Scudder
Small Company
Value Fund
Semiannual Report
February 28, 1998
Pure No-Load(TM) Funds
A pure no-load(TM) (no sales charges) mutual fund which offers opportunities for
long-term growth of capital by seeking undervalued stocks of small U.S.
companies.
SCUDDER (logo)
<PAGE>
Scudder Small Company Value Fund
- --------------------------------------------------------------------------------
Date of Inception: 10/6/95 Total Net Assets as of Ticker Symbol: SCSUX
2/28/98: $248.1 million
- --------------------------------------------------------------------------------
o For the six-month period ended February 28, 1998, Scudder Small Company Value
Fund provided a total return of 13.90%, exceeding the 12.92% return of the
unmanaged Russell 2000 Value Index and the 9.64% return of the broad-based
Russell 2000 Index of small company stocks.
o With a 41.42% total return among its peers, the Fund ranked in the top 6%
(28th) of 490 small company funds for the one-year period according to Lipper
Analytical Services.
o Reflecting the Fund's disciplined approach to investing in undervalued small
company stocks, the Fund's median price-to-earnings ratio of 15.5x was roughly
one-third lower than that of the small stock universe, and its median stock
market capitalization was $460 million (versus $499 million for the Russell
2000).
Table of Contents
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
9 Glossary of Investment Terms
10 Investment Portfolio
19 Financial Statements
22 Financial Highlights
23 Notes to Financial Statements
26 Shareholder Meeting Results
28 Officers and Trustees
29 Investment Products and Services
30 Scudder Solutions
2 - SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
Letter from the Fund's President
Dear Shareholders,
Scudder Small Company Value 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 small-cap market indices 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
small-cap stocks, 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 beginning of 1998, large-cap stocks have
continued to outperform. We find this performance perplexing considering the
relatively high valuations and slower earnings expectations of large-caps this
year compared to small-cap stocks. From a valuation standpoint, small-cap stocks
appear to have lower risk compared to large stocks in the current environment.
At the start 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
manager 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 Small Company Value
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 Small Company Value Fund
3 - SCUDDER SMALL COMPANY VALUE 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 Small Company Value Fund
- ----------------------------------------
1 Year $ 14,142 41.42% 41.42%
Life of
Fund* $ 18,709 87.09% 29.86%
- ----------------------------------------
Russell 2000 Value Index
- ----------------------------------------
1 Year $ 13,389 33.89% 33.89%
Life of
Fund* $ 17,425 74.25% 26.04%
- ----------------------------------------
Russell 2000 Index
- ----------------------------------------
1 Year $ 12,996 29.96% 29.96%
Life of
Fund* $ 15,862 58.62% 21.19%
- ----------------------------------------
S&P 500 Index
- ----------------------------------------
1 Year $ 13,502 35.02% 35.02%
Life of
Fund* $ 18,895 88.95% 30.36%
- ----------------------------------------
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 SMALL COMPANY VALUE FUND
Year Amount
- ----------------------
10/95* $10,000
11/95 $10,183
2/96 $10,609
5/96 $11,672
8/96 $11,354
11/96 $12,559
2/97 $13,229
5/97 $14,320
8/97 $16,425
11/97 $17,474
2/98 $18,709
RUSSELL 2000 VALUE INDEX
Year Amount
- ----------------------
10/95* $10,000
11/95 $10,155
2/96 $10,704
5/96 $11,511
8/96 $11,238
11/96 $12,307
2/97 $13,015
5/97 $13,875
8/97 $15,431
11/97 $16,185
2/98 $17,425
RUSSELL 2000 INDEX
Year Amount
- ----------------------
10/95* $10,000
11/95 $10,257
2/96 $10,844
5/96 $12,115
8/96 $11,219
11/96 $11,951
2/97 $12,206
5/97 $12,959
8/97 $14,467
11/97 $14,748
2/98 $15,862
S&P 500 INDEX
Year Amount
- ----------------------
10/95* $10,000
11/95 $10,429
2/96 $11,092
5/96 $11,657
8/96 $11,420
11/96 $13,333
2/97 $13,994
5/97 $15,086
8/97 $16,064
11/97 $17,136
2/98 $18,895
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. The Russell 2000 Value Index
measures the performance of those Russell 2000 companies with lower
price-to-book ratios and lower forecasted growth rates. Index returns
assume reinvestment of dividends and, unlike Fund returns, do not
reflect any fees or expenses.
*The Fund commenced operations on October 6, 1995.
- ----------------------------------------
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
1996* 1997 1998
- --------------------------------------------------------------------------------
Net Asset Value $13.57 $15.77 $21.96
- --------------------------------------------------------------------------------
Income Dividends $ .05 $ .03 $ .02
- --------------------------------------------------------------------------------
Capital Gains Distributions $ -- $ .01 $ .30
- --------------------------------------------------------------------------------
Fund Total Return (%) 6.09 24.69 41.42
- --------------------------------------------------------------------------------
Russell 2000 Value Index
Total Return (%) 7.04 21.59 33.89
- --------------------------------------------------------------------------------
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 SMALL COMPANY VALUE 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.
Equity Securities 96%
Cash Equivalents 4%
- ----------------------------------------
100%
- ----------------------------------------
The Fund seeks to be
fully invested in stocks
of small U.S. companies.
- ----------------------------------------
Sectors/Largest Holdings
(Excludes 4% Cash Equivs.)
