Scudder
21st Century Growth Fund
Semiannual Report
February 28, 1997
Pure No-Load(TM) Funds
A fund investing primarily in securities of emerging growth companies poised to
be leaders in the 21st century. For investors seeking long-term growth of
capital.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
SCUDDER
<PAGE>
Table of Contents
2 In Brief
3 Letter from the Fund's President
4 Portfolio Summary
5 Portfolio Management Discussion
8 Investment Portfolio
14 Financial Statements
17 Financial Highlights
18 Notes to Financial Statements
21 Shareholder Meeting Results
22 Investment Products and Services
23 How to Contact Scudder
In Brief
o Reflecting a difficult environment for small company growth stocks, Scudder
21st Century Growth Fund provided a total return of negative 7.83% for the
period of almost six months beginning with its September 9, 1996 inception and
ending February 28, 1997.
o The performance of small company growth stocks has lagged behind that of
large companies since the middle of 1996, and we now see substantial value in
this segment of the market.
o The health sector contains many dynamic small companies that are
potentially on the verge of seeing long-term investments come to fruition. This
is reflected in the significant weight given to health companies in the
portfolio, currently at 24% of equity holdings. Letter From the Fund's President
2 - Scudder 21st Century Growth Fund
<PAGE>
LETTER FROM THE FUND'S PRESIDENT
Dear Shareholders,
We are pleased to welcome you as an investor in Scudder 21st Century Growth
Fund, and to present the first semiannual report to shareholders, covering the
abbreviated period beginning with the Fund's September 9, 1996 inception and
ending February 28, 1997.
As detailed in the management discussion that follows, the environment over
the period covered by this report was a difficult one for investors in small
company growth stocks, like those held by the Fund. However, in our view the
small capitalization segment of the U.S. stock market currently is attractively
valued, and we are excited about the prospects of many companies held by the
Fund. Going forward, fund management will continue to apply intensive research
in seeking to identify those small companies poised to become tomorrow's
leaders. Scudder 21st Century Growth Fund remains an appropriate vehicle for
investors willing to assume what may be significant short-term volatility in
exchange for potentially high long-term total returns.
The U.S. stock market continued to reach new heights early in 1997,
following two years of exceptional performance, leading some investors to
consider what, if any, adjustments should be made to their portfolios. In
general, diversification across a number of asset classes, including small cap
stocks, money market, fixed-income, and international, can provide balance to an
investment portfolio. The performance of these distinct asset classes does not
always move in tandem, helping to reduce a portfolio's overall price volatility.
We'd like to take this opportunity to introduce a newcomer to Scudder's
mutual fund lineup: Scudder Pathway Series. Pathway uses 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 Fund products and
services, please turn to page 22. Or, visit our Internet Web site at
http://funds.scudder.com.
Thank you for your investment in Scudder 21st Century Growth Fund. We
encourage you to call our Investor Relations representatives at 1-800-225-2470
with any questions; they will be happy to assist you, with no sales pressure.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder 21st Century Growth Fund
3 - Scudder 21st Century Growth Fund
<PAGE>
PORTFOLIO SUMMARY as of February 28, 1997
- ---------------------------------------------------------------------------
ASSET ALLOCATION
- ---------------------------------------------------------------------------
Equity Holdings 95%
Cash Equivalents 5%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The portfolio is principally invested
in the stocks of small companies
positioned to be become leaders in
industries of the future.
- --------------------------------------------------------------------------
SECTOR DIVERSIFICATION
(Excludes 5% Cash Equivalents)
- --------------------------------------------------------------------------
Health 24%
Technology 18%
Service Industries 14%
Financial 11%
Consumer Discretionary 8%
Manufacturing 7%
Energy 5%
Media 3%
Durables 3%
Other 7%
- ---------------------------------------------
100%
- ---------------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
Health sector holdings are
focused on biotechnology and
medical device companies.
