Scudder
Real Estate
Investment Fund
Semiannual Report
June 30, 1998
Pure No-Load(TM) Funds
A pure no-load(TM) (no sales charges) mutual fund which seeks long-term capital
growth and current income by investing primarily in equity securities of
companies in the real estate industry.
SCUDDER (logo)
<PAGE>
Scudder Real Estate Investment Fund
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Date of Inception: 4/06/98 Total Net Assets as of Ticker Symbol: SCREX
6/30/98: $20.44 million
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o For the abbreviated semiannual period beginning with the Fund's inception on
April 6, 1998, and ending June 30, 1998, Scudder Real Estate Investment Fund
posted a total return of -4.40%. The Fund outperformed its benchmark, the
Wilshire Associates Real Estate Securities Index, which returned -4.97% during
the same period.
o Scudder Real Estate Investment Fund provides shareholders with an efficient,
low cost, way of gaining equity exposure to the U.S. real estate market through
disciplined investment in real estate investment trusts (REITs) and other real
estate securities.
Table of Contents
3 Letter from the Fund's President 11 Financial Statements
4 Portfolio Summary 14 Financial Highlights
5 Portfolio Management Discussion 15 Notes to Financial Statements
7 Glossary of Investment Terms 17 Investment Products and Services
8 Investment Portfolio 18 Scudder Solutions
2 - Scudder Real Estate Investment Fund
<PAGE>
Letter from the Fund's President
Dear Shareholders,
We are pleased to present the first semiannual report for the Scudder Real
Estate Investment Fund. The Fund's Trustees have approved the change of the
Fund's fiscal year end to December 31 to take advantage of economies of scale by
producing several funds' annual and semiannual reports at the same time. Going
forward, you can expect to receive regular reports following the Fund's annual
and semiannual periods ending in December and June.
In a period of generally weak prices for real estate-related equity
securities, the Fund posted a -4.40% total return. The Fund's performance during
the brief period from its inception through the end of June compares favorably
to its benchmark, the Wilshire Associates Real Estate Securities Index. However,
it is much too short a period to have any real meaning. For more information
about the Fund's performance, investment environment, portfolio strategy, and
outlook, please see the portfolio management discussion that begins on page 5.
For those of you interested in the newest Scudder offerings, we would like
to take this opportunity to highlight two upcoming additions to our
international category, both of which are scheduled to begin operations on
September 1. Scudder International Growth Fund will seek long-term capital
appreciation by investing primarily in the equity securities of foreign
companies with high growth potential, and Scudder International Value Fund will
seek long-term capital appreciation by investing primarily in undervalued
foreign equity securities. These two funds make Scudder among the first in the
industry to offer funds that pursue long-term growth of capital internationally
in both the growth and value styles of investing. Please see page 17 for more
information on Scudder products and services.
Thank you for your interest and investment in Scudder Real Estate
Investment Fund. Please do not hesitate to contact Investor Relations at
1-800-225-2470 with any questions regarding your account. Or visit Scudder's Web
site at http://funds.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Real Estate Investment Fund
3 - Scudder Real Estate Investment Fund
<PAGE>
PORTFOLIO SUMMARY as of June 30, 1998
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ASSET ALLOCATION
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Equity Holdings 98%
Cash Equivalents 2%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
As of the close of the period, the
Fund was nearly fully invested,
retaining only a small cash
position.
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SECTOR DIVERSIFICATION
(Excludes 2% Cash Equivalents)
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Retail Outlets 25%
Residential 22%
Recreation 14%
Health Care 9%
Industrial 8%
Office 7%
Mortgage 6%
Diversified 6%
Self-Storage 3%
- --------------------------------------------
100%
- --------------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The Fund invests in nine different
REIT categories, providing
excellent coverage of the overall
real estate market as well as broad
diversification within each sector.
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TEN LARGEST EQUITY HOLDINGS
(19% OF PORTFOLIO)
- --------------------------------------------------------------------------
1. The Macerich Company
Owner and manager of regional and community
shopping centers
2. CarrAmerica Realty Corp.
Development and operation of suburban office
properties
3. Essex Property Trust, Inc.
Developer and manager of multifamily residential
properties
4. MGI Properties, Inc.
Owner of multi-use industrial facilities, office
buildings, apartment complexes and shopping
centers
5. Shurgard Storage Centers, Inc.
Developer and manager of personal and business
self storage centers
6. Duke Realty Investments, Inc.
Ownership and rental of office, industrial and
retail properties
7. Gables Residential Trust
Developer and manager of multifamily apartment
communities
8. General Growth Properties, Inc.
General partnership interest in an operating
partnership which owns enclosed mall properties
9. Burnham Pacific Properties, Inc.
Investments in community shopping centers, single
tenant office space and factory outlet centers
10. Hospitality Properties Trust
Owner and leaser of hotel properties
Our largest allocation was in
retail outlet REITs, which
currently represent attractive value.
