Scudder
Real Estate
Investment Fund
Semiannual Report
June 30, 1999
No-Load Funds
A no-load (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
<PAGE>
Scudder Real Estate Investment Fund
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Date of Inception: 4/06/98 Total Net Assets as of Ticker Symbol: SCREX
6/30/99: $18.9 million
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o Scudder Real Estate Investment Fund posted a 5.67% total return during its
most recent semiannual period ended June 30, 1999. This compares with the 6.78%
return of the Fund's unmanaged benchmark, the Wilshire Associates Real Estate
Securities Index.
o REITs staged a strong rally in April and May, sparked by a renewed emphasis on
value investing, significant merger and acquisition activity, and a notable
investor's entry into the REIT market.
Table of Contents
3 Letter from the Fund's President 12 Financial Statements
4 Performance Update 15 Financial Highlights
5 Portfolio Summary 16 Notes to Financial Statements
6 Portfolio Management Discussion 20 Officers and Trustees
8 Glossary of Investment Terms 21 Investment Products and Services
9 Investment Portfolio 22 Scudder Solutions
2 - Scudder Real Estate Investment Fund
<PAGE>
Letter from the Fund's President
Dear Shareholders,
We are pleased to report to you on Scudder Real Estate Investment Fund's
most recent semiannual period. The Fund's objective is to provide long-term
capital growth and current income. Managed by a team of experienced
professionals, the Fund enables investors to participate in the real estate
market without directly owning properties themselves. We believe that real
estate investment trusts (REITs), which are currently offering yields five to
seven percentage points higher than the average yield of the S&P 500, can be a
key diversification tool for stock market investors.
Following a difficult period in 1998 and the first quarter of 1999, REITs
rallied strongly during the second quarter. Scudder Real Estate Investment Fund
posted a 5.67% total return during its most recent semiannual period ended June
30, 1999. This compares with the 6.78% return of the Fund's benchmark, the
Wilshire Associates Real Estate Securities Index. For more information on the
Fund's market environment, strategy, and outlook, please read the interview with
Portfolio Manager Jennifer Carter that begins on page 6.
For those interested in new Scudder products, we are pleased to introduce
Scudder Select 500 Fund and Scudder Select 1000 Growth Fund. Both funds are
managed with the goal of providing long term outperformance compared to their
benchmark indices, the S&P 500 Index and the Russell 1000 Growth Index,
respectively. For more information on either Select fund, please call us at the
number below.
Thank you for investing in Scudder Real Estate Investment Fund. Please do
not hesitate to contact Investor Relations at 1-800-SCUDDER with any questions
regarding your account. Or visit Scudder's Web site at www.scudder.com.
Sincerely,
/s/Daniel Pierce
Daniel Pierce
President,
Scudder Real Estate Investment Fund
3 - Scudder Real Estate Investment Fund
<PAGE>
Performance Update as of June 30, 1999
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Fund Index Comparison
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Total Return
- ------------------------------------------------
Period Ended Growth of Average
6/30/1999 $10,000 Cumulative Annual
- ------------------------------------------------
Scudder Real Estate Investment Fund
- ------------------------------------------------
1 Year $ 9,616 -3.84% -3.84%
Life of Fund* $ 9,194 -8.06% -6.59%
- ------------------------------------------------
Wilshire Associates Real Estate Securities Index
- ------------------------------------------------
1 Year $ 9,312 -6.88% -6.88%
Life of Fund* $ 8,849 -11.51% -9.44%
- ------------------------------------------------
* The Fund commenced operations on April 6, 1998.
Index comparisons begin April 6, 1998.
