This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
64-6-85
MIS64S
Scudder
Growth and
Income Fund
Semiannual Report
June 30, 1995
o 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.
o A pure no-load(TM) fund with no commissions to buy, sell, or exchange
shares.
<PAGE>
SCUDDER GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
CONTENTS
2 In Brief
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 Investment Products and Services
27 How to Contact Scudder
IN BRIEF
* Benefiting from a downward shift in interest rates and renewed investor
focus on corporate earnings, Scudder Growth and Income Fund provided a
solid total return of 15.36% for the six months ended June 30, 1995.
* The Fund's performance was boosted by the dramatic outperformance of most
of its manufacturing and durable goods holdings--sectors that are
overweighted in the portfolio relative to its benchmark index.
* Although strong, the Fund's performance was held back by its overweighting
in energy stocks and its traditional lack of presence in the technology
sector, which generally does not meet the Fund's selection criteria.
* The Fund maintained its commitment to emphasizing high relative yields as a
fundamental part of security selection. The approach is designed to enable
the Fund to participate in market advances while reducing downside risk in
poor markets.
2
<PAGE>
LETTER FROM THE FUND'S PRESIDENT
--------------------------------------------------------------------------------
Dear Shareholders,
The stock market provided exceptionally strong returns in the first half of
1995, spurred on by a trend change in interest rates and renewed investor focus
on corporate earnings, which remained robust overall after several prior
quarters of positive results. Scudder Growth and Income Fund provided a solid
double-digit total return of 15.36% for the six-month period. Although strong,
the Fund's performance failed to keep pace with that of the unmanaged S&P 500
Index, which benefited largely from the recent strength in technology stocks.
The Fund's underweighting in technology and recent underperformance have much to
do with its investment discipline, which focuses on holding fundamentally
attractive companies with dividend yields at least 20% higher than that of the
S&P 500.
We have examined the performance of stocks with high relative yields from
1970 through 1994, a span of years that includes a variety of market, interest
rate, and economic cycles. The results indicate a strong performance pattern of
these stocks in different cycles of the stock market: stocks with relative
yields greater than that of the S&P 500 performed competitively in rising
markets, but declined less dramatically in down markets. This relative
outperformance in declining markets occurred consistently--with 90% frequency in
the 25-year period studied. Moreover, stocks with low relative dividends or no
dividends outperformed all other categories in rising markets, but
underperformed by a wide margin in declining markets.
Of course, this study cannot guarantee future results for Scudder Growth
and Income Fund, but it illustrates the rationale behind the Fund's high
relative yield approach: to benefit from rising markets while providing
defensive characteristics and added value during weak markets. This
volatility-dampening characteristic is at the heart of Scudder Growth and Income
Fund and has been a key reason for the Fund's long-term success.
If you have questions about your Fund or your investments, please contact a
Scudder Investor Relations representative at 1-800-225-2470. Page 27 provides
more information on how to contact Scudder. Thank you for your continued
interest in Scudder Growth and Income Fund.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Growth and Income Fund
3
<PAGE>
Scudder Growth and Income Fund
Performance Update as of June 30, 1995
-----------------------------------------------------------------
Growth of a $10,000 Investment
-----------------------------------------------------------------
Scudder Growth and Income Fund
----------------------------------------
Total Return
Period Growth -------------
Ended of Average
6/30/95 $10,000 Cumulative Annual
--------- ------- ---------- -------
1 Year $11,872 18.72% 18.72%
5 Year $18,797 87.97% 13.45%
10 Year $36,032 260.32% 13.68%
S&P 500 Index
--------------------------------------
Total Return
Period Growth -------------
Ended of Average
6/30/95 $10,000 Cumulative Annual
--------- ------- ---------- -------
1 Year $12,607 26.07% 26.07%
5 Year $17,693 76.93% 12.08%
10 Year $39,322 293.22% 14.66%
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 June 30
Scudder Growth and Income Fund
Year Amount
----------------------
85 10000
86 13450
87 15397
88 14618
89 17933
90 19169
91 20498
92 24648
93 28194
94 30349
95 36032
S&P 500 Index
Year Amount
----------------------
85 10000
86 13582
87 16999
88 15826
89 19078
90 22224
91 23868
92 27069
93 30758
94 31191
95 39322
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 June 30
----------------------------------
<TABLE>
<S>
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
---------------------------------------------------------------------------------
Net Asset Value... $16.60 $17.01 $13.11 $15.38 $13.56 $13.81 $16.04 $17.20 $17.00 $18.53
Income Dividends.. $ .68 $ .66 $ .50 $ .60 $ .71 $ .64 $ .52 $ .51 $ .47 $ .51
Capital Gains
Distributions..... $ 1.43 $ 1.13 $ 2.36 $ -- $ 2.11 $ -- $ -- $ .54 $ 1.04 $ .94
Fund Total
Return (%)........ 34.47 14.45 -5.04 22.68 6.89 6.93 20.25 14.39 7.64 18.72
Index Total
Return (%)........ 35.81 25.18 -6.89 20.52 16.50 7.38 13.43 13.65 1.40 26.07
</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.
4
<PAGE>
Portfolio Summary as of June 30, 1995
---------------------------------------------------------------------------
Diversification
---------------------------------------------------------------------------
Common and
Preferred Stocks 90%
Convertible Stocks 4% With 90% of its assets in common stocks,
Convertible Bonds 2% the Fund fully participated in this year's
Cash Equivalents 4% market rally.
