This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
Scudder
Growth and
Income Fund
Annual Report
December 31, 1995
o A fund with an 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
10 Investment Portfolio
18 Financial Statements
21 Financial Highlights
22 Notes to Financial Statements
28 Report of Independent Accountants
29 Tax Information
29 Officers and Trustees
30 Investment Products and Services
31 How to Contact Scudder
IN BRIEF
- - Scudder Growth and Income Fund had a strong year and produced a 31.18%
total return in 1995.
- - This performance was better than that of the average growth and income fund
tracked by Lipper Analytical Services, but slightly below that of the
unmanaged S&P 500.
- - The Fund's disciplined investment approach resulted in an overweighting of
two of the top performing sectors of the U.S. stock market--financial
services and healthcare--but kept it out of the technology sector, which
also performed well.
- - Going forward, the Fund's emphasis on income should cushion the price
volatility of the portfolio. Favored sectors include financial services and
healthcare, selected manufacturing issues, and overseas-based companies.
2
<PAGE>
LETTER FROM THE FUND'S PRESIDENT
Dear Shareholders,
Performance of the major global stock and bond markets was generally
positive in 1995 as slow growth, moderate inflation and falling interest rates
provided a favorable economic climate. The biggest investment story of the year
was the stunning advance in the U.S. equity market, which contributed to Scudder
Growth and Income Fund's gratifying total return of 31.18% for the year.
Despite the impressive performance in 1995 of the domestic stock
market, U.S. equities are reasonably valued when viewed against the backdrop of
lower bond yields. Even so, a repeat of 1995's exceptional performance is
unlikely, especially if the economy slows as anticipated in the coming year.
This type of environment actually is one in which the Fund has historically
performed relatively well due to its disciplined investment approach.
Longer term, we see a number of trends underway that support the
outlook for investment in the U.S. and around the world. Technology is bringing
efficiencies to every stage of the product cycle, from design to distribution.
Globalization has widened the competitive universe, making inflationary price
increases less likely. Deregulation is subjecting major industries to market
discipline, increasing capacity and reducing supply bottlenecks. While investing
will always involve uncertainties and market fluctuation, the result of these
forces may well be an era of disinflationary growth that benefits investors and
raises living standards worldwide.
Finally, it is pleasing when others recognize the value of the Fund's
disciplined investment approach, as witness the following quote from
Morningstar, an independent research firm:
Overall, the fund's yield-oriented style has led
to a nice balance of solid returns and
below-average risk. It makes an appealing package
for more conservative investors. (Morningstar
Mutual Funds, 10/27/95)
Scudder Growth and Income Fund's distinctive approach is discussed in detail in
the portfolio management discussion beginning on page 6, which takes the form of
a special interview with the Fund's Lead Portfolio Manager, Robert Hoffman.
We welcome the many new investors in the Fund and appreciate your vote
of confidence.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Growth and Income Fund
3
<PAGE>
SCUDDER GROWTH AND INCOME FUND
PERFORMANCE UPDATE as of December 31, 1995
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
SCUDDER GROWTH AND INCOME FUND
- ----------------------------------------
Total Return
Period Growth --------------
Ended of Average
12/31/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $13,118 31.18% 31.18%
5 Year $21,845 118.45% 16.91%
10 Year $36,974 269.74% 13.97%
S&P 500 INDEX
- --------------------------------------
Total Return
Period Growth --------------
Ended of Average
12/31/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $13,758 37.58% 37.58%
5 Year $21,544 115.44% 16.58%
10 Year $40,036 300.36% 14.87%
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
YEARLY PERIODS ENDED DECEMBER 31
Scudder Growth and Income Fund
Year Amount
- ----------------------
85 $10,000
86 $11,830
87 $12,244
88 $13,715
89 $17,329
90 $16,926
91 $21,692
92 $23,767
93 $27,473
94 $28,187
95 $36,974
S&P 500 Index
Year Amount
- ----------------------
85 $10,000
86 $11,866
87 $12,490
88 $14,564
89 $19,178
90 $18,583
91 $24,244
92 $26,092
93 $28,721
94 $29,101
95 $40,036
The Standard & Poor's (S&P) 500 Index is an unmanaged capitalization-
weighted measure of 500 widely held common stocks listed on the
New York Stock Exchange, American Stock Exchange, and Over-The-Counter
market. Index returns assume reinvestment of dividends and, unlike
Fund returns, do not reflect any fees or expenses.
- -----------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
- -----------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
YEARLY PERIODS ENDED DECEMBER 31
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
--------------------------------------------------------------------------------
NET ASSET VALUE... $15.02 $12.31 $13.18 $14.14 $12.77 $15.76 $16.20 $17.24 $16.26 $20.23
INCOME DIVIDENDS.. $ .68 $ .68 $ .59 $ .69 $ .67 $ .55 $ .53 $ .45 $ .51 $ .56
CAPITAL GAINS
DISTRIBUTIONS..... $ 2.28 $ 2.64 $ -- $ 1.77 $ .34 $ -- $ .50 $ 1.01 $ .91 $ .48
FUND TOTAL
RETURN (%)........ 18.27 3.50 12.01 26.36 -2.33 28.16 9.57 15.59 2.60 31.18
INDEX TOTAL
RETURN (%)........ 18.66 5.25 16.56 31.63 -3.11 30.40 7.61 10.06 1.32 37.58
</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 December 31, 1995
- ---------------------------------------------------------------------------
DIVERSIFICATION
- ---------------------------------------------------------------------------
Common and Preferred
Stocks 92% The Fund focuses on
Convertible Bonds 3% stocks with above-average
Convertible Stocks 3% dividends and sound
Cash Equivalents 2% fundamentals.
----
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)
- --------------------------------------------------------------------------
Financial 19%
Manufacturing 15%
Health 15% Emphasis is on sectors that
Consumer Staples 13% should perform relatively
Energy 9% well in a slowing economy.
