This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
Scudder
Quality Growth
Fund
Semiannual Report
April 30, 1996
o A fund seeking long-term growth of capital through investment primarily in
the equity securities of seasoned, financially strong U.S. growth
companies.
o A pure no-load(TM) fund with no commissions to buy, sell, or exchange
shares.
<PAGE>
CONTENTS
2 In Brief
3 Letter from the Fund's President
4 Performance Update
5 Portfolio Summary
6 Portfolio Management Discussion
10 Investment Portfolio
14 Financial Statements
17 Financial Highlights
18 Notes to Financial Statements
21 Officers and Trustees
22 Investment Products
and Services
23 How to Contact
Scudder
IN BRIEF
o Scudder Quality Growth Fund continued to perform well in the six and 12
months ended April 30, 1996, providing total returns of 12.21% and 30.30%,
respectively.
o The Fund's biggest concentrations remain in consumer staples, healthcare,
and technology issues. Advantage was taken of the decline in technology
stock prices in late 1995 to add to the group.
o In the current environment of slow economic growth and low inflation, more
regionally growing, quality companies as found in this Fund should perform
relatively well.
2
<PAGE>
LETTER FROM THE FUND'S PRESIDENT
Dear Shareholders,
We are pleased to present this semiannual report for Scudder Quality Growth
Fund, covering the six months ended April 30, 1996. For the period, Quality
Growth Fund took advantage of a generally strong U.S. stock market and provided
a total return of 12.21%. The Fund's total return of 30.30% for the 12 months
through April is also gratifying. Assets now stand at more than $200 million,
representing more than 13,000 shareholders.
While stock prices have been on the rise for most of the past year and a
half, the market has recently shown signs of becoming more volatile. Investors
have been responding daily to uncertain and even conflicting indicators of where
the United States is in its economic cycle. We believe that Scudder Quality
Growth Fund, with its focus on identifying fundamentally sound companies capable
of consistent earnings growth, is well-suited to providing competitive
performance in such an environment. Moreover, while a modest correction would
not be unusual after an extended period of gains such as the market recently
experienced, the long-term outlook for investors here and around the world
remains positive.
We would like to take this opportunity to note a recent addition to our
family of funds: Scudder Emerging Markets Growth Fund. The Fund, which became
available to investors on May 8, seeks to provide long-term growth of capital by
investing primarily in the stock markets of such developing regions as the
Pacific Rim, Latin America and Eastern Europe. For more information on Scudder
Emerging Markets Growth Fund and other Scudder products and services, please see
page 22.
Thank you for your continued confidence and investment in Scudder Quality
Growth Fund. Please do not hesitate to contact us at 1-800-225-2470 with any
questions about your account.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Quality Growth Fund
3
<PAGE>
SCUDDER QUALITY GROWTH FUND
PERFORMANCE UPDATE as of April 30, 1996
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
SCUDDER QUALITY GROWTH FUND
- ----------------------------------------
Total Return
Period Growth --------------
Ended of Average
4/30/96 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $13,030 30.30% 30.30%
Life of
Fund* $19,173 91.73% 14.01%
RUSSELL 1000 GROWTH INDEX
- --------------------------------------
Total Return
Period Growth --------------
Ended of Average
4/30/96 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $13,256 32.56% 32.56%
Life of
Fund* $18,944 89.44% 13.86%
*The Fund commenced operations on
May 15, 1991. Index comparisons begin
May 31, 1991.
