Scudder
Small Company
Value Fund
Semiannual Report
February 29, 1996
o Offers opportunities for long-term growth of capital by seeking undervalued
stocks of small U.S. companies.
o A pure no-load(TM) fund with no commissions to buy, sell, or exchange
shares.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
<PAGE>
SCUDDER SMALL COMPANY VALUE FUND
CONTENTS
2 In Brief
3 Letter from the Fund's President
4 Portfolio Summary
5 Portfolio Management Discussion
7 Investment Portfolio
13 Financial Statements
16 Financial Highlights
17 Notes to Financial Statements
21 Officers and Trustees
22 Investment Products and Services
23 How to Contact Scudder
IN BRIEF
o Scudder Small Company Value Fund provided a positive total return of 6.09%*
from its commencement of operations on October 6, 1995, through the period
ended February 29, 1996.
o At the end of February, the Fund's 25.5 million dollars were invested in
151 stocks and one repurchase agreement.
o The average price-earnings ratio for portfolio holdings as of February 29th
was 13.4, or a little more than half of the 26.1 ratio for the unmanaged
Russell 2000 Index of small stocks.
o The Fund's most significant focus is in the finance sector, which accounts
for approximately 30% of the portfolio's stock holdings. This is also the
largest sector in the small stock segment of the U.S. market. Other groups
where the Fund's value-driven process has resulted in significant
representation include consumer discretionary, utilities, and manufacturing
stocks.
- ----------------------
* If you redeemed shares held less than one year, a fee of 1% would have been
assessed, lowering the Fund's total return to 5.09% for the period. This
fee serves to benefit remaining shareholders by recovering transaction
expenses caused by early redemptions, and is intended to encourage
long-term investment in the Fund.
2
<PAGE>
LETTER FROM THE FUND'S PRESIDENT
Dear Shareholders,
We are pleased to present the first semiannual report for Scudder Small
Company Value Fund, covering the abbreviated period from the Fund's commencement
on October 6, 1995, through the end of February. As a Fund shareholder, you can
expect to receive reports each quarter, including comprehensive reports annually
and semiannually, as well as two interim reports in the intervening quarters.
Scudder Small Company Value Fund seeks capital appreciation over time
through the identification of small U.S. stocks that appear to be selling at
prices below their true worth. The Fund's total return for the nearly five
months covered by this report was 6.09%, reflecting in part a generally rising
U.S. market with day-to-day stock price movements that for the most part stayed
within a reasonable range. More recently, the market has begun to display a
higher degree of volatility, as evidenced by the 171 point drop in the Dow Jones
Industrial Average on March 8. As The Wall Street Journal noted, however, this
decline failed to crack the top 100 of all time on a percentage basis, and the
market, in fact, rebounded the next trading day.
After an extended period of gains such as the U.S. stock market recently
experienced, a modest correction would not be unusual. In addition, a degree of
short-term volatility is natural as investors react to conflicting indicators of
such economic fundamentals as the rate of inflation. In our view, however, the
long-term outlook for investors in the U.S. and worldwide remains positive,
based on a number of structural factors that point toward a continuing trend of
disinflationary growth.
We believe Scudder Small Company Value Fund, with its highly disciplined
approach to selecting U.S. small stocks, has particularly attractive investment
characteristics at this point in the market cycle. We welcome you as a
shareholder and look forward to your continued support.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President, Scudder Small Company Value Fund
3
<PAGE>
SCUDDER SMALL COMPANY VALUE FUND
PORTFOLIO SUMMARY as of February 29, 1996
- ---------------------------------------------------------------------------
ASSET MIX
- ---------------------------------------------------------------------------
Equity Securities 95% The portfolio is invested
Cash & Equivalents, Net 5% entirely in U.S. small
- ---------------------------------- company stocks, except for
Total Net Assets (millions) $25.13 a small cash position.
Net Asset Value per Share $12.68
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- ---------------------------------------------------------------------------
STOCK CHARACTERISTICS
- ---------------------------------------------------------------------------
RUSSELL FUND AS % OF
FUND 2000* S&P 500** RUSSELL 2000
---- ---- ------- ------------
SMALL COMPANIES ($ MILLIONS)
Market Capitalization - Median 296 290 4,751 102%
Market Capitalization - Wgt. Avg. 325 554 31,978 59%
Revenues 524 507 23,189 103%
VALUE ORIENTATION
P/E - Trailing Twelve Months 13.4 26.1 18.7 51%
Price/Sales 0.6 1.0 1.1 64%
Price/Book Value 1.5 2.3 3.0 64%
Yield (Avg. Stock) 1.9% 1.4% 2.3% 144%
The average Fund holding has a price-earnings ratio of approximately one-half
that of the overall small stock market.
* The Russell 2000 Index is an unmanaged capitalization-weighted measure of
small U.S. companies whose common stocks trade on the New York Stock
Exchange, American Stock Exchange, and NASDAQ market.
** The Standard and Poor's (S&P) 500 Index is an unmanaged capitalization-
weighted measure of 500 widely held common stocks listed on the New York
Stock Exchange, American Stock Exchange, and NASDAQ market.
