This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
Scudder Growth and Income Fund
Annual Report
December 31, 1994
* A fund with a conservative, income-oriented approach to common stock
investing. Offers opportunities for long-term growth of capital,
current income, and growth of income.
* A pure no-load(tm) fund with no commissions to buy, sell, or exchange
shares.
CONTENTS
2 Highlights
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
9 Investment Portfolio
16 Financial Statements
19 Financial Highlights
20 Notes to Financial Statements
26 Report of Independent Accountants
27 Tax Information
29 Officers and Trustees
30 Investment Products and Services
31 How to Contact Scudder
HIGHLIGHTS
* For the year ended December 31, 1994, Scudder Growth and Income Fund's
total return was 2.6%, outpacing the 1.3% return of the unmanaged
Standard & Poor's 500 Index and the -0.94% average return of the 347
Growth and Income funds tracked by Lipper Analytical Services, Inc.
* The Fund benefited from its holdings of manufacturing stocks,
including chemical, paper, and forest product companies, which
generally outperformed the market during the year.
* The Fund also increased its investments in the healthcare sector, as
legislative concerns abated and companies adapted to a more
cost-conscious, competitive environment.
LETTER FROM THE FUND'S PRESIDENT
Dear Shareholders,
The world's financial markets were shaken repeatedly in 1994 by a
variety of events. Rising global interest rates, losses for investors in
highly leveraged derivatives, and unsettling global developments all
combined to create a challenging environment for stock and bond investors.
Masking the market volatility, however, many broad indexes ended the year
little changed.
The events of the past year have put a new face on an old challenge
for stock funds: to provide shareholders with long-term returns that
compensate for the risks inherent in equity investments. For some
investors, the temptation is strong to move from stocks to bonds now that
U.S. Treasuries yield between 6% and 8% if held to maturity. At times like
these, it is useful to remember that stocks historically have outperformed
fixed-income investments over longer periods _ a trend not likely altered
by one year of poor performance. Even so, the global expansion currently
underway will include additional episodes of difficult adjustment. A sound
investment plan that can weather market storms is therefore more important
than ever. Experience has shown us that maintaining a diversified portfolio
and a regular program of investing can help smooth out overall performance
in the long term.
In the coming year, we expect a combination of factors, including
central bank tightening efforts, to keep the world economy and inflation on
a moderate course. Meanwhile, corporate profits continue to grow and
business investment is at an all-time high, which should translate into
expanded economic capacity down the road. These developments ultimately
should be viewed as favorable for the financial markets, and we expect
investors to begin focusing on positive long-term fundamentals rather than
short-term uncertainties.
If you have questions about your Fund or your investments, please
contact a Scudder Investor Relations representative at 1-800-225-2470. Page
31 provides more information on how to contact Scudder. Thank you for
choosing Scudder Growth and Income Fund to help meet your investment needs.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Growth and Income Fund
<PAGE>
Scudder Growth and Income Fund
Performance Update as of December 31, 1994
- - - - -----------------------------------------------------------------
Growth of a $10,000 Investment
- - - - -----------------------------------------------------------------
Scudder Growth and Income Fund
- - - - ----------------------------------------
Total Return
Period Growth -------------
Ended of Average
12/31/94 $10,000 Cumulative Annual
- - - - --------- ------- ---------- -------
1 Year $10,260 2.60% 2.60%
5 Year $16,265 62.65% 10.22%
10 Year $37,924 279.24% 14.26%
S&P 500 Index
- - - - --------------------------------------
Total Return
Period Growth -------------
Ended of Average
12/31/94 $10,000 Cumulative Annual
- - - - --------- ------- ---------- -------
1 Year $10,132 1.32% 1.32%
5 Year $15,174 51.74% 8.69%
10 Year $38,334 283.34% 14.37%
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Yearly periods ended December 31
Scudder Growth and Income Fund
Year Amount
- - - - ----------------------
84 10000
85 13455
86 15917
87 16474
88 18453
89 23316
90 22773
91 29186
92 31978
93 36964
94 37924
S&P 500 Index
Year Amount
- - - - ----------------------
84 10000
85 13173
86 15631
87 16452
88 19185
89 25263
90 24479
91 31937
92 34370
93 37834
94 38334
The Standard & Poor's (S&P) 500 Index is an unmanaged
capitalization-weighted measure of 500 widely held common
stocks listed on the New York Stock Exchange, American Stock
Exchange, and Over-The-Counter market. Index returns assume
reinvestment of dividends and, unlike Fund returns, do not
reflect any fees or expenses.
- - - - -----------------------------------------------------------------
Returns and Per Share Information
- - - - -------------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
Yearly periods ended December 31
- - - - ----------------------------------
<TABLE>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
---------------------------------------------------------------------------------
Net Asset Value... $15.35 $15.02 $12.31 $13.18 $14.14 $12.77 $15.76 $16.20 $17.24 $16.26
Income Dividends.. $ .58 $ .68 $ .68 $ .59 $ .69 $ .67 $ .55 $ .53 $ .45 $ .51
Capital Gains
Distributions..... $ -- $ 2.28 $ 2.64 $ -- $ 1.77 $ .34 $ -- $ .50 $ 1.01 $ .91
Fund Total
Return (%)........ 34.55 18.27 3.50 12.01 26.36 -2.33 28.16 9.57 15.59 2.60
Index Total
Return (%)........ 31.73 18.66 5.25 16.56 31.63 -3.11 30.40 7.61 10.06 1.32
</TABLE>
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results.
Investment return and principal value will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than when purchased.
Portfolio Summary as of December 31, 1994
- - - - ---------------------------------------------------------------------------
Diversification
- - - - ---------------------------------------------------------------------------
Common and
Preferred Stocks 90% The Fund's strategy focuses on
Convertible Stocks 5% securities with potential for price
Convertible Bonds 3% appreciation and above-average dividend
Cash Equivalents 2% yields versus the overall market.
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- - - - --------------------------------------------------------------------------
Sectors (Excludes 2% Cash Equivalents)
- - - - --------------------------------------------------------------------------
Manufacturing 18% The Fund benefitted from holdings in
Financial 17% manufacturing stocks, including chemical,
Health 14% paper, and forest product companies.
Consumer Staples 11%
Energy 11%
Durables 7%
Communications 6%
Utilities 4%
Consumer Discretionary 4%
Other 8%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- - - - --------------------------------------------------------------------------
Ten Largest Equity Holdings
- - - - --------------------------------------------------------------------------
1. Eli Lilly Co.
Leading pharmaceutical company
2. United Technologies Corp.
Aerospace, climate control systems and elevators
3. Baxter International Inc.
Manufacturer and distributor of hospital
and laboratory products and services
4. Alltel Corp.
Telecommunications and data processing services
5. Halliburton Co.
Oil well services
6. Xerox Corp.
Manufacturer of copiers and duplicators
7. Warner-Lambert Co.
Drugs, toiletries and food products
8. First Bank System Inc.
Commercial banking in Minnesota and the northcentral U.S.