- --------------------------------------------------------------------------
10 LARGEST EQUITY HOLDINGS
(20% OF PORTFOLIO)
- --------------------------------------------------------------------------
1. NEOPROBE CORP.
Research and development of a system for
diagnosis and treatment of cancer
2. ANALYSTS INTERNATIONAL CORP.
Contract programming and software services
3. STAFF BUILDINGS, INC.
Provider of home health care services
4. KEANE, INC.
Provider of computer software project
management and design
5. SIMPSON MANUFACTURING COMPANY, INC.
Maker of connectors used in building construction
6. CAPMAC HOLDINGS INC.
Provider of financial guaranty insurance
7. ESC MEDICAL SYSTEMS LTD.
Producer of devices for non-invasive treatment of
benign vascular lesions
8. ADVANCED LIGHTING TECHNOLOGIES, INC.
Lighting products manufacturer
9. IDX SYSTEMS CORP.
Provider of health care information systems to
physician groups and academic medical centers
10. UNIVERSAL OUTDOOR HOLDINGS, INC.
Outdoor advertising company
Top holdings include companies
in growth industries such
as information systems
and medical technology.
- -----------------------------------------------------------------------------
For more complete details about the Fund's investment portfolio,
see page 8. A monthly Investment Portfolio Summary and quarterly Portfolio
Holdings are available upon request.
4 - Scudder 21st Century Growth Fund
<PAGE>
Portfolio Management Discussion
Dear Shareholders,
The period covered by this report saw the performance of large company stocks
far outstrip that of more growth-oriented small capitalization ("small cap")
issues. Reflecting in large part a difficult environment for small company
growth stocks, Scudder 21st Century Growth Fund provided a total return of
negative 7.83% for the period of almost six months beginning with its September
9, 1996 inception and ending February 28, 1997.
To illustrate the divergence between the performance of stocks of large, more
stable companies and small, higher-growth issues, for the full six-month period
from the beginning of September 1996 through February 1997, the large cap S&P
500 Index provided a total return of 22.53%, versus only 1.46% for the unmanaged
Russell 2000 Growth Index. The Russell 2000 Growth Index, a commonly used gauge
of small company growth stock performance, includes companies with market
capitalizations as high as $1.3 billion. Scudder 21st Century Growth Fund has a
smaller cap tilt than the Index, focusing on companies with market
capitalizations below $750 million; as a result, the Fund experienced a somewhat
stronger headwind and lower returns than the Index over this period of large cap
leadership.
Market Punishes Small Company Earnings Disappointments
Erratic earnings are always a risk to investors in the small company sector of
the stock market, and since the Fund began operations, earnings disappointments
among these issues have been swiftly punished by investors. The Fund experienced
its share of these earnings shocks, which can be divided roughly into two
groups: one-time blips, reflective of mere growing pains, and reactions to
endemic problems based on a fundamental weakness.
We believe Veterinary Centers of America (VCA) falls into the former category.
VCA embarked on an aggressive acquisition strategy, going from 60 to 160 centers
over a four month period. The company's accounting system was inadequate to
handle the rapid pace of expansion, resulting in an earnings shortfall reported
in November, and a stock price decline of more than 50%. In our view, this was a
temporary setback unrelated to the company's fundamentals, and we continue to
hold the stock. VCA is bringing professional management to former "mom and pop"
veterinary operations, and should benefit from economies of scale going forward.
XLConnect, by contrast, is an example of an initial public offering that did not
live up to its billing, and illustrates the risks of investing in an area of the
market that includes many companies without a track record of any real length.
The company is a spinoff of Intelligent Electronics, and is focused on the
exploding area of computer systems consulting. The new entity, however, reported
disappointing earnings for its first quarter as a public company, having been
unable to compensate for the loss of support from its former parent's
salesforce, and the stock price plummeted from the $25 range to around $6.
Doubting that management can soon
5 - Scudder 21st Century Growth Fund
<PAGE>
overcome this problem, we have eliminated the Fund's position in the stock.
Focus on Companies of Tomorrow
In general, we are looking for small companies where we expect the level and
visibility of earnings growth going forward to be high. Many of the companies
held by the Fund feature a high percentage of stock ownership by insiders --
nearly half of outstanding equity on a weighted average basis. This indicates to
us that management's interests are generally very much in alignment with ours,
as pure investors, and reflects our effort to find tomorrow's leading companies
before they are generally recognized as such by the investment community.