Durables 7%
Communications 6%
Utilities 5%
Consumer Discretionary 4%
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 equipment, climate control
systems, and elevators
2. STUDENT LOAN MARKETING ASSOCIATION
Student loan financing programs
3. XEROX CORP.
Leading manufacturer of copiers and duplicators
4. TRW INC.
Defense electronics, automotive parts and systems
5. ELI LILLY & CO.
Leading pharmaceutical company
6. LOCKHEED MARTIN CORP.
Manufacturer of aircraft, missiles and space equipment
7. H&R BLOCK INC.
Tax consulting and preparation
8. H.J. HEINZ CO.
Major manufacturer of processed foods
9. AMERICAN HOME PRODUCTS CORP.
Major U.S. diversified pharmaceutical company
10. KIMBERLY-CLARK CORP.
Consumer paper products and newsprint
A number of manufacturers that represent attractive relative value
are among the Fund's top holdings.
- -----------------------------------------------------------------------
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>
SCUDDER GROWTH AND INCOME FUND
PORTFOLIO MANAGEMENT DISCUSSION
Scudder Growth and Income Fund is managed by a team of three professionals with
a cumulative 39 years of investment experience: Robert T. Hoffman, Benjamin W.
Thorndike, and Kathleen T. Millard. For a report on the Fund's 1995 performance
and strategy, as well as management's outlook and positioning going into 1996,
here is an interview with Robert T. Hoffman, Managing Director of Scudder
Stevens & Clark and Lead Portfolio Manager of Scudder Growth and Income Fund.
Q. Rob, how did Scudder Growth and Income Fund perform in 1995?
A. The Fund's total return for the year -- which includes change in share price
plus reinvestment of any distributions -- was 31.18%. This figure reflects a
$3.97 increase in the Fund's net asset value per share, to $20.23 on December
31, as well as income distributions totaling $0.56 per share and capital gain
distributions totaling $0.48 per share.
Q. How would you characterize this performance?
A. It was a good year. Anyone who was invested in the Fund for the full year
made more than 30%. In addition, we outperformed the average growth and income
fund tracked by Lipper Analytical Services, which provided a total return of
30.82%. The Fund failed to match the 37.58% return on the unmanaged S&P 500
Index, which is not surprising in such a spectacular year for stocks. The
discipline we use in managing the Fund should provide competitive returns in
strong markets, but the biggest comparative advantage is often found in dull or
weak markets, where it is designed to provide above-average performance.
Q. Could you give us your perspective on the market of the past year?
A. Many people may have forgotten that the prognosis for equities was not very
good going into 1995. Among other factors, the Federal Reserve was still
concerned about inflation and had been pursuing a tight money policy, and there
was the crisis surrounding Latin America and the bailout of Mexico. Stock market
sector leadership vacillated over the first half of the year with speculation
concerning the Fed, as investors tried to gauge the impact of more or less
restrictive monetary policy on cyclical industries. The Fed later reversed
course in July in the face of a GDP downtick and lowered interest rates, setting
off another wave of market realignment. While falling interest rates, low
inflation and strong corporate earnings combined over the course of the year to
propel stocks in the aggregate to levels no one had really anticipated, it was
easy for investors to get whipsawed by chasing the previous month's hot sector.
Patience was the key, and we remained true to our income-oriented discipline and
evaluations of company fundamentals in the face of these gyrations. We believe
that the worst thing to do is panic when your investment style is temporarily
out of favor.
6
<PAGE>
Q. What market sectors or individual holdings were most significant in terms
of the Fund's performance in 1995?
A. Of our largest holdings at the beginning of the year, seven of the top ten
outperformed the S&P 500 Index in 1995. In particular, the outperformance of our
major holdings -- names like United Technologies, Lockheed Martin, and Rockwell
- -- occurred in the durable goods sector.
Throughout 1995, the Fund maintained overweighted positions in the year's
top two performing sectors: financial services and health. Many financial
companies have been the beneficiaries of declining interest rates, and one
significant portfolio holding, the Student Loan Marketing Association, turned in
exceptional performance, with a total return of 108% for the year. Sallie Mae
was a unique opportunity where unfavorable political and corporate developments
had been overly discounted, resulting in a depressed stock price. Health stocks
in general surged on the strength of an improved regulatory outlook and a merger
wave fed by undervaluation in the pharmaceutical group.
On the downside, our position in international stocks was one of the
primary reasons for the Fund's underperformance versus the S&P 500. European
markets on the whole lagged the U.S., and even our very small exposure to Latin
America hurt us early in the year as those markets were sharply impacted by the
Mexican peso crisis. I should note that the Fund did not have meaningful
exposure to technology, another of the year's top-performing sectors, which hurt
performance slightly versus the overall market and some of our peers. This is a
natural consequence of our emphasis on high dividends and strong fundamentals,
and meant that we missed the upsurge -- but also avoided the year-end correction
- -- experienced by that volatile group. In fact, sticking to our discipline
enabled the Fund to finish the year in a strong fashion. Our return of 6.65% for
the fourth quarter was well ahead of the 4.53% return of the average growth and
income fund, as well as the 6.02% return of the S&P 500.
Q. What is your outlook for 1996 and how does it impact Fund strategy?
A. We are maintaining an overweighted position in the financial group but have
been trimming our exposure to the money center and regional banks, whose
valuations have become less attractive, especially in the face of slowing loan
growth and deteriorating consumer credit quality. We still favor select
insurance stocks and specialized companies such as Sallie Mae and Fannie Mae. We
are also optimistic about the Fund's position in REITs (Real Estate Investment
Trusts), a group which underperformed last year, but which now sports an
historically low valuation.
The healthcare group remains reasonably valued relative to the market and
the industry's history. It's worth noting that healthcare company earnings have
historically been resilient in the face of declining consumer purchasing power
- -- a likely scenario given already high debt levels. Certain economically
7
<PAGE>
sensitive sectors such as manufacturing and energy are undervalued in our view,
and are well-represented in the portfolio. The prices of some manufacturing
stocks, particularly in the paper/forest products group, already discount a
recession and may rally well before the economy actually bottoms out. Our
technology position continues to be small, as we maintain a strong emphasis on
relative yield, which is generally lacking in this sector.
