UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-CSR
Investment Company Act file number 811-2021
SCUDDER SECURITIES TRUST
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(Exact Name of Registrant as Specified in Charter)
Two International Place, Boston, MA 02110-4103
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (617) 295-2663
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Salvatore Schiavone
Two International Place
Boston, Massachusetts 02110
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(Name and Address of Agent for Service)
Date of fiscal year end: 7/31
Date of reporting period: 7/31/04
ITEM 1. REPORT TO STOCKHOLDERS
[Scudder Investments logo]
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Annual Report to Shareholders |
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July 31, 2004 |
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Contents |
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<Click Here> Performance Summary <Click Here> Information About Your Fund's Expenses <Click Here> Portfolio Management Review <Click Here> Portfolio Summary <Click Here> Investment Portfolio <Click Here> Financial Statements <Click Here> Financial Highlights <Click Here> Notes to Financial Statements <Click Here> Report of Independent Registered Public Accounting Firm <Click Here> Tax Information <Click Here> Trustees and Officers <Click Here> Account Management Resources |
This report must be preceded or accompanied by a prospectus. To obtain a prospectus for any of our funds, refer to the Account Management Resources information provided in the back of this booklet. We advise you to consider the fund's objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other important information about the fund. Please read the prospectus carefully before you invest.
Investments in mutual funds involve risk. Some funds have more risk than others. This fund is subject to stock market risk, meaning stocks in the fund may decline in value for extended periods of time due to the activities and financial prospects of individual companies, or due to general market and economic conditions. Additionally, stocks of small companies involve greater risk than securities of larger, more-established companies, as they often have limited product lines, markets or financial resources and may be exposed to more erratic and abrupt market movements. Please read this fund's prospectus for specific information regarding its investments and risk profile.
Scudder Investments is part of Deutsche Asset Management, which is the marketing name in the US for the asset management activities of Deutsche Bank AG, Deutsche Investment Management Americas Inc., Deutsche Asset Management Inc., Deutsche Asset Management Investment Services Ltd., Deutsche Bank Trust Company Americas and Scudder Trust Company.
Fund shares are not FDIC-insured and are not deposits or other obligations of, or guaranteed by, any bank. Fund shares involve investment risk, including possible loss of principal.
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Classes A, B and C
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. Please visit scudder.com for the product's most recent month-end performance.
The maximum sales charge for Class A shares is 5.75%. For Class B shares, the maximum contingent deferred sales charge (CDSC) is 4% within the first year after purchase, declining to 0% after six years. Class C shares have no adjustment for front-end sales charges but redemptions within one year of purchase may be subject to a CDSC of 1%. Unadjusted returns do not reflect sales charges and would have been lower if they had.
Returns during the 5-year and Life of Fund periods shown reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns would have been lower.
Performance figures do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemptions of fund shares. Returns and rankings may differ by share class.
Returns shown for Class A, B and C shares for the periods prior to December 3, 2001 are derived from the historical performance of Class S shares of the Scudder Small Company Value Fund during such periods and have been adjusted to reflect the higher gross total annual operating expenses of each specific class. Any difference in expenses will affect performance.
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Average Annual Total Returns (Unadjusted for Sales Charge) as of 7/31/04 |
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Scudder Small Company Value Fund |
1-Year |
3-Year |
5-Year |
Life of Fund* |
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Class A
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25.84% |
11.37% |
8.78% |
11.02% |
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Class B
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24.79% |
10.50% |
7.92% |
10.14% |
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Class C
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24.94% |
10.54% |
7.95% |
10.17% |
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Russell 2000 Value Index+ |
22.83% |
11.25% |
12.30% |
13.14% |
Sources: Lipper Inc. and Deutsche Investment Management Americas Inc.
* The Fund commenced operations on October 6, 1995. Index returns begin October 31, 1995.|
Net Asset Value and Distribution Information |
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Class A |
Class B |
Class C |
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Net Asset Value:
7/31/04 |
$ 26.23 | $ 25.72 | $ 25.75 |
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7/31/03 |
$ 20.85 | $ 20.61 | $ 20.61 |
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Distribution Information:
Twelve Months: Income Dividends as of 7/31/04 |
$ .02 | $ - | $ - |
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Class A Lipper Rankings - Small-Cap Value Funds Category as of 7/31/04 |
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Period |
Rank |
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Number of Funds Tracked |
Percentile Ranking |
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1-Year |
61 |
of |
230 |
27 |
Source: Lipper Inc. Rankings are historical and do not guarantee future results. Rankings are based on total return unadjusted for sales charges with distributions reinvested. If sales charges had been included, rankings might have been less favorable. Rankings are for Class A shares; other share classes may vary.
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Growth of an Assumed $10,000 Investment (Adjusted for Maximum Sales Charge) |
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[] Scudder Small Company Value Fund - Class A [] Russell 2000 Value Index+ |
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Yearly periods ended July 31 |
The Fund's growth of an assumed $10,000 investment is adjusted for the maximum sales charge of 5.75%. This results in a net initial investment of $9,425.
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Comparative Results (Adjusted for Maximum Sales Charge) as of 7/31/04 |
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Scudder Small Company Value Fund |
1-Year |
3-Year |
5-Year |
Life of Fund* |
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Class A |
Growth of $10,000 |
$11,860 |
$13,020 |
$14,356 |
$23,702 |
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Average annual total return |
18.60% |
9.20% |
7.50% |
10.28% |
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Class B |
Growth of $10,000 |
$12,184 |
$13,294 |
$14,542 |
$23,444 |
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Average annual total return |
21.84% |
9.96% |
7.78% |
10.14% |
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Class C |
Growth of $10,000 |
$12,494 |
$13,506 |
$14,663 |
$23,499 |
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Average annual total return |
24.94% |
10.54% |
7.95% |
10.17% |
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Russell 2000
Value Index+
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Growth of $10,000 |
$12,283 |
$13,768 |
$17,864 |
$29,443 |
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Average annual total return |
22.83% |
11.25% |
12.30% |
13.14% |
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The growth of $10,000 is cumulative.
* The Fund commenced operations on October 6, 1995. Index returns begin October 31, 1995.+ 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. It is not possible to invest directly into an index.
Class S
Class S is not available to new investors.
All performance shown is historical, assumes reinvestment of all dividends and capital gains, and does not guarantee future results. Investment return and principal value fluctuate with changing market conditions so that, when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. Please visit myScudder.com for the product's most recent month-end performance.
Returns and rankings during the 5-year and Life of Fund periods shown reflect a fee waiver and/or expense reimbursement. Without this waiver/reimbursement, returns and rankings would have been lower.
Performance figures do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemptions of fund shares. Returns and rankings may differ by share class.
Shareholders redeeming shares held less than one year will have a lower return due to the effect of the 1% redemption fee.
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Average Annual Total Returns as of 7/3104 |
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Scudder Small Company Value Fund |
1-Year |
3-Year |
5-Year |
Life of Fund* |
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Class S
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26.26% |
11.69% |
9.08% |
11.34% |
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Russell 2000 Value Index+ |
22.83% |
11.25% |
12.30% |
13.14% |
Sources: Lipper Inc. and Deutsche Investment Management Americas Inc.
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Net Asset Value and Distribution Information |
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Class S |
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Net Asset Value:
7/31/04 |
$ 26.27 |
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7/31/03 |
$ 20.87 |
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Distribution Information:
Twelve Months: Income Dividends as of 7/31/04 |
$ .08 |
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Class S Lipper Rankings - Small-Cap Value Funds Category as of 7/31/04 |
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Period |
Rank |
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Number of Funds Tracked |
Percentile Ranking |
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1-Year |
52 |
of |
230 |
23 |
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3-Year |
54 |
of |
164 |
33 |
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5-Year |
118 |
of |
127 |
93 |
Source: Lipper Inc. Rankings are historical and do not guarantee future results. Rankings are based on total returns with distributions reinvested. Rankings are for Class S shares; other classes may vary.
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Growth of an Assumed $10,000 Investment |
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[] Scudder Small Company Value Fund - Class S [] Russell 2000 Value Index+ |
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Yearly periods ended July 31 |
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Comparative Results as of 7/31/04 |
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Scudder Small Company Value Fund |
1-Year |
3-Year |
5-Year |
Life of Fund* |
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Class S |
Growth of $10,000 |
$12,626 |
$13,932 |
$15,446 |
$25,772 |
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Average annual total return |
26.26% |
11.69% |
9.08% |
11.34% |
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Russell 2000
Value Index+
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Growth of $10,000 |
$12,283 |
$13,768 |
$17,864 |
$29,443 |
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Average annual total return |
22.83% |
11.25% |
12.30% |
13.14% |
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The growth of $10,000 is cumulative.
* The Fund commenced operations on October 6, 1995. Index returns begin October 31, 1995.+ 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. It is not possible to invest directly into an index.
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As an investor of the Fund, you incur two types of costs: ongoing expenses and transaction costs. Ongoing expenses include management fees, distribution and service (12b-1) fees and other Fund expenses. Examples of transaction costs include sales charges (loads), redemption fees and account maintenance fees, which are not shown in this section and which would result in higher total expenses. The following table is intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to help you compare these expenses with the ongoing expenses of investing in other mutual funds. The table is based on an investment of $1,000 made at the beginning of the six-month period ended July 31, 2004.
The table illustrates your Fund's expenses in two ways:
• Actual Fund Return. This helps you estimate the actual dollar amount of ongoing expenses paid on a $1,000 investment in the Fund using the Fund's actual return during the period. To estimate the expenses you paid over the period, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the "Expenses Paid per $1,000" line under the share class you hold.
• Hypothetical 5% Fund Return. This helps you to compare your Fund's ongoing expenses (but not transaction costs) with those of other mutual funds using the Fund's actual expense ratio and a hypothetical rate of return of 5% per year before expenses. Examples using a 5% hypothetical fund return may be found in the shareholder reports of other mutual funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Please note that the expenses shown in these tables are meant to highlight your ongoing expenses only and do not reflect any transaction costs, such as sales charges (loads) or redemption fees. The "Expenses Paid per $1,000" line of the tables is useful in comparing ongoing expenses only and will not help you determine the relative total expense of owning different funds. If these transaction costs had been included, your costs would have been higher.
* Expenses are equal to the Fund's annualized expense ratio for each share class, multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by 366.
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Annualized Expense Ratios+
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Class A |
Class B |
Class C |
Class S |
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Scudder Small Company Value Fund |
1.30% |
2.21% |
1.99% |
1.12% |
+ The expense ratio reflects a change to expenses within the most recent six-month period. Effective April 1, 2004, the Fund directly bears the costs of those expenses formerly covered under an Administrative Agreement. See Note C in Notes to Financial Statements.
For more information, please refer to the Fund's prospectus.