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 APRIL 30
Scudder Quality Growth Fund
Year Amount
- ----------------------
5/91* $10,000
10/91 $10,894
4/92 $11,251
10/92 $12,252
4/93 $12,094
10/93 $13,169
4/94 $12,590
10/94 $13,220
4/95 $14,092
10/95 $16,364
4/96 $18,362
Russell 1000 Growth Index
Year Amount
- ----------------------
5/91* $10,000
10/91 $10,350
4/92 $11,022
10/92 $11,470
4/93 $11,507
10/93 $12,308
4/94 $11,947
10/94 $12,973
4/95 $14,291
10/95 $16,766
4/96 $18,944
The Russell 1000 Growth Index is an unmanaged capitalization-
weighted price index of the 1000 largest U.S. growth companies
traded on the NYSE, AMEX, and NASDAQ. Index returns assume
reinvested dividends and, unlike Fund returns, do not reflect
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 APRIL 30
1992* 1993 1994 1995 1996
----------------------------------------
NET ASSET VALUE... $14.05 $15.08 $15.40 $15.88 $19.89
INCOME DIVIDENDS.. $ .03 $ .03 $ .07 $ .15 $ .14
CAPITAL GAINS
DISTRIBUTIONS..... $ .02 $ -- $ .24 $ 1.09 $ .60
FUND TOTAL
RETURN (%)........ 17.48 7.50 4.10 11.93 30.30
INDEX TOTAL
RETURN (%)........ 10.22 4.40 3.82 19.62 32.56
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. If
the Adviser had not maintained the Fund's expenses, the average annual
total return for the life of Fund would have been lower.
4
<PAGE>
PORTFOLIO SUMMARY as of April 30, 1996
- ---------------------------------------------------------------------------
ASSET ALLOCATION
- ---------------------------------------------------------------------------
Equity Holdings 98% The Fund is nearly fully
Cash Equivalents 2% invested in the stocks of
---- high quality companies.
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)
- --------------------------------------------------------------------------
Consumer Staples 19%
Health 17%
Technology 12% Consumer staples and
Consumer Discretionary 12% health, both generally
Manufacturing 10% considered to be less
Service Industries 10% economically-sensitive
Financial 7% "defensive" sectors, are
Media 5% well represented in the
Energy 2% portfolio.
Other 6%
----
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. PHILIP MORRIS COMPANIES, INC.
Tobacco, food products and brewing
2. GENERAL ELECTRIC CO.
Leading producer of electrical equipment
3. CISCO SYSTEMS, INC.
Manufacturer of computer network products
4. PROCTER & GAMBLE CO.
Diversified manufacturer of consumer products
5. MCDONALD'S CORP.
Worldwide fast food restaurant franchiser
6. PEPSICO INC.
Soft drinks, snack foods and food services
7. MERCK & CO. INC.
Leading ethical drug manufacturer
8. ATMEL CORP.
Developer and manufacturer of integrated circuits
9. AMERICAN INTERNATIONAL GROUP, INC.
Major international insurance holding company
10. JOHNSON & JOHNSON
Health care products
Top holdings are focused on companies with the potential for consistent
above-average earnings growth.
- -----------------------------------------------------------------------
For more complete details about the Fund's Investment Portfolio,
see page 10.
A monthly Investment Portfolio Summary and quarterly Portfolio Holdings
are available upon request.
5
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
Scudder Quality Growth Fund provided a total return of 12.21% for the six
months ended April 30, 1996, modestly lagging the unmanaged Russell 1000 Growth
Index and the average growth fund tracked by Lipper Analytical Services, which
returned 12.99% and 13.12%, respectively. For the 12-month period through April,
the Fund's return of 30.30% trailed the 32.56% return for the Russell Index, but
exceeded the Lipper growth average's 29.81% performance.
Rally in U.S. Stocks Stalls Near End of Period
The first four months of the period saw generally rising U.S. stock prices,
as investors were heartened by slow growth, non-threatening inflation, and the
prospect of continued low interest rates. Beginning in March, the U.S. stock
market began to display a higher degree of volatility in response to conflicting
economic indicators. In particular, much stronger-than-anticipated February
employment numbers caused the Dow Jones Industrial Average to tumble 171 points
on March 8. The market in fact rebounded the following trading day; however,
market leadership rotated away from sectors perceived as stable in the face of
weak economic growth, such as consumer staples and healthcare. Instead,
sentiment shifted towards cyclical groups that would likely respond positively
to a stronger economy, including consumer discretionary and manufacturing
companies. As the period drew to a close, most areas of the stock market
appeared stalled, as investors awaited clarity with respect to the underlying
fundamentals of corporate earnings and interest rates.