Finally, we find relative value in some non-U.S. markets including Europe,
where central banks are expected to step on the monetary accelerator to
stimulate growth. Consequently, international stock holdings have been increased
to slightly more than 10% of assets. In this area, we are focusing on foreign
counterparts to U.S. companies that display more compelling valuations with
similar, if not better, fundamentals.
In general, our focus on high dividend-paying stocks tends to lead us in
the direction of value investing, and this has benefited the Fund over time as
the market recognizes the intrinsic worth of individual stocks in the portfolio.
We think this is a good position to be in as the economy winds down and market
leadership becomes less driven by earnings.
Q. Given the higher valuations of stocks after an exceptional year in 1995, is
now a good time to invest?
A. Price-earnings ratios have to be viewed in the context of prevailing interest
rate levels, and one can make the case that U.S. equities are not overvalued in
view of last year's sharp bond yield declines. Perhaps more to the point, it's
very difficult to time the market, and we don't recommend that investors try to
do so. Historically, stocks have provided returns over time that are superior to
those of other asset classes, so participation in the equity markets has been a
good long-term strategy. For investors concerned about a stock market correction
after last year's upsurge, Scudder Growth and Income Fund focuses on consistent
performance and provides a relatively conservative way to achieve or maintain
this valuable equity exposure. In other words, while we like to think the Fund
is a great long-term investment, we feel it's an especially good fund for equity
investors after a 38% year in the stock market.
Q. Could you explain how the Fund seeks to provide consistent performance?
A. Our emphasis on yield stocks is designed to force us to look at stocks that
are out of favor, but also provides a cushion against price declines. Each stock
we buy must meet the threshold requirement of having a dividend yield 20% higher
than the market as measured by the S&P 500 Index. In addition, stocks that no
8
<PAGE>
longer meet this criterion subsequent to purchase -- due to a price rise,
dividend cut, or change in market levels -- become candidates for sale. Of
course, our analysis only begins with a stock's yield; we also perform extensive
research to assess the quality, stability, and earnings outlook of underlying
issuers.
The rationale for our "relative yield" discipline is that stocks with
higher yields than the market have in the past performed competitively in up
markets while declining less in down markets. Conversely, low-dividend stocks,
while they have tended to outperform in rising markets, have underperformed by a
wide margin in declining markets. Of course, past performance doesn't guarantee
future results.
Q. How effective has the relative yield approach been in reducing volatility
and producing reliable relative performance for Fund shareholders?
A. The Fund has in fact been less volatile than most other growth and income
funds over time. This is true in terms of standard deviation, a common way of
expressing volatility which measures the variation of returns in either
direction around an investment's mean return over time. The results are even
more impressive when you look solely at the Fund's performance in down markets.
The relative yield approach has also had a positive effect on total returns
over time. Scudder Growth and Income Fund's total returns place it in the top
quarter of growth and income funds tracked by Lipper Analytical Services for the
two (of 340 funds), three (of 259 funds), five (of 192 funds), and ten (of 119
funds) year periods ended December 31, 1995. Average annual returns for the two,
three, five, and ten year periods are 16.01%, 15.87%, 16.91%, and 13.97%,
respectively.
Q. In view of the preceding, for whom is Scudder Growth and Income Fund most
suitable as an investment?
A. Growth and Income Fund is not for investors looking to "knock the cover off
the ball." Our goal in managing the Fund is to provide well above-average
performance over the long-term, in large part by being one of the top performers
in dull and falling markets. We believe the Fund is an excellent investment for
those seeking both participation in the equity markets and more consistent
performance than the average equity vehicle. We like to feel it could be used
either as the only stock vehicle for a conservative investor seeking stock
market exposure, or for the "core" portion of an equity portfolio containing
more aggressive investments.
Scudder Growth and
Income Fund:
A Team Approach to Investing
Scudder Growth and Income Fund is managed by a team of Scudder investment
professionals who each play an important role in the Fund's management process.
Team members work together to develop investment strategies and select
securities for the Fund's portfolio. They are supported by Scudder's large staff
of economists, research analysts, traders, and other investment specialists who
work in Scudder's offices across the United States and abroad. We believe our
team approach benefits Fund investors by bringing together many disciplines and
leveraging Scudder's extensive resources.
Lead Portfolio Manager Robert T. Hoffman has had responsibility for setting
the Fund's stock investing strategy and overseeing the Fund's day-to-day
operations since he joined Scudder in 1991. Rob has 11 years of experience in
the investment industry and also heads up the portfolio management team for AARP
Growth and Income Fund. Kathleen T. Millard, Portfolio Manager, has been
involved in the investment industry since 1983 and at Scudder since 1991.
Kathleen focuses on strategy and stock selection, a role she also plays for AARP
Growth and Income Fund. Benjamin W. Thorndike, Portfolio Manager, is the Fund's
chief analyst and strategist for convertible securities. Ben, who has 16 years
of investment experience, joined Scudder and the Fund in 1986 and also is a
Portfolio Manager for AARP Growth and Income Fund.