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Deutsche Investment Management Americas Inc. ("DeIM" or the "Advisor"), which is part of Deutsche Asset Management, is the investment advisor for Scudder Small Company Value Fund. DeIM and its predecessors have more than 80 years of experience managing mutual funds and DeIM provides a full range of investment advisory services to institutional and retail clients. DeIM is also responsible for selecting brokers and dealers and for negotiating brokerage commissions and dealer charges.
Deutsche Asset Management is a global asset management organization that offers a wide range of investing expertise and resources. This well-resourced global investment platform brings together a wide variety of experience and investment insight across industries, regions, asset classes and investing styles.
DeIM is an indirect, wholly owned subsidiary of Deutsche Bank AG. Deutsche Bank AG is a major global banking institution that is engaged in a wide range of financial services, including investment management, mutual funds, retail, private and commercial banking, investment banking and insurance.
Portfolio Management Team
Janet Campagna
Managing Director of Deutsche Asset Management and Portfolio Manager of the fund.
• Joined Deutsche Asset Management in 1999 and the fund in 2003.
• Head of global and tactical asset allocation.
• Over 16 years of investment industry experience.
• Master's degree in Social Science from California Institute of Technology.
• Ph.D in Political Science from University of California at Irvine.
Robert Wang
Managing Director of Deutsche Asset Management and Portfolio Manager of the fund.
• Joined Deutsche Asset Management in 1995 and the fund in 2003.
• Over 22 years of investment industry experience.
• Senior portfolio manager for Multi Asset Class Quantitative Strategies: New York.
In the following interview, Portfolio Managers Janet Campagna and Robert Wang address the economy, the management team's approach and the resulting performance of Scudder Small Company Value Fund for the annual period ended July 31, 2004.
Q: How would you characterize the market environment during the period?
A: Economic and geopolitical concerns resulted in a highly volatile and rotational investment environment driven by extreme emotionalism. The period began on the cusp of economic recovery, with strong moves in pro-cyclical industries (those that tend to do well in an improving economy) and small-capitalization stocks, which tend to react earlier than their large-cap counterparts to economic improvement. Investors favored highly speculative names in highly volatile industries, i.e., companies with relatively low valuations and generally poor fundamentals.
Despite the economy's apparent health, as evidenced by rising employment and other positive leading indicators, the strength and sustainability of a broad economic recovery was widely debated among industry experts. The media focused on that debate, fomenting negative investor sentiment.
Historically high energy prices, rising interest rates and uncertainty surrounding the upcoming presidential election caused activity to moderate early in the new year. The market entered a narrow trading range (meaning that few industry sectors or individual stocks logged strong gains or suffered deep losses) that lasted throughout the balance of the period. Many investors went "back to basics," seeking higher-quality companies with positive cash flows and above-average growth prospects as compared with their industry peers. Others simply took a breather, believing that the market had already "priced in," or accounted for, a robust economic rebound that had only partially materialized.
Corporate America, meantime, remained reluctant to spend or reinvest its cash reserves, despite continued evidence of economic improvement. Many companies instead concentrated on tidying up their balance sheets, becoming leaner and more cost-efficient. Earnings during the period generally were strong, with growing consumer demand reflected in rising revenues and wider profit margins. Individual stock performance during the second half of the period proved to be very much earnings-driven. Companies that outperformed their peers and had positive earnings tended to do well, while those with negative guidance and weak earnings prospects generally were punished.
Q: How did the portfolio perform during the period?
A: Scudder Small Company Value Fund Class A shares gained 25.84%, outperforming the 22.83% total return of the fund's benchmark, the Russell 2000 Value Index, for the year ended July 31, 2004.1 (Returns are unadjusted for sales charges. If sales charges had been included, returns would have been lower. Past performance is not a guarantee of future results.) The fund also outpaced the 22.48% average total return of its peers in the Small Company Value Funds category, as tracked by Lipper Inc., for the same period.2 (Please see pages 3 through 6 for the performance of other share classes and more complete performance information.)
1 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. It is not possible to invest directly into an index.2 The Small Company Value Funds category, as tracked by Lipper Inc., includes those funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) of less than 250% of the dollar-weighted median market capitalization of the S&P Small Cap 600 Index. Small Cap Value funds seek long-term growth of capital by investing in companies that are considered to be undervalued relative to a major unmanaged stock index based on price-to-current earnings, book value, asset value or other factors. These funds will normally have a below-average price-to-earnings ratio, price-to-book ratio and three-year earnings growth figure, compared with the US diversified small-cap funds universe average.
More than 90% of the fund's performance relative to the benchmark during the period can be attributed to broad-based stock selection. This is exactly what we want to see. Because the fund's level of risk is comparable to that of the benchmark, our goal is to ensure that the only additional risk factors are stock-specific. So, while in general the fund is defined by the index that it tracks, its performance is not constrained by it. We were able to add quite a bit of value through stock selection.
Q: Will you describe your investment process?
A: Our proprietary US stock evaluation model incorporates valuation and growth investment parameters. We believe that by combining the techniques used by fundamental value investors with extensive, quantitative growth and earnings analysis, we can minimize investment-style bias and ultimately produce a pure, or objective, stock selection process that can add value in any market environment. In addition, we incorporate technical analysis in an effort to capture short-term price changes and evaluate the market's responsiveness to new information. We believe that objectivity and discipline, through the use of quantitative investment models, provides a framework for selecting securities with attractive valuations in an unbiased, consistent and repeatable manner.
The performance objective for the portfolio is to outperform the benchmark by taking a moderate level of risk relative to the index. We believe that consistent outperformance is derived from diversification, which can help minimize unintended risk exposure. As a result, portfolio holdings are extremely well-diversified, with only nominal deviations from the benchmark's industry weightings.
The portfolio's maximum industry underweight or overweight (its proportionate holdings relative to the benchmark index) is typically +/-2%. In selecting stocks for the portfolio, we attempt to avoid deviating from our asset class, selecting only from among the universe of small-company value stocks.
Generally, we do not make "macro bets," or investment decisions based on the outlook for the economy, or the expected performance of a given industry sector. When we rebalance the portfolio's sector allocations, and when we trade, we are attempting to optimize the portfolio's risk-adjusted return through stock selection.
Q: Which stocks contributed most to fund performance during the period?
A: Within health care, equipment and service providers fared best. Kindred Health Care, in which the fund held a meaningful overweight relative to the benchmark, was the top performer. As we mentioned earlier, stock selection drove fund performance. The top contributors - all among different industry sectors - underscore the portfolio's broad diversification.
Within health care, equipment and services providers fared best, particularly Kindred Healthcare, Inc., in which the fund held a meaningful overweight relative to the benchmark. Kindred is a provider of long-term health care services through the operation of nursing homes and institutional pharmacies. During the period, the company reported ample cash flows, strong earnings growth and outstanding forecasted earnings per share as compared with its peers.
Banta, within the printing and publishing services sector, was the second-best performer. Banta, which operates in three segments - print, supply-chain management and health care - logged robust gains during the period. The fund held a modest overweight in the stock, giving it an edge against the benchmark.
Within the capital goods sector, Nordson witnessed exceptional gains during the period. The portfolio's heavy overweight relative to the benchmark in the stock added significantly to overall results. Nordson designs, manufactures and markets precision dispensing systems that apply adhesives, sealants and coatings to a range of consumer and industrial products.
(As of July 31, 2004, positions in Kindred, Banta and Nordson were sold.)
Q: What detracted from performance?
A: While individual holdings in technology and consumer durables detracted somewhat from performance, financial stocks accounted for the majority of relative underperformance.
Within financials, LandAmerica Financial Group, Inc. was among the portfolio's poorest performers. LandAmerica is a holding company that, through its subsidiaries, provides products and services used to facilitate the purchase, sale, transfer and financing of residential and commercial real estate. The company primarily suffered from the effects of rising interest rates. Declines in current mortgage activity and in applications for future real estate transactions damaged expectations for future earnings. The portfolio held a sizable overweight in the company, which reported losses for the period, detracting significantly from overall returns.
Within technology, Iomega, a designer and marketer of products used for computer data management, lost considerable ground during the period. Originally, we believed the stock had strong earnings growth potential. During the year, however, the company saw cash flows turn negative based on a decline in profitability of its popular ZIP products and substantial cash outlays for research and development. Industry analysts downgraded the stock several times, driving prices still lower. (As of July 31, 2004, the position in Iomega was sold.)
Q: Do you have any closing comments for shareholders?
A: We are encouraged by the market's renewed emphasis on fundamental quality. We believe that as investors continue to move from higher-risk to lower-risk investment strategies, the fund should be well-positioned to benefit. In addition, small-cap stocks historically have proven to be good investments during times of economic rebirth. Despite a rising interest rate environment, we believe that the economy will stabilize.
As always, we thank our shareholders for their commitment to the fund. We look forward to continuing to serve their needs and to helping them meet their long-term investment goals.
The views expressed in this report reflect those of the portfolio managers only through the end of the period of the report as stated on the cover. The managers' views are subject to change at any time based on market and other conditions and should not be construed as a recommendation.
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Asset Allocation |
7/31/04 |
7/31/03 |
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Common Stocks
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97% |
96% |
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Cash Equivalents
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3% |
4% |
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100% |
100% |
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Stock Characteristics |
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Weighted Average Market Values |
Fund |
Russell 2000 Value Index |
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Small Companies ($ millions)
Market Capitalization |
1,075 | 899 |
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Value Orientation
P/E Trailing Twelve Months |
18.8x | 36.4x |
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Price/Sales |
.8x | .8x |
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Price/Book Value |
1.8x | 1.7x |
Asset allocation and stock characteristics are subject to change.
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Ten Largest Equity Holdings at July 31, 2004 (14.5% of Portfolio) |
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1. Energen Corp.
Producer and distributor of natural gas |
1.7% |
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2. FMC Corp.
Producer of chemical and machinery for industry and agriculture |
1.6% |
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3. Terex Corp.
Diversified global manufacturer |
1.5% |
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4. Stewart Information Services Corp.
Provider of title insurance services |
1.5% |
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5. Over seas Shipholding Group, Inc.
Operator of a fleet of marine transport vessels |
1.5% |
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6. First Federal Financial Corp.
Holder for provider of banking services |
1.4% |
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7. Georgia Gulf Corp.
Manufacturer and marketer of chemicals and plastic products |
1.4% |
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8. Zales Corp.
Operator of retail jewelry stores |
1.3% |
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9. LandAmerica Financial Group, Inc.
Provider of property insurance |
1.3% |
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10. Potlatch Corp.
Operator of an integrated forest products company |
1.3% |
Portfolio holdings are subject to change.
For more complete details about the Fund's investment portfolio, see page 18. A quarterly Fact Sheet is available upon request. Information concerning portfolio holdings of the Fund as of month end is available upon request on the 16th of the following month. Please see the Account Management Resources section for contact information.
Following the Fund's fiscal first and third quarter-end, a complete portfolio holdings listing is filed with the SEC on Form N-Q. This form is available on the SEC's Web site at www.sec.gov, and it also may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330.