- --------------------------------------------------------------------------
SECTORS/LARGEST HOLDINGS (Excludes 5% Cash Equivalents, Net)
- --------------------------------------------------------------------------
FINANCIAL (30%) TECHNOLOGY (5%)
Susquehanna Bancshares, Inc. Wyle Electronics (Producer of
(Multi-bank holding company) semicondutors, computer systems and
related services)
CONSUMER DISCRETIONARY (11%)
Claire's Stores, Inc. (Retailer HEALTH (5%)
specializing in fashion Mariner Health Group, Inc. (Provider
accessories for girls and women) of post acute healthcare services)
MANUFACTURING (10%) METALS & MINERALS (4%)
Scotsman Industries, Inc. UNR Industries, Inc. (Manufacturer
(Manufacturer of commercial of steel-related products)
refrigeration products)
DURABLES (4%)
UTILITIES (10%) Wynn's International, Inc. (Producer
Central Vermont Public Service of automotive parts and accessories
(Electric power supplier) and petro-chemical products)
CONSTRUCTION (7%) OTHER (14%)
Southdown Inc. (Cement and Citicasters Inc. (Operator of radio
concrete producer) stations)
For more complete details about the Fund's Investment Portfolio,
see page 7.
A monthly Investment Portfolio Summary and quarterly Portfolio Holdings
are available upon request.
4
<PAGE>
SCUDDER SMALL COMPANY VALUE FUND
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
Scudder Small Company Value Fund provided a positive total return of 6.09%
from its commencement of operations on October 6, 1995, through the end of its
abbreviated semiannual period on February 29, 1996. After falling in October,
small company value stocks generally rose during the remainder of the period.
The unmanaged Russell 2000 Value Index returned 5.22% for the full five-month
period from the beginning of October 1995 through the end of February 1996. The
Fund missed part of the market's October decline, accounting for its higher
return. The Russell 2000 Value Index is a widely followed gauge of stocks with
smaller capitalizations that display value characteristics, and is the Fund's
performance benchmark.
The U.S. stock market was driven over the period by continued slow growth,
a low rate of inflation, and the prospect of further interest rate declines.
While small stock returns in the aggregate were positive, they lagged those of
their larger-capitalization counterparts, principally the result of a weak
October when many small technology issues were in retreat. In addition, small
stocks were essentially flat in January, a month when larger-cap stocks posted
solid gains.
Portfolio Characteristics
Scudder Small Company Value Fund seeks long-term growth of capital by
applying a distinctive approach to investing in U.S. stocks. In doing so, the
Fund provides investors with a way to access the benefits of two techniques that
have historically provided solid long-term returns--investing in small stocks,
and employing a value-oriented selection criteria.
To review the Fund's selection process, the prospective investment universe
is first narrowed to U.S. companies with market capitalizations of between $50
and $500 million. These issues are then scored against a proprietary set of
quantitative standards that relate to the fundamental determinants of a stock's
value. Stocks are also evaluated on the basis of growth and price momentum
indicators. The small stocks that we identify as displaying the strongest
combination of investment characteristics become part of the portfolio. The
process is designed to produce a portfolio of undervalued stocks of small
companies with above-average return potential. At the end of February, the
Fund's 25.5 million dollars were invested in 151 stocks and one repurchase
agreement.
It is instructive to compare the characteristics of the average portfolio
holding to those of stocks in the Russell 2000 Index, a broadly based proxy for
the U.S. small stock market. (As described above, the Fund's performance
benchmark is the more specialized Russell 2000 Value Index, which has
historically outperformed the Russell 2000 Index.) With respect to stock
5
<PAGE>
size, the average market capitalization of the Fund's holdings was $325 million,
or less than three-fifths that of the average for the Russell 2000 Index. At the
same time, the average price-earnings ratio--a commonly used measure of stock
value--for portfolio holdings was 13.4 based on trailing 12-month earnings, or a
little more than half of the 26.1 ratio for the Russell 2000 Index. The Fund
also has lower price-to-sales and price-to-book ratios and a higher dividend
yield than the Index. We believe these value-oriented characteristics should
translate into lower Fund price volatility. At the end of February, the Fund's
most significant focus was in the finance sector, which accounted for
approximately 30% of the portfolio's stock holdings. Other groups where the
Fund's value-driven process resulted in significant representation include
consumer discretionary, utilities, and manufacturing stocks.
Looking Ahead
The U.S. stock market reached new heights seemingly on a daily basis for
much of the first two months of 1996, and it may be too much to expect this
strong performance to continue throughout the year. Short-term volatility and
periodic corrections are natural and to be expected. However, the long-term
prospects for the U.S. economy and stock market are positive, based on a number
of structural trends including low inflation and interest rates.
Scudder Small Company Value Fund continues to provide a disciplined,
value-oriented approach to small stock investing. The Fund's investment criteria
may on occasion be refined as we identify compelling relationships between
certain value stock characteristics and the price behavior of U.S. small stocks.