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
--------------------------------------------------------------------------
Sectors (Excludes 4% Cash Equivalents)
--------------------------------------------------------------------------
Financial 17%
Manufacturing 17%
Health 15% Performance was boosted by the dramatic
Consumer Staples 11% outperformance of many of the Fund's
Energy 10% manufacturing and durable goods holdings.
Durables 7%
Utilities 6%
Communications 5%
Service Industries 5%
Other 7%
----
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. United Technologies Corp.
Manufacturer of aerospace, climate control systems and elevators
2. Eli Lilly Co.
Leading pharmaceutical company
3. Xerox Corp.
Leading manufacturer of copiers and duplicators
4. Baxter International Inc.
Manufacturer and distributor of hospital
and laboratory products and services
5. Student Loan Marketing Association
Student loan financing programs
6. TRW Inc.
Defense electronics, automotive parts and systems
7. H & R Block, Inc.
Tax consulting and preparation
8. First Bank System Inc.
Commercial banking in Minnesota and the northcentral U.S.
9. Kimberly-Clark Corp.
Consumer paper products and newsprint
10. Lockheed Martin Corp.
Manufacturer of aircraft, missiles and space equipment
United Technologies, the Fund's largest holding, increased 24% during
the period, thanks to a rebound in the commercial aerospace sector.
For more complete details about the Fund's Investment Portfolio,
see page 9.
A monthly Investment Portfolio Summary is available upon request.
5
<PAGE>
SCUDDER GROWTH AND INCOME FUND
PORTFOLIO MANAGEMENT DISCUSSION
--------------------------------------------------------------------------------
Dear Shareholders,
This year's focus on an economic "soft landing"--a likelihood bolstered by
strong corporate profits, low inflation, and declining interest rates thus
far--has propelled the U.S. stock market to new heights. Scudder Growth and
Income Fund provided a total return of 15.36% in the six-month period ended June
30, 1995, compared with a 20.21% return from the unmanaged S&P 500 Index. Fund
holdings provided much better relative performance in the second quarter than in
the first, but nevertheless lagged the S&P during the six-month period.
After such rapid advances in stock prices, many investors are now wondering
whether the balmy market climate will continue. As investors focused on stock
selection, we are not in the habit of realigning the portfolio around economic
forecasts. However, we are noting with interest that little evidence exists of
the Federal Reserve's ability to engineer a soft landing. Our economic forecast
gives greater likelihood to inflationary economic reacceleration or a more
pronounced slowdown in the coming months. In either case, it is unlikely the
stock market will continue to perform as well as it has recently.
Given this uncertain outlook, we remain more committed than ever to
providing an investment discipline designed to participate in market advances
while reducing downside risk in poor markets. The following portfolio review
describes how our dividend approach influenced results in the semiannual period
ended June 30, 1995.
Portfolio Review
Since the start of the year, the portfolio has benefited most significantly
from the dramatic outperformance of most of its manufacturing and durable goods
holdings--sectors that are overweighted in the portfolio relative to the
unmanaged S&P 500 Index. Stocks such as United Technologies, Rockwell, and
Lockheed Martin posted strong double-digit returns during the period, as fears
of a recession began to dissipate and earnings momentum continued. United
Technologies (up 24%) benefited from the strengthening commercial aerospace
recovery, which aided revenues and operating income even more than expected. We
took advantage of the stock's price strength to trim our position (in fact we
selectively took profits throughout the aerospace group), but still maintained
United Technologies as the portfolio's largest holding. Specialty chemicals
company Witco also provided strong gains, up 31% for the period.
6
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
--------------------------------------------------------------------------------
Xerox, another top holding, strengthened late in the semiannual period. The
stock had weakened after first-quarter earnings came in below expectations and
an anticipated dividend increase failed to materialize. However, the company's
fundamental prospects remain strong, and investors used the buying opportunity
to increase their holdings, pushing the price higher in the final weeks of the
period for a six-month gain of 18%. With more than two-thirds of its revenues
not tied directly to the ups and downs of economic activity, we believe the
company also should remain relatively healthy in a recessionary environment.
Financial stocks have continued their strong recovery from the difficult
interest rate environment of 1994, and the portfolio's overweighting in this
sector contributed significantly to performance during the period. In fact, the
financial sector was the best performing U.S. stock market group after
technology in the first half of this year, led by stocks such as Sallie Mae,
Chemical Bank, and Banker's Trust--all significant Fund holdings. Sallie Mae
posted a 44% return during the period as support waned for a controversial plan
enabling direct student lending by the federal government. Sallie Mae, now with
a new group of board members who call themselves "The Committee to Restore Value
to Sallie Mae," has taken bold steps to enhance shareholder returns. Already,
the company has announced its intention to repurchase 25% of its outstanding
shares, with an ultimate goal of privatization.
The Portfolio also benefited from its limited exposure to the consumer
discretionary sector, which is primarily made up of retail stocks. Consumers
have shown a reluctance to spend in recent months, and the earnings of many
retailers have suffered. Even so, the Fund's retail holdings significantly
outpaced the overall sector during the period, led by J.C. Penney and Sears,
which returned 8% and 29%, respectively. Given the group's recent poor
performance, we have begun to seek opportunity in stocks that appear oversold,
focusing on issues such as specialty retailer Melville, which we believe is
beginning to reach compelling valuations.