Several of the Fund's top holdings illustrate our focus on the early
identification of companies poised to provide solutions to tomorrow's problems
or to apply more advanced techniques to meeting today's needs. We believe
Simpson Manufacturing, one of the Fund's largest holdings, is well-positioned to
benefit from a trend towards requiring new construction to be better able to
withstand earthquakes, floods, hurricanes, and the like. Simpson provides
connectors used in home construction to anchor support beams. The company, while
still largely unknown, is expanding nationally, and reported an earnings
increase of more than 50% for the fourth quarter of 1996. Moreover, Simpson is
trading at levels in the neighborhood of 15 times projected 1997 earnings, a
very reasonable multiple for a small growth company stock.
Advanced Lighting, another significant Fund holding, is a dominant provider of
metal halide lighting, which mimics sunlight, is far more economical than
conventional incandescent lighting, and runs at a much cooler temperature than
halogen and is therefore less of a fire hazard. Currently used predominantly at
stadiums, car lots, and indoor convention facilities, metal halide is beginning
to make inroads with the consumer market. Advanced Lighting, despite recent
sluggish stock price performance, has shown operating earnings growth in the 40%
per annum range and appears ideally situated to capitalize as metal halide's
share of the lighting market expands.
The health sector contains many dynamic small companies that, in our view, are
on the verge of seeing long-term investments come to fruition. This is reflected
in the substantial weight given to health companies in the portfolio, currently
at 24% of equity holdings. Fund holdings in this area are focused on
biotechnology and medical device companies that are solving problems or reducing
the costs of care, rather than caregivers such as HMOs. For example, Perclose
Inc. has developed a device that permits the leg artery, used to access the
coronary artery in a heart bypass operation, to be sutured in a minimally
invasive fashion following surgery. PLC Systems has a new laser-based
"revascularization" device that in certain circumstances can be used in lieu of
a bypass operation to promote the flow of blood to the heart. Agouron has a
product superior to Merck's protease inhibitor, used in fighting AIDS; we began
selling the company at a handsome profit once its market cap exceeded our
guidelines.
6 - Scudder 21st Century Growth Fund
<PAGE>
Outlook: Signs of Value
The performance of small company growth stocks in the aggregate has lagged that
of large companies since the middle of 1996. Accordingly, we now see substantial
value in this segment of the market. The price-to-earnings ratio (P/E) of small
growth stocks based on anticipated 1997 earnings is only 23% higher than that
for the S&P 500, while at the same time our long-term expected earnings growth
rate for small growth stocks of 27% is a multiple of the 7% projected for S&P
stocks. Moreover, small company growth stocks are selling at P/Es comparable to
large stocks based on projected earnings for 1998, meaning that investors may
actually be paying no premium for much higher expected earnings.
While the Fund's performance over the brief period since its inception has been
disappointing, we are confident that the Fund is appropriate for long-term
investors willing to assume above average volatility in order to participate in
high growth areas of the economy. Going forward, we will continue to apply
intensive research to identify companies that we believe have the potential to
be leaders in the 21st century.
Sincerely,
Your Portfolio Management Team
/s/Peter Chin /s/Roy C. McKay
Peter Chin Roy C. McKay
7 - Scudder 21st Century Growth Fund
<PAGE>
Investment Portfolio as of February 28, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 5.4%
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with State Street Bank and Trust Company dated 2/28/97 at
5.31%, to be repurchased at $732,324 on 3/3/97, collateralized by a $730,000
U.S. Treasury Bond, 7.125%, 2/15/23 (Cost $732,000) ............................................... 732,000 732,000
Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Common Stocks 94.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Discretionary 7.6%
Apparel & Shoes 0.5%
St. John Knits Inc. (Manufacturer of woman's clothing) .............................................. 1,600 65,600
------------
Department & Chain Stores 1.1%
Men's Wearhouse Inc.* (Discount retailer) ........................................................... 1,000 23,625
Renters Choice, Inc.* (Operator of rent-to-own stores offering home electronics,
appliances, furniture and accessories) ............................................................ 9,000 124,875
------------
148,500
------------
Hotels & Casinos 0.7%
Anchor Gaming* (Operator of gaming machines and casinos) ............................................ 3,100 96,100
------------
Recreational Products 1.7%
Family Golf Centers, Inc.* (Operator of golf-related recreational facilities) ....................... 8,600 236,500
------------