9. TRW Inc.
Defense electronics, automotive parts and systems
10. H.J. Heinz Co.
Major manufacturer of processed foods
We identified several attractively priced healthcare companies that
we believe were adapting to the more challenging environment for
this industry.
For more complete details about the Fund's Investment Portfolio,
see page 9.
A monthly Investment Portfolio Summary is available upon request.
<PAGE>
Dear Shareholders,
On the surface, 1994 looked relatively unremarkable, with the
unmanaged Standard & Poor's 500 Index virtually unchanged for the year. In
actuality, the S&P's 12-month total return of 1.3% incorporated no less
than six rallies and corrections that ranged between 4% and 8%, leaving
many investors exhausted by the year's market volatility.
We are pleased to report that Scudder Growth and Income Fund emerged
relatively unscathed within this environment. The Fund ended the year with
a total return of 2.6%, which includes price change plus income and capital
gain distributions. Over the past three, five, and 10 years, the Fund
reported average annual total returns of 9.12%, 10.22% and 14.26%,
respectively, versus 6.27%, 8.69%, and 14.37% for the S&P 500.
A Strategy Emphasizing Competitive Performance During Market Ups and Downs
The Fund's long-term success is the product of a disciplined strategy
that seeks to produce competitive returns in varying market conditions.
Achieving this goal means not only taking advantage of market upswings but,
as we were largely able to do in 1994, avoiding trouble when the overall
trend of stock prices is flat or negative. Specifically, we compare a
stock's current dividend yield to its past dividend yield and to that of
the market overall, selecting those stocks with comparatively above-average
yields that we believe offer the best prospects for appreciation over time.
During much of the year, manufacturing stocks significantly benefited
the Fund (18% of the portfolio, excluding cash equivalents, versus 13% of
the S&P 500), including chemical, paper, and forest product companies.
These stocks generally outperformed the market during the first part of the
year, reflecting the strong pace of U.S. economic activity. Expectations of
sharply higher earnings for commodity goods producers propelled prices of
holdings such as Dow Chemical, Federal Paperboard, and Lyondell
Petrochemical higher.
Healthcare holdings, which we significantly increased in the second
quarter, also contributed to the year's positive total return. This long
downtrodden sector continued to underperform the market through last spring
because of well-publicized concerns over healthcare reform, managed care,
and falling drug prices. We identified several attractively priced
companies that we believed were adapting to the more challenging
environment. As a result, the Fund's exposure to the group doubled by the
summer, bringing it to 12% compared with 9% for the S&P. By midyear, the
prices of healthcare stocks began to improve. The industry's evolution
included a major wave of consolidations, such as Eli Lilly's acquisition of
the pharmacy benefit-management division of McKesson, and American Home
Products' purchase of American Cyanamid. The portfolio benefited not only
from its investments in these two acquisition targets but also from
holdings such as Warner Lambert and Schering Plough, which moved higher in
anticipation of additional mergers.
Higher Oil Prices Boost Energy Stocks
Energy and food stocks were lesser but still important contributors to
Fund performance early in the year. The portfolio particularly benefited
from stocks sensitive to changes in oil prices, which moved sharply higher
in the spring. Such holdings included Murphy Oil and Louisiana Land &
Exploration. Lyondell Petrochemical also fared well as pricing for ethylene
improved. Our attraction to food stocks was driven chiefly by overly
depressed share prices as a result of an extremely competitive industry
environment.
After the successes of the first nine months, the transition into the
fourth quarter was less rewarding. Many of the strategies that helped us in
the first part of the year did not work as well as the year drew to a
close. Indeed, manufacturing stocks, the biggest positive contributor in
the first nine months, provided the most disappointing performance later in
the year. As the Federal Reserve raised short-term interest rates again in
November, investors began to fear for the economic expansion. Earnings
expectations were re-evaluated lower, and commodity goods stocks
experienced a year-end downturn.
Energy stocks also reversed course near the end of the year due to
weak oil and natural gas prices and concerns that the improving environment
for petrochemicals would be short-lived. We were also on the wrong side of
an industry consolidation when one of our stock holdings, Quaker Oats,
turned from being a rumored "acquiree" to an acquirer. After announcing its
purchase of Snapple, Quaker Oats dropped sharply from its September highs.
Looking Ahead
The challenging investment environment in 1994 seems likely to
continue into the new year. We believe well-positioned manufacturing
companies will prosper in the current environment of moderate global
growth, and we intend to maintain the Fund's exposure to this group. We are
also preserving our substantial position in financial stocks, as the
potential for stable or even declining interest rates during the second
half of 1995 should provide a much-needed lift to this group.
We expect to continue to tilt the Fund towards non-cyclical stocks,
including those in the food, beverage, tobacco, and healthcare industries.
In addition to significantly increasing our healthcare exposure earlier in
1994, we have more recently increased the portfolio's weighting in consumer
staples. Many of these stocks have been out of favor and are now
compellingly cheap. Among this group, we have focused on companies that are
actively pursuing new strategies to succeed in this era of intense
competition, including Philip Morris, Heinz, and Tambrands.
Our aim in managing your Fund is to participate during periods of
rising equity prices, while attempting to shield the portfolio from
negative market periods. In 1994, the latter proved to be the case, and we
are pleased to have helped investors avoid many of the stock market's
unpleasant surprises. While 1995 appears to offer its own challenges, we
believe our disciplined investment approach should continue to provide
exposure to the long-term benefits of the equity markets.
Sincerely,
Your Portfolio Management Team
/s/Robert T. Hoffman /s/Kathleen T. Millard
Robert T. Hoffman Kathleen T. Millard
/s/Benjamin W. Thorndike
Benjamin W. Thorndike
Scudder Growth and Income Fund:
A Team Approach to Investing
Scudder Growth and Income Fund is managed by a team of Scudder
investment professionals who each play an important role in the Fund's
management process. Team members work together to develop investment
strategies and select securities for the Fund. They are supported by
Scudder's large staff of economists, research analysts, traders, and other
investment specialists who work in our offices across the United States and
abroad. We believe our team approach benefits Fund investors by bringing
together many disciplines and leveraging Scudder's extensive resources.
Lead Portfolio Manager Robert T. Hoffman has had responsibility for
setting the Fund's stock investing strategy and overseeing the Fund's
day-to-day operations since he joined Scudder in 1991. Rob has 10 years of
experience in the investment industry and also heads up the portfolio
management team for AARP Growth and Income Fund. Kathleen T. Millard,
Portfolio Manager, has been involved in the investment industry since 1983
and at Scudder since 1991. Kathleen focuses on strategy and stock
selection, a role she also plays for AARP Growth and Income Fund. Benjamin
W. Thorndike, Portfolio Manager, is the Fund's chief analyst and strategist
for convertible securities. Ben, who has 15 years of investment experience,
joined Scudder and the Fund in 1986 and also is a Portfolio Manager for
AARP Growth and Income Fund.