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Value ($) |
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Common Stocks 97.1% |
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Consumer Discretionary 13.0%
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Auto Components 0.8% |
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Tenneco Automotive, Inc.*
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163,900 |
2,279,849 |
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Distributors 0.7% |
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Handleman Co.
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97,000 |
2,082,590 |
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Hotels Restaurants & Leisure 3.6% |
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Bob Evans Farms, Inc.
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115,100 |
3,063,962 |
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CBRL Group, Inc.
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86,300 |
2,866,886 |
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Jack in the Box, Inc.*
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41,800 |
1,333,420 |
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Landry's Restaurants, Inc.
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55,000 |
1,662,650 |
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Ryan's Restaurant Group, Inc.*
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129,300 |
1,873,557 |
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10,800,475 |
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Household Durables 1.7% |
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American Greetings Corp. "A"*
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86,300 |
2,012,516 |
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Ethan Allen Interiors, Inc.
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66,000 |
2,451,900 |
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WCI Communities, Inc.*
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34,000 |
732,020 |
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5,196,436 |
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Internet & Catalog Retail 0.2% |
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Priceline.com, Inc.*
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28,200 |
667,776 |
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Media 2.0% |
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AMC Entertainment, Inc.*
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190,600 |
3,638,554 |
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Journal Communications, Inc. "A"
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95,700 |
1,707,288 |
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Scholastic Corp.*
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21,600 |
594,216 |
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5,940,058 |
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Multiline Retail 1.0% |
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Stage Stores, Inc.*
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88,000 |
3,120,480 |
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Specialty Retail 1.5% |
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Haverty Furniture Companies, Inc.
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34,700 |
645,073 |
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Zales Corp.*
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148,800 |
4,038,432 |
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4,683,505 |
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Textiles, Apparel & Luxury Goods 1.5% |
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Kellwood Co.
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54,200 |
2,176,130 |
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Phillips-Van Heusen Corp.
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66,600 |
1,263,402 |
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Wolverine World Wide, Inc.
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49,700 |
1,161,986 |
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4,601,518 |
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Consumer Staples 2.8%
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Food Products |
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Corn Products International, Inc.
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41,200 |
1,776,544 |
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Flowers Foods, Inc.
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110,950 |
2,895,795 |
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J & J Snack Foods Corp.*
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16,100 |
591,353 |
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Lance, Inc.
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40,800 |
613,632 |
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Ralcorp Holdings, Inc.*
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44,600 |
1,626,562 |
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Sanderson Farms, Inc.
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19,300 |
930,839 |
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8,434,725 |
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Energy 7.4%
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Oil & Gas |
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Cimarex Energy Co.*
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19,500 |
634,335 |
|
Houston Exploration Co.*
|
57,300 |
3,094,200 |
|
Magnum Hunter Resources, Inc.*
|
321,200 |
3,443,264 |
|
Overseas Shipholding Group, Inc.
|
97,500 |
4,378,725 |
|
Southwestern Energy Co.*
|
22,100 |
711,399 |
|
Spinnaker Exploration Co.*
|
78,200 |
2,797,214 |
|
St. Mary Land & Exploration Co.
|
72,900 |
2,501,199 |
|
Stone Energy Corp.*
|
50,700 |
2,293,668 |
|
Tesoro Petroleum Corp.*
|
89,100 |
2,583,900 |
|
|
22,437,904 |
|
|
Financials 31.2%
|
||
|
Banks 14.4% |
||
|
BankAtlantic Bancorp., Inc. "A"
|
124,700 |
2,274,528 |
|
BankUnited Financial Corp. "A"*
|
145,700 |
3,910,588 |
|
Commercial Capital Bancorp., Inc.
|
78,100 |
1,715,857 |
|
Downey Financial Corp.
|
40,700 |
2,187,625 |
|
First Federal Financial Corp.*
|
96,300 |
4,363,353 |
|
First Midwest Bancorp, Inc.
|
25,000 |
844,250 |
|
Glacier Bancorp., Inc.
|
5,500 |
145,640 |
|
Greater Bay Bancorp.
|
105,600 |
2,782,560 |
|
Hancock Holding Co.
|
81,400 |
2,444,442 |
|
IBERIABANK Corp.
|
21,100 |
1,183,710 |
|
MAF Bancorp., Inc.
|
80,800 |
3,244,120 |
|
New Century Financial Corp.
|
55,200 |
2,597,160 |
|
Old National Bancorp.
|
49,400 |
1,175,720 |
|
Pacific Capital Bancorp
|
108,567 |
3,009,468 |
|
PFF Bancorp., Inc.
|
20,000 |
734,400 |
|
Provident Financial Services, Inc.
|
75,457 |
1,331,820 |
|
R & G Financial Corp. "B"
|
33,250 |
1,166,410 |
|
Sandy Spring Bancorp., Inc.
|
22,350 |
696,426 |
|
Texas Regional Bancshares, Inc. "A"
|
85,290 |
3,794,552 |
|
UMB Financial Corp.
|
19,135 |
959,046 |
|
United Bankshares, Inc.
|
42,900 |
1,352,208 |
|
Westamerica Bancorp.
|
37,100 |
1,882,083 |
|
|
43,795,966 |
|
|
Diversified Financial Services 1.5% |
||
|
GATX Corp.
|
113,600 |
2,894,528 |
|
Saxon Capital, Inc.*
|
64,800 |
1,524,096 |
|
|
4,418,624 |
|
|
Insurance 4.3% |
||
|
LandAmerica Financial Group, Inc.
|
100,500 |
3,969,750 |
|
Philadelphia Consolidated Holding Corp.*
|
65,700 |
3,591,819 |
|
Stewart Information Services Corp.
|
125,100 |
4,434,795 |
|
The Midland Co.
|
38,100 |
1,087,755 |
|
|
13,084,119 |
|
|
Real Estate 11.0% |
||
|
American Financial Realty Trust (REIT)
|
65,200 |
863,900 |
|
Amli Residential Properties Trust (REIT)
|
30,100 |
868,987 |
|
Anthracite Capital, Inc. (REIT)
|
71,100 |
779,967 |
|
Anworth Mortgage Asset Corp. (REIT)
|
38,100 |
403,860 |
|
Brandywine Realty Trust (REIT)
|
34,900 |
952,770 |
|
CarrAmerica Realty Corp. (REIT)
|
50,000 |
1,524,500 |
|
Colonial Properties Trust (REIT)
|
21,900 |
832,200 |
|
Commercial Net Lease Realty (REIT)
|
63,700 |
1,082,900 |
|
CRT Properties, Inc. (REIT)
|
45,900 |
991,440 |
|
Essex Property Trust, Inc. (REIT)
|
18,800 |
1,238,920 |
|
FelCor Lodging Trust, Inc. (REIT)*
|
80,800 |
921,120 |
|
First Industrial Realty Trust, Inc. (REIT)
|
37,900 |
1,388,656 |
|
Gables Residential Trust (REIT)
|
29,800 |
984,890 |
|
Glimcher Realty Trust (REIT)
|
38,700 |
838,242 |
|
Healthcare Realty Trust, Inc. (REIT)
|
23,600 |
852,432 |
|
Heritage Property Investment Trust (REIT)
|
36,600 |
1,005,036 |
|
Highwoods Properties, Inc. (REIT)
|
56,500 |
1,310,800 |
|
Home Properties, Inc. (REIT)
|
32,200 |
1,210,720 |
|
Impac Mortgage Holdings, Inc. (REIT)
|
63,900 |
1,466,505 |
|
Kilroy Realty Corp. (REIT)
|
33,200 |
1,175,280 |
|
Kramont Realty Trust (REIT)
|
22,500 |
357,750 |
|
Lexington Corporate Properties Trust (REIT)
|
56,600 |
1,107,096 |
|
Manufactured Home Communities, Inc. (REIT)
|
22,600 |
716,194 |
|
MFA Mortgage Investments, Inc. (REIT)
|
108,000 |
875,880 |
|
Nationwide Health Properties, Inc. (REIT)
|
68,500 |
1,308,350 |
|
Post Properties, Inc. (REIT)
|
44,300 |
1,239,957 |
|
Prentiss Properties Trust (REIT)
|
42,400 |
1,452,624 |
|
Realty Income Corp. (REIT)
|
24,800 |
1,004,896 |
|
Redwood Trust, Inc. (REIT)
|
21,100 |
1,197,847 |
|
Sovran Self Storage, Inc. (REIT)
|
23,300 |
903,807 |
|
Sun Communities, Inc. (REIT)
|
24,700 |
928,967 |
|
Taubman Centers, Inc. (REIT)
|
40,600 |
937,860 |
|
Washington Real Estate Investment Trust (REIT)
|
20,000 |
558,800 |
|
|
33,283,153 |
|
|
Health Care 4.6%
|
||
|
Health Care Equipment & Supplies 1.8% |
||
|
Ocular Sciences, Inc.*
|
83,000 |
3,662,790 |
|
Sybron Dental Specialties, Inc.*
|
69,500 |
1,869,550 |
|
|
5,532,340 |
|
|
Health Care Providers & Services 1.5% |
||
|
Province Healthcare Co.*
|
184,300 |
2,677,879 |
|
RehabCare Group, Inc.*
|
56,100 |
1,343,595 |
|
Sunrise Senior Living, Inc.*
|
14,500 |
511,850 |
|
|
4,533,324 |
|
|
Pharmaceuticals 1.3% |
||
|
Alpharma, Inc. "A"
|
131,000 |
2,153,640 |
|
Perrigo Co.
|
110,100 |
1,834,266 |
|
|
3,987,906 |
|
|
Industrials 13.3%
|
||
|
Aerospace & Defense 0.7% |
||
|
Moog, Inc. "A"*
|
59,800 |
2,174,926 |
|
Airlines 1.0% |
||
|
Continental Airlines, Inc. "B"*
|
120,800 |
1,085,992 |
|
Frontier Airlines, Inc.*
|
250,100 |
1,968,287 |
|
|
3,054,279 |
|
|
Building Products 1.1% |
||
|
Griffon Corp.*
|
70,400 |
1,476,288 |
|
Jacuzzi Brands, Inc.*
|
240,200 |
1,854,344 |
|
|
3,330,632 |
|
|
Commercial Services & Supplies 3.5% |
||
|
Consolidated Graphics, Inc.*
|
68,200 |
2,967,382 |
|
NCO Group, Inc.*
|
34,200 |
853,974 |
|
Nu Skin Enterprises, Inc. "A"
|
110,700 |
3,023,217 |
|
United Rentals, Inc.*
|
149,400 |
2,964,096 |
|
United Stationers, Inc.*
|
20,100 |
792,342 |
|
|
10,601,011 |
|
|
Construction & Engineering 1.0% |
||
|
Dycom Industries, Inc.*
|
44,000 |
1,185,360 |
|
Quanta Services, Inc.*
|
299,000 |
1,877,720 |
|
|
3,063,080 |
|
|
Electrical Equipment 0.1% |
||
|
Franklin Electric Co.