The result to-date of this process has been an intensification of the role value
plays in stock selection, as well as the increased weighting of traits that
should help control some of the volatility inherent in small stock investing.
Going forward, we believe the Fund is well positioned to benefit shareholders
seeking capital appreciation over time.
Sincerely,
Your Portfolio Management Team
/s/James M. Eysenbach /s/Philip S. Fortuna
James M. Eysenbach Philip S. Fortuna
Scudder Small Company
Value Fund:
A Team Approach to Investing
Scudder Small Company Value Fund is managed by a team of Scudder investment
professionals who each play an important role in the Fund's management process.
Team members work together to implement the Fund's proprietary quantitative
stock selection process. We believe our team approach benefits Fund investors by
bringing together many disciplines and leveraging Scudder's extensive resources.
Philip S. Fortuna, Lead Portfolio Manager, joined Scudder in 1986 as
manager of institutional equity accounts. He became director of quantitative
research in 1987 and served as director of investment operations from 1993 to
1994. James M. Eysenbach, Portfolio Manager, joined Scudder in 1991 as a senior
quantitative analyst and is currently director of quantitative research for
Scudder. Mr. Eysenbach has more than eight years of investment research and
management experience.
6
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO as of February 29, 1996 (Unaudited)
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
-------------------------------------------------------------------------
5.0% REPURCHASE AGREEMENTS
-------------------------------------------------------------------------
1,270,000 Repurchase Agreement with State Street Bank
and Trust Company dated 2/29/96 at 5.3%,
to be repurchased at $1,270,187 on 3/1/96,
collateralized by a $1,005,000 U.S. Treasury
Bond, 9.25%, 2/15/16 (Cost $1,270,000) ........... 1,270,000
---------
-------------------------------------------------------------------------
95.0% COMMON STOCKS
-------------------------------------------------------------------------
Shares
-------------------------------------------------------------------------
CONSUMER DISCRETIONARY 10.7%
Department & Chain Stores 2.3% 11,800 Best Products Corp., Inc.* ........................ 37,612
9,800 Carson Pirie Scott & Co.* ......................... 192,325
7,800 Mac Frugal's Bargains Close-Outs, Inc.* ........... 119,925
9,400 Ross Stores, Inc. ................................. 230,300
---------
580,162
---------
Home Furnishings 4.3% 21,200 Furniture Brands International Inc.* .............. 193,450
14,600 Haverty Furniture Co., Inc. ....................... 178,850
12,300 Interface, Inc. ................................... 161,437
17,500 Prime Hospitality Corp.* .......................... 199,063
6,800 Thomas Industries, Inc. ........................... 148,750
6,800 Toro Co. .......................................... 227,800
---------
1,109,350
---------
Recreational Products 0.6% 6,400 Carmike Cinemas, Inc.* ............................ 150,400
---------
Restaurants 0.8% 29,100 Ryan's Family Steak Houses, Inc.* ................. 192,788
---------
Specialty Retail 2.7% 7,100 Bombay Co., Inc.* ................................. 41,712
16,800 Claire's Stores, Inc. ............................. 264,600
8,700 General Host Corp.* ............................... 36,975
4,800 Inacom Corp.* ..................................... 87,000
16,100 Pier 1 Imports, Inc. .............................. 213,325
3,800 Trak Auto Corp.* .................................. 57,000
---------
700,612
---------
CONSUMER STAPLES 2.9%
Alcohol & Tobacco 1.0% 3,800 Culbro Corp.* ..................................... 251,750
---------
Food & Beverage 1.2% 8,200 Hudson Foods, Inc. "A" ............................ 110,700
10,200 International Multifoods Corp. .................... 189,975
---------
300,675
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
SCUDDER SMALL COMPANY VALUE FUND
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Textiles 0.7% 2,900 Fieldcrest Cannon, Inc.* .............................. 54,375
6,800 Guilford Mills, Inc. .................................. 142,800
-------
197,175
-------
HEALTH 4.6%
Biotechnology 0.7% 4,600 Bio-Rad Laboratories, Inc. "A"* ....................... 177,675
-------
Health Industry Services 0.7% 10,200 Foxmeyer Health Corp.* ................................ 174,675
-------
Hospital Management 1.4% 5,700 GranCare, Inc.* ....................................... 103,312
12,000 Mariner Health Group, Inc.* ........................... 228,000
1,500 United Wisconsin Services, Inc. ....................... 30,938
-------
362,250
-------
Medical Supply & Specialty 1.8% 10,700 ADAC Laboratories ..................................... 164,512
10,900 Kinetic Concepts, Inc. ................................ 148,513
5,700 West Co., Inc. ........................................ 131,813
-------
444,838
-------
FINANCIAL 28.5%
Banks 18.5% 6,000 ALBANK Financial Corp. ................................ 171,000
3,200 Astoria Financial Corp. ............................... 158,000
7,000 BancorpSouth, Inc. .................................... 165,375
5,700 Center Financial Corp. ................................ 109,725