9
<PAGE>
<TABLE>
SCUDDER GROWTH AND INCOME FUND
INVESTMENT PORTFOLIO as of December 31, 1995
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------
1.3% REPURCHASE AGREEMENT
--------------------------------------------------------------------------------------
39,452,000 Repurchase Agreement with Donaldson,
Lufkin & Jenrette dated 12/29/95 at 5.85%
to be repurchased at $39,477,644 on 1/2/96,
collateralized by a $31,294,000 U.S. Treasury
Note, 8.125%, 5/15/21 (Cost $39,452,000) ........ 39,452,000
----------
--------------------------------------------------------------------------------------
1.1% COMMERCIAL PAPER
--------------------------------------------------------------------------------------
25,000,000 Corporate Asset Funding Corp., 5.62%,
1/26/96 ......................................... 24,902,431
10,000,000 General Electric Capital Corp., 5.95%,
1/5/96 .......................................... 9,993,389
----------
TOTAL COMMERCIAL PAPER (COST $34,895,820) ......... 34,895,820
----------
--------------------------------------------------------------------------------------
0.1% FOREIGN BONDS-NON U.S. $ DENOMINATED
--------------------------------------------------------------------------------------
GBP 2,500,000 National Power PLC, 6.25%, 9/23/08
Cost $4,438,999) ................................. 4,144,629
----------
--------------------------------------------------------------------------------------
0.3% CORPORATE BONDS
--------------------------------------------------------------------------------------
FINANCIAL
5,500,000 Siemens Capital Corp. with warrants, 8%,
6/24/02 (Cost $7,177,934) ....................... 7,493,750
----------
--------------------------------------------------------------------------------------
2.8% CONVERTIBLE BONDS
--------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY 0.1%
Department &
Chain Stores 4,000,000 Federated Department Stores, Inc. debenture,
5%, 10/1/03 ..................................... 3,970,000
----------
HEALTH 0.2%
Pharmaceuticals 5,810,000 Sandoz Capital BVI Ltd., 2%, 10/6/02 .............. 5,490,450
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Principal Market
Portfolio Amount ($) Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCIAL 0.8%
Banks 0.6% 16,140,000 MBL International Finance Bermuda,
3%, 11/30/02 .................................... 18,641,700
----------
Other Financial
Companies 0.2% 4,560,000 First Financial Management Corp.,
5%, 12/15/99 .................................... 7,330,200
----------
SERVICE INDUSTRIES 0.4%
Miscellaneous
Commercial Services 24,000,000 ADT Operations Inc. Liquid Yield Option
Note, 7/6/10 .................................... 11,460,000
----------
DURABLES 0.0%
Automobiles 1,500,000 Magna International, Inc., 5%, 10/15/02 ........... 1,518,750
----------
MANUFACTURING 0.2%
Diversified
Manufacturing 5,000,000 Thermo Electron Corp., 4.25%, 1/1/03 .............. 5,425,000
----------
TECHNOLOGY 0.5%
Computer Software 0.2% 8,260,000 Softkey International, Inc., 5.5%, 11/1/00 ........ 6,174,350
----------
Electronic Data Processing 0.1% 7,500,000 Silicon Graphics Inc., 11/2/13 .................... 3,890,625
----------
Precision Instruments 0.2% 1,500,000 Thermo Instruments Systems Inc., 6.625%,
8/15/01 ......................................... 4,312,500
----------
CONSTRUCTION 0.2%
Homebuilding 9,300,000 Empresa ICA Sociedad Controladora S.A.,
5%, 3/15/04 ..................................... 4,882,500
----------
TRANSPORTATION 0.4%
Airlines 13,600,000 Delta Air Lines, Inc., 3.23%, 6/15/03 12,920,000
TOTAL CONVERTIBLE BONDS (COST $79,872,279) ........ 86,016,075
----------
--------------------------------------------------------------------------------
2.5% CONVERTIBLE PREFERRED STOCKS
--------------------------------------------------------------------------------
Shares
--------------------------------------------------------------------------------
HEALTH 1.0%
Health Industry Services 1.0% 1,100,200 FHP International Corp.,"A", Cum. $1.25 ........... 29,292,825
----------
Medical Supply &
Specialty 0.0% 25,000 US Surgical Corp., "A", Cum. $2.20 ................ 631,250
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
SCUDDER GROWTH AND INCOME FUND
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FINANCIAL 0.0%
Consumer Finance 7,500 Advanta Corp., 6.75% .............................. 287,813
----------
SERVICE INDUSTRIES 0.2%
Miscellaneous
Commercial Services 6,151,000 Jardine Strategic Holdings Ltd., 7.5%, 5/7/49 ..... 6,612,325
----------
MANUFACTURING 0.4%
Containers & Paper 0.1% 60,100 Boise Cascade Corp. "G", Cum $1.58 ................ 1,720,363
----------
47,000 International Paper Co., 5.25% .................... 2,115,000
----------
3,835,363
----------
Industrial Specialty 0.3% 606,300 Cooper Industries, Inc., 6% ....................... 8,336,625
----------
TECHNOLOGY 0.2%
Electronic Data Processing 50,000 Ceridian Corp., 5.5% .............................. 4,625,000
----------
ENERGY 0.3%
Oil & Gas Production 180,500 Parker & Parsley Capital Corp., 6.25% ............. 8,528,625
----------
METALS & MINERALS 0.4%
Precious Metals 500,000 Freeport McMoRan Copper & Gold, Inc.,
Cum. $1.25 ...................................... 13,625,000
----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost $70,400,943) .............................. 75,774,826
----------
-------------------------------------------------------------------------------
0.2% PREFERRED STOCKS
-------------------------------------------------------------------------------
COMMUNICATIONS
Telephone/
Communications 120,000 Philippine Long Distance Telephone Co.
