SCUDDER
INVESTMENTS(SM)
[LOGO]
--------------------------
EQUITY/GROWTH
--------------------------
Scudder Large
Company Growth Fund
Fund #060
Annual Report
July 31, 2000
A fund seeking long-term growth of capital by investing at least 65% of its net
assets in large U.S. companies (those with a market value of $1 billion or
more).
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
25 Notes to Financial Statements
31 Report of Independent Accountants
32 Tax Information
33 Shareholder Meeting Results
34 Officers and Trustees
35 Investment Products and Services
37 Account Management Resources
2
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Scudder Large Company Growth Fund
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ticker symbol SCQGX fund number 060
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Date of o Scudder Large Company Growth Fund returned 29.15%
Inception: during the twelve months ended July 31, 2000, beating
5/15/91 the 24.36% return of its unmanaged benchmark, the
Russell 1000 Growth Index.
o The fund has finished in the top half of large-cap
Total Net growth funds over the one-, three-, and five-year
Assets as periods according to Lipper Analytical Services1, and
of 7/31/00: has been awarded an overall rating of five stars by
$1.5 billion Morningstar(TM)2.
o Management continues to employ a diversified, long-term
approach that is focused on finding the best growth
stocks available.
1 Source: Lipper Analytical Services, Inc., an independent analyst of
investment performance. Performance includes reinvestment of dividends
and capital gains. For the period ended July 31, 2000, Scudder Large
Company Growth Fund's Lipper ranking was 181 out of 472 funds for the
one-year period, 152 out of 304 funds for the three-year period, and 70
out of 199 for the five-year period. Past performance is no guarantee
of future results.
2 Morningstar proprietary rankings reflect historical risk-adjusted
performance as of July 31, 2000. The ratings are subject to change
every month. Morningstar ratings are calculated from the fund's 3-, 5-,
and 10-year average annual returns in excess of 90-day Treasury bill
returns with appropriate fee adjustments, and a risk factor that
reflects fund performance below 90-day Treasury bill returns with
appropriate fee adjustments. Past performance is no guarantee of future
results. Scudder Large Company Growth Fund received 5 stars overall, 4
stars for the 3-year period, and 5 stars for the 5-year period. The top
10% of funds in a broad asset class receive 5 stars, the next 22.5%
receive 4 stars, and the next 35% receive 3 stars. Scudder Large
Company Growth Fund was rated among 3376 and 2348 funds for the 3- and
5-year periods, respectively, in its broad asset class. Not all Scudder
Funds receive 4- and 5-star ratings. Ratings are subject to change.
3
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Letter from the Fund's President
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Dear Shareholders,
Although growth stocks are known as an asset class that tends to experience
above-average volatility, the events of this year have nevertheless proven
unsettling for many investors. The market's rapidly shifting expectations
regarding the direction of interest rates led to several sharp moves in growth
sectors such as technology and biotech, and sparked violent swings in the Nasdaq
index, as depicted in the following table.
---------------------------------------------------------------
Nasdaq Total Returns by Period
---------------------------------------------------------------
January 1 - March 10 +24.10%
March 11 - May 23 -35.49%
May 24 - July 17 +30.73%
July 18 - July 31 -9.82%
---------------------------------------------------------------
When the market exhibits this sort of volatility, it can be difficult for growth
investors to adhere to the guidelines that we at Scudder frequently encourage:
namely, diversification and a long-term approach. Nevertheless, we believe that
you should keep these factors in mind no matter how the market is performing on
any given day. Growth stocks, despite their recent volatility, remain a critical
component of a diversified portfolio. As a shareholder of Scudder Large Company
Growth Fund, you own a fund that invests in stocks that management believes to
be the best large-cap growth names available in the market. The fund has
produced a solid performance record, finishing in the top half
4
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of the large-cap growth fund category over the one-, three-, and five-year time
periods (according to Lipper Analytical Services), and earning an overall rating
of 5 stars from Morningstar(TM).
We believe that an important reason for the fund's strong showing is
management's steady, disciplined strategy and its commitment to using intensive
fundamental research to uncover winning companies. This approach has proven
highly valuable amid the volatile market environment of the past twelve months.
For more information on the reasons behind the fund's overall performance,
please turn to the Portfolio Management Discussion that begins on page 10.
Thank you for your continued investment in Scudder Large Company Growth Fund.
For current information on the fund or your account, visit our Web site at
www.scudder.com. You can also speak with the one of our representatives by
calling 1-800-SCUDDER (1-800-728-3337).
Sincerely,
/s/Lin Coughlin
Linda C. Coughlin
President
Scudder Large Company Growth Fund
5
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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
Company Growth Russell 1000
Fund -- Scudder Shares Growth Index*
5/91** 10000 10000
'91 10247 10037
'92 11827 11308
'93 12134 11590
'94 12680 12173
'95 15743 16000
'96 17993 18484
'97 26366 28064
'98 31346 33651
'99 37377 41743
'00 48272 51911
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
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Scudder Large Company Growth Fund -- Scudder Shares
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1 year $ 12,915 29.15% 29.15%
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5 year $ 30,663 206.63% 25.12%
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Life of Fund** $ 50,404 404.04% 19.18%
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Russell 1000 Growth Index*
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1 year $ 12,436 24.36% 24.36%
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5 year $ 32,444 224.44% 26.51%
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Life of Fund** $ 51,911 419.11% 19.66%
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* The Russell 1000 Growth Index consists of those stocks in the Russell
1000 Index that have greater-than-average growth orientation. Index
returns assume reinvestment of dividends and, unlike Fund returns, do
not reflect any fees or expenses.