Despite the strong performance of many of the portfolio's major positions,
relative performance was impacted by two factors: our overweighting in energy
stocks and our lack of presence in the technology sector. Energy stocks were the
7
<PAGE>
SCUDDER GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
worst-performing sector in the second quarter (although they have returned
15.01% overall for the half year). Recent stock price weakness reflects fears
that Saudi Arabia will relinquish its role in stabilizing OPEC production and
oil pricing. In addition, earnings disappointments negatively affected such
portfolio holdings as McDermott (up only 1%) and Murphy Oil (down 4%). Despite
recent price weakness, however, we believe the longer-term outlook for energy
stocks is positive, given the burgeoning demand for energy by mature and
developing economies around the world. In contrast to energy stocks, technology
stocks set a blistering pace in the first six months of the year, returning 41%
on average. It is important to note that these stocks are often characterized by
a high degree of price volatility and minimal or nonexistent dividends, and as
such generally do not meet our investment criteria.
Outlook
The earnings growth of the past couple years continues to be quite
powerful, but belies what we believe to be a slowing global economy. In the
United States, growing evidence such as the increase in mergers and acquisitions
suggests that we may be nearing the end of the current economic cycle.
Historically, this part of the cycle has been characterized by a heightening of
near-term risk for stock investors, because as the slowdown in economic activity
becomes more pronounced, corporate earnings and stock prices suffer. A portfolio
such as the Growth and Income Fund that is positioned to take advantage of
rising markets while at the same time providing a defense against market
weakness is in the best position to provide strong relative returns in the
months ahead, in our opinion. We believe our disciplined stock selection process
will continue to serve investors well in the future, as it has in the past.
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
8
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO as of June 30, 1995 (Unaudited)
----------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------
1.2% REPURCHASE AGREEMENTS
-----------------------------------------------------------------------------------------------------
30,584,000 Repurchase Agreement with Donaldson,
Lufkin & Jenrette dated 6/30/95 at 6.07%
to be repurchased at $30,599,470 on 7/3/95,
collateralized by a $30,083,000 U.S. Treasury
Note, 6.75%, 6/30/99 (Cost $30,584,000)................. 30,584,000
-----------
-----------------------------------------------------------------------------------------------------
3.1% COMMERCIAL PAPER
-----------------------------------------------------------------------------------------------------
50,000,000 Commercial Credit Corp., 5.99%, 7/6/95................... 50,000,000
20,000,000 Ford Motor Credit Co., 5.85%, 7/19/95.................... 19,941,500
10,290,000 General Electric Capital Corp., 5.93%, 7/28/95........... 10,244,235
-----------
TOTAL COMMERCIAL PAPER (Cost $80,185,735)................ 80,185,735
-----------
-----------------------------------------------------------------------------------------------------
0.1% FOREIGN BONDS-NON U.S.$ DENOMINATED
-----------------------------------------------------------------------------------------------------
GBP 2,500,000 National Power PLC, 6.25%, 9/23/08
(Cost $4,438,999)....................................... 4,144,800
-----------
-----------------------------------------------------------------------------------------------------
0.3% CORPORATE BONDS
-----------------------------------------------------------------------------------------------------
FINANCIAL
5,500,000 Siemens Capital Corp. with warrants,
8%, 6/24/02 (Cost $7,177,934)........................... 7,535,000
-----------
-----------------------------------------------------------------------------------------------------
1.5% CONVERTIBLE BONDS
-----------------------------------------------------------------------------------------------------
HEALTH 0.1%
Health
Industry
Services 1,800,000 Hillhaven Corp., 7.75%, 11/1/02.......................... 3,042,000
-----------
FINANCIAL 0.3%
Other
Financial
Companies 4,560,000 First Financial Management Corp., 5%, 12/15/99........... 6,156,000
-----------
MEDIA 0.1%
Broadcasting &
Entertainment 8,000,000 Time Warner Inc., Zero Coupon Liquid
Yield Option Note, 6/22/13.............................. 3,210,000
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
SCUDDER GROWTH AND INCOME FUND
----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TECHNOLOGY 0.3%
Electronic Data Processing 0.2% 7,500,000 Silicon Graphics Inc., 11/5/13......................... 4,912,500
------------
Precision Instruments 0.1% 1,500,000 Thermo Instruments Systems Inc., 6.625%, 8/15/01....... 3,135,000
------------
CONSTRUCTION 0.2%
Homebuilding 9,300,000 Empresa ICA Sociedad Controladora S.A., 5%, 3/15/04.... 4,975,500
------------
TRANSPORTATION 0.5%
Airlines 13,600,000 Delta Air Lines, Inc., 3.23%, 6/15/03.................. 12,920,000
------------
TOTAL CONVERTIBLE BONDS (Cost $35,239,577)............. 38,351,000
------------
----------------------------------------------------------------------------------------------
3.8% CONVERTIBLE PREFERRED STOCKS
----------------------------------------------------------------------------------------------
Shares
----------------------------------------------------------------------------------------------
HEALTH 1.0%
Health Industry Services 1,100,200 FHP International Corp., Series A, 5%.................. 26,129,750
------------
MEDIA 0.1%
Print Media 113,700 Times Mirror Co. "B", Cum $1.374....................... 2,714,587
------------
SERVICE INDUSTRIES 1.4%
EDP Services 560,100 General Motors Corp., Series C, Cum. $3.25
(convertible into GM "E")............................. 35,286,300
------------
MANUFACTURING 0.4%
Containers & Paper 0.1% 60,100 Boise Cascade Corp. "G", Cum $1.58..................... 2,005,838
------------
Industrial Specialty 0.3% 181,000 Corning Inc., 6%....................................... 9,253,625
------------
TECHNOLOGY 0.2%
Electronic Data Processing 50,000 Ceridian Corp., 5.5% .................................. 4,175,000
------------
ENERGY 0.3%
Oil & Gas Production 180,500 Parker & Parsley Capital Corp. ........................ 8,009,687
------------
METALS AND MINERALS 0.4%
Precious Metals 500,000 Freeport McMoRan Copper & Gold, Inc.,
Cum. $1.25............................................ 10,812,500
------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $93,920,561).................................... 98,387,287
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
----------------------------------------------------------------------------------------------
0.3% PREFERRED STOCKS
----------------------------------------------------------------------------------------------
COMMUNICATIONS
Telephone/
Communications 120,000 Philippine Long Distance Telephone Co.