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Growth of a $10,000 Investment
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THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
CHART DATA:
Wilshire Associates Real Scudder Real Estate
Estate Securities Index Investment Fund
----------------------- ---------------
4/6/98* 10000 10000
4/98 9646 9717
6/98 9503 9839
9/98 8366 9163
12/98 8287 8954
3/99 7999 8305
6/99 8849 9462
The Wilshire Associates Real Estate Securities Index is a market capitalized
weighted publicly traded real estate index. The index is rebalanced monthly and
returns are calculated on a buy and sell basis. Index returns assume
reinvestment of dividends and, unlike Fund returns, do not reflect any fees or
expenses.
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Returns and Per Share Information
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THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE FUND TOTAL RETURN (%) AND
INDEX TOTAL RETURN (%)
CHART DATA:
1998* 1999
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Net Asset Value $ 11.35 $ 10.14
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Income Dividends $ .12 $ .73
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Capital Gains Distributions $ -- $ --
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Fund Total Return (%) -4.40 -3.84
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Index Total Return (%) -4.97 -6.88
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Performance is historical and assumes reinvestment of all dividends and capital
gains and is not indicative of future results. Total return and principal value
will fluctuate, so an investor's shares, when redeemed, may be worth more or
less than when purchased. If the Adviser had not maintained the Fund's expenses,
the total return for the one-year and life of Fund periods would have been
lower.
4 - Scudder Real Estate Investment Fund
<PAGE>
Portfolio Summary as of June 30, 1999
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Asset Allocation
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A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Common Stocks 100%
------------------------------------
100%
------------------------------------
Fund management seeks to remain fully invested whenever possible.
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Sector Diversification
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A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Residential 24%
Retail Outlets 24%
Recreation 13%
Office 13%
Diversified 12%
Industrial 10%
Self-Storage 3%
Health Care 1%
------------------------------------
100%
------------------------------------
The Fund provides broad exposure to the overall real estate market by investing
in eight diverse subsectors.
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Top Ten Equity Holdings
(21% of Portfolio)
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1. Essex Property Trust, Inc.
Developer and manager of
multifamily residential properties
2. Equity Residential Properties Trust
Owner of apartment properties
3. MGI Properties, Inc. Owner of multi-use
industrial facilities, office buildings,
apartment complexes and shopping centers
4. Winston Hotels, Inc.
Owner and developer of
limited-service and high-end
extended-stay hotels
5. Prentiss Properties Trust
Owner and developer of industrial
properties throughout the United
States
6. SL Green Realty Corp.
Manager of office properties
7. The Macerich Company
Owner of shopping centers
8. Shurgard Storage Centers, Inc.
Operator of self storage centers
9. Equity Inns Inc.
Owner of limited service,
extended stay and full service
hotels
10. Innkeepers USA Trust
Owner of upscale hotels
We took advantage of first quarter weakness to invest in strong companies with
low valuations.
5 - Scudder Real Estate Investment Fund
<PAGE>
Portfolio Management Discussion
In the following interview, Portfolio Manager Jennifer P. Carter discusses the
key factors leading to Scudder Real Estate Investment Fund's performance over
its most recent semiannual period:
Q: How did the Fund perform over the most recent period?
A: The Fund's total return over the six-month period ended June 30, 1999, was
5.67%, compared with the 6.78% return of the unmanaged Wilshire Associates Real
Estate Securities Index. Since its inception on April 6, 1998 -- keeping in mind
that 1998 along with the first quarter of 1999 was a difficult period for REITs
- -- the Fund has outperformed the Wilshire Index by approximately three
percentage points, -8.06% versus -11.51%.
Q: Has the tone of the REIT market become more positive?
A: Yes, I think it has. In 1998, the market reacted negatively to concerns about
overbuilding, and Congressional action eliminating pair-shared REITs (through
which the stock of two companies under the same management is sold as a unit).
The negative tone in the REIT market continued until April 1999, when several
factors caused a favorable shift in the prices of the REIT market.
Q: What caused the shift?