** The Fund commenced operations on May 15, 1991. Index comparisons begin
May 31, 1991.
6
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Returns and Per Share Information
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THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE ILLUSTRATING THE SCUDDER LARGE
COMPANY GROWTH FUND -- SCUDDER SHARES TOTAL RETURN (%) AND RUSSELL 1000 GROWTH
INDEX* TOTAL RETURN (%)
Yearly periods ended July 31
<TABLE>
<CAPTION>
1991** 1992 1993 1994 1995 1996 1997 1998 1999 2000
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fund Total
Return (%) 7.00 15.42 2.60 4.50 24.15 14.29 46.54 18.89 19.24 29.15
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Index Total
Return (%) .37 12.66 2.49 5.03 31.44 15.53 51.83 19.91 24.05 24.36
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Net Asset
Value ($) 12.84 14.77 15.13 15.51 17.74 19.49 26.27 29.48 33.36 42.46
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Income
Dividends
($) -- .03 .03 .08 .15 .14 -- -- -- --
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Capital
Gains
Distributions
($) -- .02 -- .24 1.09 .60 1.77 1.46 1.71 .59
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</TABLE>
* The Russell 1000 Growth Index consists of those stocks in the Russell
1000 Index that have greater-than-average growth orientation. Index
returns assume reinvestment of dividends and, unlike Fund returns, do
not reflect any fees or expenses.
** The Fund commenced operations on May 15, 1991. Index comparisons begin
May 31, 1991.
On March 1, 1997, the Fund adopted its current name. Prior to that
date, the Fund was known as Scudder Quality 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. If the
Adviser had not maintained the Fund's expenses, the total returns for
the life of Fund would have been lower.
7
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Portfolio Summary
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July 31, 2000
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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.
Management seeks
Common Stock 94% to remain as close to
Cash Equivalents 6% fully invested in
------------------------------------ equities as possible.
100%
------------------------------------
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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 6% Cash Equivalents) The fund's position in
technology increased
Technology 45% from 37% of net assets
Health 16% on January 31, 2000.
Consumer Discretionary 7%
Consumer Staples 7%
Media 7%
Manufacturing 6%
Communications 5%
Financial 3%
Service Industries 3%
Energy 1%
------------------------------------
100%
------------------------------------
8
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Ten Largest Equity Holdings
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(41% of Portfolio) Reflecting
management's long-term
1. Intel Corp. approach, seven of the
Producer of semiconductor memory circuits top ten holdings as of
July 31, 2000, also
2. Cisco Systems, Inc. appeared in the top
Manufacturer of computer network products ten six months ago.
3. Pfizer, Inc.
International pharmaceutical company
4. Sun Microsystems, Inc.
Manufacturer of high-performance workstations, servers
and software
5. General Electric Co.
Producer of electrical equipment
6. Microsoft Corp.
Developer of computer software
7. Medtronic, Inc.
Manufacturer of cardiac pacemakers
8. America Online, Inc.
Provider of online computer services
9. JDS Uniphase Corp.
Designer, developer, manufacturer and distributor of
products for the fiberoptic communications market
10. Applied Materials, Inc.
Producer of reactors used to manufacture thin film
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
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Portfolio Management Discussion
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July 31, 2000
In the following interview, Valerie F. Malter, lead portfolio manager of Scudder
Large Company Growth Fund, discusses the recent market environment and the
fund's current investment strategy.
Q: Please describe how growth stocks were affected by the volatility that
characterized the market environment during the past year?
A: The strong returns posted by U.S. stock indices during the past twelve months
masks the extreme volatility and rapid sector rotations that have shaken the
global equity markets so far in 2000. Growth stocks began the calendar year on a
high note, boosted by euphoric investor sentiment and the notion that in an
environment of rising interest rates, growth stocks would be able to maintain
steady earnings. During April and May, however, the sector plunged as concerns
surrounding the increasingly aggressive interest rate policy of the U.S. Federal
Reserve weighed heavily on the market. Investors reacted to the uncertain
environment by rotating out of more aggressive areas such as technology and
biotech and into defensive sectors such as consumer staples. The market changed
course yet again during June and early July, as signs of a slowing economy
signaled to market participants that the Fed's year-long campaign of higher
rates may finally be nearing an end. Although growth stocks generally moved
higher during this phase, many individual stocks fell sharply as the market
continued to punish companies that failed to meet expectations. In this
environment, stock selection became essential to performance.
Q: Did the fund's investment approach help it withstand the market's
fluctuations?
A: Yes, we believe that the fund's diversification and our adherence to a strict
investment discipline were key. In managing the fund, we seek to build a
portfolio of the best growth stocks available without concerning ourselves with
the short-term trends of the economy and the markets. Our investment strategy is
not quite sector neutral, but we are committed to managing risk through
diversification. This discipline prevents us from trying to guess the next
10
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hot sector or momentum stock. In addition, it helps ensure that the fund will be
positioned to capture gains when sectors bounce back, as many did during the
past three months.
