Scudder
Small Company
Value Fund
Semiannual Report
February 28, 1999
No-Load Funds
A no-load (no sales charges) mutual fund which invests 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
2/28/99: $245 million
- --------------------------------------------------------------------------------
o For the semiannual period ended February 28, 1999, Scudder Small Company Value
Fund posted a -1.62% total return. Over the six-month period, the Fund trailed
the 4.93% return of the Russell 2000 Value Index and the 16.79% return of the
Russell 2000 Index.
o Despite recent weakness, the Fund is up 47.93% since inception, with an
average annual return of 12.23%. This compares to the average annual returns of
11.01% for the Russell 2000 Value Index and 9.51% for the Russell 2000 Index
over the same period. Overall, the Fund ranks in the top 20% of its peers over
the three years ended February 28, 1999, according to Lipper Analytical
Services, Inc.^1
o The divergence between small- and large-cap stock returns in 1998 continued
into 1999. The result is unusually compelling values among small-cap stocks.
This is illustrated by the Fund's median price/earnings ratio, which is
significantly lower than those of both small- and large-cap benchmarks.
Table of Contents
3 Letter from the Fund's President 22 Financial Highlights
4 Performance Update 23 Notes to Financial Statements
5 Portfolio Summary 26 Shareholder Meeting Results
6 Portfolio Management Discussion 28 Officers and Trustees
9 Glossary of Investment Terms 29 Investment Products and Services
10 Investment Portfolio 30 Scudder Solutions
19 Financial Statements
^1 The average annual return of Scudder Small Company Value Fund for the
one year was -20.93%.
2 - Scudder Small Company Value Fund
<PAGE>
Letter from the Fund's President
Dear Shareholders,
The recent spread in performance between large- and small-cap stocks is one
of the widest in the 20th Century, and large-cap growth stocks have outperformed
small-cap value stocks even more. To illustrate, in 1998, the Russell 1000
Growth Index was up 38.7%, while the Russell 2000 Value Index was down 6.4%.
However, we believe that long-term equity investors who seek the benefits of
portfolio diversification should stay the course because the small-cap stocks
that your Fund invests in have rarely represented greater value.
During its most recent semiannual period, Scudder Small Company Value Fund
posted a -1.62% total return, compared with the 4.93% and 16.79% returns of the
small-cap Russell 2000 Value and Russell 2000 Indices, respectively. As the
Fund's portfolio management team describes in the interview beginning on page 6,
the Fund's positioning reflects a stronger value orientation than the Russell
2000 Value Index. It is therefore not surprising that the Fund would
underperform the Value Index in a period where value stocks performed least
well. However, for the three years ended February 28, 1999, the Fund ranks in
the top 20% of its peers, according to Lipper.
For those of you who are interested in new Scudder products, we are pleased
to introduce Scudder Select 500 Fund and Scudder Select 1000 Growth Fund. Both
funds are managed with the goal of providing long-term growth compared to their
benchmark indices, the S&P 500 Index and the Russell 1000 Growth Index,
respectively. For more information on either Select fund, please call us at the
number below.
If you have any questions regarding Scudder Small Company Value Fund or any
other Scudder fund, please call Investor Relations at 1-800-225-2470, or visit
Scudder's Web site at www.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, 1999
Fund Index Comparison
===============================================
Total Return
- -----------------------------------------------
Period Growth of Cumulative Average
Ended $10,000 Annual
2/28/1999
- -----------------------------------------------
Scudder Small Company Value Fund
- -----------------------------------------------
1 Year $ 7,907 -20.93% -20.93%
Life of Fund* $ 14,793 47.93% 12.23%
- -----------------------------------------------
Russell 2000 Value Index
- -----------------------------------------------
1 Year $ 8,182 -18.18% -18.18%
Life of Fund* $ 14,264 42.64% 11.01%
- -----------------------------------------------
Russell 2000 Index
- -----------------------------------------------
1 Year $ 8,585 -14.15% -14.15%
Life of Fund* $ 13,618 36.18% 9.51%
- -----------------------------------------------
S&P 500 Index
- -----------------------------------------------
1 Year $ 11,974 19.74% 19.74%
Life of Fund* $ 22,624 126.24% 27.14%
- -----------------------------------------------
Growth of a $10,000 Investment
===============================================
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
CHART DATA:
Scudder Small Russell 2000 Russell 2000 S&P 500
Company Value Fund Value Index Index Index
- ----------------------------------------------------------------------
10/95* 10000 10000 10000 10000
2/96 10609 10595 10771 11080
8/96 11354 11142 11153 11407
2/97 13229 12972 12157 13984
8/97 16425 15448 14455 16056
2/98 18709 17491 15870 18891
8/98 15037 13558 11600 17362
2/99 14793 14245 13590 22624
The Standard & Poor's 500 Index is a capitalization-weighted index of 500
stocks. The index is designed to measure performance of the broad domestic
economy through changes in the aggregate market value of 500 stocks representing
all major industries. 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.
Returns and Per Share Information
===========================================
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE FUND TOTAL RETURN (%) AND
INDEX TOTAL RETURN (%)
CHART DATA:
Yearly periods ended February 28
1996* 1997 1998 1999
- -------------------------------------------------------------------------------
Net Asset Value $ 13.57 $ 15.77 $ 21.96 $ 17.20
- -------------------------------------------------------------------------------
Income Dividends $ .05 $ .03 $ .02 $ .05
- -------------------------------------------------------------------------------
Capital Gains Distributions $ -- $ .01 $ .30 $ .14
- -------------------------------------------------------------------------------
Fund Total Return (%) 6.09 24.69 41.42 -20.93
- -------------------------------------------------------------------------------
Russell 2000 Value Index Total Return (%) 7.04 21.59 33.89 -18.18
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 returns for the one year and life of Fund periods would have been
lower.