For more complete details about the Fund's investment portfolio,
see page 8. A monthly Investment Portfolio Summary and quarterly Portfolio
Holdings are available upon request.
4 - Scudder Real Estate Investment Fund
<PAGE>
Portfolio Management Discussion
In the following interview, Co-Lead Portfolio Managers Philip Fortuna and
Jennifer Carter discuss Scudder Real Estate Investment Fund's strategy and the
market environment during the period since the Fund began operations on April 6,
1998.
Q: How did Scudder Real Estate Investment Fund perform in its first months?
The Fund's total return for the brief period since its inception was -4.40% as
of June 30, 1998. The total return of the Fund's benchmark, the Wilshire
Associates Real Estate Securities Index, was -4.97% over the same period.
Q: How do you view the Fund's performance?
From a total return standpoint, we would like to have been in positive
territory, but, as the Fund's benchmark index showed, market conditions were not
in our favor. The real estate market was strong during the three-month period,
but that strength was not mirrored by the real estate securities market. Capital
flows into the real estate market during the first quarter of 1998, while
increasing the values of properties held in REIT -- Real Estate Investment Trust
- -- portfolios, also made it more difficult to make favorable property
acquisitions. Growing demand for real estate also raises concerns among
investors about renewed development activity, leading to overcapacity.
Nevertheless, we are pleased that the fund outperformed its index and other real
estate funds in such a difficult environment.
Q: What are the advantages of investing in real estate?
Adding a real estate component to your investment portfolio can address a number
of important objectives in one step, from providing income to adding real
diversification and improving total portfolio performance over the long term.
REITs are a convenient way to enjoy the major benefits of real estate investing
without directly owning property. REITs pool their stockholders' money to buy
real estate properties -- office buildings, shopping malls, industrial parks,
warehouses, hotels, apartment complexes, health-care facilities or self-storage
centers. They manage the properties and distribute a portion of the rental
income and profits from sales back to the REIT stockholders. REITs have tended
to pay higher dividends than typical U.S. common stocks because they are
required by law to distribute at least 95% of their annual earnings to
stockholders.
Scudder Real Estate Investment Fund seeks to provide shareholders with low cost,
liquid exposure to the U.S. real estate market, primarily by investing in REITs,
but also through investments in other real estate securities. We believe that
this broad focus can help reduce risk and increase investment opportunities over
time.
Q: What is your portfolio strategy?
Our portfolio management team uses a proprietary quantitative model to identify
select securities for the Fund's portfolio. The model identifies inexpensive
real estate securities with stable or improving cash flow growth. Specialized
portfolio management techniques help us assess the risk associated with each
individual security, as well as its impact on the return patterns of the overall
portfolio. We also use a strict sell discipline and review the portfolio
regularly to identify holdings that no longer meet our criteria.
5 - Scudder Real Estate Investment Fund
<PAGE>
Q: How were the Fund's assets allocated at the end of the period?
The Fund invests in nine different REIT categories, providing excellent coverage
of the overall real estate market as well as broad diversification within the
sector. Our largest allocation was in retail outlet REITs, at 25% of net assets.
Formerly a lagging category, good values are now available in this area. We also
favored residential REITs, at 22% of net assets and recreation REITs, at 14%.
Q: What is your outlook for the rest of the year?
We believe that the exceptionally weak performance of real estate securities in
the first half of the year, has actually made them more attractive relative to
other stocks that are trading at historically high valuations. One advantage of
real estate investing is that it does not move in sync with other asset markets.
We will continue to stay close to fully invested in the real estate sector,
providing investors with above average opportunities for long-term capital
growth and current income.
6 - Scudder Real Estate Investment Fund
<PAGE>
Glossary of Investment Terms
DIVERSIFICATION The spreading of risk by putting assets in
several categories of assets -- stocks,
bonds, money market instruments, and REITs,
for example.
LIQUIDITY A security that is liquid has enough shares
outstanding and a substantial enough market
capitalization to allow large purchases and
sales to occur without causing a significant
change in its market price.