|
5,400 |
204,552 |
|
Industrial Conglomerates 0.9% |
||
|
Tredegar Corp.
|
167,200 |
2,755,456 |
|
Machinery 4.3% |
||
|
Flowserve Corp.*
|
139,700 |
3,345,815 |
|
Kaydon Corp.
|
12,600 |
367,038 |
|
Kennametal, Inc.
|
24,900 |
1,095,600 |
|
Reliance Steel & Aluminum Co.
|
52,000 |
2,070,640 |
|
Terex Corp.*
|
116,000 |
4,513,560 |
|
Wabash National Corp.*
|
57,100 |
1,649,048 |
|
|
13,041,701 |
|
|
Road & Rail 0.7% |
||
|
Dollar Thrifty Automotive Group, Inc.*
|
50,400 |
1,214,136 |
|
USF Corp.
|
23,500 |
834,250 |
|
|
2,048,386 |
|
|
Information Technology 8.8%
|
||
|
Communications Equipment 0.9% |
||
|
CommScope, Inc.*
|
129,200 |
2,661,520 |
|
Computers & Peripherals 0.7% |
||
|
Komag, Inc.*
|
183,800 |
2,084,292 |
|
Electronic Equipment & Instruments 2.2% |
||
|
Anixter International, Inc.
|
20,900 |
699,732 |
|
MTS Systems Corp.
|
134,100 |
2,879,127 |
|
Park Electrochemical Corp.
|
68,000 |
1,562,640 |
|
Rofin-Sinar Technologies, Inc.*
|
57,000 |
1,208,970 |
|
Zygo Corp.*
|
32,100 |
311,370 |
|
|
6,661,839 |
|
|
Internet Software & Services 0.2% |
||
|
DoubleClick, Inc.*
|
99,100 |
512,347 |
|
IT Consulting & Services 2.5% |
||
|
BISYS Group, Inc.*
|
255,400 |
3,486,210 |
|
CSG Systems International, Inc.*
|
121,700 |
1,995,880 |
|
Efunds Corp.*
|
140,900 |
2,305,124 |
|
|
7,787,214 |
|
|
Semiconductors & Semiconductor Equipment 1.3% |
||
|
Integrated Device Technology, Inc.*
|
167,300 |
1,912,239 |
|
Photronics, Inc.*
|
141,400 |
2,046,058 |
|
|
3,958,297 |
|
|
Software 1.0% |
||
|
Internet Security Systems, Inc.*
|
59,800 |
916,136 |
|
THQ, Inc.*
|
113,600 |
2,164,080 |
|
|
3,080,216 |
|
|
Materials 10.3%
|
||
|
Chemicals 6.2% |
||
|
Cambrex Corp.
|
119,400 |
2,632,770 |
|
FMC Corp.*
|
110,900 |
4,874,055 |
|
Georgia Gulf Corp.
|
118,700 |
4,219,785 |
|
Hercules, Inc.*
|
243,900 |
2,880,459 |
|
OM Group, Inc.*
|
83,600 |
2,676,872 |
|
Stepan Co.
|
30,000 |
727,200 |
|
Terra Industries, Inc.*
|
100,400 |
642,560 |
|
|
18,653,701 |
|
|
Construction Materials 0.4% |
||
|
Eagle Materials, Inc.
|
16,200 |
1,068,876 |
|
Containers & Packaging 1.5% |
||
|
Myers Industries, Inc.
|
82,552 |
1,081,431 |
|
Silgan Holdings, Inc.
|
73,900 |
3,555,329 |
|
|
4,636,760 |
|
|
Metals & Mining 0.6% |
||
|
Quanex Corp.
|
43,000 |
1,956,500 |
|
Paper & Forest Products 1.6% |
||
|
Pope & Talbot, Inc.
|
45,800 |
898,596 |
|
Potlatch Corp.
|
98,600 |
3,952,874 |
|
|
4,851,470 |
|
|
Telecommunication Services 0.6%
|
||
|
Diversified Telecommunication Services |
||
|
Cincinnati Bell, Inc.*
|
421,500 |
1,702,860 |
|
Primus Telecommunications Group, Inc.*
|
127,800 |
207,036 |
|
|
1,909,896 |
|
|
Utilities 5.1%
|
||
|
Electric Utilities 0.9% |
||
|
PNM Resources, Inc.
|
133,050 |
2,772,762 |
|
Gas Utilities 1.3% |
||
|
New Jersey Resources Corp.
|
66,250 |
2,693,063 |
|
Northwest Natural Gas Co.
|
37,200 |
1,092,936 |
|
|
3,785,999 |
|
|
Multi-Utilities & Unregulated Power 2.9% |
||
|
Avista Corp.
|
211,100 |
3,683,695 |
|
Energen Corp.
|
107,100 |
5,071,185 |
|
|
8,754,880 |
|
|
Total Common Stocks (Cost $264,237,717)
|
294,291,340 |
|
|
|
Principal Amount ($) |
Value ($) |
|
|
|
|
|
US Government Backed 0.2% |
||
|
US Treasury Bills, 1.38%**, 10/21/2004 (c) (Cost $787,456)
|
790,000 |
787,456 |
|
|
|
Value ($) |
|
|
|
|
|
Cash Equivalents 2.7% |
||
|
Scudder Cash Management QP Trust, 1.38% (b)
(Cost $8,087,778)
|
8,087,778 |
8,087,778 |
|
Total Investment Portfolio - 100.0% (Cost $273,112,951) (a)
|
303,166,574 |
|
* Non-income producing security.
** Annualized yield at the time of purchase; not a coupon rate.
(a) The cost for federal income tax purposes was $273,186,795. At July 31, 2004, net unrealized appreciation for all securities based on tax cost was $29,979,779. This consisted of aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost of $38,686,852 and aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value of $8,707,073.
(b) Scudder Cash Management QP Trust is managed by Deutsche Investment Management Americas Inc. The rate shown is the annualized seven-day yield at period end.
(c) At July 31, 2004, this security has been pledged in whole or in part, to cover initial margin requirements for open futures contracts.
At July 31, 2004, open futures contracts purchased were as follows:
|
Futures |
Expiration Date |
Contracts |
Aggregate Face Value ($) |
Value ($) |
Unrealized Appreciation (Depreciation) ($) |
|
Russell 2000
Index |
9/16/2004 |
31 |
8,800,038 | 8,551,350 | (248,688) |
The accompanying notes are an integral part of the financial statements.
|
|
|
Statement of Assets and Liabilities as of July 31, 2004 |
|
|
Assets
|
|
|
Investments: Investments in securities, at value (cost $265,025,173) |
$ 295,078,796 |
|
Investment in Scudder Cash Management QP Trust (cost $8,087,778)
|
8,087,778 |
|
Total investments in securities, at value (cost $273,112,951) |
303,166,574 |
|
Receivable for Fund shares sold |
340,549 |
|
Dividends receivable |
176,146 |
|
Interest receivable |
9,117 |
|
Receivable for daily variation margin on open futures contracts |
50,970 |
|
Other assets |
1,075 |
|
Total assets |
303,744,431 |
|
Liabilities
|
|
|
Payable for Fund shares redeemed |
757,796 |
|
Accrued management fee |
189,639 |
|
Other accrued expenses and payables |
316,206 |
|
Total liabilities |
1,263,641 |
|
Net assets, at value
|
$ 302,480,790 |
|
Net Assets
|
|
|
Net assets consist of: Undistributed net investment income |
877,307 |
|
Net unrealized appreciation (depreciation) on: Investments |
30,053,623 |
|
Futures
|
(248,688) |
|
Accumulated net realized gain (loss) |
38,611,940 |
|
Paid-in capital |
233,186,608 |
|
Net assets, at value
|
$ 302,480,790 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Assets and Liabilities as of July 31, 2004 (continued) |
|
|
Net Asset Value
|
|
|
Class A Net Asset Value and redemption price per share ($9,292,990 / 354,303 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) |
$ 26.23 |
|
Maximum offering price per share (100 / 94.25 of $26.23) |
$ 27.83 |
|
Class B Net Asset Value, offering and redemption price (subject to contingent deferred sales charge) per share ($3,049,312 / 118,541 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) |
$ 25.72 |
|
Class C Net Asset Value, offering and redemption price (subject to contingent deferred sales charge) per share ($2,234,384 / 86,766 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) |
$ 25.75 |
|
Class S Net Asset Value, offering and redemption price (a) per share ($287,904,104 / 10,959,897 outstanding shares of beneficial interest, $.01 par value, unlimited number of shares authorized) |
$ 26.27 |
(a) Redemption price per share for shares held less than one year is equal to net asset value less a 1.00% redemption fee.
The accompanying notes are an integral part of the financial statements.
|
Statement of Operations for the year ended July 31, 2004 |
|
|
Investment Income
|
|
|
Income: Dividends (net of foreign taxes withheld of $4,856) |
$ 4,773,427 |
|
Interest |
4,278 |
|
Interest - Scudder Cash Management QP Trust |
96,008 |
|
Total Income |
4,873,713 |
|
Expenses: Management fee |
2,145,597 |
|
Services to shareholders |
236,428 |
|
Custodian and accounting fees |
32,521 |
|
Administrative fee |
838,352 |
|
Distribution service fees |
58,397 |
|
Auditing |
22,510 |
|
Legal |
6,832 |
|
Trustees' fees and expenses |
10,964 |
|
Reports to shareholders |
21,472 |
|
Registration fees |
5,050 |
|
Other |
4,003 |
|
Total expenses, before expense reductions |
3,382,126 |
|
Expense reductions |
(1,120) |
|
Total expenses, after expense reductions |
3,381,006 |
|
Net investment income (loss)
|
1,492,707 |
|
Realized and Unrealized Gain (Loss) on Investment Transactions
|
|
|
Net realized gain (loss) from: Investments |
52,586,519 |
|
Futures |
715,804 |
|
Capital gain dividend received |
78,572 |
|
|
53,380,895 |
|
Net unrealized appreciation (depreciation) during the period on: Investments |
8,435,249 |
|
Futures |
(524,923) |
|
|
7,910,326 |
|
Net gain (loss) on investment transactions
|
61,291,221 |
|
Net increase (decrease) in net assets resulting from operations
|
$ 62,783,928 |
The accompanying notes are an integral part of the financial statements.