(Cost $6,000,000) ............................... 6,247,500
----------
-------------------------------------------------------------------------------
91.7% COMMON STOCKS
-------------------------------------------------------------------------------
Consumer Discretionary 4.0%
Department &
Chain Stores 3.6% 745,600 J.C. Penney Co., Inc. ............................. 35,509,200
74,100 May Department Stores ............................. 3,130,725
567,800 Melville Corp. .................................... 17,459,850
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
827,000 Rite Aid Corp. .................................... 28,324,750
666,100 Sears, Roebuck & Co. .............................. 25,977,900
-----------
110,402,425
-----------
Specialty Retail 0.4% 864,600 Intimate Brands, Inc. ............................. 12,969,000
-----------
CONSUMER STAPLES 12.2%
Alcohol & Tobacco 3.9% 515,200 Anheuser Busch Companies, Inc. .................... 34,454,000
549,600 Philip Morris Companies Inc. ...................... 49,738,800
1,060,780 RJR Nabisco Holdings Corp. ........................ 32,751,583
60,320 Schweitzer-Mauduit International, Inc. ............ 1,394,900
-----------
118,339,283
-----------
Consumer Specialties 0.1% 277,000 A.T. Cross Co. "A" ................................ 4,189,625
-----------
Food & Beverage 3.5% 559,500 General Mills, Inc. ............................... 32,311,125
1,526,850 H.J. Heinz Co. .................................... 50,576,906
686,000 Quaker Oats Co. ................................... 23,667,000
-----------
106,555,031
-----------
Package Goods/Cosmetics 4.7% 394,100 Avon Products Inc. ................................ 29,705,288
367,600 Clorox Co. ........................................ 26,329,350
126,800 Colgate-Palmolive Co. ............................. 8,907,700
603,200 Kimberly-Clark Corp. .............................. 49,914,800
601,800 Tambrands Inc. .................................... 28,735,950
-----------
143,593,088
-----------
HEALTH 13.2%
Health Industry Services 0.3% 205,500 U.S. HealthCare, Inc. ............................. 9,555,750
-----------
Medical Supply & Specialty 1.5% 1,139,000 Bausch & Lomb, Inc. ............................... 45,132,875
-----------
Pharmaceuticals 11.4% 515,700 American Home Products Corp. ...................... 50,022,900
1,095,900 Baxter International Inc. ......................... 45,890,813
404,300 Bristol-Myers Squibb Co. .......................... 34,719,263
731,600 Carter-Wallace Inc. ............................... 8,321,950
1,134,200 Eli Lilly & Co. ................................... 63,798,750
844,500 Schering-Plough Corp. ............................. 46,236,375
590,200 SmithKline Beecham PLC (ADR) ...................... 32,756,100
428,700 Warner-Lambert Co. ................................ 41,637,488
1,356,100 Zeneca Group PLC .................................. 26,243,195
-----------
349,626,834
-----------
</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> <C> <C>
COMMUNICATIONS 5.7%
Telephone/
Communications 1,363,500 Alltel Corp. ...................................... 40,223,250
791,100 GTE Corp. ......................................... 34,808,400
1,067,840 Hong Kong Telecommunications Ltd. (ADR)............ 18,954,160
810,000 Koninklijke PTT Nederland ......................... 29,475,688
745,300 Sprint Corp. ...................................... 29,718,838
750,000 Tele Danmark A/S (ADR) ............................ 20,718,750
-----------
173,899,086
-----------
FINANCIAL 17.0%
Banks 7.1% 235,000 AmSouth Bancorp. .................................. 9,488,125
544,300 Bankers Trust New York Corp. ...................... 36,195,950
607,400 Chemical Banking Corp. ............................ 35,684,750
877,800 CoreStates Financial Corp. ........................ 33,246,675
947,600 First Bank System Inc. ............................ 47,024,650
503,300 J.P. Morgan & Co., Inc. ........................... 40,389,825
128,500 Nordbanken AB ..................................... 2,226,533
62,300 Summit Bancorporation ............................. 1,962,450
269 Swiss Bank Corp. (Bearer) ......................... 109,920
353,300 Wilmington Trust Corp. ............................ 10,908,138
-----------
217,237,016
-----------
Insurance 3.6% 444,605 Allstate Corp. .................................... 18,284,381
458,000 EXEL, Ltd. ........................................ 27,938,000
287,400 Hartford Steam Boiler Inspection &
Insurance Co. ................................... 14,370,000
918,200 Lincoln National Corp. ............................ 49,353,250
-----------
109,945,631
-----------
Other Financial
Companies 3.6% 279,000 Federal National Mortgage Association .............. 34,630,875
1,125,500 Student Loan Marketing Association ................. 74,142,313
-----------
108,773,188
-----------
Real Estate 2.7% 217,100 Avalon Properties, Inc. (REIT) .................... 4,667,650
338,500 Camden Property Trust (REIT) ...................... 8,081,688
73,800 Charles E. Smith Residential Realty, Inc. (REIT) .. 1,743,525
28,100 Equity Residential Properties Trust (REIT) ........ 860,563
326,600 General Growth Properties, Inc. (REIT) ............ 6,776,950
359,300 Health Care Property Investment Inc. (REIT) ....... 12,620,413
31,400 Mark Centers Trust (REIT) ......................... 357,175
</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> <C> <C>
468,400 Meditrust SBI (REIT) .............................. 16,335,450
302,400 Nationwide Health Properties Inc. (REIT) .......... 12,700,800
61,900 Post Properties Inc. (REIT) ....................... 1,973,063
391,500 Security Capital Industrial Trust (REIT) .......... 6,851,250
451,300 South West Property Trust Inc. (REIT) ............. 6,092,550
88,800 Vornado Realty Trust (REIT) ....................... 3,330,000
-----------
82,391,077
-----------
MEDIA 0.5%
Print Media 313,000 Reader's Digest Association Inc. "A" .............. 16,041,250
-----------
SERVICE INDUSTRIES 2.9%
Miscellaneous
Consumer Services 1.7% 1,280,200 H & R Block Inc. ................................... 51,848,100
-----------
Printing/Publishing 1.2% 805,000 Deluxe Corp. ....................................... 23,345,000
182,600 Dun & Bradstreet Corp. ............................. 11,823,350
-----------
35,168,350
-----------
DURABLES 6.5%
Aerospace 5.8% 398,400 AAR Corp. .......................................... 8,764,800
710,013 Lockheed Martin Corp. .............................. 56,091,027
729,400 Rockwell International Corp. ....................... 38,567,025
7,600 Thiokol Corp. ...................................... 257,450
784,500 United Technologies Corp. .......................... 74,429,438
-----------
178,109,740
-----------
Automobiles 0.6% 660,900 Dana Corp. ......................................... 19,331,325
-----------
Construction/
Agricultural Equipment 0.1% 49,000 PACCAR, Inc. ....................................... 2,064,125
-----------
MANUFACTURING 14.2%
Chemicals 3.5% 484,700 Dow Chemical Co. ................................... 34,110,763
683,000 E.I. du Pont de Nemours & Co. ...................... 47,724,625
140,000 Lubrizol Corp. ..................................... 3,902,500
948,900 Lyondell Petrochemical Co. ......................... 21,706,088
-----------
107,443,976
-----------
Diversified
Manufacturing 4.1% 1,451,200 Dresser Industries Inc. ............................ 35,373,000
270,800 Olin Corp. ......................................... 20,106,900