A: First, there was a return to a value orientation in the REIT market (as well
as in the broader market) as investors began to favor attractively-priced
stocks with good growth prospects -- and that certainly defines many REITs right
now -- over high-priced growth stocks. Second, several corporate actions in the
REIT universe, including leveraged buyouts and hostile takeovers, heightened the
perception that REIT prices were discounted. Investors, seeing that REIT
managers were pursuing perceived discounts through these actions, followed suit.
But perhaps the most significant catalyst for the turnaround was when Warren
Buffett invested in a handful of REITs in April. After that, others jumped on
the bandwagon. The benefit to the REITs that Mr. Buffett invested in -- several
of which the Fund owned -- was similar to the boost a company obtains from
having its stock listed in the S&P 500. The overall REIT market benefited from
this as well.
Q: Are you satisfied with the Fund's performance?
A: We're satisfied with that performance because the Fund -- after slightly
fewer than 16 months in operation as of June 30 -- is meeting the objectives
that we have set for it. We have four long-term goals we believe the Fund needs
to reach to achieve superior risk adjusted performance: outperform the Wilshire
index over the long term, maintain lower volatility than the Index, outperform
the median peer REIT fund, and rank in the top third of real estate funds on a
risk-adjusted total return basis. Over the past year, the Fund has met all four
criteria.
Q: What investment advantages does real estate provide?
A: We believe that having real estate as a portion of an investor's investment
portfolio can provide income, add true diversification, and improve overall
portfolio performance over the long term. REITs offer a convenient way to enjoy
the benefits of real estate investment without directly owning property. REITs
pool their stockholders' money to purchase business and residential real estate
properties. They
6 - Scudder Real Estate Investment Fund
<PAGE>
manage the properties and distribute a portion of the rental income and profits
from sales back to REIT stockholders. REITs tend 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 potentially through investments in other real estate securities. We
believe this broad focus can reduce risk and increase investment opportunities
over time.
Q: Please describe the Fund's investment process.
A: Our portfolio management team uses a proprietary quantitative model that
identifies undervalued real estate securities with stable or improving cash flow
growth and records of rewarding investors. Specialized portfolio management
techniques help us assess the risk associated with each individual security, as
well as its potential impact on the return pattern of the total portfolio. We
also employ a strict sell discipline and review the portfolio regularly to
identify holdings that no longer meet our criteria.
Q: How did the Fund's allocations affect performance?
A: We began the period overweighted relative to the Wilshire Index in
residential REITs, which we viewed as attractively valued, and slightly
underweighted in office and industrial REITs, because we believed them to be
overvalued. All three of those property types performed well over the first half
of the year, so our performance was helped by residential and hurt by office and
industrial. Going forward, the Fund is likely to benefit from its overweight
position in diversified REITs. This group should be well equipped to capitalize
on the anticipated easing of regulations that would expand the types of business
operations that REITs can engage in.
Q: What is your outlook for the REIT market over the coming months?
A: In terms of property markets, there is now perceived to be a better balance
of supply and demand in most of the major U.S. metropolitan areas than at the
beginning of 1999. The improved pricing of REITs given the fairly significant
rally in April and May has not brought about a rush of new equity offerings as
it has sometimes done in the past, and we're encouraged by this. In addition,
some economists are predicting that the U.S. economy will slow during the second
half of this year. If this happens, and if the broad stock market turns down,
REITs, with their defensive characteristics and high yields, should look even
better. We believe that Scudder Real Estate Investment Fund remains an
attractive vehicle for investors seeking long-term capital growth, current
income, and portfolio diversification.
7 - Scudder Real Estate Investment Fund
<PAGE>
Glossary of Investment Terms
DEFENSIVE SECURITIES Stocks and bonds that are more
conservative than average, and tend to
perform better than the overall market
when that market is weak. Often,
non-cyclical stocks are used to establish
a defensive position, since they tend not
to be as severely affected during
economic slowdowns.
FUNDS FROM OPERATIONS The measurement of cash flow that is used
(FFO) to evaluate the financial performance of
a REIT. It subtracts the depreciation of
properties from the REIT's net income,
providing a more effective gauge of
management's performance.