*The Fund commenced operations on October 6, 1995.
4 - Scudder Small Company Value Fund
<PAGE>
Portfolio Summary as of February 28, 1999
Asset Allocation
================================
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Equity Securities 99%
Cash Equivalents 1%
------------------------------
100%
==============================
The Fund seeks to be fully invested in the stocks of small U.S. companies.
Sectors/Largest Holdings
(Excludes 1% Cash Equivs.)
================================
1. Manufacturing (17%)
AFC Cable Systems, Inc.
Manufacturer of electrical, voice and
data distribution products
2. Consumer Discretionary (13%)
Ames Department Stores, Inc.
Operator of discount department stores
3. Utilities (12%)
Black Hills Corp.
Electricity distributor
4. Construction (12%)
Granite Construction, Inc.
Heavy construction contractor
5. Financial (9%)
Harleysville Group, Inc.
Regional insurance holding company
6. Service Industries (8%)
Mine Safety Appliance Co.
Manufacturer of safety and health
protection equipment and instruments
7. Consumer Staples (7%)
Performance Food Group Co.
Food distributor
8. Durables (7%)
Excel Industries Inc.
Manufacturer of vehicle
window systems
9. Transportation (5%)
Alaska Air Group Inc.
Scheduled and charter
airline services
10.Technology (4%)
CTS Corp.
Manufacturer of electronic and
electromechanical components
Stock Characteristics
================================
Fund as
% of
Russell S&P Russell
Median Values Fund 2000* 500** 2000
- ----------------------------------------------------------------------------
Small Companies ($ millions)
Market Capitalization 322 388 7,555 83%
Value Orientation
P/E: Trailing Twelve Months 11.6x 19.6x 24.7x 59%
Price/Sales 0.5x 1.3x 1.4x 38%
Price/Book Value 1.3x 2.0x 3.1x 69%
*The Russell 2000 Index is an unmanaged capitalization-weighted measure of
approximately 2000 small U.S. stocks.
** The Standard & Poor's 500 Index is a capitalization-weighted index of 500
stocks. The index is designed to measure performance of the broad domestic
economy through changes in the aggregate market value of 500 stocks representing
all major industries.
Reflecting the Fund's disciplined approach to selecting attractively valued
stocks, the portfolio's average price/earnings, price/sales, and price/book
ratios continue to be significantly lower than the overall small-cap market.
For more complete details about the Fund's Investment Portfolio, see page 10. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
5 - Scudder Small COmpany Value Fund
<PAGE>
Portfolio Management Discussion
In the following interview, portfolio managers James Eysenbach, Philip Fortuna,
and Calvin Young discuss the market environment and the Fund's strategy for the
six-month period ended February 28, 1999.
Q: How did Scudder Small Company Value Fund perform over the past six months?
A: The Fund's total return was -1.62% for the semiannual period ended February
28, 1999. During the period, the Fund's benchmark, the Russell 2000 Value Index,
posted a total return of 4.93%. Despite recent weakness, the Fund's average
annual total return for the three years ended February 28, 1999, was 11.72%,
compared with the Index's return of 10.06%.
Q: Can you characterize the market environment for small-cap value stocks over
the six-month period?
A: It was very difficult -- in fact, the fourth quarter of 1998 was the worst
quarter for small value stocks relative to growth stocks in 20 years, going back
to the inception of the Russell 2000 Index in 1979. And the unfavorable
environment has continued into 1999.
Q: Why has it been so unfavorable?
A: Two factors, really. In July and August of 1998, when the broad market was
falling, value was outperforming fairly significantly. As the market crisis
subsided, and the market started to rebound, the small-cap growth area realized
the greatest recovery. That was one factor, the faster bounce back for growth
stocks. The divergence in performance between growth and value stocks was
further accentuated by a renewed focus on the Internet sector. Those stocks,
which are more heavily represented in the Russell 2000 Growth Index, had
extraordinary returns as participants in those stocks ignored any sort of
traditional price- to-earnings valuations.
Q: Why did the Fund underperform the Russell 2000 Value Index over the most
recent period?
A: The most important factor is that the Fund typically invests in stocks that
are even more value-oriented than the Russell Value Index in a period when value
dramatically underperformed. The Fund is structured to be "style pure," and we
don't deviate from that style. While there's some temptation during periods like
the last six months when small value is underperforming to add more technology
to the portfolio or increase the Fund's market cap, we believe that value will
continue to offer solid returns over the long term. Another reason for our value
orientation is that we focus on stocks where we see the greatest opportunities,
and there will be periods of time, particularly over the short run, when the
market is not recognizing those. To avoid being "whipsawed," we need to stick
with the Fund's long-term objective and strategy.
Q: How is quantitative portfolio management different?
A: As a long-term investment, the small-value stock universe has historically
provided superior returns relative to small-cap stocks, generally, as well as
the large-cap market. Even after the last six months' shortfall, the Russell
2000 Value Index has outperformed the Russell 2000 Index over the 3-, 4-, 5-,
6-, 7-, 8-, 9-, and 10-year periods as of February 1999. Within this universe,
we seek to add value through superior stock research, disciplined portfolio
construction, and efficient trading. Our intent is to leverage the inherent
6 - Scudder Small Company Value Fund
<PAGE>
advantages of this asset class through intelligent risk/return trade-offs and
management. We specifically focus on limiting downside risk potential while
pursuing above-average returns relative to the asset class.