MARKET CAPITALIZATION The value of a company's outstanding shares
of common stock, determined by the
multiplying the number of shares outstanding
by the share price (shares x price = market
capitalization).
NET ASSET VALUE (NAV) The price per share of a mutual fund based on
the sum of the market value of all the
securities owned by the fund divided by the
number of outstanding shares.
REAL ESTATE INVESTMENT TRUST A company, usually traded publicly, that
(REIT) manages a portfolio of real estate to earn
profits for investors. A REIT functions
similarly to a mutual fund in that its
investors obtain the potential benefits of a
diversified portfolio under professional
management. EQUITY REITs take equity
positions in real estate; shareholders
receive income from the rents received from
the properties and also receive capital gains
as buildings are sold for a profit.
TOTAL RETURN The most common yardstick to measure the
performance of a mutual fund. Total return
annualized or compound - is based on a
combination of share price changes plus
income and capital gain distributions, if
any, expressed as a percentage gain or loss
in value.
(Sources: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
7 - Scudder Real Estate Investment Fund
<PAGE>
Investment Portfolio as of June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
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Commercial Paper 1.6%
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<S> <C> <C>
Federal National Mortgage Association, 5.85%, 7/1/1998** (Cost $330,000) ................ 330,000 330,000
-----------
<CAPTION>
Shares
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Common Stocks 98.4%
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<S> <C> <C>
Diversified 5.7%
Colonial Properties Trust ............................................................... 10,000 310,000
Duke Realty Investments, Inc. ........................................................... 15,700 370,912
MGI Properties, Inc. .................................................................... 14,700 384,956
Pennsylvania Real Estate Investment Trust ............................................... 4,600 102,062
-----------
1,167,930
-----------
Mortgage 5.9%
Capstead Mortgage Corp. ................................................................. 6,200 51,925
CRIIMI MAE, Inc. ........................................................................ 4,800 66,600
Dynex Capital, Inc. ..................................................................... 24,600 273,675
Impac Mortgage Holdings, Inc. ........................................................... 17,700 275,456
Indymac Mortgage Holdings, Inc. ......................................................... 11,100 252,525
Thornburg Mortgage Asset Corp. .......................................................... 22,800 277,875
-----------
1,198,056
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Health Care 8.6%
Capstone Capital Corporation ............................................................ 11,500 264,500
HRPT Properties Trust ................................................................... 16,400 308,525
Health Care Property Investors, Inc. .................................................... 9,300 335,381
Health Care REIT, Inc. .................................................................. 10,700 272,850
National Health Investors Inc. .......................................................... 7,700 255,062
OMEGA Healthcare Investors, Inc. ........................................................ 8,300 291,538
Omega Worldwide, Inc.* .................................................................. 1,273 9,627
-----------
1,737,483
-----------
Industrial 8.0%
CenterPoint Properties Corporation ...................................................... 9,800 324,012
EastGroup Properties, Inc. .............................................................. 17,200 345,075
First Industrial Realty Trust, Inc. ..................................................... 9,300 295,856
Liberty Property Trust .................................................................. 12,700 324,644
ProLogis Trust .......................................................................... 13,100 327,500
-----------
1,617,087
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</TABLE>
The accompanying notes are an integral part of the financial statements.