MORTGAGE REIT A REIT that invests in loans secured
by real estate. These mortgages may be
originated and underwritten by the REIT,
or the REIT may purchase preexisting
mortgages on the secondary market. The
other kind of REIT is an equity REIT,
which takes an ownership position in real
estate, instead of acting as a lender.
QUANTITATIVE MODEL A model that evaluates measurable
factors for a universe of companies such
as the value of assets, cost of capital,
cash flow, and stock price.
REAL ESTATE INVESTMENT A company, usually traded publicly, that
TRUST (REIT) manages a portfolio of real estate to
earn profits for investors. A REIT
functions in asimilar fashion 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 at a profit.
WEIGHTING (OVER/UNDER) Refers to the allocation of assets --
usually in terms of sectors, industries,
or countries -- within a portfolio
relative to the portfolio's benchmark
index or investment universe.
(Sources: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance and
Investment Terms)
8 - Scudder Real Estate Investment Fund
<PAGE>
Investment Portfolio as of June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Market
Shares Value ($)
- --------------------------------------------------------------------------------
Common Stocks 100%
- --------------------------------------------------------------------------------
Diversified 11.7%
<S> <C> <C>
Banyan Strategic Realty Trust .................. 14,700 86,363
Colonial Properties Trust ...................... 10,000 282,500
Duke Realty Investments, Inc. .................. 15,700 354,231
Glenborough Realty Trust Inc. .................. 10,700 187,250
Kilroy Realty Corp ............................. 11,000 268,125
Lexington Corporate Properties Trust ........... 20,600 239,475
MGI Properties, Inc. ........................... 14,700 415,275
Prentiss Properties Trust ...................... 16,500 387,750
----------
2,220,969
----------
Health Care 1.3%
Health Care REIT, Inc. ......................... 10,700 248,775
----------
Industrial 10.0%
CenterPoint Properties Corp. ................... 9,800 358,925
EastGroup Properties, Inc. ..................... 17,200 345,075
First Industrial Realty Trust, Inc. ............ 9,300 255,169
Liberty Property Trust ......................... 7,600 189,050
Pacific Gulf Properties, Inc. .................. 4,200 95,025
ProLogis Trust ................................. 11,100 224,775
Trinet Corporate Realty Trust, Inc. ............ 6,800 188,275
Weeks Corp. .................................... 7,400 225,700
----------
1,881,994
----------
Office 12.6%
Brandywine Realty Trust ........................ 11,600 229,825
CarrAmerica Realty Corp. ....................... 14,400 360,000
Great Lakes REIT Inc. .......................... 14,400 234,000
Highwoods Properties Inc. ...................... 8,000 219,500
Koger Equity Inc. .............................. 7,700 141,969
Mack-Cali Realty Corp. ......................... 2,800 86,625
PS Business Parks, Inc. ........................ 14,900 363,188
Reckson Associates Realty Corp. ................ 13,700 321,950
SL Green Realty Corp. .......................... 18,800 384,225
Spieker Properties, Inc. ....................... 1,000 38,875
----------
2,380,157
----------
The accompanying notes are an integral part of the financial statements.