|
Statement of Changes in Net Assets |
||
|
Increase (Decrease) in Net Assets
|
Years Ended July 31, |
|
|
2004 |
2003 |
|
|
Operations: Net investment income (loss) |
$ 1,492,707 | $ 898,376 |
|
Net realized gain (loss) on investment transactions |
53,380,895 | (14,363,698) |
|
Net unrealized appreciation (depreciation) on
investment transactions during the period |
7,910,326 | 40,287,253 |
|
Net increase (decrease) in net assets resulting from
operations |
62,783,928 | 26,821,931 |
|
Distributions to shareholders from: Net investment income: |
||
|
Class A
|
(3,518) | - |
|
Class S
|
(855,594) | (552,562) |
|
Net realized gains: Class A |
- | (488,795) |
|
Class B
|
- | (198,255) |
|
Class C
|
- | (53,577) |
|
Class S
|
- | (24,396,693) |
|
Fund share transactions: Proceeds from shares sold |
79,789,628 | 43,674,655 |
|
Reinvestment of distributions |
653,444 | 24,863,447 |
|
Cost of shares redeemed |
(83,298,498) | (71,514,915) |
|
Redemption fees |
33,283 | 48,928 |
|
Net increase (decrease) in net assets from Fund share
transactions |
(2,822,143) | (2,927,885) |
|
Increase (decrease) in net assets
|
59,102,673 | (1,795,836) |
|
Net assets at beginning of period |
243,378,117 | 245,173,953 |
|
Net assets at end of period (including undistributed
net investment income of $877,307 and $621,635,
respectively) |
$ 302,480,790 |
$ 243,378,117 |
The accompanying notes are an integral part of the financial statements.
|
|
|
Class A |
|||
|
Years Ended July 31, |
2004 |
2003 |
2002a |
|
Selected Per Share Data
|
|||
|
Net asset value, beginning of period
|
$ 20.85 |
$ 20.77 |
$ 20.89 |
|
Income (loss) from investment operations: Net investment income (loss)b |
.08 | .05 | .03 |
|
Net realized and unrealized gain (loss) on investment
transactions
|
5.32 | 2.28 | (.09) |
|
Total from investment operations |
5.40 | 2.33 | (.06) |
|
Less distributions from: Net investment income |
(.02) | - | (.07) |
|
Net realized gains on investment transactions
|
- | (2.25) | - |
|
Total distributions |
(.02) | (2.25) | (.07) |
|
Redemption fees |
-*** | -*** | .01 |
|
Net asset value, end of period
|
$ 26.23 |
$ 20.85 |
$ 20.77 |
|
Total Return (%)c |
25.84 | 13.11 | (.24)** |
|
Ratios to Average Net Assets and Supplemental Data
|
|||
|
Net assets, end of period ($ millions) |
9 | 3 | 3 |
|
Ratio of expenses (%) |
1.35 | 1.44 | 1.48* |
|
Ratio of net investment income (loss) (%) |
.35 | .28 | .23* |
|
Portfolio turnover rate (%) |
135 | 168 | 157 |
|
a For the period from December 3, 2001 (commencement of operations of Class A shares) to
July 31, 2002. b Based on average shares outstanding during the period. c Total return does not reflect the effect of any sales charge. * Annualized ** Not annualized *** Amount is less than $.005. |
|||
|
|
|||
|
Class B |
|||
|
Years Ended July 31, |
2004 |
2003 |
2002a |
|
Selected Per Share Data
|
|||
|
Net asset value, beginning of period
|
$ 20.61 |
$ 20.71 |
$ 20.89 |
|
Income (loss) from investment operations: Net investment income (loss)b |
(.12) | (.10) | (.09) |
|
Net realized and unrealized gain (loss) on investment
transactions
|
5.23 | 2.25 | (.07) |
|
Total from investment operations |
5.11 | 2.15 | (.16) |
|
Less distributions from: Net investment income |
- | - | (.03) |
|
Net realized gains on investment transactions
|
- | (2.25) | - |
|
Total distributions |
- | (2.25) | (.03) |
|
Redemption fees |
-*** | -*** | .01 |
|
Net asset value, end of period
|
$ 25.72 |
$ 20.61 |
$ 20.71 |
|
Total Return (%)c |
24.79 | 12.21 | (.74)** |
|
Ratios to Average Net Assets and Supplemental Data
|
|||
|
Net assets, end of period ($ millions) |
3 | 2 | 2 |
|
Ratio of expenses (%) |
2.24 | 2.26 | 2.28* |
|
Ratio of net investment income (loss) (%) |
(.54) | (.54) | (.57)* |
|
Portfolio turnover rate (%) |
135 | 168 | 157 |
|
a For the period from December 3, 2001 (commencement of operations of Class B shares) to
July 31, 2002. b Based on average shares outstanding during the period. c Total return does not reflect the effect of any sales charge. * Annualized ** Not annualized *** Amount is less than $.005. |
|||
|
|
|||
|
Class C |
|||
|
Years Ended July 31, |
2004 |
2003 |
2002a |
|
Selected Per Share Data
|
|||
|
Net asset value, beginning of period
|
$ 20.61 |
$ 20.71 |
$ 20.89 |
|
Income (loss) from investment operations: Net investment income (loss)b |
(.10) | (.10) | (.08) |
|
Net realized and unrealized gain (loss) on investment
transactions
|
5.24 | 2.25 | (.08) |
|
Total from investment operations |
5.14 | 2.15 | (.16) |
|
Less distributions from: Net investment income |
- | - | (.03) |
|
Net realized gains on investment transactions
|
- | (2.25) | - |
|
Total distributions |
- | (2.25) | (.03) |
|
Redemption fees |
-*** | -*** | .01 |
|
Net asset value, end of period
|
$ 25.75 |
$ 20.61 |
$ 20.71 |
|
Total Return (%)c |
24.94 | 12.21 | (.73)** |
|
Ratios to Average Net Assets and Supplemental Data
|
|||
|
Net assets, end of period ($ millions) |
2 | .66 | .43 |
|
Ratio of expenses (%) |
2.08 | 2.25 | 2.26* |
|
Ratio of net investment income (loss) (%) |
(.38) | (.53) | (.55)* |
|
Portfolio turnover rate (%) |
135 | 168 | 157 |
|
a For the period from December 3, 2001 (commencement of operations of Class C shares) to
July 31, 2002. b Based on average shares outstanding during the period. c Total return does not reflect the effect of any sales charge. * Annualized ** Not annualized *** Amount is less than $.005. |
|||
|
|
|||||
|
Class S |
|||||
|
Years Ended July 31, |
2004 |
2003 |
2002 |
2001 |
2000 |
|
Selected Per Share Data
|
|||||
|
Net asset value, beginning of period
|
$ 20.87 |
$ 20.79 |
$ 21.45 |
$ 16.58 |
$ 19.40 |
|
Income (loss) from investment operations: |
|||||
|
Net investment income (loss)a
|
.13 | .10 | .13 | .04 | .02 |
|
Net realized and unrealized gain (loss) on
investment transactions
|
5.35 | 2.28 | (.71) | 4.85 | (2.83) |
|
Total from investment operations |
5.48 | 2.38 | (.58) | 4.89 | (2.81) |
|
Less distributions from: Net investment income |
(.08) | (.05) | (.09) | (.03) | (.02) |
|
Net realized gains on investment
transactions
|
- | (2.25) | - | - | - |
|
Total distributions |
(.08) | (2.30) | (.09) | (.03) | (.02) |
|
Redemption fees |
-* | -* | .01 | .01 | .01 |
|
Net asset value, end of period
|
$ 26.27 |
$ 20.87 |
$ 20.79 |
$ 21.45 |
$ 16.58 |
|
Total Return (%) |
26.26 | 13.40 | (2.69) | 29.57b | (14.43)b |
|
Ratios to Average Net Assets and Supplemental Data
|
|||||
|
Net assets, end of period ($ millions) |
288 | 237 | 240 | 221 | 161 |
|
Ratio of expenses before expense
reductions (%) |
1.16 | 1.21 | 1.21 | 1.25c | 1.84d |
|
Ratio of expenses after expense
reductions (%) |
1.16 | 1.21 | 1.21 | 1.18c | 1.32d |
|
Ratio of net investment income (loss) (%) |
.54 | .51 | .56 | .21 | .12 |
|
Portfolio turnover rate (%) |
135 | 168 | 157 | 71 | 29 |
|
a Based on average shares outstanding during the period. b Total return would have been lower had certain expenses not been reduced. c The ratios of operating expenses include a net reduction in reorganization expenses from fiscal 2000. The ratios without this net reduction before and after expense reductions were 1.28% and 1.21%, respectively. d The ratios of operating expenses excluding costs incurred in connection with a fund complex reorganization before and after expense reductions were 1.76% and 1.25%, respectively. * Amount is less than $.005. |
|||||
|
|
A. Significant Accounting Policies
Scudder Small Company Value Fund (the "Fund") is a diversified series of Scudder Securities Trust (the "Trust") which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company organized as a Massachusetts business trust.
The Fund offers multiple classes of shares which provide investors with different purchase options. Class A shares are offered to investors subject to an initial sales charge. Class B shares are offered without an initial sales charge but are subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions. Class B shares automatically convert to Class A shares six years after issuance. Class C shares are offered to investors without an initial sales charge but are subject to higher ongoing expenses than Class A shares and a contingent deferred sales charge payable upon certain redemptions within one year of purchase. Prior to March 1, 2004, Class C shares were offered with an initial sales charge. Class C shares do not convert into another class. Class S shares of the Fund are generally not available to new investors. Class S shares are not subject to initial or contingent deferred sales charges.
Investment income, realized and unrealized gains and losses, and certain fund-level expenses and expense reductions, if any, are borne pro rata on the basis of relative net assets by the holders of all classes of shares, except that each class bears certain expenses unique to that class such as distribution service fees, administrative fees, services to shareholders and certain other class-specific expenses. Differences in class-level expenses may result in payment of different per share dividends by class. All shares of the Fund have equal rights with respect to voting subject to class-specific arrangements.
The Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America which require the use of management estimates. Actual results could differ from those estimates. The policies described below are followed consistently by the Fund in the preparation of its financial statements.
Security Valuation. Investments are stated at value determined as of the close of regular trading on the New York Stock Exchange on each day the exchange is open for trading. Equity securities are valued at the most recent sale price or official closing price reported on the exchange (US or foreign) or over-the-counter market on which the security is traded most extensively. Securities for which no sales are reported are valued at the calculated mean between the most recent bid and asked quotations on the relevant market or, if a mean cannot be determined, at the most recent bid quotation.
Money market instruments purchased with an original or remaining maturity of sixty days or less, maturing at par, are valued at amortized cost. Investments in open-end investment companies and Scudder Cash Management QP Trust are valued at their net asset value each business day.
Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Trustees.
Futures Contracts. A futures contract is an agreement between a buyer or seller and an established futures exchange or its clearinghouse in which the buyer or seller agrees to take or make a delivery of a specific amount of a financial instrument at a specified price on a specific date (settlement date). The Fund may enter into futures contracts as a hedge against anticipated interest rate, currency or equity market changes, and for duration management, risk management and return enhancement purposes.
Upon entering into a futures contract, the Fund is required to deposit with a financial intermediary an amount (``initial margin'') equal to a certain percentage of the face value indicated in the futures contract. Subsequent payments (``variation margin'') are made or received by the Fund dependent upon the daily fluctuations in the value of the underlying security and are recorded for financial reporting purposes as unrealized gains or losses by the Fund. When entering into a closing transaction, the Fund will realize a gain or loss equal to the difference between the value of the futures contract to sell and the futures contract to buy. Futures contracts are valued at the most recent settlement price.