8 - Scudder Real Estate Investment Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
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<S> <C> <C>
Office 6.4%
Brandywine Realty Trust ................................................................. 11,600 259,550
CarrAmerica Realty Corp. ................................................................ 14,400 408,600
Mack-Cali Realty Corporation ............................................................ 8,500 292,188
Reckson Associates Realty Corporation ................................................... 13,700 323,662
Reckson Services Industries, Inc.* ...................................................... 6,576 21,783
-----------
1,305,783
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Recreation 13.9%
Equity Inns Inc. ........................................................................ 21,700 286,169
FelCor Suite Hotels, Inc. ............................................................... 9,300 291,788
Franchise Finance Corporation of America ................................................ 2,900 75,219
Hospitality Properties Trust ............................................................ 10,800 346,950
Innkeepers USA Trust .................................................................... 20,500 258,813
National Golf Properties, Inc. .......................................................... 11,200 336,700
RFS Hotel Investors, Inc. ............................................................... 14,700 279,300
Starwood Hotels & Resorts ............................................................... 6,400 309,200
Sunstone Hotel Investors, Inc. .......................................................... 24,400 324,825
Winston Hotels, Inc. .................................................................... 25,700 321,250
-----------
2,830,214
-----------
Residential 21.4%
Avalon Bay Communities, Inc. ............................................................ 3,226 122,588
BRE Properties, Inc., "A" ............................................................... 12,600 328,387
Charles E. Smith Residential Realty, Inc. ............................................... 10,800 345,600
Chateau Communities, Inc. ............................................................... 10,200 293,250
Equity Residential Properties Trust ..................................................... 900 42,694
Essex Property Trust, Inc. .............................................................. 12,700 393,700
Gables Residential Trust ................................................................ 13,600 368,900
Manufactured Home Communities, Inc. ..................................................... 12,500 301,563
Merry Land & Investment Company, Inc. ................................................... 16,300 343,319
Mid-America Apartment Communities, Inc. ................................................. 12,100 318,381
Post Properties, Inc. ................................................................... 7,400 284,900
Summit Properties Inc. .................................................................. 16,100 304,894
Sun Communities, Inc. ................................................................... 8,300 274,937
Town & Country Trust .................................................................... 18,100 299,781
Walden Residential Properties, Inc. ..................................................... 13,000 318,500
-----------
4,341,394
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9 - Scudder Real Estate Investment Fund
<PAGE>
<TABLE>
<CAPTION>
Market
Shares Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Retail Outlets 25.2%
Bradley Real Estate, Inc. ............................................................... 13,400 283,075
Burnham Pacific Properties, Inc. ........................................................ 24,800 351,850
Commercial Net Lease Realty ............................................................. 20,900 338,319
Crown American Realty Trust ............................................................. 33,000 319,687
Developers Diversified Realty Corporation ............................................... 8,600 337,012
Excel Realty Trust, Inc. ................................................................ 7,900 227,619
General Growth Properties, Inc. ......................................................... 9,500 355,063
Glimcher Realty Trust ................................................................... 16,000 311,000
IRT Property Company .................................................................... 25,600 281,600
JDN Realty Corporation .................................................................. 10,700 341,063
Kimco Realty Corporation ................................................................ 5,100 209,100
The Macerich Company .................................................................... 14,300 419,169
Realty Income Corporation ............................................................... 2,800 73,850
Saul Centers, Inc. ...................................................................... 16,000 277,000
Simon DeBartolo Group, Inc. ............................................................. 9,300 302,250
Tanger Factory Outlet Centers, Inc. ..................................................... 10,100 320,044
Vornado Realty Trust .................................................................... 2,800 111,125
Western Investment Real Estate Trust .................................................... 18,800 257,325
-----------
5,116,151
-----------
Self-Storage 3.3%
Public Storage, Inc. .................................................................... 10,100 282,800
Shurgard Storage Centers, Inc., "A" ..................................................... 13,800 382,950
-----------
665,750
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Total Common Stocks (Cost $21,123,522) 19,979,848
- ------------------------------------------------------------------------------------------------------------------------------
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- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $21,453,522) (a) 20,309,848
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $21,453,522. At June 30,
1998, net unrealized depreciation for all securities based on tax cost was
$1,143,674. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $124,475 and aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over market value of $1,268,149.
* Non-income producing security.
** Annualized yield at time of purchase; not a coupon rate.
The accompanying notes are an integral part of the financial statements.