(Cost $6,000,000).......................................... 7,725,000
------------
----------------------------------------------------------------------------------------------
89.7% COMMON STOCKS
----------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY 3.5%
Department &
Chain Stores 3.2% 650,400 J.C. Penney Inc. ........................................... 31,219,200
157,100 Melville Corp. ............................................. 5,380,675
716,100 Rite Aid Corp. ............................................. 18,350,063
479,600 Sears, Roebuck & Co. ....................................... 28,716,050
------------
83,665,988
------------
Restaurants 0.3% 559,500 Darden Restaurants Inc. .................................... 6,084,562
------------
CONSUMER STAPLES 10.7%
Alcohol & Tobacco 3.8% 528,900 Anheuser Busch Companies, Inc. ............................. 30,081,187
512,100 Philip Morris Companies Inc. ............................... 38,087,438
1,060,780 RJR Nabisco Holdings Corp. ................................. 29,569,243
------------
97,737,868
------------
Consumer Specialties 0.2% 277,000 A.T. Cross Co. "A".......................................... 4,120,375
------------
Food & Beverage 3.4% 559,500 General Mills, Inc. ........................................ 28,744,312
785,300 H.J. Heinz Co. ............................................. 34,847,687
767,700 Quaker Oats Co. ............................................ 25,238,137
------------
88,830,136
------------
Package Goods/Cosmetics 3.3% 488,000 Avon Products............................................... 32,696,000
367,600 Clorox Co. ................................................. 23,985,900
675,000 Tambrands Inc. ............................................. 28,856,250
------------
85,538,150
------------
HEALTH 12.7%
Health Industry Services 0.6% 182,400 McKesson Corp. ............................................. 8,527,200
205,500 U.S. Healthcare, Inc. ...................................... 6,293,437
------------
14,820,637
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
SCUDDER GROWTH AND INCOME FUND
----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
----------------------------------------------------------------------------------------------
Pharmaceuticals 12.1% 515,700 American Home Products Corp. ............................. 39,902,288
1,587,100 Baxter International Inc. ................................ 57,730,762
404,300 Bristol-Myers Squibb Co. ................................. 27,542,937
731,600 Carter-Wallace Inc. ...................................... 8,321,950
779,300 Eli Lilly Co. ............................................ 61,175,050
876,000 Schering-Plough Corp. .................................... 38,653,500
590,200 SmithKline Beecham PLC (ADR).............................. 26,706,550
488,700 Warner-Lambert Co. ....................................... 42,211,463
744,100 Zeneca Group PLC ......................................... 12,561,421
------------
314,805,921
------------
COMMUNICATIONS 4.6%
Telephone/Communications 1,363,500 Alltel Corp. ............................................. 34,598,812
791,100 GTE Corp. ................................................ 26,996,288
1,067,840 Hong Kong Telecommunications Ltd. (ADR)................... 21,223,320
745,300 Sprint Corp............................................... 25,060,712
438,000 Tele Danmark A/S "B" (ADR)................................ 12,264,000
------------
120,143,132
------------
FINANCIAL 16.1%
Banks 6.8% 235,000 AmSouth Bancorp........................................... 7,666,875
306,300 Bankers Trust New York Corp. ............................. 18,990,600
531,700 Chemical Banking Corp. ................................... 25,122,825
877,800 CoreStates Financial Corp. ............................... 30,613,275
1,150,700 First Bank System Inc. ................................... 47,178,700
405,900 J.P. Morgan & Co., Inc. .................................. 28,463,737
357,400 Summit Bancorporation..................................... 7,594,750
269 Swiss Bank Corp. (Bearer)................................. 95,312
1 Swiss Bank Corp. (Bearer) Warrants*
(expire 6/30/95)......................................... 24
353,300 Wilmington Trust Corp. ................................... 9,980,725
------------
175,706,823
------------
INSURANCE 2.9% 484,600 EXEL, Ltd. ............................................... 25,199,200
215,700 Hartford Steam Boiler Inspection & Insurance Co. ......... 9,571,688
918,200 Lincoln National Corp. ................................... 40,171,250
------------
74,942,138
------------
Other Financial Companies 3.6% 279,000 Federal National Mortgage Association..................... 26,330,625
553,000 Great Western Financial Corp.............................. 11,405,625
1,203,400 Student Loan Marketing Association........................ 56,409,375
------------
94,145,625
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Real Estate 2.8% 217,100 Avalon Properties, Inc...................................... 4,314,863
338,500 Camden Property Trust (REIT)................................ 7,404,687
73,800 Charles E. Smith Residential Realty, Inc. .................. 1,752,750
28,100 Equity Residential Properties Trust (REIT).................. 783,288
275,000 General Growth Properties, Inc. (REIT)...................... 5,603,125
359,300 Health Care Property Investment Inc. (REIT)................. 11,497,600
31,400 Mark Centers Trust (REIT)................................... 408,200
138,300 McArthur/Glen Realty Corp. (REIT)........................... 2,022,638
468,400 Meditrust SBI (REIT)........................................ 15,984,150
302,400 Nationwide Health Properties Inc. (REIT).................... 11,793,600
61,900 Post Properties Inc. (REIT)................................. 1,872,475
31,500 Security Capital Industrial Trust........................... 511,875
451,300 South West Property Trust Inc. (REIT)....................... 5,189,950
88,800 Vornado Realty Trust (REIT)................................. 3,096,900
------------
72,236,101
------------
MEDIA 0.3%
Print Media 177,400 Reader's Digest Association Inc. "A"........................ 7,827,775
------------