Quality Growth Fund's focus is companies with sound fundamentals, including
a solid balance sheet and strong management. Rather than attempting to make
sector moves based on the immediate direction of the economy, the Fund continued
to seek high-quality companies with the potential for consistent long-term
growth. In this vein, assets were deployed early in the period to build
positions in areas of the volatile technology sector where we have a degree of
confidence in the long-term fundamentals; principally, companies not overly
dependent upon commodity-type business lines, and that are market leaders in
growing niches. In doing so, the Fund was able to take advantage of the
significant price depreciation experienced by many technology stocks in late
1995. Within financial services, the Fund shed its exposure to increasingly
problematic consumer credit while continuing to focus on the fast-growing asset
6
<PAGE>
gathering business, holding Charles Schwab. In the retail sector, slow-growth
May Department Stores was replaced with Nordstrom, and the Fund's drugstore
exposure was consolidated into one stock, Rite Aid.
Premium on Consistent Growth Going Forward
Our expectations for the overall market going forward are now somewhat
muted due to the sharp price appreciation experienced over the last 15 months
along with the recent rise in long-term interest rates. This does not suggest
that a major portfolio shift is appropriate, but it has made us more vigilant in
ensuring we hold stocks with solid long-term earnings prospects.
The investment environment in 1996 has been characterized so far by the
crosscurrents of rising interest rates and the massive demand for equities, with
demand generally holding sway. Clearly, the continued record level of cash flow
into equity mutual funds has been a major positive for the market. Furthermore,
investors have been conditioned to "buy on the dips," which we believe has
dampened the risk of a serious market correction by providing liquidity at times
of potential panic. While the current level of demand for equities cannot go on
forever, we can identify no reason for a reversal in demand in the immediate
future.
More problematic for equities has been the rise this year in long-term
interest rates after the spectacular bull market for bonds in 1995. While there
have been inconsistent economic signals, the consumer is strapped with debt,
companies are downsizing, and an increasing number of corporations are reporting
negative earnings surprises. In short, after five years of economic expansion,
we do not see the ingredients for a reacceleration that would ignite a sustained
rise in rates. While the direction of interest rates ranks high on the list of
important variables, another concern is the potential for a dramatic change in
general economic conditions -- either a deep recession with the accompanying
earnings problems or a reacceleration that could bring about inflation fears.
In light of such imponderables, we choose to focus on investing in great
companies with growing earnings. In our view, this approach should result in
competitive long-term returns. Moreover, we believe that the best-performing
stocks in these uncertain times will be those of companies capable of continued
7
<PAGE>
fundamental progress under a variety of macroeconomic scenarios. In the year
ahead we expect quality growth companies to deliver, on average, earnings growth
that will compare favorably with the decelerating growth rates of most
economically sensitive companies and the broadly defined overall market.
Moreover, we expect the market to reward these steady growth stocks with premium
valuations, in contrast to three years ago when earnings growth and high quality
were actually negatively correlated with performance.
STRATEGY REVIEW
The Fund's investment approach is premised on achieving superior investment
returns by investing in companies with consistent above-average earnings growth.
In keeping with this philosophy, we look for companies with solid long-term
franchises, focused and experienced management teams, and dominant market shares
in growing industries. In addition, we try to avoid overpaying for these
attributes. In short, we search for companies with excellent fundamentals at
reasonable valuations. And while we are cognizant of the overall market
valuation level, it is not a major factor in our investment process.
While our investment style is primarily focused on selection of individual
stocks, concentrations in specific sectors often result from this bottom-up
approach. Entering the second half of the fiscal year, the Fund's biggest
concentrations remain in consumer staples, healthcare, and technology. These
weightings are essentially in line with the Russell 1000 Growth Index. The Fund
is still underweight in manufacturing, although we have recently added to the
sector through the purchase of Praxair, Honeywell, and an addition to Emerson.
We continue to find many outstanding investments in the service sector including
GME, Reuters, and the recently acquired CUC International.