- ----------------------------------------
1. MANUFACTURING (19%)
AFC Cable Systems, Inc.
Manufacturer of electrical products
2. FINANCIAL (14%)
Nymagic, Inc.
Property & casualty insurance
3. CONSTRUCTION (11%)
Ameron International Corp.
Manufacturer of building products
4. CONSUMER DISCRETIONARY (9%)
Fabri-Centers of America
Fabrics, crafts, patterns & sewing
accessories
5. UTILITIES (8%)
Northwestern Public Service Co.
Utilities & electric company
6. CONSUMER STAPLES (7%)
Guilford Mills, Inc.
Textiles manufacturer
7. SERVICE INDUSTRIES (6%)
Jefferies Group, Inc.
Financial & securities brokerage
8. DURABLES (6%)
Curtiss-Wright Corp.
Produces aerospace components
9. TECHNOLOGY (6%)
Park Electrochemical Corp.
Manufacturer of electrical products
10. OTHER (14%)
Alaska Air Group, Inc.
Airline services
- ----------------------------------------------------------------------
Stock Characteristics
- ----------------------------------------------------------------------
Fund as
% of
Russell S&P Russell
Fund 2000* 500** 2000
- ----------------------------------------------------------------------
Small Companies ($ millions)
Market Capitalization 460 499 7,371 92%
Value Orientation
P/E: Trailing Twelve Months 15.5 23.1 23.3 67%
Price/Sales 0.9 1.8 1.5 49%
Price/Book Value 2.1 2.8 3.3 77%
*The Russell 2000 Index is an unmanaged capitalization weighted
measure of approximately 2000 small U.S. stocks.
** 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.
Reflecting the Fund's value orientation, the
portfolio's average price-earnings, price-sales, and
price-book value ratios are less than that of the
overall small-cap market.
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 SMALL COMPANY VALUE FUND
<PAGE>
Portfolio Management Discussion
In the following interview, James M. Eysenbach, Philip S. Fortuna and Calvin S.
Young, portfolio managers of Scudder Small Company Value Fund, discuss the
Fund's strategy and the market environment during the fiscal period.
Q: How did the Fund perform?
A: The Fund performed very well, outpacing its unmanaged benchmark, the Russell
2000 Value Index as well as the broader Russell 2000 Index for the six-month
period ended February 28, 1998. Longer term, the Fund's 41.42% one-year return
outdistanced both Russell indices as well as the S&P 500. This performance
placed the Fund among the top 6% (28th) of 490 small-cap funds according to
Lipper Analytical Services for the one-year period. The Fund continued to
benefit from its disciplined approach to selecting small company stocks with
attractive valuations as well as the outperformance of small company value
stocks versus small company growth stocks.
Q: How did the performance of small-cap stocks compare to the broader market
during the six-months?
A: Small-caps provided mixed returns. During the third quarter of 1997,
small-caps rallied to outperform large-cap stocks. However, small-caps gave back
much of these gains in the fourth quarter as the Asian crisis deepened and
investors headed for domestically-oriented and defensive issues. Despite the
fact that small-caps generally derive more of their sales and earnings
domestically than large-cap stocks, small-cap indices fell more sharply in
October and continued to fall in November. Meanwhile, the S&P 500 quickly
recovered its losses in the month of November. In the end, the unmanaged Russell
2000 Index posted a 9.64% return; respectable, but well below the 17.62% return
of the S&P 500 Index for the six-month period. Small value stocks as represented
by the Russell 2000 Value Index actually fell less than the S&P 500 in October,
but trailed during the recovery, ending the period with a total return of
12.92%.
Q: How do you manage the Fund in such a changing environment?
A: Our value-driven investment approach does not change from one reporting
period to the next. We simply seek to employ a consistent strategy that exploits
inefficiencies in the small-cap segment of the U.S. stock market and add value
through systematic stock research, risk-controlled portfolio management, and
efficient trading. 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
small U.S. stocks.
Q: What distinguishes this Fund from other small-cap funds?
A: The Fund is designed to provide superior risk-adjusted performance by
investing in undervalued U.S. small-cap stocks. Thus, in addition to seeking
above-average returns, we also pay close attention to risk as part of the
portfolio management process. For example, we limit individual security risk by
maintaining more than 200 holdings with a maximum position size of about 1%. We
also evaluate the risk of the overall portfolio using advanced risk analysis
software. This allows us to gauge the impact of a security on the Fund's risk
6 - SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
level before we make a final decision to add it to the portfolio. As a result of
this focus on risk management, the Fund's strong returns have been accompanied
by relatively low risk. From inception, the Fund has been about 20% less
volatile than the Russell 2000 Index. Even compared to other small company value
funds, the Fund has exhibited below-average risk.
Q: Why does having a "value" emphasis matter in the small-cap arena?
A: In addition to lending itself to generally lower volatility, our approach is
also designed to capture the attractive return characteristics of small value
stocks. Small-cap value stocks have had a performance advantage over small-cap
stocks over the long term (see chart). While this performance advantage is only
evident in about three out of five years, that is sufficient to translate into
outperformance in more than 90% of the rolling five-year periods.
Q: What do you look at to determine attractive values?