Our aim is to efficiently analyze and manage a large number of stocks and vast
quantities of data through:
1. the systematic analysis of stock fundamentals and risk;
2. advanced portfolio construction methodology; and
3. flexible trading programs.
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART TITLE:
Risk Versus Return
For Scudder Small Company Value Fund and three comparative indices, since the
Fund's 10/6/95 inception through 2/28/99.
BAR CHART DATA:
- ----------------------------------------------------------------------------
Annualized
Total Return Risk*
- ----------------------------------------------------------------------------
Scudder Small Company Value Fund 12.23% 15.62%
- ----------------------------------------------------------------------------
Russesll 2000 Value Index 11.01% 15.13%
- ----------------------------------------------------------------------------
Russell 2000 Growth Index 7.48% 24.26%
- ----------------------------------------------------------------------------
Russell 2000 Index 9.51% 19.16%
- ----------------------------------------------------------------------------
BAR CHART FOOTNOTE:
* Risk defined as the standard deviation of monthly return, annualized.
Source: Scudder Kemper Investments
This approach leads to more informed decision making: before we buy or sell any
stock we can assess its effect on the whole portfolio in terms of risk and
expected return. Furthermore, our strategy does not focus on picking a few big
winners or sectors, but on building a portfolio with attractive overall
characteristics.
Q: Can you discuss what role individual sectors played in the Fund's recent
performance?
A: Our sector weights are a by-product of our stock selection process. Yet our
search for compelling values often turns up more stocks within sectors that are
currently out of favor. As a result, the Fund has recently been overweight in
construction, manufacturing, and durables relative to the broad value universe.
While construction has been a strong positive, manufacturing and durables --
hurt by the anticipation of weaker demand -- have negatively affected
performance. We have maintained an overweighting in these sectors as we continue
to see value among these stocks, which we believe have been unfairly hit by
fears of an economic slowdown.
Q: What is your outlook for small-cap stocks and the Fund?
A: We've just come through a year where small-cap stocks underperformed large
caps by 30 percentage points, the widest spread we've seen since the inception
of the Russell 2000 indices, and one of the widest spreads of this century. As a
result, valuations for small-cap stocks relative to large-cap stocks are now
very attractive. At some point, the dominance of large-cap stocks will come to
an end. After the last four years, when large cap funds have returned 26% versus
7 - Scudder Small Company Value Fund
<PAGE>
18% for small cap, it's easy to forget that the previous four years (ending
1994) saw the opposite hold true (12% for large cap versus 18% for small cap).*
As we've said in the past, we think small-cap value stocks have an important
place in a long-term investor's portfolio. These stocks offer many benefits,
including the potential to improve an investor's portfolio diversification and
increase long-term returns. We believe the Fund will continue to provide an
attractive vehicle for long-term investors seeking exposure to a dynamic area of
the stock market.
* Source: Morningstar
8 - Scudder Small Company Value 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 characteristic of an investment or an asset
referring to the ease of convertibility into cash
within a reasonably short period of time.
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.
OVER/UNDER WEIGHTING Refers to the allocation of assets -- usually
by sector, industry, or country -- within a
portfolio relative to a benchmark index, (e.g. the
Russell 2000 Value Index) or an investment universe.
PRICE/EARNINGS RATIO A widely used gauge of a stock's valuation that
(P/E) (also "earnings indicates what investors are paying for a company's
multiple") 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 possible future returns.
VALUE STOCK A company whose stock price does not fully reflect
its intrinsic value, as indicated by price-earnings
ratio, price-book value ratio, 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, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements 1.4%
- ------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement with State Street Bank and Trust Company dated 2/26/1999 at
4.74%, to be repurchased at $3,376,333 on 3/1/1999, collateralized by a ------------
$3,555,000 U.S. Treasury Note, 3.625%, 1/15/2007 (Cost $3,375,000) .................... 3,375,000 3,375,000
------------
<CAPTION>
Shares
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks 98.6%
- ------------------------------------------------------------------------------------------------------------------------------
Consumer Discretionary 12.5%
Apparel & Shoes 0.4%
Oxford Industries, Inc. ................................................................. 45,100 1,048,575
------------
Department & Chain Stores 3.6%
Ames Department Stores, Inc.* ........................................................... 82,900 2,487,000
Casey's General Stores, Inc. ............................................................ 95,600 1,230,850
Dress Barn Inc.* ........................................................................ 71,600 930,800
Jo-Ann Stores, Inc."A"* ................................................................. 58,300 772,475
Shopko Stores, Inc.* .................................................................... 61,600 1,940,400
Syms Corp.* ............................................................................. 174,300 1,383,506
------------
8,745,031
------------
Home Furnishings 2.1%
Haverty Furniture Co., Inc. ............................................................. 57,500 1,293,750
Interface, Inc. ......................................................................... 156,800 1,494,500
Oneida Ltd. ............................................................................. 58,200 814,800
Thomas Industries, Inc. ................................................................. 81,950 1,398,272
------------
5,001,322
------------
Hotels & Casinos 0.4%
Prime Hospitality Corp.* ................................................................ 93,500 958,375
------------
Recreational Products 0.2%
CPI Corp. ............................................................................... 19,800 433,125
------------
Restaurants 2.0%
Avado Brands, Inc. ...................................................................... 147,900 1,007,569
IHOP Corp.* ............................................................................. 19,300 788,888
Landry's Seafood Restaurants, Inc.* ..................................................... 56,800 386,950
Rainforest Cafe Inc.* ................................................................... 224,600 1,221,263
Ryan's Family Steak Houses, Inc.* ....................................................... 137,100 1,559,513
------------
4,964,183
------------
</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>
Specialty Retail 3.8%
Central Garden & Pet Co.* ............................................................... 89,600 1,523,200
