Scudder
Micro Cap Fund
Semiannual Report
February 28, 1997
A pure no-load(TM) (no sales charges) mutual fund which seeks long-term growth
of capital by investing primarily in a diversified portfolio of U.S. micro cap
stocks.
Scudder
<PAGE>
Table of Contents
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
9 Investment Portfolio
20 Financial Statements
23 Financial Highlights
24 Notes to Financial Statements
28 Shareholder Meeting Results
29 Officers and Trustees
30 Investment Products and Services
31 How to Contact Scudder
In Brief
o Scudder Micro Cap Fund provided a total return of 13.55% for the six-month
period ended February 28, 1997.
o The Fund implemented a disciplined, value-oriented approach to selecting micro
cap stocks in accordance with its objective of seeking long-term capital
appreciation.
o As of February 28, 1997, the median market capitalization of the Fund's
holdings was $46 million, reflecting investments in shares of 255 micro cap
stocks.
2-Scudder Micro Cap Fund
<PAGE>
Letter From the Fund's President
Dear Shareholders,
We are pleased to present the semiannual report for Scudder Micro Cap Fund
for the six-month period ended February 28, 1997.
Your Fund is off to an excellent start since its inception on August 12,
1996, providing attractive returns by investing in some of America's smallest
public companies. The Fund turned in positive performance during the six-month
period, exceeding the median return of micro cap stocks.
Scudder Micro Cap Fund employs a disciplined method of stock selection,
using a quantitative model to identify stocks that meet specific requirements.
By systematically analyzing micro cap stocks for value and relative
attractiveness, the Fund seeks to achieve above-average returns over the long
term. We believe that satisfying investment returns can result from this
approach. A complete discussion of your Fund's activities begins on page 6.
The outstanding performance of U.S. stocks over the last two years has
caused many investors to consider what, if any, adjustments they should make to
their portfolios. In general, diversification across several asset classes can
provide balance to an investment portfolio. Many long-term investors complement
their core stock holdings with representation from the money-market, fixed
income, international, and small cap stock areas. The performance of these
distinct asset classes tends to differ in any given year, helping to reduce
overall price volatility.
For those of you who are interested in new products and services, we
recently introduced the Scudder Pathway Series. Pathway simplifies investing
through the `fund of funds' approach and offers four distinct portfolios:
Conservative, Balanced, Growth, and International. Each portfolio invests in a
select mix of Scudder Funds, providing flexibility, diversification, and
simplicity for regular and retirement plan investors. For more information on
Scudder products and services, please turn to page 30.
Thank you for your investment in Scudder Micro Cap Fund. If you have
questions about your account, please call our Investor Relations representatives
at 1-800-225-2470; they will be happy to assist you. Or, visit our Internet Web
site at http://funds.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Micro Cap Fund
3-Scudder Micro Cap Fund
<PAGE>
PERFORMANCE UPDATE as of February 28, 1997 (Unaudited)
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
2/28/97 $10,000 Cumulative Annual
- ------------------------------------------
SCUDDER MICRO CAP FUND
- ------------------------------------------
Life of Fund** $11,422 14.22% --
- ------------------------------------------
RUSSELL 2000 INDEX
- ------------------------------------------
Life of Fund** $11,105 11.05% --
- ------------------------------------------
S&P 500 INDEX
Life of Fund** $12,084 20.84%
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
SCUDDER MICRO CAP FUND
Year Amount
- ----------------------
8/96* $10,000
9/96 $10,273
10/96 $10,133
11/96 $10,414
12/96 $10,775
1/97 $11,297
2/97 $11,355
RUSSELL 2000 INDEX
Year Amount
- ----------------------
8/96* $10,000
9/96 $10,391
10/96 $10,231
11/96 $10,652
12/96 $10,931
1/97 $11,150
2/97 $10,879
S&P 500 INDEX
Year Amount
- ----------------------
8/96* $10,000
9/96 $10,563
10/96 $10,854
11/96 $11,675
12/96 $11,443
1/97 $12,158
2/97 $12,254
The Standard & 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 Stock Market. The Russell 2000 Index is an
unmanaged capitalization-weighted measure of approximately 2000 small U.S.
stocks. Index returns assume reinvestment of dividends and, unlike Fund
returns, do not reflect any fees or expenses.
*The Fund commenced operations on August 12, 1996. The graphed Index comparison
begins August 31, 1996.
- -----------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
- -----------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
Period Ended February 28
1997**
-----------
NET ASSET VALUE... $ 13.69
INCOME DIVIDENDS.. $ .02
FUND TOTAL
RETURN (%)........ 14.22
RUSSELL 2000
INDEX TOTAL
RETURN (%)........ 11.05
Performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results. Total return
and principal value will fluctuate, so an investor's shares, when redeemed,
may be worth more or less than when purchased. If the Adviser had not
maintained the Fund's expenses, the total return for the life of Fund
period would have been lower.
**The Fund commenced operations on August 12, 1996.
4 - Scudder Micro Cap Fund
<PAGE>
PORTFOLIO SUMMARY as of February 28, 1997
- ---------------------------------------------------------------------------
ASSET ALLOCATION
- ---------------------------------------------------------------------------
Equity Holdings 96%
Cash Equivalents 4%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The Fund remained fully invested
in micro cap stocks.
- --------------------------------------------------------------------------
SECTOR DIVERSIFICATION
(Excludes 4% Cash Equivalents)
- --------------------------------------------------------------------------
Financial 26%
Consumer Discretionary 14%
Manufacturing 13%
Service Industries 8%
Consumer Staples 7%
Technology 7%
Durables 6%
Construction 5%
Health 4%
Other 10%
- ---------------------------------------------
100%
- ---------------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The portfolio was broadly
diversified in 255 stocks.
- --------------------------------------------------------------------------
Sectors/Largest Holdings
(Excludes 4% of Cash Equivalents)
- --------------------------------------------------------------------------
1. FINANCIAL (26%)
State Financial Services Corp. "A"
Multi-bank holding company
2. CONSUMER DISCRETIONARY (14%)
Amplicon, Inc.
Mid-range computer leasing and retailing
3. MANUFACTURING (13%)
Badger Meter, Inc.