4,200 Chittenden Corp. ...................................... 113,400
5,100 Colonial BancGroup, Inc. .............................. 166,387
9,275 Commerce Bancorp, Inc. ................................ 198,253
9,000 F&M National Corp. .................................... 171,000
4,900 FFY Financial Corp. ................................... 107,800
1,200 First Citizens BancShares, Inc. "A" ................... 71,400
7,500 First Commonwealth Financial Corp. .................... 139,687
7,840 First Indiana Corp. ................................... 179,340
7,900 HUBCO, Inc. ........................................... 159,481
4,700 Hancock Holding Co. ................................... 175,075
2,900 Irwin Financial Corp. ................................. 126,150
4,500 New York Bancorp, Inc ................................. 98,438
5,200 North Side Savings Bank ............................... 163,800
8,900 People's Heritage Financial Group, Inc. ............... 190,238
6,000 RCSB Financial, Inc. .................................. 141,000
9,200 Reliance Bancorp, Inc. ................................ 134,550
11,500 Riggs National Corp.* ................................. 140,875
8,900 River Forest Bancorp, Inc. ............................ 258,100
19,320 Sovereign Bancorp, Inc. ............................... 214,935
10,600 Susquehanna Bancshares, Inc. .......................... 296,800
7,600 TR Financial Corp. .................................... 198,550
5,900 United Bankshares, Inc. ............................... 172,575
4,900 Westamerica Bancorp. .................................. 221,725
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
8,400 Whitney Holding Corp. ................................. 266,700
---------
4,710,359
---------
Insurance 6.4% 8,200 Acceptance Insurance Cos., Inc.* ...................... 120,950
6,600 American Heritage Life Investment Corp. ............... 140,250
4,600 American Travellers Corp.* ............................ 138,575
4,800 First American Financial Co. .......................... 135,600
4,100 Guaranty National Corp. ............................... 55,350
14,300 Life USA Holdings Inc.* ............................... 110,825
4,580 MAIC Holdings, Inc.* .................................. 154,575
7,800 MMI Companies, Inc. ................................... 186,225
6,600 Security-Connecticut Corp. ............................ 180,675
3,300 Trenwick Group, Inc. .................................. 169,950
9,200 Washington National Corp. ............................. 243,800
---------
1,636,775
---------
Business Finance 0.9% 17,300 National Auto Credit, Inc.* ........................... 229,225
---------
Consumer Finance 0.6% 5,100 Webster Financial Corp. ............................... 152,363
---------
Other Financial Companies 0.6% 5,200 Bay View Capital Corp. ................................ 162,500
---------
Real Estate 1.5% 4,200 Bay Apartment Communities, Inc. ....................... 98,700
4,600 JDN Realty Corp. ...................................... 102,350
7,800 Walden Residential Properties, Inc. ................... 169,650
---------
370,700
---------
MEDIA 2.2%
Advertising 0.9% 11,400 True North Communications, Inc. ....................... 233,700
---------
Broadcasting &
Entertainment 1.3% 10,950 Citicasters Inc. ...................................... 317,550
---------
SERVICE INDUSTRIES 3.7%
Investment 2.1% 6,400 BHC Financial, Inc. ................................... 112,000
8,600 McDonald & Co. Investments ............................ 166,625
12,000 Raymond James Financial, Inc. ......................... 265,500
---------
544,125
---------
Miscellaneous Consumer
Services 0.8% 15,600 Kinder Care Learning Centers* ......................... 193,050
---------
Printing/Publishing 0.8% 11,300 Bowne & Co., Inc. ..................................... 211,875
---------
DURABLES 4.0%
Aerospace 0.4% 2,200 Curtiss-Wright Corp. .................................. 118,250
---------
Automobiles 3.6% 7,900 Hayes Wheels International, Inc. ...................... 179,725
11,300 Myers Industries, Inc. ................................ 185,038
10,600 SPX Corp. ............................................. 162,975
7,300 Walbro Inc. ........................................... 131,400
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
SCUDDER SMALL COMPANY VALUE FUND
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
11,500 Wynn's International, Inc. ............................ 254,438
-------
913,576
-------
MANUFACTURING 9.5%
Chemicals 0.7% 3,200 NCH Corp. ............................................. 168,400
-------
Containers & Paper 0.5% 8,000 Park Ohio Industries Inc.* ............................ 124,000
-------
Diversified Manufacturing 3.1% 7,350 Bearings, Inc. ........................................ 196,612
12,600 Cascade Corp. ......................................... 166,950
500 International Aluminum Co. ............................ 13,937
12,200 Scotsman Industries, Inc. ............................. 211,975
7,000 Valmont Industries .................................... 190,750
-------
780,224
-------
Industrial Specialty 1.3% 5,000 Central Sprinkler Corp.* .............................. 191,250
8,300 Wyman-Gordon Co.* ..................................... 147,325
-------
338,575