9 - Scudder Real Estate Investment Fund
<PAGE>
Market
Shares Value ($)
- --------------------------------------------------------------------------------
Recreation 13.0%
Boykin Lodging Company ........................... 19,400 298,275
Equity Inns Inc. ................................. 40,400 373,700
Hospitality Properties Trust ..................... 2,100 56,963
Innkeepers USA Trust ............................. 37,200 372,000
National Golf Properties, Inc. ................... 11,200 272,300
Starwood Hotels & Resorts Worldwide, Inc. ........ 11,300 345,356
Sunstone Hotel Investors, Inc. ................... 42,300 359,550
Winston Hotels, Inc. ............................. 37,400 392,700
----------
2,470,844
----------
Residential 24.1%
Amli Residential Properties Trust ................ 12,000 268,495
Apartment Investment & Management Co. ............ 3,700 158,175
Archstone Communities Trust ...................... 5,900 129,431
Berkshire Realty Co. ............................. 24,100 278,656
Camden Property Trust ............................ 3,400 94,350
Charles E. Smith Residential Realty, Inc. ........ 10,800 366,525
Chateau Communities, Inc. ........................ 10,200 305,363
Cornerstone Realty Income Trust, Inc. ............ 19,200 206,400
Equity Residential Properties Trust .............. 9,539 429,851
Essex Property Trust, Inc. ....................... 12,700 449,263
Gables Residential Trust ......................... 13,600 328,100
Manufactured Home Communities, Inc. .............. 12,500 325,000
Mid-America Apartment Communities, Inc. .......... 12,100 279,813
Summit Properties Inc. ........................... 9,500 187,625
Town & Country Trust ............................. 18,100 323,538
United Dominion Realty Trust, Inc. ............... 12,500 146,875
Walden Residential Properties, Inc. .............. 13,000 279,500
----------
4,556,960
----------
Retail Outlets 23.8%
Bradley Real Estate, Inc. ........................ 13,400 278,050
CBL & Associates Properties, Inc. ................ 7,800 205,725
Chelsea GCA Realty Inc. .......................... 5,400 200,475
Crown American Realty Trust ...................... 33,000 241,313
Developers Diversified Realty Corp. .............. 17,200 285,950
General Growth Properties, Inc. .................. 9,500 337,250
The accompanying notes are an integral part of the financial statements.
10 - Scudder Real Estate Investment Fund
<PAGE>
Market
Shares Value ($)
- --------------------------------------------------------------------------------
Glimcher Realty Trust .......................... 16,000 260,000
IRT Property Co. ............................... 25,600 252,800
JP Realty, Inc. ................................ 2,300 47,294
The Macerich Company ........................... 14,300 375,375
Mid-Atlantic Realty Trust ...................... 22,700 252,538
New Plan Excel Realty Trust .................... 9,480 170,640
Pan Pacific Retails Properties, Inc. ........... 14,900 288,688
Prime Retail, Inc. ............................. 38,500 334,469
Saul Centers, Inc. ............................. 16,000 264,000
Tanger Factory Outlet Centers, Inc. ............ 10,100 262,600
Urban Shopping Centers, Inc. ................... 7,000 220,500
Vornado Realty Trust ........................... 3,500 123,594
Westfield America Inc. ......................... 6,500 97,906
----------
4,499,167
----------
Self-Storage 3.5%
Public Storage, Inc. ........................... 10,300 288,400
Shurgard Storage Centers, Inc. "A" ............. 13,800 374,325
----------
662,725
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Total Common Stocks (Cost $20,154,341) 18,921,591
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- --------------------------------------------------------------------------------
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Total Investment Portfolio -- 100.0% (Cost $20,154,341) (a) 18,921,591
- --------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $20,154,341. At June 30,
1999, net unrealized depreciation for all securities based on tax cost
was $1,232,750. This consisted of aggregate gross unrealized
appreciation for all securities in which there was an excess of market
value over tax cost of $396,928 and aggregate gross unrealized
depreciation for all securities in which there was an excess of tax
cost over market value of $1,629,678.
The accompanying notes are an integral part of the financial statements.