A: We look at valuation from several perspectives by comparing a company's stock
price to fundamentals such as sales, cash flow and earnings. This focus on
valuation is reflected in the portfolio's current price-to-earnings (p/e)
multiple of 15.5x, or roughly one-third that of the Russell 2000 Index. (The p/e
is a widely used stock valuation gauge that indicates what investors are paying
for a company's earnings on a per-share basis. A low "earnings multiple" can
indicate an undervalued security for a given level of earnings.) Beyond low
valuations, however, we also look for a catalyst that suggests that this
undervaluation may result in price appreciation going forward. For example, we
would prefer a "cheap" stock where the company's sales and earnings are stable
or improving rather than deteriorating.
THE PRINTED DOCUMENT CONTAINS A MOUNTAIN CHART HERE
CHART TITLE:
Small Value Stocks Outperform Small Stocks
Annualized Return Difference:
Russell 2000 Value - Russell 2000
CHART PERIOD:
(1983-1997 Quarterly)
CHART DATA:
12/83 1.58
2.76
2.6
3.23
12/84 5.12
5.08
5.2
6.52
12/85 7.48
6.39
5.24
5.22
12/86 5.04
3.46
3.55
3.48
12/87 4.51
4.83
5.24
4.5
12/88 3.69
2.71
2.72
1.8
12/89 0.83
1.15
0.52
0.61
12/90 0.17
0.16
0.94
-0.43
12/91 -0.83
0.61
1.53
1.5
12/92 0.71
1.53
1.34
0.85
12/93 0.81
1.03
1.51
1.49
12/94 1.58
1.31
1.78
1.05
12/95 1.92
1.83
1.14
1.9
12/96 3.51
3.59
2.29
1.73
12/97 3.25
Values greater than zero indicate outperformance of Russell 2000 Value Index
over Russell 2000 Index for rolling five-year periods.
Q: How do you accomplish that evaluation given a universe of over 1000 stocks?
A: Our process is highly systematic, and starts with collecting extensive
financial information on individual companies. Using a proprietary investment
model, we analyze this data in a consistent, objective way across this large
universe of small companies. Each stock is assigned a ranking based on its
relative attractiveness. In addition, as
7 - SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
new information streams in, such as recent earnings reports, it is incorporated
into the evaluation so that we can instantly see how recently released
information affects the relative attractiveness of each stock. Careful
consideration is then given to the risk characteristics of these stocks within
the context of a diversified portfolio. We employ the assistance of advanced
risk-management software to assess the millions of possibilities and identify
the portfolio with the highest potential return for a given level of risk.
Finally, we work with our traders to determine the most efficient means of
executing our purchase and sale decisions.
Q: How does your strategy affect portfolio turnover and taxable distributions?
A: These are both important considerations in our management of the Fund. We
attempt to keep turnover at a relatively modest level -- it was about 24%
annualized for the most recent six-month period. Low portfolio turnover results
in lower realized gains and therefore, lower taxable capital gains distributions
to shareholders, while still providing attractive total returns.
Q: What is your outlook for small-cap value stocks and the Fund?
A: While the Fund and the Fund's universe of small-cap value stocks have
performed relatively well, they have not outperformed large-cap stocks. At the
end of the period large-caps were at relatively high valuations, whether
compared to small-caps or small-cap value stocks. Although many factors
influence the performance of small-caps, we do not expect this imbalance to
continue indefinitely. Over the long term, we continue to believe that small
stocks offer higher return potential. With regard to our management approach
going forward, we intend to stick with our value-oriented discipline which has
served the Fund so well since its inception.
8 - SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
Glossary of Investment Terms
FUNDAMENTAL Analysis of companies based on the projected impact
RESEARCH 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 The value of a company's outstanding shares of common stock,
CAPITALIZATION 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.
OVER/UNDER Refers to the allocation of assets -- usually by sector,
WEIGHTING industry, or country -- within a portfolio relative to a
benchmark index, (i.e. the Russell 2000) or an investment
universe.
PRICE/EARNINGS A widely used gauge of a stock's valuation that indicates
RATIO (P/E) (also what investors are paying for a company's earnings on a
"earnings per share basis. A higher "earnings multiple" indicates a
multiple") 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.