Corporate Express, Inc.* ................................................................ 98,000 526,750
Discount Auto Parts Inc.* ............................................................... 53,900 1,155,481
Friedman's, Inc., "A"* .................................................................. 104,300 1,095,150
Global Directmail Corp.* ................................................................ 54,300 892,556
Hollywood Entertainment Corp.* .......................................................... 57,200 1,569,425
Inacom Corp.* ........................................................................... 75,700 1,173,350
Just For Feet, Inc.* .................................................................... 88,100 900,272
United Auto Group, Inc.* ................................................................ 56,600 417,425
------------
9,253,609
------------
Consumer Staples 6.7%
Alcohol & Tobacco 0.5%
Robert Mondavi Corp. "A"* ............................................................... 37,500 1,289,063
------------
Consumer Electronic & Photographic 0.4%
Recoton Corp.* .......................................................................... 64,800 907,200
------------
Consumer Specialties 0.1%
Sola International, Inc.* ............................................................... 37,400 402,050
------------
Food & Beverage 4.2%
Earthgrains Co. ......................................................................... 30,000 736,875
Imperial Sugar Co. ...................................................................... 194,100 1,395,094
Michael Foods, Inc. ..................................................................... 61,200 1,132,200
Performance Food Group Co.* ............................................................. 98,600 2,563,600
Pilgrim's Pride Corp. ................................................................... 121,300 2,312,281
Riviana Foods, Inc. ..................................................................... 88,900 1,911,350
Seaboard Corp. .......................................................................... 300 109,500
------------
10,160,900
------------
Textiles 1.5%
Guilford Mills, Inc. .................................................................... 92,800 1,148,400
Hartmarx Corp.* ......................................................................... 350,300 1,510,669
Polymer Group, Inc.* .................................................................... 98,400 990,150
------------
3,649,219
------------
Health 1.6%
Health Industry Services 0.2%
AmeriPath, Inc.* ........................................................................ 57,000 530,813
------------
</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>
Medical Supply & Specialty 1.1%
Bindley Western Industries, Inc. ........................................................ 77,866 2,048,849
Maxxim Medical Inc.* .................................................................... 22,900 520,975
------------
2,569,824
------------
Pharmaceuticals 0.3%
Priority Health Corp. ................................................................... 19,383 754,726
------------
Financial 9.3%
Banks 2.9%
Bok Financial Corp. ..................................................................... 22,066 507,518
First Citizens BancShares, Inc. "A" ..................................................... 1,200 95,850
First Federal Financial Corp.* .......................................................... 108,000 1,829,250
Firstbank Corp. ......................................................................... 73,000 1,829,563
Imperial Bancorp* ....................................................................... 43,740 798,255
Riggs National Corp. .................................................................... 69,200 1,280,200
Silicon Valley Bancshares* .............................................................. 14,600 280,138
UST Corp. ............................................................................... 23,100 483,656
------------
7,104,430
------------
Insurance 5.5%
Acceptance Insurance Cos., Inc.* ........................................................ 50,700 868,238
American Annuity Group, Inc. ............................................................ 25,600 555,200
American Heritage Life Investment Corp. ................................................. 51,600 1,135,200
Baldwin & Lyons, Inc. "B" ............................................................... 52,042 1,089,629
Delphi Financial Group, Inc. "A" ........................................................ 8,827 423,144
Fidelity National Financial, Inc. ....................................................... 44,858 897,160
Guarantee Life Companies, Inc. .......................................................... 53,100 939,206
Harleysville Group, Inc. ................................................................ 96,500 1,978,250
Life USA Holdings Inc. .................................................................. 56,400 645,075
Medical Assurance, Inc.* ................................................................ 38,783 1,148,946
Nymagic, Inc. ........................................................................... 88,800 1,315,350
Presidential Life Corp. ................................................................. 79,200 1,410,750
Trenwick Group, Inc. .................................................................... 35,400 1,026,600
------------
13,432,748
------------
Business Finance 0.7%
Advest Group, Inc. ...................................................................... 82,400 1,637,700
------------
</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>
Real Estate 0.2%
Delta Financial Corp.* .................................................................. 67,800 394,088
IMC Mortgage Co.* ....................................................................... 231,900 94,209
------------
488,297
------------
Service Industries 7.7%
EDP Services 0.7%
Electro Rent Corp.* ..................................................................... 16,000 162,000
Pomeroy Computer Resources, Inc.* ....................................................... 68,700 1,554,338
------------
1,716,338
------------
Environmental Services 1.7%
Dames & Moore, Inc. ..................................................................... 210,600 2,079,675
Mine Safety Appliance Co. ............................................................... 32,800 2,123,800
------------
4,203,475
------------
Investment 1.2%
Jefferies Group, Inc. ................................................................... 26,100 1,029,319
Southwest Securities Group, Inc. ........................................................ 61,800 1,780,613
------------
2,809,932
------------
Miscellaneous Commercial Services 3.0%
Berlitz International, Inc.* ............................................................ 44,500 1,104,156
CORT Business Services Corp.* ........................................................... 76,200 1,262,063
McGrath Rentcorp ........................................................................ 38,000 712,500
Morrison Knudsen Corp.* ................................................................. 101,800 986,188
Olsten Corp. ............................................................................ 170,000 1,051,875