Specialty Retail 3.6%
Gadzooks, Inc.* (Specialty retailer of brand name casual apparel for teenagers) ..................... 10,000 245,000
Wilmar Industries, Inc.* (National distributor of repair and maintenance products
for the apartment housing market) ................................................................. 12,900 238,650
------------
483,650
------------
Consumer Staples 1.9%
Alcohol & Tobacco 0.4%
Robert Mondavi Corp. "A"* (Premium wine producer) ................................................... 1,400 57,400
------------
Food & Beverage 1.5%
Fletcher's Fine Foods Ltd.* (Pork producer) ......................................................... 13,300 147,963
Fresh America Corp.* (Integrated food distribution management company) .............................. 4,500 60,750
------------
208,713
------------
Health 22.7%
Biotechnology 6.0%
Alliance Pharmaceutical Corp.* (Developer of products for treatment of immune
system disorders, cancer, respiratory distress syndrome) .......................................... 9,500 118,750
ESC Medical Systems Ltd.* (Producer of devices for non-invasive treatment of
benign vascular lesions) .......................................................................... 7,600 260,300
</TABLE>
The accompanying notes are an integral part of the financial statements
8 -- SCUDDER 21ST CENTURY GROWTH FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NABI, Inc.* (Leading biopharmaceutical company in development of products to
prevent and treat autoimmune and infectious diseases) ............................................. 11,200 107,800
Neoprobe Corp.* (Research and development of a system for diagnosis and treatment
of cancer) ........................................................................................ 18,600 319,688
Norland Medical Systems, Inc.* (Marketer of systems used in diagnosis of bone
disorders) ........................................................................................ 1,600 11,200
------------
817,738
------------
Health Industry Services 4.1%
IDX Systems Corp.* (Provider of health care information systems to physician
groups and academic medical centers) .............................................................. 8,200 258,300
Staff Buildings, Inc. "A"* (Provider of home health care services) .................................. 100,000 293,750
------------
552,050
------------
Hospital Management 1.7%
Karrington Health, Inc.* (Owner and operator of private pay assisted living
residences) ....................................................................................... 9,400 104,575
Sunrise Assisted Living, Inc.* (Provider of assisted living to the elderly) ......................... 4,600 128,800
------------
233,375
------------
Medical Supply & Specialty 4.6%
Biosource International, Inc.* (Supplier of immunological reagents and test
kits used in biomedical research) ................................................................. 15,600 126,750
Endosonics Corp.* (Manufacturer of imaging catheters) ............................................... 9,500 108,063
PLC Systems Inc.* (Developer, manufacturer and marketer of medical laser systems) ................... 10,900 234,350
Perclose, Inc.* (Developer and producer of minimally invasive single-use systems
to close arterial access sites surgically) ........................................................ 6,000 146,250
------------
615,413
------------
Pharmaceuticals 6.3%
Agouron Pharmaceuticals, Inc.* (Developer of therapeutic and synthetic drugs for
treatment of cancer and other diseases) .......................................................... 1,400 123,200
Alkermes, Inc.* (Pharmaceutical company developing products to aid treatment of
central nervous system) ........................................................................... 5,800 144,275
Cyanotech Corp.* (Producer of algal products for nutritional and pharmaceutical
markets) .......................................................................................... 18,700 119,213
North American Vaccine, Inc.* (Developer of immunological products) ................................. 4,900 110,863
Noven Pharmaceuticals, Inc.* (Transdermal drug delivery systems) .................................... 8,800 118,800
SciClone Pharmaceuticals, Inc.* (Developer of pharmaceuticals for infectious
diseases, cancer and immune system disorders) ..................................................... 15,000 101,250
Sugen, Inc.* (Developer of small molecule drugs for use in cancer and diabetes
treatment) ........................................................................................ 10,400 132,600
------------
850,201
------------
Communications 1.0%
Cellular Telephone
CommNet Cellular, Inc.* (Management, maintenance and financing of cellular
telephone systems throughout the United States) ................................................... 5,100 130,050
------------
</TABLE>
The accompanying notes are an integral part of the financial statements
9 -- SCUDDER 21ST CENTURY GROWTH FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Financial 10.6%
Banks 5.7%
Corus Bankshares, Inc. (Commercial bank holding company) ............................................ 3,700 127,650