<PAGE>
INVESTMENT PORTFOLIO as of December 31, 1994
<TABLE>
- - - - ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- - - - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
------------------------------------------------------------------------------
1.9% REPURCHASE AGREEMENT
------------------------------------------------------------------------------
37,604,000 Repurchase Agreement with Donaldson,
Lufkin & Jenrette dated 12/30/94 at 5.875%
to be repurchased on 1/3/95 at $37,628,547
collateralized by a $39,207,000 U.S. Treasury
Bill, 6/29/95 (Cost $37,604,000) . . . . . . . . 37,604,000
----------
------------------------------------------------------------------------------
0.5% CORPORATE BONDS
------------------------------------------------------------------------------
FINANCIAL
3,125,000 Equitable Companies, Inc., 6.125%, 12/15/24 . . . 2,796,875
5,500,000 Siemens Capital Corp., with warrants,
8%, 6/24/02 . . . . . . . . . . . . . . . . . . 6,957,500
----------
TOTAL CORPORATE BONDS (Cost $10,302,934) . . . . . 9,754,375
----------
------------------------------------------------------------------------------
2.7% CONVERTIBLE BONDS
------------------------------------------------------------------------------
CONSUMER DISCRETIONARY 0.1%
Department & Chain Stores 2,363,000 Home Depot, Inc., 4.5%, 2/15/97 . . . . . . . . . 2,823,785
----------
HEALTH 0.1%
Health Industry Services 1,800,000 Hillhaven Corp., 7.75%, 11/1/02 . . . . . . . . . 2,304,000
----------
FINANCIAL 1.2%
Banks 0.9% 8,250,000 Banco Nacional de Mexico, 7%, 12/15/99 . . . . . . 6,558,750
8,095,000 Credit Suisse, 4.875%, 11/19/02 . . . . . . . . . 10,725,875
----------
17,284,625
----------
Other Financial Companies 0.3% 4,560,000 First Financial Management, 5%, 12/15/99 . . . . 4,810,800
1,809,000 Jardine Strategic Holdings, 7.5%, 5/7/49 . . . . 2,062,260
----------
6,873,060
----------
MEDIA 0.2%
Broadcasting &
Entertainment 8,000,000 Time Warner Inc., Zero Coupon Liquid
Yield Option Note, 6/22/13 . . . . . . . . . . 2,840,000
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
SCUDDER GROWTH AND INCOME FUND
=====================================================================================================================
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- - - - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TECHNOLOGY 0.3%
Electronic Data Processing 0.2% 7,500,000 Silicon Graphics Inc., 11/5/13 . . . . . . . . . 4,031,250
----------
Precision Instruments 0.1% 1,500,000 Thermo Instruments Systems Inc.,
6.625%, 8/15/01 . . . . . . . . . . . . . . . . 2,670,000
----------
CONSTRUCTION 0.3%
Homebuilding 9,300,000 Empresa ICA Sociedad Controladora S.A.,
5%, 3/15/04 . . . . . . . . . . . . . . . . . . 5,859,000
----------
TRANSPORTATION 0.5%
Airlines 13,600,000 Delta Air Lines, Inc., 3.23%, 6/15/03 . . . . . . 9,554,000
----------
TOTAL CONVERTIBLE BONDS (Cost $58,550,083) . . . . 54,239,720
----------
5.1% CONVERTIBLE PREFERRED STOCKS
Shares
---------------------------------------------------------------------------------
HEALTH 1.2%
Health Industry Services 948,400 FHP International Corp. "A" . . . . . . . . . . . 23,235,800
----------
SERVICE INDUSTRIES 0.9%
EDP Services 330,100 General Motors Corp., Series C, Cum. $3.25
(convertible into GM "E") . . . . . . . . . . . 18,939,488
----------
DURABLES 1.0%
Automobiles 215,800 Ford Motor Co., Series A, Cum. $4.20 . . . . . . 19,853,600
----------
MANUFACTURING 0.9%
Containers & Paper 0.5% 293,200 Boise Cascade Corp. "E", Cum $1.79 . . . . . . . 7,806,450
60,100 Boise Cascade Corp. "G", Cum $1.58 . . . . . . . 1,434,888
----------
9,241,338
----------
Industrial Specialty 0.4% 181,000 Corning Inc. . . . . . . . . . . . . . . . . . . 8,461,750
----------
TECHNOLOGY 0.2%
Electronic Data Processing 50,000 Ceridian Corp., 5.5% . . . . . . . . . . . . . . 3,150,000
----------
ENERGY 0.4%
Oil & Gas Production 180,500 Parker & Parsley Capital Corp. . . . . . . . . . 7,987,125
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
=========================================================================================================================
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - - - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
METALS AND MINERALS 0.5%
Precious Metals 500,000 Freeport McMoRan Copper & Gold, Inc.,
Cum. $1.25 . . . . . . . . . . . . . . . . . . 10,375,000
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $95,089,290) . . . . . . . . . . . . . . 101,244,101
------------
0.3% PREFERRED STOCKS
COMMUNICATIONS
Telephone/Communications 120,000 Philippine Long Distance Telephone Co.
TOTAL PREFERRED STOCKS (Cost $6,000,000) . . . 6,495,000
------------
89.5% COMMON STOCKS
CONSUMER DISCRETIONARY 3.8%
Department &
Chain Stores 521,000 Edison Brothers Stores, Inc. . . . . . . . . . 9,638,500
390,200 J.C. Penney Co., Inc. . . . . . . . . . . . . . 17,412,675
1,103,200 Rite Aid Corp. . . . . . . . . . . . . . . . . 25,787,300
499,300 Sears, Roebuck & Co. . . . . . . . . . . . . . 22,967,800
------------
75,806,275
------------
CONSUMER STAPLES 10.9%
Alcohol & Tobacco 3.4% 515,800 American Brands Inc. . . . . . . . . . . . . . 19,342,500
436,600 Anheuser Busch Companies, Inc. . . . . . . . . 22,212,025
440,000 Philip Morris Companies Inc. . . . . . . . . . 25,300,000
------------
66,854,525
------------
Consumer Specialties 0.2% 277,000 A.T. Cross Co. "A" . . . . . . . . . . . . . . 3,774,125
------------
Food & Beverage 4.0% 520,000 General Mills, Inc. . . . . . . . . . . . . . . 29,640,000
973,100 H.J. Heinz Co. . . . . . . . . . . . . . . . . 35,761,425
463,400 Quaker Oats Co. . . . . . . . . . . . . . . . . 14,249,550
------------
79,650,975
------------
Package Goods/