93,100 St. Joe Paper Co. .................................. 5,120,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
<TABLE>
SCUDDER GROWTH AND INCOME FUND
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
834,500 TRW Inc. .......................................... 64,673,750
-----------
125,274,150
-----------
Electrical Products 0.8% 345,600 Thomas & Betts Corp. .............................. 25,488,000
-----------
Industrial Specialty 0.3% 320,300 Corning Inc. ...................................... 10,249,600
-----------
Machinery/
Components/Controls 0.3% 239,300 Timken Co. ........................................ 9,153,225
-----------
Office Equipment/Supplies 2.3% 514,000 Xerox Corp. ....................................... 70,418,000
-----------
Specialty Chemicals 2.6% 180,000 ARCO Chemical Co. ................................. 8,752,500
613,800 Betz Laboratories Inc. ............................ 25,165,800
358,600 Petrolite Corp. ................................... 10,220,100
1,191,800 Witco Corp. ....................................... 34,860,150
-----------
78,998,550
-----------
Wholesale Distributors 0.3% 96,100 Alco Standard Corp. ............................... 8,216,550
-----------
ENERGY 8.7%
Oil Companies 7.6% 367,200 Exxon Corp. ....................................... 29,421,900
372,800 Murphy Oil Corp. .................................. 15,471,200
480,100 Pennzoil Co. ...................................... 20,284,225
484,000 Repsol SA (ADR) ................................... 15,911,500
229,000 Royal Dutch Petroleum Co. (New York shares) ....... 32,317,625
421,000 Societe Nationale Elf Aquitaine ................... 31,056,389
328,900 Texaco Inc. ....................................... 25,818,650
212,177 Total SA "B" ...................................... 14,337,456
386,046 Total SA (ADR) .................................... 13,125,555
1,609,900 YPF S.A. "D" (ADR) ................................ 34,814,088
-----------
232,558,588
-----------
Oilfield Services/
Equipment 1.1% 670,000 Halliburton Co. ................................... 33,918,750
-----------
METALS & MINERALS 0.9%
Precious Metals 0.4% 365,000 De Beers Consolidated Mines Ltd. (ADR) ............ 11,041,250
-----------
Steel & Metals 0.5% 542,590 Freeport McMoRan Copper & Gold,
Inc. "A" ........................................ 15,192,520
-----------
TRANSPORTATION 1.4%
Railroads 1,119,500 Canadian National Railway Co. ..................... 16,792,500
100,800 Consolidated Rail Corp. ........................... 7,056,000
120,100 Norfolk Southern Corp. ............................ 9,532,938
137,200 Union Pacific Corp. ............................... 9,055,200
-----------
42,436,638
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
% of Market
Portfolio Shares Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
UTILITIES 4.5%
Electric Utilities 698,600 CINergy Corp. ..................................... 21,394,625
227,600 CMS Energy Corp. .................................. 6,799,550
2,332,800 China Light & Power Co., Ltd. (ADR) ............... 10,614,240
239,500 National Power PLC (ADR) .......................... 2,215,375
507,300 PacifiCorp ........................................ 10,780,125
220,200 Pacific Gas & Electric Co. ........................ 6,248,175
2,329,000 PowerGen PLC ...................................... 7,997,293
970,200 PowerGen PLC (ADR) ................................ 12,733,875
1,008,000 Southern Company .................................. 24,822,000
210,000 Texas Utilities Co., Inc. ......................... 8,636,250
747,900 Unicom Corp. ...................................... 24,493,725
-------------
136,735,233
-------------
TOTAL COMMON STOCKS (COST $2,112,507,366) 2,802,297,829
-------------
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $2,354,745,341) (a) 3,056,322,429
=============
<FN>
(a) The cost for federal income tax purposes was $2,352,369,063. At December
31, 1995, net unrealized appreciation for all securities based on tax cost
was $703,953,366. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market
value over tax cost of $729,585,416 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax cost
over market value of $25,632,050.
</FN>
</TABLE>
<TABLE>
- ---------------------------------------------------------------------------------------------------
Transactions in written call options during the year ended December 31, 1995 were as follows:
PREMIUMS
NUMBER OF CONTRACTS RECEIVED ($)
---------------------------------------------------------
<S> <C> <C>
Outstanding at December 31, 1994 ........ -- --
Contracts written ..................... 18,500 20,946,597
Contracts closed ...................... (18,500) (20,946,597)
---------------------------------------------------------
Outstanding at December 31, 1995 ........ -- --
====== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
<TABLE>
SCUDDER GROWTH AND INCOME FUND
FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------------------------------
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
--------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $2,354,745,341)
(Note A) ................................................. $3,056,322,429
Collateral held for securities loaned (Note A) ............. 199,879,300
Cash ....................................................... 92,991
Receivables:
Dividends and interest ................................... 9,934,200
Investments sold ......................................... 8,976,497
Fund shares sold ......................................... 4,397,416
Foreign taxes recoverable ................................ 756,015
Other assets ............................................... 5,896
--------------
Total assets ............................................. 3,280,364,744
LIABILITIES
Payables:
Collateral on securities loaned (Note A) ................. $199,879,300
Fund shares redeemed ..................................... 11,035,007
Investments purchased .................................... 5,836,323
Accrued management fee (Note C) .......................... 1,267,197
Other accrued expenses (Note C) .......................... 1,139,337
------------
Total liabilities ...................................... 219,157,164
--------------
Net assets, at market value ................................ $3,061,207,580
==============
NET ASSETS
Net assets consist of:
Undistributed net investment income ...................... $ 2,471,598
Net unrealized appreciation (depreciation) on:
Investments ............................................ 701,577,088
Foreign currency related transactions .................. (4,957)
Accumulated net realized gain ............................ 7,577,287
Shares of beneficial interest ............................ 1,513,187
Additional paid-in capital ............................... 2,348,073,377
--------------
Net assets, at market value ................................ $3,061,207,580
==============
NET ASSET VALUE, offering and redemption price per share
($3,061,207,580 DIVIDED BY 151,318,741 shares of capital stock
outstanding, $.01 par value, unlimited number of
shares authorized) ......................................... $ 20.23
==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------------------
<CAPTION>
Year Ended December 31, 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends (net of withholding taxes of $900,442) ....... $ 90,261,325
Interest ................................................ 8,627,930
------------
98,889,255
Expenses:
Management fee (Note C) ................................. $ 13,054,200
Services to shareholders (Note C) ....................... 5,649,686
Custodian and accounting fees (Note C) .................. 508,234
Trustees' fees (Note C) ................................. 34,820
Reports to shareholders ................................. 753,664
Federal and state registration .......................... 196,490
Auditing ................................................ 54,640
Legal ................................................... 24,771
Other ................................................... 90,374 20,366,879
------------ ------------
Net investment income ................................... 78,522,376
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain (loss) from:
Investments ............................................ 79,812,797
Options ................................................ (15,734,123)
Foreign currency related transactions .................. (148,438) 63,930,236
------------
Net unrealized appreciation (depreciation) during
the period on:
Investments ............................................ 546,343,519
Foreign currency related transactions .................. (20,211) 546,323,308
------------ ------------
Net gain on investment transactions ...................... 610,253,544
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $688,775,920
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
<TABLE>
SCUDDER GROWTH AND INCOME FUND
- ----------------------------------------------------------------------
<CAPTION>
------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
------------------------
INCREASE (DECREASE IN NET ASSETS) 1995 1994
--------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income .................................... $ 78,522,376 $ 55,084,132
Net realized gain from investment
transactions ........................................... 63,930,236 110,478,324
Net unrealized appreciation (depreciation) on
investment transactions during the period .............. 546,323,308 (124,874,829)
-------------- --------------
Net increase in net assets resulting
from operations ........................................ 688,775,920 40,687,627
-------------- --------------
Distributions to shareholders from:
Net investment income ($.56 and $.51
per share, respectively) ............................. (78,569,568) (55,549,751)
-------------- --------------
Net realized gains from investment
transactions ($.48 and $.91 per share,
respectively) .................................... (69,054,578) (104,186,389)
-------------- --------------
Fund share transactions:
Proceeds from shares sold ................................ 829,474,858 660,899,843
Net asset value of shares issued to
shareholders in reinvestment of distributions .......... 133,306,288 141,532,779
Cost of shares redeemed .................................. (434,428,526) (315,194,390)
-------------- --------------
Net increase in net assets from Fund
share transactions .................................... 528,352,620 487,238,232
-------------- --------------
INCREASE IN NET ASSETS ................................... 1,069,504,394 368,189,719
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
$2,471,598 and $2,585,428, respectively) ............... $3,061,207,580 $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 .............................................. 45,610,829 38,072,976
Shares issued to shareholders in reinvestment
of distributions ....................................... 6,927,513 8,384,211
Shares redeemed .......................................... (23,674,573) (18,185,224)
-------------- --------------
Net increase in Fund shares .............................. 28,863,769 28,271,963
-------------- --------------
Shares outstanding at end of period ...................... 151,318,741 122,454,972
============== ==============
</TABLE>
The accompanying notes are an integral part of the fianancial statements.
20
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD AND OTHER
PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL STATEMENTS.
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------
1995 1994 1993(b) 1992 1991 1990 1989 1988 1987 1986
------------------------------------------------------------------------------
<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
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income .................. .55 .49 .49 .57 .57 .65 .67 .60 .68 .67
Net realized and
unrealized gain (loss) on
investment transactions .............. 4.46 (.05) 2.01 .90 2.97 (1.01) 2.75 .86 (.07) 1.96
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations ............................. 5.01 .44 2.50 1.47 3.54 (.36) 3.42 1.46 .61 2.63
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions from:
Net investment income .................. (.56) (.51) (.45) (.53) (.55) (.67) (.69) (.59) (.68) (.68)
Net realized gains on
investment transactions .............. (.48) (.91) (1.01) (.50) -- (.34) (1.77) -- (2.64) (2.28)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions ...................... (1.04) (1.42) (1.46) (1.03) (.55) (1.01) (2.46) (.59) (3.32) (2.96)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period ......... $20.23 $16.26 $17.24 $16.20 $15.76 $12.77 $14.14 $13.18 $12.31 $15.02
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%).......................... 31.18 2.60 15.59 9.57 28.16 (2.33) 26.36 12.01 3.50 18.27
RATIOS AND
SUPPLEMENTAL DATA
Net assets, end of period
($ millions) ........................... 3,061 1,992 1,624 1,166 723 491 490 402 392 385
Ratio of operating expenses to
average net assets (%) (a) ............. .80 .86 .86 .94 .97 .95 .87 .92 .89 .83
Ratio of net investment income
to average net assets (%) .............. 3.10 2.98 2.93 3.60 4.03 5.03 4.47 4.63 4.24 4.19
Portfolio turnover rate (%) .............. 26.9 42.3 35.5 27.5 44.7 64.7 76.6 47.6 59.5 45.3
<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.
</FN>
</TABLE>
21
<PAGE>
SCUDDER GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Scudder Growth and Income Fund (the "Fund") is a
diversified series of Scudder Investment Trust (the "Trust").
The Trust is organized as a Massachusetts business trust and
is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment
company. The policies described below are followed
consistently by the Fund in the preparation of its financial
statements in conformity with generally accepted accounting
principles.
SECURITY VALUATION. Portfolio securities which are
traded on U.S. or foreign stock exchanges are valued at the
most recent sale price reported on the exchange on which the
security is traded most extensively. If no sale occurred, the
security is then valued at the calculated mean between the most
recent bid and asked quotations. If there are no such bid and
asked quotations, the most recent bid quotation is used.
Securities quoted on the National Association of Securities
Dealers Automatic Quotation ("NASDAQ") System, for which there
have been sales, are valued at the most recent sale price
reported on such system. If there are no such sales, the value
is the high or "inside" bid quotation. Securities which are
not quoted on the NASDAQ System but are traded in another
over-the-counter market are valued at the most recent sale
price on such market. If no sale occurred, the security is
then valued at the calculated mean between the most recent bid
and asked quotations. If there are no such bid and asked
quotations, the most recent bid quotation shall be used.