First Federal Financial Corp.* (Commercial bank holding company) .................................... 5,600 145,600
Jefferson Bankshares Inc. (Commercial bank) ......................................................... 4,600 134,550
Magna Group, Inc. (Commercial banking and financial services) ....................................... 7,600 242,250
Southwest Bancorporation of Texas, Inc.* (Commercial bank holding company) .......................... 6,700 128,975
------------
779,025
------------
Insurance 4.9%
CapMAC Holdings Inc. (Provider of financial guaranty insurance) ..................................... 8,000 262,000
Compdent Corp.* (Provider of dental coverage in the managed dental care industry) ................... 4,700 141,588
Meadowbrook Insurance Group. Inc. (Insurance holding company) ....................................... 11,800 253,700
------------
657,288
------------
Media 3.1%
Advertising 1.9%
Universal Outdoor Holdings, Inc.* (Outdoor advertising company) ..................................... 9,400 253,800
------------
Broadcasting & Entertainment 1.2%
International Family Entertainment, Inc. "B"* (Production and distribution of
entertainment programming) ........................................................................ 8,700 166,388
------------
Service Industries 13.5%
EDP Services 3.9%
Analysts International Corp. (Contract programming and software services) ........................... 11,400 307,800
CCC Information Services Group* (Computerized data management software and systems
for auto collision estimates for insurers and repair shops) ....................................... 6,500 94,250
Computer Horizons Corp.* (Diversified information technology services and solutions) ................ 4,600 119,600
------------
521,650
------------
Environmental Services 0.2%
Commodore Applied Technologies, Inc.* (Developer of environmental technologies) ..................... 3,900 24,131
------------
Miscellaneous Commercial Services 9.4%
Alternative Resources Corp.* (Provider of technical personnel specializing in
information services) ............................................................................. 14,900 229,088
CMG Information Services, Inc.* (Developer of information-based products and
services for direct marketing) .................................................................... 16,600 219,950
Cornell Corrections, Inc.* (Developer and operator of correctional, detention
and pre-release facilities) ....................................................................... 10,500 111,563
G & K Services Inc. "A" (Uniform rentals) ........................................................... 7,700 249,288
National Processing, Inc.* (Low-cost, high-volume card and check transaction
processing) ....................................................................................... 6,300 68,513
</TABLE>
The accompanying notes are an integral part of the financial statements
10 -- SCUDDER 21ST CENTURY GROWTH FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
RTW, Inc.* (Provider of comprehensive managed care products and services for
workers' compensation programs) ................................................................... 5,300 47,700
Sitel Corp.* (Nebraska-based telemarketing company for major credit-card and
insurance companies) .............................................................................. 12,800 212,800
Veterinary Centers of America, Inc.* (Owner and manager of veterinary hospitals) .................... 12,400 131,750
------------
1,270,652
------------
Durables 2.6%
Automobiles 1.8%
Tower Automotive, Inc.* (Producer of engineered metal stampings and assemblies
for automotive industry) .......................................................................... 6,300 241,763
------------
Telecommunications Equipment 0.8%
AML Communications, Inc.* (Manufacturer of amplifiers and related products for
communications markets) ........................................................................... 12,300 110,700
------------
Manufacturing 6.9%
Containers & Paper 1.1%
Aptargroup, Inc. (Manufacturer of packaging equipment components) ................................... 3,600 143,100
------------
Diversified Manufacturing 0.4%
Alyn Corp.* (Manufacturer of consumer and industrial materials) ..................................... 5,400 50,625
------------
Electrical Products 1.9%
Advanced Lighting Technologies, Inc.* (Manufacturer of metal halide lighting
products) ......................................................................................... 11,400 259,350
------------
Industrial Specialty 3.5%
Lydall, Inc.* (Engineered fiber materials) .......................................................... 5,500 123,750
National-Oilwell, Inc.* (Manufacturer of oil and gas drilling equipment) ............................ 5,600 172,200
Thermo Fibergen Inc.* (Recovery equipment for recycling pulp and paper residue) ..................... 15,800 165,900
Thermo Fibergen Inc. Rights* ........................................................................ 6,400 18,400
------------
480,250
------------
Technology 16.7%