Cosmetics 3.3% 488,000 Avon Products Inc. . . . . . . . . . . . . . . 29,158,000
184,400 Clorox Co. . . . . . . . . . . . . . . . . . . 10,856,550
675,000 Tambrands Inc. . . . . . . . . . . . . . . . . 26,071,875
------------
66,086,425
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
SCUDDER GROWTH AND INCOME FUND
================================================================================================================
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - - - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HEALTH 12.7%
Health Industry Services 0.3% 182,400 McKesson Corp. . . . . . . . . . . . . 5,950,800
-----------
Pharmaceuticals 12.4% 418,000 American Home Products Corp. . . . . . 26,229,500
1,587,100 Baxter International Inc. . . . . . . . 44,835,575
404,300 Bristol-Myers Squibb Co. . . . . . . . 23,398,863
731,600 Carter-Wallace Inc. . . . . . . . . . . 9,510,800
779,300 Eli Lilly Co. . . . . . . . . . . . . . 51,141,563
438,000 Schering-Plough Corp. . . . . . . . . 32,412,000
358,300 SmithKline Beecham PLC (ADR) . . . . . . 12,271,775
488,700 Warner-Lambert Co. . . . . . . . . . . . 37,629,900
744,100 Zeneca Group PLC . . . . . . . . . . . . 10,229,919
-----------
247,659,895
-----------
COMMUNICATIONS 5.3%
Telephone/
Communications 1,334,400 Alltel Corp. . . . . . . . . . . . . . 40,198,800
382,600 Compania Telefonica Nacional de Espana
SA (ADR) . . . . . . . . . . . . . . 13,438,825
199,800 Compania de Telefonos de Chile,
SA (ADR) . . . . . . . . . . . . . . 15,734,250
885,240 Hong Kong Telecommunications Ltd. (ADR). 16,930,215
438,000 Tele Danmark A/S "B" (ADR) * . . . . . 11,169,000
79,900 Telecom Argentina S.A. "B" (ADR) . . . . 4,134,825
92,400 Telefonica de Argentina (ADR) . . . . . 4,897,200
-----------
106,503,115
-----------
FINANCIAL 14.9%
Banks 7.6% 235,000 AmSouth Bancorp. . . . . . . . . . . . 6,051,250
72,050 Argentaria Corporacion Bancaria
de Espana 67 . . . . . . . . . . . . . 2,553,567
704,700 Chemical Banking Corp. . . . . . . . . . 25,281,113
807,600 CoreStates Financial Corp. . . . . . . . 20,997,600
542,500 Corporacion Bancaria de Espana (ADR) . . 9,697,188
1,131,100 First Bank System Inc. . . . . . . . . 37,609,075
441,600 J.P. Morgan & Co., Inc. . . . . . . . 24,729,600
257,400 Summit Bancorporation . . . . . . . . . 4,987,125
38,777 Swiss Bank Corp. (Bearer) . . . . . . 10,720,796
1,077 Swiss Bank Corp. Warrants* (Bearer)
(expire 6/30/95) . . . . . . . . . . 12,955
353,300 Wilmington Trust Corp. . . . . . . . . 8,037,575
-----------
150,677,844
-----------
Insurance 2.2% 594,100 EXEL, Ltd. . . . . . . . . . . . . . . 23,466,950
604,000 Lincoln National Corp. . . . . . . . . 21,140,000
-----------
44,606,950
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
===========================================================================================================
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - - - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Other Financial Companies 1.8% 1,104,900 Great Western Financial Corp. . . . . . 17,678,400
31,500 Security Capital Industrial Trust . . . 535,500
547,400 Student Loan Marketing Association . . . 17,790,500
-----------
36,004,400
-----------
Real Estate 3.3% 87,200 Avalon Properties, Inc. . . . . . . . . 2,005,600
338,500 Camden Property Trust (REIT) . . . . . . 8,420,188
73,800 Charles E. Smith Residential
Realty, Inc. . . . . . . . . . . . . 1,872,675
28,100 Equity Residential Properties Trust
(REIT) . . . . . . . . . . . . . . . . 843,000
275,000 General Growth Properties, Inc.
(REIT) . . . . . . . . . . . . . . . . 6,221,875
248,600 Health Care Property Investment Inc.
(REIT) . . . . . . . . . . . . . . . . 7,489,075
31,400 Mark Centers Trust (REIT) . . . . . . . 404,275
138,300 McArthur/Glen Realty Corp. (REIT) . . 2,281,950
468,400 Meditrust SBI (REIT) . . . . . . . . . 14,169,100
342,400 Nationwide Health Properties Inc.
(REIT) . . . . . . . . . . . . . . . . 12,240,800
61,900 Post Properties Inc. (REIT) . . . . . . 1,949,850
451,300 Southwestern Properties Trust (REIT) . . 5,528,425
65,700 Vornado Realty Trust (REIT) . . . . . . 2,356,988
-----------
65,783,801
-----------
SERVICE INDUSTRIES 1.8%
Commercial Services 0.5% 440,000 Fleming Companies Inc. . . . . . . . . 10,230,000
-----------
Consumer Services 0.7% 373,200 H & R Block Inc. . . . . . . . . . . . 13,855,050
-----------
Printing/Publishing 0.6% 453,600 Deluxe Corp. . . . . . . . . . . . . . 12,020,400
DURABLES 6.3% -----------
Aerospace 5.0% 398,400 AAR Corp. . . . . . . . . . . . . . . . 5,328,600
285,100 Lockheed Corp. . . . . . . . . . . . . 20,705,388
729,400 Rockwell International Corp. . . . . . 26,076,050
70,000 Thiokol Corp. . . . . . . . . . . . . . 1,951,250
739,100 United Technologies Corp. . . . . . . . 46,470,913
-----------
100,532,201
-----------
Automobiles 1.3% 687,500 Dana Corp. . . . . . . . . . . . . . . 16,070,313
195,300 Eaton Corp. . . . . . . . . . . . . . . 9,667,350
-----------
25,737,663
-----------
MANUFACTURING 17.2%
Chemicals 4.3% 293,900 Dow Chemical Co. . . . . . . . . . . . 19,764,775
470,000 E.I. du Pont de Nemours & Co. . . . . . 26,437,500
1,007,200 Lyondell Petrochemical Co. . . . . . . . 26,061,300
449,100 Union Carbide Corp. . . . . . . . . . . 13,192,313
-----------
85,455,888
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
SCUDDER GROWTH AND INCOME FUND
===========================================================================================================
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - - - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Containers & Paper 2.7% 659,000 Federal Paper Board Co., Inc. . . . . . 19,111,000
580,800 Kimberly Clark de Mexico S.A. "A" . . . 6,806,159
33,900 Kimberly Clark de Mexico S.A.
