SCUDDER SECURITIES TRUST, N-30D, 1998-04-24

SCUDDER SECURITIES TRUST
N-30D, 1998-04-24

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Scudder
Micro Cap
Fund

Semiannual Report
February 28, 1998

Pure No-Load(TM) Funds

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 (logo)

<PAGE>

Scudder Micro Cap Fund

- --------------------------------------------------------------------------------
Date of Inception: 8/12/96 Total Net Assets as of Ticker Symbol: SCMCX
2/28/98: $139.2 million
- --------------------------------------------------------------------------------

o For the six-month period ended February 28, 1998, Scudder Micro Cap Fund
provided a total return of 8.91%, exceeding the 8.36% total return of micro-cap
funds according to Lipper Analytical Services.

o Characteristic of the Fund's disciplined, value-oriented and risk-controlled
approach, the Fund has tended to trail micro-cap benchmarks in strong up
markets, but decline less in down markets.

o Remaining true to its commitment to investing in stocks with very small market
caps, the Fund's median market cap was $56 million, versus $499 million for the
unmanaged small-cap Russell 2000 Index.

Table of Contents

3 Letter from the Fund's President 27 Financial Highlights
4 Performance Update 28 Notes to Financial Statements
5 Portfolio Summary 32 Shareholder Meeting Results
6 Portfolio Management Discussion 36 Officers and Trustees
9 Glossary of Investment Terms 37 Investment Products and Services
10 Investment Portfolio 38 Scudder Solutions
24 Financial Statements

2 - Scudder Micro Cap Fund

<PAGE>

Letter from the Fund's President

Dear Shareholders,

Scudder Micro Cap Fund's most recent six-month fiscal period was
characterized by challenging market conditions. Yet, the Fund provided investors
with generous returns which surpassed the micro-cap market for both the six- and
twelve-month periods ended February 28, 1998.

The third quarter of 1997 was one of the best periods in years for
smaller-cap issues, as they outperformed larger-cap stocks by a significant
margin. However, concerns over the financial crisis in Asia sent investors
heading for defensive domestic issues in the fourth quarter. While concerns over
Asia have abated somewhat since the fall of 1997, large-cap stocks have
continued to outperform. We find this performance perplexing considering the
relatively high valuations and slower earnings growth expectations of large-caps
compared to small-cap stocks this year. From a valuation standpoint, smaller-cap
stocks appear to have attractive investment characteristics compared to large
stocks in the current environment. Your Fund's managers discuss performance in
detail beginning on page 6.

At the beginning of 1998, your Fund's investment adviser changed its name
to Scudder Kemper Investments, Inc. from Scudder, Stevens & Clark, Inc.,
reflecting the acquisition of a majority interest in Scudder by Zurich Insurance
Company, and the combining of Scudder's business with that of Zurich Kemper
Investments, Inc. We think this combination is very positive, and will provide
your Fund's adviser with expanded resources in managing the Fund.

For those of you who are interested in new Scudder products, we recently
introduced three new industry sector funds that comprise the Choice Series:
Scudder Financial Services Fund, Scudder Health Care Fund, and Scudder
Technology Fund. In addition, April 6th marked the debut of our latest entrant
in the growth and income category, Scudder Real Estate Investment Fund. For
further information on any of these new funds, please call 1-800-225-2470.

Thank you for your continued investment in Scudder Micro Cap Fund. If you
have any questions about your account, please call Scudder Investor Relations at
the toll-free number above, or visit our 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, 1998

- ----------------------------------------
Fund Index Comparisons
- ----------------------------------------
Total Return
- ----------------------------------------
Period Growth
Ended of Average
2/28/98 $10,000 Cumulative Annual
- ----------------------------------------
Scudder Micro Cap Fund
- ----------------------------------------
1 Year $13,341 33.41% 33.41%
Life of
Fund* $15,238 52.38% 31.34%
- ----------------------------------------
Russell 2000 Index
- ----------------------------------------
1 Year $12,996 29.96% 29.96%
Life of
Fund* $14,432 44.32% 26.74%
- ----------------------------------------
S&P 500 Index
- ----------------------------------------
1 Year $13,501 35.01% 35.01%
Life of
Fund* $16,314 63.14% 37.19%

- ----------------------------------------
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
11/96 $10,475
2/97 $11,422
5/97 $11,830
8/97 $13,991
11/97 $14,776
2/98 $15,238

Russell 2000 Index
Year Amount
- ----------------------
8/96* $10,000
11/96 $10,873
2/97 $11,105
5/97 $11,791
8/97 $13,163
11/97 $13,418
2/98 $14,432

S&P 500 Index
Year Amount
- ----------------------
8/96* $10,000
11/96 $11,513
2/97 $12,084
5/97 $13,027
8/97 $13,870
11/97 $14,796
2/98 $16,314

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.

- ----------------------------------------
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.

Yearly periods ended February 28

1997* 1998
- --------------------------------------------------------------------------------
Net Asset Value $13.69 $18.19
- --------------------------------------------------------------------------------
Income Dividends $ .02 $ --
- --------------------------------------------------------------------------------
Capital Gains Distributions $ -- $ .07
- --------------------------------------------------------------------------------
Fund Total Return (%) 14.22 33.41
- --------------------------------------------------------------------------------
Russell 2000 Index Total Return (%) 11.05 29.96
- --------------------------------------------------------------------------------
Performance is historical and 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 one year and life
of Fund periods would have been lower.

4 - Scudder Micro Cap Fund
<PAGE>

Portfolio Summary as of February 28, 1998

- ----------------------------------------
Asset Allocation
- ----------------------------------------

A graph in the form of a pie chart appears
here, illustrating the exact data points
in the below table.

Common Stocks 97%
Cash Equivalents 3%
- ----------------------------------------
100%
- ----------------------------------------

The Fund seeks to be
fully invested in U.S.
micro-cap stocks.

- ----------------------------------------
Sectors/Largest Holdings
(Excludes 3% Cash Equivs.)
- ----------------------------------------

1. FINANCIAL (20%)
MSB Bancorp, Inc.
Savings bank holding company

2. CONSUMER DISCRETIONARY (17%)
Garden Fresh Restaurant Corp.
Operator of salad buffet restaurant
chain

3. MANUFACTURING (15%)
Ceradyne, Inc.
Manufacturer of technical ceramic
products for medical and industrial use

4. TECHNOLOGY (9%)
Bull Run Corp.
Manufacturer of dot matrix printers

5. CONSUMER STAPLES (8%)
Chock Full O'Nuts Corp.
Producer of coffees, teas, peanut
products

6. SERVICE INDUSTRIES (7%)
Automobile Protection Corp.
Provider of extended vehicle service
contracts

7. HEALTH (4%)
National Patent Development
Corp.
Manufacturer and distributor of
medical, health care and consumer
products

8. CONSTRUCTION (4%)
A.P. Green Industries, Inc.
Manufacturer of refractory products
and industrial lime products

9. DURABLES (4%)
Ducommun, Inc.
Manufacturer of components and
sub-assemblies for aerospace and
wireless telecommunications industries

10.TRANSPORTAION (3%)
MTL, Inc.
Transports industrial chemicals and
bulk food products by tank truck

- ----------------------------------------------------------------------
Stock Characteristics
- ----------------------------------------------------------------------

Fund as
Micro Cap % of
Median Values Fund Universe Universe
- ----------------------------------------------------------------------
Market Capitalization ($ millions) 56 64 88%
Price/Earnings 16.5 28.6 58%
Sales Growth (5 year) 10.2 7.0 146%
Return On Equity (3 year) 12.9 12.8 101%

Reflecting the Fund's commitment to investing in
micro-cap stocks, the portfolio's median market
capitalization remained significantly below that of
the micro-cap universe.