Manufacturer of water meters and other flow
measurement and control devices
4. SERVICE INDUSTRIES (8%)
URS Corp.
Infrastructure projects including transportation,
pollution control, water resources, hazardous
waste management
5. CONSUMER STAPLES (7%)
Worldtex, Inc.
Manufacturer of elastic yarns
6. TECHNOLOGY (7%)
Instron Corp.
Manufacturer of materials testing equipment
7. DURABLES (6%)
Ducommun, Inc.
Manufacturer of components and sub-assemblies
for aerospace and wireless telecommunications
industries
8. CONSTRUCTION (5%)
Shelter Components Corp.
Distributor of carpet and bath products
9. HEALTH (4%)
National Patent Development Corp.
Manufacturer and distributor of medical health
care and consumer products
10. ENERGY (3%)
American Oilfield Divers, Inc.
Provider of undersea construction, installation,
repair and maintenance services for offshore oil
and gas industry
The Fund employs a disciplined
approach to select individual
micro cap stocks.
- -----------------------------------------------------------------------------
For more complete details about the Fund's investment portfolio,
see page 9. A monthly Investment Portfolio Summary and quarterly Portfolio
Holdings are available upon request.
5 - Scudder Micro Cap Fund
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
Scudder Micro Cap Fund began operations on August 12, 1996. This report covers
the six-month period from August 31, 1996 to February 28, 1997. During this
period, the Fund's net asset value per share increased from $12.07 to $13.69,
for a total return of 13.55%, exceeding the 10.24% median return of similar
micro cap funds as reported by Lipper.
We are pleased with the Fund's performance during this initial phase of
operations. The Fund trailed the micro cap market during the first few months of
the period, due in part to the inflow of cash during the start-up phase.
Performance rebounded strongly in the last three months of the six-month period,
as the portfolio's initial investments performed well. This noteworthy
performance was achieved during a period when a number of micro cap companies
announced earnings disappointments, resulting in price declines for some stocks.
The Fund's broad diversification helped to mitigate the negative effects of
these surprises.
Micro cap stocks enjoyed a favorable environment during the six-month period,
providing attractive overall returns to investors. However, the solid returns of
micro caps were overshadowed by the stronger performance of large cap stocks,
whose earnings more directly benefited from a healthy economy. Micro cap
companies tend to be less affected by overall economic growth and the cyclical
changes of the economy, and more by their individual business prospects. This is
because micro cap companies are often dependent on a few products or a
particular market niche. Micro cap stocks have recorded impressive returns over
the long-term, and they have typically done so by marching to their own drummer.
A notable characteristic of the Fund during this period has been its limited
volatility, whether measured against the micro cap universe or the large cap S&P
500 Index. The Fund's overall volatility, as measured by the standard deviation
of returns over the six-month reporting period, has been about 20% lower than
that of the universe of micro cap stocks and less than half that of the S&P 500.
The micro cap segment of the U.S. stock market represents many of the smallest
companies which are often overlooked by analysts and investors. More than 7,000
U.S. companies are traded on leading national stock exchanges, but most equity
mutual funds invest primarily in the 3,000 largest companies. Scudder Micro Cap
Fund's investment universe is composed of the smallest domestic issues with a
market cap of less than $180 million at purchase -- about 4,000 issues. A
stock's market capitalization (market cap) is determined by multiplying its
stock price by the number of shares outstanding.
At the end of the period, the Fund had total net assets of $51 million and held
shares in 255 U.S. micro cap companies representing market values ranging in
size from $9 to $216 million. The Fund's median market capitalization was $46
million; this compares to $355 million for the Russell 2000 Index of small
company stocks and $6 billion for the typical S&P 500 company. The most
significant portfolio weightings were in the financial, consumer discretionary,
manufacturing, service, and consumer staples sectors.
6-Scudder Micro Cap Fund
<PAGE>
A Disciplined Approach
In pursuing capital appreciation from micro cap stocks, we utilize a disciplined
approach to selecting securities. Instead of attempting to gauge the prospects
of a company's new products or its management capabilities, we conduct a
quantitative evaluation on thousands of micro cap stocks, analyzing valuations,
growth rates, price and earnings momentum, and risk characteristics to identify
possible candidates for the Fund.
Our highly systematic approach starts with collecting extensive financial
information on individual companies. Using a proprietary investment model, we
analyze this data in a consistent, objective way by comparing it to a broad
universe of micro cap companies. The next step involves ranking each micro cap
stock based on its relative attractiveness. Finally there is the highly complex
process of determining which combination of stocks to hold and how much to
weight them in the portfolio. We employ the assistance of a computer model to
assess the millions of possibilities. The model helps to identify the portfolio
with the highest potential return for a given level of risk. In addition, as new
information streams in, such as recent earnings reports, it is incorporated into
the model so that we can instantly see how the fresh data affects the relative
attractiveness of each stock.
While the process may sound as though computers are making all of the decisions,
this is hardly the case. The model is only as good as the human judgment that
goes into its development, and is subject to revision as deemed necessary.
Moreover, before we buy any stock for the Fund, we carefully consider any
subjective information that may not be fully reflected in the numbers, such as a
recently announced restructuring. We think this is an important reality check
for any quantitative investment approach.
The risks of holding individual micro cap stocks can be very high. Small
companies generally have higher business risks than more established companies,
arising from untested management, less diversified product lines, and limited
financial resources. This makes micro cap companies more vulnerable to adverse
business developments than larger companies. Also, because micro cap stocks are
traded infrequently, the prices of these issues can drop quickly if investors
rush to sell. Conversely, prices can be dramatically bid up if investors try to
initiate large positions. We attempt to control these risks throughout the
selection process by holding a relatively large number of securities in the
portfolio. That way, if a few individual securities experience problems, the
effect may be minimized.
The Fund is also structured to promote a relatively stable base of assets. To
discourage short-term trading, the Fund imposes a 1% redemption fee on shares
held less than one year. Due to investment considerations particular to the
micro cap market, it is likely that the Fund may close to new individual
investors for a period when total assets reach $100 million.
7-Scudder Micro Cap Fund
<PAGE>
We are pleased with the the Fund's good start. Going forward, we will continue
to apply our disciplined, value-oriented approach to selecting micro cap stocks
in accordance with the Fund's objective of seeking long-term capital
appreciation. We believe the Fund continues to be appropriate for long-term
investors seeking exposure to this dynamic sector of the stock market as part of
a well-rounded portfolio.