While the Fund's sector weightings have not changed dramatically, there
have been a number of recent strategic shifts within sectors. For example, in
healthcare new or increased positions were established in Sandoz, SmithKline,
Amgen, and Pfizer. These companies have excellent product pipelines that should
fuel earnings for years to come. In the cases of Sandoz and SmithKline, earnings
will also benefit from cost cutting and synergies derived from their respective
mergers. In the consumer non-durable area, the Fund has added to holdings in
Procter & Gamble and McDonald's. These are extremely well-managed global
consumer product giants that we believe will not only continue to prosper but
8
<PAGE>
actually widen market share leads in their respective industries. In technology,
the Fund continued to take advantage of market volatility by investing on stock
price weakness in quality names such as Computer Associates (new position),
Cisco, Atmel (new position), and Microsoft. Increasingly, the market is
discriminating between the leaders and the average players in technology.
While fundamentally sound companies are not always rewarded by the
market, we believe the Fund's approach works over time. Moreover, in our view,
the current environment of slower economic growth and low inflation should be
positive for growth stocks. Thank you for your investment in Scudder Quality
Growth Fund, and please do not hesitate to call Scudder at 1-800-225-5163 with
any questions.
Sincerely,
Your Portfolio Management Team
/s/Valerie F. Malter /s/Bruce F. Beaty
Valerie F. Malter Bruce F. Beaty
/s/Michael K. Shields
Michael K. Shields
9
<PAGE>
SCUDDER QUALITY GROWTH FUND
INVESTMENT PORTFOLIO as of April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% of Principal Market
Portfolio Amount($) Value ($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
-------------------------------------------------------------------------------
2.2% REPURCHASE AGREEMENT
-------------------------------------------------------------------------------
4,619,000 Repurchase Agreement with State Street Bank
and Trust Company dated 4/30/96 at 5.1% to
be repurchased at $4,619,654 on 5/1/96,
collateralized by a $4,645,000 U.S. Treasury
Note, 8%, 10/15/96 (Cost $4,619,000) ............. 4,619,000
----------
-------------------------------------------------------------------------------
97.8% COMMON STOCKS
-------------------------------------------------------------------------------
Shares
-------------------------------------------------------------------------------
CONSUMER DISCRETIONARY 12.2%
Department &
Chain Stores 5.4% 70,100 Nordstrom, Inc. ........................................ 3,566,338
125,500 Rite Aid Corp. ......................................... 3,717,938
162,600 Wal-Mart Stores Inc. ................................... 3,882,075
----------
11,166,351
----------
Hotels & Casinos 1.5% 58,100 Grand Casinos Inc.* .................................... 1,880,988
84,600 Host Marriott Corp. .................................... 1,131,525
----------
3,012,513
----------
Restaurants 2.5% 107,800 McDonald's Corp. ....................................... 5,160,925
----------
Specialty Retail 2.8% 83,800 Corporate Express, Inc.* ............................... 3,132,025
125,300 Intimate Brands, Inc. .................................. 2,646,963
----------
5,778,988
----------
CONSUMER STAPLES 18.6%
Alcohol & Tobacco 2.9% 67,000 Philip Morris Companies Inc. ........................... 6,038,375
----------
Consumer Electronic
& Photographic Products 0.8% 38,500 Duracell International Inc. ............................ 1,742,125
----------
Food & Beverage 10.4% 101,700 Albertson's Inc. ....................................... 3,915,450
28,800 CPC International Inc. ................................. 1,990,800
37,900 Coca-Cola Co., Inc. .................................... 3,088,850
45,000 ConAgra Inc. ........................................... 1,738,125
50,500 Dole Food Co. .......................................... 2,020,000
78,700 PepsiCo Inc. ........................................... 4,997,450
121,600 Sara Lee Corp. ......................................... 3,769,600
----------
21,520,275
----------
Package Goods/Cosmetics 4.5% 19,500 Clorox Co. ............................................. 1,611,188
39,000 Gillette Co. ........................................... 2,106,000
</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>
65,600 Procter & Gamble Co. ................................... 5,543,200
----------
9,260,388
----------
HEALTH 16.4%
Biotechnology 2.6% 51,100 Amgen Inc.* ............................................ 2,938,250
42,108 Guidant Corp. .......................................... 2,363,312
----------
5,301,562
----------
Medical Supply &