Certain risks may arise upon entering into futures contracts, including the risk that an illiquid secondary market will limit the Fund's ability to close out a futures contract prior to the settlement date and that a change in the value of a futures contract may not correlate exactly with the changes in the value of the securities or currencies hedged. When utilizing futures contracts to hedge, the Fund gives up the opportunity to profit from favorable price movements in the hedged positions during the term of the contract.
Federal Income Taxes. The Fund's policy is to comply with the requirements of the Internal Revenue Code, as amended, which are applicable to regulated investment companies, and to distribute all of its taxable income to its shareholders. Accordingly, the Fund paid no federal income taxes and no federal income tax provision was required.
Distribution of Income and Gains. Distributions of net investment income, if any, are made annually. 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 at least annually.
The timing and characterization of certain income and capital gains distributions are determined annually in accordance with federal tax regulations which may differ from accounting principles generally accepted in the United States of America. These differences primarily relate to certain securities sold at a loss. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. Accordingly, the Fund may periodically make reclassifications among certain of its capital accounts without impacting the net asset value of the Fund.
At July 31, 2004, the Fund's components of distributable earnings (accumulated losses) on a tax basis were as follows:
|
Undistributed ordinary income* |
$ 9,434,776 |
|
Undistributed net long-term capital gains |
$ 29,957,237 |
|
Unrealized appreciation (depreciation) on investments |
$ 29,979,779 |
In addition, during the years ended July 31, 2004 and July 31, 2003, the tax character of distributions paid to shareholders by the Fund is summarized as follows:
|
|
2004 |
2003 |
|
Distributions from ordinary income* |
$ 859,112 | $ 767,853 |
|
Distributions from long-term capital gains |
$ - | $ 24,922,029 |
* For tax purposes, short-term capital gains distributions are considered ordinary income distributions.
Expenses. Expenses of the Trust arising in connection with a specific fund are allocated to that fund. Other Trust expenses which cannot be directly attributed to a fund are apportioned among the funds in the Trust.
Other. Investment transactions are accounted for on a trade date plus one basis for daily net asset value calculations. However, for financial reporting purposes, investment security transactions are reported on trade date. Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date net of foreign withholding taxes. Realized gains and losses from investment transactions are recorded on an identified cost basis. Distributions received from Real Estate Investment Trusts (REITs) in excess of income are recorded as a reduction of cost of investments and/or realized gain.
Redemption Fees. Upon the redemption or exchange of shares held by Class S 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.
B. Purchases and Sales of Securities
During the year ended July 31, 2004, purchases and sales of investment securities (excluding short-term investments) aggregated $371,697,811 and $372,788,450, respectively.
C. Related Parties
Management Agreement. Under the Management Agreement with Deutsche Investment Management Americas Inc. ("DeIM" or the "Advisor"), the Advisor directs the investments of the Fund in accordance with its investment objectives, policies and restrictions. The Advisor 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 Advisor provides certain administrative services in accordance with the Management Agreement. The management fee payable under the Management Agreement is equal to an annual rate of 0.75% of the first $500,000,000 of the Fund's average daily net assets, and 0.70% of such net assets in excess of $500,000,000, computed and accrued daily and payable monthly. Accordingly, for the year ended July 31, 2004, the fee pursuant to the Management Agreement was equivalent to an annual effective rate of 0.75% of the Fund's average daily net assets.
For the year ended July 31, 2004, the Advisor has agreed to reimburse the Fund $887 for service provider expenses.
Administrative Fee. Under the Administrative Agreement (the "Administrative Agreement"), the Advisor provided or paid others to provide substantially all of the administrative services required by the Fund (other than those provided by the Advisor under its Management Agreement with the Fund, as described above) such as transfer agent, custody, legal and audit, in exchange for the payment by each class of the Fund of an administrative services fee (the "Administrative Fee") of 0.475%, 0.525%, 0.500% and 0.450% of average daily net assets of Class A, B, C and S shares, respectively, computed and accrued daily and payable monthly.
The Administrative Agreement between the Advisor and the Fund terminated March 31, 2004, and effective April 1, 2004, the Fund directly bears the cost of those expenses formerly covered by the Administrative Agreement.
Effective October 1, 2003 through September 30, 2005, the Advisor has contractually agreed to waive all or a portion of its management and/or administrative fee and reimburse or pay certain operating expenses of the Fund to the extent necessary to maintain the operating expenses of each class at 1.50% of average daily net assets (excluding certain expenses such as extraordinary expenses, taxes, brokerage, interest, Rule 12b-1-distribution and/or service fees, trustee and trustee counsel fees and organizational and offering expenses).
In addition, for the period April 1, 2004 through September 30, 2005, the Advisor has contractually agreed to waive all or a portion of its management fee and reimburse or pay operating expenses of the Fund to the extent necessary to maintain the Fund's total operating expenses at 1.34%, 1.36%, 1.36% and 1.34% for Class A, B, C and S shares, respectively, (excluding certain expenses such as extraordinary expenses, taxes, brokerage, interest, Rule 12b-1 distribution and/or service fees and trustee and trustee counsel fees and organizational and offering expenses).
For the period from August 1, 2003 through March 31, 2004, the Administrative Fee was as follows:
|
Administrative Fee |
Total Aggregated |
|
Class A |
$ 14,620 |
|
Class B |
9,190 |
|
Class C |
3,663 |
|
Class S |
810,879 |
|
|
$ 838,352 |
Service Provider Fees. Scudder Investments Service Company ("SISC"), an affiliate of the Advisor, is the Fund's transfer, shareholder service agent and dividend-paying agent for Class A, B and C shares of the Fund. Scudder Service Corporation ("SSC"), a subsidiary of the Advisor, is the transfer, shareholder service agent and dividend-paying agent for Class S shares of the Fund. Pursuant to a sub-transfer agency agreement among SISC, SSC and DST Systems, Inc. ("DST"), SISC and SSC have delegated certain transfer agent and dividend paying agent functions to DST. The costs and expenses of such delegation are borne by SISC and SSC, not by the Fund. For the period April 1, 2004 through July 31, 2004, the amounts charged to the Fund by SISC and SSC were as follows:
|
Services to Shareholders |
Total Aggregated |
Unpaid at July 31, 2004 |
|
Class A |
$ 3,782 | $ 3,782 |
|
Class B |
3,294 | 3,294 |
|
Class C |
976 | 976 |
|
Class S |
206,668 | 206,668 |
|
|
$ 214,720 |
$ 214,720 |
Scudder Fund Accounting Corporation ("SFAC"), an affiliate of the Advisor, is responsible for computing the daily net asset value per share and maintaining the portfolio and general accounting records of the Fund. SFAC has retained State Street Bank and Trust Company to provide certain administrative, fund accounting and record-keeping services to the Fund. For the period April 1, 2004 through July 31, 2004, the amount charged to the Fund by SFAC for accounting services aggregated $25,016, all of which is unpaid at July 31, 2004.
Prior to April 1, 2004, the service provider fees outlined above were paid by the Advisor in accordance with the Administrative Agreement.
Distribution Service Agreement. Under the Distribution Service Agreement, in accordance with Rule 12b-1 under the 1940 Act, Scudder Distributors, Inc. ("SDI"), a subsidiary of the Advisor, receives a fee ("Distribution Fee") of 0.75% of average daily net assets of Class B and C shares. Pursuant to the agreement, SDI enters into related selling group agreements with various firms at various rates for sales of Class B and C shares. For the year ended July 31, 2004, the Distribution Fee was as follows:
|
Distribution Fee |
Total Aggregated |
Unpaid at July 31, 2004 |
|
Class B |
$ 20,552 | $ 1,827 |
|
Class C |
13,020 | 1,535 |
|
|
$ 33,572 |
$ 3,362 |
In addition, SDI provides information and administrative services ("Service Fee") to Class A, B and C shareholders at an annual rate of up to 0.25% of average daily net assets for each such class. SDI in turn has various agreements with financial services firms that provide these services and pay these fees based upon the assets of shareholder accounts the firms service. For the year ended July 31, 2004, the Service Fee was as follows:
|
Service Fee |
Total Aggregated |
Unpaid at July 31, 2004 |
Effective Rate |
|
Class A |
$ 13,947 | $ 1,711 |
.24% |
|
Class B |
6,701 | 629 |
.25% |
|
Class C |
4,177 | 726 |
.24% |
|
|
$ 24,825 |
$ 3,066 |
|
Underwriting Agreement and Contingent Deferred Sales Charge. SDI is the principal underwriter of the Fund. Underwriting commissions paid in connection with the distribution of Class A and Class C shares for the year ended July 31, 2004 aggregated $7,634 and $20, respectively.
In addition, SDI receives any contingent deferred sales charge ("CDSC") from Class B share redemptions occurring within six years of purchase and Class C share redemptions occurring within one year of purchase. There is no such charge upon redemption of any share appreciation or reinvested dividends. The CDSC is based on declining rates, ranging from 4% to 1% for Class B and 1% for Class C, of the value of the shares redeemed. For the year ended July 31, 2004, the CDSC for Class B and C shares aggregated $8,150 and $564, respectively.
Trustees' Fees and Expenses. The Fund pays each Trustee not affiliated with the Advisor retainer fees plus specified amounts for attended board and committee meetings.
Scudder Cash Management QP Trust. Pursuant to an Exemptive Order issued by the SEC, the Fund may invest in the Scudder Cash Management QP Trust (the "QP Trust"), and other affiliated funds managed by Scudder Investments, Inc. The QP Trust seeks to provide as high a level of current income as is consistent with the preservation of capital and the maintenance of liquidity. The QP Trust does not pay the Advisor a management fee for the affiliated Fund's investments in the QP Trust.
D. Expense Off-Set Arrangement
The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances were used to reduce a portion of the Fund's custodian expenses. During the year ended July 31, 2004, the custodian fees were reduced by $233 for custodian credits earned.