Personnel Group of America, Inc.* ....................................................... 70,600 931,038
Volt Information Sciences, Inc.* ........................................................ 62,400 1,166,100
------------
7,213,920
------------
Printing/Publishing 1.1%
Bowne & Co., Inc. ....................................................................... 128,600 1,792,363
Merrill Corp. ........................................................................... 59,600 998,300
------------
2,790,663
------------
Durables 6.4%
Aerospace 2.2%
Curtiss-Wright Corp. .................................................................... 71,300 2,678,206
Fairchild Corp. "A"* .................................................................... 105,892 1,277,322
Kaman Corp. "A" ......................................................................... 107,600 1,452,600
------------
5,408,128
------------
</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>
Automobiles 3.2%
Arvin Industries, Inc. .................................................................. 10,300 373,375
Coachmen Industries, Inc. ............................................................... 64,100 1,298,025
Excel Industries Inc. ................................................................... 125,000 2,953,125
Intermet Corp. .......................................................................... 145,500 1,818,750
Simpson Industries, Inc. ................................................................ 88,000 819,500
Wynn's International, Inc. .............................................................. 30,675 567,488
------------
7,830,263
------------
Construction/Agricultural Equipment 0.6%
Allied Products Corp. ................................................................... 60,250 297,484
NACCO Industries, Inc. "A" .............................................................. 12,600 1,108,800
------------
1,406,284
------------
Leasing Companies 0.4%
Budget Group, Inc.* ..................................................................... 57,700 674,369
Leasing Solutions, Inc.* ................................................................ 60,300 218,588
------------
892,957
------------
Manufacturing 16.4%
Apparel & Shoes 0.4%
Guess?, Inc.* ........................................................................... 124,000 852,500
------------
Chemicals 1.3%
NCH Corp. ............................................................................... 40,800 2,060,400
Stepan Co. .............................................................................. 50,000 1,181,250
------------
3,241,650
------------
Diversified Manufacturing 3.6%
ACX Technologies, Inc.* ................................................................. 17,900 222,631
Cascade Corp. ........................................................................... 131,300 1,444,300
Griffon Corp.* .......................................................................... 171,200 1,540,800
Justin Industries ....................................................................... 89,500 956,531
Robbins & Myers, Inc. ................................................................... 16,800 277,200
Scotsman Industries, Inc. ............................................................... 90,600 1,721,400
SPS Technologies, Inc.* ................................................................. 36,100 1,489,125
Tredegar Industries, Inc. ............................................................... 35,400 904,913
Valmont Industries ...................................................................... 28,100 331,053
------------
8,887,953
------------
</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>
Electrical Products 1.5%
AFC Cable Systems, Inc.* ................................................................ 66,675 2,208,609
C&D Technologies, Inc. .................................................................. 58,200 1,396,800
------------
3,605,409
------------
Hand Tools 0.9%
L.S. Starrett Corp. "A" ................................................................. 71,999 2,146,470
------------
Industrial Specialty 2.0%
Barnes Group, Inc. ...................................................................... 62,800 1,197,125
Commercial Intertech Corp. .............................................................. 72,500 888,125
O'Sullivan Industries Holdings, Inc.* ................................................... 75,000 787,500
RTI International Metals, Inc.* ......................................................... 87,400 928,625
Spartech Corp. .......................................................................... 22,300 526,838
Wyman-Gordon Co.* ....................................................................... 75,100 605,494
------------
4,933,707
------------
Machinery/Components/Controls 5.1%
Amcast Industrial Corp. ................................................................. 59,400 1,124,888
Columbus McKinnon Corp. ................................................................. 105,200 2,156,600
DT Industries, Inc. ..................................................................... 64,900 713,900
Gleason Corp. ........................................................................... 80,000 1,315,000
Mueller Industries, Inc.* ............................................................... 29,800 629,525
Reliance Steel & Aluminum Co. ........................................................... 54,900 1,403,381
Sequa Corp. "A"* ........................................................................ 34,700 1,633,069
Shaw Group, Inc.* ....................................................................... 52,800 722,700
Tennant Company ......................................................................... 45,000 1,577,813
Woodward Governor Co. ................................................................... 57,500 1,243,438
------------
12,520,314
------------
Office Equipment/Supplies 0.6%
General Binding Corp. ................................................................... 56,100 1,528,725
------------
Wholesale Distributors 1.0%
A.M. Castle & Co. ....................................................................... 54,400 741,200
Applied Industrial Technology, Inc. ..................................................... 40,425 515,419
Hughes Supply, Inc. ..................................................................... 50,950 1,028,553
------------
2,285,172
------------
Technology 3.8%
Computer Software 0.6%
MTS Systems Corp. ....................................................................... 119,200 1,497,450
------------
</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>
Diverse Electronic Products 0.6%
Esterline Technologies Corp.* ........................................................... 80,800 1,383,700
------------
Electronic Components/Distributors 1.7%
CHS Electronics, Inc.* .................................................................. 133,400 933,800
CTS Corp. ............................................................................... 47,500 2,324,531
CompuCom Systems, Inc.* ................................................................. 126,900 551,222
Rogers Corp.* ........................................................................... 15,600 403,650
------------
4,213,203
------------
Military Electronics 0.6%
Tech-Sym Corp.* ......................................................................... 59,300 1,482,500