Specialty 2.7% 35,900 Becton, Dickinson & Co. ................................ 2,894,438
49,000 Medtronic Inc. ......................................... 2,603,125
----------
5,497,563
----------
Pharmaceuticals 11.1% 21,900 American Home Products Corp. ........................... 2,310,450
67,034 Eli Lilly & Co. ........................................ 3,955,006
48,600 Johnson & Johnson ...................................... 4,495,500
78,000 Merck & Co. Inc. ....................................... 4,719,000
31,100 Pfizer, Inc. ........................................... 2,142,013
43,000 Sandoz Ltd. AG (ADR) ................................... 2,340,813
53,800 SmithKline Beecham PLC (ADR) ........................... 2,905,200
----------
22,867,982
----------
COMMUNICATIONS 1.5%
Telephone/Communications 50,600 American Telephone & Telegraph Co. ..................... 3,099,250
----------
FINANCIAL 7.2%
Banks 1.8% 74,000 State Street Boston Corp. .............................. 3,690,750
----------
Insurance 4.5% 49,250 American International Group, Inc. ..................... 4,500,219
35,700 EXEL, Ltd. ............................................. 2,570,400
31,800 MBIA Inc. .............................................. 2,269,725
----------
9,340,344
----------
Other Financial Companies 0.9% 63,300 Federal National Mortgage Association .................. 1,938,563
----------
MEDIA 5.2%
Advertising 1.0% 44,200 Interpublic Group of Companies Inc. .................... 2,066,350
----------
Broadcasting &
Entertainment 4.2% 76,100 Time Warner Inc. ....................................... 3,110,588
56,700 Viacom Inc. "B"* ....................................... 2,324,700
53,200 Walt Disney Co. ........................................ 3,298,400
----------
8,733,688
----------
SERVICE INDUSTRIES 9.8%
EDP Services 3.8% 46,100 First Data Corp. ....................................... 3,503,600
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
SCUDDER QUALITY GROWTH FUND
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
77,000 General Motors Corp. "E" ............................... 4,340,875
---------
7,844,475
---------
Investment 1.5% 128,200 Charles Schwab Corp. ................................... 3,140,900
---------
Miscellaneous
Commercial Services 3.4% 108,100 Sensormatic Electronics Corp. .......................... 2,202,538
64,600 CUC International Inc.* ................................ 2,123,725
49,900 Service Corp. International ............................ 2,650,938
---------
6,977,201
---------
Printing/Publishing 1.1% 34,800 Reuters Holdings PLC "B" (ADR) ......................... 2,353,350
---------
DURABLES 1.4%
Telecommunications
Equipment 48,600 Ascend Communications, Inc.* ........................... 2,988,900
---------
MANUFACTURING 10.0%
Chemicals 2.3% 40,800 Praxair Inc. ........................................... 1,575,890
58,475 Sigma-Aldrich Corp. .................................... 3,157,650
---------
4,733,540
---------
Diversified Manufacturing 4.7% 77,900 General Electric Co. ................................... 6,037,250
36,400 Honeywell, Inc. ........................................ 1,915,550
29,000 Thermo Electron Corp. .................................. 1,787,125
---------
9,739,925
---------
Electrical Products 3.0% 18,800 ASEA AB (ADR) .......................................... 1,898,800
51,500 Emerson Electric Co. ................................... 4,306,688
---------
6,205,488
---------
TECHNOLOGY 13.1%
Computer Software 3.8% 33,600 Computer Associates International, Inc. ................ 2,465,400
33,900 Microsoft Corp.* ....................................... 3,843,413
---------
43,600 Oracle Systems Corp.* .................................. 1,471,500
---------
7,780,313
---------
Electronic Components/
Distributors 1.0% 40,500 Altera Corp.* .......................................... 2,136,375
---------
Electronic Data Processing 1.8% 35,300 Hewlett-Packard Co. .................................... 3,737,388
---------
Office/Plant Automation 4.3% 67,100 3Com Corp.* ............................................ 3,094,988
111,500 Cisco Systems, Inc.* ................................... 5,784,063
---------
8,879,051
---------
Semiconductors 2.2% 116,100 Atmel Corp.* ........................................... 4,644,000
---------
</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>
ENERGY 2.4%
Engineering 1.2% 36,100 Fluor Corp. ........................................... 2,387,113
-----------
Oil/Gas Transmission 1.2% 59,900 Enron Corp. ........................................... 2,410,975
-----------
Total Common Stocks (Cost $159,516,340)........................ 202,174,986
-----------
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $164,135,340) (a) ..................................... 206,793,986
===========
<FN>
* Non-income producing security.