(Sources: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
9 - SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
Investment Portfolio as of February 28, 1998 (Unaudited)
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements 4.3%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreement with State Street Bank and Trust Company dated 2/27/98 at
5.63%, to be repurchased at $10,901,112 on 3/2/98, collateralized by a ------------
$8,231,000 U.S. Treasury Bond, 8.75%, 5/15/17 (Cost $10,896,000) ...................... 10,896,000 10,896,000
------------
Shares
- ------------------------------------------------------------------------------------------------------------------------------
Common Stocks 95.7%
- ------------------------------------------------------------------------------------------------------------------------------
Consumer Discretionary 8.8%
Apparel & Shoes 0.5%
Oxford Industries, Inc. ................................................................. 37,100 1,168,650
------------
Department & Chain Stores 2.5%
Ames Department Stores, Inc.* ........................................................... 74,000 1,156,250
Casey's General Stores, Inc. ............................................................ 95,600 1,439,975
Dress Barn, Inc.* ....................................................................... 29,300 855,194
Shopko Stores, Inc.* .................................................................... 50,200 1,320,888
Syms Corp.* ............................................................................. 115,400 1,572,325
------------
6,344,632
------------
Home Furnishings 3.1%
Ethan Allen Interiors Inc. .............................................................. 6,600 367,950
Interface, Inc. ......................................................................... 44,300 1,694,475
Mikasa, Inc. ............................................................................ 65,500 937,469
Oneida Ltd. ............................................................................. 41,400 1,107,450
Pillowtex Corp. ......................................................................... 11,200 439,600
Thomas Industries, Inc. ................................................................. 73,050 1,725,806
Toro Co. ................................................................................ 38,000 1,524,750
------------
7,797,500
------------
Hotels & Casinos 0.3%
Prime Hospitality Corp. ................................................................. 42,500 807,500
------------
Recreational Products 0.2%
CPI Corp. ............................................................................... 19,800 476,438
------------
Restaurants 0.7%
IHOP Corp.* ............................................................................. 19,300 692,388
Ryan's Family Steak Houses, Inc.* ....................................................... 137,100 1,135,359
------------
1,827,747
------------
Specialty Retail 1.5%
BT Office Products International, Inc.* ................................................. 95,100 1,099,594
Fabri-Centers of America "A"* ........................................................... 58,300 1,763,575
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Inacom Corp.* ........................................................................... 26,100 854,775
------------
3,717,944
------------
Consumer Staples 5.8%
Food & Beverage 3.1%
Earthgrains Co. ......................................................................... 15,000 649,688
International Multifoods Corp. .......................................................... 20,000 558,750
Michael Foods, Inc. ..................................................................... 61,200 1,552,950
Nash-Finch Co. .......................................................................... 84,500 1,637,188
Performance Food Group Co.* ............................................................. 52,500 971,250
Pilgrim's Pride Corp. ................................................................... 121,300 1,303,975
Riviana Foods, Inc. ..................................................................... 46,400 1,015,000
Seaboard Corp. .......................................................................... 300 123,600
------------
7,812,401
------------
Package Goods/Cosmetics 0.7%
American Safety Razor Co.* .............................................................. 78,800 1,802,550
------------
Textiles 2.0%
Culp, Inc. .............................................................................. 64,300 1,330,206
Guilford Mills, Inc. .................................................................... 69,400 1,969,225
Hartmarx Corp. .......................................................................... 217,100 1,763,938
------------
5,063,369
------------
Health 1.5%
Hospital Management 0.5%
Mariner Health Group, Inc.* ............................................................. 86,400 1,312,200
------------
Medical Supply & Specialty 1.0%
Bindley Western Industries, Inc. ........................................................ 58,400 1,934,500
West Co., Inc. .......................................................................... 17,900 567,206
------------
2,501,706
------------
Financial 13.1%
Banks 5.7%
Banknorth Group, Inc. ................................................................... 31,500 2,019,938
Bok Financial Corp. ..................................................................... 10,712 526,227
Chittenden Corp. ........................................................................ 42,813 1,637,635
Citizens Banking Corp. .................................................................. 26,700 897,788
F.N.B. Corp. ............................................................................ 50,000 1,850,000
First Citizens BancShares, Inc. "A" ..................................................... 1,200 139,200
First Federal Financial Corp.* .......................................................... 32,400 1,308,150
FirstBank Puerto Rico ................................................................... 33,400 1,321,388
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
National Bancorp of Alaska, Inc. ........................................................ 10,000 1,210,000
Riggs National Corp. .................................................................... 39,900 1,057,350
Silicon Valley Bancshares* .............................................................. 7,300 416,100
St. Francis Capital Corp. ............................................................... 6,200 269,700
UST Corporation ......................................................................... 23,100 632,363
Usbancorp, Inc. ......................................................................... 10,400 730,600
Webster Financial Corp. ................................................................. 6,300 404,775
------------
14,421,214
------------
Insurance 6.9%
Acceptance Insurance Cos., Inc. ......................................................... 29,200 709,925
Allied Group, Inc. ...................................................................... 17,625 555,188
American Annuity Group, Inc. ............................................................ 25,600 569,600
American Heritage Life Investment Corp. ................................................. 25,800 1,046,513
Baldwin & Lyons, Inc. "B" ............................................................... 41,400 993,600
Capitol Transamerica Corp. .............................................................. 23,100 479,325
Delphi Financial Group, Inc. "A"* ....................................................... 8,486 373,366
Fidelity National Financial, Inc. ....................................................... 40,780 1,192,815
Guarantee Life Companies, Inc. .......................................................... 53,100 1,420,425
Harleysville Group, Inc. ................................................................ 80,700 1,967,063
Life Re Corp. ........................................................................... 10,200 648,975