For more complete details about the Fund's Investment Portfolio, see page 10.
A monthly Investment Portfolio Summary and quarterly Portfolio Holdings are
available upon request.

5 - Scudder Micro Cap Fund
<PAGE>

Portfolio Management Discussion

In the following interview, James M. Eysenbach, Philip S. Fortuna, and Calvin S.
Young, portfolio managers of Scudder Micro Cap Fund, discuss the Fund's strategy
and the market environment during the fiscal semiannual period.

Q: How did the Fund perform for the six-month period ended February 28, 1998?

A: The Fund provided a total return of 8.91%, slightly ahead of the 8.36%
average return of micro-cap funds according to Lipper Analytical Services. For
the same six months, the unmanaged Russell 2000 Index1 of small stocks returned
9.64% and the large-cap S&P 500 Index returned 17.62%.

Q: ... And over longer horizons?

A: The Fund returned 33.41% for the 12-month period ended February 28, 1998 and
52.38% since the Fund's commencement of operations on August 12, 1996. While
these time periods are still relatively short for evaluating the performance of
a stock fund, we've been pleased with the Fund's progress. In addition to
outperforming the micro-cap universe, our risk-controlled approach has resulted
in low volatility compared to other micro-cap funds.

Q: How would you describe the market environment?

A: At the beginning of the six-month period we had begun to see micro-cap
performance accelerate relative to large-caps. As the Asian financial crisis
deepened, however, the markets pulled back in October across the size spectrum
from large-cap to micro-cap. While the S&P 500 quickly recovered its losses in
November and went on to record highs, micro-cap stocks continued to fall over
the next three months as investors seemed to be hunting for more defensive
domestic issues. While this has been a difficult period in terms of relative
performance for micro-cap stocks, we believe that it has only served to increase
the attractiveness of these securities relative to larger cap stocks on a
valuation basis.

PRINTED DOCUMENT CONTAINS A BAR CHART HERE

BAR CHART TITLE:

Strong Performance from Micro Caps
Annualized Total Returns 1926-1997

---------------------------------------------------------
Large Cap Small Cap Micro Cap
(CRSP D1-5) (CRSP D6-8) (CRSP D9-10)
---------------------------------------------------------
10.6% 12.0% 12.7%

CRSP market capitalization deciles are from the Center
for Research in Security Prices at the University of
Chicago's Graduate School of Business, and are
unmanaged indices.

Micro-cap stocks have a performance edge versus small- and large-cap stocks over
the long term.

- ----------
1 While the Russell 2000 Index is a widely used barometer of small-cap
performance, it includes larger-cap securities than the typical micro-cap
fund, as indicated by its median market cap of $499 million.

6 - Scudder Micro Cap Fund

<PAGE>

Q: How has this environment affected your strategy?

A: Very little, except to the extent that it has provided opportunities to buy
companies with attractive fundamentals at lower prices. We continue to stay
focused on identifying promising micro-cap stocks, buying them at reasonable
prices and managing the overall risk of the portfolio. We do not attempt to add
value through market timing, either by moving between stocks and cash or among
various segments of the equity markets. Instead we attempt to keep the Fund
essentially fully invested in U.S. micro-cap stocks. This approach is
consistently applied and does not change significantly from one reporting period
to the next.

Q: What makes micro-cap stocks attractive to investors?

A: We believe this segment offers many opportunities for capital appreciation
and diversification. There are more than 7,000 U.S. stocks traded on leading
national exchanges, but most equity mutual funds invest in issues that are among
the 3,000 largest. By contrast, Scudder Micro Cap Fund's investment universe is
comprised of the smallest domestic issues, totaling about 4,000 stocks with
market capitalizations of $200 million or less. At the end of the period, the
Fund had a median market cap of only $56 million. Historically, these micro-cap
stocks have provided higher average returns than larger-cap stocks (see chart on
page 6).

PRINTED DOCUMENT CONTAINS A SCATTER CHART HERE

CHART TITLE:

Risk/Return Comparison
Monthly total returns from 8/9/96 through 2/28/98

CHART DATA: Total Return (annualized)

Scudder Micro
Cap Fund Small Cap Large Cap
-------- --------- ---------
32% 27% 37%

Risk (standard deviation of monthly returns annualized)

The Fund has been significantly less volatile than large- and
small-cap stocks.

Large Cap = S&P 500
Small Cap = Russell 2000

Q: Micro-cap companies tend to have higher risks than more established or larger
businesses. How do you control risk in the portfolio?

A: We attempt to control these risks both at the security level and the
portfolio level. At the security level, we assess the financial risk of the
company based on its fundamentals, seeking to avoid those companies in the
poorest financial condition and those selling at very high multiples. When
building a portfolio, we limit individual security risk by holding more than 300
micro-cap stocks and limiting each position to no more than 1% of the portfolio.
Using advanced risk-management software, we can also assess the expected
volatility

7 - Scudder Micro Cap Fund

<PAGE>

of the portfolio relative to the market and the impact of different
trading decisions on the portfolio's risk level. As a result of this risk
management, the Fund has been significantly less volatile than the small-cap
market and among the least volatile of micro-cap funds (see chart on page 7). Of
course, we cannot eliminate these risks altogether, which is one of the reasons
we believe it is necessary to have a long-term investment horizon when investing
in a micro-cap fund.

Q: What is your outlook?

A: The Fund and the universe of micro-cap stocks have performed relatively well,
but they have not kept pace with large-cap stocks. At the end of the period,
large-caps were at relatively high valuations compared to micro-cap stocks.
Although many factors influence the performance of micro-caps, we do not expect
this relationship to continue indefinitely. Over the long term, we continue to
believe that small- and micro-cap stocks offer higher return.

8 - Scudder Micro Cap Fund

<PAGE>
Glossary of Investment Terms

FUNDAMENTAL RESEARCH Analysis of companies based on the projected
impact of management, products, sales, and
earnings on balance sheets and income
statements. Distinct from technical analysis,
which evaluates the attractiveness of a stock
based on historical price and trading volume
movements, rather than the financial results
of the underlying company.

GROWTH STOCK Stock of a company that has displayed
above-average earnings growth and is expected
to continue to increase profits rapidly going
forward.

LIQUIDITY A stock that is liquid has enough shares
outstanding and a substantial enough market
capitalization to allow large purchases and
sales to occur without causing a significant
change in its market price.

MARKET CAPITALIZATION The value of a company's outstanding shares
of common stock, determined by multiplying
the number of shares outstanding by the share
price (Shares x Price = Market
Capitalization). The universe of publicly
traded companies is frequently divided into
large-, mid-, and small-capitalizations. In
general, "large-cap" stocks tend to be more
liquid than "small-cap" stocks.

PRICE/EARNINGS RATIO (P/E) A widely used gauge of a stock's valuation
(also "earnings multiple") that indicates what investors are paying for
a company's earnings on a per-share basis. A
higher "earnings multiple" indicates a higher
expected growth rate and the potential for
greater price fluctuations.

STANDARD DEVIATION A statistical measure of the degree to which
an investment's return tends to vary from the
mean return. Frequently used in portfolio
management to measure the variability of past
returns and to gauge the likely range of
future returns.

VALUE STOCK A company whose stock price does not fully
reflect its intrinsic value, as indicated by
price/earnings and price/book ratios,
dividend yield, or some other valuation
measure, relative to its industry or the
market overall. Value stocks tend to display
less price volatility and may carry higher
dividend yields.