Portfolio debt securities with remaining maturities
greater than sixty days are valued by pricing agents approved
by the officers of the Fund, which quotations reflect
broker/dealer-supplied valuations and electronic data
processing techniques. If the pricing agents are unable to
provide such quotations, the most recent bid quotation
supplied by a bona fide market maker shall be used. Short-term
investments having a maturity of sixty days or less are valued
at amortized cost. All other securities are valued at their
fair value as determined in good faith by the Valuation
Committee of the Board of Trustees.
22
<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 December 31, 1995, the Fund loaned securities
with an aggregate market value of $193,380,096 which represents 6.3% 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
23
<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.
24
<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.
FEDERAL INCOME TAXES. The Fund's policy is to comply with the requirements
of the Internal Revenue Code which are applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders. The
Fund accordingly paid no federal income taxes and no provision for federal
income taxes was required.
DISTRIBUTION OF INCOME AND GAINS. Distributions of net investment income are
made quarterly. During any particular year, net realized gains from investment
transactions, in excess of available capital loss carryforwards, would be
taxable to the Fund if not distributed and, therefore, will be distributed to
shareholders. An additional distribution may be made to the extent necessary to
avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. These
differences relate primarily to non-taxable distributions and certain securities
sold at a loss. As a result, net investment income and net realized gain (loss)
on investment transactions for a reporting period may differ significantly from
distributions during such period. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting the
net asset value of the Fund.
The Fund uses the specific identified cost method for determining realized
gain or loss on investments for both financial and federal income tax reporting
purposes.
OTHER. Investment security transactions are accounted for on a trade date basis.
Dividend income and distributions to shareholders are recorded on the ex-
dividend date. Interest income is recorded on the accrual basis.
25
<PAGE>
SCUDDER GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
B. PURCHASES AND SALES OF SECURITIES
- --------------------------------------------------------------------------------
For the year ended December 31, 1995, purchases and
sales of investment securities (excluding short-term
investments) aggregated $1,061,268,297 and $660,993,305,
respectively.
C. RELATED PARTIES
- --------------------------------------------------------------------------------
On August 8, 1995, the Fund's Board of Trustees
approved a new Investment Management Agreement (the
"Management Agreement") with Scudder, Stevens & Clark, Inc.
(the "Adviser"). Under the Management Agreement the Adviser
directs the investments of the Fund in accordance with its
investment objective, policies, and restrictions. The Adviser
determines the securities, instruments, and other contracts
relating to investments to be purchased, sold or entered into
by the Fund. In addition to portfolio management services, the
Adviser provides certain administrative services in accordance
with the Management Agreement. The management fee payable
under the Management Agreement is equal to an annual rate of
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, 0.475% on the next
$500,000,000, and 0.45% of such net assets in excess of
$2,000,000,000, computed and accrued daily and payable
monthly.
Under the Investment Management Agreement between the
Fund and the Adviser which was in effect prior to August 8,
1995 (the "Agreement"), the Fund agreed to pay the Adviser 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. Both Agreements also provide
that if the Fund's expenses, exclusive of taxes, interest, and
extraordinary expenses, exceed specified limits, such excess,
up to the amount of the management fee, will be paid by the
Adviser. For the year ended December 31, 1995, the fee
pursuant to both the Management Agreement and the Agreement
amounted to $13,054,200, which was equivalent to an annual
effective rate of .52% of the Fund's average daily net assets.
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
year ended December 31, 1995, the amount charged to the Fund by SSC aggregated
$4,880,494, of which $686,744 is unpaid at December 31, 1995.
Scudder Fund Accounting Corporation ("SFAC"), a 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 year ended December 31, 1995, the amount charged to the Fund by SFAC
aggregated $198,521, of which $18,430 is unpaid at December 31, 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 year
ended December 31, 1995, Trustees' fees and expenses aggregated $34,820.
27
<PAGE>
SCUDDER GROWTH AND INCOME FUND
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE TRUSTEES OF SCUDDER INVESTMENT TRUST AND THE
SHAREHOLDERS OF SCUDDER GROWTH AND INCOME FUND:
We have audited the accompanying statement of assets
and liabilities of Scudder Growth and Income Fund, including
the investment portfolio, as of December 31, 1995, and the
related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years
in the period then ended, and the financial highlights for
each of the ten years in the period then ended. These
financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements and financial highlights
are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures
included confirmation of securities owned as of December 31,
1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all material
respects, the financial position of Scudder Growth and Income
Fund as of December 31, 1995, the results of its operations
for the year then ended, the changes in its net assets for each
of the two years in the period then ended and the financial
highlights for each of the ten years in the period then ended
in conformity with generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
February 2, 1996
28
<PAGE>
TAX INFORMATION
By now shareholders for whom year-end tax reporting is required by the IRS
should have received their Form 1099-DIV and tax information letter from the
Fund.
The Fund paid distributions of $.395 per share from net long-term capital
gains during its fiscal year ended December 31, 1995. Pursuant to Section 852 of
the Internal Revenue Code, the Fund designates $48,445,974 as capital gain
dividends for its fiscal year ended December 31, 1995.
For corporate shareholders, 100% of the income dividends paid during the Fund's
year ended December 31, 1995 qualified for the dividends received deduction.
Please consult a tax adviser if you have questions about federal or state income
tax laws, or on how to prepare your tax returns. If you have specific questions
about your Scudder Fund account, please call a Scudder Investor Relations
Representative at 1-800-225-5163.
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.
29
<PAGE>
INVESTMENT PRODUCTS AND SERVICES
<TABLE>
The Scudder Family of Funds
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
<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 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 Small Company Value Fund
Scudder Growth and Income 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.
-----------------------------------------------------------------------------------------------------------------
<FN>
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.
</FN>
</TABLE>
30
<PAGE>
HOW TO CONTACT SCUDDER
<TABLE>
Account Service and Information
<CAPTION>
-------------------------------------------------------------------------------------------------------------
<S> <C>
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
-------------------------------------------------------------------------------------------------------------
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.
-------------------------------------------------------------------------------------------------------------
Scudder Investor Relations and Scudder Funds Centers are services provided
through Scudder Investor Services, Inc., Distributor.
<FN>
* 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.
</FN>
</TABLE>
31
<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 37 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.