-------
Machinery/Components/
Controls 2.6% 5,500 Mueller Industries, Inc.* ............................. 169,813
8,700 Varlen Corp. .......................................... 206,625
3,400 Watts Industries, Inc. "A" ............................ 64,175
11,800 Zero Corporation ...................................... 209,450
-------
650,063
-------
Office Equipment/Supplies 1.1% 5,300 American Business Products, Inc. ...................... 124,550
8,000 Hunt Manufacturing Co. ................................ 133,000
3,500 Nashua Corp. "A" ...................................... 31,938
-------
289,488
-------
Wholesale Distributors 0.2% 1,600 Fisher Scientific International ....................... 59,600
-------
TECHNOLOGY 4.7%
Computer Software 0.4% 8,800 AmeriData Technologies, Inc.* ......................... 86,900
-------
EDP Peripherals 1.0% 2,900 DH Technology, Inc.* .................................. 63,800
12,100 Gerber Scientific, Inc. ............................... 179,987
-------
243,787
-------
Electronic Components/
Distributors 2.6% 11,300 Augat, Inc. ........................................... 199,162
9,600 Bell Industries, Inc.* ................................ 208,800
8,100 Wyle Electronics ...................................... 265,275
-------
673,237
-------
Military Electronics 0.7% 5,100 Watkins-Johnson Co. ................................... 187,425
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ENERGY 1.9%
Oilfield Services/Equipment 23,300 Pride Petroleum Services, Inc.* ..................... 260,669
24,500 RPC, Inc.* .......................................... 232,750
---------
493,419
---------
METALS & MINERALS 4.2%
Steel & Metals 10,100 Acme Metals, Inc.* .................................. 166,650
4,100 Birmingham Steel Corp. .............................. 60,987
7,900 Chaparral Steel Co. ................................. 112,575
8,700 Commercial Metals Co. ............................... 231,637
2,500 National Steel Corp. "B"* ........................... 33,750
12,800 Shiloh Industries, Inc.* ............................ 163,200
28,000 UNR Industries, Inc. ................................ 238,000
5,600 WHX Corporation* .................................... 65,100
---------
1,071,899
---------
CONSTRUCTION 6.6%
Building Materials 2.7% 5,200 Fibreboard Corp.* ................................... 115,700
6,400 Medusa Corp. ........................................ 187,200
10,600 Southdown Inc.* ..................................... 235,850
16,100 Universal Forest Products, Inc. ..................... 136,850
---------
675,600
---------
Building Products 0.3% 8,200 Nortek, Inc.* ....................................... 89,175
---------
Homebuilding 2.9% 3,500 Champion Enterprises, Inc.* ......................... 105,875
3,800 Continental Homes Holding Corp. ..................... 78,375
19,000 Hovnanian Enterprises Inc. "A"* ..................... 131,812
12,900 Kaufman & Broad Home Corp. .......................... 198,338
13,600 NVR Inc.* ........................................... 136,000
3,300 U.S. Home Corp.* .................................... 86,213
---------
736,613
---------
Miscellaneous 0.7% 6,400 Granite Construction, Inc. .......................... 177,600
---------
TRANSPORTATION 2.3%
Airlines 4,100 Alaska Air Group Inc.* .............................. 91,225
23,200 Mesa Airlines, Inc.* ................................ 275,500
12,100 Offshore Logistics, Inc.* ........................... 151,250
5,700 Skywest, Inc. ....................................... 71,963
---------
589,938
---------
UTILITIES 9.2%
Electric Utilities 2.7% 22,800 Central Vermont Public Service ...................... 327,750
5,700 Commonwealth Energy System Companies ................ 269,325
3,400 St. Joseph Light & Power Co. ........................ 110,500
---------
707,575
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
SCUDDER SMALL COMPANY VALUE FUND
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Natural Gas Distribution 5.7% 5,500 Bay State Gas Co. .................................. 156,062
10,000 Energen Corp. ...................................... 236,250
5,500 New Jersey Resources Corp. ......................... 160,188
7,100 Northwest Natural Gas Co. .......................... 234,300
11,000 Petroleum Heat & Power Co., Inc. "A" ............... 77,000
15,300 Public Service Co. of North Carolina ............... 252,450
14,300 Southwest Gas Corp. ................................ 228,800
6,300 United Cities Gas Co. .............................. 102,375
----------
1,447,425
----------
Water Supply 0.8% 7,900 Aquarion Co. ....................................... 203,425
----------
TOTAL COMMON STOCKS (Cost $23,194,208) ............. 24,230,766
----------
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $24,464,208) (a) ............................ 25,500,766
==========
<FN>
(a) The cost for federal income tax purposes was $24,464,208. At February 29, 1996,
net unrealized appreciation for all securities based on tax cost was $1,036,558.
This consisted of aggregate gross unrealized appreciation for all securities
in which there was an excess of market value over tax cost of $1,604,652 and
aggregate gross unrealized depreciation for all securities in which there was
an excess of tax cost over market value of $568,094.