11 - Scudder Real Estate Investment Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Assets
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
Investments, at market (identified cost $20,154,341) .................. $ 18,921,591
Cash .................................................................. 37,538
Receivable for investments sold ....................................... 131,701
Dividends and interest receivable ..................................... 164,792
Receivable for Fund shares sold ....................................... 2,512
Deferred organization expenses ........................................ 8,833
------------
Total assets .......................................................... 19,266,967
Liabilities
- ----------------------------------------------------------------------------------------------------------------
Payable for Fund shares redeemed ...................................... 2,304
Notes payable ......................................................... 150,000
Other payables and accrued expenses ................................... 119,168
------------
Total liabilities ..................................................... 271,472
--------------------------------------------------------------------------------------
Net assets, at value $ 18,995,495
--------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------
Net assets consist of:
Undistributed net investment income ................................... 64,175
Unrealized appreciation (depreciation) on investments ................. (1,232,750)
Accumulated net realized gain (loss) .................................. (1,855,128)
Paid-in capital ....................................................... 22,019,198
--------------------------------------------------------------------------------------
Net assets, at value $ 18,995,495
--------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share ($18,995,495 /
1,873,348 outstanding shares of beneficial interest, $.01 par value, -------------
unlimited number of shares authorized) ............................. $ 10.14
-------------
</TABLE>
The accompanying notes are an integral part of the finanacial statements.
12 - Scudder Real Estate Investment Fund
<PAGE>
Statement of Operations
six months ended June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Investment Income
- --------------------------------------------------------------------------------------------------
<S> <C>
Income:
Dividends ..................................................... $ 766,820
Interest ...................................................... 9,982
-----------
776,802
Expenses:
Management fee ................................................ 71,976
Services to shareholders ...................................... 68,530
Custodian and accounting fees ................................. 20,826
Trustees' fees and expenses ................................... 15,842
Auditing ...................................................... 11,926
Registration fees ............................................. 11,748
Reports to shareholders ....................................... 11,392
Legal ......................................................... 7,654
Amortization of organization expense .......................... 1,189
Other ......................................................... 4,234
-----------
Total expenses before reductions .............................. 225,317
Expense reductions ............................................ (112,827)
-----------
Expenses, net ................................................. 112,490
-------------------------------------------------------------------------------
Net investment income (loss) 664,312
-------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- --------------------------------------------------------------------------------------------------
Net realized gain (loss) from investments ..................... (1,187,807)
Net unrealized appreciation (depreciation) during the period
on investments .............................................. 1,556,397
-------------------------------------------------------------------------------
Net gain (loss) on investment transactions 368,590
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 1,032,902
-------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder Real Estate Investment Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the Period
April 6, 1998
Six Months of (commencement
Ended operations) to
June, 30, 1999 December 31,
Increase (Decrease) in Net Assets (Unaudited) 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................................................... $ 664,312 $ 748,809
Net realized gain (loss) from investment transactions ............................... (1,187,807) (717,426)
Net unrealized appreciation (depreciation) on investment transactions during
the period ....................................................................... 1,556,397 (2,789,147)
------------- -------------
Net increase (decrease) in net assets resulting from operations ..................... 1,032,902 (2,757,764)
------------- -------------
Distributions to shareholders:
From net investment income .......................................................... (600,137) (741,912)
------------- -------------
From tax return of capital .......................................................... -- (222,451)
------------- -------------
Fund share transactions:
Proceeds from shares sold ........................................................... 3,650,389 24,951,658
Net asset value of shares issued to shareholders in reinvestment of distributions ... 525,340 832,002
Cost of shares redeemed ............................................................. (3,718,578) (3,998,104)
Redemption fees ..................................................................... 11,201 29,749
------------- -------------
Net increase (decrease) in net assets from Fund share transactions .................. 468,352 21,815,305
------------- -------------
Increase (decrease) in net assets ................................................... 901,117 18,093,178
Net assets at beginning of period ................................................... 18,094,378 1,200
------------- -------------
Net assets at end of period (including undistributed net investment income of $64,175
and $0, respectively) ............................................................ $ 18,995,495 $ 18,094,378
------------- -------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ........................................... 1,824,072 100
------------- -------------
Shares sold ......................................................................... 376,904 2,126,236
Shares issued to shareholders in reinvestment of distributions ...................... 55,003 81,009
Shares redeemed ..................................................................... (382,631) (383,273)
------------- -------------
Net increase (decrease) in Fund shares .............................................. 49,276 1,823,972
------------- -------------
Shares outstanding at end of period ................................................. 1,873,348 1,824,072
------------- -------------
</TABLE>
The accompanying notes are an integral part of the finanacial statements.