------------
Semiconductors 0.3%
Siliconix, Inc.* ........................................................................ 36,900 797,963
------------
Energy 3.3%
Oil & Gas Production 1.1%
Plains Resources, Inc.* ................................................................. 100,600 930,550
Tesoro Petroleum Corp.* ................................................................. 109,835 878,680
UTI Energy Corp.* ....................................................................... 161,800 940,463
------------
2,749,693
------------
Oil Companies 0.1%
Giant Industries, Inc. .................................................................. 18,200 125,125
------------
Oilfield Services/Equipment 2.1%
Patterson Energy, Inc.* ................................................................. 268,800 756,000
Pool Energy Services Co.* ............................................................... 167,600 1,702,188
Pride International Inc.* ............................................................... 159,100 795,500
RPC, Inc. ............................................................................... 91,500 560,438
Seacor Smit Inc.* ....................................................................... 35,300 1,389,938
------------
5,204,064
------------
Metals & Minerals 2.4%
Steel & Metals
Armco, Inc.* ............................................................................ 282,800 1,414,000
Carpenter Technology Corp. .............................................................. 1,100 28,531
Citation Corp.* ......................................................................... 66,400 676,450
Cleveland-Cliffs, Inc. .................................................................. 26,700 989,569
Commercial Metals Co. ................................................................... 36,100 823,531
Quanex Corp. ............................................................................ 51,500 901,250
Shiloh Industries, Inc.* ................................................................ 85,000 1,041,250
------------
5,874,581
------------
</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>
Construction 11.8%
Building Materials 4.7%
Ameron International Corp. .............................................................. 50,500 1,982,125
Butler Manufacturing Co. ................................................................ 24,900 563,363
Florida Rock Industries, Inc. ........................................................... 73,600 2,060,800
Giant Cement Holding, Inc.* ............................................................. 50,000 981,250
Lone Star Industries, Inc. .............................................................. 62,200 2,052,600
Puerto Rican Cement Co., Inc. ........................................................... 44,300 1,517,275
Texas Industries, Inc. .................................................................. 33,800 832,325
Universal Forest Products, Inc. ......................................................... 73,700 1,478,606
------------
11,468,344
------------
Building Products 1.3%
NCI Building Systems, Inc.* ............................................................. 75,800 1,743,400
Nortek, Inc.* ........................................................................... 58,600 1,523,600
------------
3,267,000
------------
Homebuilding 4.7%
Cavalier Homes, Inc. .................................................................... 43,700 437,000
Champion Enterprises, Inc.* ............................................................. 9,200 181,125
D.R. Horton, Inc. ....................................................................... 31,200 497,250
Del Webb Corp. .......................................................................... 74,700 1,680,750
NVR Inc.* ............................................................................... 45,200 1,943,600
Ryland Group, Inc. ...................................................................... 62,200 1,586,100
Skyline Corp. ........................................................................... 81,700 2,389,712
Standard Pacific Corp. .................................................................. 124,000 1,534,500
U.S. Home Corp.* ........................................................................ 37,600 1,297,200
------------
11,547,237
------------
Miscellaneous 1.1%
Granite Construction, Inc. .............................................................. 106,800 2,623,275
------------
Transportation 4.5%
Air Freight 0.7%
Circle International Group, Inc. ........................................................ 55,800 955,575
Kitty Hawk, Inc.* ....................................................................... 78,800 662,413
------------
1,617,988
------------
Airlines 0.9%
Alaska Air Group Inc.* .................................................................. 42,300 2,144,081
------------
</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 1,886,463
------------
Trucking 2.2%
Consolidated Freightways Corp.* ......................................................... 105,200 1,525,400
Roadway Express, Inc. ................................................................... 104,800 1,611,300
U.S. Xpress Enterprises, Inc."A"* ....................................................... 45,000 720,000
USFreightways Corp. ..................................................................... 45,200 1,440,750
------------
5,297,450
------------
Utilities 12.2%
Electric Utilities 9.6%
Black Hills Corp. ....................................................................... 134,050 3,016,125
Central Hudson Gas & Electric Co. ....................................................... 62,900 2,280,125
Cleco Corp. ............................................................................. 98,200 2,884,625
Commonwealth Energy System Cos. ......................................................... 62,500 2,257,813
El Paso Electric Co.* ................................................................... 352,500 2,533,594
Northwestern Corp. ...................................................................... 111,900 2,692,594
SIGCORP, Inc. ........................................................................... 93,200 2,679,500
TNP Enterprises, Inc. ................................................................... 91,100 2,664,675
United Illuminating Co. ................................................................. 54,900 2,436,188
------------
23,445,239
------------
Natural Gas Distribution 2.6%
Energen Corp. ........................................................................... 100,600 1,408,400
Laclede Gas Co. ......................................................................... 125,500 2,886,500
North Carolina Natural Gas Corp. ........................................................ 64,350 2,059,200
------------
6,354,100
- ------------------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $259,181,507) 240,584,506
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $262,556,507) (a) 243,959,506
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $262,556,507. At February 28,
1999, net unrealized depreciation for all securities based on tax cost was
$18,597,001. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $25,812,039 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$44,409,040.