"A" (ADR) . . . . . . . . . . . . . . 788,175
524,300 Kimberly-Clark Corp. . . . . . . . . . 26,477,150
-----------
53,182,484
-----------
Diversified Manufacturing 2.7% 680,700 Dresser Industries Inc. . . . . . . . . 12,848,213
93,100 Saint Joe Paper Co. . . . . . . . . . 5,050,675
555,100 TRW Inc. . . . . . . . . . . . . . . . 36,636,600
-----------
54,535,488
-----------
Electrical Products 1.1% 345,600 Thomas & Betts Corp. . . . . . . . . . 23,198,400
-----------
Machinery/Components/
Controls 1.5% 475,900 Parker-Hannifin Group . . . . . . . . . 21,653,450
239,300 Timken Co. . . . . . . . . . . . . . . 8,435,325
-----------
30,088,775
-----------
Office Equipment/Supplies 1.9% 380,300 Xerox Corp. . . . . . . . . . . . . . . 37,649,700
-----------
Specialty Chemicals 3.0% 180,000 ARCO Chemical Co. . . . . . . . . . . . 7,920,000
613,800 Betz Laboratories Inc. . . . . . . . . 27,160,650
358,600 Petrolite Corp. . . . . . . . . . . . 9,323,600
591,600 Witco Corp. . . . . . . . . . . . . . 14,568,150
-----------
58,972,400
-----------
TECHNOLOGY 0.5%
Military Electronics 241,300 E-Systems, Inc. . . . . . . . . . . . . 10,044,113
-----------
ENERGY 10.1%
Engineering 1.4% 1,100,900 McDermott International Inc. . . . . . 27,247,275
-----------
Oil & Gas Production 0.8% 217,500 Louisiana Land & Exploration Co. . . . 7,911,563
387,500 Pacific Enterprises . . . . . . . . . . 8,234,375
-----------
16,145,938
-----------
Oil Companies 6.0% 375,700 Exxon Corp. . . . . . . . . . . . . . . 22,823,775
268,900 Murphy Oil Corp. . . . . . . . . . . . . 11,428,250
480,100 Pennzoil Co. . . . . . . . . . . . . . 21,184,413
301,800 Repsol SA (ADR) . . . . . . . . . . . . 8,224,050
97,100 Royal Dutch Petroleum Co.
(New York shares) . . . . . . . . . 10,438,250
234,250 Societe Nationale Elf Aquitaine . . . . 16,486,533
206,222 Total SA "B" . . . . . . . . . . . . . . 11,977,170
3,411 Total SA (ADR) . . . . . . . . . . . . . 100,625
785,000 YPF SA "D" (ADR) . . . . . . . . . . . . 16,779,375
-----------
119,442,441
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
===============================================================================================================
<CAPTION>
% of Market
Portfolio Shares Value ($)
- - - - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Oilfield Services/
Equipment 1.9% 1,151,100 Halliburton Co. . . . . . . . . . . . . 38,130,188
-------------
METALS AND MINERALS 1.0%
Precious Metals 0.4% 365,000 De Beers Consolidated Mines Ltd. (ADR) 8,531,875
-------------
Steel & Metals 0.6% 285,190 Freeport McMoRan Copper &
Gold, Inc. "A" . . . . . . . . . . . 6,060,288
104,900 Reynolds Metals Co. . . . . . . . . . 5,074,538
-------------
11,134,826
-------------
TRANSPORTATION 0.7%
Marine Transportation 0.3% 282,700 Alexander & Baldwin Inc. . . . . . . . 6,290,075
-------------
Railroads 0.4% 120,100 Norfolk Southern Corp. . . . . . . . . 7,281,063
-------------
UTILITIES 4.3%
Electric Utilities 698,600 CINergy Corp. . . . . . . . . . . . . . 16,329,764
227,600 CMS Energy Corp. . . . . . . . . . . . 5,206,350
953,700 Centerior Energy Corp. . . . . . . . . 8,464,088
2,332,800 China Light & Power Co., Ltd. (ADR) . . 9,797,760
196,080 Empresa Nacional de Electricidad
SA (ADR) . . . . . . . . . . . . . . 7,941,240
174,000 Empresa Nacional de Electricidad SA . . 7,085,584
136,000 PacifiCorp . . . . . . . . . . . . . . 2,465,000
461,700 Pacific Gas & Electric Co. . . . . . . 11,253,938
13,600 Southern Company . . . . . . . . . . . 272,000
747,900 Unicom Corp. . . . . . . . . . . . . . . 17,949,600
-------------
86,765,324
-------------
TOTAL COMMON STOCKS (Cost $1,632,388,017) 1,785,830,697
-------------
- - - - ----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100%
(Cost $1,839,934,324) (a) . . . . . . . . 1,995,167,893
=============
<FN>
(a) The cost for federal income tax purposes was $1,838,433,009. At December 31, 1994, net
unrealized appreciation for all securities based on tax cost was $156,734,884. This consisted
of aggregate gross unrealized appreciation for all securities in which there was an excess of
market value over tax cost of $209,422,035 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of $52,687,151.
* Nonincome producing security.
Transactions in written call options on indices during the year ended December 31, 1994 were:
PREMIUMS
NUMBER OF CONTRACTS RECEIVED ($)
----------------------------------------------------------
Outstanding at December 31, 1993. . -- --
Contracts written . . . . . . . 6,500 1,327,278
Contracts closed . . . . . . . (2,500) (710,479)
Contracts expired . . . . . . . (4,000) (616,799)
----------------------------------------------------------
Outstanding at December 31, 1994 -- --
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
SCUDDER GROWTH AND INCOME FUND
FINANCIAL STATEMENTS
=============================================================================================
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
- - - - ---------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at market (identified cost 1,839,934,324)
(Note A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,995,167,893
Collateral held for securities loaned (Note A) . . . . . . . . . . . . . . 107,958,800
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 957
Receivables:
Dividends and interest . . . . . . . . . . . . . . . . . . . . . . . . . 8,078,897
Investments sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,815,758
Fund shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,154,132
Foreign taxes recoverable . . . . . . . . . . . . . . . . . . . . . . . . 294,906
--------------
Total assets 2,132,471,343
LIABILITIES
Payables:
Collateral on securities loaned (Note A) . . . . . . . 107,958,800
Investments purchased . . . . . . . . . . . . . . . . 24,037,863
Fund share redeemed . . . . . . . . . . . . . . . . 7,217,515
Accrued management fee (Note C) . . . . . . . . . . . 879,173
Other accrued expenses (Note C) . . . . . . . . . . . 674,806
-----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 140,768,157
--------------
Net assets, at market value . . . . . . . . . . . . . . . . . . . . . . . $1,991,703,186
==============
NET ASSETS
Net assets consist of:
Undistributed net investment income . . . . . . . . . . . . . . . . . . . $ 2,585,428
Unrealized appreciation on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155,233,569
Foreign currency related transactions . . . . . . . . . . . . . . . . . 15,254
Accumulated net realized gain . . . . . . . . . . . . . . . . . . . . . . 12,634,994
Shares of beneficial interest . . . . . . . . . . . . . . . . . . . . . . 1,224,550
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . 1,820,009,391
--------------
Net assets, at market value . . . . . . . . . . . . . . . . . . . . . . . $1,991,703,186
==============
NET ASSET VALUE, offering and redemption price
per share ($1,991,703,186 -:- 122,454,972
shares of capital stock outstanding, $.01 par
value, unlimited number of shares authorized) . . . . . . . . . . . . . . $16.26
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
- - - - ------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- - - - ------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
- - - - ------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of withholding taxes of $1,308,158) . . . . . . . $63,180,209
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,709,950
------------
70,890,159
Expenses:
Management fee (Note C) . . . . . . . . . . . . . . . . . . . . $ 9,941,300
Services to shareholders (Note C) . . . . . . . . . . . . . . . 4,568,994
Trustees' fees (Note C) . . . . . . . . . . . . . . . . . . . . 38,348
Custodian and Accounting fees (Note C) . . . . . . . . . . . . . 375,218
Reports to shareholders . . . . . . . . . . . . . . . . . . . . 510,777
Auditing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,320
Legal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,359