10 - Scudder Real Estate Investment Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of June 30, 1998 (Unaudited)
<TABLE>
<S> <C> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $21,453,522) .................. $ 20,309,848
Cash .................................................................. 715
Dividends receivable .................................................. 113,411
Receivable for Fund shares sold ....................................... 38,660
Deferred organization expenses ........................................ 11,435
Reimbursement from Adviser ............................................ 6,425
----------------
Total assets .......................................................... 20,480,494
Liabilities
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Payable for Fund shares redeemed ...................................... 31,073
Other payables and accrued expenses ................................... 13,932
----------------
Total liabilities ..................................................... 45,005
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Net assets, at market value $ 20,435,489
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Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ................................... 79,627
Unrealized appreciation (depreciation) on investment securities ....... (1,143,674)
Paid-in capital ....................................................... 21,499,536
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Net assets, at market value $ 20,435,489
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Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($20,435,489 / 1,800,237 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares ----------------
authorized) ......................................................... $11.35
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder Real Estate Investment Fund
<PAGE>
Statement of Operations
for the period April 6, 1998 (commencement
of operations) to June 30, 1998 (Unaudited)
<TABLE>
<S> <C> <C>
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Income:
Dividends ............................................................. $ 321,362
Interest .............................................................. 27,381
----------------
348,743
Expenses:
Management fee ........................................................ 35,696
Services to shareholders .............................................. 58,313
Custodian and accounting fees ......................................... 12,571
Trustees' fees and expenses ........................................... 9,177
Auditing .............................................................. 6,689
Registration fees ..................................................... 14,971
Reports to shareholders ............................................... 13,026
Legal ................................................................. 4,900
Amortization of organization expense .................................. 565
Other ................................................................. 2,752
----------------
Total expenses before reductions ...................................... 158,660
Expense reductions .................................................... (103,366)
----------------
Expenses, net ......................................................... 55,294
-------------------------------------------------------------------------------------------
Net investment income (loss) 293,449
-------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) during the period on
investments ......................................................... (1,143,674)
-------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions (1,143,674)
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ (850,225)
-------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder Real Estate Investment Fund
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Period
April 6, 1998
(commence-
ment of
operations) to
June 30, 1998
Increase (Decrease) in Net Assets (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Operations:
Net investment income ...................................................... $ 293,449
Net unrealized appreciation (depreciation) on investment
transactions during the period ........................................... (1,143,674)
----------------
Net increase (decrease) in net assets resulting from operations ............ (850,225)
----------------
Distributions to shareholders:
From net investment income ................................................. (213,822)
----------------
Fund share transactions:
Proceeds from shares sold .................................................. 22,005,909
Net asset value of shares issued to shareholders in reinvestment of
distributions ............................................................ 184,918
Cost of shares redeemed .................................................... (697,508)
Redemption fees ............................................................ 5,017
----------------
Net increase (decrease) in net assets from Fund share transactions ......... 21,498,336
----------------
Increase (decrease) in net assets .......................................... 20,434,289
Net assets at beginning of period .......................................... 1,200
Net assets at end of period (including undistributed net investment ----------------
income of $79,627) ....................................................... $ 20,435,489
----------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period .................................. 100
----------------
Shares sold ................................................................ 1,844,047
Shares issued to shareholders in reinvestment of distributions ............. 16,629
Shares redeemed ............................................................ (60,539)
----------------
Net increase (decrease) in Fund shares ..................................... 1,800,137
----------------
Shares outstanding at end of period ........................................ 1,800,237
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder Real Estate Investment Fund
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
the period (a) and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
For the Period
April 6, 1998
(commencement
of operations) to
June 30, 1998
(Unaudited)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
------------------
Net asset value, beginning of period ............................................................... $12.00
------------------
Income from investment operations:
Net investment income .............................................................................. .17
Net realized and unrealized gain (loss) on investments ............................................. (.70)
------------------
Total from investment operations ................................................................... (.53)
------------------
Less distributions from net investment income ...................................................... (.12)
Redemption fees .................................................................................... --***
------------------
Net asset value, end of period ..................................................................... $11.35
------------------
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (%) (b) ............................................................................... (4.40)(c)**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ............................................................. 20
Ratio of operating expenses, net to average daily net assets (%) ................................... 1.25*
Ratio of operating expenses, before expense reductions, to average daily net assets (%) ............ 3.59*
Ratio of net investment income to average daily net assets (%) ..................................... 6.63*
Portfolio turnover rate (%) ........................................................................ --
</TABLE>
(a) Based on monthly average shares outstanding during the period.
(b) Total return would have been lower had certain expenses not been reduced.
(c) Total return does not reflect the effect to the shareholder of the 1%
redemption fee on shares held less than one year.
* Annualized
** Not annualized
*** Amount is less than one half of $.01.
14 - Scudder Real Estate Investment Trust
<PAGE>
Notes to Financial Statements (Unaudited)
A. Significant Accounting Policies
Scudder Real Estate Investment Fund (the "Fund") is a non-diversified series of
Investment Trust (the "Trust") (formerly Scudder Investment Trust). The Trust is
organized as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as an 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 Nasdaq Stock Market, Inc.
("Nasdaq"), 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 most
recent bid quotation. Securities which are not quoted on Nasdaq 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 other than money market securities with an original
maturity of over sixty days are valued by pricing agents approved by the
officers of the Fund, whose 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. Money market instruments purchased with an original
maturity of sixty days or less are valued at amortized cost. All other
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board of Trustees.