Life USA Holdings Inc.* ................................................................. 45,100 693,413
Medical Assurance, Inc. ................................................................. 35,260 1,026,936
Nymagic, Inc. ........................................................................... 70,900 2,127,000
Presidential Life Corp. ................................................................. 71,000 1,544,250
State Auto Financial Corp. .............................................................. 38,600 1,273,800
Trenwick Group, Inc. .................................................................... 19,500 711,750
------------
17,333,944
------------
Business Finance 0.5%
Imperial Bancorp* ....................................................................... 40,500 1,336,500
------------
Service Industries 5.5%
EDP Services 0.1%
Electro Rent Corp.* ..................................................................... 4,200 170,100
------------
Environmental Services 1.2%
Dames & Moore, Inc. ..................................................................... 81,900 1,054,463
Mine Safety Appliance Co. ............................................................... 30,200 1,872,400
------------
2,926,863
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment 1.2%
Dain Rauscher Corp. ..................................................................... 16,500 967,313
Jefferies Group, Inc. ................................................................... 47,800 2,118,138
------------
3,085,451
------------
Miscellaneous Commercial Services 1.5%
Berlitz International, Inc.* ............................................................ 44,500 1,154,219
CORT Business Services Corp.* ........................................................... 11,100 446,081
McGrath Rentcorp ........................................................................ 38,000 831,250
US Foodservice Inc.* .................................................................... 23,095 763,578
Volt Information Sciences, Inc.* ........................................................ 9,900 520,369
------------
3,715,497
------------
Printing/Publishing 1.5%
Bowne & Co., Inc. ....................................................................... 38,200 1,618,725
Devon Group, Inc.* ...................................................................... 25,000 1,600,000
Merrill Corp. ........................................................................... 33,600 659,400
------------
3,878,125
------------
Durables 6.5%
Aerospace 1.9%
Banner Aerospace, Inc.* ................................................................. 19,700 231,475
Curtiss-Wright Corp. .................................................................... 56,900 2,130,194
Kaman Corp. "A" ......................................................................... 100,300 1,730,175
Tracor, Inc.* ........................................................................... 21,600 661,500
------------
4,753,344
------------
Automobiles 3.8%
Arvin Industries, Inc. .................................................................. 10,300 408,138
Coachmen Industries, Inc. ............................................................... 60,900 1,739,456
Excel Industries Inc. ................................................................... 67,200 1,335,600
Intermet Corp. .......................................................................... 73,300 1,447,675
Simpson Industries, Inc. ................................................................ 88,000 1,149,500
Standard Motor Products, Inc. ........................................................... 63,500 1,309,688
Titan International, Inc. ............................................................... 73,200 1,372,500
Wynn's International, Inc. .............................................................. 30,675 778,378
------------
9,540,935
------------
Construction/Agricultural Equipment 0.8%
Allied Products Corp. ................................................................... 15,450 354,384
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NACCO Industries, Inc. "A" .............................................................. 12,600 1,638,788
------------
1,993,172
------------
Manufacturing 18.6%
Chemicals 1.9%
Cambrex Corp. ........................................................................... 11,150 551,925
NCH Corp. ............................................................................... 33,900 2,065,781
Stepan Co. .............................................................................. 50,000 1,393,750
The Carbide/Graphite Group, Inc.* ....................................................... 23,300 712,106
------------
4,723,562
------------
Containers & Paper 0.1%
Shorewood Packaging Corp.* .............................................................. 8,300 203,350
------------
Diversified Manufacturing 4.9%
ACX Technologies, Inc.* ................................................................. 44,100 1,052,888
Cascade Corp. ........................................................................... 113,200 1,761,675
Griffon Corp.* .......................................................................... 100,900 1,658,544
Insilco Corp.* .......................................................................... 15,100 598,338
Justin Industries ....................................................................... 51,400 668,200
Robbins & Myers, Inc. ................................................................... 47,900 1,898,038
SPS Technologies, Inc.* ................................................................. 32,800 1,553,900
Scotsman Industries, Inc. ............................................................... 68,700 2,018,063
Tredegar Industries, Inc. ............................................................... 11,800 826,000
Valmont Industries ...................................................................... 17,000 380,375
------------
12,416,021
------------
Electrical Products 2.0%
AFC Cable Systems, Inc.* ................................................................ 66,675 2,371,111
Benchmark Electronics, Inc.* ............................................................ 44,400 1,193,250
C&D Technologies, Inc. .................................................................. 26,700 1,395,075
------------
4,959,436
------------
Hand Tools 0.8%
L.S. Starrett Corp. "A" ................................................................. 52,499 2,106,522
------------
Industrial Specialty 1.7%
Apogee Enterprises, Inc. ................................................................ 14,500 187,594
Applied Power, Inc. "A" ................................................................. 11,200 403,200
Barnes Group, Inc. ...................................................................... 59,200 1,746,400
Commercial Intertech Corp. .............................................................. 72,500 1,418,281
Spartech Corp. .......................................................................... 22,300 418,125
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Wyman-Gordon Co.* ....................................................................... 8,300 166,000
------------
4,339,600
------------
Machinery/Components/Controls 4.6%
Amcast Industrial Corp. ................................................................. 59,400 1,314,225
Columbus McKinnon Corp. ................................................................. 79,700 1,853,025
DT Industries, Inc. ..................................................................... 6,300 222,075
Gleason Corp. ........................................................................... 54,100 1,805,588
Mueller Industries, Inc.* ............................................................... 5,500 303,188
Reliance Steel & Aluminum Co. ........................................................... 46,100 1,625,025
Sequa Corp. "A"* ........................................................................ 24,800 1,864,650