Sincerely,
Your Portfolio Management Team
/s/James M. Eysenbach /s/Philip S. Fortuna
James M. Eysenbach Philip S. Fortuna
Lead Portfolio Manager Portfolio Manager
8-Scudder Micro Cap Fund
<PAGE>
INVESTMENT PORTFOLIO as of February 28, 1997 (Unaudited)
PRINCIPAL MARKET
AMOUNT ($) VALUE ($)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS 2.4%
- --------------------------------------------------------------------------------
Repurchase Agreement with State Street Bank and
Trust Company dated 2/28/97 at 5.31%, to be
repurchased at $1,238,548 on 3/3/97, collateralized
by a $1,235,000 U.S. Treasury Bond, 7.125%, ----------
2/15/23 (Cost $1,238,000) ............................. 1,238,000 1,238,000
----------
SHORT TERM NOTES 1.9%
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. Discount Note, 3/3/97
(Cost $999,704) ....................................... 1,000,000 999,704
----------
SHARES
- --------------------------------------------------------------------------------
COMMON STOCKS 95.7%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY 13.0%
APPAREL & SHOES 1.0%
Hyde Athletic Industries, Inc. "B"* .................... 36,500 177,938
Michael Anthony Jewelers, Inc.* ........................ 51,900 168,675
Pubco Corp.* ........................................... 25,200 195,300
----------
541,913
----------
DEPARTMENT & CHAIN STORES 1.5%
Drug Emporium, Inc.* ................................... 34,700 186,513
Duckwall-ALCO Stores, Inc.* ............................ 18,200 252,525
Fred's, Inc. "A" ....................................... 26,000 230,750
Harold's Stores, Inc. .................................. 9,235 125,827
----------
795,615
----------
HOME FURNISHINGS 1.5%
Ameriwood Industries International Corp.* .............. 22,000 187,000
Baldwin Piano & Organ Co.* ............................. 16,400 202,950
National Picture & Frame Co.* .......................... 16,400 160,925
Seaman Furniture Co.* .................................. 12,490 243,555
----------
794,430
----------
HOTELS & CASINOS 1.0%
Amerihost Properties, Inc.* ............................ 25,800 154,800
International Thoroughbred Breeders, Inc.* ............. 36,500 168,813
Sonesta International Hotels Corp. "A" ................. 20,700 196,650
----------
520,263
----------
RECREATIONAL PRODUCTS 3.0%
Datamarine International, Inc.* ........................ 12,800 107,200
ERO, Inc.* ............................................. 23,500 217,375
Equity Marketing Inc.* ................................. 11,500 210,594
Escalade, Inc. ......................................... 20,100 218,588
The accompanying notes are an integral part of the financial statements.
9 -- SCUDDER MICRO CAP FUND
<PAGE>
MARKET
SHARES VALUE ($)
- --------------------------------------------------------------------------------
Foundation Powerboat Industries, Inc.* ................. 9,300 206,925
Holiday RV Superstores, Inc.* .......................... 64,600 125,163
Rexhall Industries, Inc. ............................... 28,300 180,413
Varsity Spirit Corp. ................................... 17,900 277,450
----------
1,543,708
----------
RESTAURANTS 1.3%
Benihana, Inc. "A"* .................................... 23,400 193,050
El Chico Restaurants, Inc.* ............................ 11,500 76,188
Skyline Chili, Inc.* ................................... 34,400 264,450
Timber Lodge Steakhouse, Inc.* ......................... 28,100 122,938
----------
656,626
----------
SPECIALTY RETAIL 3.7%
Amplicon, Inc.* ........................................ 14,600 324,850
Bell Microproducts, Inc.* .............................. 25,000 271,875
Brookstone, Inc.* ...................................... 29,300 241,725
D.I.Y. Home Warehouse, Inc.* ........................... 35,500 142,000
InterTAN, Inc.* ........................................ 45,600 182,400
Natural Wonders, Inc.* ................................. 35,100 188,663
Rent-Way, Inc.* ........................................ 19,600 196,000
S & K Famous Brands, Inc.* ............................. 22,100 221,000
Transnet Corp.* ........................................ 60,000 142,500
----------
1,911,013
----------
CONSUMER STAPLES 6.6%
CONSUMER ELECTRONIC & PHOTOGRAPHIC PRODUCTS 0.6%
Cambridge Soundworks, Inc.* ............................ 35,400 185,850
Cobra Electronics Corp.* ............................... 37,300 114,231
----------
300,081
----------
FOOD & BEVERAGE 3.4%
Chock Full O'Nuts Corp.* ............................... 47,800 256,925
Foodarama Supermarkets, Inc.* .......................... 13,400 204,350
Hain Food Group, Inc.* ................................. 43,600 239,800
J & J Snack Foods Corp.* ............................... 19,700 254,869
Schultz Sav-O Stores, Inc. ............................. 18,800 298,450
Seaway Food Town, Inc. ................................. 6,700 173,363
Suprema Specialties, Inc.* ............................. 46,600 198,050
Vestro Natural Foods, Inc.* ............................ 40,400 116,150
----------
1,741,957
----------
The accompanying notes are an integral part of the financial statements.