* 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, 1999 (Unaudited)
<TABLE>
<S> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $262,556,507) ................. $ 243,959,506
Cash .................................................................. 333
Receivable for investments sold ....................................... 893,033
Dividends and interest receivable ..................................... 314,486
Receivable for Fund shares sold ....................................... 145,852
Deferred organization expense ......................................... 8,012
Other assets .......................................................... 2,106
----------------
Total assets .......................................................... 245,323,328
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Payable for Fund shares redeemed ...................................... 277,143
Accrued management fee ................................................ 66,032
Other payables and accrued expenses ................................... 152,015
----------------
Total liabilities ..................................................... 495,190
-------------------------------------------------------------------------------------------
Net assets, at market value $ 244,828,138
-------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated distributions in excess of net investment income .......... (433,386)
Net unrealized appreciation (depreciation) on investments ............. (18,597,001)
Accumulated net realized gain (loss) .................................. 1,430,362
Paid-in capital ....................................................... 262,428,163
-------------------------------------------------------------------------------------------
Net assets, at market value $ 244,828,138
-------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($244,828,138 / 14,233,935 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares ----------------
authorized) ......................................................... $17.20
----------------
</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, 1999 (Unaudited)
<TABLE>
<S> <C>
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Income:
Dividends (net of foreign taxes withheld of $2,958) ................... $ 1,721,419
Interest .............................................................. 138,867
----------------
1,860,286
----------------
Expenses:
Management fee ........................................................ 969,575
Services to shareholders .............................................. 816,075
Custodian and accounting fees ......................................... 45,076
Trustees' fees and expenses ........................................... 15,828
Registration fees ..................................................... 39,066
Reports to shareholders ............................................... 28,840
Auditing .............................................................. 13,236
Legal ................................................................. 8,196
Amortization of organization expense .................................. 2,252
Other ................................................................. 10,118
----------------
Total expenses before reductions ...................................... 1,948,262
Expense reductions .................................................... (168,636)
----------------
Expenses, net ......................................................... 1,779,626
-------------------------------------------------------------------------------------------
Net investment income 80,660
-------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from investments ............................. 1,061,573
Net unrealized appreciation (depreciation) during the period on
investments ......................................................... (7,170,706)
-------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions (6,109,133)
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ (6,028,473)
-------------------------------------------------------------------------------------------
</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
February 28, Year Ended
1999 August 31,
Increase (Decrease) in Net Assets (Unaudited) 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................................... $ 80,660 $ 746,953
Net realized gain (loss) from investment transactions ............... 1,061,573 2,367,119
Net unrealized appreciation (depreciation) on
investment transactions during the period ......................... (7,170,706) (39,604,194)
---------------- ----------------
Net increase (decrease) in net assets resulting from
operations ........................................................ (6,028,473) (36,490,122)
---------------- ----------------
Distributions to shareholders from:
Net investment income ............................................... (638,997) (197,998)
---------------- ----------------
Net realized gains .................................................. (1,915,015) (2,969,965)
---------------- ----------------
Fund share transactions:
Proceeds from shares sold ........................................... 82,698,952 225,960,585
Net asset value of shares issued to shareholders in
reinvestment of distributions ..................................... 2,401,916 3,041,559
Cost of shares redeemed ............................................. (68,591,518) (76,441,815)
Redemption fees ..................................................... 221,951 378,256
---------------- ----------------
Net increase (decrease) in net assets from Fund share
transactions ...................................................... 16,731,301 152,938,585
---------------- ----------------
Increase (decrease) in net assets ................................... 8,148,816 113,280,500
Net assets at beginning of period ................................... 236,679,322 123,398,822
Net assets at end of period (including accumulated
distributions in excess of net investment income of
$433,386 and undistributed net investment income of ---------------- ----------------
$124,951, respectively) ........................................... $244,828,138 $236,679,322
---------------- ----------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ........................... 13,410,779 6,303,515
---------------- ----------------
Shares sold ......................................................... 4,410,245 10,582,782
Shares issued to shareholders in reinvestment of
distributions ..................................................... 126,951 148,152
Shares redeemed ..................................................... (3,714,040) (3,623,670)
---------------- ----------------
Net increase (decrease) in Fund shares .............................. 823,156 7,107,264
---------------- ----------------
Shares outstanding at end of period ................................. 14,233,935 13,410,779
---------------- ----------------
</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,
Six Months 1995
Ended Years Ended (commencement
February 28, August 31, of operations) to
1999 August 31,
(Unaudited) 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
-------------------------------------------------------------
Net asset value, beginning of period ............................. $ 17.65 $ 19.58 $ 13.57 $ 12.00
-------------------------------------------------------------
Income from investment operations:
Net investment income ............................................ .01 .07 .01 .07
Net realized and unrealized gain (loss) on investment
transactions ................................................... (.29) (1.71) 6.03 1.53
-------------------------------------------------------------
Total from investment operations ................................. (.28) (1.64) 6.04 1.60
-------------------------------------------------------------
Less distributions:
From net investment income ....................................... (.05) (.02) (.03) (.05)
From net realized gains on investment transactions ............... (.14) (.30) (.01) --
-------------------------------------------------------------
Total distributions .............................................. (.19) (.32) (.04) (.05)
-------------------------------------------------------------
Redemption fees .................................................. .02 .03 .01 .02
-------------------------------------------------------------
Net asset value, end of period ................................... $ 17.20 $ 17.65 $ 19.58 $ 13.57
-------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (%) (c) ............................................. (1.62)(b)** (8.45) 44.67(b) 13.54(b)**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ........................... 245 237 123 41
Ratio of operating expenses, net to average daily
net assets (%) ................................................. 1.38* 1.39 1.50 1.50*
Ratio of operating expenses before expense reductions, to
average daily net assets (%) ................................... 1.51* 1.39 1.63 2.61*
Ratio of net investment income to average daily
net assets (%) ................................................. .06* .31 .07 .67*
Portfolio turnover rate (%) ...................................... 25.5* 22.6 43.6 34.0*
</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 Stock Market, Inc.