Computer Software 9.4%
Advent Software, Inc.* (Provider of stand-alone and client/server software
products) ......................................................................................... 3,300 75,900
Aurum Software, Inc.* (Developer of sales and marketing information software) ....................... 5,200 95,550
Avant! Corp.* (Developer and marketer of integrated circuit design automation
software) ......................................................................................... 2,900 88,450
CBT Group PLC (ADR)* (Developer and publisher of software focusing on client/server
technologies) ..................................................................................... 3,800 207,100
Keane, Inc.* (Provider of computer software project management and design
development services) ............................................................................. 7,700 271,425
Project Software & Development, Inc.* (Developer of software used for management
of equipment maintenance) ......................................................................... 2,700 95,850
</TABLE>
The accompanying notes are an integral part of the financial statements
11 -- SCUDDER 21ST CENTURY GROWTH FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Pure Atria Corp.* (Developer of diagnostic and testing products for managing
software projects) ................................................................................ 5,800 111,288
Technology Modeling Associates, Inc.* (Physical simulation software for
integrated circuit design and manufacturing) ...................................................... 7,200 108,000
Vantive Corp.* (Provider of customer interaction applications software) ............................. 9,500 211,375
------------
1,264,938
------------
EDP Peripherals 0.7%
Network Appliance, Inc.* (Designer and manufacturer of network data storage devices) ................ 2,300 92,000
------------
Electronic Components/Distributors 2.2%
Rofin-Sinar Technologies Inc.* (Manufacturer of laser products use for cutting
and welding) ...................................................................................... 10,000 140,000
Trident International, Inc.* (Manufacturer of impulse ink jet subsystems) ........................... 6,900 156,975
------------
296,975
------------
Office/Plant Automation 1.8%
Cognex Corp.* (Manufacturer of machine vision systems) .............................................. 13,600 246,500
------------
Semiconductors 2.6%
Cymer, Inc.* (Provider of laser illumination sources for ultra-violet
photolithography systems) ......................................................................... 2,800 103,250
ESS Technology, Inc.* (Producer of mixed signal semiconductor audio solutions
for multimedia desktop and notebook computer manufacturers) ....................................... 4,900 128,931
Vitesse Semiconductor Corp.* (Manufacturer of digital integrated circuits) .......................... 3,000 125,806
------------
357,987
------------
Energy 4.2%
Oil & Gas Production 3.4%
Benton Oil & Gas Co.* (Oil and gas exploration, development and production) ......................... 7,800 118,950
Lomak Petroleum, Inc. (Exploration and development of oil and gas properties) ....................... 7,200 115,200
Nuevo Energy Co.* (Oil and gas exploration, development and production) ............................. 5,600 232,400
------------
466,550
------------
Oilfield Services/Equipment 0.8%
Global Industries Ltd.* (Pipeline construction, derrick and diving services for
offshore oil and gas industry) .................................................................... 6,200 113,150
------------
Metals & Minerals 0.8%
Steel & Metals
RMI Titanium Co.* (Producer of titanium products) ................................................... 6,000 108,000
------------
Construction 2.0%
Building Materials
Simpson Manufacturing Co., Inc.* (Manufacturer of wood-to-wood, wood-to-concrete
and wood-to-masonry connectors) ................................................................... 10,400 265,200
------------
</TABLE>
The accompanying notes are an integral part of the financial statements
12 -- SCUDDER 21ST CENTURY GROWTH FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Transportation 1.0%
Marine Transportation
Trico Marine Services, Inc.* (Provider of marine support services for offshore oil
and gas exploration and production operations) ...................................................... 3,300 133,650
- ------------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $13,465,754) 12,798,962
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio - 100.0% (Cost $14,197,754) (a) 13,530,962
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
(a) The cost for federal income tax purposes was $14,197,754. At February 28,
1997, net unrealized depreciation for all securities based on tax cost was
$666,792. This consisted of aggregate gross unrealized appreciation for all
securities in which there was an excess of market value over tax cost of
$639,976 and aggregate gross unrealized depreciation for all securities in
which there was an excess of tax cost over market value of $1,306,768.