10 -- SCUDDER MICRO CAP FUND
<PAGE>
MARKET
SHARES VALUE ($)
- --------------------------------------------------------------------------------
PACKAGE GOODS/COSMETICS 1.0%
Alfin, Inc.* ........................................... 97,800 134,475
Allou Health & Beauty, Inc. "A"* ....................... 32,200 209,300
Nutramax Products, Inc.* ............................... 16,300 197,638
----------
541,413
----------
TEXTILES 1.6%
Dyersburg Corp.* ....................................... 42,400 291,500
Premiumwear Inc.* ...................................... 24,000 210,000
Worldtex, Inc.* ........................................ 32,200 313,950
----------
815,450
----------
HEALTH 4.0%
BIOTECHNOLOGY 0.3%
Synbiotics Corp.* ...................................... 40,700 178,063
----------
HEALTH INDUSTRY SERVICES 1.2%
Healthcare Services Group, Inc.* ....................... 20,400 221,850
SMT Health Services, Inc. .............................. 25,737 210,722
Staff Buildings, Inc. "A"* ............................. 35,100 103,106
Star Multi Care Services, Inc. ......................... 16,780 96,485
----------
632,163
----------
HOSPITAL MANAGEMENT 0.4%
National Home Health Care Corp. ........................ 31,442 188,652
----------
MEDICAL SUPPLY & SPECIALTY 2.1%
Akorn, Inc.* ........................................... 52,100 123,738
Colorado Medtech, Inc.* ................................ 16,000 47,000
Luther Medical Products, Inc.* ......................... 20,500 82,000
Moore Medical Corp.* ................................... 16,300 155,869
National Patent Development Corp.* ..................... 29,920 231,880
Osteotech, Inc.* ....................................... 13,800 108,675
Superior Surgical Manufacturing Co., Inc. .............. 14,100 192,113
Trans Leasing International, Inc.* ..................... 24,400 164,700
----------
1,105,975
----------
FINANCIAL 24.9%
BANKS 20.1%
Andover Bancorp, Inc. .................................. 8,500 239,063
CENFED Financial Corp. ................................. 4,500 153,000
CFX Corp. .............................................. 10,420 173,233
The accompanying notes are an integral part of the financial statements.
11 -- SCUDDER MICRO CAP FUND
<PAGE>
MARKET
SHARES VALUE ($)
- --------------------------------------------------------------------------------
Centennial Bancorp* .................................... 6,030 99,495
Center Banks, Inc.* .................................... 10,800 210,600
CoBancorp, Inc. ........................................ 11,400 247,950
Coastal Bancorp, Inc. .................................. 9,800 265,825
Columbia Banking System, Inc. .......................... 8,900 154,638
Community Bankshares, Inc. ............................. 7,000 165,375
Eagle Financial Corp. .................................. 8,600 253,700
Eastern Bancorp, Inc. .................................. 5,700 146,063
FNB Rochester Corp. .................................... 12,200 179,950
Fed One Bancorp ........................................ 10,200 188,700
First Citizens Corp. ................................... 1,500 33,000
First Citizens Financial Corp. ......................... 6,000 136,500
First Essex Bancorp .................................... 13,400 213,563
First Federal Savings Bank of Siouxland ................ 3,410 102,300
First Georgia Holding, Inc. ............................ 16,100 163,013
First Mutual Savings Bank* ............................. 10,200 198,900
First Oak Brook Bancshares, Inc. "A" ................... 7,000 174,125
First Republic Bancorp, Inc.* .......................... 13,100 304,575
FirstFederal Financial Services Corp. .................. 4,800 180,000
Foothill Independent Bancorp ........................... 21,800 283,400
Granite State Bankshares, Inc. ......................... 10,300 254,925
HMN Financial, Inc.* ................................... 9,800 226,625
Haven Bancorp, Inc. .................................... 6,100 202,825
Haverfield Corp. ....................................... 13,700 280,850
Hingham Institution for Savings ........................ 9,800 181,300
Home Bancorp ........................................... 8,600 165,550
Hudson Chartered Bancorp, Inc. ......................... 8,250 222,750
Lawrence Savings Bank* ................................. 16,300 160,963
Medford Savings Bank ................................... 4,400 126,500
Merchants Bancorp, Inc. ................................ 8,500 320,875
Mid Continent Bancshares, Inc. ......................... 8,300 209,575
Midconn Bank ........................................... 9,200 221,950
New Milford Bank & Trust Co. ........................... 12,900 141,900
Northrim Bank .......................................... 21,685 195,165
Parkvale Financial Corp. ............................... 10,050 256,275
People's Bancshares, Inc. .............................. 13,100 167,844
PonceBank .............................................. 7,400 178,525
The accompanying notes are an integral part of the financial statements.
12 -- SCUDDER MICRO CAP FUND
<PAGE>
MARKET
SHARES VALUE ($)
- --------------------------------------------------------------------------------
Progress Financial Corp.* .............................. 10,800 90,450
Redwood Empire Bancorp* ................................ 12,100 167,888
SJNB Financial Corp. ................................... 10,600 254,400
Second Bancorp, Inc. ................................... 5,400 186,300
Southwest Bancorp, Inc. ................................ 5,100 110,925
State Financial Services Corp. "A" ..................... 20,140 380,143
Sterling Bancorp ....................................... 17,100 288,563
Sterling Bancshares, Inc.* ............................. 14,700 220,500
Surety Capital Corp.* .................................. 22,000 121,000
The Bank of Southington ................................ 8,800 125,400
Tolland Bank ........................................... 11,300 175,150
United Federal Savings Bank ............................ 12,100 99,825
Warren Bancorp, Inc. ................................... 4,600 73,025
Washington Savings Bank, F.S.B ......................... 24,400 128,100
West Coast Bancorp ..................................... 10,375 224,359
----------
10,427,393
----------
INSURANCE 2.4%
Amwest Insurance Group, Inc. ........................... 9,800 118,825
Cotton States Life Insurance ........................... 16,200 232,875
Investors Title Co.* ................................... 15,200 228,000
Penn-America Group, Inc.* .............................. 13,700 258,588
Seibels Bruce Group, Inc.* ............................. 64,000 128,000
Southern Security Life Insurance Co.* .................. 11,200 84,000
Standard Management Corp. .............................. 32,400 186,300
----------
1,236,588
----------
BUSINESS FINANCE 0.5%
Advest Group, Inc.* .................................... 18,800 256,150
----------
OTHER FINANCIAL COMPANIES 0.4%
First Cash, Inc.* ...................................... 30,800 200,200
----------
REAL ESTATE 1.5%
AMREP Corp.* ........................................... 35,800 152,150
Atlantic Gulf Communities Corp.* ....................... 25,700 147,775
Grubb & Ellis Co.* ..................................... 37,300 284,413
New Mexico & Arizona Land Co. .......................... 14,500 212,063
----------
796,401
----------
The accompanying notes are an integral part of the financial statements.