* Non-income producing security.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- -------------------------------------------------------------------------------------------
<CAPTION>
FEBRUARY 29, 1996 (UNAUDITED)
- -------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $24,464,208)
(Note A) ............................................... $25,500,766
Cash ..................................................... 34,996
Receivables:
Fund shares sold ....................................... 184,076
Dividends and interest ................................. 25,641
Due from Adviser (Note C) .............................. 47,811
Deferred organization expense (Note A) ................... 22,932
-----------
Total assets ......................................... 25,816,222
LIABILITIES
Payables:
Investments purchased .................................. $617,518
Fund shares redeemed ................................... 1,461
Accrued expenses (Note C) .............................. 70,762
--------
Total liabilities .................................... 689,741
-----------
Net assets, at market value .............................. $25,126,481
===========
NET ASSETS
Net assets consist of:
Undistributed net investment income .................... $ 6,705
Unrealized appreciation on investments ................. 1,036,558
Accumulated net realized loss .......................... (88,186)
Shares of beneficial interest .......................... 19,818
Additional paid-in capital ............................. 24,151,586
-----------
Net assets, at market value .............................. $25,126,481
===========
NET ASSET VALUE, offering and redemption price per
share ($25,126,481 [division sign] 1,981,777 outstanding
shares of beneficial interest, $.01 par value,
unlimited number of shares authorized) ................. $12.68
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
SCUDDER SMALL COMPANY VALUE FUND
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------------------
<CAPTION>
FOR THE PERIOD OCTOBER 6, 1995 (COMMENCEMENT OF OPERATIONS)
TO FEBRUARY 29, 1996 (UNAUDITED)
- ------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends ................................................ $ 124,430
Interest ................................................. 26,961
----------
151,391
Expenses:
Management fee (Note C) .................................. $ 42,071
Services to shareholders (Note C) ........................ 63,216
Custodian and accounting fees (Note C) ................... 82,699
Trustees' fees (Note C) .................................. 16,605
State registration ....................................... 19,053
Auditing ................................................. 14,550
Reports to shareholders .................................. 9,726
Federal registration .................................... 8,287
Legal .................................................... 4,299
Amortization of organization expense (Note A) ............ 2,798
Other .................................................... 4,143
---------
Total expenses before reductions ......................... 267,447
Expense reductions (Note C) .............................. (184,280)
---------
Expenses, net ............................................ 83,167
----------
Net investment income .................................... 68,224
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS
Net realized loss from investments ....................... (88,186)
Net unrealized appreciation during the period on
investments ...................................... 1,036,558
----------
Net gain on investment transactions ...................... 948,372
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..... $1,016,596
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------
<CAPTION>
FOR THE PERIOD
OCTOBER 6, 1995
(COMMENCEMENT
OF OPERATIONS) TO
FEBRUARY 29, 1996
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED)
- -------------------------------------------------------------------------
<S> <C>
Operations:
Net investment income .................................. $ 68,224
Net realized loss from investment transactions ......... (88,186)
Net unrealized appreciation on investment transactions
during the period .................................... 1,036,558
-----------
Net increase in net assets resulting from operations ... 1,016,596
-----------
Distributions to shareholders from net investment income
($.05 per share) ..................................... (61,519)
-----------
Fund share transactions:
Proceeds from shares sold .............................. 25,088,610
Net asset value of shares issued to
shareholders in reinvestment of distributions ........ 59,327
Cost of shares redeemed ................................ (977,733)
-----------
Net increase in net assets from Fund share
transactions ......................................... 24,170,204
-----------
INCREASE IN NET ASSETS ................................. 25,125,281
Net assets at beginning of period ...................... 1,200
-----------
NET ASSETS AT END OF PERIOD (including undistributed net
investment income of $6,705) ......................... $25,126,481
===========
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period .............. 100
-----------
Shares sold ............................................ 2,056,532
Shares issued to shareholders in
reinvestment of distributions ........................ 4,792
Shares redeemed ........................................ (79,647)
-----------
Net increase in Fund shares ............................ 1,981,677
-----------
Shares outstanding at end of period .................... 1,981,777
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
<TABLE>
SCUDDER SMALL COMPANY VALUE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING
THROUGHOUT THE PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE
FINANCIAL STATEMENTS.
<CAPTION>
FOR THE PERIOD
OCTOBER 6, 1995
(COMMENCEMENT
OF OPERATIONS) TO
FEBRUARY 29, 1996
(UNAUDITED)
-----------------
<S> <C>
Net asset value, beginning of period........................................... $12.00
------
Income from investment operations:
Net investment income (a).............................................. .05
Net realized and unrealized gain on investment transactions............ .68
------
Total from investment operations............................................... .73
------
Less distributions from net investment income.................................. (.05)
------
Net asset value, end of period................................................. $12.68
======
TOTAL RETURN (%)............................................................... 6.09 (b)**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions)......................................... 25
Ratio of operating expenses, net to average daily net assets (%) (a)........... 1.50*
Ratio of net investment income to average daily net assets (%)................. 1.23*
Portfolio turnover rate (%).................................................... 4.76*
<FN>
(a) Reflects a per share amount of expenses, exclusive of management fees,
reimbursed by the adviser............................................. $.04
Reflects a per share amount of management fee and
other fees not imposed................................................ $.11
Operating expense ratio including expenses
reimbursed, management fee and other expenses
not imposed (%)....................................................... 4.83*
(b) Total return does not reflect the effect of the applicable redemption fees.