The accompanying notes are an integral part of the financial statements
13 -- SCUDDER 21ST CENTURY GROWTH FUND
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of February 28, 1997 (Unaudited)
<TABLE>
<CAPTION>
Assets
----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investments, at market (identified cost $14,197,754) (Note A) ........ $ 13,530,962
Cash ................................................................. 781
Receivable for Investments sold ...................................... 446,914
Receivable for Fund shares sold ...................................... 67,796
Dividends and interest receivable .................................... 2,008
Due from Adviser (Note C) ............................................ 127,858
Deferred organization expenses (Note A) .............................. 22,034
----------------
Total assets ......................................................... 14,198,353
Liabilities
----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased .................................... 302,503
Payable for Fund shares redeemed ..................................... 12,731
Accrued management fee (Note C) ...................................... 37,719
Other accrued expenses (Note C) ...................................... 157,827
----------------
Total liabilities .................................................... 510,780
-------------------------------------------------------------------------------------------
Net assets, at market value $ 13,687,573
-------------------------------------------------------------------------------------------
Net Assets
----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated net investment loss ...................................... (34,937)
Unrealized depreciation on investments ............................... (666,792)
Accumulated net realized loss ........................................ (506,931)
Paid-in capital ...................................................... 14,896,233
-------------------------------------------------------------------------------------------
Net assets, at market value $ 13,687,573
-------------------------------------------------------------------------------------------
Net Asset Value
----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price (Note A) per share
($13,687,573 / 1,237,706 outstanding shares of beneficial interest, ----------------
$.01 par value, unlimited number of shares authorized) ............... $11.06
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements
14 -- SCUDDER 21ST CENTURY GROWTH FUND
<PAGE>
Statement of Operations
for the period September 9, 1996 (commencement
of operations) to February 28, 1997 (Unaudited)
<TABLE>
<CAPTION>
Investment Income
------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Income:
Dividends ............................................................ $ 4,799
Interest ............................................................. 25,257
-----------------
30,056
Expenses:
Management fee (Note C) .............................................. 37,719
Services to shareholders (Note C) .................................... 43,979
Custodian and accounting fees (Note C) ............................... 35,967
Trustees' fees and expenses (Note C) ................................. 11,893
Auditing ............................................................. 12,150
Registration fees .................................................... 20,728
Reports to shareholders .............................................. 16,861
Legal ................................................................ 6,261
Amortization of organization expense (Note A) ........................ 2,306
Other ................................................................ 4,987
-----------------
Total expenses before reductions ..................................... 192,851
Expense reductions (Note C) .......................................... (127,858)
-----------------
Expenses, net ........................................................ 64,993
--------------------------------------------------------------------------------------------
Net investment loss (34,937)
--------------------------------------------------------------------------------------------
Realized and unrealized loss on investment transactions
------------------------------------------------------------------------------------------------------------------------------
Net realized loss from investments ................................... (506,931)
Net unrealized depreciation during the period on investments ......... (666,792)
--------------------------------------------------------------------------------------------
Net loss on investment transactions (1,173,723)
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $ (1,208,660)
--------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements
15 -- SCUDDER 21ST CENTURY GROWTH FUND
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Period
September 9, 1996
(commencement of
operations) to
February 28, 1997
Increase (Decrease) in Net Assets (Unaudited)
-----------------------------------------------------------------------------------------------------------
<S> <C>
Operations:
Net investment loss ............................................... $ (34,937)
Net realized loss from investment transactions .................... (506,931)
Net unrealized depreciation on investment transactions during
the period ........................................................ (666,792)
---------------------
Net decrease in net assets resulting from operations .............. (1,208,660)
---------------------
Fund share transactions:
Proceeds from shares sold ......................................... 15,725,168
Cost of shares redeemed ........................................... (835,991)
Redemption fees (Note A) .......................................... 5,856
---------------------
Net increase in net assets from Fund share transactions ........... 14,895,033
---------------------
Increase in net assets ............................................ 13,686,373