13 -- SCUDDER MICRO CAP FUND
<PAGE>
MARKET
SHARES VALUE ($)
- --------------------------------------------------------------------------------
MEDIA 0.7%
BROADCASTING & ENTERTAINMENT
Live Entertainment, Inc.* .............................. 30,200 117,025
Vaughn Communications, Inc.* ........................... 35,000 231,875
----------
348,900
----------
SERVICE INDUSTRIES 7.8%
ENVIRONMENTAL SERVICES 1.9%
Air-Cure Technologies, Inc.* ........................... 25,600 163,200
GZA GeoEnvironmental Technologies, Inc.* ............... 47,700 149,063
Scope Industries, Inc.* ................................ 5,600 257,600
URS Corp.* ............................................. 29,000 304,500
Versar, Inc.* .......................................... 37,000 127,188
----------
1,001,551
----------
INVESTMENT 1.4%
H.D. Vest, Inc.* ....................................... 31,300 146,719
Kinnard Investment, Inc.* .............................. 41,600 208,000
M.H. Meyerson & Co, Inc.* .............................. 37,400 191,675
Scott & Stringfellow Financial, Inc. ................... 6,400 163,200
----------
709,594
----------
MISCELLANEOUS COMMERCIAL SERVICES 3.3%
American Physicians Service Group, Inc.* ............... 20,000 140,000
Automobile Protection Corp.* ........................... 44,700 176,006
Failure Group, Inc.* ................................... 36,800 202,400
General Employment Enterprises, Inc. ................... 19,570 190,808
Halifax Corp. .......................................... 12,750 157,781
International Post Ltd.* ............................... 28,900 101,150
Joule, Inc.* ........................................... 29,400 112,088
LCS Industries, Inc.* .................................. 16,600 234,475
RCM Technologies, Inc.* ................................ 20,900 172,425
TRM Copy Centers Corp.* ................................ 10,800 105,300
Thomas Group, Inc.* .................................... 12,500 117,188
----------
1,709,621
----------
MISCELLANEOUS CONSUMER SERVICES 0.8%
ACE Cash Express, Inc.* ................................ 19,450 250,419
Children's Discovery Centers of America, Inc.* ......... 31,500 161,438
----------
411,857
----------
The accompanying notes are an integral part of the financial statements.
14 -- SCUDDER MICRO CAP FUND
<PAGE>
MARKET
SHARES VALUE ($)
- --------------------------------------------------------------------------------
PRINTING/PUBLISHING 0.4%
Tufco Technologies, Inc.* .............................. 26,100 182,700
----------
DURABLES 5.4%
AEROSPACE 1.6%
Ducommun, Inc.* ........................................ 15,500 372,000
ECC International Corp.* ............................... 37,900 217,925
Engineered Support Systems, Inc.* ...................... 19,800 242,550
----------
832,475
----------
AUTOMOBILES 1.1%
AirSensors, Inc.* ...................................... 20,600 193,125
Hilite Industries, Inc.* ............................... 25,100 119,225
JPE, Inc.* ............................................. 18,100 126,700
Williams Controls, Inc.* ............................... 42,700 113,422
----------
552,472
----------
CONSTRUCTION/AGRICULTURAL EQUIPMENT 0.9%
Portec, Inc. ........................................... 21,500 241,875
Terex Corp.* ........................................... 20,300 243,600
----------
485,475
----------
LEASING COMPANIES 0.5%
PLM International, Inc.* ............................... 50,600 170,775
Sunrise Resources Inc.* ................................ 26,300 108,488
----------
279,263
----------
TELECOMMUNICATIONS EQUIPMENT 0.4%
TCI International, Inc.* ............................... 29,200 193,450
----------
MISCELLANEOUS 0.9%
Fansteel, Inc. ......................................... 44,900 291,850
McClain Industries, Inc.* .............................. 32,100 148,463
----------
440,313
----------
MANUFACTURING 12.8%
CHEMICALS 0.9%
AG Services of America, Inc.* .......................... 9,400 162,140
Aceto Corp. ............................................ 21,400 286,215
----------
448,355
----------
CONTAINERS & PAPER 0.5%
Applied Extrusion Technologies, Inc.* .................. 19,900 236,313
----------
The accompanying notes are an integral part of the financial statements.
15 -- SCUDDER MICRO CAP FUND
<PAGE>
MARKET
SHARES VALUE ($)
- --------------------------------------------------------------------------------
ELECTRICAL PRODUCTS 1.6%
Bel Fuse, Inc.* ........................................ 12,300 173,738
SL Industries, Inc.* ................................... 38,600 279,850
Sage Laboratories, Inc. ................................ 7,200 98,100
Valley Forge Corp. ..................................... 16,900 268,288
----------
819,976
----------
INDUSTRIAL SPECIALTY 7.1%
Badger Meter, Inc.* .................................... 8,800 390,500
Binks Manufacturing Co. ................................ 7,900 300,200
Dynamic Materials Corp.* ............................... 17,100 188,100
Foster (LB) Co. "A"* ................................... 42,900 160,875
Graham Corp.* .......................................... 17,900 239,413
Insteel Industries, Inc. ............................... 33,000 292,875
Interlake Corp.* ....................................... 70,800 203,550
Met-Pro Corp.* ......................................... 24,700 342,713
Peerless Manufacturing Co. ............................. 19,300 219,538
Rotonics Manufacturing, Inc.* .......................... 91,700 143,281
Sifco Industries, Inc. ................................. 22,200 255,300
Talley Industries, Inc.* ............................... 30,000 270,000
Temtex Industries, Inc.* ............................... 42,000 141,750
Tokheim Corp.* ......................................... 28,300 226,400
Trion, Inc.* ........................................... 32,300 165,538
Vitronics Corp.* ....................................... 118,800 133,650
----------
3,673,683
----------
MACHINERY/COMPONENTS/CONTROLS 1.4%
Chicago Rivet & Machine Co. ............................ 8,800 303,600
Devlieg-Bullard, Inc.* ................................. 56,400 179,775
Farrel Corp. ........................................... 38,600 98,913
Trans-Industries, Inc.* ................................ 26,500 165,625
----------
747,913
----------
OFFICE EQUIPMENT/SUPPLIES 0.8%
Dixon Ticonderoga Co.* ................................. 25,200 176,400
TAB Products Co. ....................................... 23,400 219,375
----------
395,775
----------
SPECIALTY CHEMICALS 0.5%
Melamine Chemicals, Inc.* .............................. 23,200 255,200
----------
The accompanying notes are an integral part of the financial statements.