SERVICE INDUSTRIES 3.6%
Miscellaneous
Commercial Services 0.3% 6,151,000 Jardine Strategic Holdings Ltd. ............................ 6,673,835
------------
Miscellaneous
Consumer Services 2.0% 1,287,800 H & R Block Inc. ........................................... 52,960,775
------------
Printing/Publishing 1.3% 986,700 Deluxe Corp. ............................................... 32,684,438
------------
DURABLES 6.3%
Aerospace 5.7% 398,400 AAR Corp.................................................... 7,121,400
678,713 Lockheed Martin Corp. ...................................... 42,843,758
729,400 Rockwell International Corp. ............................... 33,370,050
70,000 Thiokol Corp. .............................................. 2,117,500
813,600 United Technologies Corp. .................................. 63,562,500
------------
149,015,208
------------
Automobiles 0.6% 510,300 Dana Corp. ................................................. 14,607,338
------------
MANUFACTURING 15.4%
Chemicals 3.1% 227,200 Dow Chemical Co. ........................................... 16,330,000
590,700 E.I. du Pont de Nemours & Co. .............................. 40,610,625
948,900 Lyondell Petrochemical Co. ................................. 24,315,562
------------
81,256,187
------------
Containers & Paper 1.7% 723,400 Kimberly-Clark Corp. ....................................... 43,313,575
------------
Diversified Manufacturing 4.0% 1,451,200 Dresser Industries Inc. .................................... 32,289,200
90,900 Honeywell, Inc. ............................................ 3,920,063
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
SCUDDER GROWTH AND INCOME FUND
----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
----------------------------------------------------------------------------------------------
106,900 Olin Corp. ............................................... 5,505,350
93,100 Saint Joe Paper Co. ...................................... 5,911,850
694,100 TRW Inc. ................................................. 55,441,237
------------
103,067,700
------------
Electrical Products 0.9% 345,600 Thomas & Betts Corp. ..................................... 23,630,400
------------
Machinery/Components/
Controls 0.4% 239,300 Timken Co. ............................................... 11,037,713
------------
Office Equipment/Supplies 2.2% 493,500 Xerox Corp. .............................................. 57,862,875
------------
Specialty Chemicals 3.1% 180,000 ARCO Chemical Co. ........................................ 8,167,500
613,800 Betz Laboratories Inc. ................................... 27,774,450
358,600 Petrolite Corp............................................ 10,847,650
1,031,800 Witco Corp. .............................................. 33,275,550
------------
80,065,150
------------
ENERGY 9.7%
Engineering 1.0% 1,100,900 McDermott International Inc. .............................. 26,559,213
------------
Oil Companies 7.6% 375,700 Exxon Corp. ............................................... 26,533,812
268,900 Murphy Oil Corp............................................ 11,024,900
480,100 Pennzoil Co. .............................................. 22,624,712
484,000 Repsol SA (ADR)............................................ 15,306,500
229,000 Royal Dutch Petroleum Co. (New York shares)................ 27,909,375
234,250 Societe Nationale Elf Aquitaine............................ 17,310,719
338,800 Texaco Inc. ............................................... 22,233,750
206,222 Total SA "B" .............................................. 12,412,641
375,211 Total SA (ADR) ............................................ 11,350,133
1,609,900 YPF SA "D" (ADR) .......................................... 30,386,863
------------
197,093,405
------------
Oilfield Services/Equipment 1.1% 750,500 Halliburton Co. .......................................... 26,830,375
------------
METALS AND MINERALS 0.6%
Precious Metals 0.4% 365,000 De Beers Consolidated Mines Ltd. (ADR).................... 9,444,375
------------
Steel & Metals 0.2% 285,190 Freeport McMoRan Copper & Gold, Inc. "A".................. 5,882,044
------------
TRANSPORTATION 0.8%
Railroads 100,800 Consolidated Rail Corp.................................... 5,607,000
120,100 Norfolk Southern Corp..................................... 8,091,738
137,200 Union Pacific Corp. ...................................... 7,597,450
------------
21,296,188
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
UTILITIES 5.4%
Electric Utilities 698,600 CINergy Corp................................................ 18,338,250
227,600 CMS Energy Corp............................................. 5,604,650
2,332,800 China Light & Power Co., Ltd. (ADR)......................... 11,897,280
174,000 Empresa Nacional de Electricidad SA ........................ 8,590,464
196,080 Empresa Nacional de Electricidad SA (ADR)................... 9,656,940
239,500 National Power PLC (ADR).................................... 2,963,812
470,000 Niagara Mohawk Power Corp. ................................. 6,932,500
136,000 PacifiCorp.................................................. 2,550,000
605,900 Pacific Gas & Electric Co. ................................. 17,571,100
440,000 PowerGen PLC ............................................... 1,340,013
970,200 PowerGen PLC (ADR) (b)...................................... 11,884,950
1,008,000 Southern Company............................................ 22,554,000
747,900 Unicom Corp. .............................................. 19,912,837
-------------
139,796,796
-------------
TOTAL COMMON STOCKS (Cost $1,917,497,531)................... 2,323,682,821
-------------
----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $2,175,044,337) (a).................................. 2,590,595,643
=============
<FN>
(a) The cost for federal income tax purposes was $2,173,543,022. At June 30, 1995, net unrealized appreciation for all securities
based on tax cost was $417,052,621. This consisted of aggregate gross unrealized appreciation for all securities in which
there was an excess of market value over tax cost of $438,667,882 and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over market value of $21,615,261.