Repurchase Agreements. The Fund may enter into repurchase agreements with
certain banks and broker/dealers whereby the Fund, through its custodian,
receives delivery of the underlying securities, the amount of which at the time
of purchase and each subsequent business day is required to be maintained at
such a level that the market value, depending on the maturity of the repurchase
agreement, is equal to at least 100.5% of the repurchase price.
Federal Income Taxes. The Fund's policy is to comply with the requirements of
the Internal Revenue Code, as amended, which are applicable to regulated
investment companies, and to distribute all of its taxable income to its
shareholders. The Fund accordingly paid no federal income taxes and no provision
for federal income taxes was required.
Redemption Fees. In general, shares of the Fund may be redeemed at net asset
value. However, upon the redemption or exchange of shares held by shareholders
for less than one year, a fee of 1% of the current net asset value of the shares
will be assessed and retained by the Fund for the benefit of the remaining
shareholders. The redemption fee is accounted for as an addition to paid-in
capital.
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.
15 - Scudder Real Estate Investment Fund
<PAGE>
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.
Organization Costs. Costs incurred by the Fund in connection with its
organization 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 period ended June 30, 1998, purchases and sales of investment securities
(excluding short-term investments) aggregated $21,123,521 and $0, respectively.
C. Related Parties
Under the Investment Management Agreement (the "Management Agreement") with
Scudder Kemper Investments, Inc. (the "Adviser"), 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 Management Agreement. The
management fee payable under the Management Agreement is equal to an annual rate
of 0.80% of the Fund's average daily net assets, computed and accrued daily and
payable monthly. In addition, the Adviser has agreed not to impose all or a
portion of its management fee until December 31, 1998 in order to maintain the
annualized expenses of the Fund at not more than 1.25% of average daily net
assets. Accordingly, for the period ended June 30, 1998, the Adviser did not
impose any of its fee amounting to $35,696. Further, due to the limitations of
such Agreement, the Adviser's reimbursement payable to the Fund for the period
ended June 30, 1998, amounted to $6,425.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
period ended June 30, 1998, SSC did not impose any of its fee, which amounted to
$50,753.
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 period ended June 30, 1998,
STC did not impose any of its fee, which amounted to $11.
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 period ended
June 30, 1998, SFAC did not impose any of its fee, which amounted to $10,481.
The Trust pays each Trustee not affiliated with the Adviser an annual retainer,
plus specified amounts for attended board and committee meetings. For the period
ended June 30, 1998, Trustees' fees and expenses aggregated $9,177.
16 - Scudder Real Estate Investment Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Premium Shares*
Managed Shares*
Scudder Government Money Market Series --
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund***
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund***
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Equity
- -------------
Worldwide
Scudder Global Fund
Scudder International Value Fund
Scudder International Growth and Income Fund
Scudder International Fund++
Scudder International Growth Fund
Scudder Global Discovery Fund***
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal Fund, Inc.
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. +++Funds within categories are listed in order from
expected least risk to most risk. Certain Scudder funds may not be available for
purchase or exchange. +A portion of the income from the tax-free funds may be
subject to federal, state, and local taxes. *A class of shares of the Fund.
**Not available in all states. ***Only the Scudder Shares of the Fund are part
of the Scudder Family of Funds. ++Only the International Shares of the Fund are
part of the Scudder Family of Funds. +++ +++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 Kemper Investments, Inc., are traded on the New York Stock Exchange and,
in some cases, on various other stock exchanges.
17 - Scudder Real Estate Investment Fund
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
A convenient investment program in which money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
purchase price over time.*
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
* Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- http://funds.scudder.com
1-800-343-2890
Scudder Electronic Account Services: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you previously designated.
Distributions Direct
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
18 - Scudder Real Estate Investment Fund
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 8,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(SM) provides using Scudder funds.
investors with access to a marketplace of more than
500 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
</TABLE>
19 - Scudder Real Estate Investment Fund
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $200 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts. It is one of the ten largest mutual fund companies in the
United States.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 79
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Group. As a result, Zurich's subsidiary, Zurich Kemper Investments,
Inc., with 50 years of mutual fund and investment management experience, was
combined with Scudder. Headquartered in New York, Scudder Kemper Investments
offers a full range of investment counsel and asset management capabilities,
based on a combination of proprietary research and disciplined, long-term
investment strategies. With its global investment resources and perspective,
the firm seeks opportunities in markets throughout the world to meet the needs
of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Group. The Zurich Group is an internationally recognized leader in
financial services, including property/casualty and life insurance, reinsurance,
and asset management.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER
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