ended July 31, 2000
--------------------------------------------------------------------------------
Investment Income
-------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $360,357) ......... $ 45,385,657
Interest ...................................................... 2,925,582
---------------
Total Income .................................................. 48,311,239
---------------
Expenses:
Management fee ................................................ 13,995,880
Services to shareholders ...................................... 6,499,356
Custodian and accounting fees ................................. 173,655
Auditing ...................................................... 64,182
Legal ......................................................... 37,571
Trustees' fees and expenses ................................... 119,861
Reports to shareholders ....................................... 192,879
Registration fees ............................................. 25,691
Reorganization ................................................ 101,387
Other ......................................................... 134,711
---------------
Total expenses, before expense reductions ..................... 21,345,173
Expense reductions ............................................ (100,878)
---------------
Total expenses, after expense reductions ...................... 21,244,295
-------------------------------------------------------------------------------
Net investment income (loss) 27,066,944
-------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
-------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ................................................... 200,089,459
Foreign currency related transactions ......................... (4,670)
---------------
200,084,789
---------------
Net unrealized appreciation (depreciation) during the period on
investments ................................................ (357,371,269)
-------------------------------------------------------------------------------
Net gain (loss) on investment transactions (157,286,480)
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $(130,219,536)
-------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Ten Months Year Ended
July 31, Ended September 30,
Increase (Decrease) in Net Assets 2000 July 31, 1999 1998
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income (loss) .... $ 27,066,944 $ 24,963,189 $ 28,421,758
Net realized gain (loss) on
investment transactions ...... 200,084,789 109,584,503 162,388,328
Net unrealized appreciation
(depreciation) on investment
transactions during the period (357,371,269) 401,441,655 (280,820,721)
---------------- ------------------ ---------------
Net increase (decrease) in net
assets resulting from
operations ................... (130,219,536) 535,989,347 (90,010,635)
---------------- ------------------ ---------------
Distributions to shareholders from:
Net investment income ........... (31,937,431) (14,320,764) (18,248,388)
---------------- ------------------ ---------------
Net realized gains .............. (118,822,149) (166,948,064) (141,425,011)
---------------- ------------------ ---------------
Fund share transactions:
Proceeds from shares sold ....... 504,584,013 533,428,766 349,010,684
Reinvestment of distributions ... 141,135,599 172,807,082 152,377,751
Cost of shares redeemed ......... (841,931,226) (502,959,873) (467,271,665)
---------------- ------------------ ---------------
Net increase (decrease) in net
assets from Fund share
transactions ................. (196,211,614) 203,275,975 34,116,770
---------------- ------------------ ---------------
Increase (decrease) in net assets (477,190,730) 557,996,494 (215,567,264)
Net assets at beginning of period 2,555,162,368 1,997,165,874 2,212,733,138
Net assets at end of period
(including undistributed net
investment income of
$13,317,646, $19,761,249, and
$23,122,144, respectively) ... $ 2,077,971,638 $ 2,555,162,368 $ 1,997,165,874
Other Information
-----------------------------------------------------------------------------------------
Shares outstanding at beginning
of period .................... 85,028,260 77,857,803 76,343,193
---------------- ------------------ ---------------
Shares sold ..................... 18,653,719 18,349,312 12,220,382
Shares issued to shareholders in
reinvestment of distributions 5,303,854 6,234,024 5,700,627
Shares redeemed ................. (31,492,731) (17,412,879) (16,406,399)
---------------- ------------------ ---------------
Net increase (decrease) in Fund
shares ....................... (7,535,158) 7,170,457 1,514,610
Shares outstanding at end of
period ....................... 77,493,102 85,028,260 77,857,803
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
2000(a)(b)1999(a)(c)1998(a)(d)1997(a)(d)1996(d) 1995(d)
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $30.05 $25.65 $28.98 $22.64 $22.92 $19.54
-------------------------------------------------------
------------------------------------------------------------------------------------
Income (loss) from investment operations:
------------------------------------------------------------------------------------
Net investment income
(loss) .33 .30(e) .36 .38 .36 .13
------------------------------------------------------------------------------------
Net realized and
unrealized gain (loss) on
investment transactions (1.73) 6.38 (1.59) 8.60 2.94 3.98
-------------------------------------------------------
------------------------------------------------------------------------------------
Total from investment
operations (1.40) 6.68 (1.23) 8.98 3.30 4.11
------------------------------------------------------------------------------------
Less distributions from:
------------------------------------------------------------------------------------
Net investment income (.39) (.18) (.24) (.16) (.08) --
------------------------------------------------------------------------------------
Net realized gains on
investment transactions (1.45) (2.10) (1.86) (2.48) (3.50) (.73)
-------------------------------------------------------
------------------------------------------------------------------------------------
Total distributions (1.84) (2.28) (2.10) (2.64) (3.58) (.73)
------------------------------------------------------------------------------------
Net asset value, end
of period $26.81 $30.05 $25.65 $28.98 $22.64 $22.92
-------------------------------------------------------
------------------------------------------------------------------------------------
Total Return (%) (4.61) 26.79** (4.54) 43.06 15.94 21.96
------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------------
Net assets, end of period
($ millions) 2,078 2,555 1,997 2,213 1,651 1,492
------------------------------------------------------------------------------------
Ratio of expenses before
expense reductions (%) .95(f) .87* .88 .93 .92 .98
------------------------------------------------------------------------------------
Ratio of expenses after
expense reductions (%) .94(f) .87* .88 .93 .92 .98
------------------------------------------------------------------------------------
Ratio of net investment
income (loss) (%) 1.20 1.25* 1.25 1.51 1.62 .62
------------------------------------------------------------------------------------
Portfolio turnover rate (%) 46 35* 40 43 151 154
------------------------------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) For the year ended July 31, 2000.