16 -- SCUDDER MICRO CAP FUND
<PAGE>
MARKET
SHARES VALUE ($)
- --------------------------------------------------------------------------------
TECHNOLOGY 6.3%
COMPUTER SOFTWARE 1.1%
Concurrent Computer Corp.* ............................. 41,500 114,125
Data Systems & Software, Inc.* ......................... 60,900 296,888
Metatec Corp. "A"* ..................................... 35,500 155,313
----------
566,326
----------
DIVERSE ELECTRONIC PRODUCTS 1.3%
Aseco Corp.* ........................................... 18,900 186,638
Impact Systems, Inc.* .................................. 85,800 139,425
SBS Technologies, Inc.* ................................ 6,900 158,700
WPI Group, Inc.* ....................................... 30,500 213,500
----------
698,263
----------
EDP PERIPHERALS 0.7%
Key Tronic Corp.* ...................................... 21,700 146,475
Printronix, Inc.* ...................................... 15,300 227,588
----------
374,063
----------
ELECTRONIC COMPONENTS/DISTRIBUTORS 2.0%
Alpha Technologies Group, Inc.* ........................ 43,900 123,469
American Technical Ceramics Corp.* ..................... 28,100 226,556
IEC Electronics Corp. (New)* ........................... 25,900 200,725
Jaco Electronics, Inc.* ................................ 31,800 258,375
Merrimac Industries, Inc. .............................. 11,100 126,263
Nu Horizons Electronics Inc.* .......................... 13,900 128,575
----------
1,063,963
----------
PRECISION INSTRUMENTS 0.7%
Instron Corp.* ......................................... 28,300 353,750
----------
SEMICONDUCTORS 0.5%
Diodes, Inc.* .......................................... 32,000 276,000
----------
ENERGY 3.4%
OIL & GAS PRODUCTION 2.0%
Alamco, Inc.* .......................................... 18,300 256,200
Hallwood Energy Partners, L.P. ......................... 22,500 196,875
Key Production Co., Inc.* .............................. 21,400 224,700
McFarland Energy, Inc.* ................................ 16,700 188,919
Resource America, Inc. "A" ............................. 7,500 181,875
----------
1,048,569
----------
The accompanying notes are an integral part of the financial statements.
17 -- SCUDDER MICRO CAP FUND
<PAGE>
MARKET
SHARES VALUE ($)
- --------------------------------------------------------------------------------
OILFIELD SERVICES/EQUIPMENT 1.4%
American Oilfield Divers, Inc.* ........................ 28,800 331,200
Dawson Geophysical Co.* ................................ 16,500 206,250
Industrial Holdings Inc.* .............................. 18,100 205,888
----------
743,338
----------
METALS & MINERALS 1.0%
STEEL & METALS
Bayou Steel Corp.* ..................................... 52,100 153,044
Friedman Industries, Inc. .............................. 33,500 184,250
NS Group, Inc.* ........................................ 39,600 193,050
----------
530,344
----------
CONSTRUCTION 5.0%
BUILDING MATERIALS 1.3%
A.P. Green Industries, Inc.* ........................... 31,200 280,800
Genlyte Group, Inc.* ................................... 18,900 198,450
Strober Organization, Inc.* ............................ 30,800 179,988
----------
659,238
----------
BUILDING PRODUCTS 1.0%
Shelter Components Corp.* .............................. 25,800 316,050
Thermal Industries, Inc. ............................... 12,600 182,700
----------
498,750
----------
HOMEBUILDING 1.2%
Engle Homes, Inc.* ..................................... 20,900 206,388
Kit Manufacturing Company* ............................. 16,400 200,900
Starrett Corp. ......................................... 20,600 206,000
----------
613,288
----------
MISCELLANEOUS 1.5%
ACMAT Corp. "A"* ....................................... 11,000 170,493
Instituform East, Inc. ................................. 46,800 146,250
MYR Group Inc.* ........................................ 19,500 248,625
Turner Corp.* .......................................... 17,300 220,575
----------
785,943
----------
TRANSPORTATION 2.5%
AIR FREIGHT 0.8%
Golden Eagle Group, Inc.* .............................. 48,800 146,400
Hudson General Corp. ................................... 7,000 267,750
----------
414,150
----------
The accompanying notes are an integral part of the financial statements.
18 -- SCUDDER MICRO CAP FUND
<PAGE>
MARKET
SHARES VALUE ($)
- --------------------------------------------------------------------------------
AIRLINES 0.4%
Mercury Air Group, Inc.* ............................... 29,200 211,700
----------
RAILROADS 0.1%
Providence & Worcester Railroad Co. .................... 7,200 63,000
----------
TRUCKING 1.2%
MTL, Inc.* ............................................. 12,000 283,500
Morgan Group, Inc. "A"* ................................ 31,200 226,200
Trism, Inc.* ........................................... 34,600 121,100
----------
630,800
----------
UTILITIES 2.3%
ELECTRIC UTILITIES 0.9%
Unitil Corp. ........................................... 9,400 186,825
Upper Peninsular Energy Corp. .......................... 16,300 275,063
----------
461,888
----------
NATURAL GAS DISTRIBUTION 0.3%
Valley Resources, Inc. ................................. 13,900 152,900
----------
WATER SUPPLY 0.6%
Dominguez Services Corp. ............................... 6,800 158,100
Southwest Water Co. .................................... 13,980 178,245
----------
336,345
----------
MISCELLANEOUS 0.5%
Florida Public Utilities Co. ........................... 13,200 272,250
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $45,715,058) 49,663,808
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0% (Cost $47,952,762)(a) 51,901,512
- --------------------------------------------------------------------------------
* Non-income producing security.
(a) The cost for federal income tax purposes was $47,952,762. At February 28,
1997, net unrealized appreciation for all securities based on tax cost was
$3,948,750. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $5,518,815 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$1,570,065.
The accompanying notes are an integral part of the financial statements.