While we closely monitor how economic trends affect individual companies, we do
not allow short-term macroeconomic fluctuations to drive our investment
discipline. So while other managers may eliminate positions that tend to
underperform in certain environments, we examine each company's ability to
sustain momentum regardless of what sector it's in. This was especially
important during a period in which most sectors experienced wild swings.
Anticipating rotations and trading patterns is difficult in any market, but
almost impossible in this one.
Q: Did your approach translate into a positive performance?
A: Yes. For the twelve-month period ended July 31, 2000, the fund produced a
total return of 29.15%, beating the 24.36% return of its unmanaged benchmark,
the Russell 1000 Growth Index. In addition, the fund has finished in the top
half of large-cap growth funds over the one-, three-, and five-year periods
according to Lipper Analytical Services, and has been awarded an overall rating
of five stars by Morningstar(TM).
Q: How is the fund positioned at present?
A: Our focus on earnings growth led us to establish a marginal overweighting in
the health care sector, where the fund benefited from the strong performance of
pharmaceuticals (Warner Lambert, Pfizer) and biotech stocks (Allergan,
MedImmune) during the past six months. The portfolio's holdings in the
technology stocks also helped performance over the full period, despite the
sector's spring correction. We took advantage of the volatility of April and May
to add to the fund's positions in Aether Systems, Broadcom, Siebel Systems, i2
Technologies, Juniper Networks, and Ariba, a decision that allowed us to benefit
from the June rally in tech
11
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stocks. On the negative side, performance was hurt by the fund's holdings in
retail stocks, which were hurt by earnings disappointments and concerns over a
potential slowdown in the U.S. economy. We are confident that the portfolio is
well-positioned in this area, since it is focused on value-end retailers such as
Wal-Mart, Target, and Kohl's, companies whose focus on consumer staples makes
them less vulnerable to fluctuations in the economy.
The fund's diversification has proven helpful to fund performance during this
volatile period. While growth investors who were weighted too heavily in
technology suffered during the spring, the fund's downside was cushioned by its
holdings in pharmaceuticals and consumer staples, defensive areas that actually
benefited from the volatility in tech stocks. In our view, diversification is a
much more effective way to deal with market rotations than an approach that
emphasizes active trading.
Q: The fund's top ten holdings include seven of the same names that were
included in the top ten list in the semiannual report that was issued on January
31, 2000. Is it part of your strategy to buy and hold?
A: Absolutely. Before we buy a stock, we must believe in its long-term merits.
We evaluate each stock using rigorous proprietary fundamental analysis that is
supplemented by quantitative measures. Once we have purchased a stock, we are
not going to sell it because of non-fundamental, short-term price changes. Also,
we don't believe that making constant changes to the portfolio effectively
serves our shareholders.
Q: Where are you seeing potential opportunities going forward?
A: We are on the lookout for retailers who can grow their concepts via the Web.
Most traditional retailers are currently in an expansion phase. We believe that
those that have existing Web capabilities in place will continue to use the
Internet to their advantage to build sales and increase efficiencies.
12
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In addition, we think that investors have been overly pessimistic regarding
pharmaceutical stocks. Demographic trends, combined with the capacity of some
companies to develop new products, makes the prospects for large pharmaceuticals
better than ever. This suggests that there will be more valuable drugs
introduced in the near future. If opportunities present themselves, we may
increase the fund's exposure to certain names or add to others.
Q: What is your outlook for large-cap growth stocks?
A: Despite the fact that the Nasdaq recovered a good portion of its March and
April losses over the course of the subsequent three months, we continue to
believe that the market will remain in a trading range during the remainder of
the year. A lot depends on whether the Federal Reserve is successful at slowing
the economy and stemming inflation without throwing the country into a
recession. If it is, and interest rates don't go up much more, large-cap growth
stocks should continue to do well. However, consistently rising rates are not
good for the fund's higher P/E stocks or for the market overall.
The portfolio remains broadly diversified and filled with the highest quality
large growth stocks we can find. We feel the fund's diversification and our
attention to quality will help provide a degree of protection against additional
market volatility. We fear that the remainder of 2000 will bring more of what we
have seen so far: incredible volatility and a lack of patience with
disappointment. As a result, we continue to focus our energy on identifying and
buying those stocks with the best near- and long-term fundamentals, and the
lowest probability of disappointing investors. We will also continue to stay
close to the process and discipline that we have been using for the past five
years, and believe that our adherence to these very important rules of growth
stock investing will continue to keep the portfolio well-positioned for the
future.
The opinions expressed are those of Valerie Malter, and may not actually come to
pass. This information is subject to change at any time, based on market and
other conditions and should not be construed as a recommendation of any specific
security.
13
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Scudder Large Company Growth Fund:
A Team Approach to Investing
Scudder Large Company Growth 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 Valerie F. Malter joined the Adviser in 1995 and is
responsible for the fund's investment strategy and daily operation. Ms. Malter
has 15 years of experience as an analyst covering a wide range of industries,
and five years of portfolio management experience focusing on the stocks of
companies with medium- to large-sized market capitalizations.
Portfolio manager George Fraise joined the team and the Adviser in 1997 and has
13 years of experience in the financial industry.
14
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<TABLE>
<CAPTION>
Glossary of Investment Terms
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<S> <C>
Consumer Staples Products purchased by consumers on a regular basis, such as
food, beverages, alcohol, and tobacco. In the aggregate,
sales of consumer staples tend to be steady and less
sensitive to economic fluctuations.