Shaw Group, Inc.* ....................................................................... 29,100 698,400
Tennant Company ......................................................................... 45,000 1,636,875
Zero Corporation ........................................................................ 12,600 333,900
------------
11,656,951
------------
Office Equipment/Supplies 1.0%
CSS Industries, Inc.* ................................................................... 49,000 1,727,250
General Binding Corp. ................................................................... 26,900 850,713
------------
2,577,963
------------
Wholesale Distributors 1.6%
A.M. Castle & Co. ....................................................................... 54,400 1,312,400
Applied Industrial Technology, Inc. ..................................................... 40,425 1,051,050
Hughes Supply, Inc. ..................................................................... 45,250 1,569,609
------------
3,933,059
------------
Technology 6.1%
Computer Software 0.6%
MTS Systems Corp. ....................................................................... 96,500 1,574,156
------------
Diverse Electronic Products 1.1%
Cubic Corp. ............................................................................. 38,500 1,063,563
Esterline Technologies Corp.* ........................................................... 40,400 1,590,750
------------
2,654,313
------------
EDP Peripherals 0.6%
In Focus Systems, Inc.* ................................................................. 35,600 1,421,775
------------
Electronic Components/Distributors 2.7%
CTS Corp. ............................................................................... 47,500 1,528,906
CompuCom Systems, Inc.* ................................................................. 103,000 907,688
MicroAge Inc.* .......................................................................... 58,600 754,475
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Park Electrochemical Corp. .............................................................. 53,200 1,709,050
Pioneer Standard Electronics, Inc. ...................................................... 85,800 1,415,700
Rogers Corp.* ........................................................................... 15,600 600,600
------------
6,916,419
------------
Electronic Data Processing 0.1%
Sequent Computer Systems, Inc.* ......................................................... 6,300 133,481
------------
Military Electronics 0.6%
Tech-Sym Corp.* ......................................................................... 58,700 1,548,213
------------
Semiconductors 0.4%
Siliconix, Inc.* ........................................................................ 24,700 1,040,488
------------
Energy 3.3%
Oil & Gas Production 1.5%
Benton Oil & Gas Co.* ................................................................... 62,700 779,831
Plains Resources, Inc.* ................................................................. 65,700 1,038,881
Tesoro Petroleum Corp.* ................................................................. 109,835 1,819,142
------------
3,637,854
------------
Oil Companies 0.1%
Giant Industries, Inc. .................................................................. 18,200 331,013
------------
Oilfield Services/Equipment 1.7%
Cliffs Drilling Co.* .................................................................... 13,400 519,250
Pool Energy Services Co.* ............................................................... 96,400 2,277,450
Pride International Inc.* ............................................................... 23,500 536,094
RPC, Inc. ............................................................................... 91,500 1,035,094
------------
4,367,888
------------
Metals & Minerals 5.0%
Steel & Metals
Armco, Inc.* ............................................................................ 257,200 1,366,375
Brush Wellman, Inc. ..................................................................... 71,200 1,922,400
Carpenter Technology Corp. .............................................................. 1,100 52,044
Citation Corp.* ......................................................................... 66,400 1,286,500
Cleveland-Cliffs, Inc. .................................................................. 26,700 1,371,713
Commercial Metals Co. ................................................................... 19,200 614,400
Commonwealth Industries Inc. ............................................................ 64,200 934,913
Lone Star Technologies* ................................................................. 15,600 483,600
National Steel Corp. "B" ................................................................ 88,200 1,367,100
Quanex Corp. ............................................................................ 51,500 1,705,938
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
RMI Titanium Co.* ....................................................................... 48,200 1,144,750
Shiloh Industries, Inc.* ................................................................ 15,300 319,388
------------
12,569,121
------------
Construction 10.3%
Building Materials 5.3%
Ameron International Corp. .............................................................. 34,300 2,055,856
Butler Manufacturing Co. ................................................................ 13,100 461,775
Florida Rock Industries, Inc. ........................................................... 66,200 1,729,475
Giant Cement Holding, Inc.* ............................................................. 50,000 1,300,000
Lone Star Industries, Inc. .............................................................. 31,100 1,873,775
Puerto Rican Cement Co., Inc. ........................................................... 40,400 1,868,500
Southdown, Inc. ......................................................................... 14,100 902,400
Texas Industries, Inc. .................................................................. 12,700 717,550
Triangle Pacific Corp.* ................................................................. 37,700 1,357,200
Universal Forest Products, Inc. ......................................................... 73,700 1,169,988
------------
13,436,519
------------
Building Products 1.4%
NCI Building Systems, Inc.* ............................................................. 28,300 1,117,850
Nortek, Inc. ............................................................................ 20,800 647,400
Zurn Industries, Inc. ................................................................... 39,800 1,746,225
------------
3,511,475
------------
Homebuilding 2.8%
Champion Enterprises, Inc.* ............................................................. 9,200 231,150
D.R. Horton, Inc. ....................................................................... 31,200 727,350
Del Webb Corp. .......................................................................... 47,800 1,529,600
NVR Inc. ................................................................................ 45,200 1,463,350
Skyline Corp. ........................................................................... 16,200 517,388
Standard Pacific Corp. .................................................................. 57,900 1,002,394
U.S. Home Corp.* ........................................................................ 37,600 1,647,350
------------
7,118,582
------------
Miscellaneous 0.8%
Granite Construction, Inc. .............................................................. 71,200 1,886,800
------------
Transportation 3.4%
Air Freight 0.6%
Circle International Group, Inc. ........................................................ 55,200 1,559,400
------------
Airlines 0.9%
Alaska Air Group Inc.* .................................................................. 42,300 2,329,144
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Marine Transportation 0.7%
Avondale Industries, Inc.* .............................................................. 61,100 1,756,625
------------
Trucking 1.2%