Source: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms

9 - Scudder Micro Cap Fund

<PAGE>
Investment Portfolio as of February 28, 1998 (Unaudited)

<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 2.6%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with Donaldson, Lufkin & Jenrette dated 2/27/98 at 5.63%, to be
repurchased at $3,623,699 on 3/2/98, collateralized by a $3,623,000 U.S. Treasury -----------
Note, 5.125%, 11/30/98 (Cost $3,622,000) .............................................. 3,622,000 3,622,000
-----------
Shares
- ------------------------------------------------------------------------------------------------------------------------------
Common Stocks 97.4%
- ------------------------------------------------------------------------------------------------------------------------------
Consumer Discretionary 16.1%
Apparel & Shoes 1.7%
Cache, Inc.* ............................................................................ 99,200 316,200
Deckers Outdoor Corp.* .................................................................. 71,600 563,850
Hyde Athletic Industries, Inc. "B"* ..................................................... 61,400 253,275
Marisa Christina, Inc. .................................................................. 47,900 281,413
Michael Anthony Jewelers, Inc.* ......................................................... 146,500 311,313
Pubco Corp.* ............................................................................ 28,100 321,833
Salant Corp.* ........................................................................... 226,700 382,556
-----------
2,430,440
-----------
Department & Chain Stores 1.6%
Drug Emporium, Inc.* .................................................................... 135,700 568,244
Duckwall-ALCO Stores, Inc.* ............................................................. 37,200 511,500
Fred's, Inc. "A" ........................................................................ 32,875 840,367
Rose's Holdings, Inc.* .................................................................. 190,200 303,131
-----------
2,223,242
-----------
Home Furnishings 0.8%
Ameriwood Industries International Corp.* ............................................... 45,300 322,763
Baldwin Piano & Organ Co.* .............................................................. 23,600 371,700
Salton/Maxim Housewares, Inc.* .......................................................... 39,300 348,788
-----------
1,043,251
-----------
Hotels & Casinos 1.4%
Amerihost Properties, Inc.* ............................................................. 42,200 179,350
Buckhead America Corp.* ................................................................. 52,100 364,700
International Thoroughbred Breeders, Inc.* (b) .......................................... 58,300 81,620
Jackpot Enterprises, Inc.* .............................................................. 47,300 591,250
Sonesta International Hotels Corp. "A" .................................................. 24,500 343,000
Supertel Hospitality, Inc.* ............................................................. 37,900 407,425
-----------
1,967,345
-----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

10 - Scudder Micro Cap Fund
<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Recreational Products 3.9%
Aldila, Inc. ............................................................................ 109,400 512,813
Allen Organ Co. "B" ..................................................................... 13,600 518,500
Datamarine International, Inc.* ......................................................... 20,000 120,000
Equity Marketing, Inc.* ................................................................. 13,200 272,250
Escalade, Inc.* ......................................................................... 30,800 554,400
Fountain Powerboat Industries, Inc.* .................................................... 25,900 297,850
Holiday RV Superstores, Inc.* ........................................................... 178,800 368,775
Marker International* ................................................................... 70,300 285,594
Polk Audio, Inc.* ....................................................................... 34,100 313,294
Rawlings Sporting Goods Co., Inc. ....................................................... 41,700 495,188
Reading Entertainment, Inc. ............................................................. 36,500 483,625
Rentrak Corp. ........................................................................... 94,400 575,250
Rexhall Industries, Inc.* ............................................................... 71,520 366,540
Riddel Sports, Inc.* .................................................................... 60,700 330,056
-----------
5,494,135
-----------
Restaurants 2.3%
Back Bay Restaurant Group, Inc.* ........................................................ 54,800 342,500
Benihana, Inc. "A"* ..................................................................... 33,800 403,488
DenAmerica Corp.* ....................................................................... 216,500 514,188
Garden Fresh Restaurant Corp.* .......................................................... 58,500 994,500
Max & Erma's Restaurants, Inc.* ......................................................... 80,800 484,800
Skyline Chili, Inc.* .................................................................... 41,100 269,719
Timber Lodge Steakhouse, Inc.* .......................................................... 33,100 206,875
-----------
3,216,070
-----------
Specialty Retail 4.4%
Alrenco, Inc.* .......................................................................... 37,600 639,200
Amplicon, Inc. .......................................................................... 31,200 608,400
Bell Microproducts, Inc.* ............................................................... 76,200 609,600
Books-A-Million, Inc. ................................................................... 67,800 423,750
Brookstone, Inc.* ....................................................................... 33,900 402,563
D.I.Y. Home Warehouse, Inc.* ............................................................ 127,400 350,350
InterTAN, Inc. .......................................................................... 60,000 303,750
Natural Wonders, Inc.* .................................................................. 54,900 281,363
Perfumania, Inc.* ....................................................................... 143,300 385,119
</TABLE>

The accompanying notes are an integral part of the financial statements.

11 - Scudder Micro Cap Fund
<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Rag Shops, Inc. ......................................................................... 80,300 235,881
Reeds Jewelers, Inc. .................................................................... 20,200 83,325
Rent-Way, Inc.* ......................................................................... 24,900 610,050
S & K Famous Brands, Inc.* .............................................................. 28,400 411,800
Transnet Corp.* ......................................................................... 139,800 279,600
Ultimate Electronics, Inc.* ............................................................. 67,700 228,488
Wolohan Lumber Co. ...................................................................... 27,900 334,800
-----------
6,188,039
-----------
Consumer Staples 7.4%
Alcohol & Tobacco 0.2%
Genesee Corp. "B" ....................................................................... 6,800 268,600
Todhunter International, Inc.* .......................................................... 5,600 51,800
-----------
320,400
-----------
Consumer Electronic & Photographic Products 0.5%
Cobra Electronics Corp.* ................................................................ 85,800 622,050
-----------
Farming 0.6%
Orange-Co, Inc.* ........................................................................ 67,400 463,375
Sylvan, Inc. ............................................................................ 27,800 417,000
-----------
880,375
-----------
Food & Beverage 4.2%
Celestial Seasonings, Inc. .............................................................. 12,600 469,350
Chock Full O'Nuts Corp.* ................................................................ 129,200 928,625
Foodarama Supermarkets, Inc.* ........................................................... 14,100 341,925
Fresh America Corp.* .................................................................... 17,700 320,813
Grist Mill Co.* ......................................................................... 48,850 570,934
Hain Food Group, Inc. ................................................................... 63,500 904,875
J & J Snack Foods Corp.* ................................................................ 22,300 348,438
Schultz Sav-O Stores, Inc. .............................................................. 33,050 504,013
Seaway Food Town, Inc. .................................................................. 22,100 574,600
Seneca Foods Corp.* ..................................................................... 8,400 136,500
Smithfield Companies, Inc. .............................................................. 20,200 118,675
Suprema Specialties, Inc.* .............................................................. 98,500 437,094
Village Super Market, Inc. "A"* ......................................................... 23,400 269,100
-----------
5,924,942
-----------
Package Goods/Cosmetics 0.5%
Allou Health & Beauty, Inc. "A"* ........................................................ 67,200 583,800
</TABLE>

The accompanying notes are an integral part of the financial statements.