* Annualized
** Not annualized
</FN>
</TABLE>
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Scudder Small Company Value Fund (the "Fund") is a diversified series of Scudder
Securities Trust (the "Trust"). The Trust is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. The policies described
below are followed by the Fund in the preparation of its financial statements in
conformity with generally accepted accounting principles.
SECURITY VALUATION. Portfolio securities which are traded on U.S. 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 National Association of Securities
Dealers Automatic Quotation ("NASDAQ") System, for which there have been sales,
are valued at the most recent sale price reported on such system. If there are
no such sales, the value is the high or "inside" bid quotation. Securities which
are not quoted on the NASDAQ System but are traded in another over-the-counter
market are valued at the most recent sale price on such market. 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 shall be used. Short-term investments having a
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,
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, depending on the maturity of the repurchase
agreement and the underlying collateral, is equal to at least 100.5% of the
resale price.
17
<PAGE>
SCUDDER SMALL COMPANY VALUE FUND
- --------------------------------------------------------------------------------
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements of
the Internal Revenue Code 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.
REDEMPTION FEES. In general, shares of the Fund may be redeemed at net asset
value. However, upon the redemption or exchange of shares held by shareholders
for less than one year, a fee of 1% of the lower of cost or the current net
asset value of the shares will be assessed and retained by the Fund for the
benefit of the remaining shareholders. The redemption fee is accounted for
as an addition to paid-in capital. Total redemption fees received by the Fund
for the period October 6, 1995 (commencement of operations) to February 29,
1996 amounted to $7,397.
DISTRIBUTION OF INCOME AND GAINS. Distributions of net investment income are
made annually. During any particular year 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 annually. An additional distribution may be made to the extent
necessary to avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. As a result, net
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
ORGANIZATION COSTS. Costs incurred by the Fund in connection with its
organization have been deferred and are being amortized on a straight-line basis
over a five-year period.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
OTHER. Investment security transactions are accounted for on a trade-date basis.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on an accrual basis.
B. PURCHASES AND SALES OF SECURITIES
- --------------------------------------------------------------------------------
During the period October 6, 1995 (commencement of operations) to February
29, 1996, purchases and sales of investment securities (excluding short-term
investments) aggregated $23,591,956 and $309,562, respectively.
C. RELATED PARTIES
- --------------------------------------------------------------------------------
Under the Fund's Investment Management Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Fund pays the Adviser a fee equal to
an annual rate of 0.75% of the Fund's average daily net assets, computed and
accrued daily and payable monthly. As manager of the assets of the Fund, 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 Agreement also provides that if the Fund's expenses, exclusive of
taxes, interest, and extraordinary expenses, exceed specified limits, such
excess, up to the amount of the management fee, will be paid by the Adviser. In
addition, the Adviser has agreed not to impose all or a portion of its
management fee until December 31, 1996 in order to maintain the annualized
expenses of the Fund at not more than 1.50% of average daily net assets. For the
period October 6, 1995 (commencement of operations) to February 29, 1996, the
Adviser did not impose all of its management fee amounting to $42,071. Further,
due to the limitations of such Agreement, the Adviser's reimbursement payable to
the Fund for the period October 6, 1995 (commencement of operations) to February
29, 1996, amounted to $47,811.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
period October 6, 1995 (commencement of operations) to February 29, 1996, SSC
did not impose any of its fee amounting to $46,577.
19
<PAGE>
SCUDDER SMALL COMPANY VALUE FUND
- --------------------------------------------------------------------------------
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 period October
6, 1995 (commencement of operations) to February 29, 1996, SFAC did not impose
any of its fee amounting to $38,517.
The Fund pays each of its Trustees not affiliated with the Adviser $4,000
annually, plus specified amounts for attended board and committee meetings. For
the period October 6, 1995 (commencement of operations) to February 29, 1996,
Trustees did not impose a portion of their fee amounting to $9,304, and the fee
imposed amounted to $7,301.
20
<PAGE>
OFFICERS AND TRUSTEES
Daniel Pierce*
President and Trustee
Paul Bancroft III
Trustee; Venture Capitalist and Consultant
Thomas J. Devine
Trustee; Consultant
Keith R. Fox
Trustee; President, Exeter Capital Management Corporation
Douglas M. Loudon*
Vice President and Trustee
Dr. Wilson Nolen
Trustee; Consultant
Juris Padegs*
Trustee
Dr. Gordon Shillinglaw
Trustee; Professor Emeritus of Accounting, Columbia University Graduate
School of Business
Edmond D. Villani*
Trustee
Robert W. Lear
Honorary Trustee; Executive-in-Residence, Columbia University Graduate
School of Business
Robert G. Stone, Jr.