E. Share Transactions
The following table summarizes share and dollar activity in the Fund:
|
|
Year Ended |
Year Ended |
||
|
|
Shares |
Dollars |
Shares |
Dollars |
|
Shares sold
|
||||
|
Class A |
290,205 | $ 7,448,466 | 208,694 | $ 4,159,955 |
|
Class B |
75,643 | 1,822,667 | 68,374 | 1,362,886 |
|
Class C |
197,200 | 5,145,112 | 14,692 | 283,633 |
|
Class S |
2,590,728 | 65,373,383 | 1,982,274 | 37,868,181 |
|
|
|
$ 79,789,628 |
|
$ 43,674,655 |
|
Shares issued to shareholders in reinvestment of distributions
|
||||
|
Class A |
132 | $ 3,267 | 22,164 | $ 393,409 |
|
Class B |
- | - | 10,192 | 179,780 |
|
Class C |
- | - | 3,013 | 53,155 |
|
Class S |
26,715 | 650,177 | 1,365,471 | 24,237,103 |
|
|
|
$ 653,444 |
|
$ 24,863,447 |
|
Shares redeemed
|
||||
|
Class A |
(79,456) | $ (2,020,078) | (220,619) | $ (4,163,240) |
|
Class B |
(68,544) | (1,614,520) | (42,958) | (815,211) |
|
Class C |
(142,217) | (3,454,675) | (6,679) | (126,667) |
|
Class S |
(3,032,174) | (76,209,225) | (3,535,752) | (66,409,797) |
|
|
|
$ (83,298,498) |
|
$ (71,514,915) |
|
Redemption
fees |
- | $ 33,283 | - | $ 48,928 |
|
Net increase (decrease)
|
||||
|
Class A |
210,881 | $ 5,431,655 | 10,239 | $ 390,124 |
|
Class B |
7,099 | 208,147 | 35,608 | 727,455 |
|
Class C |
54,983 | 1,690,437 | 11,026 | 210,121 |
|
Class S |
(414,731) | (10,152,382) | (188,007) | (4,255,585) |
|
|
|
$ (2,822,143) |
|
$ (2,927,885) |
F. Line of Credit
The Fund and several other affiliated funds (the "Participants") share in a $1.25 billion revolving credit facility administered by J.P. Morgan Chase Bank 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, based upon net assets, among each of the Participants. Interest is calculated at the Federal Funds Rate plus 0.5 percent. The Fund may borrow up to a maximum of 33 percent of its net assets under the agreement.
G. Regulatory Matters and Litigation
Since at least July 2003, federal, state and industry regulators have been conducting ongoing inquiries and investigations ("inquiries") into the mutual fund industry, and have requested information from numerous mutual fund companies, including Scudder Investments. We are unable to determine what the outcome of these inquiries will be or what the effect, if any, would be on the funds or their advisors. Publicity about mutual fund practices arising from these industry-wide inquiries serves as the general basis of a number of private lawsuits against the Scudder funds. These lawsuits, which previously have been reported in the press, involve purported class action and derivative lawsuits, making various allegations and naming as defendants various persons, including certain Scudder funds, Deutsche Asset Management ("DeAM") and its affiliates, certain individuals, including in some cases Fund Trustees/Directors, and other parties. DeAM has undertaken to bear all liabilities and expenses incurred by the Scudder funds in connection with these lawsuits, or other lawsuits or regulatory actions that may be filed making allegations similar to these lawsuits regarding fund valuation, market timing, revenue sharing or other subjects of the pending inquiries. Based on currently available information, DeAM believes the likelihood that the pending lawsuits will have a material adverse financial impact on a Scudder fund is remote and such actions are not likely to materially affect its ability to perform under its investment management agreements with the Scudder funds.
|
|
To the Trustees of Scudder Securities Trust and the Shareholders of Scudder Small Company Value Fund:
In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Scudder Small Company Value Fund (the "Fund") at July 31, 2004, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States), which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at July 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
|
Boston, Massachusetts |
PricewaterhouseCoopers LLP |
|
|
Pursuant to Section 852 of the Internal Revenue Code, the Fund designates $31,400,000 as capital gain dividends for its year ended July 31, 2004, of which 100% represents 15% rate gains.
For corporate shareholders, 100% of the income dividends paid during the Fund's fiscal year ended July 31, 2004 qualified for the dividends received deduction.
For federal income tax purposes, the Fund designates $4,500,000, or the maximum amount allowable under tax law, as qualified dividend income.
Please consult a tax advisor if you have questions about federal or state income tax laws, or on how to prepare your tax returns. If you have specific questions about your account, please call 1-800-SCUDDER.
|
|
The following table presents certain information regarding the Trustees and Officers of the fund as of July 31, 2004. Each individual's year of birth is set forth in parentheses after his or her name. Unless otherwise noted, (i) each individual has engaged in the principal occupation(s) noted in the table for at least the most recent five years, although not necessarily in the same capacity, and (ii) the address of each Trustee is c/o Dawn-Marie Driscoll, PO Box 100176, Cape Coral, FL 33910. Unless otherwise indicated, the address of each Officer is Two International Place, Boston, Massachusetts 02110. The term of office for eachTrustee is until the next meeting of shareholders called for the purpose of electing Trustees and until the election and qualification of a successor, or until such Trustee sooner dies, resigns, retires or is removed as provided in the governing documents of the fund. Because the fund does not hold an annual meeting of shareholders, each Trustee will hold office for an indeterminate period. The Trustees of the fund may also serve in similar capacities with other funds in the fund complex.
|
Independent Trustees |
||
|
Name, Year of
Birth, Position(s)
Held with the
Fund and Length
of Time Served1
|
Principal Occupation(s) During Past 5 Years and Other Directorships Held |
Number
of Funds
in Fund
Complex
Overseen
|
|
Dawn-Marie
Driscoll (1946) Chairman, 2004-present Trustee, 1987-present |
President, Driscoll Associates (consulting firm); Executive
Fellow, Center for Business Ethics, Bentley College; formerly,
Partner, Palmer & Dodge (1988-1990); Vice President of
Corporate Affairs and General Counsel, Filene's (1978-1988).
Directorships: CRS Technology (technology service company);
Advisory Board, Center for Business Ethics, Bentley College;
Board of Governors, Investment Company Institute; former
Chairman, ICI Directors Services Committee |
48 |
|
Henry P. Becton,
Jr. (1943) Trustee, 1990-present |
President, WGBH Educational Foundation. Directorships:
Becton Dickinson and Company (medical technology
company); The A.H. Belo Company (media company); Concord
Academy; Boston Museum of Science; Public Radio
International. Former Directorships: American Public
Television; New England Aquarium; Mass Corporation for
Educational Telecommunications; Committee for Economic
Development; Public Broadcasting Service |
48 |
|
Keith R. Fox
(1954) Trustee, 1996-present |
Managing Partner, Exeter Capital Partners (private equity
funds). Directorships: Facts on File (school and library
publisher); Progressive Holding Corporation (kitchen importer
and distributor); Cloverleaf Transportation Inc. (trucking);
K-Media, Inc. (broadcasting); Natural History, Inc. (magazine
publisher); National Association of Small Business Investment
Companies (trade association) |
48 |
|
Louis E. Levy
(1932) Trustee, 2002-present |
Retired. Formerly, Chairman of the Quality Control Inquiry
Committee, American Institute of Certified Public Accountants
(1992-1998); Partner, KPMG LLP (1958-1990). Directorships:
Household International (banking and finance); ISI Family of
Funds (registered investment companies; 4 funds overseen) |
48 |
|
Jean Gleason
Stromberg (1943) Trustee, 1999-present |
Retired. Formerly, Consultant (1997-2001); Director, US
General Accounting Office (1996-1997); Partner, Fulbright &
Jaworski, L.L.P. (law firm) (1978-1996). Directorships: The
William and Flora Hewlett Foundation; Service Source, Inc. |
48 |
|
Jean C. Tempel
(1943) Trustee, 1994-present |
Managing Partner, First Light Capital (venture capital group)
(2000-present); formerly, Special Limited Partner, TL Ventures
(venture capital fund) (1996-1998); General Partner, TL
Ventures (1994-1996); President and Chief Operating Officer,
Safeguard Scientifics, Inc. (public technology business
incubator company) (1991-1993). Directorships: Sonesta
International Hotels, Inc.; Aberdeen Group (technology
research); United Way of Mass Bay; The Commonwealth
Institute (supports women entrepreneurs). Trusteeships:
Connecticut College, Vice Chair of Board, Chair, Finance
Committee; Northeastern University, Vice Chair of Finance
Committee, Chair, Funds and Endowment Committee |
48 |
|
Carl W. Vogt
(1936) Trustee, 2002-present |
Senior Partner, Fulbright & Jaworski, L.L.P. (law firm); formerly,
President (interim) of Williams College (1999-2000); President,
certain funds in the Deutsche Asset Management Family of
Funds (formerly, Flag Investors Family of Funds) (registered
investment companies) (1999-2000). Directorships: Yellow
Corporation (trucking); American Science & Engineering (x-ray
detection equipment); ISI Family of Funds (registered
investment companies, 4 funds overseen); National Railroad
Passenger Corporation (Amtrak); formerly, Chairman and
Member, National Transportation Safety Board |
48 |
|
Officers |
|
|
Name, Year of Birth,
Position(s) Held with
the Fund and Length
of Time Served1
|
Principal Occupation(s) During Past 5 Years and Other Directorships Held |
|
Julian F. Sluyters2
(1960) Chief Executive Officer, 2004-present |
Managing Director, Deutsche Asset Management (since May 2004);
President and Chief Executive Officer of The Germany Fund, Inc., The
New Germany Fund, Inc., The Central Europe and Russia Fund, Inc.,
The Brazil Fund, Inc., The Korea Fund, Inc., Scudder Global High
Income Fund, Inc. and Scudder New Asia Fund, Inc. (since May 2004);
President and Chief Executive Officer, UBS Fund Services (2001-2003);
Chief Administrative Officer (1998-2001) and Senior Vice President
and Director of Mutual Fund Operations (1991-1998) UBS Global
Asset Management |
|
Brenda Lyons (1963) President, 2003-present |
Managing Director, Deutsche Asset Management |
|
John Millette (1962) Vice President and Secretary, 1999-present |
Director, Deutsche Asset Management |
|
Kenneth Murphy
(1963) Vice President, 2002-present |
Vice President, Deutsche Asset Management (2000-present);
formerly, Director, John Hancock Signature Services (1992-2000) |
|
Charles A. Rizzo
(1957) Treasurer and Chief Financial Officer, 2002-present |
Managing Director, Deutsche Asset Management (April
2004-present); formerly, Director, Deutsche Asset Management (April
2000-March 2004); Vice President and Department Head, BT Alex.
Brown Incorporated (now Deutsche Bank Securities Inc.) (1998-1999);
Senior Manager, Coopers & Lybrand L.L.P. (now
PricewaterhouseCoopers LLP) (1993-1998) |
|
Lisa Hertz2 (1970) Assistant Secretary, 2003-present |
Assistant Vice President, Deutsche Asset Management |
|
Daniel O. Hirsch3
(1954) Assistant Secretary, 2002-present |
Managing Director, Deutsche Asset Management (2002-present) and
Director, Deutsche Global Funds Ltd. (2002-present); formerly,
Director, Deutsche Asset Management (1999-2002); Principal, BT
Alex. Brown Incorporated (now Deutsche Bank Securities Inc.)