(b) Security valued in good faith by the Valuation Committee of the Board of Trustees. The cost of this security at June 30, 1995
aggregated $12,020,754. See Note A of the Notes to Financial Statements.
* Non-income producing security.
At June 30, 1995 outstanding written call options were as follows (Note A):
</FN>
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION MARKET
CONTRACTS DATE STRIKE PRICE VALUE ($)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
S&P 500 Index .................... 1,500 July 95 530 2,831,250
S&P 500 Index .................... 1,500 Aug. 95 540 1,845,000
----------
Total outstanding written options (Premiums received $3,379,132).................... 4,676,250
==========
--------------------------------------------------------------------------------------------------------------------------
Transactions in written call options during the six months ended June 30, 1995 were as follows:
</TABLE>
<TABLE>
<CAPTION>
PREMIUMS
NUMBER OF CONTRACTS RECEIVED ($)
-----------------------------------------------------------------------------
<S> <C> <C>
Outstanding at December 31, 1994......... - -
Contracts written.................... 8,700 6,301,236
Contracts closed..................... (5,700) (2,922,104)
-----------------------------------------------------------------------------
Outstanding at June 30, 1995............. 3,000 3,379,132
====== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
<TABLE>
SCUDDER GROWTH AND INCOME FUND
FINANCIAL STATEMENTS
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
----------------------------------------------------------------------------------------
<CAPTION>
JUNE 30, 1995 (UNAUDITED)
----------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $2,175,044,337)
(Note A) ............................................ $ 2,590,595,643
Collateral held for securities loaned (Note A)......... 204,556,476
Receivables:
Dividends and interest............................... 10,902,942
Investments sold..................................... 29,396,581
Fund shares sold..................................... 2,165,749
Foreign taxes recoverable............................ 934,180
Other assets......................................... 5,896
--------------
Total assets....................................... 2,838,557,467
LIABILITIES
Payables:
Collateral on securities loaned (Note A) ............ $ 204,556,476
Investments purchased................................ 61,571,198
Fund shares redeemed................................. 2,784,606
Accrued management fee (Note C)...................... 1,078,980
Other accrued expenses (Note C)...................... 713,555
Written options, at market (premiums received
$3,379,132) (Note A) .............................. 4,676,250
--------------
Total liabilities ................................. 275,381,065
--------------
Net assets, at market value............................ $2,563,176,402
==============
NET ASSETS
Net assets consist of:
Undistributed net investment income.................. $ 24,698,917
Net unrealized appreciation (depreciation) on:
Investments...................................... 415,551,306
Written options.................................. (1,297,118)
Foreign currency related transactions............ 97,460
Accumulated net realized gain........................ 27,787,254
Shares of beneficial interest........................ 1,383,619
Additional paid-in capital........................... 2,094,954,964
--------------
Net assets, at market value............................ $2,563,176,402
==============
NET ASSET VALUE, offering and redemption price per
share ($2,563,176,402 -:- 138,361,916 shares of capital
stock outstanding, $.01 par value, unlimited number of
shares authorized).................................... $18.53
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
-------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
-------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends ............................................ $ 43,853,557
Interest ............................................ 4,364,844
------------
48,218,401
Expenses:
Management fee (Note C)............................... $ 5,933,395
Services to shareholders (Note C) .................... 2,696,571
Custodian and accounting fees (Note C) ............... 264,361
Trustees' fees (Note C) .............................. 20,517
Reports to shareholders .............................. 352,245
Auditing ............................................. 26,850
Legal ................................................ 9,216
State registration ................................... 60,034
Other................................................. 142,817 9,506,006
----------- ------------
Net investment income 38,712,395
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT TRANSACTIONS
Net realized gain (loss) from:
Investments ........................................ 32,412,807
Options ............................................ (4,276,696)
Foreign currency related transactions .............. (101,372) 28,034,739
-----------
Net unrealized appreciation (depreciation) during
the period on:
Investments ........................................ 260,317,737
Written options .................................... (1,297,118)
Foreign currency related transactions .............. 82,206 259,102,825
----------- ------------
Net gain on investment transactions .................. 287,137,564
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $325,849,959
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
<TABLE>
SCUDDER GROWTH AND INCOME FUND
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
----------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED YEAR
JUNE 30, ENDED
1995 DECEMBER 31,
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED) 1994
----------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income................................... $ 38,712,395 $ 55,084,132
Net realized gain from investment
transactions ......................................... 28,034,739 110,478,324
Net unrealized appreciation (depreciation) on
investment transactions during the period ............ 259,102,825 (124,874,829)
-------------- --------------
Net increase in net assets resulting
from operations ...................................... 325,849,959 40,687,627
-------------- --------------
Distributions to shareholders from:
Net investment income ($.13 and $.51
per share, respectively) ............................ (16,598,906) (55,549,751)
-------------- --------------
Net realized gains from investment transactions
($.10 and $.91 per share, respectively) ............. (12,882,479) (104,186,389)
-------------- --------------
Fund share transactions:
Proceeds from shares sold .............................. 460,513,419 660,899,843
Net asset value of shares issued to shareholders