Defensive Securities Stocks and bonds that are more conservative than average,
and tend to perform better than the overall market when that
market is weak. Often, non-cyclical stocks are used to
establish a defensive position, since they tend not to be as
severely affected during economic slowdowns.
Fundamental Research Analysis of companies based on the projected impact of
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.
Growth Stock Stock of a company that has displayed above average earnings
growth and is expected to continue to increase profits
faster than the overall market. Stocks of such companies
usually trade at higher valuations and experience more price
volatility than the market as a whole. Distinct from value
stock.
Momentum Investing The practice of investing in the market's top performing
stocks in order to capture additional upward movements in
their prices.
Price To Earnings Price of a stock divided by its earnings per share. A widely
(P/E) Ratio (also used gauge of a stock's valuation that indicates what
Earnings Multiple) investors are paying for a company's earnings on a per share
basis. A higher earnings multiple indicates higher investor
expectations or a higher growth rate, as well as the
potential for greater price fluctuations.
</TABLE>
(Source: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
15
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Investment Portfolio as of July 31, 2000
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Principal
Amount ($) Value ($)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Repurchase Agreements 2.8%
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Donaldson, Lufkin & Jenrette, 6.53%, to be
repurchased at $20,003,628 on 8/1/2000** ..... 20,000,000 20,000,000
State Street Bank and Trust Company, 6.53%, to be
repurchased at $22,220,030 on 8/1/2000** ..... 22,216,000 22,216,000
--------------------------------------------------------------------------------
Total Repurchase Agreements (Cost $42,216,000) 42,216,000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Short-Term Investments 2.9%
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Student Loan Marketing Association Discount Note,
8/1/2000 (Cost $45,000,000) .................. 45,000,000 45,000,000
[GRAPHIC OMITTED]
Shares
----------------------------------------------------------------------------
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Common Stocks 94.3%
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Consumer Discretionary 6.2%
Department & Chain Stores
Gap, Inc. ....................................... 346,550 12,410,822
Home Depot, Inc. ................................ 461,575 23,886,506
Kohl's Corp.* ................................... 285,650 16,210,638
Target Corp. .................................... 469,400 13,612,600
Wal-Mart Stores, Inc. ........................... 532,100 29,232,244
------------
95,352,810
------------
Consumer Staples 6.2%
Food & Beverage 2.7%
Coca-Cola Co. ................................... 191,900 11,765,869
PepsiCo, Inc. ................................... 633,640 29,028,624
------------
40,794,493
------------
Package Goods/Cosmetics 3.5%
Colgate-Palmolive Co. ........................... 497,150 27,685,041
Estee Lauder Companies, Inc. "A" ................ 422,750 18,601,000
Gillette Co. .................................... 243,450 7,105,697
------------
53,391,738
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Health 15.1%
Biotechnology 2.8%
Genentech, Inc.* ................................ 159,100 24,203,088
The accompanying notes are an integral part of the financial statements.
16
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Shares Value ($)
---------------------------------------------------------------
MedImmune, Inc.* .................. 300,800 17,897,600
------------
42,100,688
------------
Medical Supply & Specialty 2.7%
Medtronic, Inc. ................... 809,838 41,352,353
------------
Pharmaceuticals 9.6%
Allergan, Inc. .................... 216,100 14,465,194
Johnson & Johnson ................. 242,200 22,539,738
Merck & Co., Inc. ................. 421,150 30,191,191
Pfizer, Inc. ...................... 1,841,537 79,416,283
------------
146,612,406
------------
Communications 5.1%
Cellular Telephone 1.9%
American Tower Corp. "A"* ......... 270,050 11,578,394
Vodafone Group plc (ADR) .......... 401,800 17,327,625
------------
28,906,019
------------
Telephone/Communications 3.2%
JDS Uniphase Corp.* ............... 271,410 32,060,306
Nortel Networks Corp. ............. 234,700 17,455,813
------------
49,516,119
------------
Financial 3.1%
Insurance 1.1%
American International Group, Inc. 196,137 17,198,763
------------
Consumer Finance 0.9%
American Express Co. .............. 247,400 14,024,488
------------
Other Financial Companies 1.1%
Morgan Stanley Dean Witter & Co. .. 181,100 16,525,375
------------
Media 6.1%
Advertising 0.9%
Omnicom Group, Inc. ............... 158,850 13,502,250
------------
Broadcasting & Entertainment 4.2%
Clear Channel Communications, Inc.* 200,200 15,252,738
Univision Communication, Inc.* .... 136,900 17,009,825
Viacom, Inc. "B"* ................. 267,850 17,761,803
Walt Disney Co. ................... 376,550 14,567,778
------------
64,592,144
------------
The accompanying notes are an integral part of the financial statements.