("Nasdaq"), for which there have been sales, are valued at the most recent sale
price reported on Nasdaq. If there are no such sales, the value is the high or
"inside" bid quotation. Securities which are not quoted on Nasdaq 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 is equal to at least 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 during such
23 - Scudder Small Company Value Fund
<PAGE>
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, 1999, purchases and sales of investment
securities (excluding short-term investments) aggregated $45,745,572 and
$32,202,498, respectively.
C. Related Parties
Under the Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"), the Adviser directs the
investments of the Fund in accordance with its investment objectives, policies,
and restrictions. The Adviser determines the securities, instruments, and other
contracts relating to investments to be purchased, sold or entered into by the
Fund. In addition to portfolio management services, the Adviser provides certain
administrative services in accordance with the Agreement. The management fee
payable under the Agreement is equal to an annual rate of approximately 0.75% of
the Fund's average daily net assets computed and accrued daily and payable
monthly. In addition, as of December 1, 1998, the Adviser agreed to maintain the
annualized expenses of the Fund at not more than 1.25% of average daily net
assets until November 30, 1999. For the six months ended February 28, 1999, the
Adviser did not impose a portion of its management fee which amounted to
$168,636, and the amount imposed amounted to $800,939, of which $66,032 was
unpaid at February 28, 1999.
Effective September 7, 1998, Zurich Insurance Company ("Zurich"), majority owner
of the Adviser, entered into an agreement with B.A.T Industries p.l.c. ("B.A.T")
pursuant to which the financial services businesses of B.A.T were combined with
Zurich's businesses to form a new global insurance and financial services
company known as Zurich Financial Services. Upon consummation of the
transaction, the Fund's Management Agreement with Scudder Kemper Inc. was deemed
to have been assigned and, therefore, terminated. In December 1998, the Board of
Trustees and the shareholders of the Fund approved a new investment management
agreement with Scudder Kemper, which is substantially identical to the former
Management Agreement, except for the dates of execution and termination.
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, 1999, the amount charged to the Fund by SSC
aggregated $398,730, of which $70,113 was unpaid at February 28, 1999.
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, 1999, the amount charged to the Fund by STC aggregated $298,006, of which
$46,228 was unpaid at February 28, 1999.
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, 1999, the amount charged to the Fund by SFAC aggregated
$35,843, of which $6,051 was unpaid at February 28, 1999.
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 Fund 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, 1999, the
Special Servicing Agreement expense charged to the Fund amounted to $19,024.
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, 1999, Trustees' fees and expenses aggregated
$15,828.
D. Line of Credit
The Fund and several other Scudder Funds (the "Participants") share in a $850
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, pro rata based on net assets, 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% of its net assets
under the agreement.
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 December 15, 1998, at the office of Scudder Kemper
Investments, Inc., Two International Place, Boston, Massachusetts 02110. At the
Meeting the following matters were voted upon by the shareholders (the resulting
votes for each matter are presented below).
1. To approve a new Investment Management Agreement for the Fund with Scudder
Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
6,962,230 158,755 249,345 0
2. To approve the revision of the Fund's fundamental lending policy.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
6,644,152 289,734 319,733 116,711
- --------------------------------------------------------------------------------
* 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.
26 - Scudder Small Company Value Fund
<PAGE>
This Page
intentionally
left blank.
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
Keith R. Fox
Trustee; Private Equity Investor
William H. Luers
Trustee; Chairman and
President, U.N. Association of
the U.S.A.
Kathryn L. Quirk*
Trustee, Vice President and
Assistant Secretary
Joan Spero
Trustee; President, Doris Duke
Charitable Foundation
Thomas J. Devine
Honorary Trustee; Consultant
Wilson Nolen
Honorary Trustee; Consultant
Robert G. Stone, Jr.
Honorary Trustee; Chairman
Emeritus and Director, Kirby
Corporation
Edmund R. Swanberg
Honorary Trustee
Peter Chin*
Vice President
J. Brooks Dougherty*
Vice President
James M. Eysenbach*
Vice President
James E. Fenger*
Vice President
Philip S. Fortuna*
Vice President
Thomas W. Joseph*
Vice President
Ann M. McCreary*
Vice President
Thaddeus Paluszek*
Vice President
Kurt R. Stalzer*
Vice President
Peter Taylor*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Richard W. Desmond*
Assistant Secretary
John R. Hebble*
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 --
Prime Reserve Shares*
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 Corporate Bond Fund
Scudder High Yield Bond Fund
Global Income
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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 Dividend & Growth 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 Equity
- -------------
Worldwide
Scudder Global Fund
Scudder International Value Fund
Scudder International Growth and Income Fund
Scudder International Fund++
Scudder International Growth 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
Preferred Series
- ----------------
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small
Company Fund
Retirement Programs and Education Accounts
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Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
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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.
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. ***Only the Scudder Shares of the Fund are part
of the Scudder Family of Funds. ++Only the International Shares of the Fund are
part of the Scudder Family of Funds. +++ +++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. +++ +++ +++A no-load variable
annuity contract issued by Glenbrook Life and Annuity Company and underwritten
by Allstate Financial Services, Inc., sold 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 -- www.scudder.com
1-800-343-2890
Personal Investment Organizer: 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 8,000 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
800 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 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 $280 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts.
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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