(a) The cost for federal income tax purposes was $164,371,079. At April 30,
1996, net unrealized appreciation for all securities based on tax cost was
$42,422,907. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $43,360,377 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$937,470.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
SCUDDER QUALITY GROWTH FUND
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $164,135,340)
(Note A) ............................................ $206,793,986
Cash .................................................. 668
Receivables:
Investments sold .................................... 2,354,709
Fund shares sold .................................... 89,348
Dividends and interest .............................. 168,162
Deferred organization expenses (Note A) ............... 1,214
------------
Total assets....................................... 209,408,087
LIABILITIES
Payables:
Investments purchased................................ $ 38,060
Fund shares redeemed................................. 95,695
Accrued management fee (Note C)...................... 119,201
Other accrued expenses (Note C)...................... 91,229
-------
Total liabilities ................................. 344,185
------------
Net assets, at market value............................ $209,063,902
============
NET ASSETS
Net assets consist of:
Undistributed net investment income.................. $ 49,048
Unrealized appreciation on investments............... 42,658,646
Accumulated net realized gain........................ 7,610,396
Shares of beneficial interest........................ 105,127
Additional paid-in capital........................... 158,640,685
------------
Net assets, at market value............................ $209,063,902
============
NET ASSET VALUE, offering and redemption price per
share ($209,063,902/10,512,706 outstanding shares
of beneficial interest, $.01 par value, unlimited
number of shares authorized)......................... $ 19.89
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of $14,980).. $ 1,262,731
Interest.............................................. 214,355
-----------
1,477,086
Expenses:
Management fee (Note C)............................... $676,013
Services to shareholders (Note C)..................... 219,929
Custodian and accounting fees (Note C)................ 45,627
Trustees' fees and expenses (Note C).................. 14,112
Reports to shareholders............................... 32,277
Auditing.............................................. 18,185
Legal................................................. 4,359
Federal registration.................................. 3,789
State registration.................................... 16,950
Amortization of organization expense (Note A)......... 4,960
Other................................................. 4,356 1,040,557
------------------------
Net investment income................................. 436,529
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investments.................... 7,996,141
Net unrealized appreciation on investments
during the period................................... 13,381,623
-----------
Net gain on investments............................... 21,377,764
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.. $21,814,293
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
<TABLE>
SCUDDER QUALITY GROWTH FUND
- --------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED
1996 OCTOBER 31,
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED) 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ........................ $ 436,529 $ 966,751
Net realized gain on investments ............. 7,996,141 5,911,775
Net unrealized appreciation on
investments during the period .............. 13,381,623 23,228,314
------------ ------------
Net increase in net assets
resulting from operations .................. 21,814,293 30,106,840
------------ ------------
Distributions to shareholders from:
Net investment income ($.14 and $.15
per share, respectively) ................... (1,354,259) (1,069,236)
------------ ------------
Net realized gains from investment
transactions ($.60 and $1.09 per share,
respectively) .............................. (5,803,710) (7,769,783)
------------ ------------
Fund share transactions:
Proceeds from shares sold .................... 38,713,495 62,792,871
Net asset value of shares issued to
shareholders in reinvestment of
distributions .............................. 6,992,173 8,642,766
Cost of shares redeemed ...................... (24,769,805) (32,495,742)
------------ ------------
Net increase in net assets from
Fund share transactions .................... 20,935,863 38,939,895
------------ ------------
INCREASE (DECREASE) IN NET ASSETS ............ 35,592,187 60,207,716
Net assets at beginning of period ............ 173,471,715 113,263,999
------------ ------------
NET ASSETS AT END OF PERIOD (including
undistributed net investment income
of $49,048 and $966,778, respectively) ..... $209,063,902 $173,471,715
============ ============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period .... 9,409,227 7,006,138
------------ ------------
Shares sold .................................. 2,021,028 3,794,148
Shares issued to shareholders in reinvestment
of distributions ........................... 380,630 595,642
Shares redeemed .............................. (1,298,179) (1,986,701)
------------ ------------
Net increase in Fund shares .................. 1,103,479 2,403,089
------------ ------------
Shares outstanding at end of period .......... 10,512,706 9,409,227
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL
STATEMENTS.