19 -- SCUDDER MICRO CAP FUND
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AS OF FEBRUARY 28, 1997 (UNAUDITED)
ASSETS
- --------------------------------------------------------------------------------
Investments, at market (identified cost
$47,952,762) (Note A)............................ $ 51,901,512
Cash .............................................. 314,709
Receivable for Fund shares sold ................... 87,859
Dividends and interest receivable ................. 18,292
Due from the Adviser (Note C) ..................... 189,188
Deferred organization expenses (Note A) ........... 23,671
------------
Total assets ...................................... 52,535,231
LIABILITIES
- --------------------------------------------------------------------------------
Payable for investments purchased ................. 1,128,624
Payable for Fund shares redeemed .................. 66,504
Accrued management fee ............................ 115,346
Other accrued expenses (Note C) ................... 264,557
------------
Total liabilities ................................. 1,575,031
--------------------------------------------------------------------
NET ASSETS, AT MARKET VALUE $ 50,960,200
--------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net
investment income ............................... (71,205)
Unrealized appreciation on investments ............ 3,948,750
Accumulated net realized gain ..................... 198,671
Paid-in capital ................................... 46,883,984
--------------------------------------------------------------------
NET ASSETS, AT MARKET VALUE $ 50,960,200
--------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------
NET ASSET VALUE, offering and redemption price
(Note A) per share ($50,960,200 / 3,723,323
outstanding shares of beneficial interest,
$.01 par value, unlimited number of shares ------------
authorized) ..................................... $ 13.69
------------
The accompanying notes are an integral part of the financial statements.
20 -- SCUDDER MICRO CAP FUND
<PAGE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 1997 (UNAUDITED)
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $107).. $ 141,154
Interest .......................................... 86,709
-----------
227,863
Expenses:
Management fee (Note C) ........................... 115,346
Services to shareholders (Note C) ................. 151,453
Custodian and accounting fees (Note C) ............ 86,699
Trustees' fees and expenses (Note C) .............. 16,494
Auditing .......................................... 7,850
Registration fees ................................. 27,704
Reports to shareholders ........................... 35,870
Legal ............................................. 6,472
Amortization of organization expense (Note A) ..... 2,637
Other ............................................. 3,006
-----------
Total expenses before reductions .................. 453,531
Expense reductions (Note C) ....................... (189,188)
-----------
Expenses, net ..................................... 264,343
--------------------------------------------------------------------
NET INVESTMENT LOSS (36,480)
--------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENT TRANSACTIONS
- --------------------------------------------------------------------------------
Net realized gain from investments ................ 198,671
Net unrealized appreciation during the period
on investments .................................. 3,924,510
--------------------------------------------------------------------
NET GAIN ON INVESTMENT TRANSACTIONS 4,123,181
--------------------------------------------------------------------
--------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 4,086,701
--------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
21 -- SCUDDER MICRO CAP FUND
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS FOR THE PERIOD
ENDED AUGUST 12, 1996
FEBRUARY (COMMENCEMENT OF
28, 1997 OPERATIONS) TO
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED) AUGUST 31, 1996
- --------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) ............ $ (36,480) $ 4,890
Net realized gain ....................... 198,671 --
Net unrealized appreciation on
investment transactions during the period 3,924,510 24,240
------------ -----------
Net increase in net assets resulting
from operations ....................... 4,086,701 29,130
------------ -----------
Distributions to shareholders from net
investment income...................... (39,615) --
------------ -----------
Fund share transactions:
Proceeds from shares sold ............... 40,535,983 7,839,168
Reinvestment of distributions ........... 37,143 --
Cost of shares redeemed ................. (1,533,408) (4,097)
Redemption fees (Note A) ................ 7,995 --
------------ -----------
Net increase in net assets from Fund
share transactions ...................... 39,047,713 7,835,071
------------ -----------
INCREASE IN NET ASSETS .................. 43,094,799 7,864,201
Net assets at beginning of period ....... 7,865,401 1,200
Net assets at end of period (including
accumulated distributions in
excess of net investment income of
$71,205 and undistributed
net investment income of $4,890, ------------ -----------
respectively) ......................... $ 50,960,200 $ 7,865,401
------------ -----------
OTHER INFORMATION
- -------------------------------------------------------------------------------------
INCREASE IN FUND SHARES
Shares outstanding at beginning of period 651,850 100
------------ -----------
Shares sold ............................. 3,186,624 652,092
Shares issued to shareholders in
reinvestment of distributions ......... 2,884 --
Shares redeemed ......................... (118,035) (342)
------------ -----------
Net increase in Fund shares ............. 3,071,473 651,750
------------ -----------
Shares outstanding at end of period ..... 3,723,323 651,850
------------ -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
22 -- SCUDDER MICRO CAP FUND
<PAGE>
FINANCIAL HIGHLIGHTS
The following table includes selected data for a share outstanding throughout
each period (a) and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
SIX MONTHS FOR THE PERIOD
ENDED AUGUST 12, 1996
FEBRUARY (COMMENCEMENT) OF
28, 1997 OPERATIONS) TO
(UNAUDITED) AUGUST 31, 1996
- -----------------------------------------------------------------------------------
<S> <C> <C>
-------------------------------
Net asset value, beginning of period ............ $ 12.07 $ 12.00
-------------------------------
Income from investment operations:
Net investment income (loss) .................... (.02) .01
Net realized and unrealized gain on investments . 1.66 .06
-------------------------------
Total from investment operations ................ 1.64 .07
-------------------------------
Less distributions from net investment income ... (.02) --
Redemption fees (Note A) (d) .................... .00 --
-------------------------------
Net asset value, end of period .................. $ 13.69 $ 12.07
- -----------------------------------------------------------------------------------
TOTAL RETURN (%) (b) ............................ 13.55(c)** .58(c)**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions) .......... 51 8
Ratio of operating expenses, net to average daily
net assets (%) ................................ 1.75* 1.75*
Ratio of operating expenses before expense
reductions, to average daily net assets (%) ... 3.00* 22.06*
Ratio of net investment income (loss) to average
daily net assets (%) .......................... (.24)* 2.58*
Portfolio turnover rate (%) ..................... 4.0* None
Average commission rate paid .................... $ .0326 $ .0323
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been reduced.
(c) Total return does not reflect the effect of the 1% redemption fee on shares
held less than one year.
(d) Redemption fees were less than one-half of $.01.