14 - Scudder Real Estate Investment Fund
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period (a) and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
For the Period
April 6, 1998
Six Months Ended (commencement of
June 30, 1999 operations) to
(Unaudited) December 31, 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
-----------------------------------
Net asset value, beginning of period .................................................. $ 9.92 $ 12.00
-----------------------------------
Income from investment operations:
Net investment income ................................................................. .36 .41
Net realized and unrealized gain (loss) on investments ................................ .17 (1.98)
-----------------------------------
Total from investment operations ...................................................... .53 (1.57)
-----------------------------------
Less distributions from net investment income ......................................... (.32) (.41)
Tax Return of capital ................................................................. -- (.12)
Redemption fees ....................................................................... .01 .02
-----------------------------------
Total distributions ................................................................... (.31) (.51)
-----------------------------------
-----------------------------------
Net asset value, end of period ........................................................ $ 10.14 $ 9.92
-----------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Total Return (%) (b) (c) .............................................................. 5.67** (13.0)**
Ratios and Supplemental Data
Net assets, end of period ($ millions) ................................................ 19 18
Ratio of operating expenses, net to average daily net assets (%) ...................... 1.25* 1.25*
Ratio of operating expenses, before expense reductions, to average daily net assets (%) 2.50* 2.66*
Ratio of net investment income to average daily net assets (%) ........................ 7.38* 5.32*
Portfolio turnover rate (%) ........................................................... 42.2* 33.72*
</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
15 - Scudder Real Estate Investment Fund
<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") which is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as an open-end management investment
company organized as a Massachusetts business trust.
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. Investments are stated at value determined as of the close
of regular trading on the New York Stock Exchange. 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 ("Nasdaq"), for which there have been sales, are valued at
the most recent sale price reported. 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, or if no sale occurred, at the calculated mean between the most recent
bid and asked quotations on such market. If there are no such bid and asked
quotations, the most recent bid quotation shall be used.
Portfolio debt securities purchased with an original maturity greater than 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 or
sub-custodian bank, 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 is equal to at least the
principal amount of the repurchase price plus accrued interest.
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. Accordingly, the Fund paid no federal income taxes and no federal
income tax provision was required. In addition, from November 1, 1998 through
December 31, 1998, the Fund incurred approximately $192,000 of net realized
capital losses. As permitted by tax regulations, the Fund intends to elect to
defer these losses and treat them as arising in the fiscal year ended December
31, 1999.
At December 31, 1998, the Fund had a net tax basis capital loss carryforward of
approximately $475,000 which may be applied against any realized net taxable
capital gains of each succeeding year until fully utilized or until December 31,
2006, the expiration date.
16 - Scudder Real Estate Investment Fund
<PAGE>
Distribution of Income and Gains. Distributions of net investment income, if
any, are made quarterly. 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 at least
annually.
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. As a result, net
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date. Realized gains and
losses from investment transactions are recorded on an identified cost basis.
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.
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.
B. Purchases and Sales of Securities
During the six months ended June 30, 1999, purchases and sales of investment
securities (excluding short-term investments) aggregated $4,245,362 and
$3,785,138, respectively.
C. Related Parties
Under the Management Agreement (the "Agreement") with Scudder Kemper
Investments, Inc. ("Scudder Kemper" or 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 Agreement. The management fee
payable under the 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 April 30, 2000 in order to maintain the annualized expenses
of the Fund at not more than 1.25% of average daily net assets. Accordingly, for
the six months ended June 30, 1999, the Adviser did not impose any of its fee
amounting to $71,976.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend paying and shareholder service agent for the Fund. For the
six months ended June 30, 1999, SSC did not impose a portion of its fee, which
amounted to $29,821. The amount imposed aggregated $21,014, all of which is
unpaid at June 30, 1999.