17
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Shares Value ($)
-------------------------------------------------------------------
Cable Television 1.0%
AT&T Corp. -- Liberty Media Corp. "A" . 676,250 15,046,564
------------
Service Industries 2.6%
EDP Services 0.8%
Electronic Data Systems Corp. ......... 301,600 12,968,800
------------
Investment 1.0%
Charles Schwab Corp. .................. 400,375 14,463,547
------------
Miscellaneous Commercial Services 0.8%
Siebel Systems, Inc.* ................. 83,110 12,050,950
------------
Manufacturing 5.9%
Diversified Manufacturing
General Electric Co. .................. 1,319,550 67,874,353
Textron, Inc. ......................... 390,600 22,288,613
------------
90,162,966
------------
Technology 42.8%
Computer Software 8.4%
America Online, Inc.* ................. 633,350 33,765,472
i2 Technologies, Inc.* ................ 108,400 14,064,900
Microsoft Corp.* ...................... 860,450 60,070,166
Oracle Corp.* ......................... 271,080 20,381,828
------------
128,282,366
------------
Diverse Electronic Products 6.4%
Aether Systems, Inc.* ................. 100,520 16,730,298
Applied Materials, Inc.* .............. 405,880 30,796,145
Dell Computer Corp.* .................. 395,870 17,393,538
General Motors Corp. "H"* ............. 530,640 13,730,310
Teradyne, Inc.* ....................... 312,660 19,814,828
------------
98,465,119
------------
EDP Peripherals 4.6%
Ariba, Inc.* .......................... 232,090 26,907,934
EMC Corp.* ............................ 361,540 30,776,093
Network Appliance, Inc.* .............. 142,500 12,281,719
------------
69,965,746
------------
Electronic Components/Distributors 8.9%
Broadcom Corp. "A"* ................... 68,360 15,329,730
Cisco Systems, Inc.* .................. 1,651,790 108,089,008
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
<TABLE>
<CAPTION>
Shares Value ($)
--------------------------------------------------------------------------------------------
<S> <C> <C>
Juniper Networks, Inc.* ..................................... 86,620 12,337,936
-------------
135,756,674
-------------
Electronic Data Processing 4.5%
Sun Microsystems, Inc.* ..................................... 658,840 69,466,443
-------------
Semiconductors 10.0%
Intel Corp. ................................................. 1,631,460 108,899,955
Linear Technology Corp. ..................................... 422,760 23,357,490
Vitesse Semiconductor Corp.* ................................ 342,080 20,396,520
-------------
152,653,965
-------------
Energy 1.2%
Oilfield Services/Equipment
Schlumberger Ltd. ........................................... 257,150 19,013,028
-------------
--------------------------------------------------------------------------------------------
Total Common Stocks (Cost $976,559,433) 1,442,165,814
--------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $1,063,775,433) (a) 1,529,381,814
--------------------------------------------------------------------------------------------
</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 $1,066,000,486. At July
31, 2000, net unrealized appreciation for all securities based on tax
cost was $463,381,328. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of value
over tax cost of $488,422,436 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax
cost over value of $25,041,108.
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 $1,063,775,433) ............... $1,529,381,814
Receivable for investments sold ......................................... 21,835,208
Dividends receivable .................................................... 184,369
Interest receivable ..................................................... 7,657
Receivable for Fund shares sold ......................................... 2,913,223
Due from Adviser ........................................................ 37,489
---------------
Total assets ............................................................ 1,554,359,760
Liabilities
------------------------------------------------------------------------------------------
Due to custodian bank ................................................... 1,846
Payable for investments purchased ....................................... 70,238,216
Payable for Fund shares redeemed ........................................ 8,960,929
Accrued management fee .................................................. 884,938
Accrued reorganization costs ............................................ 349,645
Accrued Trustees' fees and expenses ..................................... 73,697
Other accrued expenses and payables ..................................... 561,322
---------------
Total liabilities ....................................................... 81,070,593
Net assets, at value .................................................... $1,473,289,167
Net Assets
------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation (depreciation) on investments ............... 465,606,381
Accumulated net realized gain (loss) .................................... 36,675,271
Paid-in capital ......................................................... 971,007,515
Net assets, at value .................................................... $1,473,289,167
Net Asset Value
------------------------------------------------------------------------------------------
Scudder Shares
NetAsset Value, offering and redemption price per share ($1,415,498,408 /
33,337,103 outstanding shares of beneficial interest, $.01 par value, --------------
unlimited number of shares authorized) ............................... $ 42.46
Class R Shares --------------
Net Asset Value, offering and redemption price per share ($57,790,759 /
1,364,051 outstanding shares of beneficial interest, $.01 par value, --------------
unlimited number of shares authorized) ............................... $ 42.37
--------------
</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 $2,770) ........... $ 4,528,486
Interest ...................................................... 3,524,462
---------------
Total Income .................................................. 8,052,948
---------------
Expenses:
Management fee ................................................ 8,344,919
Services to shareholders ...................................... 4,970,525
Custodian and accounting fees ................................. 143,325
Administrative services fees .................................. 78,141
Auditing ...................................................... 66,450
Legal ......................................................... 25,534
Trustees' fees and expenses ................................... 113,765
Reports to shareholders ....................................... 167,623
Reorganization ................................................ 446,450
Registration fees and other expenses .......................... 136,645
---------------
Total expenses, before expense reductions ..................... 14,493,377
Expense reductions ............................................ (70,181)
---------------
Total expenses, after expense reductions ...................... 14,423,196
--------------------------------------------------------------------------------
Net investment income (loss) (6,370,248)
--------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
-------------------------------------------------------------------------------
Net realized gain (loss) from investments ..................... 40,290,549
Net unrealized appreciation (depreciation) during the period on
investments ................................................ 226,687,163
--------------------------------------------------------------------------------