Honorary Trustee; Chairman of the Board and Director, Kirby Corporation
Edmund R. Swanberg
Honorary Trustee
Peter Chin*
Vice President
James M. Eysenbach*
Vice President
Philip S. Fortuna*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
David S. Lee*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Roy C. McKay*
Vice President
Edward J. O'Connell*
Vice President and Assistant Treasurer
Kathryn L. Quirk*
Vice President and Assistant Secretary
Richard W. Desmond*
Assistant Secretary
Coleen Downs Dinneen*
Assistant Secretary
* Scudder, Stevens & Clark, Inc.
21
<PAGE>
INVESTMENT PRODUCTS AND SERVICES
<TABLE>
<CAPTION>
The Scudder Family of Funds
<C> <C>
Money Market Income
Scudder Cash Investment Trust Scudder Emerging Markets Income Fund
Scudder U.S. Treasury Money Fund Scudder Global Bond Fund
Tax Free Money Market+ Scudder GNMA Fund
Scudder Tax Free Money Fund Scudder Income Fund
Scudder California Tax Free Money Fund* Scudder International Bond Fund
Scudder New York Tax Free Money Fund* Scudder Short Term Bond Fund
Tax Free+ Scudder Zero Coupon 2000 Fund
Scudder California Tax Free Fund* Growth
Scudder High Yield Tax Free Fund Scudder Capital Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Managed Municipal Bonds Scudder Global Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Global Discovery Fund
Scudder Massachusetts Tax Free Fund* Scudder Gold Fund
Scudder Medium Term Tax Free Fund Scudder Greater Europe Growth Fund
Scudder New York Tax Free Fund* Scudder International Fund
Scudder Ohio Tax Free Fund* Scudder Latin America Fund
Scudder Pennsylvania Tax Free Fund* Scudder Pacific Opportunities Fund
Growth and Income Scudder Quality Growth Fund
Scudder Balanced Fund Scudder Small Company Value Fund
Scudder Growth and Income Fund Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan+++* (a variable annuity) Profit Sharing and Money Purchase
401(k) Plans Pension Plans
Closed-End Funds#
The Argentina Fund, Inc. The Latin America Dollar Income Fund, Inc.
The Brazil Fund, Inc. Montgomery Street Income Securities, Inc.
The First Iberian Fund, Inc. Scudder New Asia Fund, Inc.
The Korea Fund, Inc. Scudder New Europe Fund, Inc.
Scudder World Income Opportunities Fund, Inc.
Institutional Cash Management
Scudder Institutional Fund, Inc. Scudder Treasurers Trust(TM)++
Scudder Fund, Inc.
</TABLE>
For complete information on any of the above Scudder funds, including management
fees and expenses, call or write for a free prospectus. Read it carefully before
you invest or send money. +A portion of the income from the tax-free funds may
be subject to federal, state, and local taxes. *Not available in all states.
+++A no-load variable annuity contract provided by Charter National Life
Insurance Company and its affiliate, offered by Scudder's insurance agencies,
1-800-225-2470. #These funds, advised by Scudder, Stevens & Clark, Inc. are
traded on various stock exchanges. ++For information on Scudder Treasurers
Trust,(TM) an institutional cash management service that utilizes certain
portfolios of Scudder Fund, Inc. ($100,000 minimum), call 1-800-541-7703.
22
<PAGE>
HOW TO CONTACT SCUDDER
Account Service and Information
For existing account service and transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163
For personalized information about your Scudder accounts;
exchanges and redemptions; or information on any Scudder
fund
SCUDDER AUTOMATED INFORMATION LINE (SAIL)
1-800-343-2890
Investment Information
To receive information about the Scudder funds, for
additional applications and prospectuses, or for investment
questions
SCUDDER INVESTOR RELATIONS
1-800-225-2470
For establishing 401(k) and 403(b) plans
SCUDDER DEFINED CONTRIBUTION SERVICES
1-800-323-6105
Please address all correspondence to
THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
Many shareholders enjoy the personal, one-on-one service of
the Scudder Funds Centers. Check for a Funds Center near
you--they can be found in the following cities:
Boca Raton New York
Boston Portland, OR
Chicago San Diego
Cincinnati San Francisco
Los Angeles Scottsdale
For information on For information on
Scudder Treasurers Scudder
Trust,(TM) an Institutional
institutional cash Funds,* funds
management service designed to meet the
for corporations, broad investment
non-profit management and
organizations and service needs of
trusts that uses banks and other
certain portfolios institutions, call
of Scudder Fund, 1-800-854-8525.
Inc.* ($100,000
minimum), call
1-800-541-7703.
Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a
prospectus with more complete information, including management fees and
expenses. Please read it carefully before you invest or send money.
23
<PAGE>
Celebrating Over 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven Clark,
Scudder, Stevens & Clark was the first independent investment counsel firm in
the United States. Since its birth, Scudder's pioneering spirit and commitment
to professional long-term investment management have helped shape the investment
industry. In 1928, we introduced the nation's first no-load mutual fund. Today
we offer 37 pure no load(TM) funds, including the first international mutual
fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication to
research and fundamental investment disciplines have helped us become one of the
largest and most respected investment managers in the world. Though times have
changed since our beginnings, we remain committed to our long-standing
principles: managing money with integrity and distinction; keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.
<PAGE>