Roadway Express, Inc. ................................................................... 47,800 1,099,400
USFreightways Corp. ..................................................................... 22,500 786,094
Yellow Corp.* ........................................................................... 51,100 1,076,294
------------
2,961,788
------------
Utilities 7.8%
Electric Utilities 6.1%
Black Hills Corp. ....................................................................... 37,300 1,221,575
Central Hudson Gas & Electric Co. ....................................................... 27,400 1,113,125
Central Louisiana Electric Co. .......................................................... 25,200 819,000
Commonwealth Energy System Cos. ......................................................... 62,500 2,253,906
El Paso Electric Co.* ................................................................... 275,700 1,878,206
Northwestern Public Service Co. ......................................................... 106,100 2,453,563
SIGCORP, Inc. ........................................................................... 28,100 811,388
TNP Enterprises Inc. .................................................................... 73,500 2,361,188
United Illuminating Co. ................................................................. 51,600 2,376,825
------------
15,288,776
------------
Natural Gas Distribution 1.7%
Energen Corp. ........................................................................... 50,300 1,952,269
Laclede Gas Co. ......................................................................... 50,300 1,248,069
North Carolina Natural Gas Corp. ........................................................ 23,550 581,391
Southern Union Co. ...................................................................... 25,310 604,276
------------
4,386,005
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $196,380,906) 241,134,081
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $207,276,906) (a) 252,030,081
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $207,276,906. At February 28,
1998, net unrealized appreciation for all securities based on tax cost was
$44,753,175. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $46,897,976 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$2,144,801.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
18 - SCUDDER SMALL COMPANY VALUE 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 $207,276,906) ................ $ 252,030,081
Cash ................................................................. 53,393
Receivable for Fund shares sold ...................................... 745,286
Dividends and interest receivable .................................... 239,822
Deferred organization expense ........................................ 12,540
Other assets ......................................................... 661
----------------
Total assets ......................................................... 253,081,783
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased .................................... 4,559,271
Payable for Fund shares redeemed ..................................... 200,974
Accrued management fee ............................................... 136,117
Other payables and accrued expenses .................................. 80,376
----------------
Total liabilities .................................................... 4,976,738
---------------------------------------------------------------------------------------------
Net assets, at market value $ 248,105,045
---------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income ......... (51,178)
Net unrealized appreciation (depreciation) on investments ............ 44,753,175
Accumulated net realized gain (loss) ................................. 6,050,161
Paid-in capital ...................................................... 197,352,887
---------------------------------------------------------------------------------------------
Net assets, at market value $ 248,105,045
---------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($248,105,045 / 11,297,988 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares ----------------
authorized) ........................................................ $21.96
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19 - SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
Statement of Operations
six months ended February 28, 1998 (Unaudited)
<TABLE>
<CAPTION>
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Income:
Dividends (net of foreign taxes withheld of $2,141) .................. $ 1,076,216
Interest ............................................................. 317,515
----------------
1,393,731
----------------
Expenses:
Management fee ....................................................... 710,032
Services to shareholders ............................................. 396,845
Custodian and accounting fees ........................................ 56,824
Trustees' fees and expenses .......................................... 19,872
Registration fees .................................................... 41,678
Reports to shareholders .............................................. 17,336
Auditing ............................................................. 10,804
Legal ................................................................ 5,267
Amortization of organization expense ................................. 2,156
Other ................................................................ 5,291
----------------
1,266,105
---------------------------------------------------------------------------------------------
Net investment income 127,626
---------------------------------------------------------------------------------------------
<CAPTION>
Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net realized gain (loss) from investments ............................ 6,578,046
Net unrealized appreciation (depreciation) during the period on
investments ........................................................ 16,575,276
---------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 23,153,322
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 23,280,948
---------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 - SCUDDER SMALL COMPANY VALUE 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 ....................................... $ 127,626 $ 51,548
Net realized gain (loss) from investment transactions ....... 6,578,046 2,467,254
Net unrealized appreciation (depreciation) on
investment transactions during the period ................. 16,575,276 25,374,837
----------------- ----------------
Net increase (decrease) in net assets resulting from
operations ................................................ 23,280,948 27,893,639
----------------- ----------------
Distributions to shareholders from:
Net investment income ....................................... (197,998) (127,322)
----------------- ----------------
Net realized gains .......................................... (2,969,965) (18,189)
----------------- ----------------
Fund share transactions:
Proceeds from shares sold ................................... 129,578,176 67,337,610
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................. 3,041,559 138,706
Cost of shares redeemed ..................................... (28,166,914) (13,069,182)
Redemption fees ............................................. 140,417 56,374
----------------- ----------------
Net increase (decrease) in net assets from Fund share
transactions .............................................. 104,593,238 54,463,508
----------------- ----------------
Increase (decrease) in net assets ........................... 124,706,223 82,211,636
Net assets at beginning of period ........................... 123,398,822 41,187,186
Net assets at end of period (including accumulated
distributions in excess of net investment income of
$51,178 and undistributed net investment income ----------------- ----------------
of $19,194, respectively) ................................. $248,105,045 $123,398,822