State registration . . . . . . . . . . . . . . . . . . . . . . . 70,898
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218,813 15,806,027
------------ ------------
Net investment income . . . . . . . . . . . . . . . . . . . . . 55,084,132
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain from:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . 109,806,159
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . 614,232
Foreign currency related transactions . . . . . . . . . . . . . 57,933 110,478,324
------------
Net unrealized appreciation (depreciation) during
the period on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . (124,889,147)
Foreign currency related transactions . . . . . . . . . . . . . 14,318 (124,874,829)
------------ ------------
Net loss on investment transactions . . . . . . . . . . . . . . (14,396,505)
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 40,687,627
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
SCUDDER GROWTH AND INCOME FUND
========================================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
INCREASE (DECREASE) IN NET ASSETS 1994 1993
- - - - --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income . . . . . . . . . . . . . . . . . . . $ 55,084,132 $ 41,637,348
Net realized gain from investment
transactions . . . . . . . . . . . . . . . . . . . . . . . 110,478,324 92,568,085
Net unrealized appreciation (depreciation) on
investment transactions during the period . . . . . . . . (124,874,829) 70,874,326
-------------- --------------
Net increase in net assets resulting
from operations . . . . . . . . . . . . . . . . . . . . . 40,687,627 205,079,759
-------------- --------------
Distributions to shareholders:
From net investment income ($.51 and $.45
per share, respectively) . . . . . . . . . . . . . . . . (55,549,751) (38,326,003)
-------------- --------------
From net realized gains from
investment transactions ($.91 and $1.01 per share,
respectively) . . . . . . . . . . . . . . . . . . . . . . (104,186,389) (89,879,431)
-------------- --------------
Fund share transactions:
Proceeds from shares sold . . . . . . . . . . . . . . . . . 660,899,843 529,361,632
Net asset value of shares issued to
shareholders in reinvestment of distributions . . . . . . 141,532,779 112,277,088
Cost of shares redeemed . . . . . . . . . . . . . . . . . (315,194,390) (260,587,818)
-------------- --------------
Net increase in net assets from Fund
share transactions . . . . . . . . . . . . . . . . . . . 487,238,232 381,050,902
-------------- --------------
INCREASE IN NET ASSETS . . . . . . . . . . . . . . . . . . 368,189,719 457,925,227
Net assets at beginning of period . . . . . . . . . . . . . 1,623,513,467 1,165,588,240
-------------- --------------
NET ASSETS AT END OF PERIOD (including
undistributed net investment income
of $2,585,428 and $3,273,577, respectively) . . . . . . . $1,991,703,186 $1,623,513,467
============== ==============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period . . . . . . . . . 94,183,009 71,952,913
-------------- --------------
Shares sold 38,072,976 30,928,769
Shares issued to shareholders in reinvestment
of distributions . . . . . . . . . . . . . . . . . . . . . 8,384,211 6,514,045
Shares redeemed (18,185,224) (15,212,718)
-------------- --------------
Net increase in Fund shares . . . . . . . . . . . . . . . . 28,271,963 22,230,096
-------------- --------------
Shares outstanding at end of period . . . . . . . . . . . . 122,454,972 94,183,009
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
- - - - -------------------------------------------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD AND OTHER PERFORMANCE
INFORMATION DERIVED FROM THE FINANCIAL STATEMENTS.
<CAPTION>
Years Ended December 31,
------------------------------------------------------------------------------------
1994 1993(b) 1992 1991 1990 1989 1988 1987 1986 1985
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ... $17.24 $16.20 $15.76 $12.77 $14.14 $13.18 $12.31 $15.02 $15.35 $11.90
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income ... .49 .49 .57 .57 .65 .67 .60 .68 .67 .59
Net realized and
unrealized gain
(loss) on investment
transactions .......... (.05) 2.01 .90 2.97 (1.01) 2.75 .86 (.07) 1.96 3.44
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations .............. .44 2.50 1.47 3.54 (.36) 3.42 1.46 .61 2.63 4.03
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions from:
Net investment
income ................ (.51) (.45) (.53) (.55) (.67) (.69) (.59) (.68) (.68) (.58)
Net realized gains on
investment
transactions .......... (.91) (1.01) (.50) -- (.34) (1.77) -- (2.64) (2.28) --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions ...... (1.42) (1.46) (1.03) (.55) (1.01) (2.46) (.59) (3.32) (2.96) (.58)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period ........... $16.26 $17.24 $16.20 $15.76 $12.77 $14.14 $13.18 $12.31 $15.02 $15.35
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%) ......... 2.60 15.59 9.57 28.16 (2.33) 26.36 12.01 3.50 18.27 34.55
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of
period ($ millions) ..... 1,992 1,624 1,166 723 491 490 402 392 385 302
Ratio of operating
expenses to average
net assets (%) (a) ...... .86 .86 .94 .97 .95 .87 .92 .89 .83 .84
Ratio of net investment
income to average
net assets (%) ......... 2.98 2.93 3.60 4.03 5.03 4.47 4.63 4.24 4.19 4.35
Portfolio turnover
rate (%) ............... 42.3 35.5 27.5 44.7 64.7 76.6 47.6 59.5 45.3 73.3
<FN>
(a) The Adviser did not impose a portion of its management fee amounting to $.02 per share for the year ended December 31, 1992.
If all expenses, including the management fee not imposed, had been incurred by the Fund, the annualized ratio of expenses
to average net assets for such year would have been 1.08% and the total return would have been lower. This ratio includes
costs associated with the acquisition of certain assets of Niagara Share Corporation on July 27, 1992, exclusive of these
charges the ratio would have been .92%.
(b) Effective January 1, 1993, the Fund discontinued using equalization accounting.
</TABLE>
<PAGE>
SCUDDER GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS
- - - - --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- - - - --------------------------------------------------------------------------------
Scudder Growth and Income Fund (the "Fund") is a diversified series of Scudder
Investment Trust (the "Trust"). The Trust is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The policies
described below are followed consistently by the Fund in the preparation of its
financial statements in conformity with generally accepted accounting
principles.
SECURITY VALUATION. Portfolio securities which are traded on U.S. or foreign
stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the National Association of
Securities Dealers Automatic Quotation ("NASDAQ") System, for which there have
been sales, are valued at the most recent sale price reported on such system.
If there are no such sales, the value is the high or "inside" bid quotation.
Securities which are not quoted on the NASDAQ System but are traded in another
over-the-counter market are valued at the most recent sale price on such
market. If no sale occurred, the security is then valued at the calculated mean
between the most recent bid and asked quotations. If there are no such bid and
asked quotations, the most recent bid quotation shall be used.
Portfolio debt securities with remaining maturities greater than sixty days are
valued by pricing agents approved by the officers of the Fund, which quotations
reflect broker/dealer-supplied valuations and electronic data processing
techniques. If the pricing agents are unable to provide such quotations, the
most recent bid quotation supplied by a bona fide market maker shall be used.
Short-term investments having a maturity of sixty days or less are valued at
amortized cost.