Net assets at beginning of period ................................. 1,200
Net assets at end of period (including accumulated net ---------------------
investment loss of $34,937) ....................................... $13,687,573
---------------------
Other information
-----------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ......................... 100
---------------------
Shares sold ....................................................... 1,308,988
Shares redeemed ................................................... (71,382)
---------------------
Net increase in Fund shares ....................................... 1,237,606
---------------------
Shares outstanding at end of period ............................... 1,237,706
---------------------
</TABLE>
The accompanying notes are an integral part of the financial statements
16 -- SCUDDER 21ST CENTURY GROWTH FUND
<PAGE>
Financial Highlights
Letter From the Fund's President
The following table includes selected data for a share outstanding throughout
the period (a) and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
For the Period
September 9, 1996
(commencement) of
operations) to
February 28, 1997
(Unaudited)
----------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period .................................................... $12.00
---------------------
Income from investment operations: ...................................................... (.05)
Net investment loss
Net realized and unrealized loss on investments ......................................... (.90)
---------------------
Total from investment operations ........................................................ (.95)
---------------------
Redemption fees (Note A) ................................................................ .01
---------------------
Net asset value, end of period .......................................................... $11.06
----------------------------------------------------------------------------------------------------------------
Total Return (%) (b) .................................................................... (7.83)(c)**
Ratios and Supplemental Data
Net assets, end of period ($ millions) .................................................. 14
Ratio of operating expenses, net to average daily net assets (%) ........................ 1.75*
Ratio of operating expenses before expense reductions, to average daily net assets (%)... 5.20*
Ratio of net investment income to average daily net assets (%) .......................... (.94)*
Portfolio turnover rate (%) ............................................................. 81.3*
Average commission rate paid ............................................................ $.0378
</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.
* Annualized
** Not annualized
17 -- SCUDDER 21ST CENTURY GROWTH FUND
<PAGE>
Notes to Financial Statements (Unaudited)
A. Significant Accounting Policies
Scudder 21st Century Growth 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.
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 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.
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
18 -- SCUDDER 21ST CENTURY GROWTH FUND
<PAGE>
(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 period September 9, 1996 (commencement of operations) to February 28,
1997, purchases and sales of investment securities (excluding short-term
investments) aggregated $17,250,434 and $3,277,749, 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 1.00% 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 the Fund's
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
period September 9, 1996 (commencement of operations) to February 28, 1997, the
Adviser did not impose any portion of its management fee amounting to $37,719.
Further, due to the limitations of such Agreement the Adviser also reimbursed
the Fund for other expenses, which amounted to $33,243. The Adviser's
reimbursement payable to the Fund for the period September 9, 1996 (commencement
of operations) to February 28, 1997 amounted to $127,858.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
period September 9, 1996 (commencement of operations) to February 28, 1997, SSC
did not impose all of its fee, which amounted to $36,645.
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 period September 9, 1996
(commencement of operations) to February 28, 1997, STC did not impose any
portion of its fee, which amounted to $876.
19 -- SCUDDER 21ST CENTURY GROWTH FUND
<PAGE>
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
September 9, 1996 (commencement of operations) to February 28, 1997, SFAC did
not impose any portion of its fee, which amounted to $19,375.
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 September 9, 1996 (commencement of operations) to February 28, 1997
the Trustees' fees and expenses aggregated $11,893.
20 -- SCUDDER 21ST CENTURY GROWTH FUND
<PAGE>
Shareholder Meeting Results
A special meeting of shareholders of Scudder 21st Century Growth 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>
<S> <C> <C> <C>
<CAPTION>
Trustee Number of Votes:
------- ----------------
For Witheld Broker Non-Votes*
--- ------- -----------------
Daniel Pierce 171,761 885 0
Paul Bancroft III 171,761 885 0
Thomas J. Devine 171,761 885 0
Keith R. Fox 171,961 685 0
Dudley H. Ladd 171,961 685 0
Dr. Wilson Nolen 171,961 685 0
Kathryn L. Quirk 171,961 685 0
Dr. Gordon Shillinglaw 171,761 885
</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>
<S> <C> <C> <C> <C>
<CAPTION>
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
167,779 1,332 3,535 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.
21 - Scudder 21st Century Growth 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#
- --------------------------------------------------------------------------------
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.
22 - Scudder 21st Century Growth 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 CounselSM -- 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.
23 - Scudder 21st Century Growth 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