Net gain (loss) on investment transactions 266,977,712
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 260,607,464
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
--------------------------------------------------------------------------------
Statements of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine Months Year Ended
Year Ended Ended July 31, October 31,
Increase (Decrease) in Net Assets July 31, 2000 1999 1998
------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income (loss) ...... $ (6,370,248) $ (2,513,387) $ (213,021)
Net realized gain (loss) on
investment transactions ........ 40,290,549 16,822,623 31,321,568
Net unrealized appreciation
(depreciation) on investment
transactions during the period . 226,687,163 116,057,567 35,342,915
---------------- ---------------- ---------------
Net increase (decrease) in net
assets resulting from
operations ..................... 260,607,464 130,366,803 66,451,462
---------------- ---------------- ---------------
Distributions to shareholders from:
Net realized gains:
Scudder shares .................. (15,765,593) (32,234,768) (16,858,738)
---------------- ---------------- ---------------
Class R shares .................... (293,269) -- --
---------------- ---------------- ---------------
Fund share transactions:
Proceeds from shares sold ......... 829,542,987 476,042,466 297,954,229
Reinvestment of distributions ..... 15,736,257 31,494,884 16,409,785
Cost of shares redeemed ........... (445,853,126) (278,510,744) (149,865,907)
---------------- ---------------- ---------------
Net increase (decrease) in net
assets from Fund share
transactions ................... 399,426,118 229,026,606 164,498,107
---------------- ---------------- ---------------
Increase (decrease) in net assets . 643,974,720 327,158,641 214,090,831
Net assets at beginning of period . 829,314,447 502,155,806 288,064,975
Net assets at end of period ....... $ 1,473,289,167 $ 829,314,447 $ 502,155,806
</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.
Scudder Shares
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
2000(a)(b) 1999(a)(c) 1998(a)(d) 1997(a)(d) 1996(a)(d) 1995(d)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $33.35 $28.17 $25.10 $21.19 $18.44 $16.17
--------------------------------------------------------------
-------------------------------------------------------------------------------------------
Income (loss) from investment operations:
-------------------------------------------------------------------------------------------
Net investment income
(loss) (.21) (.11) (.02) (.01) .08 .11
-------------------------------------------------------------------------------------------
Net realized and
unrealized gain (loss) on
investment transactions 9.91 7.00 4.55 5.69 3.41 3.40
--------------------------------------------------------------
-------------------------------------------------------------------------------------------
Total from investment
operations 9.70 6.89 4.53 5.68 3.49 3.51
-------------------------------------------------------------------------------------------
Less distributions from:
-------------------------------------------------------------------------------------------
Net investment income -- -- -- -- (.14) (.15)
-------------------------------------------------------------------------------------------
Net realized gains on
investment transactions (.59) (1.71) (1.46) (1.77) (.60) (1.09)
--------------------------------------------------------------
-------------------------------------------------------------------------------------------
Total distributions (.59) (1.71) (1.46) (1.77) (.74) (1.24)
-------------------------------------------------------------------------------------------
Net asset value, end
of period $42.46 $33.35 $28.17 $25.10 $21.19 $18.44
--------------------------------------------------------------
-------------------------------------------------------------------------------------------
Total Return (%) 29.15 24.83** 18.86 28.84 19.49 23.78
Ratios to Average Net Assets and Supplemental Data
-------------------------------------------------------------------------------------------
Net assets, end of period
($ millions) 1,415 829 502 288 221 173
-------------------------------------------------------------------------------------------
Ratio of expenses before
expense reductions (%) 1.21(e) 1.23* 1.19 1.21 1.07 1.17
-------------------------------------------------------------------------------------------
Ratio of expenses after
expense reductions (%) 1.21(e) 1.23* 1.19 1.21 1.07 1.17
-------------------------------------------------------------------------------------------
Ratio of net investment
income (loss) (%) (.53) (.46)* (.06) (.05) .41 .71
-------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 56 63* 54 68 69 92
-------------------------------------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) For the year ended July 31, 2000.
(c) For the nine months ended July 31, 1999. On August 10, 1998, the
Trustees of the Fund changed the fiscal year end from October 31 to
July 31.
(d) For the year ended October 31.
(e) The ratios of operating expenses excluding costs incurred in connection
with the reorganization before and after expense reductions were 1.17%
and 1.17%, respectively (see Notes to Financial Statements).
* Annualized
** Not annualized
23
<PAGE>
The following table includes selected data for a share outstanding throughout
the period and other performance information derived from the financial
statements.
Class R Shares
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
2000(b)
------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $33.27
----------
------------------------------------------------------------------------------------
Income (loss) from investment operations:
------------------------------------------------------------------------------------
Net investment income (loss) (a) (.29)
------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investment transactions 9.98
----------
------------------------------------------------------------------------------------
Total from investment operations 9.69 Less distributions from:
------------------------------------------------------------------------------------
Net investment income --
------------------------------------------------------------------------------------
Net realized gains on investment transactions (.59)
----------
------------------------------------------------------------------------------------
Total distributions (.59)
------------------------------------------------------------------------------------
Net asset value, end of period $42.37
----------
------------------------------------------------------------------------------------
Total Return (%) 29.22**
------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
------------------------------------------------------------------------------------
Net assets, end of period ($ millions) 58
------------------------------------------------------------------------------------
Ratio of expenses before expense reductions (%) 1.43(c)*
------------------------------------------------------------------------------------
Ratio of expenses after expense reductions (%) 1.42(c)*
------------------------------------------------------------------------------------
Ratio of net investment income (loss) (%) (.74)*
------------------------------------------------------------------------------------
Portfolio turnover rate (%) 56*
------------------------------------------------------------------------------------
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) For the period August 2, 1999 (commencement of Class R shares) to July
31, 2000.