17 - Scudder Real Estate Investment Fund
<PAGE>
Scudder Trust Company ("STC"), a subsidiary of the Adviser, provides
recordkeeping and other services in connection with certain retirement and
employee benefit plans invested in the Fund. For the six months ended June 30,
1999, STC did not incur any such fees.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records of the Fund. For the six months
ended June 30, 1999, SFAC did not impose a portion of its fee, which aggregated
$11,030. The amount imposed aggregated $7,720, of which $7,720 is unpaid at June
30, 1999.
The Fund pays each Trustee not affiliated with the Adviser an annual retainer,
plus specified amounts for attended board and committee meetings. For the six
months ended June 30, 1999, Trustees' fees and expenses aggregated $15,842.
D. Line of Credit
The Fund and several Scudder Funds ("The Participants") share in a $850 million
revolving credit facility for temporary or emergency purposes, including the
meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated pro rata among each of the Participants. Interest is
calculated based on the market rates at the time of the borrowing. The Fund may
borrow up to a maximum of 33 percent of its net assets under the agreement.
The weighted average outstanding daily balance of all loans (based on the number
of days the loans were outstanding) was $150,000 with a weighted average
interest rate of 6.45%. Interest for the six months ended June 30, 1999 was $27
(less than $.01 per share). The maximum month-end borrowings outstanding at any
time during the period was $150,000.
18 - Scudder Real Estate Investment Fund
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19 - Scudder Real Estate Investment Fund
<PAGE>
Officers and Trustees
Daniel Pierce*
President and Trustee
Henry P. Becton, Jr.
Trustee; President and General
Manager, WGBH Educational
Foundation
Dawn-Marie Driscoll
Trustee; President, Driscoll
Associates; Executive Fellow,
Center for Business Ethics,
Bentley College
Peter B. Freeman
Trustee, Corporate Director
George M. Lovejoy, Jr.
Trustee; President and Director,
Fifty Associates
Wesley W. Marple, Jr.
Trustee; Professor of Business
Administration, Northeastern
University
Kathryn L. Quirk*
Trustee, Vice President and
Assistant Secretary
Jean C. Tempel
Trustee; Venture Partner,
Venture Capital Group
Bruce F. Beaty*
Vice President
Jennifer P. Carter*
Vice President
Philip S. Fortuna*
Vice President
William F. Gadsden*
Vice President
Robert T. Hoffman*
Vice President
Thomas W. Joseph*
Vice President
Valerie F. Malter*
Vice President
Ann M. McCreary*
Vice President
John Millette*
Vice President and Secretary
John R. Hebble*
Treasurer
Caroline Pearson*
Assistant Secretary
*Scudder Kemper Investments, Inc.
20 - 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 --
Prime Reserve Shares*
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 GNMA Fund
Scudder Income Fund
Scudder Corporate Bond 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 Select 500 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 Select 1000 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
Preferred Series
- ----------------
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small
Company Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
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.
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 or classes thereof 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. +++
+++ +++A no-load variable annuity contract issued by Glenbrook Life and Annuity
Company and underwritten by Allstate Financial Services, Inc., sold 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.
21 - 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 -- www.scudder.com
1-800-343-2890
Personal Investment Organizer: 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
- ------------------------------------------------------------------------------------------------------------------------------
22 - 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
800 no-load funds from well-known companies--with no
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder
Brokerage account already reserved for them, with
no minimum investment. For information about
Scudder Brokerage Services, call 1-800-700-0820.
Fund Folio funds held less than six months will be charged a transaction fee. 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.
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>
23 - 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 organizations worldwide, managing more than $280 billion
in assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 80
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Financial Services 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 Financial Services Group. The Zurich Financial Services 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