----------------- ----------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ................... 6,303,515 3,034,156
----------------- ----------------
Shares sold ................................................. 6,216,536 4,061,936
Shares issued to shareholders in reinvestment of
distributions ............................................. 148,152 9,042
Shares redeemed ............................................. (1,370,215) (801,619)
----------------- ----------------
Net increase (decrease) in Fund shares ...................... 4,994,473 3,269,359
----------------- ----------------
Shares outstanding at end of period ......................... 11,297,988 6,303,515
----------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
21 - SCUDDER SMALL COMPANY VALUE 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
October 6, 1995
Six Months (commencement of
Ended Year Ended operations) to
February 28, 1997 August 31, August 31,
(Unaudited) 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period .......................... $19.58 $13.57 $12.00
Income from investment operations: --------------------------------------------------------
Net investment income ......................................... .01 .01 .07
Net realized and unrealized gain on investment transactions ... 2.67 6.03 1.53
--------------------------------------------------------
Total from investment operations .............................. 2.68 6.04 1.60
--------------------------------------------------------
Less distributions:
From net investment income .................................... (.02) (.03) (.05)
From net realized gains on investment transactions ............ (.30) (.01) --
--------------------------------------------------------
Total distributions ........................................... (.32) (.04) (.05)
--------------------------------------------------------
Redemption fees ............................................... .02 .01 .02
--------------------------------------------------------
Net asset value, end of period ................................ $21.96 $19.58 $13.57
- ---------------------------------------------------------------------------------------------------------------------------
Total Return (%) .............................................. 13.90** 44.67(b) 13.54(b)(c)**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ........................ 248 123 41
Ratio of operating expenses, net to average daily net
assets (%) .................................................. 1.32* 1.50 1.50*
Ratio of operating expenses before expense reductions,
to average daily net assets (%) ............................. 1.32* 1.63 2.61*
Ratio of net investment income to average daily net
assets (%) .................................................. .13* .07 .67*
Portfolio turnover rate (%) ................................... 23.6* 43.6 34.0*
Average commission rate paid .................................. $.0355 $.0332 $.0364
</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
22 - SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
Notes to Financial Statements (Unaudited)
A. Significant Accounting Policies
Scudder Small Company Value Fund (the "Fund") is a diversified series of Scudder
Securities Trust (the "Trust"). The Trust is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
The 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.
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
provision for federal income tax 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 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
23 - SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
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 an 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 $120,730,744 and
$21,803,842, respectively.
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 objectives, policies, and restrictions. The Adviser determines the
securities, instruments, and other contracts relating to investments to be
purchased, sold or entered into by the Fund. In addition to portfolio management
services, the Adviser provides certain administrative services in accordance
with the Management Agreement. 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 1.50% of average daily net
assets. For the six months ended February 28, 1998, the Adviser imposed fees
amounting to $710,032.
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 $320,246, of which $59,127 was unpaid at February 28, 1998.
24 - SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the six months ended February
28, 1998, the amount charged to the Fund by STC aggregated $65,267, of which
$19,265 was 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 $6,795.
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
$43,070, of which $6,891 was unpaid at February 28, 1998.
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, Trustees' fees and expenses aggregated
$19,872.
D. Lines of Credit
The Fund and several affiliated Funds (the "Participants") share in a $500
million revolving credit facility for temporary or emergency purposes, including
the meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated among each of the Participants. Interest is calculated based
on the market rates at the time of the borrowing. The Fund may borrow up to a
maximum of 33.33% of its net assets under the agreement. In addition, the Fund
also maintains an uncommitted line of credit.
25 - SCUDDER SMALL COMPANY VALUE FUND
<PAGE>
Shareholder Meeting Results
A Special Meeting of Shareholders (the "Meeting") of Scudder Small Company Value
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 3,524,830 150,103
Sheryle J. Bolton 3,528,545 146,388
William T. Burgin 3,528,862 146,071
Thomas J. Devine 3,522,716 152,217
Keith R. Fox 5,530,288 144,645
William H. Luers 3,528,383 146,550
Wilson Nolen 3,528,591 146,342
Daniel Pierce 3,528,945 145,988
Kathryn L. Quirk 3,527,053 147,880
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*
--- ------- ------- -----------------
3,440,407 133,973 100,553 160,458
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*
--- ------- ------- -----------------
3,130,865 244,744 138,866 160,458
26 - SCUDDER SMALL COMPANY VALUE 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*
--- ------- ------- -----------------
3,295,054 210,684 167,882 151,237
5. To approve the revision of certain fundamental investment policies.
<TABLE>
<S> <C> <C> <C> <C> <C>
<CAPTION>
Number of Votes:
----------------
Broker
Fundamental Policies For Against Abstain Non-Votes*
-------------------- --- ------- ------- ----------
5.1 Diversification 3,164,951 208,601 140,923 160,458
5.2 Borrowing 3,152,588 221,209 140,678 160,458
5.3 Senior securities 3,161,309 211,613 141,553 160,458
5.4 Concentration 3,159,579 215,685 139,211 160,458
5.5 Underwriting of securities 3,165,458 208,756 140,261 160,458
5.6 Investment in real estate 3,161,744 189,787 162,944 160,458
5.7 Purchase of physical 3,161,555 189,177 163,743 160,458
commodities
5.8 Lending 3,162,369 189,499 162,607 160,458
</TABLE>
6. To ratify the selection of Coopers & Lybrand L.L.P. as the Fund's
independent accountants.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
3,499,887 62,484 112,562
* 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.
27 - SCUDDER SMALL COMPANY VALUE 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; President, 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
Roy C. McKay*
Vice President
Thaddeus Paluszek*
Vice President
Peter Taylor*
Vice President
Thomas F. McDonough*
Vice President, Secretary and
Treasurer
Richard W. Desmond*
Assistant Secretary
John R. Hebble*
Assistant Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
28 - SCUDDER SMALL COMPANY VALUE 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.
29 - Scudder Small Company Value 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.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
30 - Scudder Small Company Value 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>
31 - SCUDDER SMALL COMPANY VALUE 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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