(c) For the ten months ended July 31, 1999. On June 7, 1999, the Trustees
of the Fund changed the fiscal year end from September 30 to July 31.
(d) For the year ended September 30.
(e) Net investment income per share includes non-recurring dividend income
amounting to $.05 per share.
(f) The ratios of operating expenses excluding costs incurred in connection
with the reorganization before and after expense reductions were .94%
and .94%, respectively (see Notes to Financial Statements).
* Annualized
** Not annualized
23
<PAGE>
Notes to Financial Statements
--------------------------------------------------------------------------------
A. Significant Accounting Policies
Scudder Large Company Value (the "Fund") is a diversified series of Value Equity
Trust (the "Trust") which is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment company
organized as a Massachusetts business trust.
On June 7, 1999, the Fund changed its fiscal year end for financial reporting
and federal income tax purposes to July 31 from September 30.
The Fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States which require the use of
management estimates. The policies described below are followed consistently by
the Fund in the preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close
of regular trading on the New York Stock Exchange. Securities which are traded
on U.S. or foreign stock exchanges are valued at the most recent sale price
reported on the exchange on which the security is traded most extensively. If no
sale occurred, the security is then valued at the calculated mean between the
most recent bid and asked quotations. If there are no such bid and asked
quotations, the most recent bid quotation is used. Securities quoted on the
Nasdaq Stock Market ("Nasdaq"), for which there have been sales, are valued at
the most recent sale price reported. If there are no such sales, the value is
the most recent bid quotation. Securities which are not quoted on Nasdaq but are
traded in another over-the-counter market are valued at the most recent sale
price, or if no sale occurred, at the calculated mean between the most recent
bid and asked quotations on such market. If there are no such bid and asked
quotations, the most recent bid quotation shall be used.
Portfolio debt securities purchased with an original maturity greater than sixty
days are valued by pricing agents approved by the officers of the Trust, whose
quotations reflect broker/dealer-supplied valuations and electronic data
processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. Money market instruments purchased with an original maturity of
sixty days or less are valued at amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Trustees.
24
<PAGE>
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian or
sub-custodian bank, receives delivery of the underlying securities, the amount
of which at the time of purchase and each subsequent business day is required to
be maintained at such a level that the market value is equal to at least the
principal amount of the repurchase price plus accrued interest.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Accordingly, the Fund paid no federal income taxes and no federal
income tax provision was required.
Distribution of Income and Gains. Distributions of net investment income, if
any, are made annually. Net realized gains from investment transactions, in
excess of available capital loss carryforwards, would be taxable to the Fund if
not distributed, and, therefore, will be distributed to shareholders at least
annually.
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. As a result, net investment income (loss) and net realized gain (loss)
on investment transactions for a reporting period may differ significantly from
distributions during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date. Certain dividends
from foreign securities may be recorded subsequent to the ex-dividend date as
soon as the Fund is informed of such dividends. Realized gains and losses from
investment transactions are recorded on an identified cost basis.
B. Purchases and Sales of Securities
During the year ended July 31, 2000, purchases and sales of investment
securities (excluding short-term investments) aggregated $999,724,101 and
$1,311,070,648, respectively.
25
<PAGE>
C. Related Parties
Under the Investment Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. (the "Adviser"), the Adviser directs the investments of the
Fund in accordance with its investment objectives, policies, and restrictions.
The Adviser determines the securities, instruments, and other contracts relating
to investments to be purchased, sold or entered into by the Fund. In addition to
portfolio management services, the Adviser provides certain administrative
services in accordance with the Agreement. The Fund has agreed to pay to the
Adviser a fee equal to an annual rate of 0.75% of the first $500,000,000 of
average daily net assets, 0.65% of the next $500,000,000 of such net assets,
0.60% of the next $500,000,000 of such net assets, 0.55% of the next
$500,000,000 of such net assets, and 0.50% of such net assets in excess of
$2,000,000,000 computed and accrued daily and payable monthly. For the year
ended July 31, 2000, the fees pursuant to the Agreement amounted to $13,995,880
which was equivalent to an annual effective rate of 0.62% of the Fund's average
daily net assets.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
year ended July 31, 2000, the amount charged to the Fund by SSC amounted to
$2,568,627, of which $199,096 is unpaid at July 31, 2000.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the year ended July 31, 2000,
the amount charged to the Fund by STC amounted to $1,725,486, of which $144,169
is unpaid at July 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 the Fund. For the year ended
July 31, 2000, the amount charged to the Fund by SFAC aggregated $168,934, of
which $13,899 is unpaid at July 31, 2000.