(c) The ratios of operating expenses excluding costs incurred in connection
with the reorganization before and after expense reductions were 1.37%
and 1.37%, respectively (see Notes to Financial Statements).
* Annualized
** Not annualized
24
<PAGE>
Notes to Financial Statements
--------------------------------------------------------------------------------
A. Significant Accounting Policies
Scudder Large Company Growth Fund (the "Fund") is a diversified series of the
Investment 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 and is organized as a Massachusetts business trust.
On August 10, 1998, the Fund changed its fiscal year end for financial reporting
and federal income tax purposes to July 31 from October 31.
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.
Effective August 2, 1999, the Fund offers two classes of shares: Scudder shares
and Class R shares. Class R shares are available for purchase by participants of
certain employer-sponsored retirement plans.
Investment income, realized and unrealized gains and losses, and certain
fund-level expenses and expense reductions, if any, are borne pro rata on the
basis of relative net assets by the holders of all classes of shares except that
each class bears certain expenses unique to that class such as shareholder
services, administrative services and certain other class specific expenses.
Differences in class expenses may result in payment of different per share
dividends by class. All shares of the Fund have equal rights with respect to
voting subject to class specific arrangements.
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
25
<PAGE>
there are no such bid and asked quotations, the most recent bid quotation shall
be used.
Portfolio debt securities purchased with an original maturity greater than sixty
days are valued by pricing agents approved by the officers of the Trust, whose
quotations reflect broker/dealer-supplied valuations and electronic data
processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. Money market instruments purchased with an original maturity of
sixty days or less are valued at amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Trustees.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian or
sub-custodian bank, receives delivery of the underlying securities, the amount
of which at the time of purchase and each subsequent business day is required to
be maintained at such a level that the market value is equal to at least the
principal amount of the repurchase price plus accrued interest.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
investment companies, and to distribute all of its taxable income to its
shareholders. Accordingly, the Fund paid no federal income taxes and no federal
income tax provision was required.
Distribution of Income and Gains. Distributions of net investment income, if
any, are made annually. Net realized gains from investment transactions, in
excess of available capital loss carryforwards, would be taxable to the Fund if
not distributed, and, therefore, will be distributed to shareholders at least
annually.
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. These differences primarily relate to investments in certain securities
sold at a loss. 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.
26
<PAGE>
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
For the year ended July 31, 2000, purchases and sales of investment securities
(excluding short-term investments) aggregated $1,019,419,455 and $630,382,602,
respectively.
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 objective, 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 management fee payable under the
Agreement is equal to an annual rate of 0.70% of the Fund's average daily net
assets computed and accrued daily and payable monthly. For the year ended July
31, 2000, the fee pursuant to the Agreement amounted to $8,344,919.
Administrative Services Fees. Kemper Distributors, Inc. ("KDI"), an affiliate of
the Adviser, provides information and administrative services to Class R
shareholders at an annual rate of up to 0.25% of average daily net assets for
the class. KDI in turn has various agreements with financial services firms that
provide these services and pays these firms based on assets of shareholder
accounts the firms service. For the period August 2, 1999 through July 31, 2000,
the Administrative Services Fees were as follows:
Fees Waived by Unpaid at
Administrative Services Fees Total Aggregated KDI July 31, 2000
--------------------------------------------------------------------------------
Class R .................... $ 78,141 -- $ 78,141
Shareholder Services Fees. Kemper Service Company ("KSC"), an affiliate of the
Adviser, is the transfer, dividend-paying and shareholder service agent for the
Fund's Class R shares. During the first year of operations for Class R
27
<PAGE>
shares, shareholder services fees will be accrued at a rate of 0.35%. For the
period August 2, 1999 through July 31, 2000, the amount charged to Class R
shares aggregated $109,502, of which $76,451 is unpaid at July 31, 2000. Scudder
Service Corporation ("SSC"), a subsidiary of the Adviser, is the transfer,
dividend-paying and shareholder service agent for the Scudder shares of the
Fund. For the year ended July 31, 2000, the amount charged to the Scudder shares
of the Fund by SSC aggregated $1,295,705, of which $113,553 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 aggregated $2,696,270, of which $280,780
was 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 $135,642, of
which $10,344 was 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 Scudder class of the
Underlying Funds based on each Underlying Funds' proportionate share of assets
owned by the Portfolios. No Underlying Funds will be charged expenses that
exceed the estimated savings to such Scudder class of the Underlying Fund. These
estimated savings result from the elimination of separate shareholder accounts
which either currently are or have potential to be invested in the Scudder class
of the Underlying Funds. For the year ended July 31, 2000, the Special Servicing
Agreement expense charged to the Fund amounted to $439,376.
The Trust 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 for the Trust
aggregated $38,789. In addition, a one-time fee of $74,976 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 G. Inasmuch as the
28
<PAGE>
Adviser will also benefit from administrative efficiencies of a consolidated
Board, the Adviser has agreed to bear $37,489 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 $3,233 and $29,459,
respectively, under these arrangements.