(1998-1999); Assistant General Counsel, United States Securities and
Exchange Commission (1993-1998) |
|
Caroline Pearson
(1962) Assistant Secretary, 1997-present |
Managing Director, Deutsche Asset Management |
|
Kevin M. Gay (1959) Assistant Treasurer, 2004-present |
Vice President, Deutsche Asset Management |
|
Salvatore Schiavone
(1965) Assistant Treasurer, 2003-present |
Director, Deutsche Asset Management |
|
Kathleen Sullivan
D'Eramo (1957) Assistant Treasurer, 2003-present |
Director, Deutsche Asset Management |
1 Length of time served represents the date that each Trustee was first elected to the common board of Trustees which oversees a number of investment companies, including the fund, managed by the Advisor. For the Officers of the fund, the length of time served represents the date that each Officer was first elected to serve as an Officer of any fund overseen by the aforementioned common board of Trustees.
2 Address: 345 Park Avenue, New York, New York
3 Address: One South Street, Baltimore, Maryland
The fund's Statement of Additional Information ("SAI") includes additional information about the Trustees. The SAI is available, without charge, upon request. If you would like to request a copy of the SAI, you may do so by calling the following toll-free number: 1-800-SCUDDER.
|
|
For shareholders of Classes A, B and C
|
Automated Information Lines |
ScudderACCESS (800) 972-3060 Personalized account information, information on other Scudder funds and services via touchtone telephone and for Classes A, B, and C only, the ability to exchange or redeem shares. |
|
Web Site |
scudder.com View your account transactions and balances, trade shares, monitor your asset allocation, and change your address, 24 hours a day.Obtain prospectuses and applications, blank forms, interactive worksheets, news about Scudder funds, subscription to fund updates by e-mail, retirement planning information, and more. |
|
For More Information |
(800) 621-1048 To speak with a Scudder service representative. |
|
Written Correspondence |
Scudder Investments PO Box 219356Kansas City, MO 64121-9356 |
|
Proxy Voting |
A description of the fund's policies and procedures for voting
proxies for portfolio securities and information about how the
fund voted proxies related to its portfolio securities during the
12-month period ended June 30 is available on our Web site -
scudder.com (type "proxy voting" in the search field) - or on the
SEC's Web site - www.sec.gov. To obtain a written copy of the
fund's policies and procedures without charge, upon request, call
us toll free at (800) 621-1048. |
|
Principal Underwriter |
If you have questions, comments or complaints, contact: Scudder Distributors, Inc. 222 South Riverside PlazaChicago, IL 60606-5808 (800) 621-1148 |
|
|
Class A |
Class B |
Class C |
|
Nasdaq Symbol |
SAAUX |
SABUX |
SACUX |
|
CUSIP Number |
811196-724 |
811196-716 |
811196-690 |
|
Fund Number |
450 |
650 |
750 |
For shareholders of Class S
|
Automated Information Lines |
SAIL™ (800) 343-2890 |
|
|
Personalized account information, the ability to exchange or
redeem shares, and information on other Scudder funds and
services via touchtone telephone. |
|
Web Site |
myScudder.com |
|
|
View your account transactions and balances, trade shares, monitor
your asset allocation, and change your address, 24 hours a day. Obtain prospectuses and applications, blank forms, interactive worksheets, news about Scudder funds, subscription to fund updates by e-mail, retirement planning information, and more. |
|
For More Information |
(800) SCUDDER To speak with a Scudder service representative. |
|
Written Correspondence |
Scudder Investments PO Box 219669Kansas City, MO 64121-9669 |
|
Proxy Voting |
A description of the fund's policies and procedures for voting
proxies for portfolio securities and information about how the
fund voted proxies related to its portfolio securities during the
12-month period ended June 30 is available on our Web site -
myScudder.com (type "proxy voting" in the search field) - or on
the SEC's Web site - www.sec.gov. To obtain a written copy of the
fund's policies and procedures without charge, upon request, call
your service representative. |
|
Principal Underwriter |
If you have questions, comments or complaints, contact: Scudder Distributors, Inc. 222 South Riverside PlazaChicago, IL 60606-5808 (800) 621-1148 |
|
|
Class S |
|
Nasdaq Symbol |
SCSUX |
|
Fund Number |
078 |
|
Notes |
|
|
|
Notes |
|
|
ITEM 2. CODE OF ETHICS.
As of the end of the period, July 31, 2004, Scudder Securities Trust has adopted
a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its
Principal Executive Officer and Principal Financial Officer.
There have been no amendments to, or waivers from, a provision of the code of
ethics during the period covered by this report that would require disclosure
under Item 2.
A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Funds' audit committee is comprised solely of trustees who are "independent"
(as such term has been defined by the Securities and Exchange Commission ("SEC")
in regulations implementing Section 407 of the Sarbanes-Oxley Act (the
"Regulations")). The Funds' Board of Trustees has determined that there are
several "audit committee financial experts" serving on the Funds' audit
committee. The Board has determined that Louis E. Levy, the chair of the Funds'
audit committee, qualifies as an "audit committee financial expert" (as such
term has been defined by the Regulations) based on its review of Mr. Levy's
pertinent experience and education. The SEC has stated that the designation or
identification of a person as an audit committee financial expert pursuant to
this Item 3 of Form N-CSR does not impose on such person any duties, obligations
or liability that are greater than the duties, obligations and liability imposed
on such person as a member of the audit committee and board of directors in the
absence of such designation or identification. In accordance with New York Stock
Exchange requirements, the Board believes that all members of the Funds' audit
committee are financially literate, as such qualification is interpreted by the
Board in its business judgment, and that at least one member of the audit
committee has accounting or related financial management expertise.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
SCUDDER SMALL COMPANY VALUE FUND
FORM N-CSR DISCLOSURE RE: AUDIT FEES
The following table shows the amount of fees that PricewaterhouseCoopers, LLP
("PWC"), the Fund's auditor, billed to the Fund during the Fund's last two
fiscal years. For engagements with PWC entered into on or after May 6, 2003, the
Audit Committee approved in advance all audit services and non-audit services
that PWC provided to the Fund.
The Audit Committee has delegated certain pre-approval responsibilities to its
Chairman (or, in his absence, any other member of the Audit Committee).
Services that the Fund's Auditor Billed to the Fund
--------------------------------------------------------------------------------
Fiscal Year Audit Fees Audit-Related Tax Fees All Other
Ended Billed Fees Billed Billed Fees Billed
July 31, to Fund to Fund to Fund to Fund
--------------------------------------------------------------------------------
2004 $49,500 $185 $6,900 $0
--------------------------------------------------------------------------------
2003 $44,100 $1,205 $5,600 $0
--------------------------------------------------------------------------------
The above "Tax Fees" were billed for professional services rendered for tax
compliance and tax return preparation.
Services that the Fund's Auditor Billed to the Adviser and
Affiliated Fund Service Providers
The following table shows the amount of fees billed by PWC to Deutsche
Investment Management Americas, Inc. ("DeIM" or the "Adviser"), and any entity
controlling, controlled by or under common control with DeIM ("Control
Affiliate") that provides ongoing services to the Fund ("Affiliated Fund Service
Provider"), for engagements directly related to the Fund's operations and
financial reporting, during the Fund's last two fiscal years.
--------------------------------------------------------------------------------
Audit-Related Tax Fees All
Fiscal Fees Billed to Billed to Other Fees Billed
Year Adviser and Adviser and to Adviser and
Ended Affiliated Fund Affiliated Fund Affiliated Fund
July 31, Service Providers Service Providers Service Providers
--------------------------------------------------------------------------------
2004 $767,051 $0 $0
--------------------------------------------------------------------------------
2003 $517,013 $55,500 $0
--------------------------------------------------------------------------------
The "Audit-Related Fees" were billed for services in connection with the
assessment of internal controls, agreed-upon procedures and additional related
procedures.
1
Non-Audit Services
The following table shows the amount of fees that PWC billed during the Fund's
last two fiscal years for non-audit services. For engagements entered into on or
after May 6, 2003, the Audit Committee pre-approved all non-audit services that
PWC provided to the Adviser and any Affiliated Fund Service Provider that
related directly to the Fund's operations and financial reporting. The Audit
Committee requested and received information from PWC about any non-audit
services that PWC rendered during the Fund's last fiscal year to the Adviser and
any Affiliated Fund Service Provider. The Committee considered this information
in evaluating PWC's independence.
--------------------------------------------------------------------------------
Total Non-Audit
Fees billed to
Adviser and
Affiliated Fund Total
Service Providers Non-Audit Fees
(engagements billed to
related Adviser and
directly to the Affiliated Fund
Total operations Service
Fiscal Non-Audit and financial Providers
Year Fees Billed reporting (all other Total of
Ended to Fund of the Fund) engagements) (A), (B)
July 31, (A) (B) (C) and (C)
--------------------------------------------------------------------------------
2004 $6,900 $0 $1,584,295 $1,591,195
--------------------------------------------------------------------------------
2003 $5,600 $55,500 $5,960,377 $6,021,477
--------------------------------------------------------------------------------
All other engagement fees were billed for services in connection with risk
management, tax services and process improvement/integration initiatives for
DeIM and other related entities that provide support for the operations of the
fund.
2
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not Applicable
ITEM 6. SCHEDULE OF INVESTMENTS
Not Applicable
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not Applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS
Not Applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Committee on Independent Trustees/Directors selects and nominates
Independent Trustees/Directors. Fund shareholders may also submit nominees that
will be considered by the committee when a Board vacancy occurs. Submissions
should be mailed to the attention of the Secretary of the Trust, Two
International Place, Boston, MA 02110.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The Chief Executive and Financial Officers concluded that the Registrant's
Disclosure Controls and Procedures are effective based on the evaluation of the
Disclosure Controls and Procedures as of a date within 90 days of the filing
date of this report.
Fund management has previously identified a significant deficiency relating to
the overall fund expense payment and accrual process. This matter relates
primarily to a bill payment processing issue. There was no material impact to
shareholders, fund net asset value, fund performance or the accuracy of any
fund's financial statements. Fund management discussed this matter with the
Registrant's Audit Committee and auditors, instituted additional procedures to
enhance its internal controls and will continue to develop additional controls
and redesign work flow to strengthen the overall control environment associated
with the processing and recording of fund expenses.
(b) There have been no changes in the registrant's internal control over
financial reporting that occurred during the registrant's last half-year (the
registrant's second fiscal half-year in the case of the annual report) that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal controls over financial reporting.
ITEM 11. EXHIBITS.
(a)(1) Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached
hereto as EX-99.CODE ETH.
(a)(2) Certification pursuant to Rule 30a-2(a) under the Investment Company
Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as
Exhibit 99.CERT.
(b) Certification pursuant to Rule 30a-2(b) under the Investment Company
Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as
Exhibit 99.906CERT.
Form N-CSR Item F
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant: Scudder Small Company Value Fund
By: /s/Julian Sluyters
---------------------------
Julian Sluyters
Chief Executive Officer
Date: October 1, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Registrant: Scudder Small Company Value Fund
By: /s/Julian Sluyters
---------------------------
Julian Sluyters
Chief Executive Officer
Date: October 1, 2004
By: /s/Paul Schubert
---------------------------
Paul Schubert
Chief Executive Officer
Date: October 1, 2004