in reinvestment of distributions ..................... 26,290,150 141,532,779
Cost of shares redeemed ................................ (211,698,927) (315,194,390)
-------------- --------------
Net increase in net assets from Fund
share transactions ................................... 275,104,642 487,238,232
-------------- --------------
INCREASE IN NET ASSETS ................................. 571,473,216 368,189,719
Net assets at beginning of period ...................... 1,991,703,186 1,623,513,467
-------------- --------------
NET ASSETS AT END OF PERIOD (including
undistributed net investment income of
$24,698,917 and $2,585,428, respectively) ............ $2,563,176,402 $1,991,703,186
============== ==============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period .............. 122,454,972 94,183,009
-------------- --------------
Shares sold ............................................ 26,597,039 38,072,976
Shares issued to shareholders in reinvestment
of distributions ..................................... 1,505,930 8,384,211
Shares redeemed ........................................ (12,196,025) (18,185,224)
-------------- --------------
Net increase in Fund shares ............................ 15,906,944 28,271,963
-------------- --------------
Shares outstanding at end of period .................... 138,361,916 122,454,972
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<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>
Six Months Ended
June 30, Years Ended December 31,
1995 ----------------------------------------------------------------------------------------
(Unaudited) 1994 1993(b) 1992 1991 1990 1989 1988 1987 1986 1985
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.................. $16.26 $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...... .28 .49 .49 .57 .57 .65 .67 .60 .68 .67 .59
Net realized and
unrealized gain (loss) on
investment transactions... 2.22 (.05) 2.01 .90 2.97 (1.01) 2.75 .86 (.07) 1.96 3.44
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Total from investment
operations................. 2.50 .44 2.50 1.47 3.54 (.36) 3.42 1.46 .61 2.63 4.03
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Less distributions from:
Net investment income (.13) (.51) (.45) (.53) (.55) (.67) (.69) (.59) (.68) (.68) (.58)
Net realized gains on
investment transactions.... (.10) (.91) (1.01) (.50) - (.34) (1.77) - (2.64) (2.28) -
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Total distributions......... (.23) (1.42) (1.46) (1.03) (.55) (1.01) (2.46) (.59) (3.32) (2.96) (.58)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ -------
Net asset value, end of
period.................... $18.53 $16.26 $17.24 $16.20 $15.76 $12.77 $14.14 $13.18 $12.31 $15.02 $15.35
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%)............ 15.36** 2.60 15.59 9.57 28.16 (2.33) 26.36 12.01 3.50 18.27 34.55
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of period
($ millions)............... 2,563 1,992 1,624 1,166 723 491 490 402 392 385 302
Ratio of operating expenses
to average net
assets (%) (a)............ .85* .86 .86 .94 .97 .95 .87 .92 .89 .83 .84
Ratio of net investment
income to average
net assets (%)............. 3.44* 2.98 2.93 3.60 4.03 5.03 4.47 4.63 4.24 4.19 4.35
Portfolio turnover rate (%) 34.0* 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.
* Annualized
** Not annualized
</FN>
</TABLE>
19
<PAGE>
SCUDDER GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited)
--------------------------------------------------------------------------------
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. A security valued in good
faith by the Valuation Committee of the Board of Trustees at fair value
amounted to $11,884,950 (0.46% of net assets) and has been noted in the
investment portfolio as of June 30, 1995.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement, is equal to at least 100.5% of the 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 June 30, 1995, the Fund loaned securities with
an aggregate market value of $198,288,518 which represents 7.7% of total net
assets.
OPTIONS. An option contract is a contract in which the writer of the option
grants the buyer of the option the right to purchase from (call option), or
sell to (put option), the writer a designated instrument at a specified price
within a specified period of time. Certain options, including options on
indices, will require cash settlement by the Fund if the option is exercised.
During the period, the Fund wrote call options on financial instruments as a
hedge against potential adverse price movements in the value of portfolio
assets.
If the Fund writes an option and 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 Fund elects to close out the
option it would recognize a gain or loss based on the difference between the
cost of closing the option and the initial premium received. If the Fund
purchased an option and allows the option to expire it would realize a loss to
the extent of the premium paid. If the Fund elects to close out the option it
would recognize a gain or loss equal to the difference between the cost of
acquiring the option and the amount realized upon the sale of the option.
The gain or loss recognized by the Fund upon the exercise of a written call
or purchased put option is adjusted for the amount of option premium. If a
written put or purchased call option is exercised the
21
<PAGE>
SCUDDER GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
Fund's cost basis of the acquired security or currency would be the exercise
price adjusted for the amount of the option premium.
The liability representing the Fund's obligation under an exchange traded
written option or investment in a purchased option is valued at the last sale
price or, in the absence of a sale, the mean between the closing bid and asked
price or at the most recent asked price (bid for purchased options) if no bid
and asked price are available. Over-the-counter written or purchased options
are valued using dealer supplied quotations.
When the Fund writes a covered call option, the Fund foregoes, in exchange for
the 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. When the Fund writes a put option it accepts the risk of a decline
in the market value of the underlying security or currency below the exercise
price. Over-the-Counter options have the risk of the potential inability of
counterparties to meet the terms of their contracts. The Fund's maximum
exposure to purchased options is limited to the premium initially paid. In
addition, certain risks may arise upon entering into option contracts including
the risk that an illiquid secondary market will limit the Fund's ability to
close out an option contract prior to the expiration date and, that a change in
the value of the option contract may not correlate exactly with changes in the
value of the securities or currencies hedged.