All other securities are valued at their fair value as determined in good faith
by the Valuation Committee of the Board of Trustees.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- - - - --------------------------------------------------------------------------------
market value, depending on the maturity of the repurchase agreement, is equal
to at least 100.5% of the resale price.
SECURITY LENDING. The Fund may seek to increase its income by lending portfolio
securities. Such loans may be made through the Fund's authorized agent to
registered broker/dealers and are required to be collateralized by cash in an
amount at least equal to the market value plus accrued interest of the
securities loaned. The collateral is invested, and a negotiated percentage of
the interest earned is remitted to the Fund. This income is included as a
component of interest income. At December 31, 1994, the Fund loaned securities
with an aggregate market value of $103,830,213 which represents 5.2% of total
net assets.
OPTIONS. The Fund may write (sell) exchange-listed and over-the-counter call
and put options on securities, indices, currencies and other financial
instruments. When the Fund writes a call, it gives the purchaser of the call
option the right to buy the underlying security or currency at the price
specified in the option (the "exercise price") at any time during the option
period, generally ranging up to nine months. When the Fund writes a put option,
it gives the purchaser of the put option the right to sell the underlying
security or currency to the Fund at the exercise price at any time during the
option period, generally ranging up to nine months.
If the option expires unexercised, the Fund will realize income, in the form of
a capital gain, to the extent of the amount received for the option (the
"premium"). If the option is exercised, a decision over which the Fund has no
control, the Fund must sell the underlying security or currency to the option
holder or purchase the underlying security or currency from the option holder
at the exercise price. Certain options, including options on indices, will
require cash settlement by the Fund if the option is exercised. By writing a
call option, the Fund foregoes, in exchange for the premium less the commission
("net premium"), the opportunity to profit during the option period from an
increase in the market value of the underlying security or currency above the
exercise price. By writing a put option, the Fund, in exchange for the net
premium received, accepts the risk of a decline in the market value of the
underlying security or currency below the exercise price.
<PAGE>
SCUDDER GROWTH AND INCOME FUND
- - - - --------------------------------------------------------------------------------
The liability representing the Fund's obligation under an exchange traded
written call or put option is valued at the last sale price or, in the absence
of a sale, the mean between the closing bid and asked quotations or at the most
recent asked quotation if no bid and asked quotations are available. Over the
counter written options are valued at the most recent asked quotation.
In addition, the Fund may purchase, singly and in combination, call and put
options on securities, indices, currencies and other financial instruments.
Exchange traded purchased options are valued at the last sales price or, in the
absence of a sale, the mean between the closing bid and asked quotations or at
the most recent bid quotation if no bid and asked quotations are available.
Over-the-counter purchased options are valued at the most recent bid quotation.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency transactions are translated into U.S. dollars
on the following basis:
(i) market value of investment securities, other assets and liabilities
at the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the rates of exchange prevailing on
the respective dates of such transactions.
The Fund does not isolate that portion of gains and losses on investments which
is due to changes in foreign exchange rates from that which is due to changes
in market prices of the investments. Such fluctuations are included with the
net realized and unrealized gains and losses from investments.
Net realized and unrealized gain (loss) from foreign currency related
transactions includes gains and losses between trade and settlement dates on
securities transactions, gains and losses arising from the sales of foreign
currency, and gains and losses between the ex and payment dates on dividends,
interest, and foreign withholding taxes.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. In connection with portfolio
purchases and sales of securities denominated in a foreign currency, the Fund
may enter into forward foreign currency exchange contracts ("contracts").
Additionally, the Fund may enter into contracts to hedge certain other foreign
currency denominated assets. Contracts are recorded at market value. Certain
risks may arise upon
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- - - - --------------------------------------------------------------------------------
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts. Realized and unrealized gains and losses
arising from such transactions are included in net realized and unrealized gain
(loss) from foreign currency related transactions.
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders. The
Fund accordingly paid no federal income taxes and no provision for federal
income taxes was required.
DISTRIBUTION OF INCOME AND GAINS. Distributions of net investment income are
made quarterly. During any particular year, net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders. An additional distribution may be made to the extent necessary to
avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax
regulations which may differ from generally accepted accounting principles.
These differences relate primarily to non-taxable distributions and certain
securities sold at a loss. As a result, net investment income and net realized
gain (loss) on investment transactions for a reporting period may differ
significantly from distributions during such period. Accordingly, the Fund may
periodically make reclassifications among certain of its capital accounts
without impacting the net asset value of the Fund.
The Fund uses the specific identified cost method for determining realized gain
or loss on investments for both financial and federal income tax reporting
purposes.
OTHER. Investment security transactions are accounted for on a trade date
basis. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis.
B. PURCHASES AND SALES OF SECURITIES
- - - - --------------------------------------------------------------------------------
For the year ended December 31, 1994, purchases and sales of investment
securities (excluding short-term investments) aggregated $1,139,384,068 and
$744,104,152, respectively.
<PAGE>
SCUDDER GROWTH AND INCOME FUND
- - - - --------------------------------------------------------------------------------
C. RELATED PARTIES
- - - - --------------------------------------------------------------------------------
On August 9, 1994, the Fund's Board of Trustees approved a new Investment
Management Agreement (the "Management Agreement") with Scudder, Stevens &
Clark, Inc. (the "Adviser"). Under the Management Agreement the Adviser directs
the investments of the Fund in accordance with its investment objective,
policies, and restrictions. The Adviser determines the securities, instruments,
and other contracts relating to investments to be purchased, sold or entered
into by the Fund. In addition to portfolio management services, the Adviser
provides certain administrative services in accordance with the Management
Agreement. The management fee payable under the Management Agreement is equal
to an annual rate of 0.60% on the first $500,000,000 of the Fund's average
daily net assets, 0.55% on the next $500,000,000, 0.50% on the next
$500,000,000, and 0.475% of such net assets in excess of $1,500,000,000,
computed and accrued daily and payable monthly.
Under the Investment Management Agreement between the Fund and the Adviser
which was in effect prior to August 9, 1994 (the "Agreement"), the Fund agreed
to pay to the Adviser a fee equal to an annual rate of 0.65% on the first
$200,000,000 of average daily net assets, 0.60% on the next $200,000,000 of
such net assets, 0.55% on the next $500,000,000 of such net assets, and 0.50%
of such net assets in excess of $900,000,000, computed and accrued daily and
payable monthly. Both Agreements provide that if the Fund's expenses, exclusive
of taxes, interest, and extraordinary expenses, exceed specified limits, such
excess, up to the amount of the management fee, will be paid by the Adviser.
For the year ended December 31, 1994, the fee pursuant to both the Management
Agreement and the Agreement amounted to $9,941,300, which was equivalent to an
annual effective rate of .54% of the Fund's average daily net assets.
Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the Adviser,
is the transfer, dividend paying and shareholder service agent for the Fund.