* Annualized
** Not annualized
23 -- SCUDDER MICRO CAP FUND
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
A. SIGNIFICANT ACCOUNTING POLICIES
Scudder Micro Cap Fund (the "Fund") is a diversified series of Scudder
Securities Trust, a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company.
Due to investment considerations, it is presently intended that the Fund will
close to new individual investors when total assets of the Fund reach $100
million. It is anticipated that current individual shareholders of the Fund will
be able to continue to invest in the Fund after it reaches $100 million in total
assets. Further, the Fund will remain open to investment through qualified
retirement plans. If the Fund closes at $100 million in total assets as
currently expected, the Trustees may determine to reopen the Fund at some point
based on market conditions and other factors.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
SECURITY VALUATION. Portfolio 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 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, is equal to at least 100.5% of the resale price.
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 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.
24 -- SCUDDER MICRO CAP FUND
<PAGE>
DISTRIBUTION OF INCOME AND GAINS. Distributions of net investment income, if
any, 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.
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 the accrual basis.
B. PURCHASES AND SALES OF SECURITIES
During the six months ended February 28, 1997, purchases and sales of investment
securities (excluding short-term investments) aggregated $41,707,899 and
$563,154, 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
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 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 August 31, 1997 in order to maintain the annualized
expenses of the Fund at not more than 1.75% of average daily net assets. For the
six months ended February 28, 1997, the Adviser did not impose any of its
management fee amounting to $115,346.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
six months ended February 28, 1997, the amount charged to the Fund by SSC
aggregated $117,634, of which $51,097 was not imposed, and $66,537 is unpaid at
February 28, 1997.
25 -- SCUDDER MICRO CAP FUND
<PAGE>
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 six months ended February
28, 1997, the amount charged to the Fund by STC aggregated $5,246, of which
$2,279 was not imposed, and $2,967 is unpaid at February 28, 1997.
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 six months
ended February 28, 1997, the amount charged to the Fund by SFAC aggregated
$47,115, of which $20,466 was not imposed, and $26,649 is unpaid at February 28,
1997.
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 six months ended February 28, 1997 the Trustee fees and expenses aggregated
$16,494, of which $7,444 is unpaid at February 28, 1997.
26 -- SCUDDER MICRO CAP FUND
<PAGE>
This Page
intentionally
left blank
27-Scudder Micro Cap Fund
<PAGE>
Shareholder Meeting Results
A special meeting of shareholders of Scudder Micro Cap Fund was held on Monday,
December 2, 1996, at the offices of Scudder, Stevens & Clark, Inc., 345 Park
Avenue, New York, New York. The two matters voted upon by the shareholders and
the resulting votes for each matter are presented below.
1. The election of eight Trustees to hold office until their respective
successors shall have been duly elected and qualified.
<TABLE>
<CAPTION>
Trustee Number of Votes:
------- ----------------
For Witheld Broker Non-Votes*
--- ------- -----------------
<S> <C> <C> <C>
Daniel Pierce 1,047,328 27,935 0
Paul Bancroft III 1,044,080 31,183 0
Thomas J. Devine 1,045,103 30,160 0
Keith R. Fox 1,047,165 28,098 0
Dudley H. Ladd 1,044,975 30,289 0
Dr. Wilson Nolen 1,051,500 23,764 0
Kathryn L. Quirk 1,043,859 31,404 0
Dr. Gordon Shillinglaw 1,050,226 25,037
</TABLE>
2. Ratification or rejection of the action taken by the Board of Trustees
in selecting Coopers & Lybrand L.L.P as independent accountants for the
fiscal year ending August 31, 1997.
<TABLE>
<CAPTION>
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
<S> <C> <C> <C> <C>
1,034,484 13,180 27,600 0
</TABLE>
- -----------------------
* 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.
28-Scudder Micro Cap Fund
<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
Dudley H. Ladd*
Trustee
Dr. Wilson Nolen
Trustee; Consultant
Kathryn L. Quirk*
Trustee, Vice President and Assistant Secretary
Dr. Gordon Shillinglaw
Trustee; Professor Emeritus of Accounting, Columbia University
Graduate School of Business
Robert W. Lear
Honorary Trustee; Executive-in-Residence, Visiting Professor, Columbia
University Graduate School of Business
Robert G. Stone, Jr.
Honorary Trustee; Chairman Emeritus 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
Richard W. Desmond*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
29-Scudder Micro Cap Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Tax Free Money Market+
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax Free+
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund*
Scudder Massachusetts Limited Term
Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
U.S. Income
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
Scudder Balanced Fund
Scudder Growth and Income Fund
U.S. Growth
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
Worldwide
Scudder Global Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund
Retirement Programs
IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan *+++ +++
(a variable annuity)
Closed-End Funds#
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The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.
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. +++Funds within categories are listed in order from
expected least risk to most risk. +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.
30-Scudder Micro Cap Fund
<PAGE>
How to Contact Scudder
Account Service and Information
- --------------------------------------------------------------------------------
For existing account services and transactions
Scudder Investor Relations -- 1-800-225-5163
For 24 hour account information, fund information, exchanges,
and an overview of all the services available to you
Scudder Electronic Account Services --
http://funds.scudder.com
For information about your Scudder accounts, exchanges and
redemptions
Scudder Automated Information Line (SAIL) -- 1-800-343-2890
Investment Information
- --------------------------------------------------------------------------------
For information about the Scudder funds, including additional
applications and prospectuses, or for answers to investment
questions
Scudder Investor Relations -- 1-800-225-2470
[email protected]
Scudder's World Wide Web Site -- http://funds.scudder.com
For establishing 401(k) and 403(b) plans
Scudder Defined Contribution Services -- 1-800-323-6105
Scudder Brokerage Services
- --------------------------------------------------------------------------------
To receive information about this discount brokerage service and
to obtain an application
Scudder Brokerage Services* -- 1-800-700-0820
Personal Counsel(SM) -- A Managed Fund Portfolio Program
- --------------------------------------------------------------------------------
To receive information about this mutual fund portfolio guidance
and management program
Personal Counsel from Scudder -- 1-800-700-0183
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 Chicago San Francisco
Boston New York
Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
* Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061 --
Member NASD/SIPC.
31-Scudder Micro Cap Fund
<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 over 40 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.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER