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 daily 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.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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. A forward foreign currency
exchange contract (forward contract) is a commitment to purchase or sell a
foreign currency at the settlement date at a negotiated rate. During the
period, the Fund utilized forward contracts as a hedge in connection with
portfolio purchases and sales of securities denominated in foreign currencies.
Forward contracts are valued at the prevailing forward exchange rate of the
underlying currencies and unrealized gain/loss is recorded daily. Forward
contracts having the same settlement date and broker are offset and any gain
(loss) is realized on the date of offset; otherwise, gain (loss) is realized on
settlement date. Realized and unrealized gains and losses which represent the
difference between the value of the forward contract to buy and the forward
contract to sell are included in net realized and unrealized gain (loss) from
foreign currency related transactions.
Certain risks may arise upon entering into forward contracts from the
potential inability of counterparties to meet the terms of their contracts.
Additionally, when utilizing forward contracts to hedge the Fund gives up the
opportunity to profit from favorable exchange rate movements during the term of
the contract.
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.
23
<PAGE>
SCUDDER GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
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 six months ended June 30, 1995, purchases and sales of investment
securities (excluding short-term investments) aggregated $601,519,085 and
$372,257,520, respectively.
C. RELATED PARTIES
--------------------------------------------------------------------------------
Under the Fund's Investment Management Agreement (the "Agreement") with
Scudder, Stevens & Clark, Inc. (the "Adviser"), the Fund agrees to pay to the
Adviser a fee equal to an annual rate of approximately 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. As
manager of the assets of the Fund, the Adviser directs the investments of the
Fund in accordance with its investment objectives, policies, and restrictions.
The Adviser determines the securities, instruments, and other contracts relating
to investments to be purchased, sold or entered into by the Fund. In addition to
portfolio management services, the Adviser provides certain administrative
services in accordance with the Agreement. The Agreement also provides that if
the Fund's expenses, exclusive of taxes, interest, and extraordinary expenses,
exceed
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
specified limits, such excess, up to the amount of the management fee, will
be paid by the Adviser. For the six months ended June 30, 1995, the fee
pursuant to the Agreement amounted to $5,933,395 which was equivalent to an
annual effective rate of 0.53% 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 six months ended June 30, 1995, the amount charged to the Fund by SSC
aggregated $2,344,409, of which $409,158 is unpaid at June 30, 1995.
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 six months ended June 30, 1995, the amount charged to the Fund
by SFAC aggregated $95,016, of which $16,406 is unpaid at June 30, 1995.
The Fund pays each Trustee not affiliated with the Adviser $4,000 annually,
plus specified amounts for attended board and committee meetings. For the six
months ended June 30, 1995, Trustees' fees aggregated $20,517.
25
<PAGE>
INVESTMENT PRODUCTS AND SERVICES
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
The Scudder Family of Funds
-----------------------------------------------------------------------------------------------------------------
<S> <C>
Money Market Income
Scudder Cash Investment Trust Scudder Emerging Markets Income Fund
Scudder U.S. Treasury Money Fund Scudder GNMA Fund
Tax Free Money Market+ Scudder Income Fund
Scudder Tax Free Money Fund Scudder International Bond Fund
Scudder California Tax Free Money Fund* Scudder Short Term Bond Fund
Scudder New York Tax Free Money Fund* Scudder Short Term Global Income Fund
Tax Free+ Scudder Zero Coupon 2000 Fund
Scudder California Tax Free Fund* Growth
Scudder High Yield Tax Free Fund Scudder Capital Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Managed Municipal Bonds Scudder Global Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Global Small Company Fund
Scudder Massachusetts Tax Free Fund* Scudder Gold Fund
Scudder Medium Term Tax Free Fund Scudder Greater Europe Growth Fund
Scudder New York Tax Free Fund* Scudder International Fund
Scudder Ohio Tax Free Fund* Scudder Latin America Fund
Scudder Pennsylvania Tax Free Fund* Scudder Pacific Opportunities Fund
Growth and Income Scudder Quality Growth Fund
Scudder Balanced Fund Scudder Value Fund
Scudder Growth and Income Fund The Japan Fund
Retirement Plans and Tax-Advantaged Investments
-----------------------------------------------------------------------------------------------------------------
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan+++* (a variable annuity) Profit Sharing and Money Purchase
401(k) Plans Pension Plans
Closed-End Funds#
-----------------------------------------------------------------------------------------------------------------
The Argentina Fund, Inc. The Latin America Dollar Income Fund, Inc.
The Brazil Fund, Inc. Montgomery Street Income Securities, Inc.
The First Iberian Fund, Inc. Scudder New Asia Fund, Inc.
The Korea 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.
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HOW TO CONTACT SCUDDER
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Account Service and Information
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<S> <C>
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
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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
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THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
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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 New York
Boston Portland, OR
Chicago San Diego
Cincinnati San Francisco
Los Angeles Scottsdale
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For information on Scudder For information on Scudder
Treasurers Trust,(TM) an institutional Institutional Funds,* funds
cash management service for designed to meet the broad
corporations, non-profit investment management and
organizations and trusts that uses service needs of banks and
certain portfolios of Scudder Fund, other institutions, call
Inc.* ($100,000 minimum), call 1-800-854-8525.
1-800-541-7703.
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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.
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27
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Celebrating Over 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 us 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 long-standing
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.