12 - Scudder Micro Cap Fund
<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BeautiControl Cosmetics, Inc.* .......................................................... 15,100 124,575
-----------
708,375
-----------
Textiles 1.4%
Dyersburg Corp. ......................................................................... 49,100 491,000
Hampshire Group, Ltd. ................................................................... 29,900 560,625
Premiumwear, Inc. ....................................................................... 70,500 378,938
Worldtex, Inc.* ......................................................................... 74,000 573,500
-----------
2,004,063
-----------
Health 4.3%
Biotechnology 0.2%
Synbiotics Corp.* ....................................................................... 72,300 244,013
-----------
Health Industry Services 0.8%
Caretenders Healthcorp* ................................................................. 46,500 360,375
Healthcare Services Group, Inc.* ........................................................ 33,700 471,800
Staff Builders, Inc. "A"* ............................................................... 148,300 347,578
-----------
1,179,753
-----------
Hospital Management 0.2%
National Home Health Care Corp. ......................................................... 78,190 332,309
-----------
Medical Supply & Specialty 3.1%
Akorn, Inc.* ............................................................................ 99,600 485,550
Atrion Corp. ............................................................................ 15,500 180,188
Biosource International, Inc. ........................................................... 45,300 271,800
Gamma Biologicals, Inc. ................................................................. 97,100 515,844
Moore Medical Corp.* .................................................................... 33,400 409,150
National Patent Development Corp.* ...................................................... 52,220 685,388
Osteotech, Inc.* ........................................................................ 14,800 345,950
Polymedica Industries, Inc. ............................................................. 41,300 500,763
Scherer Healthcare, Inc. ................................................................ 27,800 114,675
Span-America Medical Systems, Inc. ...................................................... 46,000 322,000
Superior Surgical Manufacturing Co., Inc. ............................................... 30,500 518,500
-----------
4,349,808
-----------
Communications 1.0%
Telephone/Communications 0.3%
ATC Communications Group, Inc.* ......................................................... 97,200 164,025
Hector Communications Corp. ............................................................. 27,000 271,688
-----------
435,713
-----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

13 - Scudder Micro Cap Fund
<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Miscellaneous 0.7%
Datapoint Corp.* ........................................................................ 148,500 417,656
Datum, Inc. ............................................................................. 35,300 591,275
-----------
1,008,931
-----------
Financial 19.8%
Banks 14.8%
Alliance Bancorp of New England, Inc. ................................................... 25,166 500,174
Andover Bancorp, Inc. ................................................................... 13,600 542,300
CoBancorp, Inc. ......................................................................... 19,600 867,300
Coastal Bancorp, Inc. ................................................................... 9,800 306,863
Columbia Banking System, Inc.* .......................................................... 11,760 368,970
Equitable Federal Savings Bank* ......................................................... 2,400 73,200
FNB Rochester Corp. ..................................................................... 23,000 442,750
Fed One Bancorp ......................................................................... 11,100 398,213
Fidelity Bancorp, Inc. .................................................................. 18,300 448,350
First Citizens Corp. .................................................................... 12,750 408,000
First Essex Bancorp ..................................................................... 15,800 373,275
First Georgia Holding, Inc. ............................................................. 10,300 103,000
First Mutual Savings Bank ............................................................... 26,310 483,446
First Oak Brook Bancshares, Inc. "A" .................................................... 14,700 690,900
First Shenango Bancorp, Inc. ............................................................ 6,600 287,100
Foothill Independent Bancorp ............................................................ 27,510 512,374
Granite State Bankshares, Inc. .......................................................... 30,650 796,900
HMN Financial, Inc.* .................................................................... 15,400 446,600
Haven Bancorp, Inc. ..................................................................... 12,200 298,900
Hingham Institution for Savings ......................................................... 15,700 518,100
Hudson Chartered Bancorp, Inc. .......................................................... 12,375 256,781
Kankakee Bancorp, Inc. .................................................................. 4,400 149,050
Lawrence Savings Bank* .................................................................. 45,600 769,500
MSB Bancorp, Inc. ....................................................................... 34,800 1,213,650
Marion Capital Holdings, Inc. ........................................................... 7,100 191,700
Matewan Bancshares, Inc. ................................................................ 3,300 81,675
Medford Bancorp Inc. .................................................................... 11,800 517,725
Merchants Bancorp, Inc. ................................................................. 17,600 514,800
Mid Continent Bancshares, Inc. .......................................................... 8,300 378,688
Mutual Savings Bank F.S.B.* ............................................................. 27,000 357,750
</TABLE>

The accompanying notes are an integral part of the financial statements.

14 - Scudder Micro Cap Fund
<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
New Milford Bank & Trust Corp. .......................................................... 17,300 330,863
Northrim Bank ........................................................................... 40,724 565,046
Parkvale Financial Corp. ................................................................ 19,437 617,125
People's Bancshares, Inc. ............................................................... 17,600 393,800
Pinnacle Bancshares, Inc. ............................................................... 12,600 195,300
PonceBank ............................................................................... 8,000 202,000
Progress Financial Corp. ................................................................ 12,985 219,122
SJNB Financial Corp. .................................................................... 12,900 451,500
Second Bancorp, Inc. .................................................................... 11,600 319,000
Skaneateles Bancorp, Inc. ............................................................... 25,950 496,294
Southwest Bancorp, Inc. ................................................................. 7,800 210,600
State Financial Services Corp. "A" ...................................................... 30,168 776,826
Sterling Bancorp ........................................................................ 22,700 547,638
Surety Capital Corp.* ................................................................... 87,100 413,725
Union Bankshares Ltd.* .................................................................. 13,000 354,250
Warren Bancorp, Inc. .................................................................... 21,100 485,300
Washington Savings Bank, F.S.B. ......................................................... 29,100 254,625
Winton Financial Corp. .................................................................. 17,500 470,313
-----------
20,601,361
-----------
Insurance 2.7%
ACCEL International Corp.* .............................................................. 103,900 324,688
Atlantic American Corp. ................................................................. 60,900 304,500
Cotton States Life Insurance ............................................................ 45,525 782,461
Investors Title Co. ..................................................................... 24,100 614,550
Penn-America Group, Inc. ................................................................ 21,050 481,519
Security National Financial Corp. "A" ................................................... 73,500 284,813
Siebels Bruce Group, Inc.* .............................................................. 55,100 413,250
Southern Security Life Insurance Co. .................................................... 11,500 79,063
Standard Management Corp.* .............................................................. 59,000 427,750
-----------
3,712,594
-----------
Business Finance 1.0%
Advest Group, Inc. ...................................................................... 19,000 473,813
HPSC, Inc. .............................................................................. 55,800 299,925
KBK Capital Corp.* ...................................................................... 50,200 633,775
-----------
1,407,513
-----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

15 - Scudder Micro Cap Fund
<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Other Financial Companies 0.4%
First Cash, Inc.* ....................................................................... 65,900 502,488
-----------
Real Estate 0.9%
AMREP Corp.* ............................................................................ 65,600 623,200
Grubb & Ellis Co.* ...................................................................... 31,000 368,125
New Mexico & Arizona Land Co.* .......................................................... 23,250 313,875
-----------
1,305,200
-----------
Media 0.9%
Broadcasting & Entertainment 0.5%
Todd-AO Corp. "A" ....................................................................... 31,800 321,975
Vaughn Communications, Inc.* ............................................................ 63,500 381,000
-----------
702,975
-----------
Print Media 0.4%
Advanced Marketing Services, Inc. ....................................................... 29,300 512,750
-----------
Service Industries 7.4%
Environmental Services 1.3%
GZA GeoEnvironmental Technologies, Inc.* ................................................ 83,800 416,381
Scope Industries, Inc. .................................................................. 8,400 500,850
URS Corp.* .............................................................................. 32,400 455,625
Versar, Inc.* ........................................................................... 84,700 481,731
-----------
1,854,587
-----------
Investment 0.7%
H.D. Vest, Inc.* ........................................................................ 47,800 250,950
Kinnard Investment, Inc.* ............................................................... 68,200 409,200
Scott & Stringfellow Financial, Inc. .................................................... 15,750 334,688
-----------
994,838
-----------
Miscellaneous Commercial Services 4.1%
American Physicians Service Group, Inc.* ................................................ 31,100 227,419
Audits & Surveys, Inc. .................................................................. 103,900 298,713
Automobile Protection Corp.* ............................................................ 99,800 823,350
BI, Inc.* ............................................................................... 42,200 453,650
Business Resource Group* ................................................................ 64,900 206,869
C.H. Heist Corp.* ....................................................................... 43,900 329,250
Failure Group, Inc.* .................................................................... 41,000 410,000
General Employment Enterprises, Inc. .................................................... 46,005 816,589
Halifax Corp. ........................................................................... 27,150 227,381
</TABLE>

The accompanying notes are an integral part of the financial statements.

16 - Scudder Micro Cap Fund
<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Joule, Inc.* ............................................................................ 52,700 283,263
LCS Industries, Inc. .................................................................... 22,000 374,000
RCM Technologies, Inc. .................................................................. 32,800 606,800
Unapix Entertainment, Inc. .............................................................. 129,600 615,600
-----------
5,672,884
-----------
Miscellaneous Consumer Services 0.9%
ACE Cash Express, Inc.* ................................................................. 33,025 427,261
Children's Discovery Centers of America, Inc.* .......................................... 47,900 473,013
PLM International Inc. .................................................................. 52,800 277,200
-----------
1,177,474
-----------
Printing/Publishing 0.3%
Tufco Technologies, Inc.* ............................................................... 47,100 435,675
-----------
Miscellaneous 0.1 %
Beard Company* .......................................................................... 42,300 206,213
-----------
Durables 4.2%
Aerospace 1.1%
Aeroflex, Inc. .......................................................................... 44,200 505,538
Ducommun, Inc.* ......................................................................... 16,200 521,438
Engineered Support Systems, Inc. ........................................................ 23,600 472,000
-----------
1,498,976
-----------
Automobiles 0.8%
Hilite Industries, Inc.* ................................................................ 50,400 371,700
Motorcar Parts & Accessories, Inc. ...................................................... 24,000 402,000
Republic Automotive Parts, Inc.* ........................................................ 21,000 343,875
-----------
1,117,575
-----------
Construction/Agricultural Equipment 0.3%
Portec, Inc. ............................................................................ 24,800 353,400
-----------
Telecommunications Equipment 1.4%
Cognitronics Corp.* ..................................................................... 20,900 356,606
Comdial Corp.* .......................................................................... 44,400 488,400
Datron Systems, Inc.* ................................................................... 41,800 376,200
Microlog Corp. .......................................................................... 74,800 388,025
TCI International, Inc.* ................................................................ 64,100 296,463
Technical Communications, Inc.* ......................................................... 18,100 110,863
-----------
2,016,557
-----------
Miscellaneous 0.6%
Fansteel, Inc.* ......................................................................... 52,400 373,350
</TABLE>

The accompanying notes are an integral part of the financial statements.

17 - Scudder Micro Cap Fund
<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Featherlite Manufacturing, Inc. ......................................................... 49,700 397,600
-----------
770,950
-----------
Manufacturing 14.7%
Chemicals 0.6%
AG Services of America, Inc.* ........................................................... 12,900 225,715
Aceto Corp. ............................................................................. 29,600 614,200
-----------
839,915
-----------
Containers & Paper 0.8%
Applied Extrusion Technologies, Inc. .................................................... 67,500 573,750
UFP Technologies, Inc. .................................................................. 86,500 346,000
Ultra Pac, Inc. ......................................................................... 25,800 180,600
-----------
1,100,350
-----------
Diversified Manufacturing 0.5%
McRae Industries, Inc. "A" .............................................................. 30,800 248,325
Nanometrics, Inc.* ...................................................................... 41,100 395,588
-----------
643,913
-----------
Electrical Products 1.7%
Axsys Technologies, Inc. ................................................................ 13,000 338,000
Bel Fuse, Inc. .......................................................................... 27,500 646,250
SL Industries, Inc. ..................................................................... 51,400 687,475
Sage Laboratories, Inc. ................................................................. 16,700 210,838
Valley Forge Corp. ...................................................................... 31,600 450,300
-----------
2,332,863
-----------
Industrial Specialty 6.3%
American Locker Group, Inc. ............................................................. 12,900 393,450
Ault, Inc.* ............................................................................. 98,300 552,938
Badger Meter, Inc. ...................................................................... 18,000 705,375
Ceradyne, Inc.* ......................................................................... 96,100 708,738
Dynamic Materials Corp.* ................................................................ 42,600 383,400
Foster (LB) Co. "A"* .................................................................... 75,600 382,725
Graham Corp.* ........................................................................... 24,500 437,938
Insteel Industries, Inc. ................................................................ 76,300 538,869
Interlake, Corp.* ....................................................................... 78,300 371,925
Kinark Corp.* ........................................................................... 135,800 398,913
Lamson & Sessions Co.* .................................................................. 67,700 456,975
MFRI, Inc.* ............................................................................. 59,000 479,375
</TABLE>

The accompanying notes are an integral part of the financial statements.

18 - Scudder Micro Cap Fund
<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Met-Pro Corp. ........................................................................... 27,400 421,275
Optical Coating Laboratory, Inc. ........................................................ 12,200 167,750
Rotonics Manufacturing, Inc. ............................................................ 187,000 257,125
Sifco Industries, Inc. .................................................................. 26,600 565,250
Southwall Technologies, Inc. ............................................................ 48,800 378,200
Temtex Industries, Inc.* ................................................................ 68,700 214,688
Tokheim Corp.* .......................................................................... 29,600 540,200
Trion, Inc. ............................................................................. 78,000 380,250
-----------
8,735,359
-----------
Machinery/Components/Controls 2.8%
Bridgeport Machines, Inc.* .............................................................. 46,200 496,650
Chicago Rivet & Machine Co. ............................................................. 18,300 603,900
Devlieg-Bullard, Inc.* .................................................................. 88,600 218,731
Farrel Corp. ............................................................................ 86,100 419,738
Hein-Werner Corp.* ...................................................................... 65,625 516,797
IMPCO Technologies, Inc.* ............................................................... 36,300 476,438
Oilgear Co. ............................................................................. 21,300 287,550
Summa Industries, Inc.* ................................................................. 42,600 489,900
Trans-Industries, Inc.* ................................................................. 35,500 461,500
-----------
3,971,204
-----------
Office Equipment/Supplies 1.0%
Dixon Ticonderoga Co.* .................................................................. 30,100 383,775
Gradco Systems, Inc.* ................................................................... 47,400 319,950
TAB Products Co. ........................................................................ 51,900 681,188
-----------
1,384,913
-----------
Specialty Chemicals 0.6%
Balchem Corp. "B" ....................................................................... 25,800 383,775
Detrex Corp.* ........................................................................... 34,200 521,550
-----------
905,325
-----------
Wholesale Distributors 0.4%
SED International Holdings, Inc. ........................................................ 36,900 511,988
-----------
Technology 8.6%
Computer Software 0.9%
Comnet Corp.* ........................................................................... 23,400 178,425
FDP Corp. ............................................................................... 32,300 327,038
Media 100, Inc.* ........................................................................ 25,000 89,063
</TABLE>

The accompanying notes are an integral part of the financial statements.

19 - Scudder Micro Cap Fund
<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Scan Optics, Inc.* ...................................................................... 45,900 324,169
Symix Systems, Inc. ..................................................................... 20,000 377,500
-----------
1,296,195
-----------
Diverse Electronic Products 0.8%
Data I/O Corp.* ......................................................................... 66,000 367,125
SBS Technologies, Inc.* ................................................................. 10,200 275,400
WPI Group, Inc.* ........................................................................ 50,800 498,475
-----------
1,141,000
-----------
EDP Peripherals 0.9%
Bull Run Corp.* ......................................................................... 164,100 553,838
Equitrac Corp.* ......................................................................... 26,300 466,825
Printronix, Inc.* ....................................................................... 18,400 292,100
-----------
1,312,763
-----------
Electronic Components/Distributors 3.6%
Alpha Technologies Group, Inc.* ......................................................... 75,300 338,850
American Technical Ceramics Corp.* ...................................................... 30,200 485,088
Anderson Group, Inc. .................................................................... 15,000 86,250
C.P. Clare Corp.* ....................................................................... 18,900 271,688
Creative Computers, Inc. ................................................................ 36,400 436,800
IEC Electronics Corp. (New)* ............................................................ 33,600 319,200
Interlink Electronics, Inc.* ............................................................ 80,800 424,200
Jaco Electronics, Inc.* ................................................................. 38,700 270,900
MATEC Corp.* ............................................................................ 23,100 92,400
Nu Horizons Electronics, Inc.* .......................................................... 55,300 349,081
Programmer's Paradise, Inc. ............................................................. 49,000 447,125
Richey Electronics, Inc.* ............................................................... 45,000 455,625
Sigmatron International, Inc.* .......................................................... 34,800 356,700
Trans-Lux Corp. ......................................................................... 32,300 484,500
Video Display Corp.* .................................................................... 17,800 169,100
-----------
4,987,507
-----------
Military Electronics 0.7%
DBA Systems, Inc.* ...................................................................... 24,100 197,319
EDO Corp. ............................................................................... 51,900 473,588
Titan Corp.* ............................................................................ 50,000 303,125
-----------
974,032
-----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

20 - Scudder Micro Cap Fund
<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Precision Instruments 1.4%
DSP Technology, Inc.* ................................................................... 57,100 510,331
Instron Corp. ........................................................................... 30,800 527,450
Micrion Corp.* .......................................................................... 36,900 511,988
O.I. Corp.* ............................................................................. 96,600 410,550
-----------
1,960,319
-----------
Semiconductors 0.3%
Diodes, Inc.* ........................................................................... 35,600 396,050
-----------
Energy 1.9%
Oil & Gas Production 1.1%
Hallwood Energy Partners, L.P. .......................................................... 42,700 304,238
Key Production Co., Inc.* ............................................................... 57,400 577,588
Petroleum Development Corp.* ............................................................ 60,100 326,794
Resource America, Inc. "A"* ............................................................. 8,200 385,400
-----------
1,594,020
-----------
Oilfield Services/Equipment 0.8%
American Oilfield Divers, Inc.* ......................................................... 35,700 423,938
Dawson Geophysical Co.* ................................................................. 37,300 638,763
-----------
1,062,701
-----------
Metals & Minerals 1.5%
Steel & Metals 1.3%
Bayou Steel Corp.* ...................................................................... 110,900 693,125
Driver Harris Co.* ...................................................................... 36,700 380,763
Friedman Industries, Inc. ............................................................... 51,525 341,353
Webco Industries, Inc.* ................................................................. 45,400 351,850
-----------
1,767,091
-----------
Miscellaneous 0.2%
United States Lime & Minerals, Inc. ..................................................... 37,300 247,113
-----------
Construction 4.2%
Building Materials 0.8%
A.P. Green Industries, Inc. ............................................................. 45,300 784,256
Genlyte Group, Inc.* .................................................................... 18,900 361,463
-----------
1,145,719
-----------
Building Products 1.3%
Baltek Corp.* ........................................................................... 38,300 308,794
Continental Materials Corp. ............................................................. 10,400 295,100
</TABLE>

The accompanying notes are an integral part of the financial statements.

21 - Scudder Micro Cap Fund
<PAGE>

<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Martin Industries, Inc. ................................................................. 99,900 511,988
Noland Co. .............................................................................. 10,000 227,500
Waxman Industries, Inc.* ................................................................ 112,500 499,219
-----------
1,842,601
-----------
Homebuilding 0.7%
Engle Homes, Inc. ....................................................................... 33,200 564,400
Liberty Homes, Inc. "A" ................................................................. 13,000 130,000
Lindal Cedar Homes, Inc.* ............................................................... 82,400 278,100
-----------
972,500
-----------
Miscellaneous 1.4%
ACMAT Corp. "A"* ........................................................................ 29,500 486,750
Abrams Industries, Inc. ................................................................. 18,780 150,240
Instituform East, Inc. .................................................................. 129,900 316,631
MYR Group Inc. .......................................................................... 39,166 465,096
Turner Corp.* ........................................................................... 19,700 514,663
-----------
1,933,380
-----------
Transportation 2.6%
Air Freight 0.4%
Golden Eagle Group, Inc.* ............................................................... 60,300 109,294
Hudson General Corp. .................................................................... 9,400 458,250
-----------
567,544
-----------
Airlines 0.5%
Mercury Air Group, Inc. ................................................................. 86,600 660,325
-----------
Marine Transportation 0.1%
International Shipholding Corp. ......................................................... 8,700 147,356
-----------
Railroads 0.3%
Providence & Worcester Railroad Co. ..................................................... 25,000 434,375
-----------
Trucking 1.0%
Boyd Brothers Transportation, Inc.* ..................................................... 47,500 439,375
Kenan Transport Co. ..................................................................... 7,000 224,000
MTL, Inc.* .............................................................................. 18,000 689,625
-----------
1,353,000
-----------
Miscellaneous 0.3%
Travel Ports of America, Inc. ........................................................... 105,100 394,125
-----------
</TABLE>

The accompanying notes are an integral part of the financial statements.

22 - Scudder Micro Cap Fund
<PAGE>

* Non-income producing security.

(a) The cost for federal income tax purposes was $115,111,644. At February 28,
1998, net unrealized appreciation for all securities based on tax cost was
$24,306,345. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $30,275,667 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$5,969,322.

(b) Securities valued in good faith by the Valuation Committee of the Board of
Directors at fair value amounted to $81,620 (.06% of net assets). Their
values have been estimated by the Board of Directors in the absence of
readily ascertainable market values. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly
from the values that would have been used had a ready market for the
securities existed, and the difference could be material. The cost of
these securities at February 28, 1998 aggregated $229,008. These
securities may also have certain restrictions as to resale.

The accompanying notes are an integral part of the financial statements.

23 - Scudder Micro Cap Fund
<PAGE>

Financial Statements

Statement of Assets and Liabilities
as of February 28, 1998 (Unaudited)

<TABLE>
<CAPTION>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Investments, at market (identified cost $115,111,644) .............. $ 139,417,989
Receivable for Fund shares sold .................................... 68,042
Dividends and interest receivable .................................. 46,985
Receivable for investments sold .................................... 29,102
Deferred organization expenses ..................................... 9,642
Other assets ....................................................... 440
----------------
Total assets ....................................................... 139,572,200
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased .................................. 13,842
Payable for Fund shares redeemed ................................... 223,734
Accrued management fee ............................................. 79,744
Other payables and accrued expenses ................................ 84,253
----------------
Total liabilities .................................................. 401,573
-------------------------------------------------------------------------------------------
Net assets, at market value $ 139,170,627
-------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated net investment loss .................................... (224,126)
Net unrealized appreciation (depreciation) on investments .......... 24,306,345
Accumulated net realized gain ...................................... 3,869,545
Paid-in capital .................................................... 111,218,863
-------------------------------------------------------------------------------------------
Net assets, at market value $ 139,170,627
-------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price (Note A) per
share ($139,170,627 / 7,650,726 outstanding shares of
beneficial interest, $.01 par value, unlimited number of ----------------
shares authorized) ............................................... $18.19
----------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

24 - Scudder Micro Cap Fund
<PAGE>

Statement of Operations

six months ended February 28, 1998 (Unaudited)

<TABLE>
<CAPTION>
Investment Income (Loss)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Income:
Dividends .......................................................... $ 469,691
Interest ........................................................... 207,012
-----------------
676,703
Expenses:
Management fee ..................................................... 491,505
Services to shareholders ........................................... 233,062
Custodian and accounting fees ...................................... 69,974
Trustees' fees and expenses ........................................ 19,821
Auditing ........................................................... 16,613
Registration fees .................................................. 24,876
Reports to shareholders ............................................ 32,084
Legal .............................................................. 7,687
Amortization of organization expense ............................... 1,385
Other .............................................................. 3,822
-----------------
900,829
-------------------------------------------------------------------------------------------
Net investment loss (224,126)
-------------------------------------------------------------------------------------------

Realized and unrealized gain (loss) on investment transactions
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ........................................................ 4,135,875
Futures ............................................................ (190,868)
-----------------
3,945,007
-----------------
Net unrealized appreciation during the period on investments ....... 5,614,201
-------------------------------------------------------------------------------------------
Net gain on investment transactions 9,559,208
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 9,335,082
-------------------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

25 - Scudder Micro Cap Fund
<PAGE>

Statements of Changes in Net Assets

<TABLE>
<CAPTION>
Six Months
Ended Year
February 28, Ended
1998 August 31,
Increase (Decrease) in Net Assets (Unaudited) 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income (loss) ................................. $ (224,126) $ (99,149)
Net realized gain ............................................ 3,945,007 562,960
Net unrealized appreciation on investment transactions
during the period .......................................... 5,614,201 18,667,904
---------------- ----------------
Net increase in net assets resulting from operations ......... 9,335,082 19,131,715
---------------- ----------------
Distributions to shareholders from:
Net investment income ........................................ -- (39,615)
---------------- ----------------
Net realized gains ........................................... (535,902) --
---------------- ----------------
Fund share transactions:
Proceeds from shares sold .................................... 58,886,514 70,826,488
Reinvestment of distributions ................................ 518,950 37,143
Cost of shares redeemed ...................................... (20,788,298) (6,227,396)
Redemption fees .............................................. 126,877 33,668
---------------- ----------------
Net increase in net assets from Fund share transactions ...... 38,744,043 64,669,903
---------------- ----------------
Increase in net assets ....................................... 47,543,223 83,762,003
Net assets at beginning of period ............................ 91,627,404 7,865,401
Net assets at end of period (including accumulated net ---------------- ----------------
investment loss of $224,126 at February 28, 1998) .......... $139,170,627 $ 91,627,404
---------------- ----------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------------
Increase in Fund shares
Shares outstanding at beginning of period .................... 5,463,768 651,850
---------------- ----------------
Shares sold .................................................. 3,336,673 5,254,231
Shares issued to shareholders in reinvestment of
distributions .............................................. 30,277 2,884
Shares redeemed .............................................. (1,179,992) (445,197)
---------------- ----------------
Net increase in Fund shares .................................. 2,186,958 4,811,918
---------------- ----------------
Shares outstanding at end of period .......................... 7,650,726 5,463,768
---------------- ----------------
</TABLE>

The accompanying notes are an integral part of the financial statements.

26 - 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>
For the Period
August 12,
1996
Six Months (commencement of
Ended Year Ended operations) to
February 28, 1998 August 31, August 31,
(Unaudited) 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
---------------------------------------------------
Net asset value, beginning of period .................................. $16.77 $12.07 $12.00
---------------------------------------------------
Income from investment operations:
Net investment income (loss) .......................................... (.03) (.03) .01
Net realized and unrealized gain on investments ....................... 1.50 4.74 .06
---------------------------------------------------
Total from investment operations ...................................... 1.47 4.71 .07
---------------------------------------------------
Less distributions from:
Net investment income ................................................. -- (.02) --
Net realized gains from investment transactions ....................... (.07) -- --
---------------------------------------------------
Total distributions ................................................... (.07) (.02) --
---------------------------------------------------
Redemption fees ....................................................... .02 .01 --
---------------------------------------------------
Net asset value, end of period ........................................ $18.19 $16.77 $12.07
- ---------------------------------------------------------------------------------------------------------------------------
Total Return (%) ...................................................... 8.91** 39.10(b)(c) .58(b)(c)**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ................................ 139 92 8
Ratio of operating expenses, net to average daily net assets (%) ...... 1.37* 1.75 1.75*
Ratio of operating expenses before expense reductions, to average
daily net assets (%) ................................................ 1.37* 2.19 22.06*
Ratio of net investment income (loss) to average daily net
assets (%) .......................................................... (.34)* (.21) 2.58*
Portfolio turnover rate (%) ........................................... 20.92* 17.13 --
Average commission rate paid .......................................... $.0331 $.0318 $.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 to the shareholder of the 1%
redemption fee on shares held less than one year.
* Annualized
** Not annualized

27 - 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.

Effective September 22, 1997, the Fund suspended the sale of its shares to new
investors. Current individual shareholders of the Fund are able to continue to
invest in the Fund. The Fund remains open to investment through qualified
retirement plans. The Trustees may 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 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 most recent 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. Money market instruments
purchased with an original maturity of sixty days or less are valued at
amortized cost.

All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Trustees.

Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
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 repurchase price.

Futures Contracts. A futures contract is an agreement between a buyer or seller
and an established futures exchange or its clearinghouse in which the buyer or
seller agrees to take or make a delivery of a specific amount of an item at a
specified price on a specific date (settlement date). During the period, the
Fund purchased index futures as a temporary substitute for purchasing selected
investments.

Upon entering into a futures contract, the Fund is required to deposit with a
financial intermediary an amount ("initial margin") equal to a certain
percentage of the face value indicated in the futures contract. Subsequent
payments ("variation margin") are made or received by the Fund each day,
dependent on the daily fluctuations in the value of the underlying security, and
are recorded for financial reporting purposes as unrealized gains or losses by
the Fund. When entering into a closing transaction, the Fund will realize a gain
or loss equal to the difference between the value of the futures contract to
sell and the futures contract to buy. Futures contracts are valued at the most
recent settlement price.

28 - Scudder Micro Cap Fund
<PAGE>

Certain risks may arise upon entering into futures contracts including the risk
that an illiquid secondary market will limit the Fund's ability to close out a
futures contract prior to the settlement date and that a change in the value of
a futures contract may not correlate exactly with changes in the value of the
securities or currencies hedged. When utilizing futures contracts to hedge, the
Fund gives up the opportunity to profit from favorable price movements in the
hedged positions during the term of the contract.

Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Accordingly, the Fund paid no federal income taxes and no federal
income tax provision was required.

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 (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, 1998, purchases and sales of investment
securities (excluding short-term investments) aggregated $54,153,209 and
$12,953,856, respectively.

The aggregate face value of futures contracts opened and closed during the six
months ended February 28, 1998 was $16,303,240.

29 - Scudder Micro Cap Fund
<PAGE>

C. Related Parties

Effective December 31, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") and The
Zurich Insurance Company ("Zurich"), an international insurance and financial
services organization, formed a new global investment organization by combining
Scudder's business with that of Zurich's subsidiary, Zurich Kemper Investments,
Inc. As a result of the transaction, Scudder changed its name to Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"). The transaction between
Scudder and Zurich resulted in the termination of the Fund's Investment
Management Agreement with Scudder. However, a new Investment Management
Agreement (the "Management Agreement") between the Fund and Scudder Kemper was
approved by the Fund's Board of Trustees and by the Fund's Shareholders. The
Management Agreement, which is effective December 31, 1997, is the same in all
material respects as the corresponding previous Investment Management Agreement,
except that Scudder Kemper is the new investment adviser to the Fund.

Under the Management Agreement with Scudder Kemper, 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 Management Agreement. In addition, the Adviser had agreed not to impose
all or a portion of its management fee until December 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, 1998, the fee imposed
amounted to $491,505, of which $79,744 was unpaid.

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, 1998, the amount charged to the Fund by SSC
aggregated $180,617, of which $27,625 is unpaid at February 28, 1998.