For the year ended December 31, 1994, the amount charged to the Fund by SSC
aggregated $3,952,719, of which $374,385 is unpaid at December 31, 1994.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- - - - --------------------------------------------------------------------------------
Effective October 1, 1994, Scudder Fund Accounting Corporation ("SFAC"), a
wholly-owned subsidiary of the Adviser, assumed responsibility for determining
the daily net asset value per share and maintaining the portfolio and general
accounting records of the Fund. For the period ended December 31, 1994, the
amount charged to the Fund by SFAC aggregated $39,116, of which $14,948 is
unpaid at December 31, 1994.
The Fund pays each Trustee not affiliated with the Adviser $4,000 annually,
plus specified amounts for attended board and committee meetings. For the year
ended December 31, 1994, Trustees' fees aggregated $38,348.
<PAGE>
SCUDDER GROWTH AND INCOME FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- - - - --------------------------------------------------------------------------------
TO THE TRUSTEES OF SCUDDER INVESTMENT TRUST AND THE SHAREHOLDERS OF
SCUDDER GROWTH AND INCOME FUND:
We have audited the accompanying statement of assets and liabilities of Scudder
Growth and Income Fund, including the investment portfolio, as of December 31,
1994, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the ten years in the
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder Growth and Income Fund as of December 31, 1994, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the ten years in the period then ended in conformity with generally accepted
accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
February 3, 1995
<PAGE>
TAX INFORMATION
- - - - --------------------------------------------------------------------------------
By now shareholders for whom year-end tax reporting is required by the IRS
should have received their Form 1099-DIV and tax information letter from the
Fund.
The Fund paid distributions of $0.65 per share from net long-term capital gains
during its fiscal year ended December 31, 1994. Pursuant to Section 852 of the
Internal Revenue Code, the Fund designates $78,317,383 as capital gain
dividends for its fiscal year ended December 31, 1994.
For corporate shareholders, 100% of the net investment income and short-term
gain dividends paid during the Fund's year ended December 31, 1994 qualified
for the dividends received deduction.
Please consult a tax adviser 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 Scudder Fund account, please call a Scudder Service
Representative at 1-800-225-5163.
<PAGE>
OFFICERS AND TRUSTEES
Daniel Pierce*
President and Trustee
Henry P. Becton, Jr.
Trustee; President and General Manager, WGBH Educational Foundation
Dudley H. Ladd*
Trustee
George M. Lovejoy, Jr.
Trustee; Chairman Emeritus, Meredith & Grew, Inc.
Wesley W. Marple, Jr.
Trustee; Professor of Business Administration, Northeastern
University
Juris Padegs*
Trustee
Jean C. Tempel
Trustee; Director and Executive Vice President, Safeguard
Scientifics, Inc.
Jerard K. Hartman*
Vice President
Robert T. Hoffman*
Vice President
Thomas W. Joseph*
Vice President
David S. Lee*
Vice President
Douglas M. Loudon*
Vice President
Thomas F. McDonough*
Vice President, Secretary and Assistant Treasurer
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Coleen Downs Dinneen*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
INVESTMENT PRODUCTS AND SERVICES
The Scudder Family of Funds
Money market
Scudder Cash Investment Trust
Scudder U.S. Treasury Money Fund
Tax free money market+
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax free+
Scudder California Tax Free Fund*
Scudder High Yield Tax Free Fund
Scudder Limited Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder Massachusetts Limited Term Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder Medium Term Tax Free Fund
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
Growth and Income
Scudder Balanced Fund
Scudder Growth and Income Fund
Income
Scudder Emerging Markets Income Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder International Bond Fund
Scudder Short Term Bond Fund
Scudder Short Term Global Income Fund
Scudder Zero Coupon 2000 Fund
Growth
Scudder Capital Growth Fund
Scudder Development Fund
Scudder Global Fund
Scudder Global Small Company Fund
Scudder Gold Fund
Scudder Greater Europe Growth Fund
Scudder International Fund
Scudder Latin America Fund
Scudder Pacific Opportunities Fund
Scudder Quality Growth Fund
Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
IRAs
Keogh Plans
Scudder Horizon Plan+++* (a variable annuity)
401(k) Plans
403(b) Plans
SEP-IRAs
Profit Sharing and Money Purchase Pension Plans
Closed-end Funds#
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities Fund, Inc.
Institutional Cash Management
Scudder Institutional Fund, Inc.
Scudder Fund, Inc.
Scudder Treasurers Trust(tm)++
For complete information on any of the above Scudder funds,
including management fees and expenses, call or write for a free
prospectus. Read it carefully before you invest or send money. +A
portion of the income from the tax-free funds may be subject to
federal, state and local taxes. *Not available in all states. +++A
no-load variable annuity contract provided by Charter National Life
Insurance Company and its affiliate, offered by Scudder's insurance
agencies, 1-800-225-2470. #These funds, advised by Scudder, Stevens &
Clark, Inc., are traded on various stock exchanges. ++For information
on Scudder Treasurers Trust(tm), an institutional cash management
service that utilizes certain portfolios of Scudder Fund, Inc.
($100,000 minimum), call: 1-800-541-7703.
HOW TO CONTACT SCUDDER
Account Service and Information
For existing account service and transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163
For account updates, prices, yields, exchanges and redemptions
SCUDDER AUTOMATED INFORMATION LINE (SAIL)
1-800-343-2890
Investment Information
To receive information about the Scudder funds, for additional
applications and prospectuses, or for investment questions
SCUDDER INVESTOR RELATIONS
1-800-225-2470
For establishing 401(k) and 403(b) plans
SCUDDER DEFINED CONTRIBUTION SERVICES
1-800-323-6105
Please address all correspondence to
THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
Many shareholders enjoy the personal, one-on-one service of the
Scudder Funds Centers. Check for a Funds Center near you_they can
be found in the following cities:
Boca Raton
Boston
Chicago
Cincinnati
Los Angeles
New York
Portland, OR
San Diego
San Francisco
Scottsdale
For information on Scudder Treasurers Trust(tm), an institutional cash
management service for corporations, non-profit organizations and
trusts which utilizes certain portfolios of Scudder Fund, Inc.*
($100,000 minimum), call: 1-800-541-7703.
For information on Scudder Institutional Funds,* funds designed to
meet the broad investment management and service needs of banks and
other institutions, call:1-800-854-8525.
Scudder Investor Relations and Scudder Funds Centers are services
provided through Scudder Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive
a prospectus with more complete information,
including management fees and expenses. Please read it carefully
before you invest or send money.
Celebrating 75 Years of Serving Investors
Established in 1919 by Theodore Scudder, Sidney Stevens, and F.
Haven Clark, Scudder, Stevens & Clark was the first independent
investment counsel firm in the United States. Since its birth,
Scudder's pioneering spirit and commitment to professional long-term
investment management have helped shape the investment industry. In
1928, we introduced the nation's first no-load mutual fund. Today we
offer 36 pure no load(tm) funds, including the first international
mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and
dedication to research and fundamental investment disciplines have
helped Scudder become one of the largest and most respected investment
managers in the world. Though times have changed since our beginnings,
we remain committed to our longstanding principles: managing money
with integrity and distinction, keeping the interests of our clients
first; providing access to investments and markets that may not be
easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.