<CAPTION>
FOR THE PERIOD
SIX MONTHS MAY 15, 1991
ENDED (COMMENCEMENT
APRIL 30, YEARS ENDED OCTOBER 31, OF OPERATIONS)
1996 ------------------------------------------ TO OCTOBER 31,
(UNAUDITED) 1995 1994 1993 1992 1991
----------- ------------------------------------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $18.44 $16.17 $16.42 $15.30 $13.65 $12.00
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income (a)................. .04 .11 .16 .06 .02 .03
Net realized and unrealized gain (loss)
on investments.......................... 2.15 3.40 (.09) 1.09 1.68 1.62
------ ------ ------ ------ ------ ------
Total from investment operations............ 2.19 3.51 .07 1.15 1.70 1.65
------ ------ ------ ------ ------ ------
Less distributions from:
Net investment income..................... (.14) (.15) (.08) (.03) (.03) --
Net realized gains on investment
transactions.............................. (.60) (1.09) (.24) -- (.02) --
------ ------ ------ ------ ------ ------
Total distributions......................... (.74) (1.24) (.32) (.03) (.05) --
------ ------ ------ ------ ------ ------
Net asset value, end of period.............. $19.89 $18.44 $16.17 $16.42 $15.30 $13.65
====== ====== ====== ====== ====== ======
TOTAL RETURN (%)............................ 12.21** 23.78 .39 7.49 12.47 13.75**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period ($ millions)...... 209 173 113 126 101 30
Ratio of operating expenses net, to
average daily net assets (%) (a).......... 1.08* 1.17 1.25 1.20 1.25 1.25*
Ratio of net investment income to
average daily net assets (%).............. .45* .71 .96 .39 .24 .83*
Portfolio turnover rate (%)................. 67.2* 91.6 119.7 111.4 27.4 11.5*
Average commission rate paid (b)............ $.0557 -- -- -- -- --
<FN>
(a) Reflects a per share amount of
expenses, exclusive of management
fees, reimbursed by the Adviser of... $ -- $ -- $ -- $ -- $ -- $ .01
Reflects a per share amount of
management fee not imposed by
the Adviser of....................... $ -- $ -- $ -- $ -- $ .01 $ .02
Operating expense ratio including
expense reductions (%)............... -- -- -- -- 1.40 2.67*
(b) Average commission rate paid per share
of portfolio securities is calculated
for fiscal years beginning on or after
September 1, 1995.
* Annualized
** Not annualized
</FN>
</TABLE>
17
<PAGE>
SCUDDER QUALITY GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Scudder Quality Growth 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 Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Fund in the
preparation of its financial statements.
SECURITY VALUATION. Portfolio securities which are traded on U.S. or foreign
stock exchanges are valued at the most recent sale price reported on the
exchange on which the security is traded most extensively. If no sale occurred,
the security is then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked quotations, the most
recent bid quotation is used. Securities quoted on the 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. Short-term investments
having a maturity of sixty days or less are valued at amortized cost.
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 and the underlying collateral, is equal to at least 100.5% of the
resale price.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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. Accordingly,
the Fund paid no federal income taxes and no federal income tax provision was
required.
DISTRIBUTION OF INCOME AND GAINS. Distributions of net investment income are
made annually. During any particular year net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders annually. An additional distribution may be made to the extent
necessary to avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. The differences
primarily relate to investments in certain securities sold at a loss. As a
result, net investment income (loss) and net realized gain (loss) on investment
transactions for a reporting period may differ significantly from distributions
during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial and federal income tax reporting purposes.
ORGANIZATION COSTS. Costs incurred by the Fund in connection with its
organization and initial registration of shares have been deferred and are being
amortized on a straight-line basis over a five-year period.
OTHER. Investment security transactions are accounted for on a trade date basis.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis.