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, 1998, the amount charged to the Fund by STC aggregated $13,157, of which
$2,570 is unpaid at February 28, 1998.

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, 1998, the amount charged to the Fund by SFAC aggregated
$50,834, of which $6,177 is unpaid at February 28, 1998.

The Fund is one of several Scudder Funds (the "Underlying Funds") in which the
Scudder Pathway Series Portfolios (the "Portfolios") invest. In accordance with
the Special Servicing Agreement entered into by the Adviser, the Portfolios, the
Underlying Funds, SSC, SFAC, STC, and Scudder Investor Services, Inc., expenses
from the operation of the Portfolios are borne by the Underlying Funds based on
each Underlying Fund's proportionate share of assets owned by the Portfolios. No
Underlying Funds will be charged expenses that exceed the estimated savings to
each respective Underlying Fund. These estimated savings result from the
elimination of separate shareholder accounts which either currently are or have
potential to be invested in the Underlying Funds. At February 28, 1998, the
Special Servicing Agreement expense charged to the Fund amounted to $37,656.

30 - Scudder Micro Cap Fund
<PAGE>

The Fund pays each of its Trustees not affiliated with the Adviser an annual
retainer plus specified amounts for attended board and committee meetings. For
the six months ended February 28, 1998 the Trustee fees and expenses aggregated
$19,821.

31 - Scudder Micro Cap Fund

<PAGE>

Shareholder Meeting Results

A Special Meeting of Shareholders (the "Meeting") of Scudder Micro Cap Fund (the
"Fund") was held on October 27, 1997, at the office of Scudder Kemper
Investments, Inc. (formerly Scudder, Stevens & Clark, Inc.), 345 Park Avenue (at
51st Street), New York, New York 10154. At the Meeting, as adjourned and
reconvened, the following matters were voted upon by the shareholders (the
resulting votes for each matter are presented below). With regard to certain
proposals, it was recommended that the Meeting be reconvened in order to provide
shareholders with an additional opportunity to return their proxies. The date of
the reconvened meeting at which the matters were decided is noted after the
proposed matter.

1. To elect Trustees.

Number of Votes:
----------------

Trustee For Withheld
------- --- --------

Paul Bancroft III 3,275,347 141,869

Sheryle J. Bolton 3,272,385 141,831

William T. Burgin 3,275,074 142,142

Thomas J. Devine 3,271,628 145,588

Keith R. Fox 3,276,662 140,554

William H. Luers 3,271,606 145,610

Wilson Nolen 3,273,904 143,312

Daniel Pierce 3,273,730 143,486

Kathryn L. Quirk 3,269,606 147,610

2. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.

Number of Votes:
----------------

For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------

3,190,323 139,299 87,594 23,223

3. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise.

Number of Votes:
----------------

For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------

2,990,885 289,621 113,487 23,223

32 - Scudder Micro Cap Fund

<PAGE>

4. To approve certain amendments to the Declaration of Trust. Sufficient
proxies had not been received by December 2, 1997 to approve the
amendments to the Declaration of Trust. Management has determined not to
continue to seek shareholder approval for this item.

Number of Votes:
----------------

For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------

3,126,928 209,433 133,052 19,402

5. To approve the revision of certain fundamental investment policies.

<TABLE>
<CAPTION>
Number of Votes:
----------------
Broker
Fundamental Policies For Against Abstain Non-Votes*
-------------------- --- ------- ------- ---------

<S> <C> <C> <C> <C>
5.1 Diversification 3,076,088 209,588 108,317 23,223
5.2 Borrowing 3,060,857 224,612 108,524 23,223
5.3 Senior securities 3,071,576 213,846 108,571 23,223
5.4 Concentration 3,074,126 211,550 108,317 23,223
5.5 Underwriting of securities 3,074,106 210,008 109,879 23,223
5.6 Investment in real estate 3,071,886 194,355 127,752 23,223
5.7 Purchase of physical
commodities 3,063,735 201,520 128,738 23,223
5.8 Lending 3,069,372 196,377 128,244 23,223
</TABLE>

6. To ratify the selection of Coopers & Lybrand L.L.P. as the Fund's independent
accountants.

Number of Votes:
----------------

For Against Abstain
--- ------- -------

3,267,886 57,829 91,501

* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary power
to vote on a particular matter.

33 - Scudder Micro Cap Fund

<PAGE>

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intentionally
left blank.

34 - Scudder Micro Cap Fund

<PAGE>

This Page
intentionally
left blank.

35 - Scudder Micro Cap Fund

<PAGE>

Officers and Trustees

Daniel Pierce*
President and Trustee

Paul Bancroft III
Trustee; Venture Capitalist and
Consultant

Sheryle J. Bolton
Trustee; Chief Executive Officer,
Scientific Learning Corporation

William T. Burgin
Trustee; General Partner,
Bessemer Venture Partners

Thomas J. Devine
Trustee; Consultant

Keith R. Fox
Trustee; President, Exeter Capital
Management Corporation

William H. Luers
Trustee; Director, The
Metropolitan Museum of Art

Wilson Nolen
Trustee; Consultant

Kathryn L. Quirk*
Trustee, Vice President and
Assistant Secretary

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

Thaddeus Paluszek*
Vice President

Peter Taylor*
Vice President

Thomas F. McDonough*
Vice President, Secretary and
Treasurer

Roy C. McKay*
Vice President

Richard W. Desmond*
Assistant Secretary

John R. Hebble*
Assistant Treasurer

Caroline Pearson*
Assistant Secretary

*Scudder Kemper Investments, Inc.

36 - 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
Scudder Money Market Series --
Premium Shares*
Managed Shares*
Scudder Government Money Market Series --
Managed Shares*

Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
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
Scudder S&P 500 Index Fund
Scudder Real Estate Investment 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 Growth and Income 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, Inc.

Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care FUnd
Scudder Technology Fund

Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------

Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)

Education Accounts
- ------------------
Education IRA
UGMA/UTMA

Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal 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. Certain Scudder funds may not be
available for purchase or exchange. +A portion of the income from the tax-free
funds may be subject to federal, state, and local taxes. *A class of shares of
the Fund. **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 Kemper Investments, Inc., are traded on the New York Stock Exchange
and, in some cases, on various other stock exchanges.

37 - Scudder Micro Cap Fund

<PAGE>

Scudder Solutions
<TABLE>
<CAPTION>

Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy

A convenient investment program in which money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
purchase price over time.

Automatic Dividend Transfer Payroll Deduction and Direct Deposit

The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).

Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.

Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- http://funds.scudder.com
1-800-343-2890
Scudder Electronic Account Services: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.

Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell

You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you previously designated.

Distributions Direct

Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.

38 - Scudder Micro Cap Fund
<PAGE>

Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder

Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 6,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
500 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with Scudder funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.

Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.

Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.

For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center

For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York

</TABLE>

39 - Scudder Micro Cap Fund
<PAGE>
About the Fund's Adviser

Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $200 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts. It is one of the ten largest mutual fund companies in the
U.S.

Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 79
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Group. As a result, Zurich's subsidiary, Zurich Kemper Investments,
Inc., with 50 years of mutual fund and investment management experience, was
combined with Scudder. Headquartered in New York, Scudder Kemper Investments
offers a full range of investment counsel and asset management capabilities,
based on a combination of proprietary research and disciplined, long-term
investment strategies. With its global investment resources and perspective,
the firm seeks opportunities in markets throughout the world to meet the needs
of investors.

Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Group. The Zurich Group is an internationally recognized leader in
financial services, including property/casualty and life insurance, reinsurance,
and asset management.

This information must be preceded or accompanied by a
current prospectus.

Portfolio changes should not be considered recommendations
for action by individual investors.

SCUDDER

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