The Fund is one of several Scudder Funds (the "Underlying Funds") in which the
Scudder Pathway Series Portfolios (the "Portfolios") invest. In accordance with
the Special Servicing Agreement entered into by the Adviser, the Portfolios, the
Underlying Funds, SSC, SFAC, STC, and Scudder Investor Services, Inc., expenses
from the operation of the Portfolios are borne by the Underlying Funds based on
each Underlying Fund's proportionate share of assets owned by the Portfolios. No
Underlying Funds will be charged expenses
26
<PAGE>
that exceed the estimated savings to each respective Underlying Fund. These
estimated savings result from the elimination of separate shareholder accounts
which either currently are or have the potential to be invested in the
Underlying Funds. For the year ended July 31, 2000, the Special Servicing
Agreement expense charged to the Fund amounted to $323,019.
The Fund pays each of its Trustees not affiliated with the Adviser an annual
retainer plus specified amounts for attended board and committee meetings. For
the year ended July 31, 2000, Trustees' fees and expenses aggregated $51,335. In
addition, a one-time fee of $68,526 was accrued for payment to those Trustees
not affiliated with the Adviser who are not standing for re-election, under the
reorganization discussed in Note F. Inasmuch as the Adviser will also benefit
from administrative efficiencies of a consolidated Board, the Adviser has agreed
to bear $34,263 of such costs.
D. Expense Off-Set Arrangements
The 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 year ended July 31, 2000,
the Fund's custodian and transfer agent fees were reduced by $3,245 and $63,370,
respectively, under these arrangements.
E. Line of Credit
The Fund and several 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. The Fund may borrow up to a maximum of 33 percent of
its net assets under the agreement.
F. 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
27
<PAGE>
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.
These costs, including printing, shareholder meeting expenses and professional
fees, are presented as reorganization expenses in the Statement of Operations of
the Fund.
28
<PAGE>
Report of Independent Accountants
--------------------------------------------------------------------------------
To the Trustees of Value Equity Trust and the Shareholders of Scudder Large
Company Value Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Scudder Large Company Value Fund
(the "Fund") at July 31, 2000, the results of its operations, the changes in its
net assets, and the financial highlights for the periods indicated therein, in
conformity with accounting principles generally accepted in the United States.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at July 31, 2000 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
September 12, 2000
29
<PAGE>
Tax Information
--------------------------------------------------------------------------------
The Fund paid distributions of $1.44 per share from net long-term capital gains
during its year ended July 31, 2000, of which 100% represents 20% rate gains.
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates
$209,710,000 as capital gain dividends for its year ended July 31, 2000, of
which 100% represents 20% rate gains.
For corporate shareholders, 100% of the income dividends paid during the Fund's
fiscal year ended July 31, 2000 qualified for the dividends received deduction.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your account, please call 1-800-SCUDDER.
30
<PAGE>
Shareholder Meeting Results (Unaudited)
--------------------------------------------------------------------------------
A Special Meeting of Shareholders (the "Meeting") of Scudder Large Company Value
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 the fund.
Number of Votes:
Trustee For Withheld
--------------------------------------------------------------------------------
Henry P. Becton, Jr. 39,439,714 898,710
Linda C. Coughlin 39,395,321 943,102
Dawn-Marie Driscoll 39,427,691 910,732
Edgar R. Fiedler 39,335,721 1,002,702
Keith R. Fox 39,427,482 910,941
Joan E. Spero 39,412,645 925,778
Jean Gleason Stromberg 39,384,883 953,541
Jean C. Tempel 39,379,177 959,247
Steven Zaleznick 39,390,573 947,851
--------------------------------------------------------------------------------
2. To ratify the selection of PricewaterhouseCoopers LLP as the
independent accountants for the fund for the current fiscal year.
Number of Votes:
Broker
For Against Abstain Non-Votes*
--------------------------------------------------------------------------------
39,384,201 369,920 584,303 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.
31
<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 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
32
<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 Pathway Growth Portfolio Choice Series
Scudder Health Care Fund
U.S. Growth and Income Scudder Technology Fund
Scudder Balanced Fund
Scudder Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder Select 500 Fund
Scudder S&P 500 Index Fund
33
<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.
34
<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.
35
<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
36
<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-SCUDDDER
www.scudder.com
A member of the [LOGO] Zurich Financial Services Group