B. PURCHASES AND SALES OF SECURITIES
- --------------------------------------------------------------------------------
For the six months ended April 30, 1996, purchases and sales of investment
securities (excluding short-term investments) aggregated $81,738,767 and
$62,005,632, respectively.
19
<PAGE>
SCUDDER QUALITY GROWTH FUND
- --------------------------------------------------------------------------------
C. RELATED PARTIES
- --------------------------------------------------------------------------------
Under the Fund's Investment Management Agreement (the "Agreement") with Scudder,
Stevens & Clark, Inc. (the "Adviser"), the Fund pays the Adviser a fee equal to
an annual rate of 0.70% of the Fund's average daily net assets, computed and
accrued daily and payable monthly. As manager of the assets of the Fund, the
Adviser directs the investments of the Fund in accordance with its investment
objectives, policies, and restrictions. The Adviser determines the securities,
instruments, and other contracts relating to investments to be purchased, sold
or entered into by the Fund. In addition to portfolio management services, the
Adviser provides certain administrative services in accordance with the
Agreement. The Agreement provides 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. In
addition, the Adviser agreed not to impose all or a portion of its management
fee until February 29, 1996 in order to maintain the annualized expenses of the
Fund at not more than 1.25% of average daily net assets. For the six months
ended April 30, 1996, the fee pursuant to the Agreement amounted to $676,013.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
six months ended April 30, 1996, the amount charged to the Fund by SSC
aggregated $132,745, of which $23,173 is unpaid at April 30, 1996.
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the six months ended April 30,
1996, the amount charged to the Fund by STC aggregated $62,518, of which $10,730
is unpaid at April 30, 1996
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the six months
ended April 30, 1996, the amount charged to the Fund by SFAC aggregated $28,575,
of which $4,933 is unpaid at April 30, 1996.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Fund pays each of its Trustees not affiliated with the Adviser $4,000
annually plus specified amounts for attended board and committee meetings. For
the six months ended April 30, 1996, Trustees fees and expenses aggregated
$14,112.
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; President and Director, Fifty Associates
Wesley W. Marple, Jr.
Trustee; Professor of Business Administration, Northeastern University
Juris Padegs*
Trustee
Jean C. Tempel
Trustee; General Partner,
TL Ventures
Bruce F. Beaty*
Vice President
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
Valerie F. Malter*
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.
21
<PAGE>
INVESTMENT PRODUCTS AND SERVICES
The Scudder Family of Funds
<TABLE>
<CAPTION>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Money Market Income
Scudder Cash Investment Trust Scudder Emerging Markets Income Fund
Scudder U.S. Treasury Money Fund Scudder Global Bond Fund
Tax Free Money Market+ Scudder GNMA Fund
Scudder Tax Free Money Fund Scudder Income Fund
Scudder California Tax Free Money Fund* Scudder International Bond Fund
Scudder New York Tax Free Money Fund* Scudder Short Term Bond 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 Emerging Markets Growth Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Global Fund
Scudder Massachusetts Tax Free Fund* Scudder Global Discovery Fund
Scudder Medium Term Tax Free Fund Scudder Gold Fund
Scudder New York Tax Free Fund* Scudder Greater Europe Growth Fund
Scudder Ohio Tax Free Fund* Scudder International Fund
Scudder Pennsylvania Tax Free Fund* Scudder Latin America Fund
Growth and Income Scudder Pacific Opportunities Fund
Scudder Balanced Fund Scudder Quality Growth Fund
Scudder Growth and Income Fund Scudder Small Company Value Fund
Scudder Value 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 Treasurers Trust(TM)++
Scudder Fund, Inc.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
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.
22
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Account Service and Information
- --------------------------------------------------------------------------------------------------------------
For existing account service and transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163
For personalized information about your
Scudder accounts; exchanges and
redemptions; or information on any
Scudder fund 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 New York
Boston Portland, OR
Chicago San Diego
Cincinnati San Francisco
Los Angeles Scottsdale
- --------------------------------------------------------------------------------------------------------------
</TABLE>
For information on Scudder Treasurers Trust(TM), an institutional cash
management service for corporations, non-profit organizations and trusts
that uses 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.
23
<PAGE>
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 38 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.