E. Share Transactions
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
July 31, 2000 July 31, 1999
----------------------------------- --------------------------------
Shares Dollars Shares Dollars
Shares sold
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Scudder Shares ........ 18,548,987 $ 752,070,116 14,423,168 $ 476,042,466
Class R* .............. 1,945,668 77,472,871 -- --
$ 829,542,987 $ 476,042,466
Shares issued to shareholders in reinvestment of distributions
------------------------------------------------------------------------------------------
Scudder Shares ........ 384,247 $ 15,443,016 989,473 $ 31,494,884
Class R* .............. 7,304 293,241 -- --
$ 15,736,257 $ 31,494,884
Shares redeemed
------------------------------------------------------------------------------------------
Scudder Shares ........ (10,459,812) $(421,748,505) (8,377,733) $(278,510,744)
Class R* .............. (588,921) (24,104,621) -- --
$(445,853,126) $(278,510,744)
Net increase (decrease)
------------------------------------------------------------------------------------------
Scudder Shares ........ 8,473,422 $ 345,764,627 7,034,908 $ 229,026,606
Class R* .............. 1,364,051 53,661,491 -- --
$ 399,426,118 $ 229,026,606
</TABLE>
* For the period August 2, 1999 (commencement of sale of Class R shares)
to July 31, 2000.
29
<PAGE>
Year Ended
October 31, 1998
-----------------------------------
Shares Dollars
Shares sold
-------------------------------------------------------------------
Scudder Shares ................. 11,101,198 $ 297,954,229
Shares issued to shareholders
in reinvestment of distributions
---------------------------------------------------------------
Scudder Shares ................. 667,879 $ 16,409,785
Shares redeemed
---------------------------------------------------------------
Scudder Shares ................. (5,417,328) $(149,865,907)
Net increase (decrease)
---------------------------------------------------------------
Scudder Shares ................. 6,351,749 $ 164,498,107
F. 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.
G. 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. These costs, including printing, shareholder meeting
expenses and professional fees, are presented as reorganization expenses in the
Statement of Operations of the Fund.
30
<PAGE>
Report of Independent Accountants
--------------------------------------------------------------------------------
To the Trustees of Investment Trust and the Shareholders of Scudder Large
Company Growth 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 Growth 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 15, 2000
31
<PAGE>
Tax Information
--------------------------------------------------------------------------------
The Fund paid distributions of $0.43 per share from net long-term capital gains
during its year ended July 31, 2000, of which 100% represented 20% rate gains.
Pursuant to section 852 of the Internal Revenue Code, the Fund designates
$42,000,000 as capital gain dividends for its year ended July 31, 2000, of which
100% represents 20% rate gains.
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.
32
<PAGE>
Shareholder Meeting Results (Unaudited)
--------------------------------------------------------------------------------
A Special Meeting of Shareholders (the "Meeting") of Scudder Large Company
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 the fund.
Number of Votes:
Trustee For Withheld
--------------------------------------------------------------------------------
Henry P. Becton, Jr. 13,861,777 278,721
Linda C. Coughlin 13,862,817 277,681
Dawn-Marie Driscoll 13,860,750 279,748
Edgar R. Fiedler 13,850,807 289,691
Keith R. Fox 13,864,620 275,878
Joan E. Spero 13,859,591 280,907
Jean Gleason Stromberg 13,860,034 280,464
Jean C. Tempel 13,863,949 276,549
Steven Zaleznick 13,861,781 278,717
--------------------------------------------------------------------------------
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*
--------------------------------------------------------------------------------
13,851,002 124,109 165,387 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.
33
<PAGE>
Officers and Trustees
--------------------------------------------------------------------------------
Linda C. Coughlin* William F. Gadsden*
o President and Trustee o Vice President
Henry P. Becton, Jr. William F. Glavin*
o Trustee; President, WGBH o Vice President
Educational Foundation
Valerie F. Malter*
Dawn-Marie Driscoll o Vice President
o Trustee; President, Driscoll
Associates; Executive Fellow, James E. Masur*
Center for Business Ethics, o Vice President
Bentley College
Ann M. McCreary*
Edgar R. Fiedler o Vice President
o Trustee; Senior Fellow and
Economic Counsellor, The Kathleen T. Millard*
Conference Board, Inc. o Vice President
Keith R. Fox Howard S. Schneider*
o Trustee; General Partner, o Vice President
The Exeter Group of Funds
John Millette*
Joan E. Spero o Vice President and Secretary
o Trustee; President, The Doris
Duke Charitable Foundation Kathryn L. Quirk*
o Vice President and
Jean Gleason Stromberg Assistant Secretary
o Trustee; Consultant
John R. Hebble*
Jean C. Tempel o Treasurer
o Trustee; Managing Director,
First Light Capital, LLC Brenda Lyons*
o Assistant Treasurer
Steven Zaleznick
o Trustee; President and Caroline Pearson*
Chief Executive Officer, o Assistant Secretary
AARP Services, Inc.
*Scudder Kemper Investments, Inc.
Thomas V. Bruns*
o Vice President
James M. Eysenbach*
o Vice President
34
<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
35
<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.
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Account Management Resources
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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.
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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
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Notes
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<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
A member of the [LOGO] Zurich Financial Services Group
